Q1 2024 Amphenol Corp Earnings Call

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Operator: Hello, and welcome to the first 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.

Hello, and welcome to the first 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.

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 today's conference host, Mr. Craig Lampo. Sir, you may begin.

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

I'd now like to introduce today's conference host Mr. Craig Lampo, Sir you may begin.

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 welcome you to our first quarter 2024 conference call. Our first quarter 2024 results were released this morning, and I will provide some financial commentary, and then Adam will give an overview of the business and current market trends. Then we will take questions.

Craig A. Lampo: Thank you very much.

Craig A. Lampo: Good afternoon, everyone. This is Craig Lampo, Amphenol, CFO and I'm here together with Adam Norwood, Our CEO, we would like to welcome you to our first quarter 2024 conference call. Our first quarter 2024. Our results were released this morning and I.

Adam Norwood: We'll provide some financial commentary and then Adam will give an overview of the business and current market trends then we will take questions.

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 first quarter with sales of $3,256,000,000 and adjusted diluted EPS of $0.80. First quarter sales were up 9% in US dollars, 10% in local currencies, and 6% organically compared to the first quarter of 2023. However, sequentially, sales were down 2% in U.S. dollars, 2% in local currencies, and 4% organically.

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 Norwood: The company closed the first quarter with sales of $3.256 billion and adjusted diluted EPS of 80 cents.

Adam Norwood: First quarter sales were up 9% in U S dollars, 10% in local currencies and 6% organically compared to the first quarter of 2023.

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

Craig A. Lampo: Adam will comment further on trends by market in a few minutes. Orders in the quarter were $3,348,000,000, up 16% compared to the first quarter of 2023 and 66% sequentially, resulting in a book to bill ratio of 1.03 to 1. Gap in adjusted operating income was $685 million, and operating margin was 21% in the first quarter of 2024, on a GAAP basis. Operating margin increased by 110 basis points compared to the first quarter of 23, and 30 basis points compared to the fourth quarter of 23.

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

Adam Norwood: Orders in the quarter were $3.348 billion up 16% compared to the first quarter of 2023, and 66% sequentially, resulting in a book to bill ratio of 1.13 to one.

Adam Norwood: GAAP and adjusted operating income was 685 $9 and operating margin was 21% in the first quarter of 2024.

On a GAAP basis operating margin increased by 110 basis points compared to the first quarter of 'twenty, three and 30 basis points compared to the fourth quarter of 'twenty three.

Craig A. Lampo: On an adjusted basis, operating margin increased by 90 basis points from the prior year quarter and decreased by 20 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on higher sales volumes, which was partially offset by the delusive impact of acquisitions completed in the prior 12 months. On a sequential basis, the modest decrease in adjusted operating margin reflected better than typical conversion on the lower sales levels, partially offset by the dilutive impact of acquisitions made in the fourth quarter.

Adam Norwood: On an adjusted basis operating margin increased by 90 basis points from the prior year quarter and decreased by 20 basis points sequentially.

Adam Norwood: The year over year increase in adjusted operating margin was primarily driven by strong operating leverage on higher sales volumes, which was partially offset by the dilutive impact of acquisitions completed in the prior 12 months.

Adam Norwood: On a sequential basis, the modest decrease in adjusted operating margin reflected better than typical conversion on the lower sales levels, partially offset by the dilutive impact of acquisitions made in the fourth quarter.

Craig A. Lampo: We are very proud of the company's operating margin performance, which reflects the continued strong execution of our team. Breaking down the first quarter results by segment relative to the first quarter of 2023, sales and the harsh environment solution segment were $916 million and increased by 7% in US dollars and 3% organically. The segment operating margin was 26.7%. Deals in the communications solution segment were $1,266,000,000, increasing by 12% in U.S. dollars and 11% organically.

We are very proud of the company's operating margin performance, which reflects the continued strong execution of our teams.

Adam Norwood: Breaking down in the first quarter results by segment relative to the first quarter of 2023.

Adam Norwood: Sales in harsh environment solutions segment were 916 $9 increased by 7% in U S dollars at 3% organically a segment operating margin was 26, 7%.

Adam Norwood: Sales in the communications solutions segment were $1 $266 million, an increase by 12% in U S dollars and 11% organically.

Craig A. Lampo: Segment Operating Margin was 22.6%. Sales in the Interconnect and Sensor Systems Segment were $1,075,000,000, increased by 8% in U.S. dollars and 2% organically, and segment operating margin was 18.2%. The company's GAAP effective tax rate for the first quarter was 16.7%, and the adjusted effective tax rate was 24%, which compared to 20.9% and 24% in the first quarter of 2023, respectively. Gap, diluted EPS was 87 cents in the first quarter of 24, up 23% compared to the prior period, and the prior year period. And on the adjusted basis, diluted EPS increased 16% to 80 cents compared This was an excellent result!

Adam Norwood: Segment operating margin was 22, 6%.

Adam Norwood: Sales into interconnect sensors, and interconnect and sensor systems segment.

Adam Norwood: We're at 1.075 billion increased by 8% in U S dollars and cheaper sent organically and segment operating margin was 18, 2%.

Adam Norwood: The company's GAAP effective tax rate for the first quarter was 16, 7% in the adjusted effective tax rate was 24%, which compared to 29% and 24% in the first quarter of 2023, respectively.

Adam Norwood: GAAP diluted EPS was <unk> 87 cents in the first quarter of <unk> 24 up 23% compared to the prior period prior year period.

Adam Norwood: And on an adjusted basis diluted EPS increased 16% to 80 cents compared to 69 cents in the first quarter of 'twenty. Three this was an excellent result.

Craig A. Lampo: Operating cash flow in the first quarter was $599 million, or 120% of adjusted net income. And net of capital spending or free cash flow was $506 million, or 101% of adjusted net income. We are pleased to have continued to deliver a strong free cash flow yield in the quarter. I would note here that we may see slightly elevated levels of CapEx in the coming couple of quarters as we invest to support some of the growth that we are seeing in certain markets. From a working capital standpoint, inventories days, days sales outstanding, and payable days were 89, 70, and 53 days, respectively, all within normal levels.

Adam Norwood: Operating cash flow in the first quarter was $599 million or 120% of adjusted net income and net of capital spending our free cash flow was $506 million or 100, or a 1% of adjusted net income. We are pleased to have continued to deliver strong free cash flow yield in the quarter.

Speaker Change: I would note here that we may see slightly elevated levels of capex in the coming couple of quarters as we invest to support some of the growth that we are seeing in certain markets.

Speaker Change: From a working capital standpoint inventory days days sales outstanding and payable days were 80, 970, and 53 days, respectively, all within the normal levels.

Craig A. Lampo: During the quarter, the company repurchased 1.4 million shares of common stock at an average price of approximately $108 million. When combined with our normal quarterly dividend, total capital return to shareholders in the first quarter of fiscal year 24 was $286 million. In the month of April, the company repurchased the remaining authorized amount of stock under its existing $2 billion stock repurchase plan, thus completing the plan. And as noted in today's earnings release, the company's board of directors has approved a new $2 billion three-year open market stock repurchase plan.

Speaker Change: During the quarter the company repurchased one 4 million shares of common stock at an average price of approximately 108 hundred $8 when combined with our normal quarterly dividend total capital returned to shareholders in the first quarter of 'twenty four was $286 million.

Speaker Change: During the month of April the company repurchased the remaining authorized amount of stock under its existing $2 billion stock repurchase plan. Thus completing the plan and as noted in today's earnings release. The company's board of Directors has approved a new $2 billion three year open market stock repurchase plan.

Craig A. Lampo: Total debt on March 31st was $4.3 billion, and net debt was $2.3 billion. Total liquidity at the end of the quarter was $5.7 billion, which included cash and short-term investments on hand of $2 billion, plus availability under existing credit facilities. First quarter 2024 EBITDA was $810 million, and at the end of the first quarter of 2024, net leverage was 0.7 times. Following the close of the quarter in April, the company used $359 in cash on hand to repay its maturing 3.2% U.S. senior notes, and our $750 million undrawn term loan matured and was not renewed.

Speaker Change: Total debt on March 31 was $4 $3 billion in net debt was $2 $3 billion.

Speaker Change: Total liquidity at the end of the quarter was $5 $7 billion, which included cash and short term investments on hand of $2 billion plus availability under our existing credit facilities.

Speaker Change: First quarter 2024, EBITDA was $810 million at the end of the first quarter of 2024, our net leverage was <unk> seven times.

Speaker Change: Following the close of the quarter in April the company used $359 in cash on hand to repay its maturing three 2% U S senior notes and our and our $750 million Undrawn term loan matured and was not renewed.

Craig A. Lampo: In addition, in early April, we completed a $1.5 billion U.S. bond offering, and the company intends to use the net proceeds from the bond offering, together with cash on hand and other debt financing, to fund the company's pending acquisition of Carlyle Interconnect Technologies, which we continue to expect to close by the end of the second quarter of 2024. As a result of the U.S. bond offering, we do expect quarterly interest expense to increase to approximately $55 million, although until CIT is closed, we also expect interest income generated from the increased cash balance to offset the increase in interest expense.

Speaker Change: In addition in early April we completed a $1 $5 billion U S bond offering and the company intends to use the net proceeds from the bond offering together with cash on hand, and other debt financing to fund the company's pending acquisition of Carlisle interconnect technologies, which we continue to expect to close by the end of the second quarter of 2024.

Speaker Change: As a result of the U S bond offering we do expect quarterly interest expense to increase to approximately $55 million. Although until it's closed. We also expect interest income generated from the increase that cash balance to offset the increase in interest expense.

Craig A. Lampo: As such, the impact on earnings will be relatively neutral until the CIT closing occurs. The company is in a very strong financial position, and we are well positioned to fund future opportunities as they arise. Now I'll turn the call over to Adam, who will provide some commentary on market trends. Thank you very much.

Speaker Change: As such the impact on earnings will be relatively neutral until the closing occurs.

Speaker Change: Okay.

Speaker Change: Company is in a very strong financial position, we are well positioned to fund future opportunities as they arise.

I will now turn the call over to Adam who will provide some commentary on market trends well. Thank you very much Craig and I'd like to extend my warmest welcome to all of you here from a beautiful Wallingford, Connecticut, where spring is certainly in the air.

Richard Adam Norwitt: Well, thank you very much, Craig. And I'd like to extend my warmest welcome to all of you here from beautiful Wallingford, Connecticut, where spring is certainly in the air. As you know, as is typical, I'm going to highlight some of our achievements in the first quarter. I'll then discuss our trends and our progress across our diversified markets. Finally, I'll comment on the outlook for the second quarter. And, of course, we'll have time for questions.

Adam Norwood: As a as you know is a typical I'm going to highlight some of our achievements in the first quarter I will then discuss our trends and our progress across our diversified markets. Finally, I'll comment on the outlook for the second quarter and of course, we will have time for questions.

Richard Adam Norwitt: Our results in the first quarter were stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. We're very pleased our sales grew from the prior year by 9% in US dollars and 10% in local currencies, reaching $3,256,000,000. On an organic basis, our sales increased by 6%, with growth in IT data com, commercial air, automotive, defense, and mobile devices markets somewhat offset by declines in mobile networks, broadband, and industrial markets. And I'll talk about each of those markets here in a few moments.

Adam Norwood: Our results in the first quarter were stronger than expected exceeding the high end of guidance in sales and adjusted diluted earnings per share were very pleased that our sales grew from prior year by 9% in U S dollars and 10% in local currencies, reaching $3.256 billion.

On an organic basis, our sales increased by 6% with growth in it Datacom commercial air automotive defense and mobile devices markets somewhat offset by declines in the mobile networks broadband in industrial markets and I'll talk about each of those markets here.

Adam Norwood: <unk> moment.

Richard Adam Norwitt: We're very pleased that the company booked $3,348,000,000 in orders in the first quarter and that that represented a positive book-to-bill of 1.03 to 1. Our profitability was very strong in the quarter, and adjusted operating margins reached 21% even in the quarter, a robust 90 basis point increase from last year's levels. And from that profitability, we generated adjusted diluted EPS, which grew 16% from the prior year to $0.80. Finally, we generated strong operating and free cash flow of $599 million and $506 million, another clear demonstration of the high quality of the company's earnings.

Adam Norwood: We're very pleased that the company booked $3.348 billion in orders in the first quarter and that that represented a positive book to bill of 1.03 to one.

Adam Norwood: Our profitability was very strong in the quarter and adjusted operating margins reached 21% even in the quarter, a robust 90 basis point increase from last year's levels and from that profitability, we generated adjusted diluted EPS, which grew 16% from prior year to 87.

Adam Norwood: Finally, we generated strong operating and free cash flow of $599 million and $506 million.

Adam Norwood: Another clear demonstration of the high quality of the company's earnings.

Richard Adam Norwitt: As Craig mentioned, we're very pleased that the Board of Directors has approved the new $2 billion, three-year stock repurchase program, and this represents another important component of the company's balanced capital deployment. I'm extremely proud of our global team of Amphenolians.

Adam Norwood: As Craig mentioned, we're very pleased that the board of directors has approved a new $2 billion three year stock repurchase program.

Adam Norwood: This represents another important component of the company's balanced capital deployment.

I'm extremely proud of our global team of Amphenol in the Companys results. This quarter once again reflect the discipline and agility of our entrepreneurial organization.

Richard Adam Norwitt: The company's results this quarter once again reflect the discipline and agility of our entrepreneurial organization, who continue to perform very well in a most dynamic of environments. Now, as we announced on January 30th, just after our Q4 earnings, we're very pleased to have signed an agreement to acquire Carlisle's Interconnect Technologies business for $2 billion in cash. CIT, as it is known, is a leading global supplier of harsh environment interconnect solutions, primarily to the commercial air, defense, and industrial end markets, with approximately 6,000 employees worldwide.

Adam Norwood: Continued to perform very well in the most dynamic of environment.

Adam Norwood: Now as we announced on January 30th just after our Q4 earnings were very pleased to have signed an agreement to acquire carlyle's interconnect technologies business for $2 billion in cash.

Adam Norwood: As it is known as a leading global supplier of harsh environment interconnect solutions, primarily to the commercial air defense and industrial end markets with approximately 6000 employees worldwide.

Richard Adam Norwitt: The company's wide range of products, including wire and cable, cable assemblies, contacts, connectors, and sensors, are highly complementary to Amphenol's existing interconnect and sensor solutions. As previously announced, CIT is expected to have annual sales of approximately $900 million in 2024, with an EBITDA margin of approximately 20%. We do continue to anticipate that the transaction will be completed by the end of this second quarter. Accordingly, and based on CIT's current operating performance, we expect this acquisition to add roughly two pennies to earnings in the second half of 2024, excluding acquisition-related costs.

Adam Norwood: Company's wide range of products, including wire and cable cable assemblies contacts connectors and sensors are highly complementary to amphenol as existing interconnect and sensor solutions.

Adam Norwood: As previously announced <unk> is expected to have annual sales of approximately $900 million in 2024 with an EBITDA margin of approximately 20%.

Adam Norwood: We do continue to anticipate that the transaction will be completed by the end of the second quarter.

Adam Norwood: Accordingly, and based on <unk> current operating performance, we do expect this acquisition to add roughly two pennies to earnings in the second half of 2024, excluding acquisition related costs.

Richard Adam Norwitt: As we look forward to welcoming the outstanding CIT team to Amphenol, I remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute upon acquisitions of all sizes and to successfully bring these new companies into Amphenol remains a core competitive advantage for the company. As our organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all sizes.

Adam Norwood: As we look forward to welcoming the outstanding Ci team to Cit's team to Amphenol I remain confident that our acquisition program will continue to create great value for the company.

Adam Norwood: Our ability to identify and execute upon acquisitions really of all sizes and to successfully bring these new companies into the Amphenol remains a core competitive advantage for the company.

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

Richard Adam Norwitt: Now, turning to our progress across our SERP markets, I would just comment that we continue to be pleased that the company's end market exposure remains highly diversified, balanced, and broad. This diversification continues to create great value for Amphenol, enabling us to participate across all areas of the global electronics industry while not being disproportionately exposed to the risks associated with any given market or application. So starting out with the defense market, this important market represented 11% of our sales in the quarter, and sales grew from the prior year by a strong 13% in US dollars and 11% organically. And this is really driven by broad-based growth across most segments within the defense market. Subsequently, our sales were down by 2%, and this was modestly better than our expectations coming into the quarter.

Adam Norwood: Now turning to our progress across our served markets I would just comment that we continue to be pleased that the company's end market exposure remains highly diversified balanced and broad.

Adam Norwood: This diversification continues to create great value for amphenol enable us to enabling us to participate across all areas of the global electronics industry, while not being disproportionately exposed to the risks associated with any given market or application.

Adam Norwood: So starting out with the defense market. This this important market represented 11% of our sales in the quarter and sales grew from prior year by a strong 13% in U S dollars and 11% organically and this was really driven by broad based growth across most segments within the defense market.

Adam Norwood: Sequentially, our sales were down by 2% and this was modestly better than our expectations coming into the quarter.

Richard Adam Norwitt: Looking into the second quarter, we expect sales to increase modestly from these first quarter levels. And we remain encouraged by the company's strength and position in the defense market, where we continue to offer the industry's widest range of high-technology 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.

Looking into the second quarter, we expect sales to increase modestly from these first quarter levels.

Adam Norwood: And we remain encouraged by the company's strengthened position in the defense market, where we continue to offer the industry's widest range of high technology interconnect products.

Adam Norwood: 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.

Richard Adam Norwitt: We're well positioned to accelerate our new product development while also increasing our capacity to support this demand long into the future. The commercial aerospace market represented 4% of our sales in the quarter. Sales increased by a strong 20% both in U.S. dollars and organically, and that was really driven by broad-based strength across virtually all aircraft applications. Frequently, our sales grow much better than expected by 11% from the fourth quarter. As we look into the second quarter, we do expect a modest reduction in sales versus these very strong first quarter levels. I'm just really proud of our team working in the commercial air market.

Adam Norwood: We're well positioned to accelerate our new product development, while also increasing our capacity to support this demand long into the future.

Adam Norwood: The commercial aerospace market represented 4% of our sales in the quarter sales increased by a strong 20% both in U S dollars and organically and that was really driven by broad based strength across virtually all aircraft applications.

Adam Norwood: Sequentially, our sales grew up much better than expected, 11% from the fourth quarter.

Adam Norwood: As we look into the second quarter, we do expect a modest reduction in sales versus the very strong first quarter levels.

I'm, just really proud of our team working in the commercial air market.

Richard Adam Norwitt: With the ongoing growth 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 for the company. We continue to see great long-term opportunities for expansion of our technology offering to this important market, including with the CIT acquisition, and look forward to realizing the benefits of our growth initiatives for many years to come. The industrial market represented 25% of our sales in the quarter, and our sales in this market declined by 1% in US dollars and 10% organically.

Adam Norwood: With the ongoing growth 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 for the company.

Adam Norwood: We continue to see great long term opportunities for expansion of our technology offering to this important market, including with the Citi acquisition and look forward to realizing the benefits of our growth initiatives for many years to come.

Adam Norwood: The industrial market represented 25% of our sales in the quarter and our sales in this market did decline by 1% in U S dollars and 10% organically.

Richard Adam Norwitt: During the quarter, we did see some growth in marine, public safety, rail mass transit, and oil and gas applications, but that was more than offset by moderating performance, particularly in battery and electric heavy vehicles, instrumentation, and factory automation. On a sequential basis, we were pleased that sales were up 6% from the fourth quarter, a bit better than our expectations, but that growth was really driven by our acquisitions completed in the fourth quarter. Looking into the second quarter, we expect sales in the industrial market to remain at similar levels as in the first quarter.

Adam Norwood: During the quarter, we did see some growth in marine public safety rail mass transit and oil and gas applications, but that was more than offset by moderating performance, particularly in battery and electric heavy vehicles instrumentation and factory automation.

Adam Norwood: On a sequential basis, we were pleased that sales were up 6% from the fourth quarter, a bit better than our expectations, but that growth was really driven by our acquisitions completed in the fourth quarter.

Adam Norwood: Looking into the second quarter, we expect sales in the industrial market to remain at similar levels as here in the first quarter.

Richard Adam Norwitt: And despite this near-term pause in demand, I remain proud of our outstanding global team working in the industrial market. 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 electronic revolutions that will no doubt continue to occur across the industrial market. The automotive market represented 24% of our sales in the first quarter, and sales in the first quarter grew 18% in U.S. dollars and 17% organically. That was really driven by broad-based strength across most automotive applications, including especially communications-related applications, as well as electric and hybrid, electric vehicle, and drivetrain.

Adam Norwood: Despite this near term pause in demand I remain proud of our outstanding global team working in the industrial market 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 electronics.

Adam Norwood: Electronic revolutions that will no doubt continue to occur across the industrial market.

Adam Norwood: The automotive market represented 24% of our sales in the first quarter and sales in the first quarter grew 18% in U S dollars, a 17% organically that was really driven by broad based strength across most automotive applications, including especially communications related applications is.

Adam Norwood: Well as electric and hybrid electric vehicle Drivetrains.

Richard Adam Norwitt: sequentially, our sales declined by 3% from the fourth quarter, which was better than our expectations, and that reflected strong execution by our team working in the automotive market. As we head into the second quarter, we do expect a modest sequential decline in sales. But, you know, I'm just so proud of our team working in the automotive market. Our continued and clear-cut performance is yet another confirmation of the benefit of our team's focus on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. And, you know, while that includes electrified drivetrains, it also includes a multitude of other exciting applications.

Adam Norwood: Sequentially, our sales declined by 3% from the fourth quarter, which was better than our expectations and that reflects the strong execution by our team working in the automotive market.

Adam Norwood: As we head into the second quarter, we do expect a modest sequential decline in sales.

Adam Norwood: But you know I'm I'm, just so proud of our team working in the automotive market.

Adam Norwood: Our continued and clear out performance is yet another confirmation of the benefit of our team's focus on driving new design wins with customers, who are implementing a wide array of new technologies into their vehicles.

Adam Norwood: Well that includes electrified drivetrains. It also includes a multitude of other exciting application.

Richard Adam Norwitt: And we look forward to benefiting from that strong position for many years. The mobile devices market represented 8% of our sales in the quarter. Our sales were flat from the prior year in U.S. dollars, but they grew 2% organically as growth in laptops and smartphones was offset by declines in tablets, wearables, and other products. Sequentially, our sales declined by a better than expected 29% compared to the fourth quarter.

Adam Norwood: And we look forward to benefiting from that strong position for many years to come.

Adam Norwood: The mobile devices market represented 8% of our sales in the quarter.

Adam Norwood: Our sales were flat from prior year in U S dollars, but grew 2% organically as growth in laptops and smartphones was offset by declines in tablets wearables and other products.

Adam Norwood: Sequentially, our sales declined by a better than expected, 29% compared to the fourth quarter.

Richard Adam Norwitt: As we head into the second quarter, we now expect a mid-single digit sales decline from these first quarter levels as customers prepare for new model launches in the second half of 2024. Well, mobile devices will no doubt always remain one of our most volatile 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.

Adam Norwood: As we head into the second quarter, we now expect a mid single digit sales decline from these first quarter levels as customers prepare for new model launches in the second half of 2024.

Adam Norwood: While mobile devices will no doubt always remain one of our most volatile markets.

Adam Norwood: Our outstanding and agile team is poised as always to capture any opportunities for incremental sales that may arise in 2024 and beyond.

Adam Norwood: 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.

Richard Adam Norwitt: The mobile networks market represented 3% of our sales in the quarter, and sales did decline from the prior year by 13% in US dollars and 25% organically, as we continue to manage a broad-based reduction in spending by network operators and wireless equipment manufacturers.

Adam Norwood: The mobile networks market represented 3% of our sales in the quarter and sales did decline from prior year by 13% in U S dollars and 25% organically as we continued to manage through a broad based reduction in spending by network operators of wireless equipment manufacturers.

Richard Adam Norwitt: sequentially, though, we were pleased to see that our sales did grow by 5% from the fourth quarter, as we had expected coming into Q1. And as we look into the second quarter, we now expect a high single-digit increase in sales, which does reflect some increased demand that we're seeing from our mobile operator customers. While no doubt the short-term investment environment in the mobile networks market has been challenging, I can just tell you that 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.

Adam Norwood: Sequentially, though we were pleased to see that our sales did grow by 5% from the fourth quarter as we had expected coming into Q1.

Adam Norwood: And as we look into the second quarter, we now expect a high single digit increase in sales, which does reflect some increased demand that we're seeing from our mobile operator customers.

Adam Norwood: While no doubt the short term investment environment.

Adam Norwood: The mobile networks market has been challenging I can just tell you that our team continues to work aggressively to realize the benefits of our efforts to expand our position in next generation <unk> equipment and networks around the world.

Richard Adam Norwitt: When customers once again drive renewed wireless investments, we look forward to benefiting from the increased potential that comes from our unique position with both equipment manufacturers and mobile service providers. We're poised to build on that position as wireless technology continues to accelerate long into the future. The information technology and data communications market represented 21% of our sales in the quarter. Sales in the first quarter grew by a very strong 29% in US dollars and 28% organically.

Adam Norwood: When customers once again drive renewed wireless investments, we look forward to benefiting from the increased potential that comes from our unique position with both equipment manufacturers and mobile service providers, we're poised to build on that position as wireless technology continues to accelerate long into the future.

Adam Norwood: The information technology and data communications market represented 21% of our sales in the quarter.

Adam Norwood: Sales in the first quarter grew by a very strong 29% in U S dollars and 28% organically and this was driven by accelerating demand for our products used in artificial intelligence data centers.

Richard Adam Norwitt: And this was driven by accelerating demand for our products used in artificial intelligence data centers. On a sequential basis, sales increased by 1% from the fourth quarter, which was substantially better than our expectation for a mid-single-digit decline.

Adam Norwood: On a sequential basis sales increased by 1% from the fourth quarter, which was substantially better than our expectation for a mid single digit decline.

Richard Adam Norwitt: We continue to experience strong orders for AI-related interconnect products, and accordingly, as we look into the second quarter, we expect sales to grow in the low double-digit range from these first quarter levels. I can tell you that we're more encouraged than ever by the company's position in the global IT data market. Our team continues to do a really outstanding job securing future business for next-generation IT systems, particularly those enabling AI.

Adam Norwood: We continue to experience strong orders for AI related interconnect products and accordingly, as we look into the second quarter, we expect sales to grow in the low double digit range range from these first quarter levels.

Adam Norwood: I can tell you that we're more encouraged than ever by the Companys position in the global I T Datacom market.

Our team continues to new a really outstanding job securing future business on next generation it systems, particularly those enabling AI.

Richard Adam Norwitt: Indeed, this revolution in AI that we're all living through right now has created a unique opportunity for Amphenol, given our leading high-speed and power interconnect products. With machine learning driving a more intensive usage of these highest technology interconnect products, we're very well positioned for the future. And whether it's high-speed power or fiber optic interconnect, our products are critical components in these next-generation networks, and that just creates a continued long-term growth opportunity for the company.

Adam Norwood: Lead this revolution in AI that we're all living through right now has created a unique opportunity for amphenol, giving our given our leading high speed and power interconnect products.

Adam Norwood: With machine learning driving a more intensive usage of these highest technology interconnect products were very well positioned for the future and whether it's high speed power or fiber optic interconnect. Our products are critical components. In these next generation networks and that just creates a continued long term growth opportunity for the company.

Richard Adam Norwitt: The broadband market represented 4% of our sales in the quarter, but sales declined by 19% in U.S. dollars and organically from the prior year, as broadband operators continued to reduce their procurement levels. On a sequential basis, sales were flat, which was slightly worse than our expectations coming into the quarter.

Adam Norwood: The broadband market represented 4% of our sales in the quarter.

Adam Norwood: Sales declined by 19% in U S dollars and organically from.

Adam Norwood: From prior year as broadband operators continued to reduce their procurement levels.

Adam Norwood: On a sequential basis sales were flat, which was slightly worse than our expectations coming into the quarter.

Richard Adam Norwitt: And as we look into the second quarter, we anticipate sales to remain roughly at these first quarter levels. Yeah, regardless of the current demand dynamics in broadband, we do remain encouraged by the company's strength in position. 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 as we look into the second quarter, we anticipate sales to remain roughly at these first quarter levels.

Adam Norwood: Regardless of the current demand dynamics in broadband we do remain encouraged by the company's strengthened position.

Adam Norwood: 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.

Richard Adam Norwitt: Now turning to our outlook, and of course, assuming current market conditions as well as constant exchange rates, for the second quarter, we expect sales in the range of $3,240,000,000 to $3,300,000,000 and adjusted diluted EPS in the range of $0.79 to $0.81. This would represent sales growth of 6-8% and adjusted diluted EPS growth of 10-13% compared to the second quarter of last year.

Now turning to our outlook and of course, assuming current market conditions as well as constant exchange rates.

Adam Norwood: For the second quarter, we expect sales in the range of $3 $240 million to $3.300 billion and adjusted diluted EPS in the range of 79 to 81.

Adam Norwood: This would represent sales growth of 6% to 8% and adjusted diluted EPS growth of 10% to 13% compared to the second quarter of last year.

Operator: I just wanted to note that, as is our usual practice, this guidance does not include acquisitions which have not yet closed, including CIT. 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 our market position while driving sustainable and strong profitability over the long term. And finally, I would just like to take this opportunity again to thank the entire global team of Amphenolians around the world, nearly 100,000 of them worldwide, for their truly outstanding efforts here in the first quarter.

I just wanted to note that as is our usual practice. This guidance does not include acquisitions, which have not yet closed including C. I T.

Adam Norwood: 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 our market position, while driving sustainable and strong profitability over the long term.

And finally, I would just like to take again this opportunity to thank the entire global team of Amphenol ins around the world nearly a 100000 of them worldwide for their truly outstanding efforts here in the first quarter and with that operator, we'd be very happy to take any questions.

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 question is from Amit Daryanani with Evercore. You may go ahead.

Speaker Change: Thank you the question and answer period will now begin please limit to one question per caller.

Speaker Change: Our first question is from Amit <unk> with Evercore you May go ahead.

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

Speaker Change: Hum.

Good afternoon. Thanks for taking my question I guess, Adam I know you talked a bit about AI as well, but certainly a big focus for everyone, including investors. So I'm, hoping you could maybe perhaps help us understand you know what solutions what products as I'm, putting on really sell to that customer base right now.

Speaker Change: When it comes to AI infrastructure, and how does that really differ from what you sell to processor companies versus the cloud providers that are running their own infrastructure love to just understand that and if there's any way to put dimensions on how big this business can get for you folks over time it would be really helpful. Thank you.

Richard Adam Norwitt: Well, thanks very much, Amit. I really appreciate the question.

Speaker Change: Well, thanks, very much Amit and really appreciate the question look we're really excited about.

Richard Adam Norwitt: Look, we're really excited about the renewed and really revolutionary investments that are being made in AI right now. I mean, I have to confess that I am a consumer of these products. I've been using them for a while now. It's amazing. I mean, last night, you know, my wife made me tacos because, of course, it's Tuesday, and she went on a GPT chat. And she said, "Give me a great taco recipe."

Speaker Change: The renewed and really revolutionary investments that are being made in AI right now I mean I have to confess that I am a consumer of these products that had been using them. It's amazing I mean less last night my wife, maybe tacos because of course, it's Tuesday, and she went on on chat GBT and she said give me a great Taco recipe.

Richard Adam Norwitt: And it's just unbelievable what you can do for these things. And, you know, the underlying magic of these systems is just extraordinary computations, you know, creating essentially probability models that are based on comparing everything to everything else. And to do that, you need the chips, which whether they be GPUs or TPUs or Tensor or whatever the chips that there are, they need to be connected to each other in essentially a fabric network.

Speaker Change: And it's unbelievable what you can do for these things and you know the underlying magic of these systems is just extraordinary computations, creating essentially a probability models that are based on comparing everything to everything else and to do that you need.

Speaker Change: The chips, which are whether they'd be gpus, our gpus are tenths or whatever the chips that there are they need to be connected to each other in essentially a fabric network and these calculations and computations and comparisons have to happen virtually at light speed and thus that requires an enormous degree.

Richard Adam Norwitt: And these calculations and computations and comparisons have to happen, you know, virtually at light speed. And thus, that requires an enormous degree of high-speed, low-latency interconnect products that are different in their architecture. You have much more use, for example, of cable assemblies than you did in the past using maybe printed circuit boards. You have really direct connecting as close as possible to the chip of those high-speed products.

Speaker Change: Of high speed low latency interconnect products.

Speaker Change: Our different in their architecture, you have much more use for example of cable assemblies than you did in the past using maybe printed circuit boards, you have really direct connecting as close as possible to the chip of those high speed products and and these are extraordinarily challenging products to build these are products that we've been working on for so many years.

Richard Adam Norwitt: And these are extraordinarily challenging products to build. These are products that we've been working on for so many years, I mean, more than a decade of effort in developing these products. And they're just extremely challenging, extremely high technology, and extremely critical to the good performance of those products. But it doesn't just start and end with high speed.

Speaker Change: I mean more than a decade of effort in developing these products.

And Theyre, just extremely challenging extremely high technology and extremely critical to the good performance of those products, but it doesn't just start and end with high speed I think it's been broadly discussed lately power and what does power mean, Fred for AI and is there even enough power in the world to two.

Richard Adam Norwitt: I think it's been broadly discussed lately, you know, power and what power means for AI. And, you know, is there even enough power in the world to energize these AI data centers that people are talking about? And so you can imagine that there's an enormous focus as well on the efficiency of the power interconnect in these systems. And that's another area where Amphenol is participating with some of our leading-edge power interconnects, whether that's connectors, cable assemblies, bus bars, and all the like. And then there's obviously fiber optics and the fact that we use optical interfaces, whether those are active or passive fiber optic products.

Speaker Change: To energize. These AI data centers. The people are talking about and so you can imagine that there's an enormous focus as well on the efficiency of the power interconnect in these systems and that's another area, where amphenol is participating with some of our leading edge power interconnect, whether that's connectors cable assemblies bus bars, and all all of the like.

Speaker Change: And then there's obviously fiber optics and the fact of using optical interfaces, whether those are active or passive fiber optic products. Those are all things that we can offer to our customers and when we have the broadest deepest highest technology offering into the data center market, we've been working and preparing for kind of this moment for <unk>.

Richard Adam Norwitt: Those are all things that we can offer to our customers, and we have the broadest, deepest, highest technology offering in the data center market. We've been working and preparing for kind of this moment for so many years, as we've been developing this sort of type of interconnect architecture that needs to be used. And, you know, fortunately, over the last kind of five quarters or so, that's really taken hold. And I think this AI seems to really have a lot of value for end users.

Speaker Change: So many years as we've been developing this sort of type of interconnect architecture that needs to be used and fortunately over the last kind of five quarters or so.

Speaker Change: That's really taken hold and I think it's you know this AI seems to really have a lot of value for the end users. It seems to draw an enormous amount of investment in capital maybe by the way, even a little bit of cannibalizing of capital from more traditional data centers.

Richard Adam Norwitt: It seems to draw an enormous amount of investment in capital, maybe, by the way, even a little bit of cannibalizing capital from more traditional data centers. And it's not just about having the right products, but it's also about being able to ramp up those products and being able to react quickly to our customers, who are really having, you know, in many ways, kind of an arms race. And, you know, when I talked about the IT data market, I mentioned all of our growth, and in fact, a little bit more than all of our growth this quarter, which was very substantial growth, 28% organically came from products that are being integrated into AI data centers.

Speaker Change: And it's not just about having the right products, but it's also about being able to ramp up those products and being able to react quickly to our customers who are really having and in many ways kind of an arms race.

Speaker Change: I talked about the it datacom market I mentioned you know.

Speaker Change: All of our growth and in fact, a little bit more than all of our growth this quarter, which was very substantial growth. You know, 28% organically came from from products that are being integrated into into AI data centers and it's something that you know as we look into next quarter, where we still have a favorable view of that.

Richard Adam Norwitt: And it's something that, you know, as we look into next quarter, where we still have a favorable view of that, I think our team is realizing the benefits of really a lot of work over many years in the past. Thank you. Our next question is from Luke Junk with Baird. You may go ahead. Good afternoon.

Speaker Change: I think our team is realizing the benefits of really a lot of labors for many years in the past.

Speaker Change: Thank you. Our next question is from Luke Young with Baird. You May go ahead.

Operator: Thank you. Our next question is from Luke Junk with Baird. You may go ahead. Good afternoon.

Luke Young: Good afternoon. Thank you for taking the question just hoping you could help us unpack a little bit more of the uptick in orders and the book to Bill being positive. This quarter, just a particular areas of strength and are driving that and maybe areas that are still lagging at this point. Thank you.

Richard Adam Norwitt: Well, thanks so much, Luke. First of all, we're really pleased to see the positive book on bill 103. I mean, I know during COVID, there were some funny books to bill at one at a few points where it was like 115 to one, and then there were some negative books to bill. Traditionally, 103 is actually a very strong book to bill for us because our lead times are not that long. We're a very reactive company.

Speaker Change: Well, thanks, so much Luke.

First of all we're really pleased to see the positive book to Bill 103, I mean, I know during Covid. There were some funny books to bill at one <unk> at a few points of our deal was like $1 15 to one and then there were some negative book to Bill I mean traditionally one of the three is actually a very strong book to bill for us because our lead times are not that long, we're very reactive company and I think that's a really good.

Richard Adam Norwitt: And I think that's a really good sign. You know, it shouldn't be surprising that, you know, maybe the two places where we saw slightly negative book to bill would have been mobile networks and industry. Otherwise, we saw either flat or positive book to bill, and probably our strongest bookings on a book to bill came out of IT Datacom, as well as Commercial Air, which were really good books to bill. Thank you. Our next question is from Sari Boroditsky with Jeffreys. You may go ahead.

Sin.

Speaker Change: It shouldnt be surprising that you know maybe the two places where we saw you know a slightly negative book to bill would've been in mobile networks.

Speaker Change: And industrial otherwise, we saw either flat or positive book to Bill and probably our strongest bookings on a book to Bill came out of IC Datacom as well as commercial air which were which were really good book to bill.

Speaker Change: Thank you. Our next question is from theory boy that ski with Jefferies. You May go ahead.

Richard Adam Norwitt: Well, thank you very much, Sari. I mean, first, I just want to compliment Carlyle, the corporation. I work closely with the CEO of Carlyle. He's a wonderful guy.

Terry Boyatzis: Hi, Thanks for taking the question.

Terry Boyatzis: I wanted to dig in more on the CHP acquisition relatively large.

Terry Boyatski: Commercial roofing company before so what's the opportunity here being under your ownership and where do you see.

Theory Boy: To improve margins. Thank you.

Well. Thank you very much Sir I mean first I just wanted to compliment Carlyle The corporation.

Theory Boy: Yes.

Theory Boy: I work closely with the CEO of Carlo is a wonderful guy, it's a fabulous company actually and it's true their focus and their stated strategic focus is to be is to be in the building materials industry than they were a wonderful steward of Carlisle interconnect for many years, but theres no doubt that interconnect was not where they were focused.

Richard Adam Norwitt: It's a fabulous company, actually, and it's true. Their focus and their stated strategic focus is to be in the building materials industry. And they were a wonderful steward of Carlyle Interconnect for many years. But there's no doubt that Interconnect was not where they were focused strategically.

Strategically and I I'm, I'm really pleased and happy for the team the corporate team of Carlyle, because I think they've really been able to realize their vision to be a focused building materials company at the same time Carlyle interconnect is a fabulous company I've known this company for most of my quarter century, and Amphenol, It's one of those companies.

Richard Adam Norwitt: And I'm really pleased and happy for the team, the corporate team at Carlyle, because I think they've really been able to realize their vision to be a focused building materials company. At the same time, Carlyle Interconnect is a fabulous company. I've known this company for most of my quarter century at Amphenol. It's one of those companies that we actually don't compete with them very much, very little, actually.

Theory Boy: Is that we actually don't compete with them very much very little actually at its such a complementary company, but I've always admired the company and we've always admired the company for their great technology Fabulous people and I've known some of the people at SDI T. Also for many many years and I just can't tell you how happy I am.

Richard Adam Norwitt: It's such a complementary company. But I've always admired the company, and we've always admired the company for its great technology and fabulous people. And I've known some of the people at CIT for many, many years, and I just can't tell you how happy I am that they're going to be on our side of the table, that they're going to join the Amphenol family.

Theory Boy: That theyre going to be on our side of the table, but theyre going to join the Amphenol family and that's really just it's such a fabulous organization inside of C. I T. I mean, what we really love about this company. They are a true leader in the technologies around wire and cable and cable assemblies in con.

Richard Adam Norwitt: And that's really just – it's such a fabulous organization inside of CIT. I mean, what we really love about this company is that they are a true leader in the technologies around wire and cable, in cable assemblies, in contact technology, which is just so complementary to our leadership position on connectors and other value-add interconnect on things like back shells and the like. And when we bring that together, that offering to customers, whether that's in the commercial air market, whether that's in the defense market, whether that's in certain segments of the industrial market where they participate, we will be able to bring a total solution to those customers at a time when those customers really want to have reliable partners.

Theory Boy: <unk> technologies.

Theory Boy: Which is just so complementary to our leadership position on connectors and other value add interconnect.

Theory Boy: Things like back shelves and the like and when we bring that together that offering to customers whether that's in the commercial air market, whether thats in the defense markets, whether that's in certain segments of the industrial market, where they participate we will be able to bring a total solution to those customers at a time when those customers really want to have reliable partners.

Richard Adam Norwitt: I mean, you think about some of the dynamics that are evident, you know, for example, in commercial air transport, the reliability of your partners is an enormous premium in these things. I mean, you're making such critical devices, airplanes that hundreds of passengers go on.

Theory Boy: I mean, you think about some of the dynamics that are evident you know for example in commercial air the reliability of your partners is an enormous premium and these things I mean, you're making such critical devices airplanes that hundreds of passengers go on and being able to go to one Cup.

Richard Adam Norwitt: And being able to go to one company and say, these, you know, can you bring us a total suite, a total set of solutions for our interconnect needs? You know, that has a really, really wonderful and comforting dynamic for the customers. You know, in terms of the profitability, you know, CIT is a great company. It is operated, you know, in a bit of a holding company structure. I can tell you that we in Amphenol have a lot of different sister companies, brother companies around the world who have figured out lots of tricks of the trade, of accessing low-cost manufacturing, of helping to reduce the supply chain and all of that. And while the CIT team, they're going to still run this company, it's not like we're going to parachute a bunch of folks into CIT and say, go run it on their behalf. Quite the contrary.

Theory Boy: I'd say these can you bring us a total suite a total set of solutions.

For our interconnect needs you know that that has a really really wonderful and comforting dynamic for the customers in terms of the profitability. You know CRT is a great company. It has it has operated in in a bit of a holding company structure.

Theory Boy: I can tell you that we in amphenol have a lot of different sister companies brother companies around the world, who have figured out lots of tricks of the trade.

Theory Boy: Of accessing low cost manufacturing of of helping to reduce the supply chain and all of that and while the Ci team theyre going to still run. This company. It's not like we're gonna parachute a bunch of folks tend to sit and say go run it on their behalf quite the contrary I mean, the existing management team is going to stay running that company as part of amphenol, but they will be able to avail of them.

Richard Adam Norwitt: I mean, the existing management team is going to stay running that company as part of Amphenol, but they will be able to avail themselves of the experience of collaborative interactions with folks around Amphenol that, in our experience, ultimately leads to better performance. You know, we've had a good track record and, you know, some may call it a great track record of buying companies that were great companies with great technology, and great people that just were maybe part of the wrong parent company.

Himself of experience of collaborative interactions with folks around amphenol that in our experience ultimately leads to better performance.

Theory Boy: We've had good a good track records and some may call. It a great track record.

Theory Boy: Of buying companies that were great companies with great technology, great people that just weren't maybe part of the wrong parent company all the way back to nearly 19 years ago. When we acquired the Teradyne connection systems from Teradyne Corporation again Teradyne is an outstanding company in the test and measurement industry, but they were not in interconnect company.

Richard Adam Norwitt: You know, all the way back to nearly 19 years ago when we acquired Teradyne Connection Systems from Teradyne Corporation. Again, Teradyne is an outstanding company in the test and measurement industry, but they were not an interconnect company. When we acquired the Advanced Sensors business from GE, and again, GE is an outstanding company. You know, I'm just, you know, as you know, they focus now, and it's now GE Aerospace. A wonderful company, but they were not an interconnect company.

Theory Boy: When we acquired the advanced sensors business from GE and again GE has an outstanding company and you know I'm just yeah. As you know the focus now and it's now <unk> Aerospace is a wonderful company, but they were not in interconnect company and and here again, you know with with the M. T. S. The company that we acquired in 2020. One. Another example of a great.

Richard Adam Norwitt: And here again, you know, with MTS, the company that we acquired in 2021, another example of a great company that ultimately was not an interconnect or, in that case, a sensor company. I think as part of now an interconnect company where they really belong, I have really high hopes long term for the progress that the CIT team will make. This will not come overnight. There's no doubt about that. You know, that takes time, and we're patient in that respect, but we're very hopeful, and we have really a strong vision for the future of this company as part of Amphenol.

Theory Boy: Company that ultimately was not an interconnector in that case a sensor company.

I think as part of now an interconnect company, where they really belong.

Theory Boy: I have really high hopes long term for the for the for the progress that the <unk> team will make this will not come overnight.

Theory Boy: There's no doubt about it you know that takes time.

Theory Boy: And we're patient in that respect, but we're very hopeful and we have really a strong vision for the future of this company as part of the Amphenol family.

Operator: Thank you. Our next question is from Wamsi Mohan with Bank of America.

Thank you. Our next question is from <unk> Mohan with Bank of America. You May go ahead.

Richard Adam Norwitt: Yes, thank you so much. Adam, maybe we can get back to this AI topic a little bit. Thanks for all the color you shared.

Mohan: Hi, yes. Thank you so much Adam maybe back to back with this AI topic, a little bit.

Mohan: Thanks for all the color you shared a clearly amphenol.

Richard Adam Norwitt: Clearly, Amphenol has been in this space for a long time, and you continue to push the envelope, both in terms of data speeds and signal integrity issues. So can you just talk about how you're seeing pricing evolve, maybe generation to generation? What's been the history there?

Mohan: It has been in this space for a prolonged time and you continue to push the envelope in terms of data speeds and signal integrity issues. So can you just talk about how you're seeing pricing evolved maybe generation to generation, what's been the history, there or how are you anticipating that given the higher value and kind of much more so.

Richard Adam Norwitt: How are you anticipating that, given the higher value and kind of much more sort of, you know, transmitting 800 gigabytes instead of 400 gigabits? So clearly, there's value in there, but the density of applications is becoming more complicated, and the unit volumes are also growing, you know, by an order of magnitude higher. So putting all those together, how should we think about just the opportunity here? Is it right to think about maybe a, you know, you're guiding to like a 30% growth in this end market right here in the next quarter? Is that something that's possible to continue into 2025? Thank you so much. Well,

Transplanting 800 gigs is instead of 400 gig speeds. So clearly there's value in there, but the density of applications is becoming more complicated and the unit volumes are also growing.

Mohan: Kind of order of magnitude higher so putting all those together how should we think about.

Mohan: The opportunity here.

Mohan: Is it right to think about maybe a you just you are guiding to like a 30% growth in this end market right here in the next quarter is that something that is possible to continue into 2025.

Speaker Change: So much.

Richard Adam Norwitt: Well, thanks, Wamsi. There is a lot wrapped up in that question. I mean, look, I guess to the very end of your question, I'm not going to get out ahead of myself and try to give you guidance about this revolutionary thing into 2025. As you know, we give guidance for the quarter ahead of us, and then we try to make sure we're maximizing our position on whatever the market will bring us long term. So I would say this:

Speaker Change: Well, thanks, Onvia a lot wrapped up in that in that question I mean, I look I guess to the very end of your question I'm not going to get out ahead of myself and tried to give a guidance about this this revolutionary thing into 2025.

As you know we give guidance for the quarter ahead of US and then you know we try to make sure we're maximizing our position.

Speaker Change: Whatever the market will bring us long term.

Speaker Change: But I would say this.

Richard Adam Norwitt: Number one, you mentioned pricing. I mean, we are always trying to deliver value to our customers. And so, you know, our goal is to deliver the maximum amount of value to our customers at the lowest price that they can get.

Speaker Change: Number one you mentioned pricing I mean, we are always trying to deliver to our customers value.

Speaker Change: And so you know our goal is to deliver the maximum amount of value to our customers at the lowest price that they can get.

Richard Adam Norwitt: And if we can deliver enough value to our customers, then there will be some of that value left over for us. And I think what you see in AI is the criticality of the interconnect in these systems. I mean, there is a direct correlation between the power of these AI learning and inference models and the quality, performance, and capability of the interconnect systems. Because again, you're talking about speed and latency. And so when you think about how long it takes to build a model, well, if you have even the tiniest proportion of higher latency. Between the Chips.

Speaker Change: And if we can deliver enough value to our customers then there will be some of that value leftover for us and I think what you see in AI is the criticality of the interconnect in these systems.

Speaker Change: There is a direct correlation between the power of these AI learning and inference models and the quality and performance and capability of the interconnect systems, because again, you're talking about speed and latency and so when you think about how long does it take to build.

Speaker Change: <unk> our model.

Speaker Change: Well, if you have even the tiniest proportion of higher latency between the chips.

Richard Adam Norwitt: Then all of a sudden, what may take a month takes three months to build these complex models that are using trillions of learning factors across them. And if you take three months, and your competitor takes one month, and your model is more up-to-date than your competitors, all of a sudden, all of a sudden, you as a service provider are not able to monetize these massive investments that you're making. So if you think about that correlation between speed and latency and, in fact, the economics of the models, you can understand that there is a lot of value embedded in our products as it relates to what they create in terms of functionality for our customers.

Speaker Change: Then all of a sudden what may take a month. It takes three months to build these complex models that are using trillions of learning factors across them.

Speaker Change: And if you take three months and your competitor takes one months and your model is more up to date than your competitors all of a sudden all of a sudden you as a service provider are not able to monetize these massive investments that you're making so if you think about that correlation between the speed the latency and then in fact the economics.

Speaker Change: Of the models you can understand that there is a lot of value embedded in our products as it relates to what it creates in terms of functionality for our customers.

Richard Adam Norwitt: And, you know, whether that's, you know, at the chip processor level, whether that's inside the data centers with the cloud operators, whatever that is. Now, you know, we have to build also our capacity and that these are extremely high-precision products. They require a lot of testing.

Whether that's at the <unk>.

Speaker Change: At the at the chip processor level, whether it's inside the data centers with the cloud operators whatever that is now.

Speaker Change: There's no doubt about it that you know we have to build also our capacity and that these are extremely high precision products. They require intensity of testing they require intensity of automation.

Richard Adam Norwitt: They require an intense level of automation. Craig, I think, alluded in his prepared remarks a little bit that, you know, we might see a couple quarters of a little bit more CapEx, not just for this market but, you know, for other markets as well. But this is one of those areas where, you know, we're really building up phenomenal capabilities. And, you know, I just have to take one, you know, last moment here and answer your question.

Speaker Change: I think alluded to in his prepared remarks, a little bit, but you know we might see a couple of quarters are a little bit more capex not just for this market, but for other markets as well, but this is one of those areas, where we were really building up a phenomenal capabilities and yeah. I just have to take one last moment here in answer to your question like everything that I'm talking about.

Richard Adam Norwitt: Like, everything that I'm talking about; it's easy for me to say all these things. I can't tell you how hard our team is working to execute on these words. I mean, again, these are complex products with complex production processes, complex systems, extremely high reliability, and a lot at stake because of the underlying economics.

Speaker Change: It's it's easy for me to say all these things I can't tell you how hard our team is working to execute on these words.

Speaker Change: Again these are complex products with complex production processes complex systems extremely high reliability, a lot at stake because of those underlying economics and boy I I have rarely been as grateful as I am to those folks who are working 24 seven across amphenol around the world to really.

Richard Adam Norwitt: And boy, I have rarely been as grateful as I am to those folks who are working 24-7 across Amphenol around the world to really ramp up in support of our customers that are implementing these AI data. Thank you. Our next question is from Mark Delaney with Goldman Sachs. You may go ahead. Yes, good afternoon. Thanks very much.

Speaker Change: Ramp up in support of our customers that are implementing these AI data centers.

Speaker Change: Thank you. Our next question is from Mark Delaney with Goldman Sachs. You May go ahead.

Mark Delaney: Yes. Good afternoon. Thanks, very much for taking my question I'm, hoping to better understand how amphenol is thinking about capital allocation for the rest of the year, especially with the pending Carlisle interconnect transaction as the M&A funnel is still active and with our new repurchase authorization, we announced this morning, but also the potential cash usage for M&A, such as Carlyle, how active might the company beyond buybacks this year.

Operator: Thank you. Our next question is from Mark Delaney with Goldman Sachs. Please go ahead.

Richard Adam Norwitt: Yeah, thanks a lot, Mark. Yeah, I think in regards to our capital deployment, we've had a, you know, very consistent policy and practice over many years with regard to our capital deployment and over a whole host of years where we've done, you know, a significant amount of M&A and less M&A. And, you know, we continue to be kind of, it continues to be a balanced and flexible deployment strategy. You know, in the current year with the CIT, I talked about how strong our balance sheet is, the 0.7 times net leverage, you know, the strong free cash flow that we generate and continue to generate. And so I wouldn't think, even with CIT, I wouldn't say that that would have any impact, ultimately, on our capital deployment strategy.

Speaker Change: Yeah, Thanks, a lot mark.

Speaker Change: Yeah, I think in regards to our capital deployment, we've had a very consistent you know.

Speaker Change: Policy and practice over many years with regards to our capital deployment in over a whole host of years, where we've done a significant amount of M&A and less M&A in <unk>.

Speaker Change: We continue to be kind of it continues to be a balanced and flexible deployment strategy.

Speaker Change: In the current year with the C. A T. I mean, we I talked about how strong our balance sheet is the 0.7 times net leverage.

Speaker Change: Strong free cash flow that we generate and continue to generate and I. So I wouldn't think even with C. I T. I wouldn't say that that would have any impact ultimately on our capital deployment strategy and we did just renew or have a new $2 billion three year.

Richard Adam Norwitt: And, you know, we did just renew or have a new $2 billion three-year share repurchase program. Certainly, that's one of the legs of a return of capital to shareholders. We, you know, Ultimately, over time, we want to return about 50% or roughly half of our free cash flow to our shareholders. And part of that is our dividend yield, which is roughly 1%. And we will continue to target that over time, as well as our share repurchase plan.

Speaker Change: Share repurchase program certainly that's one of the legs and a return of capital to shareholders. We.

Speaker Change: Ultimately over time, we want to return about 50% or roughly half of our free cash flow to our shareholders and part of that is our dividend yield which is roughly a 1% you know and and we continue to target that over time and as well as our share repurchase plan. So I would say this is a new plan.

Richard Adam Norwitt: So I would say this new plan is just consistent with that, and our dividend policy is consistent with that. And ultimately, M&A continues to be the focus that, over time, we believe that that will continue to drive strong returns. So if there was a time where we generated a significant number of closing of deals in a particular year, what we think about maybe dialing back share repurchases. But at the end of the day, considering the significant free cash flow that we generate, we really haven't had to do that, and certainly wouldn't expect this year, just with CIT, to have to make any adjustment to that.

Speaker Change: Oh, just consistent with that and our dividends certainly policies consistent with that and ultimately that M&A continues to be the focus that ultimately over time, we believe that that will continue to drive strong returns.

Speaker Change: So if there was a time, where we you know we generated significant closing of deals in a particular year, we think about maybe dialing back share repurchases, but at the end of the day just considering the significant free cash flow that we generate we really haven't had to do that and certainly we didn't expect.

Speaker Change: This year, just with C. I T to have to have any adjustment to that.

Richard Adam Norwitt: And Mark, relative to the M&A pipeline, I would just tell you that our pipeline remains strong. Yes, we completed 10 acquisitions last year. Yes, we announced in January our largest ever acquisition with CIT.

And mark relative to the M&A pipeline and I would just tell you that our pipeline remains strong.

Mark Delaney: Yes, we completed last year 10 acquisitions, Yes, we announced in January our largest ever acquisition with Ti T.

Richard Adam Norwitt: But I can tell you we have the appetite, the capacity, and the ability and agility to continue to make acquisitions large and small. And I think we continue to demonstrate our ability to make more acquisitions, to make bigger acquisitions. And, you know, the beauty of this industry and the beauty of this market is that there are just so many great opportunities to find companies with great people and great technology and a very complementary market position to Amphenol. We remain extremely disciplined in our acquisition program.

Mark Delaney: But I can tell you we have the appetite the capacity and the ability and agility to continue to make acquisitions of large and small and I think we continue to demonstrate our ability to do more acquisitions to do bigger acquisitions.

Mark Delaney: The beauty of this industry and the beauty of this market is that Theres, just so many great opportunities to find companies with great people and great technology, and a very complementary market position to amphenol.

Mark Delaney: We remain extremely disciplined in our acquisition program and.

Operator: And, you know, we will walk away if we get a bad feeling up until the last second before we wire money. But there's no doubt about it that there are great, great opportunities for us in the future. And, you know, as Craig mentioned, our financial condition is in really a fantastic position with 0.7 times leverage here at the end of the quarter. Our leverage, you know, will just be, what, a touch above one following the acquisition of CIT. And, you know, so we really have the capacity, the capability, and the appetite to continue. Thank you. Our next question is from Steven Fox with Fox Advisors. Please go ahead. Hi, good afternoon.

Mark Delaney: We will walk away a four four if we get a bad feeling up until the last second before we wire money.

Mark Delaney: But there's no doubt about it that there's great great opportunities for us for the future and you know as Craig mentioned like our financial condition is and really a fantastic position with <unk> seven times leverage here at the end of the quarter, our leverage will just be what a touch above one <unk>.

Mark Delaney: Following the acquisition of C. I T and so we have really the capacity the capability and the appetite to continue.

Mark Delaney: Thank you. Our next question is from Steven Fox with Fox Advisors, You May go ahead.

Steven Fox: Hi, Good afternoon, I was just wondering on the auto markets in the 17% growth you talked about I know you highlighted communications.

Richard Adam Norwitt: I was just wondering about the auto markets, the 17%.

Operator: Thank you. Our next question is from Steven Fox with Fox Advisors. Please go ahead.

Steven Fox: And I know you guys don't like to count cars per se, but can you just sort of provide some color on the background drop you're selling.

Richard Adam Norwitt: Thanks. Yeah, thanks. Thanks very much, Steven.

Richard Adam Norwitt: You're right. I don't necessarily like counting cars. I mean, you know, the market is what the market is. But look, we have taken advantage, I think, for a very long time, not of an overall growing auto market. I mean, if you look over, I don't know, eight years or something, it's still sort of a similar level of total worldwide auto production. But there's no doubt that the content has expanded, you know, dramatically over these years. And I think we've taken a real advantage of that.

Steven Fox: Selling into right now and into Q2, and what exactly would you call out as sort of leading products at year.

It's really doing well and right now thanks.

Yeah. Thanks, Thanks, very much Steve and you're right I don't like counting cars necessarily I mean, the market is what the market is but look we have taken advantage I think for a very long time not of an overall growing auto market. I mean, if you look over I don't know eight years or something it's still sort of a similar level of total worldwide auto.

Steven Fox: Production.

Steven Fox: But theres no doubt that the content has expanded dramatically over these years and I think we've taken a real advantage of that so when we think about you know are opportunities we've talked a lot over the past year is about electric electrified drivetrains to high voltage connectors for example sensors that go into that.

Richard Adam Norwitt: So when we think about, you know, our opportunities, we've talked a lot over the past years about electrified drivetrains, the high-voltage connectors, for example, sensors that go into that, but we've also talked about all the other applications. And so when you think about, you know, communications, as I highlighted earlier, there's just more and more communications technology being put into cars. And as a leader in RF technology for cars, as a leader in antennas for cars, as someone who participates really across that whole signal chain of communications, you know, that creates a great opportunity.

Steven Fox: But we've also talked about all the other applications and so when you think about communications you know as I highlighted earlier, there's just more and more communications technology being put into cars and <unk>.

Steven Fox: And as a leader in RF technology for cars is a leader in antennas for cars is someone who participates really across that whole signal chain of communications that creates a great opportunity theres other areas like connectivity passenger connectivity engine control by the way there's still the vast majority of cars that are built are using.

Richard Adam Norwitt: There are other areas like connectivity, passenger connectivity, and engine control. By the way, the vast majority of cars that are built are still using fuel-based engines or ICE vehicles. And those require an enormous amount of different content as well. In fact, most of what we sell into cars is agnostic to the drive. But it's not agnostic to the increase in content in cars. As there are more electronics, there's going to be more opportunities for Amphenol.

Steven Fox: Fuel based engines or ice vehicles, and those require an enormous amount of different contents as well most of actually what we sell into cars is agnostic to the drivetrain, but its not agnostic to the increase in in content in cars as theres more electronics theres going to be more opportunities for amphenol.

Operator: Thank you. Our next question is from Samik Chatterjee with JP Morgan. You may go ahead. Hey, thanks for the question. This is Joe Cardoso with Persomic. Can you just give me a moment?

Speaker Change: Thank you. Our next question is from stomach chatter G with J P. Morgan you May go ahead.

Speaker Change: Hey, Thanks for the question. This is Joe Cardoso on for stomach.

Can you just give us an update on where we stand on the inventory destocking headwinds in the industrial market and how you're thinking about timing of when we'll see that normalizing and then maybe as a quickie second if I can can you just touch on the Capex investments that you highlighted in your prepared remarks, how should we be thinking about magnitude and besides it datacom that you mentioned and what are the other major.

Operator: Thank you. Our next question is from Samik Chatterjee with JP Morgan. You may go ahead.

Richard Adam Norwitt: Yeah, I mean, just very quickly on industrial, I think we continue to see the demand for industrial equipment somewhat muted. There is no doubt an impact from destocking with distributors. But it's not just destocking. I think distributors' orders are also down. And so it's not just that they have too much inventory, but there's demand in certain pockets of industry. You know, I would say in particular in places like Europe, maybe to a lesser extent in some parts of Asia, and then even to a lesser extent in North America.

Your buckets of investments there. Thank you.

Yeah, I mean, just very quickly on industrial I mean, I think we continue to see the demand in industrial to be somewhat muted. There is no doubt an impact from destocking with distributors, but it's not just destocking I think distributors orders themselves are also.

Speaker Change: Are also down and so it's not just that they have too much inventory, but the demand in certain pockets of industrial and you know I would.

Speaker Change: Say in particular in places like Europe.

Speaker Change: Maybe to a lesser extent in some parts of Asia, and then even to a lesser extent in in North America.

Richard Adam Norwitt: With regard to our comments on CapEx, I mean, I talked about it in the context of AI, but you can imagine, you know, we're growing strongly in a number of our markets, including, in particular, in defense. We grew last year in defense by 20%. We grew last quarter by 11% organically, and we continue to see strong momentum. And, you know, the defense industry also uses extremely high technology products. We have a very vertically integrated capability and offering to our customers.

Speaker Change: With regards to our comments on on Capex, I mean, I I talked about it in the context of AI, but you can imagine we're growing strongly in a number of our markets, including in particular in defense.

Speaker Change: We grew last year in defense by 20%, we grew last quarter by 11% organically.

Speaker Change: We continue to see strong momentum in the defense industry uses also extremely high technology products, we have a very vertically integrated.

Speaker Change: Capability and offering to our customers and usually you can't grow by 20% in defense related products, It's just impossible to flex and I think our team's just done a fabulous job of flexing their capacity, but you know that may require a little bit more but we're look we're not talking about big numbers here I mean, we said we expect slight Ella.

Richard Adam Norwitt: And, you know, usually you can't grow by 20% in defense-related products. It's just impossible to flex. And I think our team's just done a fabulous job of flexing their capacity. But, you know, that may require a little bit more.

Richard Adam Norwitt: But look, we're not talking about big numbers here. I mean, we said we expected a slight increase in CapEx. Our CapEx is still very, very reasonable. I think Craig, it was less than 3% last quarter. And so, you know, this is not a big deal. We expect to still have very strong and robust free cash flow through the year.

Speaker Change: <unk> and Capex, our Capex is still very very reasonable I think Craig it was less than 3% last quarter and so you know this is not a big deal we expect to still have very strong and robust free cash flow through the year.

Operator: Thank you. Our next question is from William Stein with Truist Securities. You may go ahead.

Speaker Change: Thank you. Our next question is from William Stein with Truest Securities. You May go ahead great.

Richard Adam Norwitt: Great, thanks for taking my question. I'm going to ask yet another question on AI. We understand that the three main connector vendors in this space, Amphenol and two others, have very solid positions, and very good technical capabilities. I'm wondering if you can talk about the competitive dynamics among the three of you, and also the degree to which you can capture some of their share, or whether it's possible that another entrant among the hundreds of connector companies globally could realistically attack this market. Uh, yeah.

William Stein: Great. Thanks for taking my question I'm going to ask yet another on AI.

William Stein: We understand that the three main connector vendors in our space Amphenol in two others.

William Stein: A very solid positions very good technical capabilities I'm wondering if you could talk about the competitive dynamics among the three of you and also.

William Stein: The degree to which you can capture some of their share or whether it's possible.

William Stein: Another entrant among the hundreds of connector companies globally could realistically attack. This attack this market.

Richard Adam Norwitt: Well, thanks very much, Will. Look, I'm not going to comment on our peers. I have great respect for them. They're fabulous companies. What I would say is that, you know, we've been working in this area for a very, very long time. And, you know, as the leader in high-speed interconnect technology, you can imagine that we also have a very robust position here. You know, this is not something that we have just recently developed.

Speaker Change: Yeah. Thank you.

Speaker Change: So thanks, very much well look I'm not going to comment on our peers I have great respect for them, they're fabulous companies, what what I will say is that we've been working in this area for very very long time, and you know as the leader in high speed interconnect technology, you can imagine that we also have a very robust position.

Speaker Change: Here.

Speaker Change: This is not this is not something that we have just recently developed this is a very very long intensive.

Richard Adam Norwitt: This is a very, very long, intense, and a real leading position in the development of those technologies. But, you know, I have great respect for all of our competitors. And, you know, this AI is a great thing for our industry because it is really a multiplier of content because of the unique architecture of these products. And, you know, we're not going to win 100% of everything, but I can tell you that we certainly get more than our fair share.

Speaker Change: In real leading position in development of those technologies, but you know I have great respect for all of our competitors and you know if this is this AI is a great thing for our industry.

Speaker Change: Because it is really a.

Speaker Change: A multiple of content because of the unique architecture of these products and you know, we're not going to win 100% of everything but I can tell you that we certainly get more than our fair share in terms of new entrants I mean look there can always be.

Operator: In terms of new entrants, I mean, look, there can always be new folks who come along. These are among the hardest products that are made in the interconnect industry, and I think I already spent some time talking about the economics of those products and how those economics mean that, as a customer, you want to be very careful to not use a product that cannot meet the requirements that you need in these high-performance applications. Thank you. Our next question is from Asiya Merchant of Citigroup. You may go ahead. Great, thanks for taking my questions and giving me great results. Just the incremental gross margin if I

Speaker Change: New folks who come along these are among the hardest products that are made in the interconnect industry and I think I already spent some time talking about the economics of those products and how those economics.

Mean that as a customer you want to be very careful to not use a product that cannot meet the requirements that you need in these high performance systems.

Speaker Change: Thank you. Our next question is from <unk> merchant with Citigroup you May go ahead.

Asiya Merchant: Great. Thanks for taking my question and Great results.

Incremental gross margin if I did the calculation here right, where it's already operating margins a very strong maybe you can talk about how you guys think about the trajectory of those cause incremental margins at that point or progresso or progressing, especially when you think about it.

Operator: Thank you. Our next question is from Asiya Merchant with Citigroup. You may go ahead.

Asiya Merchant: Rolling in a pretty sizable acquisition in the back half how we should be modeling for that thank you.

Richard Adam Norwitt: Yeah, thanks, Asiya. Yeah, no, we are really proud of the 21% operating margins here in the first quarter. I mean, first quarter typically is, you know, the more challenging quarter in the years, given the sequential quarter typical decline we have. And that's because we did 10 acquisitions last year, you know, as you know, and those acquisitions were, you know, significantly under our company average.

Yeah. Thanks Alethia.

Speaker Change: Yeah, No we're really proud of the 21% operating margins here in the first quarter I mean first quarter typically is that you know the.

Speaker Change: The more challenging quarter in the years, given the sequential quarter typical decline we have.

Speaker Change: And certainly we you always do a good job, but this this quarter really I think is a outstanding quarter from being able to achieve 20% 30% year over year.

Speaker Change: And rarely sequentially about 30% and and that's you know we did 10 acquisitions last year, you know as you know and those acquisitions were significantly under our company average so when you really pull out and to look at the organic you know a conversion in our 6% growth on a year over year basis, it's significantly stronger than that 30.

Richard Adam Norwitt: So, when you really pull out and look at the organic, you know, conversion on our 6% growth on a year over year basis, it's significantly stronger than the 30% that, you know, kind of in the reported numbers. And sequentially, you know, kind of the same dynamic with the acquisitions we did in the fourth quarter being, you know, well under the average profitability of the company. And sequentially, that conversion really is well under that 30% kind of on a phase. So, really strong execution by the team.

Speaker Change: Sent that kind of in the reported numbers and and sequentially.

Speaker Change: The same dynamic with the acquisitions, we did in the fourth quarter I'm being well under the company average profitability. The company sequentially that that conversion really is well under that 30% kind of in the face. So so really strong execution by the team I mean, the team has done outstanding job of.

Richard Adam Norwitt: I mean, the team has just done an outstanding job of, you know, really not only the teams that are growing but also the teams that are impacted by a negative sign. As you know, our industrial market is more challenged than a few other markets as well, and they've just done an outstanding job at controlling costs on the downside as well. So, the combination of those two really has just turned into really strong profitability for the company.

Speaker Change: It really not only that the teams that are growing but also the teams that are impacted on the negative side as you know our industrial market is more challenged and a few other markets as well and they've just done an outstanding job of controlling cost on the downside as well. So the combination of those two those two really has just turned into a really strong profitability for the company I mean, as we look forward.

Richard Adam Norwitt: I mean, as we look forward, you know, taking out CIT, I'll talk about that in a second, I would expect that, you know, again, more normal profitability levels on incremental revenue. We talk about the 25% longer-term target. I would expect more in that normal range as we kind of get into more of the normal cadence from a, you know, pricing cost perspective that we're in right now.

Speaker Change: It's taking out C. A T I talk about that in a second.

I would expect that you know again more normal profitability levels on an incremental kind of revenue are we talking about 25% longer term target I would expect more in that normal range as we kind of get into more of a normal cadence from a pricing cost perspective that we're in right now and but no doubt our teams will continue to.

Richard Adam Norwitt: But no doubt our teams will continue to manage on a very strong level and do their best to maximize profitability as they have. But I think 25%, you know, or so is kind of what I would kind of expect as we go throughout the year. Now, when we layer in CIT, when CIT does close, and we expect it here by the end of Q2, there's no doubt that business is, you know, well under our, you know, average company profitability levels currently.

Speaker Change: To manage it in a very strong level in and do their best to maximize profitability as they have but I think 25% or so is kind of what I would kind of expect as we kind of go throughout the year now when we layer in CIT and CFT does close that we expect here by the end of Q2, there is no doubt, though that businesses well under our.

Speaker Change: Average company profitability levels currently.

Richard Adam Norwitt: And there would be some impact on profitability on the margins, you know, slightly, you know, from an operating margin perspective. And, you know, over time, we would certainly work, and the team would work, as Adam kind of mentioned earlier, to get those back up to the company average. But certainly, in 2024, we would expect some impact on the second half from a profitability perspective from them. But it's a great team, and certainly we would expect them over time to improve upon that. Thank you. Our next

Speaker Change: And there would be some impact on the profitability on the margins slightly.

Speaker Change: From a from a operating margin perspective, and over time, we would certainly work and the team would work as Adam mentioned earlier to get those back up to the company average, but certainly in 2024, and we would expect some impact on the second half.

Speaker Change: Profit profitability perspective from them, but but it's a great team and certainly we would expect over time to improve upon that.

Speaker Change: Thank you. Our next question is from Andrew Buscaglia with BNP Parabiont you May go ahead.

Operator: Thank you. Our next question is from Andrew Buscaglia with BNP Paribas. Please go ahead.

Richard Adam Norwitt: Yes, following up on that question, CIT, you know, I think it's a great price. And, you know, as part of a holding company, you guys alluded to maybe not running optimally. But is this integration?

Andrew Edouard Buscaglia: Hey, good afternoon guys.

Andrew Edouard Buscaglia: Good afternoon.

Andrew Edouard Buscaglia: Yes.

Andrew Edouard Buscaglia: Following up on that question, you know E I T E.

Andrew Edouard Buscaglia: At a great price.

Andrew Edouard Buscaglia: Hum.

Andrew Edouard Buscaglia: As part of our holding company you guys alluded to maybe maybe not run optimally.

But is this is this integration is this company a cost savings story.

Richard Adam Norwitt: Is this company a cost-saving story? Or, you know, if you look at CIT, their growth historically wasn't all that exciting. Is this more of an opportunity to reaccelerate their growth? Or is it both? And then, if you could comment on that potential margin dilution in the back half, what might that be at this point?

Andrew Edouard Buscaglia: Or if you look at the I T. Their growth historically it wasn't all that exciting is this more of an opportunity to reaccelerate their growth or is it full.

Andrew Edouard Buscaglia: And then comment if you could comment like that potential margin dilution in the back half of what might that be at this point.

Richard Adam Norwitt: Yeah, I don't know that we have a specific number to give you for the margin dilution. I mean, we'll talk about it when we own the company. In terms of the priorities, I mean, every acquisition we make, we want them to accelerate their growth and make more money doing it. And so you can imagine that with the CIT team, we're already talking about, to the extent that we can before closing, how they both accelerate their growth, expand their market position, take advantage of being part of Amphenol, take advantage of, you know, the broader access that we have as a company, take advantage of the And in turn, how do they take advantage of, you know, our low-cost manufacturing?

Speaker Change: Yeah, I don't know that we have a specific number to give you for the margin dilution I mean, when it will talk about it when we own the company.

Speaker Change: In terms of the priorities I mean every acquisition, we make we want them to accelerate their growth and make more money doing it and so you can imagine that with the <unk> team. We're already talking about you know to the extent that we can before closing.

Speaker Change: We're already talking about how do they both accelerate their growth expand their market position take advantage of being part of Amphenol take advantage of the broader access that we have as a company to take advantage of the broader suite of technologies that we have.

Two to grow their business and in turn how do they take advantage of.

Speaker Change: Of our low cost manufacturing, how do they take advantage of the broader relationships. We have in the supply chain whatever that may be and also just how do they take advantage of now being part of a high performance interconnect company like Amphenol I will tell you in years past.

Richard Adam Norwitt: How do they take advantage of the broader relationships we have in the supply chain, whatever that may be? And also, just how do they take advantage of now being part of a high-performance interconnect company like Amphenol? I will tell you, in years past, when we've seen companies improve their performance, some of that was just because they came in and saw, oh my goodness, I didn't realize I could make that much money, and they just figured it out and made it happen.

Speaker Change: When we've seen companies improve their performance some of that was just they came in and they saw Oh my goodness I didn't realize I could make that much money.

Speaker Change: And they just figured it out and made it happen.

Richard Adam Norwitt: And it's not that we parachuted in with a bunch of folks from headquarters or otherwise, but there are so many great role models of organizations run by entrepreneurs, run by Amphenol, and general managers who have just figured it out. And that is, you know, we don't have an Amphenol business system; we don't have an Amphenol way. The Amphenol way is to liberate people, to give them authority, and to hold them accountable as entrepreneurs.

Speaker Change: And it's not that we parachute and with a bunch of folks from headquarters or otherwise, but there is inside of the company. So many great role models of organizations run by entrepreneurs run by Amphenol in general managers, who have just figured it out and that that is we don't have.

Amphenol business system, we don't have an amphenol way the Amphenol way is just to liberate people to give them the authority and to hold them accountable as entrepreneurs and and that mindset is very different from most other companies and again.

Richard Adam Norwitt: And that mindset is very different from most other companies. And again, Carlisle is a fabulous organization, the parent company, but they're not an interconnect company. And I think CIT as part of Amphenol, with our unique culture, with our uniquely broad suite of products and relationships, you know, I can't tell you exactly how they're going to do it, but I have a lot of confidence that they will.

Speaker Change: Carlyle is a fabulous organization, the parent company, but they're not in interconnect company and I think Ti T. As part of Amphenol with our unique culture with our uniquely broad suite of products and relationships.

Speaker Change: I can't tell you exactly how they're going to do it but I have a lot of confidence that they will.

Operator: Thank you. And our last question comes from Joe Giordano with TD Cowen. You may go ahead.

Speaker Change: Thank you and our last question comes from Joe Giordano with P. D. Cowen you May go ahead.

Richard Adam Norwitt: Hey, thanks, guys. Just curious, like, with the AI stuff, is there any inherent margin differential between the products that you're selling on these next-gen technologies versus, you know, more traditional data centers or versus, like, more of the company average? And then, if I could, I asked your competitor this this morning, but when you think about the CapEx that you need to do and the scale of what these customers of yours are thinking over a multi-year period, it's massive.

Joseph Craig Giordano: Hey, Thanks, guys.

Joseph Craig Giordano: Just curious like with the AI stuff is there any inherent margin differential between the products that you're selling on these next gen technologies versus more traditional data center or versus like more than the company average and then I if I could I asked your competitor this morning, but.

Joseph Craig Giordano: When you think about the Capex that you need to do and the scale of what these customers of yours are thinking over a multi year period is massive.

Richard Adam Norwitt: How do you, like, bring that down to your own spend and, like, rationalize? Is this doable? Like, how fast do we want to spend ahead of something that might be a five-year story? Like, how do you balance?

Joseph Craig Giordano: You like bringing that down to your own spend in like <unk>.

Joseph Craig Giordano: Rationalize it just doable like how fast and we wanted to spend ahead of something that might be a five year story like how do you balance that.

Richard Adam Norwitt: Yeah, look, I may let Craig comment on the margins, except, I mean, it's an easy answer. It's just like, look, we make margins based on selling value to customers. If we can create value for our customers, then usually there's value for us to be had there. And I think that's basically what I would say in this respect. Relative to scaling and working with our customers, I mean, you can imagine that we have very intense discussions with our customers in every market here because of the economics behind it, because of the pressure on our customers and the big vision. You can imagine that we're having even more intense discussions.

Speaker Change: Yeah look I may let Craig comment on the margins, except I mean, it's an easy answer. It's just like look we make margins based on selling value to customers. If we can create value for our customers and usually there is value for us to be had there and I think that's basically what I would say in this respect.

Speaker Change: Relative to scaling and working with our customers I mean, you can imagine that we have very intensive discussions with our customers in every market here because of the economics behind it because of the pressure on our customers in the end the big vision, you can imagine that we're having even more intensive discussions and so.

Richard Adam Norwitt: And so this is not just like, you know, you get an order, and then you say, all right, well, I'm going to go invest X, Y, Z. I mean, this is a very iterative, interactive discussion, but it's all done under the context of the Amphenol approach. You know, these aren't that we're making decisions here at headquarters and allocating capital. We have general managers making decisions and having responsibility for specific products.

Speaker Change: This is not just like you know you you get an order and then you say all right well I'm going to go invest X Y Z. I mean, this is a very iterative interactive discussion, but it's all done under the context of the amphenol.

Speaker Change: Broach you know these are it's not that we're making decisions here at headquarters and allocating capital, we have general managers, making and having responsibility for specific products and theyre going to figure out how do they satisfy the customer but also knowing that it's their capital that they're spending.

Richard Adam Norwitt: And they're going to figure out how to satisfy the customer, but also knowing that, you know, it's their capital that they're spending, and if they spend more than they should, that's going to hit their P&L, not just hit Amphenol's P&L, it's going to hit their P&L. I think that is something that is very unique in our organization. And over time, when I think about why does Amphenol spend what we spend on capital, on capital expenditures, it is in large part because of the ownership of that.

Speaker Change: And if they if they spend more than they should that's going to hit their P&L not just going to hit Amphenol has been I was going to hit their P&L and that accountability.

Speaker Change: Sort of from birth to death of a program.

Speaker Change: It is something that I think is very unique in our organization and over time when I think about why does amphenol spend what we spend on capital on capital expenditures.

Speaker Change: It is in large part because of the ownership of that.

Richard Adam Norwitt: The accountability and authority for that are resident in individuals who also go to the customer every day, who also are in charge of the factory, who also are in charge of developing the product. And when you have that comprehensive authority, you tend to make wiser decisions about it. And it's not like, well, I'm going to overinvest now and let the next person clean it up on my behalf. These folks are there for the long term, and they own it all. And I think they're going to make wise decisions accordingly.

Speaker Change: The accountability the authority for that.

Speaker Change: Resident and individuals who also go to the customer everyday who also are in charge of the factory, who also are in charge of developing the products and when you have that comprehensive authority you tend to make wiser decision.

Speaker Change: About this and it's not like well I'm going to over invest now and let the next next person cleaned it up on my behalf.

Speaker Change: These folks are there for the long term and they own it all and I think they're going to make wise decisions accordingly.

Richard Adam Norwitt: Thank you, and I'll now turn the call back over to Mr. Norwitt for any closing remarks.

Richard Adam Norwitt: Thank you and I'll now turn the call back over to Mr. Norway for any closing remarks.

Richard Adam Norwitt: Well, thank you very much and again, thanks to everybody for your time today. We appreciate everybody's attention, and I wish that everybody had a fabulous spring, and we'll talk to you again in 90 days or so. Take care.

Norway: Well, thank you very much and again, thanks to everybody for your time today, we appreciate it but I appreciate everybody's attention and I wish that everybody has a fabulous spring and we'll talk to you again in 90 days or so take care. Thank you.

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

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