Q4 2023 Amphenol Corp Earnings Call

Hello and welcome to the Fourth Quarter Earnings Conference Call for Amphenol Corporation.

Hello, and welcome to the fourth quarter earnings Conference call for Amphenol Corporation. Following today's presentation, there will be a formal question and answer session.

Following today's presentation, there will be a formal question and answer session.

Until then, all lines will remain in a listen-only mode.

Until then all lines will remain in a listen only mode.

At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time.

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

I would now like to introduce our conference host, Mr. Craig Lampo. Thank you, sir. You may begin. Thank you very much. Good afternoon, everyone. This is Craig Lampo, Amphenol CFO, and I'm here together with Adam Norwitt, our CEO. We would like to wish everyone a happy new year and welcome you to our fourth quarter of 23 conference call.

I'd now like to answer that one.

Okay.

Lampo.

Sir you may begin.

Thank you very much good afternoon, everyone. This is Craig Lampo, Amphenol, CFO and I'm here together with out of Norway. Our CEO, we would like to wish everyone. A happy new year and welcome you to our fourth quarter of 23 conference call.

Craig A. Lampo: Our fourth quarter and full year 23 results were released this morning. I will provide some financial commentary and then Adam will give an overview of the business and current trends.

Our fourth quarter and full year 'twenty. Three results were released this morning, I will provide some financial commentary and then Adam will give an overview of the business and current trends.

Adam Norwitt: Then we will take questions.

Then we will take questions as a reminder, during the call we may refer to certain non-GAAP financial measures and make certain forward looking statements. So please refer to the relevant disclosures in our press release for further information.

Adam Norwitt: As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements, so please refer to the relevant disclosures in our press release for further information.

Adam Norwitt: The company closed the fourth quarter with sales of $3,327,000,000 and record adjusted diluted EPS of 82 cents.

The company closed the fourth quarter with sales of $3.327 billion.

And record adjusted diluted EPS of <unk> 82 cents.

Adam Norwitt: Fourth quarter sales were up 3% in U.S. dollars, 2% in local currencies, and down 1% organically compared to the fourth quarter of 2022.

Fourth quarter sales were up 3% in U S dollars, 2% in local currencies and down 1% organically compared to the fourth quarter of 2022.

Adam Norwitt: Sequentially, sales were up 4% in U.S. dollars, 4% in local currencies, and 2% organically.

Sequentially sales were up 4% in U S dollars, 4% in local currencies and 2% organically.

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

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

Adam Norwitt: For the full year of 23, sales were $12,555,000,000, down 50 basis points in U.S. dollars, flat in local currencies, and down 3% organically compared to 2022.

Adam: For the full year of 23 sales were $12 $575 million down 50 basis points in U S dollars flat in local currencies and down 3% organically compared to 2022.

Adam Norwitt: Orders in the quarter were $3,164,000,000, up 10% compared to the fourth quarter of 2022, and flat sequentially, resulting in a book-to-bill ratio of 0.95 to 1.

Adam: Orders in the quarter were $3 $164 million up 10% compared to the fourth quarter of 2022 and flat sequentially, resulting in a book to bill ratio of <unk> 95 to one.

Adam Norwitt: For the full year, orders were $12,267,000,000, down 5% compared to 2022, resulting in a book to bill 0.9821.

Adam: For the full year orders were 12, and $12 $67 million down 5% compared to 2022, resulting in a book to Bill <unk> 98 to one.

Adam Norwitt: The operating income and operating margin was $690 million and 20.7% respectively in the fourth quarter of 23, which increased 10 basis points compared to both the fourth quarter of 22 and the third quarter of 23.

Adam: GAAP operating income and operating margin was $690 million and 27% respectively. In the fourth quarter of 'twenty, three which increased 10 basis points compared to the both the fourth quarter of 'twenty two in the third quarter of 23.

Adam Norwitt: Adjusted operating income was $706 million, which excluded $16 million in acquisition-related costs.

Adam: Adjusted operating income was $706 million, which excluded $16 million in acquisition related costs.

Adam Norwitt: Adjusted operating margin was 21.2% during the fourth quarter, a new quarterly record for the company.

Adam: Adjusted operating margin was 21, 2% during the fourth quarter, a new quarterly record for the company.

Adam Norwitt: On an adjusted basis, operating margin increased by 30 basis points compared to the fourth quarter of 22 and increased by 40 basis points sequentially.

Adam: On an adjusted basis operating margin increased by 30 basis points compared to the fourth quarter of 'twenty, two and increased by 40 basis points sequentially.

Adam Norwitt: The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on slightly higher sales levels.

Adam: The year over year increase in adjusted operating margin was primarily driven by strong operating leverage on slightly higher sales levels as.

Adam Norwitt: as well as the benefit of Pricing Action.

Adam: As well as the benefit of pricing actions. These benefits were partially offset by the dilutive impact of recent acquisitions most of which are currently operating below the corporate average.

Adam Norwitt: These benefits were partially offset by the dilutive impact of recent acquisitions, most of which are currently operating below the corporate average.

Adam Norwitt: For the full year of 2023, GAAP operating income was $2,560,000,000, which included $35,000,000 of acquisition-related costs, and excluding these costs, adjusted operating income was $2,594,000,000.

For the full year of 2023, GAAP operating income was 2 billion and 560 million, which included 35 million of acquisition related costs.

Adam: Excluding these costs adjusted operating income was 2 billion in five years at a 95 $594 million.

Adam Norwitt: For the full year of 23, GAAP operating margin was 20.4%, and adjusted operating margin was a strong 20.7%, consistent with our previous annual record margins achieved in 2022 and 2018.

Adam: For the full year of 'twenty three GAAP operating margin was 24% and adjusted operating margin was a strong 27% consistent with our previous annual record margins achieved in 2022 and 2018.

Adam Norwitt: On a GAAP basis, operating margin decreased 10 basis points compared to 2022.

Adam: On a GAAP basis operating margin decreased 10 basis points compared to the 2022.

Adam Norwitt: Compared to 2020, adjusted operating margin was flat, which primarily was driven by strong operational performance as well as the benefit of pricing action.

Adam: Compared to 2022, adjusted operating margin was flat, which primarily was driven by strong operational performance as well as the benefit of the pricing actions, partially offset by the dilutive impact of acquisitions. This was an impressive margin performance given the slight sales decline we experienced in 2023.

Adam Norwitt: Partially offset by the dilutive impact of acquisitions, this was an impressive margin performance given the slight sales decline we experienced in 2023.

Adam Norwitt: Our team continued to execute well in the quarter and we are proud to have sustained these healthy levels of profitability despite the continued range of challenges around the world.

Adam: Our team continued to execute well in the quarter and we are proud to have sustained these healthy levels of profitability. Despite the continued range of challenges around the world.

Adam Norwitt: Bringing down fourth quarter results by segment, relative to the fourth quarter of 2022, sales in a harsh environment solution segment were $900 million and increased by 13% in U.S. dollars and 6% organically. Segment operating margin was 26.5%.

Adam: Breaking down fourth quarter results by segment relative to the fourth quarter of 2022.

Adam: Sales in our harsh environment solutions segment were $900 million and increased by 13% in U S dollars and 6% organically.

Adam: Segment operating margin was 26, 5%.

Adam Norwitt: The sales in the communication solutions segment were $1,345,000,000 and declined by 6% in U.S. dollars and 7% organically,

Adam: Sales in the communications solutions segment were $1 $245 million and declined by 6% in U S dollars and 7% organically.

Adam Norwitt: Segment operating margin was 23.1%.

Adam: Segment operating margin was 23, 1%.

Adam Norwitt: Sales in the interconnect and sensor system segment were $1 billion and $82 million and increased by 7% in U.S. dollars and 2% organically. Segment operating margin was 18.5%.

Adam: Sales in our interconnect and sensor systems segment were 1 billion, an $82 million an increase by 7% in U S dollars and 2% organically segment operating margin was 18, 5%.

Adam Norwitt: Breaking down full year results by segment relative to 2022, sales in the harsh environment solution segment were $3,531,000,000 and increased by 14% in U.S. dollars and 9% organically, and segment operating margin was 26.7%.

Adam: Breaking down full year results by segment relative to 2022 sales in the harsh environment solutions segment were one 3 billion to $531 million and increased by 14% in U S dollars and 9% organically and segment operating margin was 26, 7%.

Adam Norwitt: Sales in the communications solution segment were $4,913,000,000 and declined by 13% in U.S. dollars and organically. And segment operating margin was 21.6%.

Adam: In the Communications solutions segment were 4.913 billion and declined by 13% in U S dollars and organically at Sigma.

Adam: Operating margin was 21, 6%.

Adam Norwitt: Sales in the interconnect and sensor systems segment were $4.1 billion, an increase by 6% in U.S. dollars and 3% organically, and segment operating margin was 18.3%.

Adam: Sales of interconnect and system sensor systems segment, or 404 billion wondering of $11 million and increased by 6% in U S dollars and 3% organically and segment operating margin was 18, 3%.

Adam Norwitt: The company's gap effective tax rate for the fourth quarter was 22% and the adjusted effective tax rate was 24%, which compared to 19.2 and 24.5 in the fourth quarter of 2022, respectively. And for the full year of 23, the company's gap effective tax rate was 20.7% and the adjusted effective tax rate was 24%, which compared to 22.3 and 24.5% in 2022, respectively.

The company's GAAP effective tax rate for the fourth quarter was 22% and adjusted effective tax rate was 24%, which compares to 19.2 and $24 five in the fourth quarter of 2022, respectively and for the full year of 23, the company's GAAP effective tax rate was 27% and that.

Adam: Adjusted effective tax rate was 24%, which compared to $22, three and 24, 5% and 22022, respectively.

Adam Norwitt: In 2024, we expect our adjusted effective tax rate to be approximately 24%.

Adam: Into 2024, we expect our adjusted effective tax rate to be approximately 24%.

Adam Norwitt: Gap diluted EPS was $0.83 in the fourth quarter, up 1% compared to the prior year period, and on an adjusted basis, diluted EPS increased 5% to a record $0.82 compared to $0.78 in the fourth quarter of 2022. This was an excellent result.

Speaker Change: Yeah absolutely.

Speaker Change: GAAP diluted EPS was <unk> 83 in the fourth quarter up 1% compared to the prior year period and on an adjusted basis diluted EPS increased 5% to a record 82 cents compared to 78 cents in the fourth quarter of 'twenty. Two this was an excellent result.

Adam Norwitt: For the full year, GAAP diluted EPS with a record $3.11, a 2% increase from $3.06 in 2022, and adjusted diluted EPS with a record $3.01 in 2023, an increase from $3 in 2022.

Speaker Change: For the full year GAAP diluted EPS was a record $3.11 a 2% increase from 3006 <unk> thousand 22, and adjusted diluted EPS was a record $3.01 in 2023, an increase from $3 in 2022.

Adam Norwitt: Operating cash flow in the fourth quarter was a record $842 million, or 162% of adjusted net income. And net of capital spending our free cash flow was a record $739 million, or 142% of adjusted net income. We are pleased to have continued to deliver such a strong cash flow yield in the quarter and for the full year.

Speaker Change: Operating cash flow in the fourth quarter was a record $842 million or 162% of adjusted net income and net of capital spending our free cash flow was a record 700 and $739 million or 142% of adjusted net income. We are pleased to have continued to deliver such a strong cash flow yield in the quarter.

Speaker Change: And for the full year.

Adam Norwitt: In the full year 2023 operating cash flow was a record $2,529,000,000 or 130% of adjusted net income.

Speaker Change: And the full year 2023, operating cash flow was a record $2.529 billion or 130% of adjusted net income.

Adam Norwitt: Net of capital spending, our free cash flow for 2023 was a record $2,160,000,000, or 111% of adjusted net income, a very strong result.

Speaker Change: Net of capital spending our free cash flow for 2023 was a record two Boe and $160 million or 111% of adjusted net income a very strong result.

Adam Norwitt: From a working capital standpoint, inventory days, day sales outstanding, and payable days were 85, 70, and 55 days respectively, all within our normal levels.

Speaker Change: From a working capital standpoint inventory days days sales outstanding and payable days were 80, 570, and 75 days, respectively, all within our normal levels.

Adam Norwitt: And during the quarter, the company repurchased 1.3 million shares of common stock in an average price of approximately $86, bringing total repurchases during 2023 to 7.2 million shares, or $585 million. When combined with our normal quarterly dividend, total capital returned to shareholders in 2023 was $1,086,000,000.

Speaker Change: And during the quarter the company repurchased one 3 million shares of common stock at an average price of approximately $86, bringing total repurchases during 2023 to seven 2 million shares or $585 million when combined combined with our normal quarterly dividend total capital returned to shareholders in 2023.

Speaker Change: It was $1.886 billion.

Adam Norwitt: Total debt on December 31st was $4.3 billion and net debt was $2.7 billion. Total liquidity at the end of the quarter was $4.9 billion, which included cash and short-term investments on hand of $1.7 billion, plus availability under our existing credit facility.

Speaker Change: Total debt at December 31 was $4 $3 billion in net debt was $2 $7 billion total liquidity at the end of the quarter was $4 $9 billion, which included a cash and short term investments on hand of one 7 billion plus availability under our existing credit facilities.

Adam Norwitt: Fourth quarter and full year 2023 EBITDA was $830 million and $3.1 billion, respectively.

Fourth quarter and full year of 2023, EBITDA was $830 million and $3 $1 billion respectively.

Adam Norwitt: And at the end of the fourth quarter of 2023, our net leverage was 0.9 times.

Speaker Change: And at the end of the fourth quarter of 2023, our net leverage was <unk> nine times.

Adam Norwitt: We are very pleased that the company's financial condition remains strong by any measure.

Speaker Change: We're very pleased that the company's financial condition remains strong by any measure.

Adam Norwitt: I will now turn the call over to Adam who will provide some commentary on current market trends.

I will now turn the call over to Adam who will provide some commentary on current market trends.

Adam Norwitt: Well, Craig, thank you very much, and I'd like to extend my welcome to everybody on the phone here today, and I hope it's not too late to wish all of you a Happy New Year here from Wallingford, Connecticut. As Craig mentioned, I'm going to highlight some of our achievements in the fourth quarter and also for the full year of 2023. I'll then discuss our trends and progress across our served markets. I'll make some comments on our outlook for the first quarter, and then, of course, we'll have time for questions.

Adam: Craig Thank you very much and I'd like to extend my welcome to everybody on the phone here today and I hope, it's not too late to wish all of you a happy new year here from Wallingford, Connecticut.

Adam: Craig mentioned I'm going to highlight some of our achievements in the fourth quarter and also for the full year of 2023, I'll, then discuss our trends and progress across our served markets I'll make some comments on our outlook for the first quarter and then of course, we will have time for questions.

Adam Norwitt: Our results in the fourth quarter were stronger than expected, exceeding the high end of our guidance in sales and adjusted diluted earnings per share.

Adam: Our results in the fourth quarter were stronger than expected exceeding the high end of our guidance in sales and adjusted diluted earnings per share sales.

Adam Norwitt: Sales grew by 3% in U.S. dollars, 2% in local currencies, reaching $3,327,000,000.

Adam: Sales grew by 3% in U S dollars, 2% in local currencies, reaching $3.327 billion.

Adam Norwitt: On an organic basis, our sales did decline by just 1% with growth in commercial air, defense, automotive, and IT datacom markets offset by declines across our other end markets.

Adam: On an organic basis, our sales did decline by just 1% with growth in commercial air defense automotive and it datacom markets offset by declines across our other end markets.

Adam Norwitt: The company booked $3,164,000,000 in orders in the fourth quarter. This was a 10% growth versus prior year and flat to last quarter, but did represent a book-to-bill of 0.95 to 1.

Adam: The company booked $3.164 billion in orders in the fourth quarter.

This was a 10% growth versus prior year and flat to last quarter, but did represent a book to bill of <unk> 95 to one.

Adam Norwitt: We're very pleased to have delivered record adjusted operating margins of 21.2% in the quarter, a clear reflection of our team's outstanding execution, and these margins increased 30 basis points from prior year and 40 basis points sequentially.

Adam: We're very pleased to have delivered record adjusted operating margins of 21, 2% in the quarter.

Adam: A clear reflection of our team's outstanding execution and these margins increased 30 basis points from prior year and 40 basis points sequentially.

Adam Norwitt: Adjusted diluted EPS reached 82 cents in the quarter, representing a growth of 5% from prior year.

Adam: Adjusted diluted EPS reached 82 cents in the quarter, representing a growth of 5% from prior year.

Adam Norwitt: I have to say that we were especially pleased that the company generated record operating and free cash flow of $842 million and $739 million respectively in the fourth quarter, both just really clear reflections of the quality of the company's earnings.

Adam: I have to say that we were especially pleased that the company generated record operating and free cash flow of $842 million and $739 million, respectively in the fourth quarter.

Adam: Both just really clear reflections of the quality of the company's earnings.

Adam Norwitt: I come out of the fourth quarter extremely proud of the Amphenol team. Our results this quarter once again reflect the discipline and agility of our entrepreneurial organization as we continue to perform well amidst the challenging and dynamic environment.

Adam: Come out of the fourth quarter extremely proud of the Amphenol team our results. This quarter once again reflect the discipline and agility of our entrepreneurial organization as we continued to perform well amidst the challenging and dynamic environment.

Adam Norwitt: We're also pleased that we announced this morning that we closed four acquisitions in the quarter, really in November and December. Based in Ohio, TPC Wire and Cable is a value-added provider of harsh environment cable and cable assemblies for applications across the industrial market. And this includes particularly factory automation and heavy equipment, and TPC has annual sales of roughly $110 million.

We're also pleased that we announced this morning that we closed four acquisitions in the quarter really in November and December.

Adam: Based in Ohio, TPC wire and cable as a value added provider of harsh environment cable and cable assemblies for applications across the industrial market and this includes particularly factory automation and heavy equipment and TPC has annual sales of roughly $110 million.

Adam Norwitt: I'm headquartered in New Hampshire, and with annual sales of approximately $90 million, Aramar is a leading provider of sensors for the recreational marine, commercial fishing, and industrial markets.

Adam: Headquartered in New Hampshire, and with annual sales of approximately $90 million Irma as a leading provider of sensors for the recreational marine commercial fishing and industrial markets.

Adam Norwitt: LID Technologies, based in Toulouse, France, has annual sales of approximately $40 million, and LID is a high-technology supplier of sensor products to the industrial and automotive markets with a focus on tire pressure monitoring and the telematics associated with that.

Adam: <unk> technologies based in Toulouse, France has annual sales of approximately $40 million.

Adam: D as a high technology supplier of sensor products to the industrial and automotive markets with a focus on tire pressure monitoring and the telematics associated with that.

Adam Norwitt: We also closed on the previously announced acquisition of PcTel, a leading global provider of antennas for a broad array of markets, including and particularly the Internet of Things or industrial IoT market. PcTel generated in 2023 approximately $85 million in sales.

Adam: We also closed on the previously announced acquisition of PC tell a leading global provider of antennas for a broad array of markets, including in particular, the internet of things or industrial Iot market.

Adam: <unk> generated in generated in 2023, approximately $85 million in sales.

Adam Norwitt: As we welcome these outstanding new teams to Amphenol, I remain confident that our acquisition program will continue to create great value for the company.

Adam: As we welcome these outstanding new teams to Amphenol I remain confident that our acquisition program will continue to create great value for the company and.

Adam Norwitt: In fact, our acquisition program was very successful in 2023, and our pipeline of prospective deals remains strong as we enter the new year. Indeed, we continue to see interesting near-term potential opportunities to bring outstanding and complementary organizations into the Anthemall family.

Adam: In fact, our acquisition program was very successful in 2023, and our pipeline of prospective deals remains strong as we enter the new year.

Adam: Indeed, we continue to see interesting near term potential opportunities to bring outstanding and complementary organizations into the Amphenol family.

Adam Norwitt: Our ability to identify and execute upon acquisitions and then to successfully bring these companies into the Amphenol family remains a core competitive advantage for the company.

Our ability to identify and execute upon acquisitions and then to successfully bring these companies into the Amphenol family remains a core competitive advantage for the company.

Adam Norwitt: As our organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all size.

Adam: As the organization has evolved and scaled so too has our ability to effectively manage a greater number of acquisitions of all sizes.

Adam Norwitt: Now turning to the full year of 2023, despite the demand challenges that we did experience in certain end markets in the year, I have to say that the Amphenol team delivered another successful year of performance.

Adam: Now turning to the full year of 2023, despite the demand challenges that we did experience in certain end markets and in the year I have to say that the amphenol team delivered another successful year of performance.

Adam Norwitt: Amidst significant organic declines in the communications end markets due to inventory builds in 2022, as well as the more recent moderations in demand in the industrial market, our team was able to deliver overall sales that were only slightly down from prior year. This was a testament to the breadth and diversification of the company, as well as our team's ability to capitalize in real time on opportunities for incremental sales across the entirety of our market.

Adam: Amid significant organic declines in the communications end markets due to inventory builds in 2020 two as well as the more recent moderation in demand in the industrial market. Our team was able to deliver overall sales that were only slightly down from prior year. This was a testament to the breadth and diversification of the company as well as <unk>.

Adam: Our teams ability to capitalize in real time on opportunities for incremental sales across the entirety of our markets.

Adam Norwitt: Our full year 2023 adjusted operating margin of 20.7% was flat with our last year record levels in 2022, despite the organic sales decline.

Adam: Our full year 2023, adjusted operating margin of 27% was flat with our last year record levels in 2022, despite the organic sales decline.

Adam Norwitt: This excellent performance by our team allowed us to deliver adjusted diluted EPS of $3.01, which was just slightly above prior year levels.

Adam: This excellent performance by our team allowed us to deliver adjusted diluted EPS of $3.01, which was just slightly above prior year levels.

Adam Norwitt: We also generated record operating and free cash flow of $2,529,000,000 and $2,160,000,000 respectively, both confirmations of the company's superior execution and disciplined working capital management.

Adam: We also generated record operating and free cash flow of $2 $529 million and $2 billion $160 million, respectively. Both confirmations of the company's superior execution and disciplined working capital management.

Adam Norwitt: Our acquisition program, which I just discussed, really created great value throughout the year with 10 new companies contributing annualized sales of more than $600 million joining Amphenol in 2023.

Adam: Our acquisition program, which I just discussed really create a great value throughout the year with 10, new companies contributing annualized sales of more than $600 million joining amphenol in 2023.

Adam Norwitt: These new acquisitions enhanced our position across a broad array of technologies while bringing outstanding and talented individuals into the NFL organization.

Adam: These new acquisitions enhanced our position across a broad array of technologies, while bringing outstanding and talented individuals into the Amphenol organization.

Adam Norwitt: We're excited that these companies represent expanded platforms for the company's future performance and have deepened our already strong bench of leaders around the world.

Adam: We're excited that these companies represent expanded platforms for the company's future performance and have deepened our already strong bench of leaders around the world.

Adam Norwitt: In addition, in 2023, we bought back over 7 million shares under our share buyback program and increased our quarterly dividend by 5%. And that represented a total return of capital to shareholders of nearly $1.1 billion.

Adam: In addition in 2023, we bought back over 7 million shares under our share buyback program increased and increased our quarterly dividend by 5% and that represented a total return of capital to shareholders of nearly $1 1 billion.

Adam Norwitt: So while there continued to be a high level of volatility across the overall market environment in 2023, as we enter 2024, our agile entrepreneurial management team is confident that we have built further strength from which we can drive superior long-term performance.

Adam: So while there continued to be a high level of volatility across the overall market environment in 2023, as we enter 2024, our agile entrepreneurial management team is confident that we have built further strength from which we can drive superior long term performance.

Adam Norwitt: Now turning to the trends and our progress across our served markets, I would just comment that we remain very pleased that the company's end market exposure is still highly diversified, balanced, and broad, with no end market representing more than 25% of our sales in 2023.

Adam: Now turning to our track the trends and our progress across our served markets I would just comment that we remain very pleased that the company is end market exposure is still highly diversified balanced and broad with no end market, representing more than 25% of our sales in 2020 three.

Adam Norwitt: This market diversity helps to insulate us from the effect of any given market's volatility while also exposing us to the exciting revolutions happening across the electronics industry.

Adam: Market diversity helps to insulate us from the effect of any given market volatility while also exposing us to the exciting revolutions happening across the electronics industry.

Adam Norwitt: Turning first to the defense market, our sales represented 12% of our total in the fourth quarter and 11% for the full year of 2023.

Adam: Turning first to the defense market, our sales represented 12% of our total in the fourth quarter and 11% for the full year of 2023.

Adam Norwitt: Fourth quarter sales once again grew strongly from prior year, increasing by 18% in U.S. dollars and 17% in local currency.

Adam: Fourth quarter sales once again grew strongly from prior year, increasing by 18% in U S dollars and 17% in local currency.

Adam Norwitt: On an organic basis, sales in the defense market increased by 15%, with broad-based growth across virtually all defense applications, particularly strong in naval, helicopters, communications, and airframe applications.

Adam: On an organic basis sales in the defense market increased by 15% with broad based growth across virtually all defense applications, particularly strong enable helicopters communications and airframe applications.

Adam Norwitt: Sequentially, our sales increased by a better than expected 4% from the third quarter.

Adam: Sequentially, our sales increased by a better than expected, 4% from the third quarter.

Adam Norwitt: For the full year 2023, sales in the defense market grew by 20% in U.S. dollars in local currency and by 18% organically.

Adam: For the full year 2023 sales in the defense market grew by 20% in U S dollars and local currency and by 18% organically.

Adam Norwitt: This reflected our operational execution as well as broad strength across most segments of the defense market, and that particularly related to naval, aircraft engine, helicopter, communications, and space-related applications.

Adam: This reflected our operational execution as well as broad strength across most segments of the defense market and that particularly related to naval aircraft engine helicopter communications and space related applications.

Adam Norwitt: Looking ahead, we expect sales in the first quarter to decline in the mid-single digits sequentially.

Adam: Looking ahead, we expect sales in the first quarter did decline in the mid single digits sequentially and.

Adam Norwitt: And we remain very encouraged by the company's strengthened position in the defense market.

Adam: And we remain very encouraged by the company's strengthened position in the defense market where.

Adam Norwitt: where we continue to offer the industry's widest range of high technology interconnect products.

Adam: Where we continue to offer the industry's widest range of high technology interconnect products.

Adam Norwitt: Amidst today's dynamic geopolitical environment, countries around the world are expanding their investments in both current and next generation defense technologies, thereby increasing the long-term demand potential for Amphenol. We're well positioned to accelerate our new product development and increase our capacity to support this demand long into the future.

Adam: Amidst todays dynamic geopolitical environment countries around the world are expanding their investments in both current and next generation defense technologies, thereby increasing the long term demand potential for amphenol.

Adam: We're well positioned to accelerate our new product development and increase our capacity to support this demand long into the future.

Adam Norwitt: The commercial air market represented 3% of our sales in the quarter and 4% of our sales for the full year of 2023.

Adam: The commercial air market represented 3% of our sales in the quarter and 4% of our sales for the full year of 2023.

Adam Norwitt: In the fourth quarter, our sales grew by a very strong 25% in U.S. dollars and 23% in local currency and organically, and this was driven by broad-based strength across all aircraft applications.

Adam: In the fourth quarter, our sales grew by a very strong 25% in U S dollars and 23% in local currency and organically and this was driven by broad based strength across all aircraft applications.

Adam Norwitt: Sequentially, our sales grew by 1% from the third quarter, which was actually ahead of our expectations for a modest seasonal decline.

Adam: Sequentially, our sales grew by 1% from the third quarter, which was actually ahead of our expectations for a modest seasonal decline.

Adam Norwitt: For the full year 2023, sales increased by a very robust 36% in U.S. dollar local currency and organically, reflecting our strong design in positions on a broad range of platforms, as well as broad-based demand across all aircraft applications.

Adam: For the full year 2023 sales increased by a very robust 36% in U S dollar local currency and organically, reflecting our strong design in positions on a broad range of platforms as well as broad based demand across all aircraft applications.

Adam Norwitt: Looking into the first quarter, we expect sales to remain at these lofty fourth quarter levels.

Looking into the first quarter, we expect sales to remain at these lofty fourth quarter levels.

Adam Norwitt: I'm truly proud of our team working in the commercial air market. With the ongoing recovery in travel and thus demand for jetliners, our efforts to strengthen our breadth of high-technology interconnect products while diversifying our market position into next-generation aircraft are paying real dividends.

Adam: I'm truly proud of our team working in the commercial air market.

Adam: With the ongoing recovery in travel and thus demand for jetliners, our efforts to strengthen our breadth of high technology interconnect products, while diversifying our market position into next generation aircraft are paying real dividends. We continue to see great long term opportunities for expansion of our technology offering to this important market and look forward.

Host: Hello, and welcome to the Fourth Quarter Earnings Conference Call for Amphenol Corporation. Following today's presentation, there will be a formal question and answer session. Until then, all lines will remain in a listen-only mode.

Adam Norwitt: We continue to see great long-term opportunities for expansion of our technology offering to this important market and look forward to realizing the benefits of those growth initiatives for many years to come.

Adam: To realizing the benefits of those growth initiatives for many years to come.

Operator: At the request of the company, today's conference is being recorded. If anyone has any objections, they may disconnect at this time. I would now like to introduce our conference host, Mr. Craig Lampo. Thank you, sir. You may begin. Thank you very much.

Adam Norwitt: The industrial market represented 23% of our sales in the quarter and 25% of our sales for the full year.

Adam: The industrial market represented 23% of our sales in the quarter and 25% of our sales for the full year.

Adam Norwitt: Our sales in the fourth quarter did decline by 4% in U.S. dollars, 5% in local currencies, and 12% organically.

Adam: Our sales in the fourth quarter did decline by 4% in U S dollars, 5% in local currencies and 12% organically.

Craig A. Lampo: Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to wish everyone a happy new year and welcome you to our fourth quarter and full year 23 results were released this morning. I will provide some financial commentary, and then Adam will give an overview of the business and current trends. Then we will take questions.

Adam Norwitt: As growth that we realized in oil and gas, rail mass transit, and marine applications was more than offset by moderations in demand in other segments, including battery and electric heavy vehicles, building automation, transportation, and heavy equipment.

Adam: As growth that we realized in oil and gas rail mass transit and marine applications was more than offset by moderations in demand in other segments, including battery and electric heavy vehicles building automation transportation and heavy equipment.

Adam Norwitt: In addition, our sales into the industrial distribution channel continue to be more muted than they were a year ago.

Adam: In addition, our sales into the industrial distribution channel continues to be more muted than they were a year ago.

Craig A. Lampo: As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements, so please refer to the relevant disclosures in our press release for further information. The company closed the fourth quarter with sales of $3,327,000,000 and record adjusted diluted EPS of 82 cents. Fourth quarter sales were up 3% in U.S. dollars, 2% in local currencies, and down 1% organically compared to the fourth quarter of 2022. However, sequentially, sales were up 4% in U.S. dollars, 4% in local currencies, and 2% organically. Adam will comment further on trends by market in a few minutes. For the full year of 2018, sales were $12,555,000,000, down 50 basis points in U.S. dollars, flat in local currencies, and down 3% organically compared to 2022.

Adam Norwitt: On a sequential basis, sales grew by 1%, but that was driven primarily by acquisitions that we did close in the quarter.

Adam: On a sequential basis sales grew by 1%, but that was driven primarily by acquisitions that we did close in the quarter.

Adam Norwitt: For the full year 2023, sales were flat in U.S. dollars and local currency and declined by 7% organically as the contribution from acquisitions was offset by weakness in instrumentation, battery and electric heavy vehicles, factory automation, and heavy equipment applications in particular.

Adam: For the full year 2023 sales were flat in U S dollars and local currency and declined by 7% organically as the contribution from acquisitions was offset by weakness in instrumentation battery and EV and electric heavy vehicles factory automation and heavy equipment applications in particular.

Adam Norwitt: Looking into the first quarter, we expect sales to remain at these levels as the benefit of recent acquisitions offsets a modest organic sequential decline.

Adam: Looking into the first quarter, we expect sales to remain at these levels as the benefit of recent acquisitions offset some modest organic sequential decline.

Adam Norwitt: Despite this near-term demand pause, driven in particular by elevated inventory levels, both in the distribution channel as well as in certain end markets, I remain proud of our outstanding global team working in the industrial markets.

Adam: Despite this near term demand pause driven in particular by elevated inventory levels. Both in the distribution channel as well as in certain end markets I remain proud of our outstanding global team working in the industrial market.

Craig A. Lampo: Orders in the quarter were $3,164,000,000, up 10% compared to the fourth quarter of 2022 and flat sequentially, resulting in a book-to-bill ratio of 0.95 to 1. For the full year, orders were $12,267,000,000, down 5% compared to 2022, resulting in a book-to-bill ratio of 0.9821. The operating income and operating margin were $690 million and 20.7%, respectively, in the fourth quarter of 23, which increased 10 basis points compared to both the fourth quarter of 22 and the third quarter of 23. Adjusted operating income was $706 million, which excluded $16 million in acquisition-related costs.

Adam Norwitt: We are very excited by the additions of TPC, Airmar, LID, and PCTel, each of which adds complementary new interconnect sensor and antenna technologies to our industrial product offering.

Adam: We are very excited by the additions of TPC Aeromar L. I D and PC tell each of which adds complementary new interconnect sensor and antenna technologies to our industrial product offering.

Adam Norwitt: And I'm confident that our long-term strategy to expand our high-technology interconnect, antenna, and sensor offering, both organically and through complementary acquisitions, has positioned us to capitalize on the many revolutions that will no doubt continue to occur across the industrial electronics market.

Adam: And I'm confident that our long term strategy to expand our high technology interconnect and tenant sensor offering both organically and through complementary acquisitions has positioned us to capitalize on the many revolutions that will no doubt continue to occur across the like the industrial electronics market.

Adam Norwitt: The automotive market represented 24% of our sales in the quarter and 23% of our sales for the full year.

Adam: The automotive market represented 24% of our sales in the quarter and 23% of our sales for the full year sale.

Adam Norwitt: Sales in the fourth quarter grew by a robust 16% in U.S. dollars and 15% in local currency. And on an organic basis, our sales to the automotive market increased by 12%. That was really driven by broad-based strength across most automotive applications, including electric and hybrid electric vehicles.

Adam: Sales in the fourth quarter grew by a robust 16% in U S dollars and 15% in local currency and on an organic basis, our sales to the automotive market increased by 12% that was really driven by broad based strength across most automotive applications, including electric and hybrid electric vehicles.

Craig A. Lampo: Adjusted operating margin was 21.2% during the fourth quarter, a new quarterly record for the company. On an adjusted basis, operating margin increased by 30 basis points compared to the fourth quarter of 22 and increased by 40 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on slightly higher sales levels, as well as the benefit of Pricing Action. However, these benefits were partially offset by the dilutive impact of recent acquisitions, most of which are currently operating below the corporate average.

Adam Norwitt: Sequentially, our automotive sales increased by 8%, which was better than our expectations coming into the quarter.

Sequentially, our automotive sales increased by 8%, which was better than our expectations coming into the quarter.

Adam Norwitt: for the full year 2023.

Adam: For the full year 2023.

Adam Norwitt: I'm pleased that our sales increased by a strong 12% in U.S. dollars, 13% in local currency, and 12% organically, and that reflected broad strength across the automotive market, including in particular next-generation electronics, for example, electric and hybrid drivetrains.

Adam: I'm pleased that our sales increased by a strong 12% in U S dollars, 13% in local currency and 12% organically and that reflected broad strength across the automotive market, including in particular next generation electronics.

Craig A. Lampo: For the full year of 2023, GAAP operating income was $2,560,000,000, which included $35,000,000 of acquisition-related costs, and excluding these costs, adjusted operating income was $2,594,000,000. For the full year of 2023, GAAP operating margin was 20.4%, and adjusted operating margin was a strong 20.7%, consistent with our previous annual record margins achieved in 2022 and 2018. On a GAAP basis, operating margin decreased 10 basis points compared to 2022.

Adam: For example, electric and hybrid Drivetrains.

Adam Norwitt: Looking into 2024, we expect a high single-digit sequential seasonal moderation in sales in the first quarter from these levels.

Adam: Looking into 2024, we expect a high single digit sequential seasonal moderation in sales in the first quarter from these levels.

Adam Norwitt: I'm truly proud of our team working in the automotive market. Their performance in 2023 is yet another confirmation of the benefits of their focus on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. It's really a multitude of applications, including electrified drivetrains, but not just that, many other applications.

Adam: I'm truly proud of our team working in the automotive market <unk>.

Adam: Their performance in 2023 is yet another confirmation of the benefits of their focus on driving new design wins with customers, who are implementing a wide array of new technologies into their vehicles, it's really a multitude of applications, including electrified drivetrains, but not just that many other applications.

Craig A. Lampo: Compared to 2020, adjusted operating margin was flat, which was primarily driven by strong operational performance as well as the benefit of pricing action. Partially offset by the dilutive impact of acquisitions, this was an impressive margin performance given the slight sales decline we experienced in 2023. Our team continued to execute well in the quarter, and we are proud to have sustained these healthy levels of profitability despite the continued range of challenges around the world. Bringing down fourth-quarter results by segment, relative to the fourth quarter of 2022, sales in the harsh environment solution segment were $900 million and increased by 13% in U.S. dollars and 6% organically. The segment operating margin was 26.5%.

Adam Norwitt: We look forward to benefiting from that strong position for many years to come.

Adam: We look forward to benefiting from that strong position for many years to come.

Adam Norwitt: The mobile devices market represented 11% of our sales in the quarter and 10% of our sales for the full year 2023.

Adam: The mobile devices market represented 11% of our sales in the quarter and 10% of our sales for the full year 2023.

Adam Norwitt: Our fourth quarter sales moderated by 3% in U.S. dollars, local currency, and organic as robust growth in smartphones was once again more than offset by declining sales into tablets, laptops, and wearables.

Adam: Our fourth quarter sales moderated by 3% in U S dollars local currency and organic as robust growth in smartphones was once again more than offset by declining sales into tablets laptops and wearables.

Adam Norwitt: Sequentially, our sales increased by 9%, which was much better than our expectation coming into the quarter for a high single-digit decline.

Adam: Sequentially, our sales increased by 9%, which was much better than our expectation coming into the quarter for a high single digit decline.

Adam Norwitt: For the full year 2023, sales in the mobile devices market declined by 12% in U.S. dollars and 10% organically, as strong growth in smartphones was more than offset by declines in other mobile device applications.

Adam: For the full year 2023 sales in the mobile devices market declined by 12% in U S dollars and 10% organically as strong growth in smartphones was more than offset by declines in other mobile device applications.

Craig A. Lampo: The sales in the communication solutions segment were $1,345,000,000 and declined by 6% in U.S. dollars and 7% organically. Segment operating margin was 23.1%. Sales in the interconnect and sensor system segment were $1 billion and $82 million and increased by 7% in U.S. dollars and 2% organically. Segment operating margin was 18.5%. Breaking down full-year results by segment relative to 2022, sales in the harsh environment solution segment were $3,531,000,000 and increased by 14% in U.S. dollars and 9% organically, and segment operating margin was 26.7%. Sales in the communications solution segment were $4,913,000,000 and declined by 13% in U.S. dollars and organically.

Adam Norwitt: Looking into the first quarter, we do anticipate a typical seasonal sequential decline of approximately 35%.

Adam: Looking into the first quarter, we do anticipate a typical seasonal sequential decline of approximately 35%.

Adam Norwitt: While mobile devices will always remain one of our most volatile of markets, our outstanding and agile team is poised as always to capture any opportunities for incremental sales that may arise in 2024 and beyond.

Adam: While mobile devices will always remain one of our most volatile markets are outstanding and agile team is poised as always to capture any opportunities for incremental sales that may arise in 2024 and beyond.

Adam Norwitt: Our leading array of antennas, interconnect products, and mechanisms continues to enable a broad range of next-generation mobile devices, which positions us well for the long term.

Our leading array of antennas interconnect products and mechanisms continues to enable a broad range of next generation mobile devices, which positions us well for the long term.

Adam Norwitt: The mobile networks market represented 3% of our sales in the quarter and 4% of our sales for the full year.

Adam: The mobile networks market represented 3% of our sales in the quarter and 4% of our sales for the full year.

Adam Norwitt: Sales in this market declined from prior year by 26% in U.S. dollars, 27% in local currency, and 34% organically, as we continued to manage through a broad-based reduction in spending by network operators and wireless equipment manufacturers.

Adam: Sales in this market declined from prior year by 26% in U S dollars, 27% in local currency and 34% organically as we continued to manage through a broad based reduction in spending by network operators and wireless equipment manufacturers.

Craig A. Lampo: And the segment operating margin was 21.6%. Sales in the interconnect and sensor systems segment were $4.1 billion, an increase by 6% in U.S. dollars and 3% organically, and the segment operating margin was 18.3%. The company's gap effective tax rate for the fourth quarter was 22%, and the adjusted effective tax rate was 24%, which compared to 19.2 and 24.5 in the fourth quarter of 2022, respectively. And for the full year of 23, the company's gap effective tax rate was 20.7%, and the adjusted effective tax rate was 24%, which compared to 22.3 and 24.5% in 2022, respectively.

Adam Norwitt: Sequentially, our sales decreased by 6%, which was in line with our expectations.

Adam: Sequentially, our sales decreased by 6%, which was in line with our expectations.

Adam Norwitt: For the full year, sales declined by 26% from prior year and 32% organically, driven by the spending reductions that we've discussed throughout the year.

For the full year sales declined by 26% from prior year, and 32% organically driven by the spending reductions that we've discussed throughout the year.

Adam Norwitt: Looking ahead, we expect a modest increase in sales from these fourth quarter levels. And despite this more challenging short-term wireless investment environment, our team continues to work aggressively to realize the benefits of our efforts to expand our position in next-generation 5G equipment and networks around the world. When customers once again drive renewed wireless investment,

Looking ahead, we expect a modest increase in sales from these fourth quarter levels and despite this more challenging short term wireless investment environment. Our team continues to work aggressively to realize the benefits of our efforts to expand our position in the next generation <unk> equipment and networks around the world when customers want.

Adam: Again drive renewed wireless investments, we look forward to benefiting from the increased potential that comes from our position with both equipment manufacturers and mobile service providers.

Adam Norwitt: We look forward to benefiting from the increased potential that comes from our position with both equipment manufacturers and mobile service providers.

Craig A. Lampo: In 2024, we expect our adjusted effective tax rate to be approximately 24%. Gap diluted EPS was $0.83 in the fourth quarter, up 1% compared to the prior year period, and on an adjusted basis, diluted EPS increased 5% to a record $0.82 compared to $0.78 in the fourth quarter of 2022. This was an excellent result.

Adam Norwitt: The information technology and data communications market represented 20% of our sales in the quarter and 19% of our sales for the full year. We're very pleased that our sales in the fourth quarter returned to growth compared to prior year, with sales in U.S. dollars and local currency increasing by 6% and organically by 5%.

Adam: The information technology and data communications market represented 20% of our sales in the quarter and 19% of our sales for the full year.

We're very pleased that our sales in the fourth quarter returned to growth compared to prior year with sales in U S dollars and local currency, increasing by 6% and organically by 5%.

Adam Norwitt: Sequentially, our sales increased by a much better than expected 6% as we continued to benefit from our strong presence with AI data center customers as well as some overall improved demand.

Adam: Sequentially, our sales increased by a much better than expected, 6% as we continued to benefit from our strong presence with AI data center customers as well as some overall improved demand.

Craig A. Lampo: For the full year, GAAP diluted EPS was a record $3.11, a 2% increase from $3.06 in 2022, and adjusted diluted EPS was a record $3.01 in 2023, an increase from $3 in 2022. Operating cash flow in the fourth quarter was a record $842 million, or 162% of adjusted net income. And net of capital spending, our free cash flow was a record $739 million, or 142% of adjusted net income. We are pleased to have continued to deliver such a strong cash flow yield in the quarter and for the full year. For the full year 2023, operating cash flow was a record $2,529,000,000, or 130% of adjusted net income.

Adam Norwitt: For the full year 2023, our sales in the IT Datacom market declined 13% in U.S. dollars and organically, as strong demand for AI-related applications was more than offset by inventory adjustments that we saw amongst our traditional IT Datacom applications.

Adam: For the full year 2023, our sales in the it datacom market declined 13% in U S dollars and organically as strong demand for AI related applications was more than offset by inventory adjustments that we saw amongst our traditional it datacom applications.

Adam Norwitt: Looking ahead, we do expect in the first quarter a mid-single-digit sequential seasonal decline in sales.

Looking ahead, we do expect in the first quarter of mid single digit sequential seasonal decline in sales.

Adam Norwitt: I have to say, coming out of what was a challenging year in the overall IT Datacom market, that we're more encouraged than ever by the company's position in this space.

I have to say coming out of what was a challenging year and the overall datacom market that we're more encouraged than ever by the company's position in this space. Our team continues to do an outstanding job securing future business on next generation it systems, particularly those enabling artificial intelligence.

Adam Norwitt: Our team continues to do an outstanding job securing future business on next-generation IT systems, particularly those enabling artificial intelligence.

Adam Norwitt: Indeed, the revolution in AI has created a unique opportunity for Amphenol, given our leading high-speed power and fiber-optic interconnect product.

Adam: Lead the Revolution in AI has created a unique opportunity for amphenol, giving given our leading high speed power and fiber optic interconnect products.

Adam Norwitt: With machine learning driving a more intensive usage of these highest technology interconnect products, we're very well positioned for the future. This creates a continued long-term growth opportunity for Amphenol.

Adam: Is machine learning driving a more intensive usage of these highest technology interconnect products were very well positioned for the future. This.

Adam: This creates a continued long term growth opportunity for amphenol.

Adam Norwitt: The broadband communication market represented 4% of our sales in the quarter and 4% for the year. Sales in the fourth quarter were down 31% in U.S. dollars and 32% organically, as broadband operators continued to moderate their procurement level.

Adam: The broadband communication market represented 4% of our sales in the quarter and 4% for the year sales in the fourth quarter were down 31% in U S dollars, 32% organically as broadband operators continued to moderate their procurement levels.

Craig A. Lampo: Net of capital spending, our free cash flow for 2023 was a record $2,160,000,000, or 111% of adjusted net income, a very strong result. From a working capital standpoint, inventory days, day sales outstanding, and payable days were 85, 70, and 55 days, respectively, all within our normal levels. And during the quarter, the company repurchased 1.3 million shares of common stock at an average price of approximately $86, bringing total repurchases during 2023 to 7.2 million shares, or $585 million. When combined with our normal quarterly dividend, total capital returned to shareholders in 2023 was $1,086,000,000. Total debt on December 31st was $4.3 billion, and net debt was $2.7 billion.

Adam Norwitt: On a sequential basis, sales did decline by 12%, which was worse than our expectations coming into the quarter when we anticipated more of a modest increase.

Adam: On a sequential basis sales did decline by 12%, which was worse than our expectations coming into the quarter. When we anticipated more of a modest increase.

Adam Norwitt: For the full year 2023, sales were down by 7% in U.S. dollars and organically, driven by the continued pause in broadband operator spending.

For the full year 2023 sales were down by 7% in U S dollars and organically driven by the continued pause in broadband operators spending.

Adam Norwitt: Looking ahead, we expect sales in the first quarter to increase modestly from these levels.

Adam: Looking ahead, we expect sales in the first quarter to increase modestly from these levels.

Adam Norwitt: Regardless of the current demand dynamics, we do remain encouraged by the company's strength and position in the broadband market.

Adam: Regardless of the current demand dynamics, we do remain encouraged by the company's strengthened position in the broadband market. We look forward to continuing to support our service provider customers around the world all of whom are working to increase their network coverage and bandwidth to support the proliferation of high speed data applications to homes and businesses.

Adam Norwitt: We look forward to continuing to support our service provider customers around the world, all of whom are working to increase their network coverage and bandwidth to support the proliferation of high-speed data applications to homes and businesses.

Adam Norwitt: And finally, turning to our outlook, there's no doubt that the current economic environment remains somewhat uncertain.

And finally, turning to our outlook there is no doubt that the current economic environment remains somewhat uncertain.

Adam Norwitt: Assuming the continuation of these current market conditions and also assuming constant exchange rates,

Craig A. Lampo: Total liquidity at the end of the quarter was $4.9 billion, which included cash and short-term investments on hand of $1.7 billion, plus availability under our existing credit facility. Fourth quarter and full year 2023 EBITDA was $830 million and $3.1 billion, respectively. And at the end of the fourth quarter of 2023, our net leverage was 0.9 times. We are very pleased that the company's financial condition remains strong by any measure.

Adam: The continuation of these current market conditions and also assuming constant exchange rates.

Adam Norwitt: For the first quarter, we expect sales in the range of $3.4 billion to $3.1 billion and adjusted diluted EPS in the range of $0.71 to $0.73.

Adam: For the first quarter, we expect sales in the range of 3.040 billion to $3 1 billion and adjusted diluted EPS in the range of 71 to 73 cents.

Adam Norwitt: This would represent sales growth of 2-4% and adjusted diluted EPS growth of 3-6% compared to the first quarter of 2023.

This would represent sales growth of 2% to 4% and adjusted diluted EPS growth of three 6% compared to the first quarter of 2023.

Adam Norwitt: I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow Amphenol's market position while driving sustainable and strong profitability over the long term.

I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow amphenol its market position, while driving sustainable and strong profitability over the long term.

I will now turn the call over to Adam, who will provide some commentary on current market trends. Well, Craig, thank you very much, and I'd like to extend my welcome to everybody on the phone here today, and I hope it's not too late to wish all of you a Happy New Year here from Wallingford, Connecticut. As Craig mentioned, I'm going to highlight some of our achievements in the fourth quarter and also for the full year of 2023. I'll then discuss our trends and progress across our served markets. I'll make some comments on our outlook for the first quarter, and then, of course, we'll have time for questions. Our results in the fourth quarter were stronger than expected, exceeding the high end of our guidance in sales and adjusted diluted earnings per share. Sales grew by 3% in U.S. dollars and 2% in local currencies, reaching $3,327,000,000. However, on an organic basis, our sales did decline by just 1% with growth in commercial air, defense, automotive, and IT datacom markets offset by declines across our other end markets. The company booked $3,164,000,000 in orders in the fourth quarter.

Adam Norwitt: And finally, I just want to take this opportunity to thank our entire global team around the world, including all of those who work across our factories, touch our products, and ultimately deliver to our customers what they need. I'm just truly grateful for all of their outstanding efforts, both here in the fourth quarter, but moreover for the entirety of 2023. Without them, we wouldn't be able to make it happen like we do. And with that, operator, we'd be very happy to take any questions.

Adam: And finally I just wanted to take this opportunity to thank our entire global team around the world, including all of those who work across our factories touch our products and ultimately deliver to our customers what they need I'm just truly grateful for all of their outstanding efforts both here in the fourth quarter, but Moreover for.

Adam: The entirety of 2023 without them, we wouldn't be able to make it happen like we do and with that operator, we'd be very happen happy to take any questions.

Speaker Change: Thank you. The question and answer period will now begin. Please limit to one question per caller. Our first caller is Amit Daryanani with Evercore. You may go ahead.

Speaker Change: Thank you the question and answer.

Speaker Change: We'll now begin please limit to one question for Conor.

Speaker Change: Our first call is Amit.

Hey, Brian.

Amit: With Evercore you May go ahead.

Amit: Go ahead.

Amit: Yeah.

Amit Daryanani: Thank you. Good afternoon, everyone. The one question for me would be, can you talk about the weakness on the industrial market? You talked about softness there, a little bit of inventory softness as well. I'm curious, is that stable worse than what you saw 90 days ago, or do you feel like it's getting worse as you head into 2024? And then to the extent you can talk about it, do you see the list of this perhaps in the hot market as well? Great. Thank you.

Amit: David Good afternoon, everyone.

Amit: The one question for me would be can you just touch on the weakness on the industrial market.

Amit: Talked about softness there a little bit of inventory destocking as well.

Amit: Sure.

Amit: If only worse than what you thought might be days ago do you feel like it's getting worse.

Amit: Hum.

Amit: And then you can talk about did you see the list.

Amit: Hotspots as well great.

This was 10% growth versus prior year and flat to last quarter, but it did represent a book-to-bill of 0.95 to 1. We're very pleased to have delivered record adjusted operating margins of 21.2% in the quarter, a clear reflection of our team's outstanding execution. These margins increased 30 basis points from prior year and 40 basis points sequentially. Adjusted diluted EPS reached 82 cents in the quarter, representing a growth of 5% from the prior year. I have to say that we were especially pleased that the company generated record operating and free cash flow of $842 million and $739 million, respectively, in the fourth quarter, both just really clear reflections of the quality of the company's earnings. I came out of the fourth quarter extremely proud of the Amphenol team.

Amit: Great.

Speaker Change: Amit, I didn't perfectly hear the second part of your question. There's a little bit of a connection issue, but I think relative to your question, which was, is industrial stable versus 90 days ago? I mean, look, I think we came into the quarter with an expectation of kind of a modest reduction in sales. Our sales were essentially in line with that. So I think it was kind of what we expected it to be. I would say that the book-to-bill in industrial was a bit weaker. I mean, if we think about why our book-to-bill was 0.95 to 1, I mean, the real driver for that was industrial on one side. And we did see in the IT Datacom market a little bit of a softer book-to-bill, but that is really just a little bit more of an equalization from very high books-to-bill that we've seen over the prior couple of quarters. So I don't think the IT Datacom book-to-bill is at all representative of the demand environment. But I think in the industrial market... We did see bookings a little softer than we had anticipated. I'm going to assume that your second question is, how do we see that going forward? And, you know, where do we see that kind of cycle in industrial? And I think it's early to tell. I mean, the beauty of our industrial business is it's so broad. And so we're not levered onto one or another of the individual segments. And, you know, there are so many segments across the industrial market that we participate in. And so... And we don't have any of those that are really disproportionate to our overall business. And we continue to see some of those segments, you know, areas like marine and oil and gas, rail mass transit, you know, medical during the course of this year, that still had very robust demand. But no doubt about it, areas like factory automation, instrumentation, those are areas where we've seen, you know, more market reductions in demand and also more impact from the distribution channel. You know, when is that going to be working? When is that going to be worked out in the distribution channel, the inventory? When does some of that demand return in some of those segments? I think it's a little too early to tell. And as we go through the course of this year, we'll try to give you a really good read on that. I mean, as we look into here now, the first quarter, as I said in my prepared remarks, we do anticipate in the first quarter a kind of a modest level, but that's really supported by the acquisitions that we have. And on an organic basis, we see the first quarter, you know, again, modestly down from our current level.

Speaker Change: Yeah, Amit I didn't perfectly here the second part of your question there was a little bit of a connection issue, but I think.

Speaker Change: Relative to your question, which was is industrial stable versus 90 days ago. I mean look I think we came into the corridor.

Speaker Change: With an expectation of kind of a modest reduction in sales our sales were essentially in line with that so I think it was kind of what we expected it to be I would say that the book to Bill and industrial was a bit weaker.

Speaker Change: If we think about why our book to Bill was <unk> 95 to one I mean, the real driver for that was industrial on one side and we did see in the it datacom market a little bit of a softer book to bill, but that that is really just a little bit more of an equalization from very high book to bill that we've seen over the prior couple of quarters. So I don't think the IC Datacom book to bills.

Speaker Change: At all representative of the.

Speaker Change: The demand environment, but I think in the industrial market, we did see bookings a little softer than we had anticipated.

Our results this quarter once again reflect the discipline and agility of our entrepreneurial organization as we continue to perform well amidst the challenging and dynamic environment. We're also pleased that we announced this morning that we closed four acquisitions in the quarter, really in November and December. Based in Ohio, TPC Wire and Cable is a value-added provider of harsh environment cable and cable assemblies for applications across the industrial market.

Speaker Change: I'm going to assume that your second question is how do we see that going forward.

Speaker Change: And where do we see that kind of cycle in industrial.

Speaker Change: And I think it's early to tell I mean, the beauty of our industrial business is it's so broad and so we're not levered onto one or another of the individual segments and you know theres. So many segments across the industrial market that we participate in and we don't have any of those that are really just proportionate to our own.

And this includes, particularly, factory automation and heavy equipment, and TPC has annual sales of roughly $110 million. I'm headquartered in New Hampshire, and with annual sales of approximately $90 million, Aramar is a leading provider of sensors for the recreational marine, commercial fishing, and industrial markets. LID Technologies, based in Toulouse, France, has annual sales of approximately $40 million, and LID is a high-technology supplier of sensor products to the industrial and automotive markets, with a focus on tire pressure monitoring and the telematics associated with that.

Speaker Change: For our business and we continue to see some of those segments areas like marine and oil and gas rail mass transit medical during the course of this year.

Speaker Change: There's still had very robust demand, but no doubt about it areas like factory automation instrumentation.

Speaker Change: Those are areas, where we've seen more market reductions in demand and also more impact from the distribution channel when is that going to be worked out in the distribution channel the inventory.

Speaker Change: When does some of that demand return.

Speaker Change: And some of those segments I think it's a little too early to tell and as we go through the course of this year, we will try to give you a really good read on that I mean, as we look into gear now now the first quarter as I said in my prepared remarks, we do anticipate.

We also closed on the previously announced acquisition of PcTel, a leading global provider of antennas for a broad array of markets, including and particularly the Internet of Things or industrial IoT market. PcTel generated approximately $85 million in sales in 2023. As we welcome these outstanding new teams to Amphenol, I remain confident that our acquisition program will continue to create great value for the company. In fact, our acquisition program was very successful in 2023, and our pipeline of prospective deals remains strong as we enter the new year. Indeed, we continue to see interesting near-term potential opportunities to bring outstanding and complementary organizations into the Anthemall family. Our ability to identify and execute upon acquisitions and then successfully bring these companies into the Amphenol family remains a core competitive advantage for the company.

Speaker Change: In the first quarter.

Speaker Change: Kind of a modest Ah.

Speaker Change: Level, but that's really supported by the acquisitions that we've made and on an organic basis, we see the first quarter, you know again modestly down from our from our current levels.

Speaker Change: Our next question comes from Asya Merchant with CitySherp. You may go ahead. You may go ahead.

Speaker Change: Our next question comes from Austin <unk> with.

Speaker Change: You May go ahead.

Speaker Change: Yes.

Asya Merchant: Great. Hopefully, you can hear me clearly and I don't have an echo. I will try. On the IT Datacom market, if you guys can please share some insight. Looks like this market's ramping up quite nicely for you guys. If you could elaborate a little bit on how you think about your wins in the AI segment and how you're able to ramp that into revenues going forward, especially given constraints on supply on the GPU side. How do you guys think you can ramp for AI for the remainder of the year? Thank you. Thank you. Well, thank you very much and welcome to our call. I look forward to getting to meet you in person. We're really excited about the progress that the company has made in AI. And I just want to reflect on one aspect, which is that AI is not new to us. Well, the world over the course of the last year, has sort of woken up to AI with the advent, you know, a year ago, November, of ChatGPT and this sort of revolution of generative AI. Our team's been working on the interconnect architecture surrounding AI for a long, long time. And so it is only now that maybe there is this acceleration, almost you could call it even a kind of revolution or a gold rush around AI. But we've been building the capability, building the product capability, building the product capability, building the product capability, building the manufacturing capability and capacity to support that for a long time. And I think this year, one of the ways that we were able to maybe even get a disproportionate share of some of the more urgent demand was that we were very quick to flex our capacity in favor of customers who needed products and when they needed it. And I think our team has always showed the ability to have that agility in reacting to upticks of demand and to be able to do that. And I think that this AI is no different. I'm really proud of our team and how they've done that. You know, looking forward, it's still too early to say, you know, what does that look like over the long term? But there's no question in my mind that AI seems like something that is not such a small deal. It seems like something where there are real economics behind it, where large companies are making significant investments into AI, and where ultimately, you know, we're going to be able to do a lot more. But ultimately, you know, our architecture, our interconnect architecture, is a very critical component together with the chips that you alluded to. Now, relative to shortages of chips, you know, that's, I mean, we hope that there are significant investments in chip manufacturing because in our industrial business, we do supply a lot of interconnect products that go into the industry for semiconductor manufacturing. I don't think that we've necessarily seen that as a governor on our output, or on our customers' demand right now. But, you know, we'll see. It's not something that would directly impact, except that maybe customers, if they couldn't get enough chips, they would moderate their overall construction. But we haven't seen that yet, and I think our team is just doing a fabulous job dealing with the surge in demand that we saw this year. And it came at a time when overall IT demand was down. But, in fact, some of the products were very different products. So it wasn't just that we were able to reallocate customers, we were able to reallocate capacity from IT products that were not being consumed as much. And to these, there was a lot of new stuff that we had to do, and I think we did a really great job.

Austin: Great hopefully you can make any clearing the warning don't have an echo.

Speaker Change: I'll try.

Speaker Change: Okay.

Speaker Change: Mark can you guys share some insight and looks like the market is ramping up quite nicely for you guys. If you could elaborate a little bit on how you think about your wins in the AI segment and high.

Speaker Change: Hi, you are able to ramp that into revenues going forward, especially given constraints on supply.

GPU side, how do you guys think you can ramp up.

Speaker Change: For.

As our organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all sizes. Now turning to the full year of 2023, despite the demand challenges that we did experience in certain end markets during the year, I have to say that the Amphenol team delivered another successful year of performance. Amidst significant organic declines in the communications end markets due to inventory builds in 2022, as well as the more recent moderations in demand in the industrial market, our team was able to deliver overall sales that were only slightly down from the prior year. This was a testament to the breadth and diversification of the company, as well as our team's ability to capitalize in real time on opportunities for incremental sales across the entirety of our market.

The remainder of the year. Thank you.

Speaker Change: Well, thank you very much and welcome to our call look forward to getting to meet you in person.

Speaker Change: We're really excited about the progress that the company has made in AI and I just want to reflect on one aspect, which is that AI is not new to us well, while the world over the course of the last year has sort of woken up to AI with the advent of <unk>.

Speaker Change: Year ago November of chat GPT, and and this sort of revolution of generative AI. Our team has been working on the interconnect architecture surrounding AI for for a long long time.

Speaker Change: And so it is only now that maybe there is this acceleration almost you could call. It even a kind of revolution of our gold rush around AI.

Speaker Change: But we've been building the capability building the product capability building, the manufacturing capability and capacity to support that for a long time and I think this year one of the ways that we were able to maybe even get a disproportionate share of some of the more urgent demand what was that we were very quick to flex.

Our full year 2023 adjusted operating margin of 20.7% was flat with our last year's record levels in 2022, despite the organic sales decline. This excellent performance by our team allowed us to deliver adjusted diluted EPS of $3.01, which was just slightly above prior year levels. We also generated record operating and free cash flow of $2,529,000,000 and $2,160,000,000, respectively, both confirmations of the company's superior execution and disciplined working capital

Speaker Change: Our capacity in favor of customers, who needed products and when they needed it and I think our team has always showed the ability to have that agility in reacting to uptick of demand and I think that this AI is no different I I'm really proud of our team and how they've done that.

Speaker Change: Now looking forward its still too early to say you know what does that look like over the long term, but there's no question in my mind that AI seems like something that is not such a small deal.

Our acquisition program, which I just discussed, really created great value throughout the year with 10 new companies contributing annualized sales of more than $600 million joining Amphenol in 2023. These new acquisitions enhanced our position across a broad array of technologies while bringing outstanding and talented individuals into the NFL organization. We're excited that these companies represent expanded platforms for the company's future performance and have deepened our already strong bench of leaders around the world. In addition, in 2023, we bought back over 7 million shares under our share buyback program and increased our quarterly dividend by 5%. And that represented a total return of capital to shareholders of nearly $1.1 billion.

Speaker Change: It seems like something where there are real economics behind it.

Speaker Change: They're large companies are making significant investments are into into AI.

Speaker Change: And where ultimately are.

Speaker Change: Our our architecture, our interconnect architecture is a very critical component together with the chips that you alluded to now relative to shortages of chips. You know that's a I mean, we hope that there are significant investments in chip manufacturing because in our industrial business, we do supply a lot of interconnect products that go into the industry.

Speaker Change: <unk> for semiconductor manufacturing I don't think that we've necessarily seen that as a as a governor on our output or on our customers' demand right now.

So while there continued to be a high level of volatility across the overall market environment in 2023, as we enter 2024, our agile, entrepreneurial management team is confident that we have built further strength from which we can drive superior long-term performance. Now turning to the trends and our progress across our served markets, I would just comment that we remain very pleased that the company's end market exposure is still highly diversified, balanced, and broad, with no end market representing more than 25% of our sales in 2023. This market diversity helps to insulate us from the effect of any given market's volatility while also exposing us to the exciting revolutions happening across the electronics industry. Turning first to the defense market, our sales represented 12% of our total in the fourth quarter and 11% for the full year of 2023. Fourth quarter sales once again grew strongly from the prior year, increasing by 18% in U.S. dollars and 17% in local currency.

Speaker Change: But we'll see it it's not something that would directly impact except that maybe customers. If they couldn't get enough chips. They would they would moderate there their overall construction, but we haven't seen that yet and I think our team is just doing a fabulous job dealing with the surge in demand that we saw this year and it came at a time when overall it demand was was.

Speaker Change: Down but in fact, some of the products were very different products. So it wasn't just that we were able to reallocate capacity from products that were that were not being consumed as much into it is that there was a lot of new stuff that we had to do it and I think we did a really great job of executing on that.

Speaker Change: Our next caller comes from Luke Junk with Baird, you may go ahead.

Speaker Change: Our next caller comes from Luke junk with Baird you May go ahead.

Luke L. Junk: Great, thanks for taking the question. Adam, just hoping you could comment on pricing dynamics into 2024, especially in which parts of the portfolio you might look at as more normal with respect to price downs this year versus areas of the business that could be a laggard in that respect. And then the related question would just be how you're feeling about delivering productivity of your supply chain and your operations to offset any price downs you might face this year. Thanks, Adam. Thanks, Adam.

Luke L. Junk: Great. Thanks for taking the question Adam just hoping you could comment on pricing dynamics into 2024, especially in which parts of the portfolio might look at as more normal with respect to <unk>. This year versus areas of the business that could be a lag in that respect and then the related question would just be how you're feeling about <unk>.

On an organic basis, sales in the defense market increased by 15%, with broad-based growth across virtually all defense applications, particularly strong in naval, helicopters, communications, and airframe applications. Sequentially, our sales increased by a better than expected 4% from the third quarter. For the full year 2023, sales in the defense market grew by 20% in U.S. dollars in local currency and by 18% organically. This reflected our operational execution as well as broad strength across most segments of the defense market, and particularly related to naval, aircraft engine, helicopter, communications, and space-related applications. Looking ahead, we expect sales in the first quarter to decline in the mid-single digits sequentially. And we remain very encouraged by the company's strengthened position in the defense market, where we continue to offer the industry's widest range of high-tech interconnect products. Amidst today's dynamic geopolitical environment, countries around the world are expanding their investments in both current and next-generation defense technologies, thereby increasing the long-term demand potential for Amphenol.

Luke L. Junk: Bring productivity of your supply chain your operations to offset any price downs you might face this year. Thanks Adam.

Luke L. Junk: Yeah.

Luke L. Junk: Hey, Luke, it's Craig. I'll take that one for Adam. I think as we think about pricing, you know, 23, certainly we talked about the fact that we didn't necessarily – we saw pricing coming back to normal. I mean, 22, we talked a lot about, you know, pricing adjustments we were making to try to catch up to inflation, inflationary increases on costs that we saw. And I think that, you know, as we came into 23, you know, sequentially we did a great job on the profitability, but that wasn't necessarily the pricing dynamics. That was more really just operational execution. And I think the pricing in 23 and as we look into 24 is certainly more normalized in that the price and cost environment is more balanced. I wouldn't say the cost environment necessarily has, you know, decreased at all. I think there is certainly an elevated. Level of cost, but they're just not increasing at the pace that we saw, you know, a year ago. So from that perspective, I think the pricing environment is in more of a normal situation. And as we move into 24, I don't necessarily think we're going to get necessarily the benefit of price. And historically, that's not something that we would see anyways. And, you know, typically if you have a normal cost environment, a normal price environment, you know, I think you'll see kind of typical kind of margins and margin increases from a profitability perspective. We talk about 25% as being, you know, typical target that we have in a normal environment. And I think as we move into 24, I would expect that to be the case kind of sequentially as we move into it. So really happy with where we actually ended the year here at record operating level. So we're really well positioned, I think, as we move into 24. I mean, if you look at our margin improvements, I think that that's something that I'm really proud of the team to be able to actually, you know, execute so well during the year to get to these profitability levels. So, yeah. Moving to 24, I expect that overall environment to be the same, and I certainly expect the team to be able to execute at a similar level.

Speaker Change: Hey, Luke its Craig I L. A.

Craig A. Lampo: That one for FERC for Adam I think as we think about pricing.

23, certainly we talked about the fact that we didn't necessarily you saw pricing kind of coming back to normal I mean, 'twenty. Two we talked a lot about you know pricing adjustments, we're making to try to catch up to inflation inflationary increases on costs that we saw and I think that you know as we came into 'twenty three.

Craig A. Lampo: Sequentially, we did a great job on the profitability, but that wasn't necessarily the pricing dynamics that was more really just operational execution and I think the pricing in 'twenty three and as we look into 'twenty. Four is certainly in a more normalized and that the price and cost environment is more balanced I wouldn't say that.

Craig A. Lampo: Cost environment necessarily has decreased.

Craig A. Lampo: Decreased at all I think there are certain elevated level of cost, but they're just not increasing at the pace that we saw you know a year ago.

Craig A. Lampo: So from that perspective, I think the pricing environment is in more of a normal situation and as we move into 'twenty four I don't necessarily think we're gonna get necessarily the benefit of price and historically, that's not something that we would see anyways and you know typically if you have a normal cost environment than normal price environment.

We are well positioned to accelerate our new product development and increase our capacity to support this demand long into the future. The commercial air market represented 3% of our sales in the quarter and 4% of our sales for the full year of 2023. In the fourth quarter, our sales grew by a very strong 25% in U.S. dollars and 23% in local currency and organically, and this was driven by broad-based strength across all aircraft applications. Sequentially, our sales grew by 1% from the third quarter, which was actually ahead of our expectations for a modest seasonal decline. For the full year 2023, sales increased by a very robust 36% in U.S. dollar local currency and organically, reflecting our strong design position on a broad range of platforms, as well as broad-based demand across all aircraft applications. Looking into the first quarter, we expect sales to remain at these lofty fourth-quarter levels. I'm truly proud of our team working in the commercial air market.

Craig A. Lampo: You'll see kind of a niche typical kind of margins and margin increases from a profitability perspective, we talk about 25% as being typical target that we have in normal environment and I think as we move into 'twenty four I would expect that to be the case kind of sequentially as we move into it so really happy with where we actually ended the year here.

Record operating levels. So, we're really well positioned I think as we move into 'twenty four I mean, if you look at our our our margin improvements I think that that's something that a really proud of the team to be able to actually execute so well during the year to get to these profitability level. So as we move into 'twenty four I expect that overall environment to be the same and I certainly expect it at that.

Craig A. Lampo: Seem to be able to execute at a similar level.

Craig A. Lampo: Okay.

Speaker Change: Our next question comes from Wamsi Mohan with Bank of America. You may go ahead.

Speaker Change: The next question comes from <unk> <unk> with Bank of America.

Speaker Change: Go ahead.

Wamsi Mohan: Yes, thank you. Adam, you called out the weakness in 2023 in the communication related markets, but you did exceed your expectations in the fourth quarter. Do you see a greater than normal organic growth rate over the next two years in these markets, given the historically easier compares here? And if you could also just talk about the environment in China, that'd be really helpful. Thank you.

Speaker Change: Yes. Thank you Adam you called out the weakness in 2023 and the communication related markets.

Speaker Change: But you did exceed your expectations in the fourth quarter do.

Speaker Change: Do you see a greater than normal organic growth rate over the next two years in these markets given the historically easier compares here and if you could also just talk about the environment in China that would be really helpful. Thank you.

With the ongoing recovery in travel and thus demand for jetliners, our efforts to strengthen our breadth of high-technology interconnect products while diversifying our market position into next-generation aircraft are paying real dividends. We continue to see great long-term opportunities for expansion of our technology offering to this important market and look forward to realizing the benefits of those growth initiatives for many years to come. The industrial market represented 23% of our sales in the quarter and 25% of our sales for the full year. Our sales in the fourth quarter did decline by 4% in U.S. dollars, 5% in local currencies, and 12% organically.

Speaker Change: Well, thank you very much, Wamsi. Boy, you're asking me to do a tough thing, which is to talk about the next two years in a very volatile space, which is communications. I think that's hard to say what will be the overall growth across communications. I would tell you we see great opportunities across each of those areas, you know, with different things going on. Because, remember, communications is not just IT datacom. It includes mobile networks. It includes mobile devices and, obviously, broadband. And I think there's different stuff going on in each of those areas. If you talk just about IT datacom, which is the biggest part of our communications business, I mean, there is no doubt that, as I mentioned earlier, these investments in AI, I think we're in early days on this. I think that there are going to be more and more developments around the real. Kind of creation of new economic models around AI and then the investments to support that. That's already been broadly talked about. You've heard folks talking about, you know, pretty significant investments in these next generation systems. And, again, the interconnect products are a really integral part of those systems. So I think on that front, you know, I'm not getting out too ahead of my skis to say that I think at least specific to AI in IT datacom, I would expect over the coming couple of years to see, you know, some some great opportunities. I don't know about the base of IT datacom over the next two years. I'm I couldn't I couldn't get I can barely give you a 90 day kind of a very inaccurate guidance for mobile devices. I think that on wireless it.

Speaker Change: Well. Thank you very much want Z boy, you're asking me to do a tough thing which is to talk about the next two years.

Speaker Change: And in a very volatile states such as communications I think that's hard to say what will be the overall growth across communications I would tell you we see great opportunities across each of those areas with different things going on because remember communications not just IC datacom. It includes mobile networks.

Speaker Change: Whose mobile devices, and obviously broadband and I think theres different stuff going on in each of those each of those areas. If you talk just about IC Datacom, which is the biggest part of our communications business. I mean, there is no doubt that as I mentioned earlier. These investments in AI I think we're in early days on this I think that there are going to.

Growth that we realized in oil and gas, rail mass transit, and marine applications was more than offset by moderations in demand in other segments, including battery and electric heavy vehicles, building automation, transportation, and heavy equipment. In addition, our sales into the industrial distribution channel continue to be more muted than they were a year ago. On a sequential basis, sales grew by 1%, but that was driven primarily by acquisitions that we did close in the quarter. For the full year 2023, sales were flat in U.S. dollars and local currency and declined by 7% organically as the contribution from acquisitions was offset by weakness in instrumentation, battery and electric heavy vehicles, factory automation, and heavy equipment applications in particular.

Speaker Change: To be more and more developments around the the real kind of creation of new economic models around AI and then the investments to support that that's already been broadly talked about.

Speaker Change: You've heard folks talking about pretty significant investments in these next generation systems and again the interconnect products are really integral part of of those system. So I think on that front you know I'm not getting too ahead of my skis to say that I think at least specific to AI and it datacom I would expect over the coming couple of years to see.

Speaker Change: You know some some great opportunities I don't know about the base of IC Datacom over the next few years I'm I Couldnt I Couldnt get I can barely give you a 90 day kind of are a.

Speaker Change: Very inaccurate guidance for mobile devices.

Speaker Change: I think that on wireless it we're going through a cycle, which is a typical cycle, where they invest in a new type of a standard they wait to see and by day I mean, the service providers the operators they wait to see how does that settle out how do customers take it our customers willing to pay more.

Looking into the first quarter, we expect sales to remain at these levels as the benefit of recent acquisitions offsets a modest organic sequential decline. Despite this near-term demand pause, driven in particular by elevated inventory levels, both in the distribution channel as well as in certain end markets, I remain proud of our outstanding global team working in the industrial markets. We are very excited by the additions of TPC, Airmar, LID, and PCTel, each of which adds complementary new interconnect, sensor, and antenna technologies to our industrial product offering. And I'm confident that our long-term strategy to expand our high-technology interconnect, antenna, and sensor offering, both organically and through complementary acquisitions, has positioned us to capitalize on the many revolutions that will no doubt continue to occur across the The automotive market represented 24% of our sales in the quarter and 23% of our sales for the full year. Sales in the fourth quarter grew by a robust 16% in U.S. dollars and 15% in local currency.

Speaker Change: We're going through a cycle, which is a typical cycle, where they invest in a new type of a standard. They wait to see, and by they I mean the service providers, the operators. They wait to see how does that settle out, how do customers take it, are customers willing to pay more for the functionality that's delivered by that. And then there starts usually another round of the investments around that. And I think we're in that lull period right now. I couldn't tell you when that lull period will inflect and become more investment. But I can tell you for sure that in the coming years, there will need to be more investment around 5G and ultimately 6G and all the wireless networks. Because the vast majority of people connecting to the Internet are doing it not on a connection, like a Cat5 cable or in an office. They're doing it on a wireless basis while they're moving around the world. And so that network is going to have to keep up with the data traffic that continues to expand, you know, kind of on an unabated basis. And then finally, broadband, you know, broadband is an area where I think there is a lot of push.

Speaker Change: For the functionality that's delivered by that and then Theres starts usually another round of the investments around that and I think we're in that low period right now I Couldnt tell you when that lull period, well will inflect and become more investment, but I can tell you for sure that in the coming years, there will need to be more investments around.

Speaker Change: Round.

Speaker Change: Round five G and ultimately 60 and all of the wireless networks, because the vast majority of people connecting to the Internet are doing it not on our connections like a cat five cable or in an office, they're doing it on a wireless basis, while they're moving around the world and so that network is going to have to keep up with the data traffic there.

Speaker Change: Continues to expand you know kind of about an unabated basis, and then finally broadband broadband is an area where I think there is a lot of push.

Speaker Change: Thank you very much. Thank you very much. Thank you very much.

Speaker Change: In countries like ours, and others to ensure that there is both the capacity and the coverage for broadband access because it's viewed not as a luxury but rather as a necessity that folks can have broadband access and so I think long term, there's good opportunities there as well.

And on an organic basis, our sales to the automotive market increased by 12%. That was really driven by broad-based strength across most automotive applications, including electric and hybrid electric vehicles. Sequentially, our automotive sales increased by 8%, which was better than our expectations coming into the quarter for the full year 2023. I'm pleased that our sales increased by a strong 12% in U.S. dollars, 13% in local currency, and 12% organically, and that reflected broad strength across the automotive market, including in particular next-generation electronics, for example, electric and hybrid drivetrains. Looking into 2024, we expect a high single-digit sequential seasonal moderation in sales in the first quarter from these levels. I'm truly proud of our team working in the automotive market. Their performance in 2023 is yet another confirmation of the benefits of their focus on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. It's really a multitude of applications, including electrified drivetrains, but not just that; there are many other applications.

Speaker Change: Relative to China, I think I'm very happy to see that the sort of geopolitics of China and the U S seems to be the pendulum is swinging towards the more moderate because there's more people talking and all of that and we're encouraged by that I think the world is a better place when countries are talking rather than arguing and I think that that's a good thing.

Speaker Change: I think there's a lot written about the Chinese macro environment and I'm not the expert to sort of go off on that but what I will say is that you know in those areas of the electronics industries, where we support and in China, You know places like the automotive industry places like the industrial market, we continue to see great opportunities and our team continues to do a fab.

Speaker Change: This job of capitalizing on those opportunities for the domestic market and we feel really good about the position that we have as a company who is of course, a global company, but who operates through our unique organizational approach as a local company in that environment and being the best of both worlds at a time like this when the world is somewhat uncertain.

Speaker Change: It is a really good advantage for amphenol.

Speaker Change: And our next caller is Samik Chatterjee with JPMorgan. You may go ahead.

Speaker Change: And our next caller is systemic chatterji with Jpmorgan you May go ahead.

Samik Chatterjee: Hi. Happy New Year.

Samik Chatterjee: Oh, Hi, happy new year, and thanks for taking my question I guess, Adam I wanted to see if you can share your thoughts around.

Samik Chatterjee: I guess Adam

Samik Chatterjee: Share your thoughts around.

Samik Chatterjee: Organic

Samik Chatterjee: Organic growth opportunities for the company.

Samik Chatterjee: in all

Samik Chatterjee: Food related inorganic growth.

We look forward to benefiting from that strong position for many years to come. The mobile devices market represented 11% of our sales in the quarter and 10% of our sales for the full year 2023. Our fourth-quarter sales moderated by 3% in U.S. dollars, local currency, and organically as robust growth in smartphones was once again more than offset by declining sales into tablets, laptops, and wearables. However, sequentially, our sales increased by 9%, which was much better than our expectation coming into the quarter for a high single-digit decline. For the full year 2023, sales in the mobile devices market declined by 12% in U.S. dollars and 10% organically, as strong growth in smartphones was more than offset by declines in other mobile device applications.

Samik Chatterjee: Thank you for joining us.

Samik Chatterjee: Strong pipeline of revenue from the acquisitions, you've closed that you're on boarding.

Samik Chatterjee: Thank you so much for joining us.

Samik Chatterjee: Maybe share your thoughts about how you think about the rest of the business growing with David.

Samik Chatterjee: Thank you for joining us.

Samik Chatterjee: and negative

Samik Chatterjee: David switching from negative <unk> 24, and what does the average sort of grow that what do you expect that all of the acquisitions that you closed some more recently.

Samik Chatterjee: The average sort of grew to be expected of the act.

Speaker Change: Thank you.

Speaker Change: Thank you very much. Again, there seemed to be a little bit of a cutout of the sound there. But I think your question is, you know, how do I see the organic growth prospects as opposed to just the acquisitions? And I think we feel, you know, we feel good about the organic prospects of the company, you know, given all what I talked about each of our individual markets, and I'm not going to go through each of them once again. But I will just tell you that the investments that we've made in next generation technologies, the work that we've done to support customers, when they need us the most over the last, you know, two, three, four years, has positioned us very, very strongly organically to have strong, robust performance in the years to come. And the other thing I would say as well is, we think about acquisitions, and obviously, in the first year that you own a company, you know, that's considered. acquired growth. But we're focused much more on what happens thereafter. And are we acquiring companies that become platforms of future organic growth for the company? And I would tell you, you know, all these 10 companies that we acquired this year, the nearly 30 companies that we've acquired since 2019,

Speaker Change: Yeah. Thank you very much again, there seem to be a little bit of a cut off.

The sound there, but I think your question is how do I see the organic growth prospects as opposed to just the acquisitions and I think we feel you know we feel good about the organic prospects of the company you know given all what I talked about each of our individual markets and I'm not going to go through each of them are once again, but I will just tell you that the <unk>.

Speaker Change: Investments that we've made in next generation technologies, the work that we've done to support customers.

Speaker Change: When they need us the most over the last two or three or four years has positioned us very very strongly organically two to have a strong robust performance in the years to come and the other thing I would say as well is we think about acquisitions and obviously in the first year that you own a company that's considered acquired.

Looking into the first quarter, we do anticipate a typical seasonal sequential decline of approximately 35%. While mobile devices will always remain one of our most volatile of markets, our outstanding and agile team is poised as always to capture any opportunities for incremental sales that may arise in 2024 and beyond. Our leading array of antennas, interconnect products, and mechanisms continues to enable a broad range of next-generation mobile devices, which positions us well for the long term. The mobile networks market represented 3% of our sales in the quarter and 4% of our sales for the full year. Sales in this market declined from the prior year by 26% in U.S. dollars, 27% in local currency, and 34% organically, as we continued to manage through a broad-based reduction in spending by network operators and wireless equipment manufacturers. Sequentially, our sales decreased by 6%, which was in line with our expectations. For the full year, sales declined by 26% from the prior year and 32% organically, driven by the spending reductions that we've discussed throughout the year.

Speaker Change: But we're focused much more on what happens thereafter and are we acquiring companies that become platforms of future organic growth for the company and I would tell you you know all of these 10 companies that we acquired this year. The nearly 30 companies that we've acquired since 2019.

Speaker Change: To me, these companies all represent expanded platforms for future organic growth for the company, which makes me feel confident that over time we will have, you know, subject to all of the market dynamics that for sure we're not immune to, that the company is positioned to have really great organic growth potential.

Speaker Change: To me these companies all represent expanded platforms for future organic growth for the company.

Speaker Change: Which makes me feel confident that over time, we will have you know subject to all of the market dynamics that for sure we are not immune to.

Speaker Change: That the company is positioned to have really great organic growth potential.

Speaker Change: Yeah.

Speaker Change: And our next caller is Andrew Buscaglia with BNP. You may go ahead.

Speaker Change: And our next caller is Andrew Buscaglia with BNP you May go ahead.

Andrew Buscaglia: Bye, guys.

Andrew Buscaglia: Hi, guys.

Andrew Buscaglia: I just wanted to ask on IT Datacom, again, with AI, the past couple of quarters, you called out sequential, you know, attributed sequential improvements.

Andrew Buscaglia: Wanted to ask on <unk>.

Andrew Buscaglia: It Datacom.

Andrew Buscaglia: Again [laughter].

Andrew Buscaglia: With with AI.

Andrew Buscaglia: The past couple of quarters, you called out sequential attributed sequential improvements.

Andrew Buscaglia: to AI.

Andrew Buscaglia: Hi.

Andrew Buscaglia: What would you say the same thing took place in Q4?

What would you say the same thing.

Andrew Buscaglia: Took place in Q4 and then.

Andrew Buscaglia: That plus your guidance, would you imply, because we can't see that AI piece in that business, would you say it's continuing to accelerate on a sequential basis?

Looking ahead, we expect a modest increase in sales from these fourth-quarter levels. And despite this more challenging short-term wireless investment environment, our team continues to work aggressively to realize the benefits of our efforts to expand our position in next-generation 5G equipment and networks around the world. When customers once again drive renewed wireless investment, we look forward to benefiting from the increased potential that comes from our position with both equipment manufacturers and mobile service providers. The information technology and data communications market represented 20% of our sales in the quarter and 19% of our sales for the full year.

Andrew Buscaglia: That plus your guidance would you imply are is this.

Andrew Buscaglia: Because we can't see that AI piece in that business would you say its continuing to accelerate.

Andrew Buscaglia: On a sequential basis.

Speaker Change: Thank you very much, Andrew. Yeah, I think what I said in my remarks is that we saw growth in AI and we saw also growth in the underlying business. So I think over the last couple of quarters, I've described that all of our upside, all of our sequential growth really did come from AI. I think that this quarter, you know, it's some of each, which is actually really encouraging for us that we've seen maybe what one could call a bottoming of the underlying IT demand. You know, are we continuing to make progress in AI? Do we see continued acceleration opportunities? Yeah, I wouldn't say that every quarter it's going to accelerate, you know, in lockstep like it did, you know, over the course of Q2 and Q3. But for sure, we see opportunities long term. We see opportunities to be generating sales related to AI that are greater than we than we are today.

Speaker Change: Yes. Thank you very much Andrew Yeah, I think what I said in my remarks is that we saw growth in AI and we saw also growth in the underlying business. So I think over the last couple of quarters I've described that our all of our upside all of our sequential growth really did come from AI I think that this quarter.

Speaker Change: You know, it's sum of each which is actually really encouraging for us that we've seen maybe what one could call a bottoming of the underlying demand.

Speaker Change: Demand.

Speaker Change: Are we continuing to make progress in AI do we see continued acceleration opportunities yeah, I wouldn't say that every quarter, it's going to accelerate.

We're very pleased that our sales in the fourth quarter returned to growth compared to the prior year, with sales in U.S. dollars and local currency increasing by 6% and organically by 5%. Sequentially, our sales increased by a much better than expected 6% as we continued to benefit from our strong presence with AI data center customers as well as some overall improved demand. For the full year 2023, our sales in the IT Datacom market declined 13% in U.S. dollars and organically, as strong demand for AI-related applications was more than offset by inventory adjustments that we saw amongst our traditional IT Datacom applications.

<unk> stepped like it did over the course of Q2 and Q3.

Speaker Change: But for sure we see opportunities long term to be generating sales related to AI that are greater than we than we are today.

Speaker Change: And our next caller is Mark Delaney with Goldman Sachs. You may go ahead.

Speaker Change: And our next caller is Mark Delaney with Goldman Sachs. You May go ahead.

Mark Delaney: Yes, good afternoon. Thanks very much for taking my question and Happy New Year to all of you as well. Automotive has been a fast growing market for the company. However, several auto OEMs have been seeing slower EV sales and have said they're going to rethink how fast they want to shift their production toward EVs. And so I'm hoping to better understand if you think that will create any meaningful near to intermediate term challenges for Amphenol that could limit the company's growth of our market or perhaps lead to some inventory destocking. Thanks.

Mark Delaney: Yes, good afternoon, and thanks very much for taking my question and happy New year to all of you as well automotive has been a fast growing market for the company. However, several auto Oems have been seen slower EV sales I know that theyre going to rethink how fast they want to shift our production toward evs and I'm, hoping to better understand if you think that will create any meaningful.

Mark Delaney: Near to intermediate term challenges for amphenol they could eliminate.

Mark Delaney: The company's growth.

Mark Delaney: Market or perhaps lead to some inventory destocking.

Looking ahead, we do expect a mid-single-digit sequential seasonal decline in sales. But I have to say, coming out of what was a challenging year in the overall IT Datacom market, that we're more encouraged than ever by the company's position in this space. Our team continues to do an outstanding job securing future business on next-generation IT systems, particularly those enabling artificial intelligence. Indeed, the revolution in AI has created a unique opportunity for Amphenol, given our leading high-speed power and fiber-optic interconnect products. With machine learning driving a more intensive usage of these highest technology interconnect products, we're very well positioned for the future. This creates a continued long-term growth opportunity for Amphenol. The broadband communication market represented 4% of our sales in the quarter and 4% for the year. However, sales in the fourth quarter were down 31% in U.S. dollars and 32% organically, as broadband operators continued to moderate their procurement levels.

Speaker Change: Thank you.

Speaker Change: Well, thank you very much, Mark, and Happy New Year to you as well. Look, we read all the same papers and we hear about the sort of discussions about slowdowns in EV sales. I think we shouldn't forget that this is a fairly Western dynamic. I don't think we hear, for example, in Asia and specifically in the largest car market in the world, China, about folks, you know, turning their back on EVs and going back to internal combustion engine. But we do hear a little bit about that, I think, here and in Europe. And as I've described, I mean, we don't care if a car has an EV drivetrain or not. What we care about, does a car have a lot of electronics in it and new electronic systems? Among those systems are certainly electrified drivetrains or hybrid electric drivetrains. And I think that what we've seen in Asia, what we've seen in Europe, what we've seen in North America, is that there is a real acceleration of the adoption of electronics in cars, period.

Speaker Change: Well, thank you very much mark and happy new year to you as well.

We read all the same papers and we hear about the the sort of discussions about slowdowns in EV sales I think we shouldn't forget that this is a fairly western dynamic I don't think we hear for example in Asia and specifically in the largest car market in the world China about folks you know turning their back on EV.

Speaker Change: And going back to two internal combustion engine, but we do hear a little bit about that Ah I think here and in Europe.

Speaker Change: And as I've described I mean, we don't care if a car has an E V drivetrain or not when we care about does a car have a lot of electronics in a new electronic systems. Among those systems are certainly electrified drivetrains or hybrid electric drivetrains.

Speaker Change: And I think that what we've seen in in Asia, what we've seen in Europe, what we've seen in North America is that there is a real acceleration of the adoption of electronics in cars period.

Speaker Change: and some of that may actually be related to the fact that EVs tend to be a little more fancy electronically. And I think car companies are seeing that and upgrading their standard companies to incorporate more electronic functionality. And whenever you have electronic functionality in a car, regardless of the drivetrain, you're going to have new interconnect solutions, you're going to have new sensor solutions, you're going to have new antenna solutions. And those are the three areas of our participation in the automotive market. For sure, if I go to like the world's largest EV market, China, for example, I mean, there continues to be unabated, a real adoption. And I would almost say that EVs in that market have kind of reached a sort of escape velocity where it's just really normal. I mean, you see them all over the place. And I think our team there just did a fabulous job of getting a breadth of connectivity. And I think we've done a great job of getting that penetration across both domestic and international EV manufacturers, whereby we really are able to enjoy the benefits of that. And I think in Europe and in North America, we've done a great job, but we've also done a really great job on capitalizing upon some of these new electronics. And so I wouldn't put any dynamic here in the category of something that we view as a real near or medium term challenge. I think quite the contrary is car companies struggle to figure out how. They can sell their products and make more money from doing it. They're always going to fall back on electronics as the way to do that. And that's a good thing for them.

Speaker Change: And some of that may actually be related to the fact that E. V is tend to be a little more fancy electronically and I think car companies are seeing that and upgrading their their standard companies to incorporate more electronic functionality and whenever you have electronic functionality in the car regardless of the drivetrain.

On a sequential basis, sales did decline by 12%, which was worse than our expectations coming into the quarter when we anticipated more of a modest increase. For the full year 2023, sales were down by 7% in U.S. dollars and organically, driven by the continued pause in broadband operator spending. Looking ahead, we expect sales in the first quarter to increase modestly from these levels. Regardless of the current demand dynamics, we do remain encouraged by the company's strength and position in the broadband market. We look forward to continuing to support our service provider customers around the world, all of whom are working to increase their network coverage and bandwidth to support the proliferation of high-speed data applications to homes and businesses. And finally, turning to our outlook, there's no doubt that the current economic environment remains somewhat uncertain. Assuming the continuation of these current market conditions and also assuming constant exchange rates, for the first quarter, we expect sales in the range of $3.4 billion to $3.1 billion and adjusted diluted EPS in the range of $0.71 to $0.73.

Speaker Change: You you you're going to have new interconnect solutions youre going to have new sensor solutions, you're going to have new antenna solutions and those are the three areas of our participation in the automotive market for.

Speaker Change: For sure if I go to like the world's largest EV market China.

Speaker Change: For example, I mean, there continues to be unabated.

Speaker Change: A real adoption and I would almost say that <unk> in that market have kind of reached a sort of escape velocity, where there's just really normal I mean do you see them all over the place and and I think our team. There just did a fabulous job of getting a breadth of penetration across both domestic and international EV manufacturers, whereby we really are.

Speaker Change: To enjoy the benefits of that and I think in Europe and in North America, we've done a great job, but we've also done a really great job on capitalizing upon some of these new electronics and so I wouldn't put any dynamic here in the category of something that we view as a real near or medium term challenge.

This would represent sales growth of 2-4% and adjusted diluted EPS growth of 3-6% compared to the first quarter of 2023. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow Amphenol's market position while driving sustainable and strong profitability over the long term. And finally, I just want to take this opportunity to thank our entire global team around the world, including all of those who work across our factories, touch our products, and ultimately deliver to our customers what they need. I'm just truly grateful for all of their outstanding efforts, both here in the fourth quarter and, moreover, for the entirety of 2023. Without them, we wouldn't be able to make it happen like we do.

Speaker Change: Quite the contrary as car companies struggle to figure out how they can sell their products and make more money from doing that they're always going to they're always going to fall back on electronics is the way to do that and that's that's a good thing for amphenol.

Speaker Change: Our next caller is William Stein with Truist Securities. You may go ahead.

Speaker Change: Our next caller is William Stein with Truth Securities You May go ahead.

William Stein: Great, thanks. Adam, I'm hoping you can comment on the aperture for M&A and products within it. I think historically you've talked about not wanting to acquire system-level solutions, and I think at least one of the acquisitions you've done recently has such products, and I wonder if that could potentially be something you'll grow into and expand, or if we should see you perhaps shy away of that business going forward. Thank you.

William Stein: Great. Thanks, Adam I'm, hoping you can comment on the.

Speaker Change: The aperture for M&A and products within it.

Adam: I think historically, you've talked about not <unk>.

Adam: Wanting to acquire system level solutions, and I think at least one of the acquisitions you've done recently has.

Adam: Such products and I wonder if that could be.

Adam: Potentially be.

Adam: Something you'll grow into and expand or if we should see perhaps shy away of that business going forward. Thank you.

Operator: And with that, operator, we'd be very happy to take any questions. Thank you. The question and answer period will now begin. Please limit yourself to one question per caller.

Speaker Change: Thank you so much. I think what you're alluding to is PCTel and the fact that they have a very small test and measurement business and really wonderful people, wonderful products. But that's not why we bought PCTel. You'll recall we've acquired companies in the past, some of which are not purely the things that we were looking to acquire. And we're always very sensitive that we're never going to put ourselves in a competitive situation with our customers. And really, PCTel is known for their antenna technologies, which are fabulous. Not to say a bad word about their team that works in test and measurement, but we're not adopting a strategy to go after system-level products. In terms of our aperture for M&A, we just see fabulous opportunities. I mentioned it in my prepared remarks. You know, I think we have demonstrated an ability to acquire companies really across the board from a size perspective. We've demonstrated the ability to acquire a lot of companies and to process those effectively. And, you know, our small little headquarters team here, they may have been a little bit busier than normal over the last year with these 10 acquisitions. But the beauty is because of our organizational structure, now having 14 groups across three global divisions, we have the wherewithal to make sure that those acquisitions get. Really, they're due attention when they become part of Amphenol. And, you know, I think the near-term pipeline remains a very robust pipeline. And, you know, we look forward to taking advantage of that. We will always remain a very disciplined buyer, as we have forever. You know, I am willing to walk away at the very last moment if I have to, if something we find is not to our liking. We'll always pay a reasonable price, a fair price for great companies. We may not always be the highest. We may not always be the highest-priced buyer, but I think we are often the best buyer because of our effectiveness, our willingness to work aggressively to get things done. And the fact is our organizational structure allows those newly acquired companies to become part of Amphenol in a very unobtrusive fashion. They join seamlessly. They come in, and on day one, they just keep operating like they were doing on all the days before. And that is a relatively low-risk approach to acquisition because we're not going in and just over. We're just sort of having these kind of convulsive restructurings of the company where you run the risk of destroying what you didn't even know you had. So we look forward to continuing to have great acquisitions in the future, but we're not going to be a kind of a system-level company. We know what we are. We're an interconnect company. There are wonderful opportunities for interconnect products to be expanded both organically and through acquisition going forward. Lots of really attractive companies out there, and, you know, we'll continue to position ourselves so that the ones that – that match with us, the ones that go through our really rigorous kind of Rubicon of deciding whether or not to buy them, you know, we'll be in a good position to execute on those over the near, medium, and long term.

Speaker Change: Well thank you so much.

Speaker Change: What youre alluding to is PC sell and the fact that they have a very small test and measurement business and really wonderful people wonderful products.

Amit Daryanani: Our first caller is Amit Daryanani with Evercore. You may go ahead. Thank you. Good afternoon, everyone.

Speaker Change: But that's not why we bought pizza tell I'm, just you'll you'll recall we've acquired companies in the past some of which are not purely the things that we were looking to to acquire and we were always very sensitive that we're never going to put ourselves in a competitive situation with our customers.

Amit Daryanani: The one question for me would be, can you talk about the weakness in the industrial market? You talked about softness there, and a little bit of inventory softness as well. I'm curious, is that stable worse than what you saw 90 days ago, or do you feel like it's getting worse as you head into 2024? And then, to the extent you can talk about it, do you see the list of this perhaps in the hot market as well? Great. Thank you.

Speaker Change: And you know really pizza tell is known for their antenna technologies, which is which are fabulous.

Speaker Change: Not to say a bad word about their their team that works in test and measurement, but we're not adopting a strategy to go after system level products.

Amit, I didn't perfectly hear the second part of your question. There's a little bit of a connection issue, but I think, relative to your question, which was, is industrial stable versus 90 days ago? I mean, look, I think we came into the quarter with an expectation of kind of a modest reduction in sales, and our sales were essentially in line with that. So I think it was kind of what we expected it to be.

Speaker Change: In terms of our aperture for M&A I mean, we just see fabulous opportunities I mentioned it in my prepared remarks.

Speaker Change: We I think we have demonstrated an ability to acquire companies really across the board from a size perspective, we've demonstrated the ability to acquire a lot of companies in the process those effectively.

Speaker Change: And you know are small little headquarters team here. They may have been a little bit busier than normal over the last year with these 10 acquisitions, but the beauty is because of our organizational structure now having 14 groups across three global divisions, we have the wherewithal to make sure that those acquisitions get really they're due attention when they become part of Amphenol and.

I would say that the book-to-bill in industrial was a bit weaker. I mean, if we think about why our book-to-bill was 0.95 to 1, the real driver for that was industrial on one side. And we did see in the IT Datacom market a little bit of a softer book-to-bill, but that is really just a little bit more of an equalization from the very high books-to-bill that we've seen over the prior couple of quarters. So I don't think the IT Datacom book-to-bill is at all representative of the demand environment.

Speaker Change: I think the near term pipeline remains a very robust pipeline and we look forward to taking advantage of that we will always remain a very disciplined buyer.

But I think in the industrial market... We did see bookings a little softer than we had anticipated. I'm going to assume that your second question is, how do we see that going forward? And, you know, where do we see that kind of cycle in industrial? And I think it's too early to tell. I mean, the beauty of our industrial business is that it's so broad. And so we're not levered into one or another of the individual segments.

Speaker Change: As we have forever.

Speaker Change: I I am willing to walk away at the very last moment, if I have two if something we find does not to our liking him will always pay a reasonable price a fair price for great companies.

Speaker Change: We may not always be the highest priced buyer, but I think we are often the best buyer because of our effectiveness our willingness to work aggressively to get things done and the fact is our organizational structure allows those newly acquired companies to become part of Amphenol and the very unobtrusive fashion. They joined seamlessly they come in and on day one they just.

And, you know, there are so many segments across the industrial market that we participate in. And so... And we don't have any of those that are really disproportionate to our overall business. And we continue to see some of those segments, you know, areas like marine and oil and gas, rail mass transit, you know, medical during the course of this year that still have very robust demand. But no doubt about it, areas like factory automation, instrumentation, those are areas where we've seen more market reductions in demand and also more impact from the distribution channel. You know, when is that going to be working?

Speaker Change: Keep operating like they were doing on on all the days before and that is a relatively low risk approach to acquisition, because we're not going in and just over just sort of having these kind of convulsive restructurings of the company, where you run the risk of destroying what you didn't even know you had.

Speaker Change: So we look forward to continuing to have a great acquisitions in the future, but we're not going to be a kind of a system level company. We know what we are we're in the interconnect company. There are wonderful opportunities for interconnect products to be expanded both organically and through acquisition going forward lots of really attractive companies out there and we'll continue to.

When is that going to be worked out in the distribution channel and the inventory? When does some of that demand return in some of those segments? I think it's a little too early to tell.

And as we go through the course of this year, we'll try to give you a really good read on that. I mean, as we look into here now, the first quarter, as I said in my prepared remarks, we do anticipate a kind of modest level in the first quarter, but that's really supported by the acquisitions that we have. And on an organic basis, we see the first quarter, you know, again modestly down from our current level. Our next question comes from Asya Merchant with CitySherp. You may go ahead. You may go ahead. Great. Hopefully, you can hear me clearly, and I don't have an echo. I will try.

Speaker Change: And ourselves so that the ones that that that match with us the ones that go through our a really rigorous a kind of rubicon of of of deciding whether or not to buy them well, we'll be in a good position to execute on those are over the near medium and long term.

Speaker Change: And our next caller is Chris Snyder with UBS. You may go ahead.

Speaker Change: And our next Congress, Chris Snyder with UBS you May go ahead.

Chris Snyder: Thank you. I want to follow up on some of the earlier conversation on AI. So it sounds like book to bill for AI moderated sequentially, maybe after some early outsized orders, just given the company's foundation in that market. So I guess my question is, do you think that this moderation is a single quarter phenomenon? Or do you would you expect that to persist for multiple quarters? Because it does seem like the top line is still continuing to grow sequentially. Thank you. Thanks very much, Chris. Yeah, I mean, look, I don't usually talk about book to bill by sub markets, but I will tell you that, for sure, I mean, we had very strong bookings in AI, AI related applications in Q2 and Q3. And so it's not surprising that here in Q4, our IT Datacom book to bill was a bit below zero. And sorry, a bit below one. And, and because of those significant orders that we received, which customers wanted to place because they need the product, and then we're executing upon those orders. And yeah, I think that our IT Datacom business is, is in a is in a good position looking forward. I mean, our guidance for for the first quarter is is to have a little moderation. Just not abnormal this time of year. Actually, quite, quite normal. Let me say that. And layered on top of that, I think the AI is, is a good thing to have. So no, I think you characterize it quite well.

Chris Snyder: Thank you I wanted to follow up on some of the earlier conversation on AI. So it sounds like book to Bill for AI moderated sequentially, maybe after some early outsized orders just given the company's foundation in that market. So I guess my question is.

On the IT Datacom market, if you guys can please share some insight. Looks like this market's ramping up quite nicely for you guys. If you could elaborate a little bit on how you think about your wins in the AI segment and how you're able to ramp that into revenues going forward, especially given constraints on supply on the GPU side. How do you guys think you can ramp up AI for the remainder of the year? Thank you. Thank you. Well, thank you very much and welcome to our call. I look forward to getting to meet you in person.

Chris Snyder: Do you think that this moderation there isn't a single quarter phenomenon or do you would you expect that to persist for multiple quarters because it does seem like the top line is still continuing to grow sequentially. Thank you.

Speaker Change: Thanks, Barry Thanks, very much Chris Yeah, I mean look I don't usually talk about book to Bill by Submarkets, but I will tell you that for sure I mean, we had very strong bookings in AI.

We're really excited about the progress that the company has made in AI. And I just want to reflect on one aspect, which is that AI is not new to us. Well, the world has sort of woken up to AI over the course of the last year with the advent, you know, a year ago, November, of ChatGPT and this sort of revolution in generative AI.

Speaker Change: AI related applications in Q2, and Q3 and so it's not surprising that here in Q4, our I T. Datacom book to Bill was a bit below zero.

Speaker Change: Sorry, a bit below one.

Speaker Change: And and because of those significant orders that we received which customers wanted to place because they need the product and then we're executing upon those orders and and yes, I think that our Datacom business is is in a is in a good position looking forward I mean, our guidance for the first quarter is.

Our team's been working on the interconnect architecture surrounding AI for a long, long time. And so it is only now that maybe there is this acceleration, almost you could call it even a kind of revolution or a gold rush around AI. But we've been building the capability, building the product capability, building the product capability, building the manufacturing capability, and capacity to support that for a long time. And I think this year, one of the ways that we were able to maybe even get a disproportionate share of some of the more urgent demand was that we were very quick to flex our capacity in favor of customers who needed products and when they needed them. And I think our team has always shown the ability to have that agility in reacting to upticks of demand and to be able to do that. And I think that this AI is no different. I'm really proud of our team and how they've done this.

Speaker Change: Is to have a little moderation.

Speaker Change: It is not abnormal this time of year.

Speaker Change: Quite quite normal let me say that in.

Speaker Change: And layered on top of that I think the AI is a good thing to have so no I think you characterized it quite well.

Speaker Change: Our next caller is Joseph Giordano with TD Cohen. You may go ahead.

Speaker Change: Our next caller is Joseph Giordano with PD Cowen you May go ahead.

Speaker Change: Hi guys, this is Michael on for Joe.

Speaker Change: Hi, guys. This is Michael on for Joe.

Michael: So earlier you had mentioned, you know, commentary regarding orders and specific markets. Can you just provide like a high level, maybe book to bill on a consolidated basis for the quarter or any color there?

Michael: So earlier you had mentioned you know commentary regarding orders.

Michael: Specific markets can you just provide a high level, maybe book to bill on a consolidated basis for the quarter or any color there.

are paying real dividends. We continue to see great long-term opportunities for expansion of our technology offering to this important market and look forward to realizing the benefits of those growth initiatives for many years to come. The industrial market represented 23% of our sales in the quarter and 25% of our sales for the full year. Our sales in the fourth quarter declined by 4% in US dollars, 5% in local currencies, and 12% organically, as growth that we realized in oil and gas, rail mass transit, and marine applications was more than offset by moderations in demand in other segments, including battery and electric heavy vehicles, building automation, transportation, and heavy equipment. In addition, our sales into the industrial distribution channel continue to be more muted than they were a year ago.

You know, looking forward, it's still too early to say what that looks like over the long term. But there's no question in my mind that AI seems like something that is not such a small deal. It seems like something where there is real economics behind it, where large companies are making significant investments in AI, and where, ultimately, you know, we're going to be able to do a lot more. But ultimately, you know, our architecture, our interconnect architecture, is a very critical component together with the chips that you alluded to. Now, relative to shortages of chips, you know, that's, I mean, we hope that there are significant investments in chip manufacturing because, in our industrial business, we do supply a lot of interconnect products that go into the industry for semiconductor manufacturing. I don't think that we've necessarily seen that as a governor on our output or on our customers' demand right now. But, you know, we'll see.

Michael: about earlier that our book to bill was 0.95 to 1 for the quarter.

Michael: It's about earlier that our book to Bill was <unk> 95 to one for the quarter.

Speaker Change: Thank you.

Michael: Yeah.

Speaker Change: I pray, do we have another question?

Operator, do we have another question.

Speaker Change: Our next caller is Steven Fox with Fox Advisors. You may go ahead.

Speaker Change: Our next caller is Steven Fox with Fox Advisors, you May go ahead.

Hi, good afternoon.

Broadly speaking the latest round of acquisitions were around sensors antennas and assemblies.

Speaker Change: I was just curious like Adam your updated thoughts on your M&A focus by technology, especially in the context of what looks like gross margins that are now at 33% level.

On a sequential basis, sales grew by 1%, but that was driven primarily by acquisitions that we did close in the quarter. For the full year 2023, sales were flat in US dollars and local currency and declined by 7% organically, as the contribution from acquisitions was offset by weakness and instrumentation, battery and electric heavy vehicles, factory automation, and heavy equipment applications in particular.

Speaker Change: I guess some of these products have lower gross margins some have higher I don't know if theres a mix impact that's influencing the gross margin now with the M&A, but just broadly speaking when you you know the general buckets of technology that you look at what is your thinking of what you've done and where you need to go now.

It's not something that would directly impact the company, except that maybe customers, if they couldn't get enough chips, they would moderate their overall construction. But we haven't seen that yet, and I think our team is just doing a fabulous job dealing with the surge in demand that we saw this year. And it came at a time when overall IT demand was down. But, in fact, some of the products were very different products.

Speaker Change: Well, thanks, very much Steve Yeah, I mean look in the quarter, we acquired companies who make sensors antennas.

Looking into the first quarter, we expect sales to remain at these levels as the benefit of recent acquisitions offsets a modest organic sequential decline. Despite this near-term demand pause driven in particular by elevated inventory levels, both in the distribution channel, as well as in certain end markets, I remain proud of our outstanding global team working in the industrial market. We are very excited by the additions of TPC, Aromar, LID, and PCTEL, each of which adds complementary new interconnect sensor and antenna technologies to our industrial product offerings.

Speaker Change: Cable and cable assemblies, and you know really high technology cable actually that has really great value for its customers and we continue to see acquisition opportunities across really all of our interconnect products from discrete connectors to cable cable assembly value add complex value add interconnect products.

Speaker Change: Sensors complex sensor interconnect assemblies.

So it wasn't just that we were able to reallocate customers, we were able to reallocate capacity from IT products that were not being consumed as much. And on top of that, there was a lot of new stuff that we had to do, and I think we did a really great job. Our next caller comes from Luke Junk with Baird. You may go ahead.

Speaker Change: Antennas and the like and we're really pleased to continue to find companies across all of those products I wouldn't tell you that we think so much about gross margin by product, we see great margin opportunities as you know and Craig has said it. So many times, we're very much focused on operating margins and yeah.

And I'm confident that our long-term strategy to expand our high-technology interconnect, antenna, and sensor offering, both organically and through complementary acquisitions, has positioned us to capitalize on the many revolutions that will no doubt continue to occur across the industrial electronics market. The automotive market represented 24% of our sales in the quarter and 23% of our sales for the full year. Sales in the fourth quarter grew by a robust 16% in U.S. dollars and 15% in local currency.

Luke L. Junk: Great, thanks for taking the question. Adam, just hoping you could comment on pricing dynamics into 2024, especially which parts of the portfolio you might look at as more normal with respect to price cuts this year versus areas of the business that could be a laggard in that respect. And then the related question would just be how you're feeling about delivering productivity in your supply chain and your operations to offset any price downs you might face this year. Thanks, Adam. Thanks, Adam. Hey, Luke, it's Craig.

Speaker Change: Some of these companies do operate below.

Speaker Change: Below our corporate average not all of them by the way, but some of them do and I think we that doesn't relate at all to their product type. We we don't believe that there is a correlation between whether someone makes a connector a sensor and antenna.

Speaker Change: A cable or a cable assembly that that is necessarily going to put them in a certain bucket of profit potential we actually see great profit potential for all companies and that's one of the ways. We screen for acquisitions I mean, we're not going to buy a company. If we don't see the long term potential for that company to to elevate its profitability too.

And on an organic basis, our sales to the automotive market increased by 12%. That was really driven by broad-based strength across most automotive applications, including electric and hybrid electric vehicles. Sequentially, our automotive sales increased by 8%, which was better than our expectations coming into the quarter for the full year 2023. I'm pleased that our sales increased by a strong 12% in US dollars, 13% in local currency, and 12% organically. And that reflected broad strength across the automotive market, including in particular next-generation electronics, for example, electric and hybrid drivetrains.

Craig A. Lampo: I'll take that one for Adam. I think as we think about pricing, you know, 23. We certainly talked about the fact that we didn't necessarily – we saw pricing coming back to normal. I mean, at 22, we talked a lot about, you know, pricing adjustments we were making to try to catch up to inflation, inflationary increases in costs that we saw. And I think that, you know, as we came into 23, we did a great job on profitability, but that wasn't necessarily the pricing dynamics. That was really just operational execution.

Speaker Change: At or above our corporate average now we do have industry, leading margins and so most of the companies that we do acquire tend to be lower than we are and then it's our job and their job, becoming part of the amphenol family to bring those margins up over time, but it's really not at all correlated to the type of products that they sell.

Steven Fox: And our last question comes from Matt Sheerin with Stifel, you may go ahead.

And our last question comes from Matt Sheerin with Stifel. You May go ahead.

Looking into 2024, we expect a high single-digit sequential seasonal moderation in sales in the first quarter from these levels. I'm truly proud of our team working in the automotive market. Their performance in 2023 is yet another confirmation of the benefits of their focus on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. It's really a multitude of applications, including electrified drivetrains, but not just that; there are many other applications.

Matt Sheerin: Yes, thank you. Good afternoon. Adam, in your commentary on mobile devices, you mentioned that tablets and notebook PCs continue to be weak, but we are hearing some chatter about expectations for a potential refresh PC refresh cycle playing out in the next year or two. So, wondering if you have any visibility into that, and can you give us a sense of the content opportunity for Amphenol within notebooks, particularly in the next generation so-called AI-enabled PCs?

Matt Sheerin: Yes. Thank you good afternoon, Adam in your commentary on mobile devices, you mentioned that tablets and notebook Pcs continue to be weak but.

Craig A. Lampo: And I think the pricing in 23 and as we look into 24, is certainly more normalized in that the price and cost environment is more balanced. I wouldn't say the cost environment necessarily has, you know, decreased at all. I think there is certainly an elevated.

Matt Sheerin: But we are hearing some chatter about expectation for a potential refresh PC refresh cycle playing out in the next year or two so I'm wondering if you have any visibility into that and can you give us a sense of the content opportunity for amphenol within notebooks, particularly in the next generation so called AI enabled Pcs.

Craig A. Lampo: Level of cost, but they're just not increasing at the pace that we saw, you know, a year ago. So from that perspective, I think the pricing environment is in more of a normal situation. And as we move into 24, I don't necessarily think we're going to get the benefit of price. And historically, that's not something that we would see anyway.

Adam Norwitt: Great. Thanks so much, Matt. Look, I hope what you say is the case. We certainly hope that there is a refresh. Look, I think we've talked about this year and even a little bit last year that the strength that we've seen in phones this year, which was more than offset in particular by things like laptops and tablets, it had to do with the clear fact that during the pandemic and when everybody went to work from home and study from home, there was an enormous rush to buy new devices, which caused a surge and really kind of upset the normal replacement cycle of those products. And so, you know, I guess that one could expect that if everybody bought a bunch of stuff in 2020 and 2021, and if those things tend to last, you know, three, four, five years, that eventually you would hope to see a little bit of a refresh. I don't know. I can't tell you I have any information to support that. I'm sure you're getting your information from even wiser sources than I would have. Relative to the content, you know, we do see great content opportunities in these devices as they get more complex, as they get more different wireless standards that they have to support, as they have higher speeds, as they have more fine pitch and more, you know, more precision inside of them. All of these create opportunities for Amphenol long term. We've always said about the mobile device market, and that includes, you know, tablets and laptops and the like, that to the extent that there is a premium on the hardware of the product, that can create opportunities for Amphenol over the long term. And I think that that will, whether that's related to AI or not, that I have, I can't necessarily connect those dots. But. For sure, people are going to need new devices in the future, and we'll be happy to enable the interconnect products across those devices.

Speaker Change: Alright, thanks, so much Matt look I I hope what you say is the case, we certainly hope that there is a refresh.

We look forward to benefiting from that strong position for many years to come. The mobile devices market represented 11% of our sales in the quarter and 10% of our sales for the full year 2023. Our fourth-quarter sales moderated by 3% in US dollars, local currency, and organically, as robust growth in smartphones was once again more than offset by declining sales into tablets, laptops, and wearables. However, sequentially, our sales increased by 9%, which was much better than our expectation coming into the quarter for a high single-digit decline. For the full year 2023, sales in the mobile devices market declined by 12% in US dollars and 10% organically, as strong growth in smartphones was more than offset by declines in other mobile device applications.

Matt Sheerin: Look I think we've talked about this year and even a little bit last year that the strength that we've seen in phones. This year, which was more than offset in particular by things like laptops and tablets. It had to do with with the clear fact that during the pandemic and when everybody went to work from home and study from home there was.

Craig A. Lampo: And, you know, typically, if you have a normal cost environment, a normal price environment, you know, I think you'll see kind of typical margins and margin increases from a profitability perspective. We talk about 25% as being, you know, a typical target that we have in a normal environment. And I think as we move into 24, I would expect that to be the case kind of sequentially as we move into it. So really happy with where we actually ended the year here at a record operating level. So we're really well positioned, I think, as we move into 24. I mean, if you look at our margin improvements, I think that that's something that I'm really proud of the team for being able to actually, you know, execute so well during the year to get to these profitability levels. So, yeah. Moving to 24, I expect that the overall environment to be the same, and I certainly expect the team to be able to perform at a similar level.

Matt Sheerin: An enormous rush to buy new devices, which caused a surge in and really kind of upset the normal replacement cycle of those products and so I you know I guess that one could expect that if everybody bought a bunch of stuff in 'twenty, and 2020 and 'twenty, one and if those things tend to last 345 years that eventually you.

We'd hoped to see a little bit of a refresh I don't know I can't tell you I have any information to support that I'm sure you're you're getting your information from even wiser sources than I would have relative to the content. We do see great content opportunities in these devices as they get more complex as they get more.

Looking into the first quarter, we do anticipate a typical seasonal sequential decline of approximately 35%. While mobile devices will always remain one of our most volatile of markets, our outstanding and agile team is poised as always to capture any opportunities for incremental sales that may arise in 2024 and beyond. Our leading array of antennas, interconnect products, and mechanisms continues to enable a broad range of next-generation mobile devices, which positions us well for the long term. The mobile networks market represented 3% of our sales in the quarter and 4% of our sales for the full year. Sales in this market declined from the prior year by 26% in U.S. dollars, 27% in local currency, and 34% organically, as we continued to manage through a broad-based reduction in spending by network operators and wireless equipment manufacturers. Sequentially, our sales decreased by 6%, which was in line with our expectations. For the full year, sales declined by 26% from the prior year and 32% organically, driven by the spending reductions that we've discussed throughout the year.

Matt Sheerin: More different wireless standards that they have to support.

Wamsi Mohan: Our next question comes from Wamsi Mohan with Bank of America. You may go ahead. Yes, thank you.

Matt Sheerin: As they have higher speeds as they have more fine pitch in more more precision inside of them. All of these create opportunities for amphenol long term, we've always said about the mobile device market and that includes tablets and laptops in the lake that to the extent that there is a premium on the hardware.

Adam, you called out the weakness in 2023 in the communication-related markets, but you did exceed your expectations in the fourth quarter. Do you see a greater than normal organic growth rate over the next two years in these markets, given the historically easier comparisons here? And if you could also just talk about the environment in China, that'd be really helpful.

Matt Sheerin: Of the product that can create opportunities for amphenol over the long term and I think that that will whether thats related to AI or not that I have I can't necessarily connect those dots.

Wamsi Mohan: Thank you. Well, thank you very much, Wamsi. Boy, you're asking me to do a tough thing, which is to talk about the next two years in a very volatile space, which is communications. I think it's hard to say what the overall growth across communications will be. I would tell you we see great opportunities across each of those areas, you know, with different things going on. Because, remember, communications is not just IT datacom. It includes mobile networks, mobile devices, and, obviously, broadband.

Matt Sheerin: But for sure people are going to need new devices in the future and we'll be happy to enable the interconnect products across those devices.

Speaker Change: Thank you.

Matt Sheerin: Yeah.

Matt Sheerin: Yeah.

Speaker Change: Well, Operator, if that was our last question, I guess I'd like to take this opportunity to thank everybody here today for spending a little bit of your time with us. I wish that you all have a good continuation of your winter wherever you may be, and we look forward to talking to all of you just 90 days from now. Thanks so much. Thanks, everybody.

Speaker Change: Well operator, if that was our last question I guess I'd like to take this opportunity to thank everybody here today for spending a little bit of your time with us I wish that you all have a good continuation of your winter weather wherever you may be and we look forward to talking to all of you just 90 days from now thanks, so much thanks everybody.

Looking ahead, we expect a modest increase in sales from these fourth-quarter levels. And despite this more challenging short-term wireless investment environment, our team continues to work aggressively to realize the benefits of our efforts to expand our position in next-generation 5G equipment and networks around the world. When customers once again drive renewed wireless investment, we look forward to benefiting from the increased potential that comes from our position with both equipment manufacturers and mobile service providers. The information technology and data communications market represented 20% of our sales in the quarter and 19% of our sales for the full year.

Speaker Change: And this concludes today's conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.

Speaker Change: And this concludes today's conference. Thank you for participating you may disconnect at this time and have a great rest of your day.

And I think there's different stuff going on in each of those areas. If you talk just about IT datacom, which is the biggest part of our communications business, I mean, there is no doubt that, as I mentioned earlier, these investments in AI, I think we're in the early days on this. I think that there are going to be more and more developments around the real. The kind of creation of new economic models around AI and then the investments to support that. That's already been talked about broadly.

We're very pleased that our sales in the fourth quarter returned to growth compared to the prior year, with sales in US dollars and local currency increasing by 6% and organically by 5%. Sequentially, our sales increased by a much better than expected 6% as we continued to benefit from our strong presence with AI data center customers, as well as some overall improved demand. For the full year 2023, our sales in the IT datacom market declined 13% in US dollars and organically, as strong demand for AI-related applications was more than offset by inventory adjustments that we saw amongst our traditional IT datacom applications. Looking ahead, we do expect in the first quarter a mid-single-digit sequential seasonal decline in sales.

You've heard folks talking about, you know, pretty significant investments in these next-generation systems. And, again, the interconnect products are a really integral part of those systems. So I think on that front, you know, I'm not getting out too far ahead of my skis to say that, at least specific to AI in IT datacom, I would expect over the coming couple of years to see some great opportunities. I don't know about the base of IT datacom in the next two years. I'm I couldn't I couldn't get I can barely give you a 90 day kind of very inaccurate guidance for mobile devices.

I have to say, coming out of what was a challenging year in the overall IT day-to-day market, they were more encouraged than ever by the company's position in this space. Our team continues to do an outstanding job securing future business on next-generation IT systems, particularly those enabling artificial intelligence. Indeed, the revolution in AI has created a unique opportunity for Amphenol, given our leading high-speed power and fiber optic interconnect products. With machine learning driving a more intensive usage of these highest technology interconnect products, we're very well positioned for the future. This creates a continued long-term growth opportunity for Amphenol. The broadband communication market represented 4% of our sales in the quarter and 4% of our sales for the year. Sales in the fourth quarter were down 31% in US dollars and 32% organically, as broadband operators continue to moderate their procurement levels.

I think that in wireless, we're going through a cycle, which is a typical cycle, where they invest in a new type of standard. They wait to see how that settles out, how customers take it, are customers willing to pay more for the functionality that's delivered by that. And then there usually starts another round of investments around that. And I think we're in that lull period right now.

I can't tell you when that lull period will end and when there will be more investment. But I can tell you for sure that in the coming years, there will need to be more investment around 5G and ultimately 6G and all the wireless networks. Because the vast majority of people connecting to the Internet are doing it not on a connection like a Cat5 cable or in an office.

On a sequential basis, sales did decline by 12%, which was worse than our expectations coming into the quarter when we anticipated more of a modest increase. For the full year 2023, sales were down by 7% in US dollars and organically, driven by the continued pause in broadband operator spending. Looking ahead, we expect sales in the first quarter to increase modestly from these levels. Regardless of the current demand dynamics, we do remain encouraged by the company's strength and position in the broadband market. We look forward to continuing to support our service provider customers around the world, all of whom are working to increase their network coverage and bandwidth to support the proliferation of high-speed data applications to homes and businesses. And finally, turning to our outlook, there's no doubt that the current economic environment remains somewhat uncertain. Assuming the continuation of these current market conditions and also assuming constant exchange rates, for the first quarter, we expect sales in the range of $3,040,000,000 to $3,100,000,000 and adjusted diluted EPS in the range of $0.71 to $0.73.

They're doing it on a wireless basis while they're moving around the world. And so that network is going to have to keep up with the data traffic that continues to expand, you know, kind of on an unabated basis. And then finally, broadband, you know, broadband is an area where I think there is a lot of push. Thank you very much. Thank you very much. Thank you very much.

And our next caller is Samik Chatterjee with JPMorgan. You may go ahead. Hi. Happy New Year. I guess Adam. Share your thoughts around.

Samik Chatterjee: Organic, in all, Thank you for joining us. Thank you so much for joining us. Thank you for joining us, and negative, The average sort of grew to be expected of the act. Thank you very much. Again, there seemed to be a little bit of a cutout of the sound there.

This would represent sales growth of 2 to 4% and adjusted diluted EPS growth of 3 to 6% compared to the first quarter of 2023. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow Amphenol's market position while driving sustainable and strong profitability over the long term. And finally, I just want to take this opportunity to thank our entire global team around the world, including all of those who work across our factories, touch our products, and ultimately deliver to our customers what they need. I'm just truly grateful for all of their outstanding efforts, both here in the fourth quarter and, moreover, for the entirety of 2023. Without them, we wouldn't be able to make it happen like we do.

But I think your question is, you know, how do I see the organic growth prospects as opposed to just the acquisitions? And I think we feel, you know, we feel good about the organic prospects of the company, given all that I talked about each of our individual markets, and I'm not going to go through each of them once again. But I will just tell you that the investments that we've made in next-generation technologies, and the work that we've done to support customers when they need us the most over the last, you know, two, three, four years, have positioned us very, very strongly organically to have strong, robust performance in the years to come. And the other thing I would say as well is that we think about acquisitions, and obviously, in the first year that you own a company, you know, that's considered. Acquired growth

Operator: And with that, operator, we'd be very happy to take any questions. Thank you, the question and answer period will now begin. Please limit to one question per caller. Our first caller is Amit Daryanani with Evercore. You may go ahead. Thanks, good afternoon, everyone.

But we're focused much more on what happens thereafter, and are we acquiring companies that become platforms of future organic growth for the company? And I would tell you, you know, all these 10 companies that we acquired this year, the nearly 30 companies that we've acquired since 2019, To me, these companies all represent expanded platforms for future organic growth for the company, which makes me feel confident that, over time, subject to all of the market dynamics that, for sure, we're not immune to, the company is positioned to have really great organic growth potential. And our next caller is Andrew Buscaglia You may go ahead. Bye, guys.

Amit Daryanani: The one question for me would be, can you discuss the weakness in the industrial market, seeing softness there, and a little bit of industry as well? I'm curious, is that stable, worse than what you saw 90 days ago, or do you feel like it's getting worse as you head into 2024? And then, to the extent you can talk about it, do you see the risk of this perhaps in other markets as well? Thank you. Yeah, Amit, I didn't perfectly hear the second part of your question. There's a little bit of a connection issue.

But I think relative to your question, which was about the industrial stable versus 90 days ago, I mean, look, I think we came into the quarter with an expectation of kind of a modest reduction in sales. Our sales were essentially in line with that. So I think it was kind of what we expected it to be.

Andrew Buscaglia: I just wanted to ask on IT Datacom, again, with AI, the past couple of quarters, you called out sequential, you know, attributed sequential improvements to AI. What would you say took place in Q4? That plus your guidance, would you imply, because we can't see the AI piece in that business, would you say it's continuing to accelerate on a sequential basis? Thank you very much, Andrew. Yeah, I think what I said in my remarks is that we saw growth in AI, and we also saw growth in the underlying business. So I think over the last couple of quarters, I've described that all of our upside, all of our sequential growth really did come from AI. I think that this quarter, you know, it's some of each, which is actually really encouraging for us that we've seen maybe what one could call a bottoming of the underlying IT demand. But are we continuing to make progress in AI? Do we see continued acceleration opportunities? Yeah, I wouldn't say that every quarter it's going to accelerate, you know, in lockstep like it did, you know, over the course of Q2 and Q3.

I would say that the book-to-bill in industrial was a bit weaker. I mean, if we think about why our book-to-bill was 0.95 to 1, the real driver for that was industrial on one side. And we did see in the IT Datacom market a little bit of a softer book-to-bill, but that is really just a little bit more of an equalization from the very high books-to-bill that we've seen over the prior couple of quarters. So I don't think the IT Datacom book-to-bill is at all representative of the demand environment.

But I think in the industrial market, we did see bookings a little softer than we had anticipated. I'm going to assume that your second question is how do we see that going forward? And, you know, where do we see that kind of cycle in industrial? And I think it's too early to tell. I mean, the beauty of our industrial business is that it's so broad. And so we're not levered into one or another of the individual segments.

But for sure, we see opportunities long term. We see opportunities to be generating sales related to AI that are greater than we are today. And our next caller is Mark Delaney with Goldman Sachs. You may go ahead. Yes, good afternoon. Thanks very much for taking my question and Happy New Year to all of you as well.

And, you know, there are so many segments across the industrial market that we participate in, and we don't have any of those that are really disproportionate to our overall business. And we continue to see some of those segments, you know, areas like marine and oil and gas, rail mass transit, you know, medical during the course of this year. They still have very robust demand. But no doubt about it, areas like factory automation, instrumentation, those are areas where we've seen, you know, more market reductions in demand and also more impact from the distribution channel. You know, when is that going to be worked out in the distribution channel and the inventory? When will some of that demand return in some of those segments? I think it's a little too early to tell.

Mark Delaney: The automotive market has been a fast growing market for the company. However, several auto OEMs have been seeing slower EV sales and have said they're going to rethink how fast they want to shift their production toward EVs. And so I'm hoping to better understand if you think that will create any meaningful near to intermediate-term challenges for Amphenol that could limit the company's growth in our market or perhaps lead to some inventory destocking. Thanks. Thank you. Well, thank you very much, Mark, and Happy New Year to you as well.

Look, we read all the same papers, and we hear about the sort of discussions about slowdowns in EV sales. But I think we shouldn't forget that this is a fairly Western dynamic. I don't think we hear, for example, in Asia, and specifically in the largest car market in the world, China, about folks, you know, turning their backs on EVs and going back to internal combustion engines.

And as we go through the course of this year, we'll try to give you a really good read on that. I mean, as we look into the first quarter, as I said in my prepared remarks, we do anticipate a kind of modest level in the first quarter, but that's really supported by the acquisitions that we've made. And on an organic basis, we see the first quarter, you know, again modestly down from our current level. Our next question comes from Ossian Merchant of Citigroup. You may go ahead. Great, hopefully you can hear me clearly and I don't have an echo. I will try.

But we do hear a little bit about that, I think, here and in Europe. And as I've described, I mean, we don't care if a car has an EV drivetrain or not. What we care about is whether a car has a lot of electronics in it and new electronic systems. Among those systems are certainly electrified drivetrains or hybrid electric drivetrains.

On the IT Datacom market, if you guys can please share some insight, looks like this market's ramping up quite nicely for you guys. So if you could elaborate a little bit on how you think about your wins in the AI segment and how you're able to ramp that into revenues going forward, especially given constraints on supply on the GPU side, how do you guys think you can ramp up AI for the remainder of the year? Thank you. Thank you. Yeah, well, thank you very much, and welcome to our call. I look forward to getting to meet you in person.

And I think that what we've seen in Asia, what we've seen in Europe, what we've seen in North America, is that there is a real acceleration of the adoption of electronics in cars, period, and some of that may actually be related to the fact that EVs tend to be a little more fancy electronically. And I think car companies are seeing that and upgrading their standard models to incorporate more electronic functionality. And whenever you have electronic functionality in a car, regardless of the drivetrain, you're going to have new interconnect solutions, you're going to have new sensor solutions, you're going to have new antenna solutions.

We're really excited about the progress that the company has made in AI. And I just want to reflect on one aspect, which is that AI is not new to us. While the world, over the course of the last year, has sort of woken up to AI with the advent, a year ago, November of chat GPT and this sort of revolution of generative AI, our team's been working on the interconnect architecture surrounding AI for a long, long time.

And those are the three areas of our participation in the automotive market. For sure, if I go to the world's largest EV market, China, for example, I mean, there continues to be unabated real adoption. And I would almost say that EVs in that market have kind of reached a sort of escape velocity where they're just really normal. I mean, you see them all over the place.

And I think our team there just did a fabulous job of getting a breadth of connectivity, and I think we've done a great job of getting that penetration across both domestic and international EV manufacturers, whereby we are really able to enjoy the benefits of that. And I think in Europe and in North America, we've done a great job, but we've also done a really great job of capitalizing upon some of these new electronics. And so I wouldn't put any dynamic here in the category of something that we view as a real near or medium-term challenge. I think quite the contrary is that car companies struggle to figure out how they can sell their products and make more money from doing it.

And so it is only now that maybe there's this acceleration, almost, you could call it even a kind of revolution or a gold rush around AI. But we've been building the capability, building the product capability, building the manufacturing capability, and capacity to support that for a long time. And I think this year, one of the ways that we were able to maybe even get a disproportionate share of some of the more urgent demand was that we were very quick to flex our capacity in favor of customers who needed products and when they needed them. And I think our team has always shown the ability to have that agility in reacting to uptakes of demand. And I think that this AI is no different. I'm really proud of our team and how they've done it.

They're always going to fall back on electronics as the way to do that. And that's a good thing for them. Our next caller is William Stein with Truist Securities. You may go ahead. Okay. Thanks.

William Stein: Adam, I'm hoping you can comment on the appetite for M&A and products within it. I think historically you've talked about not wanting to acquire system-level solutions, and I think at least one of the acquisitions you've done recently has such products, and I wonder if that could potentially be something you'll grow into and expand, or if we should see you perhaps shy away from that business going forward. Thank you. Thank you so much.

Now, looking forward, it's still too early to say what that looks like over the long term. But there's no question in my mind that AI seems like something that is not such a small deal. It seems like something where there is real economics behind it, where large companies are making significant investments in AI, and where, ultimately, our architecture, our interconnect architecture, is a very critical component together with the chips that you alluded to. Now, relative to shortages of chips, we hope that there are significant investments in chip manufacturing because, in our industrial business, we do supply a lot of interconnect products that go into the industry for semiconductor manufacturing. But I don't think that we've necessarily seen that as a governor on our output or on our customers' demand right now. But we'll see. It's not something that would directly impact the company except that maybe customers, if they couldn't get enough chips, they would moderate their overall construction. But we haven't seen that yet.

I think what you're alluding to is PCTel and the fact that they have a very small test and measurement business and really wonderful people, wonderful products. But that's not why we bought PCTel. You'll recall that we've acquired companies in the past, some of which are not purely the things that we were looking to acquire. And we're always very sensitive to the fact that we're never going to put ourselves in a competitive situation with our customers.

And really, PCTel is known for their antenna technologies, which are fabulous. Not to say a bad word about their team that works in test and measurement, but we're not adopting a strategy to go after system-level products. In terms of our appetite for M&A, we just see fabulous opportunities. I mentioned it in my prepared remarks. You know, I think we have demonstrated an ability to acquire companies really across the board from a size perspective. We've demonstrated the ability to acquire a lot of companies and to process those effectively. And, you know, our small little headquarters team here, they may have been a little bit busier than normal over the last year with these 10 acquisitions. But the beauty is because of our organizational structure, now having 14 groups across three global divisions, we have the wherewithal to make sure that those acquisitions go through. Really, they'll get their due attention when they become part of Amphenol.

And I think our team is just doing a fabulous job dealing with the surge in demand that we saw this year, and it came at a time when overall IT demand was down. But in fact, some of the products were very different products.

Luke L. Junk: So it wasn't just that we were able to reallocate capacity from IT products that were not being consumed as much into these. There was a lot of new stuff that we had to do. And I think we did a really great job. Our next caller comes from Luke Junk with Baird. You may go ahead.

Craig A. Lampo: Great, thanks for taking the question. Adam, just something you could comment on pricing dynamics into 2024, especially which parts of the portfolio you might look at as more normal with respect to price cuts this year, versus areas of the business that could be a laggard in that respect. And then the related question would just be how you're feeling about delivering productivity in your supply chain in your operations to offset any price downs you might face this year. Thanks, Adam. Hey Luke, it's Craig.

And, you know, I think the near-term pipeline remains a very robust pipeline, and we look forward to taking advantage of that. We will always remain a very disciplined buyer, as we have forever. You know, I am willing to walk away at the very last moment if I have to if something we find is not to our liking. We'll always pay a reasonable price, a fair price for great companies. We may not always be the highest.

Craig A. Lampo: I'll take that one for Adam. I think as we think about pricing, you know, 23 certainly, we talked about the fact that we didn't necessarily see pricing coming back to normal. I mean, at 22, we talked a lot about, you know, pricing adjustments we were making to try to catch up to inflation, inflationary increases in costs that we saw. And I think that, you know, as we came into 23, we did a great job on profitability, but that wasn't necessarily the pricing dynamics. That was really just operational execution.

We may not always be the highest-priced buyer, but I think we are often the best buyer because of our effectiveness, our willingness to work aggressively to get things done. And the fact is, our organizational structure allows those newly acquired companies to become part of Amphenol in a very unobtrusive fashion. They join seamlessly.

Craig A. Lampo: And I think the pricing in 23, and as we look into 24, is certainly more normalized in that the price and cost environment is more balanced. I wouldn't say the cost environment necessarily has, you know, decreased at all. I think there is certainly an elevated level of cost, but they're just not increasing at the pace that we saw, you know, a year ago. So from that perspective, I think the pricing environment is in more of a normal situation. And as we move into 24, I don't necessarily think we're going to get the benefit of price. And historically, that's not something that we would see anyway.

They come in, and on day one, they just keep operating like they were doing on all the days before. And that is a relatively low-risk approach to acquisition because we're not going in and just taking over. We're just sort of having these kind of convulsive restructurings of the company where you run the risk of destroying what you didn't even know you had. So we look forward to continuing to have great acquisitions in the future, but we're not going to be a kind of system-level company. We know who we are.

Craig A. Lampo: And, you know, typically, if you have a normal cost environment and normal price environment, you know, I think you'll see kind of typical margins and margin increases from a profitability perspective. We talked about 25% as being, you know, a typical target that we have in a normal environment. And I think as we move into 24, I would expect that to be the case kind of sequentially as we move into it. So, really happy with where we actually ended the year here at a record operating level.

Craig A. Lampo: So we're really well positioned, I think, as we move into 24. I mean, if you look at our margin improvements, I think that that's something that I'm really proud of the team for being able to actually, you know, execute so well during the year to get to these profitability levels. So, as we move into 24, I expect that overall environment to be the same, and I certainly expect the team to be able to execute at a similar level.

We're an interconnect company, and there are wonderful opportunities for interconnect products to be expanded both organically and through acquisition going forward. Lots of really attractive companies out there, and, you know, we'll continue to position ourselves so that the ones that match with us, the ones that go through our really rigorous kind of Rubicon process of deciding whether or not to buy them, we'll be in a good position to execute on those over the near, medium, and long term. And our next caller is Chris Snyder with UBS.

Wamsi Mohan: Your next question comes from Wamsi Mohan with Bank of America. You may go ahead. Yes, thank you.

Adam, you called out the weakness in 2023 in the communication-related markets, but you did exceed your expectations in the fourth quarter. Do you see a greater than normal organic growth rate over the next two years in these markets, given the historically easier comparisons here? And if you could also just talk about the environment in China, that'd be really helpful.

Chris Snyder: You may go ahead. Thank you. I want to follow up on some of the earlier conversation on AI. So it sounds like book to bill for AI moderated sequentially, maybe after some early outsized orders, just given the company's foundation in that market. So I guess my question is, do you think that this moderation is a single quarter phenomenon, or would you expect that to persist for multiple quarters?

Thank you. Well, thank you very much, Wamsi. You're asking me to do a tough thing, which is to talk about the next two years in a very volatile space, which is communications. I think that's hard to say what the overall growth across communications will be. I would tell you we see great opportunities across each of those areas, you know, with different things going on. Because, remember, communications is not just IT Datacom. It includes mobile networks. It includes mobile devices and, obviously, broadband.

Because it does seem like the top line is still continuing to grow sequentially. Thank you. Thanks very much, Chris. Yeah, I mean, look, I don't usually talk about book to bill by sub markets, but I will tell you that, for sure, we had very strong bookings in AI-related applications in Q2 and Q3. And so it's not surprising that here in Q4, our IT Datacom book to bill was a bit below zero. And, sorry, a bit below one.

And because of those significant orders that we received, which customers wanted to place because they needed the product, and then we're executing upon those orders. And yeah, I think that our IT Datacom business is, is in a good position looking forward. I mean, our guidance for the first quarter is to have a little moderation. Just not abnormal at this time of year. Actually, quite, quite normal.

And I think there's different stuff going on in each of those areas. If you talk just about IT Datacom, which is the biggest part of our communications business, I mean, there is no doubt that, as I mentioned earlier, these investments in AI, I think we're in the early days on this. I think that there are going to be more and more developments around the real kind of creation of new economic models around AI and then the investments to support that. That's already been broadly talked about.

Let me say that. And layered on top of that, I think the AI is a good thing to have. So no, I think you characterize it quite well.

Joseph Giordano: Our next caller is Joseph Giordano with TD Cohen. You may go ahead. Hi guys, this is Michael on for Joe.

Michael: So earlier you had mentioned, you know, commentary regarding orders and specific markets. Can you just provide, like, a high level, maybe book to bill on a consolidated basis for the quarter or any color there? I mentioned earlier that our book to bill was 0.95 to 1 for the quarter.

You've heard folks talking about, you know, pretty significant investments in these next-generation systems. And, again, the interconnect products are a really integral part of those systems. So I think on that front, you know, I'm not getting out too far ahead of my skis to say that, at least specific to AI and IT Datacom, I would expect over the coming couple of years to see some great opportunities. I don't know about the base of IT Datacom over the next two years. I couldn't get – I can barely give you a 90-day kind of very inaccurate guidance for mobile devices.

Craig A. Lampo: Thank you. I pray, do we have another question? Our next caller is Steven Fox with Fox Advisors. You may go ahead. And our last question comes from Matt Sheerin with Stifel. You may go ahead. Yes, thank you. Good afternoon.

Steven Fox: Adam, in your commentary on mobile devices, you mentioned that tablets and notebook PCs continue to be weak, but we are hearing some chatter about expectations for a potential refresh cycle for PCs playing out in the next year or two. So, wondering if you have any visibility into that, and can you give us a sense of the content opportunity for Amphenol within notebooks, particularly in the next generation of so-called AI-enabled PCs? Great. Thanks so much, Matt. Look, I hope what you say is the case. We certainly hope that there is a refresh. Look, I think we talked about this year and even a little bit last year that the strength that we've seen in phones this year, which was more than offset in particular by things like laptops and tablets, had to do with the clear fact that, during the pandemic and when everybody went to work from home and studied from home, there was an enormous rush to buy new devices, which caused a surge and really kind of upset the normal replacement cycle of those products.

I think that on wireless, we're going through a cycle, which is a typical cycle where they invest in a new type of standard. They wait to see, and by they, I mean the service providers, the operators, they wait to see how that settles out. How do customers take it?

Are customers willing to pay more for the functionality that's delivered by that? And then there usually is another round of investments around that. And I think we're in that low period right now. I couldn't tell you when that low period will end and become more investment, but I can tell you for sure that in the coming years, there will need to be more investments around 5G and ultimately 6G and all the wireless networks because the vast majority of people connecting to the internet are doing it not on a connection like a Cat5 cable or in an office. They're doing it on a wireless basis while they're moving around the world.

Steven Fox: And so, you know, I guess that one could expect that if everybody bought a bunch of stuff in 2020 and 2021, and if those things tend to last, you know, three, four, five years, that eventually, you would hope to see a little bit of a refresh. I don't know. I can't tell you I have any information to support that. I'm sure you're getting your information from even wiser sources than I would have.

And so that network is going to have to keep up with the data traffic that continues to expand on an unabated basis. And then, finally, broadband. Broadband is an area where I think there is a lot of push in countries like ours and others to ensure that there is both the capacity and the coverage for broadband access because it's viewed not as a luxury but rather as a necessity that folks can have broadband access. And so I think, long term, there are good opportunities there as well. Relative to China, I think I'm very happy to see that the sort of geopolitics of China and the US seems to be swinging towards a more moderate phase. There are more people talking and all of that. And we're encouraged by that. I think the world is a better place when countries are talking rather than arguing.

Matt Sheerin: Relative to content, you know, we do see great content opportunities in these devices as they get more complex, as they get more different wireless standards that they have to support, as they have higher speeds, as they have more fine pitch, and more, you know, more precision inside of them. All of these create opportunities for Amphenol in the long term. We've always said about the mobile device market, and that includes, you know, tablets and laptops and the like, that to the extent that there is a premium on the hardware of the product, that can create opportunities for Amphenol over the long term. And I think that will, whether that's related to AI or not, but I can't necessarily connect those dots.

And I think that's a good thing. I think there's a lot written about the Chinese macro environment, and I'm not the expert to sort of go off on that. But what I will say is that, you know, in those areas of the electronics industries where we support in China, places like the automotive industry, places like the industrial market, we continue to see great opportunities, and our team continues to do a fabulous job of capitalizing on those opportunities for the domestic market. And, you know, we feel really good about the position that we have as a company that is, of course, a global company but who operates through our unique organizational approach as a local company in that environment. And being the best of both worlds at a time like this, when the world is somewhat uncertain, is a really good advantage for us. And our next caller is Samik Chatterjee with J.P. Morgan. You may go ahead. Hi, happy new year. Share your thoughts around... Organic, in order.

But. For sure, people are going to need new devices in the future, and we'll be happy to enable interconnect products across those devices. Thank you. Well, Operator, if that was our last question, I guess I'd like to take this opportunity to thank everybody here today for spending a little bit of your time with us. I wish that you all have a good continuation of your winter wherever you may be, and we look forward to talking to all of you just 90 days from now. Thanks so much. Thanks, everybody. And this concludes today's conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.

Samik Chatterjee: Pipeline of revenue from the Act. Thank you for joining us. Have a great day.

Operator: Thanks for the questions. I'm going to go ahead and close the webinar. I'll be back in a minute.

Operator: So thank you for joining us. And if you have any questions, please feel free to put them in the Q&A box. And we'll be back in a minute. I'm going to close the webinar. And I'll be back in a minute. Thank you.

The Bulletproof Executive 2013, Negative. This is the average sort of group that I'm really expecting of, yeah. Yeah, thank you very much. Again, there seems to be a little bit of a cutout of the sound there.

But I think your question is, you know, how do I see the organic growth prospects as opposed to just the acquisitions? And I think we feel, you know, we feel good about the organic prospects of the company, you know, given all that I talked about each of our individual markets, and I'm not going to go through each of them once again. But I will just tell you that the investments that we've made in next-generation technologies, the work that we've done to support customers when they need us the most over the last, you know, two, three, four years, have positioned us very, very strongly organically to have strong, robust performance in the years to come. And the other thing I would say as well is that we think about acquisitions, and obviously, in the first year that you own But we're focused much more on what happens thereafter.

And are we acquiring companies that will become platforms of future organic growth for the company? And I would tell you, you know, all these 10 companies that we acquired this year, the nearly 30 companies that we've acquired since 2019, To me, these companies all represent expanded platforms for future organic growth for the company, which makes me feel confident that, over time, subject to all of the market dynamics that, for sure, we are not immune to, the company is positioned to have really great organic growth potential. And our next caller is Andrew Buscaglia with BNP. You may go ahead. Hi guys. I just wanted to ask on IT Datacom, again, with AI, the past couple quarters, you called out sequential, you know, attributed sequential improvement to AI. What would you say if the same thing took place in Q4 and then?

Andrew Buscaglia: You know, that plus your guidance, would you imply is this because we can't see that AI piece in that business, would you say it's continuing to accelerate on a sequential basis? Thank you very much, Andrew. Yeah, I think what I said in my remarks is that we saw growth in AI, and we also saw growth in the underlying business. So I think over the last couple of quarters, I've described that all of our upside, all of our sequential growth really did come from AI. I think that this quarter, you know, it's some of each, which is actually really encouraging for us that we've seen maybe what one could call a bottoming of the underlying IT demand. But are we continuing to make progress in AI? Do we see continued acceleration opportunities? Yeah, I wouldn't say that every quarter it's going to accelerate, you know, in lockstep like it did, you know, over the course of Q2 and Q3.

But for sure, we see opportunities in the long term to be generating sales related to AI that are greater than we are today. And our next caller is Mark Delaney with Goldman Sachs. You may go ahead. Yes, good afternoon. Thanks very much for taking my question and Happy New Year to all of you as well.

Mark Delaney: The automotive market has been a fast-growing market for the company. However, several auto OEMs have been seeing slower EV sales and have said they're going to rethink how fast they want to shift their production toward EVs. And so I'm hoping to better understand if you think that will create any meaningful near to intermediate-term challenges for Amphenol that could limit the company's growth in our market or perhaps lead to some inventory de-stocking

Thank you. Thank you. Well, thank you very much, Mark. And Happy New Year to you as well.

We read all the same papers, and we hear about the sort of discussions about slowdowns in EV sales. But I think we shouldn't forget that this is a fairly Western dynamic. I don't think we hear, for example, in Asia, and specifically in the largest car market in the world, China, about folks, you know, turning their backs on EVs and going back to internal combustion engines.

But we do hear a little bit about that, I think, here and in Europe. And as I've described, I mean, we don't care if a car has an EV drivetrain or not. What we care about is whether a car has a lot of electronics in it and new electronic systems. Among those systems are certainly electrified drivetrains or hybrid electric drivetrains.

And I think that what we've seen in Asia, what we've seen in Europe, what we've seen in North America, is that there is a real acceleration of the adoption of electronics in cars, period. And some of that may actually be related to the fact that EVs tend to be a little more fancy electronically. And I think car companies are seeing that and upgrading their standard models to incorporate more electronic functionality. And whenever you have electronic functionality in a car, regardless of the drivetrain, you're going to have new interconnect solutions, you're going to have new sensor solutions, you're going to have new antenna solutions.

And those are the three areas of our participation in the automotive market. For sure, if I go to the world's largest EV market, China, for example, I mean, there continues to be unabated real adoption. And I would almost say that EVs in that market have kind of reached a sort of escape velocity, where they're just really normal. I mean, you see them all over the place.

And I think our team there just did a fabulous job of getting a breadth of penetration across both domestic and international EV manufacturers, whereby we are really able to enjoy the benefits of that. And I think in Europe and in North America, we've done a great job, but we've also done a really great job of capitalizing on some of these new electronics. And so I wouldn't put any dynamic here in the category of something that we view as a real near or medium-term challenge. I think quite the contrary.

William Stein: As car companies struggle to figure out how they can sell their products and make more money from doing it, they're always going to fall back on electronics as the way to do that, and that's a good thing for Apple. Our next caller is William Stein with Truist Securities. You may go ahead. Okay. Great, thanks.

Adam, I'm hoping you can comment on the appetite for M&A and products within it. I think historically you've talked about not wanting to acquire system-level solutions, and I think at least one of the acquisitions you've done recently has such products, and I wonder if that could potentially be something you'll grow into and expand, or if we should see you perhaps shy away from that business going forward. Thank you. Will, thank you so much.

I think what you're alluding to is PCTEL and the fact that they have a very small test and measurement business and really wonderful people, wonderful products. But that's not why we bought PCTEL. You'll recall that we've acquired companies in the past, some of which are not purely the things that we were looking to acquire. And we're always very sensitive to the fact that we're never going to put ourselves in a competitive situation with our customers.

And really, PCTEL is known for its antenna technologies, which are fabulous. Not to say a bad word about their team that works in test and measurement, but we're not adopting a strategy to go after system-level products. In terms of our aperture for M&A, I mean, we just see fabulous opportunities. I mentioned it in my prepared remarks.

You know, I think we have demonstrated an ability to acquire companies really across the board from a size perspective. We've demonstrated the ability to acquire a lot of companies and to process those effectively. And, you know, our small little headquarters team here, they may have been a little bit busier than normal over the last year with these 10 acquisitions. But the beauty is because of our organizational structure, now having 14 groups across three global divisions, we have the wherewithal to make sure that those acquisitions get their due attention when they become part of Amphenol.

And, you know, I think the near-term pipeline remains a very robust pipeline. And, you know, we look forward to taking advantage of that. We will always remain a very disciplined buyer, as we have forever. You know, I am willing to walk away at the very last moment if I have to, if something we find is not to our liking.

We'll always pay a reasonable price, a fair price, for great companies. We may not always be the highest-priced buyer, but I think we are often the best buyer because of our effectiveness, and our willingness to work aggressively to get things done. And the fact is, our organizational structure allows those newly acquired companies to become part of Amphenol in a very unobtrusive fashion. They join seamlessly. They come in, and on day one, they just keep operating like they were doing on all the days before.

And that is a relatively low-risk approach to acquisition because we're not going in and just sort of having these kind of convulsive restructurings of the company, where you run the risk of destroying what you didn't even know you had. So, we look forward to continuing to have great acquisitions in the future, but we're not going to be a kind of a system-level company. We know what we are.

We're an interconnect company, and there are wonderful opportunities for interconnect products to be expanded both organically and through acquisition going forward. Lots of really attractive companies out there, and we'll continue to position ourselves so that the ones that match us, the ones that go through our really rigorous kind of Rubicon process of deciding whether or not to buy them, we'll be in a good position to execute on those over the near, medium, and long-term.

Chris Snyder: You may go ahead. Thank you. I wanted to follow up on some of the earlier conversation on AI. So it sounds like book-to-bill for AI moderated sequentially, maybe after some early outsize orders, just given the company's foundation in that market. So I guess my question is, do you think that this moderation is a single-quarter phenomenon, or would you expect that to persist for multiple quarters? Because it does seem like the top line is still continuing to grow sequentially. Thank you. Thanks very much, Chris.

Yeah, I mean, look, I don't usually talk about book-to-bill by sub-markets, but I will tell you that, for sure, we had very strong bookings for AI-related applications in Q2 and Q3, and so it's not surprising that here in Q4 our IT Datacom book-to-bill was a bit below zero, sorry, a bit below one, because of those significant orders that we received, which And, yeah, I think that our IT Datacom business is in a good position going forward. I mean, our guidance for the first quarter is to have a little moderation, which is not abnormal at this time of year. Actually, quite normal, let me say that.

Joseph Giordano: And layered on top of that, I think the AI is a good thing to have. So, no, I think you characterized it quite well. Our next caller is Joseph Giordano with TD Cowen. You may go ahead.

Operator: So earlier you had mentioned, you know, commentary regarding orders and specific markets. Can you just provide, like, a high-level, maybe book-to-bill on a consolidated basis for the quarter or any color there? Our book-to-bill was 0.9521 for the quarter. Thank you. Thank you. Do we have another question? Our next caller is Steven Fox with Fox Advisors. You may go ahead. Hi, good afternoon.

Steven Fox: I guess, broadly speaking, the latest round of acquisitions were around sensors, antennas, and assemblies. I was just curious, like Adam, your updated thoughts on, you know, your M&A focus by technology, especially in the context of what looks like, you know, gross margins that are now at the 33% level. I guess some of these products have lower gross margins; some have higher. I don't know if there's a mixed impact that's influencing the gross margin now with the M&A, but just broadly speaking, when you think about the general buckets of technology that you look at, what is your thinking about what you've done and where you need to go now? Thanks.

Well, thanks very much, Steve. Yeah, I mean, look, in the quarter, we acquired companies that make sensors, antennas, cable, and cable assemblies, and, you know, really high-tech cable, actually, that has really great value for its customers. And we continue to see acquisition opportunities across really all of our interconnect products, from discrete connectors to cable, cable assembly, value-add, complex value-add interconnected products, sensors, complex sensor interconnect assemblies, antennas, and the like. And, you know, we're really pleased to continue to find companies across all of those products. I wouldn't tell you that we think so much about gross margin by product, but we see great margin opportunities. As you know, and Craig has said it so many times, we're very much focused on operating margins. And, yeah, I mean, some of these companies do operate below our corporate average, not all of them, by the way, but some of them do.

And I think that doesn't relate at all to their product type. We don't believe that there is a correlation between whether someone makes a connector, a sensor, an antenna, a cable, or a cable assembly, that that is necessarily going to put them in a certain bucket of profit potential. We actually see great profit potential for all companies, and that's one of the ways we screen requisitions. I mean, we're not going to buy a company if we don't see the long-term potential for that company to elevate its profitability to, you know, at or above our corporate average. Now, we do have industry-leading margins, and so most of the companies that we do acquire tend to be lower than we are. And then it's our job and their job, becoming part of the Amphenol family, to bring those margins up over time. But it's really not at all correlated to the type of products that they sell.

Matt Sheerin: And our last question comes from Matt Sheerin with CIFL. You may go ahead. Yes, thank you. Good afternoon.

Adam, in your commentary on mobile devices, you mentioned that tablets and notebook PCs continue to be weak, but we are hearing some chatter about expectations for a potential refresh cycle for PCs playing out in the next year or two. So, wondering if you have any visibility into that and can you give us a sense of the content opportunity for Amplenol within notebooks, particularly in the next generation of so-called AI-enabled PCs? Thanks so much, Matt.

Look, I hope what you say is the case. We certainly hope that there is a refresh. Look, I think we talked about this year and even a little bit last year that the strength that we've seen in phones this year, which was more than offset in particular by things like laptops and tablets, had to do with the clear fact that, during the pandemic and when everybody went to work from home and studied from home, there was an enormous rush to buy new devices, which caused a surge and really upset the normal replacement cycle of those products. I guess I don't know. I can't tell you if I have any information to support that. I'm sure you're getting your information from even wiser sources than I would have.

Relative to content, you know, we do see great content opportunities in these devices as they get more complex, as they get more different wireless standards that they have to support, as they have higher speeds, as they have more fine pitch and more precision inside of them. All of these create opportunities for Amphenol in the long term. We've always said about the mobile device market, and that includes tablets and laptops and the like, that to the extent that there is a premium on the hardware of the product, that can create opportunities for Amphenol over the long term. And I think that whether that's related to AI or not, I can't necessarily connect those dots.

But for sure, people are going to need new devices in the future, and we'll be happy to enable the interconnect products across those devices. Well, operator, if that was our last question, I guess I'd like to take this opportunity to thank everybody here today for spending a little bit of their time with us. I, I wish that you all have a good continuation of your winter weather wherever you may be, and we look forward to talking to all of you in just 90 days from now. Thanks so much. Thanks, everybody. And this concludes today's conference. Thank you for participating. You may disconnect at this time and have a great rest of your day.