Q1 2025 Amphenol Corp Earnings Call
Hello, and welcome to the first quarter 2025 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. At the request of the company, today's conference is being reported. If anyone has any objections, you may disconnect at this time.
I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may forget
Thank you very much.
Good afternoon everyone, this is Craig Lampo, Amphenol CFO , and I'm here together with Adam Norwitt, our CEO . We would like to welcome you to our first quarter of 2025 conference call.
Our first quarter, 25 results were released this morning, I will provide some financial commentary and then Adam will give an overview of the business and current market trends and then we will take questions.
As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements, so please refer to the relevant disclosures and our press release for further information.
The company closed the first quarter of 2025 with record sales of $4,811 million in gap in record adjusted the blue EPS of $0.58 and $0.63 respectively.
First quarter sales are up 40% in US dollars, 49% in low currencies and 33% organically compared to the first quarter of 2024.
Sequentially sales are up 11% in US dollars, 12% in local currencies and 6% organically. [inaudible]
Adam will comment further on trends by market in a few minutes.
Orders in the quarter were a record $5,292 million, up a strong 58% compared to the first quarter of 2024, and up 6% sequentially resulting in a book to build ratio of 1.1 to 1. [inaudible]
Gap operating income was $1 billion and $25 million in the quarter, and Gap operating margin was 21.3%.
Gap operating income included $105 million of acquisition-related costs primarily related to the acquisition of the Andrew business from Comscope, which closed at the beginning of February . Thank you very much.
Excluding these acquisition-related costs, adjusted operating income in the first quarter of 2025 was $1 billion, $130 million, resulting in a record-adjusted operating margin of 23.5%.
On an adjusted basis, operating margin increased by 250 basis points from the prior year quarter in 110 basis points sequentially.
The year of year increase in the adjusted operating margin was primarily driven by strong operating leverage on the higher sales volumes, which is modestly offset by the diluted impact of acquisitions.
High and sequential basis, the increase in the adjusted operating margin reflected strong conversion on the higher sales levels, as well as meaningful progress on profitability improvement initiatives on certain acquisitions.
Craig Lampo
Speaker Change: I am very proud of the company's record operating margin performance in the first quarter, which reflects continued strong execution by our teams.
Speaker Change: Berking down first quarter results by segment compared to the first quarter of 2024. Sales in the harsh environment solution segment were 1,268 million dollars and increased by 38% in US dollars and 8% organically and segment operating margin was 24.5%. [inaudible]
Speaker Change: Sales and the communication solution segment were $2,414,000, and increased by 91% in US dollars and 73% organically, and segment operating margin was 27.4%.
Speaker Change: Sales and interconnect and sensor system segment were $1.1 billion, and increased by 5% in U.S. dollars and 6% organically and segment operating margin was 18.1%.
Speaker Change: The company's gap effective tax rate for the first quarter was 22.7%, and the adjusted effective tax rate was 24.5%, which compared to 16.7% and 24% in the first quarter of 2024 respectively.
Speaker Change: We continue to expect our adjusted effective tax rate to be approximately 24 and a half percent for the full year 2025.
Speaker Change: Gap Deluted EPS was 58 cents in the first quarter, up 32% compared to the prior year period.
Speaker Change: to a record 63 cents compared to 40 cents in the first quarter of 2024.
This was an excellent result.
Speaker Change: Operating cash flow on the first quarter was $765 million or 104% of an income, and free cash flow was $580 million or 79% of an income.
An excellent result, considering the growth we have experienced.
Speaker Change: We expect to again have somewhat elevated levels of capital spending in the second quarter, as we continue to invest to support the significant growth we are seeing in the IT datacom market.
It was a pleasure. Thank you. Thank you.
Speaker Change: From a working capital standpoint, inventory days, days sales outstanding, and payable days were 80, 69 and 59 days respectively, all within normal levels.
Speaker Change: During the quarter, the company repurchased 2.7 million shares of common stock at an average price of approximately $68.00. When combined with our normal quarterly dividend, total capital of return to shareholders in the first quarter of 2025 was approximately $389.00.
Speaker Change: Total debt on March 31st was $7.2 billion, and net debt was $5.5 billion. Total liquidity at the end of the quarter was $4 billion, which included cash and short-term investments on hand of $1.7 billion, plus availability under or existing credit facilities. [inaudible]
Speaker Change: Excluding acquisition-related costs, first quarter to 2025 EBITDA was $1 billion, $319 million at the end of the first quarter of 2025, our net leverage ratio was 1.2 times.
Speaker Change: As a result of the closing of the acquisition of Andrew, we now expect quarterly interest expense, net of interest income earned on cash on hand, to be approximately $70 million, which is reflected in our second quarter of guidance.
Speaker Change: We are very pleased that the company's financial conditions remain strong by any measure.
Speaker Change: I will now turn the call over to Adam, who will provide some commentary on current market trends.
Speaker Change: I'm going to highlight our first quarter achievements, discuss and trends and progress across our serve markets, and then make some comments on our outlook for the second quarter, and of course we'll have time for some questions.
Speaker Change: So, turning to the first quarter, Craig just reviewed. We really drove excellent performance in Q1. Our results were much stronger than expected, exceeding the high end of guidance in sales and adjusted deluded earnings for share.
Speaker Change: Sales Group from prior year by 48% in US dollars, 49% in local currencies, reaching a new record of 4,811 million.
Speaker Change: And our organic basis were very pleased that our sales increased by a very strong 33% with growth, with growth across most of our serve markets.
Speaker Change: Craig alluded to it, we booked record 5,292 million in orders in the first quarter, which was a very healthy book to bill of 1.1 to 1.
Speaker Change: Orders grew by a very strong 58% from prior year and we're up 6% sequentially. I would just comment that our orders were really strong across the board with all of our end markets reaching book to bills of at least one to one.
Speaker Change: Well particularly pleased to have delivered record adjusted operating margins of 23.5% in the quarter. This was up 250 basis points from prior year and 110 basis points sequentially.
Speaker Change: There's no doubt that the superior profitability is a direct result of the outstanding execution of the Amphenol teams around the world.
Speaker Change: Adjusted Deluity Piasco, 58% from prior year to reach a new record of 63 cents.
Speaker Change: And then finally, we converted our earnings into cash, generating strong operating cash flow of $765 million, and free cash flow of $580 million in the quarter, both clear reflections of the quality of the company's earnings.
Speaker Change: I just cannot express enough my pride in our team for this quarter's results. These results once again reaffirmed the value of the drive, discipline and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment. Thank you very much.
Speaker Change: Now as we announced on February 3rd, we're also excited that we completed the acquisition of Comscopes, OWN, and DAS businesses, which we are now calling by the company's original name,
Speaker Change: We're actually very proud to bring back this storied brand, which stretches back to the company's original founding by Victor Andrew in 1937.
Speaker Change: The Acquisition of Andrew brings Amphenol and industry leading portfolio of innovative and advanced RF and Tana and interconnect technologies for the communications network's market.
Speaker Change: I'm especially excited that we get to welcome the nearly 4,000 talented employees of Andrew to the Amphenol family, and I look forward to further supporting our customers for developing next generation wireless networks around the world.
Speaker Change: As we announced at the time of the closing in February , the Andrew business was expected to generate full year sales of 1.3 billion and approximately six cents of accretion to Amphenol in 2025.
Speaker Change: We're very pleased with the performance of the Andrew team in their first few months as Amphenolians, and accordingly, we now anticipate that the acquisition will add approximately nine cents to our earnings this full year.
Speaker Change: As we welcome the outstanding Andrew and life thing teams to Amphenol, we remain confident that our acquisition program will continue to create great value for the company.
Speaker Change: Our ability to identify and execute upon acquisitions, and then successfully bring these new companies into Amphenol, remains a core competitive advantage for the company.
Speaker Change: As the organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all sizes.
Speaker Change: Now turning to the trends across all of our sort of markets, I would just note as usual that we're very pleased with the company's end market exposure because it remains highly diversified, balanced and broad.
Speaker Change: I would just note that this diversification continues to create great value for the company because it enables us to participate across all areas of the global electronics industry while not being overly or disproportionately exposed to the volatility of any given market or application.
Speaker Change: So turning first to the defense market, our defense sales represent 9% of our sales in the quarter and grew from prior year by a strong 21% in US dollars and 14% organically. This was essentially driven by broad base growth across virtually all segments within the defense market and importantly across all geographies.
Speaker Change: sequentially sales grew by 2%, which was a bit better than our expectations coming into the quarter.
Speaker Change: As we look into the second quarter, we expect sales to increase in the high single-digit range sequentially and we remain encouraged by the company's leading position in the defense market where we continue to offer the industry's widest range of high technology products.
Speaker Change: Amit's the current and very dynamic geopolitical environment. Countries around the world are expanding their spending on both current and next generation defense technologies.
Speaker Change: With our investments in the development of a broad array of new interconnect products, as well as the capacity to build them, we're well positioned to capitalize on this long-term demand potential.
Speaker Change: The commercial aerospace market represented 5% of our sales in the quarter and sales increased by a strong 106% in US dollars as we benefited from the addition of CIT.
Speaker Change: On organic basis, sales declined modestly by 3% from prior year as procurement volumes from Jetliner customers moderated.
Speaker Change: Sequentially, our sales moderated by 4% from the fourth quarter, which actually was a bit better than we had expected coming into the quarter.
Speaker Change: and as we look into the second quarter, we expect ourselves to remain roughly at similar levels as in the first quarter.
Speaker Change: I'm truly proud of our team working in the commercial air market. With the ongoing growth and demand for airliners, our efforts to expand our product offering both organically and through our acquisition program have paid real dividends.
Speaker Change: In particular, I would just tell you we're very encouraged by the progress of the CIT team as part of Amphenol and we look forward to further capitalizing on our expanded range of product solutions long into the future.
Speaker Change: The industrial market represented 20% of our sales in the quarter, and our sales increased by 20% in US dollars and 6% organically, as we continue to see improvements across the diversified industrial market.
Speaker Change: In particular, organic growth in the medical instrumentation, alternative energy and rail mass transit markets, more than offset moderations in heavy equipment and factory automation.
Speaker Change: In addition, our organic growth was driven by expansions in Asian North America and Europe was down just slightly a bit better than it had been in the prior quarters.
Speaker Change: On the sequential basis, sales were up 1% from the fourth quarter, which is better than we had expected coming into the quarter.
Speaker Change: Looking into the second quarter, we expect sales in the industrial market to remain at roughly these levels.
Speaker Change: I would tell you that we remain encouraged by the company's strength across the many diversified segments of this important market.
Speaker Change: While demanding Europe has been challenging, I am confident that our long-term strategy to expand our high technology interconnect and tenant sensor offering, both organically and through complementary acquisitions.
Speaker Change: Has positioned us better than ever to capitalize on the many electronic revolutions that will no doubt continue to occur across the industrial market.
Speaker Change: This creates exciting opportunities for our standing team working in this important area.
Speaker Change: The automotive market represented 16% of our sales in the quarter, and sales were slightly down by 2% in US dollars and just barely down 1% organically.
Speaker Change: As Gross in North American Asia was more than offset by a moderation of sales in Europe .
Speaker Change: Sequentially, our sales were down by 3% from the fourth quarter, but this was better than our expectations, and it reflected really strong execution by our team working in the automotive market.
Speaker Change: For the second quarter, we expect a slight sequential moderation in sales.
Speaker Change: Despite some near-term challenges, I remain proud of our team working in the automotive market. While the market's no doubt uncertain, our team continues to be focused on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles.
Speaker Change: We look forward to benefiting from our strong position in the automotive market for many years to come.
Speaker Change: Now as I noted last quarter, we have combined our broadband and mobile networks markets into a new market that we will call communications networks.
Speaker Change: Our sales in this market primarily go to telco operator and OEM customers across the global communications industry.
Speaker Change: So the communications network market represented 10% of our sales in the first quarter and sales grew from prior year by 107% driven primarily by the addition of Andrew to the Amphenol family.
Speaker Change: On organic basis, those sales did increase by 11% from prior year as we benefited from increased spending by communication network operators as well as wireless equipment manufacturers.
Speaker Change: Sequentially, our sales in the first quarter grew by 81%, that was driven by the Andrew acquisition, and on an organic basis, our sales moderated by 4%, which was better than we had expected. We had come into the quarter expecting a mid-teens
Speaker Change: Looking into the second quarter, we expect sale to increase in the high teens ranged sequentially as we benefit from the full quarter edition of Andrew.
Speaker Change: With our expanded range of technology offerings following the acquisition of Andrew, we're well positioned with both service provider, provider, and OEM customers across the global communication network's market.
Speaker Change: Our deep and broad range of products coupled with an expansive manufacturing footprint have positioned us to support customers wherever they are around the world.
Speaker Change: And as those customers continue to drive their systems to ever higher levels of performance, we look forward to supporting them for many years to come.
Speaker Change: The mobile devices market represented 7% of our sales in the quarter, and our sales grew by 20% in US dollars and organically from prior year.
Speaker Change: As strong growth in smartphones, laptops, and wearables was only partially offset by a moderation in sales related to tablets.
Speaker Change: Sequentially our sales declined by a better than expected 26% compared to the typically seasonally stronger fourth quarter. We do believe that some of this outperformance in the first quarter was driven by a slight pull-in of demand from certain customers.
Speaker Change: Looking into the second quarter, we expect sales to moderate in the high teens as customers adjust production in preparation for product launches in the second half of 2025.
Speaker Change: I'm very proud of our team working in the always dynamic mobile devices market, as their agility and reactivity has once again enabled us to capture incremental sales in the quarter.
Speaker Change: I'm confident that with our leading array of antennas, interconnect products, and mechanisms designed in across a broad range of next-generation devices, we're well positioned for the long term.
Speaker Change: And now turning to the IT DataCom market, it represented 33% of ourselves in the quarter.
Speaker Change: And sales in the first quarter grew by a very strong 133% in US dollars and 134% organically.
Speaker Change: and that was really driven by continued acceleration in demand for our products used in artificial intelligence applications together with continued robust growth in our base IT data con business.
Speaker Change: On a sequential basis, sales increased by 34% from the fourth quarter, substantially better than our expectation from mid single digit increase.
Speaker Change: This growth was driven by sales of AI-related products as well as growth in our based IG Data
Speaker Change: Looking ahead, we expect the help to increase further from these first quarter levels in the high single-digit range as investments in AI-related data centers, as well as the underlying IT investment continue to accelerate.
Speaker Change: Look, we're more encouraged than ever before by the company's position in the global IT data come market. Our team has simply done an outstanding job securing future business on next generation IT systems, particularly those enabling AI.
Speaker Change: The Revolution in Artificial Intelligence continues to create a unique opportunity for Amphenol, given our leading, high speed, and power interconnect products.
and Weather High Speed, Tower, or Fiberoptic Interconnect.
Speaker Change: Our products are critical components in these next generation networks, and this creates a continued long-term growth opportunity for Amphenol.
Speaker Change: Now turning to our guidance, and of course assuming current market conditions as well as constant exchange rates.
Speaker Change: For the second quarter, we expect sales in the range of $4,900,000,000 to $5,000,000 and adjusted to diluted EPS in the range of $0.64 to $0.66.
Speaker Change: 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.
Speaker Change: Finally, I'd like to take this opportunity to thank our entire global team of Amphenolians for their truly outstanding efforts here in the first quarter. And with that operator, we'd be very happy to take whatever questions there may be. Thank you very much for your time.
Thank you Mr Norwitt.
Speaker Change: The question and answer period will now begin. Please limit to one session for caller.
Speaker Change: To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing your to ask your question, please ensure your devices unmuted locally.
Speaker Change: We have a question from Andrew Buscaglia with BNP Parable. Please go ahead.
Hey, good morning, guys.
Morning, Andrew.
Thank you.
Speaker Change: The question is around, you could imagine around terror, you know, you guys are a very global company, and I know a lot of your businesses, you know, somewhat strategically set up, I think for a situation like this, but I'm wondering what you have to, you have to have some incremental cost you're factoring in and I would expect and how, can you, can I identify with markets? [inaudible]
Speaker Change: Those would be in and what is embedded in your Q2 guide and anything we should model in thereafter.
Speaker Change: Yeah, well, thank you very much, Andrew, and I'm not surprised to get a question on tariffs. Look, our organization, and you alluded to it, in many ways, is purpose built.
for a time like this.
Speaker Change: It's purpose-built in the sense that we push down through the organization, through our entrepreneurial organization.
Speaker Change: The authority, the all the levers of running these businesses, and then we can hold those folks accountable. And that's the sort of amphenolian entrepreneurship.
and at a time when you have such a dynamic.
Speaker Change: New policy environment, like tariffs. And you know everybody talks about tariffs here, but you know there's there's the various measures being taken by a variety of governments around the world and without expressing any opinions about those about those measures. They are what they are.
Speaker Change: and so it's really up to our organization, wherever they may be, to number one, work in every possible way to mitigate the impact of those tariffs.
Speaker Change: and then to the extent that we can't fully mitigate it to work with our customers to pass on to them the pricing impacts of these tariffs. And we are very local company around the world. We have more than 300 facilities in more than 40 countries and our general principle.
Speaker Change: is that we support our customers close to where they are in whatever region.
Speaker Change: Look, to the extent that there are some impacts of these tariffs, is there some pressure to some of our general managers that they have to work with customers?
Speaker Change: to find a way to pass that on. Of course, that's happening and I wouldn't say that it's specific to one or another of our end markets.
and I'd say that there's a slight...
Speaker Change: Let's say that there's a slight impact on pricing as we go into the second quarter and our team is going to work really well to moderate whatever impact could be on the bottom line. And I think implicit in our guidance is that our margins are still very strong in the second quarter so that must not be a tremendous impact.
Speaker Change: Thank you. Our next question comes from Amit Daryanani with Everquart ISI. Please go ahead.
Ami Virianani: Good afternoon, everyone. Thanks for being my question. Adam, you folks have really sizeable upside in the march, what are revenue numbers, and you know, some of it may be a couple hundred million is from Andrews, but rest of it seems organic.
Ami Virianani: Can you spend some time on what is enabling this size of organic bait and given the discussion you said on tariffs, how do you get comfort that there wasn't a high degree of revenue getting pulled in into the March quarter because of customer's potential to avoid the tariff scenario? Thank you.
Speaker Change: Well, thank you very much, Amit. I mean, look, the first thing I want to say is you kind of alluded to it in your question.
Speaker Change: and this is a very, very strong organic performance in the quarter and it's a testament to the ability of our team to execute on this level of demand from customers.
Speaker Change: It's not easy. I mean, if you think about some of these markets, I mean, the most acute one, IT DataCom growing 134% on a year of year basis, 34% sequentially.
Speaker Change: I mean, that's an enormous amount of effort by our teams to ramp up in the face of that level of customer demand and I just can't stop thanking them for all of their efforts.
Speaker Change: To your question on a pull-in, I mentioned in my prepared remarks that we saw a slight pull-in in mobile devices.
Speaker Change: But that was really the only place where we saw any signs of anything that was very specific to a pull-in, and, you know, is that related to tariff? I mean...
Speaker Change: I know folks have written nice reports about that present company included and so maybe in that market there was a little again I would classify that as a slight pull in. [inaudible]
Speaker Change: of Demand, and we've reflected that as well in our outlook in the second quarter from
Speaker Change: But if you look at our outlook in some of the other markets in particular IT DataCom where we still have a very strong outlook as we had
Speaker Change: into the second quarter. I would tell you that our customers are not pulling in, they're working very hard to equip as much as they can. These advanced computing data centers related to AI and also responding to demand on the base IT DataCom business.
that is there.
Speaker Change: The only other area that one could think about as a potential, was there a little bit of pull-in?
Speaker Change: would be in distribution, but honestly I can't tell you that we saw anything meaningful there, in fact.
and our overall distribution business from Q4 to Q. Thank you.
Speaker Change: Q-1, it was up a little bit, but it didn't show…
Speaker Change: Any sort of anomaly that would lead one to think that that was a pull in demand? Now look, I mean at the end of the day this was a quarter of tremendous execution by our team. We've done a fabulous job to position ourselves to capitalize and take more than our fair share of a lot of exciting revolutions.
Speaker Change: Going on around the electronic industry and then our team just delivered by executing which was not hard work but was very impressive or which was very hard work and was very impressive.
Thank you.
Joe Speck: Thank you. Our next question comes from Joseph Spak from UBS.
Please go ahead.
Thank you so much.
Adam, I was wondering, you know, in prior quarters.
with Indy,
Joe Speck: Industrial Business. I think some of the commentary was Europe was a little bit of the laggard. I'm wondering if anything has sort of changed there if you're seeing any sort of further green shoots in Europe within that segment. And then while you're on that business as well, if you're seeing any sort of change in order patterns in North America or in Asia given some of the new tariff policies. [inaudible]
Speaker Change: Well, thanks very much, Joe. Look, I think I alluded to the fact that industrial, we're in courage, we've had two straight quarters of six percent organic growth overall, but that has been really driven by
North American, Agent, that was...
Clearly the case last quarter. [inaudible]
Speaker Change: That was the case, again, this quarter. You know, if we want to say, is there a little bit of a green shoot from Europe ? I would say that the European rate of decline is much lower this quarter. It's just slightly down actually on an organic basis.
Euroverear in Europe and in Stastrial.
Speaker Change: and on a sequential basis. Actually, we did start to see growth in Europe . So.
Speaker Change: Yeah, I mean, Green Shoes, here in Spring with all the beautiful flowers outside of our windows. Sure, I guess...
Speaker Change: You know, there's a daffo bill or two in Europe as well. In terms of order pattern, look, we had a positive book to bill in industrial, not our strongest book to bill by the way. I'd say our strongest book to bill was in defense.
That's clearly not related to tariffs, I should tell you.
Speaker Change: that's a robust demand across the defense market globally. But we had a strong book to build in industrial, and I think it's a sign more, you know, maybe a few of these.
Speaker Change: Greener Shoots, and maybe an occasional flower popping up here in the spring. But it's a little early to tell. I mean, still Europe is down year by year slightly. And as we go through the course of this year, we'll see whether we see that improving further.
Thank you.
Speaker Change: Our next question comes from the line of Luke Junk with Baird.
Luke, please go ahead.
Good afternoon. Thanks for taking the question.
Adam Norwitt: Adam, maybe more of a philosophical question for you today, just, you know, reflecting on the fact that...
IT DataCom has had just such incredible growth rising to...
Adam Norwitt: Just how you think about that relative to an exposure being that big as a percentage of the company if I think historically maybe individual markets have gotten up to kind of the most 25% or so both maybe from a capital allocation standpoint going forward if it has any implications and maybe also from a just a risk management standpoint and thinking about the diversity that you like to drive in the model. Thank you.
Speaker Change: Well, Luke, that's a philosophical question that's very close to my heart because, as you know,
Speaker Change: and that's been a great asset for Amphen long-term. And while it hasn't driven capital allocation specifically, I would say, and I've said this many times, that we would never make an acquisition.
Speaker Change: If that acquisition ended up driving a dramatic overexposure to an upsetting that breadth and balance of the market, but I've never said as the following.
Speaker Change: We would capitalize on every growth opportunity that is available to us in the electronics industry and no matter what revolution is happening across you know my whole now you know more than 26 years in the company.
We have always.
with the full drive of the Ampholorganization. [inaudible]
Start to take advantage of that.
Speaker Change: And it just so happens that today in this revolution that is called AI and all what is going on around that.
Speaker Change: put it you know on the scale of kind of electrification on the scale of the internet when it was first being built out on the scale of when
Speaker Change: when the personal computer and the sort of democratization of computing that happened many years ago, and I think the acceleration of computing.
Speaker Change: and its manifestation in these extraordinary investments being made in AI, machine learning, generative AI, and the like, is another one of those sort of moments in the development of the electronics industry, which is a unique opportunity. And in this case,
Speaker Change: Moreover, it is a revolution that creates for our industry a disproportionate opportunity because of the unique nature of the architecture and the intensity of the interconnect solutions that are associated with that architecture.
and so when you stack that all together...
Speaker Change: You know, it's a great revolution, it's a more interconnected, intensive revolution, and we've taken more than our fair share of that, you know, the result has been that our IT data
Speaker Change: So I think that that upsets the breadth and balance of Amphenol, not at all. This hasn't happened because of a capital allocation decision, an acquisition. It's happened because our team has done a phenomenal job. And we're never going to shy away from organic growth opportunities.
Speaker Change: Even if it means that a market, you know, for at least right now, is at this size. Now also I would think back and think about the fact that in the last nine quarters we've made, I think, close to 15 acquisitions.
Speaker Change: and those acquisitions have also been across Oliver and Mark. It's including our two largest acquisitions, CIT.
Speaker Change: Andrew, one of which has a big exposure to the defense and commercial air and the industrial market and the other one.
Speaker Change: to our, as we now call it, communications networks market. So we're constantly trying to make sure that the company has that breadth and balance. And I think where we've exercised our balance sheet to make these acquisitions, those have always been in furtherance of a really wonderful balance in the company.
Speaker Change: So we feel great about this, I think philosophically or otherwise, and we're not going to shy away, we're certainly not going to turn down orders from customers and we're not going to try not to win everything possible.
Speaker Change: Thank you. Our next question comes from Samik Chatterjee from J. King Morgan. Please go ahead.
Salma Chatterjee: Hi, thanks for taking my question, Hi, Adam, Hi, Craig. Maybe Adam, you in the IT data on business just to follow up on the last question.
Salma Chatterjee: You now have a significant step up in the revenue from 4Q to 1Q, and you're guiding to another increase into 2Q. And clearly part of that's a part of the strong organic growth that the total business has as well.
May be moderate over time.
Salma Chatterjee: and then just a longer-term question associated with that. I mean, one of your big customers has talked about adopting something that's more co-packaged optic solution in the future that moves away from connections on the back plane to a certain extent. [inaudible]
Salma Chatterjee: How should we think about the longer-term implications of that in terms of connectivity content on that platform? Thank you.
Speaker Change: Thanks very much. Look, relative to organic growth, and we've tried to give guidance here for the second quarter. It's a very dynamic world, so we are not giving guidance beyond the second quarter. But I think what we know in IT DataCom in general, and as well, what we know in the specific portion of IT DataCom which is AI, is a very strong position with our customers.
Speaker Change: I just mentioned in that last, to the last question, you know, not only is this a generational, a generational transformation of how compute works.
Speaker Change: But it's a more interconnect intensive, and we've taken more than our fair share of that. And the breadth of our products, the breadth of our products which include high-speed products, power products, and fiber optic products, is such to coupled with our ability to execute on behalf of those customers.
Speaker Change: It is such that we're in a great position for them for the long term.
Speaker Change: Now, could there ever be an air pocket in the overall spending patterns of any of our markets, including IT? Of course, there can be.
Speaker Change: and that's the agility of Amphenol to manage to maximize our position on the upside and to protect the company if there ever is a kind of an air pocket.
Speaker Change: The other thing I'll say about this AI in particular, and we've said this before, is we have a very broad exposure.
Speaker Change: Across up and down the stack of the folks who are involved in creating this exciting new technology, starting with those who are spending the money, the web service providers.
themselves, and so that breadth of our exposure.
without a disproportionate...
Speaker Change: Reliance on one or another customer is also another important aspect of that. Look, you asked this final piece about a very specific technology on a very specific customer. I'm not going to answer specific questions about specific customers and specific technologies, but I will say this, which is that interconnect products.
Speaker Change: in these new systems play a very significant role. And whether it's copper, whether it's copper high speed power, fiber optics, what we care about is that there's more of everything.
Speaker Change: and that more of everything and our ability to capitalize and take more than our fair share of that more than everything, in other words, the higher content. That's really what makes me most excited about this opportunity over the long term.
Thank you.
Acia Merchant: Our next question comes from Asiya Merchant from City Group. Please go ahead.
Great, thank you. Congratulations on a great quarter. Thank you very much.
Speaker Change: Adam, if you can, just double-click a little bit on the non-AI portions of the business. I think you called that out, you know, that there was strength there.
Speaker Change: So if you can just kind of elaborate on that a little bit, where this trend is coming from, is it specific regions, customers, how to think about that, and visibility just looking ahead. Thank you.
Speaker Change: Well, thank you very much Asiya. And when you talk about non-AI, I assume you're talking about also within IT DataCom, but I'll answer it in kind of both ways. We're very encouraged to see strength.
Speaker Change: Not just in those customers focused on AI, but across all of our IT data come customers. I mean really really strong, I mean I would...
Speaker Change: I would tell you that of our IT data come growth on a year of year basis, we would say roughly two thirds of that has been from AI on a year of year basis and maybe a little more than half of the sequential growth, so that's really outstanding growth.
Speaker Change: of our non-AI-related IT data companies. And I wouldn't specify that that's one...
Regent, or another one set of customers.
Speaker Change: I a little bit understand that. I mean, customers around the world, enterprise, operator and otherwise are realizing the importance of an IT backbone and what that can create for you and the value of that and the payback on those investments. So I think that that makes a lot of sense.
Speaker Change: Now, if the question is really outside of even IT DataCom, look, even if you take away this extraordinary performance that we had in IT DataCom, and specifically that extraordinary performance,
Speaker Change: that we had with AI, the company still delivered outstanding organic growth on a year-of-year basis or on a sequential basis.
Speaker Change: and I think that that, if I wanted to put some...
Speaker Change: Some sort of scale around that. I mean, you're talking about, you know, high growth, the mid-teens kind of organic growth and environment like we're facing today. And I think that's just a testament to the fact that it's not just that the company is winning in AI, but we're winning really across all of our diverse fight at Mark. [inaudible]
Thank you.
Speaker Change: Our next question comes from Joe Giordano from TD Cowan. Please go ahead.
Hey guys, good afternoon.
Thank you. Bye-bye.
Adam Norwitt: I'm not sure even how to answer this question, but I think...
Speaker Change: It's worth asking anyway. For the commentary you made about Poland, and you're not seeing it really...
Speaker Change: The numbers look normal to you, like to anyone, so maybe it doesn't feel like pulling you just the numbers aren't out of whack, but what if like...
Speaker Change: Cohen is looking as appearing like normal demand. Is there a risk of that?
Speaker Change: Yeah, look, I think so, your question is really, are we confident in what we don't have visibility over?
Speaker Change: and I would say, look, all we can judge by is what we see. And we know in mobile devices and we saw in mobile devices, there was a slight pull-in.
are not only buying our product, but they want more.
Speaker Change: I mean, if we could have shipped more and by the way we shipped a lot more than anybody expected us to ship in the quarter, but they probably wouldn't take an even more if we could have done it when I look at the other markets.
Speaker Change: The one place that I would look very carefully at, and I mentioned that earlier is distribution, and our sales to distribution from Q4 to Q1, which is when you would have expected, you know, maybe this pull in to be happening in anticipation of the policies that were broadly reported. Thank you very much.
Speaker Change: You know, it was a very modest, kind of low single digit sequential growth that we saw in distribution.
Speaker Change: Are there things that we don't see through the supply chain that could end up, you know?
Speaker Change: Whatever, in hindsight, yeah, maybe there was a little bit of a pull-in here and there. Yeah, I'm not going to say that's impossible, Joe.
So I think that it's hard for me.
to kind of say anything categorically.
Speaker Change: But just on the basis of what we've seen across those areas where it would be most likely for us to have seen it.
Speaker Change: We've tried to be specific that we saw it in mobile devices and we don't think we've seen it, at least we haven't seen the evidence of it in the other spaces. But that wouldn't mean that there could be some bullet, but we just haven't seen the clear evidence of it.
Thank you.
Speaker Change: Our next question comes from William Stein from Truist. Please go ahead.
Great. Thanks for taking my question.
Speaker Change: I'm wondering if maybe it's time to revisit that target and perhaps think about a...
Speaker Change: Higher contribution margin level going forward, something on the order of 30%, I think you can beat that this quarter, but any comment on go forward profitability and a microcrest to model it would be very helpful. Thanks.
Speaker Change: Yeah, thanks, well, yeah, there's no doubt, I mean the team really just has done, you know, an excellent job, you know, driving margin expansion, you know, over time but especially over, you know, the last, you know, year here.
Speaker Change: especially over the last couple quarters. As you mentioned, our kind of long-term target for conversion has, you know, historically been the 25% level.
Speaker Change: More recently, we definitely have outperformed that benchmark and given our continued momentum, a strong institution I believe we are in a really well positioned to possibly even exceed that historical 25% target again here this year. In that reflected in our guidance, if you look at our implied guidance here in the second quarter, we are guiding to a little bit better than that 25%. With all that being said, the current environment is challenging and there is a lot of...
of the Fund.
Speaker Change: is quite significant. We're at levels of revenue, we're able to really execute well and leverage that.
Speaker Change: So I think that's right, I think that 25% is something we should continue to be able to exceed with these level of growth.
Speaker Change: at least been here in the near term and we'll at some point maybe talk about a higher
Craig Norwitt, Craig Lampo
Thank you.
Thank you.
Our next question comes from Mark Delaney from Goldman Sachs.
You may proceed.
Mark Delaney: Good afternoon, thank you very much for taking my question and congratulations on the strong results, including the record margins.
Speaker Change: Sales and orders were extraordinarily robust in the data center market. That said, there's been several media reports that at least one hyper-scaler, if not a few, could be slowing the pace of their investments going forward. So I'm hoping to better understand the breadth of the strength that Amphenol has been seen, and has been broad-based or a little bit more mixed amongst the key hyper-scalers. And what's your expectation for the breadth of customer demand in the data center market going forward? Thanks. Thank you very much.
Speaker Change: Yeah, thanks, Mark. I mean, look, simply put, we've seen really strong performance across the breadth of companies involved in building out AI.
Speaker Change: So whether that's the hyperscalers, whether that's the OEMs, the sort of sub-tears of those OEMs or the chip companies who are involved in that, so I wouldn't say that that is so concentrated.
Speaker Change: in that sense. You know, look, I know there have been a variety of different reports out there, but all what we can tell you is what we hear from our customers, which is they need as much as we can get them.
Speaker Change: And when you look at our guide for Q2, it reflects, you know, an incremental performance in that market. And, you know, when we 90 days from now we'll try to tell you what looks like in the third quarter. But it is very broad our position.
Thank you.
Speaker Change: Our next question comes from Saree Boroditsky from Jeffries. Please go ahead.
Speaker Change: Some concerns on a positive investment or maybe some reshore. So just any color there would be really helpful. Thank you.
Speaker Change: Thank you very much. I mean, look, back to automation has been a tricky market.
Speaker Change: for a few quarters. And last quarter, I think, you know, as we close the year...
Speaker Change: We talked about the fact that we did see while it was still down on a year-rear basis, we saw a little bit of sequential growth and we're like, well we don't know if that's what that's a real sign of. I would tell you it's still on a year-rear basis down, maybe it's done by a little bit less than it was.
Speaker Change: in prior year. It is a more European dominated part of the business, the major OEMs and machine builders that make up our factory automation business tend to be from Europe and
Speaker Change: Again, while we've seen a little bit of green shoots out of Europe , I think it's still too early to call a total springed loom here.
Dr. Junk, Mark Delaney,
Speaker Change: Thank you. Our next question comes from Steven Fox, from Fox Advisors. Please go ahead,
Steven Fox: Hi, good afternoon. Adam, I was just wondering within the context of all that's going on in IT data that come, if you could talk about your transceiver portfolio and how that's contributing to some of the strategies behind that. Thanks.
Adam Norwitt: Yeah, thanks very much, Steve. I don't think I would talk so specifically about a very individual product like you mentioned.
Steven Fox: But I would say that we have a very broad business in IT data come.
High Speed, Copper, Amazing Power Products,
Steven Fox: and of course the optics, both the passive and the active optics.
Steven Fox: and that's something we've been very thoughtful about over many years, and we've been involved in pacify Brophyx for a very, very long time.
Steven Fox: and it's really over the last five or six years that we also, through the acquisitions of ex gig and Halo and other initiatives inside the company, have been involved in active optics and we're very happy with our participation and our progress.
Steven Fox: that we've made in active optics, and I think it gets to sort of the breadth of the interconnect solutions that we offer across all of our end market.
Steven Fox: and more and more of those interconnect solutions have something going on inside of them in particular as you get to like really high speeds on their copper or you get to these really complex. Thank you very much.
Steven Fox: and Active Optics products. There's a lot of engineering, a lot of know-how, and a lot of challenges in building them. And I think our team's done a really great job of embracing that and doing a fabulous...
Steven Fox: Job Making Progress in that space. But to get really deep into the overall market of one thing like that, I probably would defer that. But we're very happy with the company's position across active and passive optics.
Speaker Change: Thank you. Our next question comes from Wamsi Mohan, from Bank of America. Please go ahead.
Speaker Change: Thank you. Can you talk a little bit about the order linearity in ID data comm sounds like?
You aren't able to maybe meet as much. [inaudible]
Speaker Change: Off the demand as you would have liked to, although it was a very strong water.
Speaker Change: Do you take, there is any increased level of disconnect between your shipments relative to end product shipments that could potentially lead to any kind of slowdown in the back half?
Speaker Change: and you spoke about diversification across multiple vectors, but if you could share maybe any talk around split of GPU versus A6, where your products are going, or maybe signal versus power, that would be helpful. Thank you so much.
Speaker Change: Thanks very much, Wamsi. I mean, look, in terms of order linearity, you made one comment, which is we weren't able to meet our expectations. We far exceeded.
Speaker Change: in the corridor and our customers' expectations of what we could execute, but they still would have taken more if we could deliver it.
Speaker Change: So I guess coming into the corner, one of the reasons we outperformed by such a significant margin is our team outperformed.
Speaker Change: They executed far beyond what we thought they could do, and far beyond what our customers thought they could do, and that was really a great thing. It's not that we were disappointing customers, in fact we were pleasing customers.
Speaker Change: here in the corner. Now, would they have taken more? The point is, yes, they would and I think that's the sign of the fact that there is a robust build-out that is happening right now in particular across.
Speaker Change: across the AI. I mean, did that create, do our shipments create a disconnect?
Speaker Change: in the supply chains of the customers. I don't think nothing that we have seen would lead me to think that there is that kind of disconnect. Again, if folks stop spending money. [inaudible]
Next Generation, Generative AI based data centers.
Speaker Change: We won't be immune to that. That's when, you know, if there is ever an air pocket around that spending, you know, I'm sure teams will manage through that in a highly effective fashion as we always have in the past, but I don't think anything about how we've been supplying is creating that kind of disconnect and as it relates to kind of. [inaudible]
Speaker Change: It's a little hard to tell. I mean, obviously, all of the AI related business, the core of that, it is for sure GPUs, both for training and for inference.
Speaker Change: and so I think one could say that, let's say two-thirds of our growth on a year of your basis that ultimately was driven by AI, and the significant position that we have in AI, I guess you would say that that's...
Predominantly related to GPU or GPU equivalent.
Speaker Change: kind of architectures. Would you then say that our not AI business is related more to non-GPU architectures?
Speaker Change: I haven't thought about it necessarily in that way, but I guess one could sort of say that. Remember that our IT business is a combination of servers, networking and storage systems.
Speaker Change: and so to define it just by GPU versus ASIC I think it's only, maybe that's only within servers which is you know a meaningful portion but we have a very significant networking business as well.
Speaker Change: So there, I don't think that distinction is as relevant to thinking about the makeup of the business.
Speaker Change: Thank you. Our next question comes from Guy Hardwick from Freedom Capital Markets.
Good afternoon.
Hi, good afternoon. Bye, guys.
Speaker Change: Hi, Adam, you alluded to earlier, but perhaps you can maybe expand on how your general marriages and 130 plus businesses now.
Speaker Change: You know, how they respond in these environments to where there's tariffs or supply chain issues.
Speaker Change: because obviously as he said, he pushed down the responsibility for managing needs.
Speaker Change: He's issues down to them, because it does seem to be a real competitive advantage. And on that point, I mean, in terms of tariffs, I believe that some of your US subsidiaries do have offshore manufacturing in China, for example. I was just wondering how you...
Speaker Change: How the company or the individual businesses cope with these sort of challenges?
Speaker Change: Yeah, thanks, thanks very much, guys. Look, this is a topic really close to my heart because at the end of the day, when we think about why Amphenol is successful, why do we win more than our fair share of these revolutionary opportunities?
Why are we so effective? [inaudible]
at Successfully Requiring.
Speaker Change: There's so many companies over the year and bring them so successfully into Amphenol family and how have we been able to navigate?
Dynamics, Uncertainty, and even very severe disruption.
Speaker Change: Over a very long time period, it all comes back actually to the same basic underlying value of the company, which is that entrepreneurial. [inaudible]
Structure, that culture of what we call, Amphenoline Entrepreneurship.
Speaker Change: whereby our general managers who now are 140 strong around the world, they have full authority to run their respective businesses, and then we can hold them, these men and women around the world clearly accountable for their individual performance.
Speaker Change: And when we say that they have total authority, we really mean it. And we enable them. We liberate them to make all the decisions that you need to make on a day-to-day in running a business. And the fact is, even if there were not such a thing called a tariff.
There are every day hundreds of decisions. [inaudible]
Speaker Change: That have to get made. And the number of those decisions that actually come up to my desk, I can count them on less than one hand. Let me say it that way.
Speaker Change: Every day, these folks are making the fundamental decisions about how to run the business, and now along comes the thing called tariff.
Speaker Change: or a long-came-a-thing called COVID. A long-came-a-thing called the supply chain crisis. A long-came-a-thing called the global financial crisis. I go way back in time and I say a long-came-a-thing called the Internet bubble. And each of these big dislocations, these disruptions to the business.
Speaker Change: Our folks just got and make it happen. And what does that mean specifically with tariff?
It's quite interesting.
Speaker Change: because we talk so generally about tariffs, but these are very technical, specific situation.
Speaker Change: Every product you sell, you have to have a deep understanding.
of who is the customer? [inaudible]
Speaker Change: What is your position with that customer? Who are the competitors for that product? What is their position? What are their strengths? What is their footprint?
Speaker Change: and where do you make your product and where can you make your product and what supply chain underlying that? What are the logistics loads of that? It's a lot of very specific knowledge that you want to have about every product that could be subject to tariffs in order to make the wisest decision. [inaudible]
Speaker Change: And when I say the wisest decision, I mean, you can easily, when tariffs come, just say, hey, we're going to raise every price by X percent across the company. Take just a blanket approach, send a letter around the world. We're just going to raise prices. Well, if you do that, there's many cases where you're going to lose the business.
Speaker Change: Because your customers, maybe your competitors have a different footprint than you have. There's other cases where maybe you should have passed on more of the price to your customer because of the specifics of that individual circumstance. Yeah.
Speaker Change: and instead of ability to tailor make the actions of the company.
Speaker Change: in such a highly fine-tuned fashion at the general management level that allows us to manage through a time like this.
Speaker Change: Yeah, do we have some to your point, some of our products sold in the US to come from overseas?
I'm short, we do.
Speaker Change: Do we have 300 facilities around the world? Do we have general managers whose hands are not tied to take whatever actions are necessary? All right.
Speaker Change: To manage through those situations, absolutely we do. And so, you know, we're not immune to tariffs. The policies can get worse. The policies can get better. They will be unpredictable. That seems to be...
Speaker Change: For sure the case, but there's no doubt in my mind that organization is the best equipped to manage through that dynamic and what I'm very proud of is one thing.
Speaker Change: is that no matter how big we have gotten, you know, here we are in delivering in one quarter or 4.8 billion dollars of sale.
Speaker Change: I mean, this is a very significant, it's nearly twice the size of when I became CEO 16 years ago in a full year, and we're delivering twice that in a quarter. And yet the strength of that entrepreneurial culture today I can tell you is better than it's ever been.
Speaker Change: and the history of the company. We have not only preserved that culture but we've scaled the company.
Speaker Change: Amit's that culture. And so now here you are facing these tariffs. And like I said, I think the company is purpose-built for a situation like this. We're not immune to it. There can still be negative impacts. They can be unpredictable. Some of them can be very hard to manage. It's hard work.
Speaker Change: For people, a lot of time, waste of time, some could argue, but it is what it is. And our team faces that in a very unemotional fashion and just makes it happen, as Amphenol did.
Speaker Change: Thank you. Our next question comes from Scott Graham from Seaport Research. Please go ahead.
Scott Graham: Hey, good afternoon. Thanks for taking my question, squeezing me in. There'll be short. We're just wondering with the uncertainty that's out there, the IMF lowering its economic forecast toward recession in the year pretty much every day.
Ladder, soft, or depending on the day? [inaudible]
Speaker Change: Has your acquisition funnel increased with that uncertainty? In other words, are you seeing more
You know relationships that you have
Opportunities across your businesses now in a time of uncertainty.
Speaker Change: Well, thanks very much, Scott, and it's a very nice question. Look, we've had a very successful acquisition program for many, many years, and we've had that in good times and bad.
Speaker Change: And the one thing that we have never done is tried to time acquisitions for macro cycles. I mean look, we've made 15 acquisitions in the last nine quarters and some of those were pretty robust times.
Speaker Change: And so, you know, our more people selling Amit's uncertainty today than maybe they were a year or two ago. I don't know if that's the case.
Speaker Change: Are we a more compelling fire than we've ever been before because of the strength of our financial position, our reputation, as really an acquire of choice in this industry?
Speaker Change: and our ability to execute quickly in acquisitions like we've demonstrated here in these last couple of years. I think we are. I think, you know, we have a very robust pipeline. We've had a robust pipeline and I wouldn't necessarily say that it's a pipeline that's changing because of the headlines or whatever the IMF forecast. Thank you.
Thank you. Have a great day.
Speaker Change: Thank you. We currently have no further questions, so I will hand back to Mr. Norwitt for closing remarks.
Adam Norwitt: Well, thank you all very much. Look, in these uncertain times, nothing is predictable. I can tell you that. I mean, who would have thought the top movie of the year is Minecraft, but it is a world of dynamic uncertainty. But in that, I'm certain of one thing.
Adam Norwitt: that this is an organization that can make it happen in any environment. And I really thank you all for your time today, and we look forward to talking to you again in 90 days. Thank you. Thank you, everybody.
Thank you, everybody.
Adam Norwitt: This concludes today's call. Thank you for joining. You may now disconnect your lines.