A month has gone by since the last earnings report for TE Connectivity (TEL) . Shares have added about 6.8% in that time frame, outperforming the S&P 500. Will the recent positive trend continue leading up to its next earnings release, or is TE Connectivity due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. TE Connectivity Q2 Earnings Beat Estimates, ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 29, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 001-33260 (Commission File Number) TE CONNECTIVITY LTD. (Exact name of registrant as specified in its charter) Switzerland (Jurisdiction of Incorporation) 98-0518048 (I.R. ...

Financial Data and Key Metrics Changes - The company reported second quarter sales of $3.97 billion, which was in line with guidance and represented a 3% organic growth sequentially, but a 5% decline on a reported basis year-over-year [20][48] - Adjusted earnings per share (EPS) was $1.86, up 13% year-over-year, driven by a 250 basis points expansion in adjusted operating margins to 18.5% [31][76] - Free cash flow for the first half of the fiscal year reached $1.1 billion, up 32% year-over-year, with expectations to exceed 100% free cash flow conversion for the year [32][49] Business Line Data and Key Metrics Changes - In the Transportation segment, organic growth was 1%, with double-digit growth in China offset by declines in North America and Europe [68] - The Industrial segment saw a 6% organic decline overall, but three out of four businesses continued to show growth, while the Industrial Equipment business faced a 28% organic decline due to destocking [70][71] - The Communications segment is expected to return to year-over-year growth in the third quarter, driven by momentum in high-speed cloud and AI applications [17][43] Market Data and Key Metrics Changes - Global auto production is expected to be around 21 million units per quarter for the second half of the fiscal year, with EV and hybrid production projected to increase by 24% this fiscal year [40][67] - The company noted a strengthening dollar has created headwinds for growth and earnings, impacting the second quarter and expected to continue into the third quarter [18] - The company anticipates stability in most end markets served, with improved order levels across all segments, marking the first time in 1.5 years that orders exceeded $4 billion [22][86] Company Strategy and Development Direction - The company is strategically positioned around secular growth trends, including renewable energy, cloud applications, and electric vehicle production [19] - Continued investment in the auto business is aimed at supporting engineering requirements for next-generation vehicles, including electrification and high-speed data applications [25] - The long-term value creation model remains focused on margin performance, operational leverage, and strong cash generation to return capital to shareholders while pursuing bolt-on M&A opportunities [64][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit earnings growth for the fiscal year, despite a slow growth environment [15] - The company expects to see normalization in the Industrial Equipment business later this fiscal year, with early indications of stabilization in order patterns [34][71] - Management highlighted the importance of AI applications, projecting revenues from AI to double from $200 million this year to $400 million next year, with a long-term goal of reaching $1 billion [72][90] Other Important Information - The company issued its "Connecting Our World" report detailing commitments to corporate responsibility and sustainability initiatives [21] - Adjusted operating margins were up in each segment compared to the prior year, indicating strong operational performance [15][48] Q&A Session Summary Question: What underpins TE's more positive view on auto production? - Management noted that despite shifts in production strategies among OEMs, global auto production is expected to remain slightly up this year, with strong growth in EVs and hybrids, particularly in China [52][82] Question: Can you elaborate on order patterns and market health? - Management indicated that destocking in the Communications segment is over, and they expect stability and growth in other segments, with sequential order momentum indicating a positive outlook [58][86] Question: What are the growth opportunities in AI solutions? - Management highlighted a broad range of products for AI applications, with expectations to double AI revenues next year and a path to $1 billion in a few years [90][92] Question: How is the company addressing pricing and margin impacts? - Management stated that pricing is expected to be neutral at the TE level, with effective price actions to recover inflation costs [125] Question: What is the outlook for fiscal 2025? - Management expressed optimism for fiscal 2025, anticipating continued growth in electric vehicles and a return to normalcy in the Industrial Equipment business, with expectations of 4% to 6% growth [116][118]

Exhibit 99.1 NEWS RELEASE te.com TE Connectivity announces second quarter results for fiscal year 2024 Year-over-year EPS growth driven by significant margin expansion; record cash flow generation SCHAFFHAUSEN, Switzerland – April 24, 2024 – TE Connectivity Ltd. (NYSE: TEL) today reported results for the fiscal second quarter ended March 29, 2024. Second Quarter Highlights "Our teams delivered EPS above our guidance this quarter with double-digit earnings growth driven by margin expansion in all three of ou ...

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the company's unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Net sales | $3,831 | $3,841 | | Gross margin | $1,324 | $1,187 | | Operating income | $698 | $502 | | Income tax (expense) benefit | $1,105 | $(87) | | Net income | $1,803 | $397 | | Basic earnings per share | $5.80 | $1.26 | | Diluted earnings per share | $5.76 | $1.24 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed Consolidated Statements of Comprehensive Income (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Net income | $1,803 | $397 | | Other comprehensive income | $173 | $376 | | Comprehensive income attributable to TE Connectivity Ltd. | $1,972 | $764 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (Dec 29, 2023 vs Sep 29, 2023) | Metric | Dec 29, 2023 (in millions) | Sep 29, 2023 (in millions) | | :--- | :--- | :--- | | Total current assets | $7,441 | $7,892 | | Property, plant, and equipment, net | $3,854 | $3,754 | | Goodwill | $5,836 | $5,463 | | Intangible assets, net | $1,278 | $1,175 | | Deferred income taxes (assets) | $3,852 | $2,600 | | Total assets | $23,071 | $21,712 | | Total current liabilities | $4,011 | $4,463 | | Total liabilities | $9,822 | $10,057 | | Total equity | $13,141 | $11,551 | [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Condensed Consolidated Statements of Equity (Q1 FY24) | Metric | Balance at Sep 29, 2023 (in millions) | Net Income (in millions) | Other Comprehensive Income (in millions) | Repurchase of Common Shares (in millions) | Balance at Dec 29, 2023 (in millions) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total TE Connectivity Ltd. shareholders' equity | $11,551 | $1,803 | $174 | $(420) | $13,136 | | Total equity | $11,551 | $1,803 | $174 | $(420) | $13,141 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $719 | $581 | | Net cash used in investing activities | $(468) | $(265) | | Net cash used in financing activities | $(745) | $(621) | | Net decrease in cash, cash equivalents, and restricted cash | $(491) | $(295) | | Cash, cash equivalents, and restricted cash at end of period | $1,170 | $793 | - Acquisition of businesses, net of cash acquired, increased to **$349 million** in Q1 FY24 from $109 million in Q1 FY23[20](index=20&type=chunk) - Repurchase of common shares increased to **$476 million** in Q1 FY24 from $287 million in Q1 FY23[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements (unaudited)](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) [1. Basis of Presentation and Accounting Policies](index=9&type=section&id=1.%20Basis%20of%20Presentation%20and%20Accounting%20Policies) - The unaudited Condensed Consolidated Financial Statements are prepared in U.S. dollars, in accordance with GAAP[22](index=22&type=chunk) - The company adopted ASU No 2022-04 (Supplier Finance Programs) in the first quarter of fiscal 2024, which did not have a material impact on the financial statements[27](index=27&type=chunk) - The company is currently assessing the impact of ASU No 2023-07 (Segment Reporting) and ASU No 2023-09 (Income Tax Disclosures), effective for fiscal 2025 and 2026, respectively[25](index=25&type=chunk)[26](index=26&type=chunk) [2. Restructuring and Other Charges, Net](index=10&type=section&id=2.%20Restructuring%20and%20Other%20Charges%2C%20Net) Net Restructuring and Other Charges (Q1 FY24 vs Q1 FY23) | Charge Type | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Restructuring charges, net | $9 | $104 | | Loss on divestiture and impairment of held for sale business | $11 | $6 | | Other charges, net | $1 | $1 | | **Total Restructuring and other charges, net** | **$21** | **$111** | - Initiated a fiscal 2024 restructuring program to optimize manufacturing footprint and improve cost structure, primarily in Industrial Solutions and Transportation Solutions segments, with **$5 million recorded in Q1 FY24**[33](index=33&type=chunk) - Sold one business for net cash proceeds of **$38 million**, recording a pre-tax loss on sale of **$11 million**, reported in the Transportation Solutions segment[38](index=38&type=chunk) [3. Acquisitions](index=12&type=section&id=3.%20Acquisitions) - Acquired approximately **98.7% of Schaffner Holding AG for $349 million** (net of cash acquired) in Q1 FY24, reported as part of the Industrial Solutions segment[40](index=40&type=chunk) - Acquired one business for **$109 million** (net of cash acquired) in Q1 FY23, reported as part of the Industrial Solutions segment[41](index=41&type=chunk) [4. Inventories](index=12&type=section&id=4.%20Inventories) Inventories (Dec 29, 2023 vs Sep 29, 2023) | Inventory Type | Dec 29, 2023 (in millions) | Sep 29, 2023 (in millions) | | :--- | :--- | :--- | | Raw materials | $394 | $367 | | Work in progress | $1,284 | $1,185 | | Finished goods | $1,105 | $1,000 | | **Total Inventories** | **$2,783** | **$2,552** | [5. Goodwill](index=12&type=section&id=5.%20Goodwill) Goodwill by Segment (Dec 29, 2023 vs Sep 29, 2023) | Segment | Sep 29, 2023 (in millions) | Acquisition (in millions) | Currency translation and other (in millions) | Dec 29, 2023 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Transportation Solutions | $1,478 | — | $29 | $1,507 | | Industrial Solutions | $3,263 | $257 | $71 | $3,591 | | Communications Solutions | $722 | — | $16 | $738 | | **Total** | **$5,463** | **$257** | **$116** | **$5,836** | - Goodwill in the Industrial Solutions segment increased by **$257 million** due to an acquisition in Q1 FY24[43](index=43&type=chunk)[44](index=44&type=chunk) [6. Intangible Assets, Net](index=13&type=section&id=6.%20Intangible%20Assets%2C%20Net) Intangible Assets, Net (Dec 29, 2023 vs Sep 29, 2023) | Asset Type | Dec 29, 2023 (Net, in millions) | Sep 29, 2023 (Net, in millions) | | :--- | :--- | :--- | | Customer relationships | $1,020 | $914 | | Intellectual property | $245 | $248 | | Other | $13 | $13 | | **Total** | **$1,278** | **$1,175** | - Intangible asset amortization expense was **$42 million** for Q1 FY24, down from $46 million in Q1 FY23[46](index=46&type=chunk) - Aggregate amortization expense on intangible assets is expected to be **$128 million** for the remainder of fiscal 2024[47](index=47&type=chunk) [7. Debt](index=13&type=section&id=7.%20Debt) - Commercial paper outstanding decreased to **$261 million** at December 29, 2023, from $330 million at September 29, 2023, with a weighted-average interest rate of **5.50%**[48](index=48&type=chunk) - The fair value of debt was approximately **$4,103 million** at December 29, 2023, up from $3,974 million at September 29, 2023[48](index=48&type=chunk) [8. Leases](index=13&type=section&id=8.%20Leases) Lease Cost (Q1 FY24 vs Q1 FY23) | Lease Cost Component | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Operating lease cost | $34 | $34 | | Variable lease cost | $12 | $12 | | **Total lease cost** | **$46** | **$46** | - Cash paid for operating leases was **$34 million** in Q1 FY24, compared to $32 million in Q1 FY23[51](index=51&type=chunk) [9. Commitments and Contingencies](index=14&type=section&id=9.%20Commitments%20and%20Contingencies) - The company is subject to various legal proceedings, trade compliance matters, and environmental remediation, but does not expect a material effect on financial results[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Environmental remediation costs are estimated in the range of **$17 million to $44 million**, with a probable loss of **$20 million** accrued as of December 29, 2023[54](index=54&type=chunk) - Outstanding letters of credit, letters of guarantee, and surety bonds totaled **$196 million** at December 29, 2023[57](index=57&type=chunk) - Obligations under the supply chain finance program were **$122 million** at December 29, 2023, up from $109 million at September 29, 2023[58](index=58&type=chunk) [10. Financial Instruments](index=15&type=section&id=10.%20Financial%20Instruments) - The company uses cross-currency swap contracts and foreign currency forward contracts to manage foreign currency exchange rate risk[59](index=59&type=chunk) - Net investment in foreign operations is hedged using intercompany loans, external borrowings (aggregate notional value **$2,792 million** at Dec 29, 2023), and cross-currency swap contracts (aggregate notional value **$3,599 million** at Dec 29, 2023)[60](index=60&type=chunk)[61](index=61&type=chunk) - Commodity swap contracts, designated as cash flow hedges, had an aggregate notional value of **$431 million** at December 29, 2023, to manage commodity price fluctuations[64](index=64&type=chunk) [11. Retirement Plans](index=17&type=section&id=11.%20Retirement%20Plans) Net Periodic Pension Benefit Cost (Q1 FY24 vs Q1 FY23) | Plan Type | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Non-U.S. Plans | $10 | $10 | | U.S. Plans | $3 | $3 | | **Total** | **$13** | **$13** | - The company contributed **$12 million** to its non-U.S. pension plans during Q1 FY24[66](index=66&type=chunk) [12. Income Taxes](index=17&type=section&id=12.%20Income%20Taxes) - The company recorded an income tax benefit of **$1,105 million** for Q1 FY24, compared to an expense of $87 million for Q1 FY23[67](index=67&type=chunk) - The Q1 FY24 benefit includes an **$874 million** net income tax benefit from a Swiss tax credit and a **$262 million** benefit from the revaluation of deferred tax assets due to a Swiss corporate tax rate increase[67](index=67&type=chunk) - Approximately **$30 million** of unrecognized income tax benefits could be resolved within the next twelve months[68](index=68&type=chunk) [13. Earnings Per Share](index=17&type=section&id=13.%20Earnings%20Per%20Share) Weighted-Average Number of Shares Outstanding (Q1 FY24 vs Q1 FY23) | Share Type | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Basic | 311 | 317 | | Dilutive impact of share-based compensation arrangements | 2 | 2 | | **Diluted** | **313** | **319** | - Antidilutive share options not included in diluted EPS computation totaled **2 million** for both Q1 FY24 and Q1 FY23[72](index=72&type=chunk) [14. Equity](index=18&type=section&id=14.%20Equity) - Dividends paid per common share increased to **$0.59** in Q1 FY24 from $0.56 in Q1 FY23[73](index=73&type=chunk) - The board of directors authorized a **$1.5 billion** increase in the share repurchase program during Q1 FY24[74](index=74&type=chunk) - Repurchased **3 million** common shares for **$420 million** in Q1 FY24, compared to 2 million shares for $233 million in Q1 FY23[74](index=74&type=chunk) - As of December 29, 2023, **$1.8 billion** remained available under the share repurchase authorization[74](index=74&type=chunk) [15. Share Plans](index=18&type=section&id=15.%20Share%20Plans) - Share-based compensation expense was **$34 million** in Q1 FY24, up from $32 million in Q1 FY23[75](index=75&type=chunk) - Unrecognized compensation expense related to share-based awards totaled **$211 million**, expected to be recognized over a weighted-average period of **1.9 years**[77](index=77&type=chunk) Share-Based Awards Granted (Q1 FY24) | Award Type | Shares Granted (in millions) | Grant-Date Fair Value | | :--- | :--- | :--- | | Share options | 0.9 | $39.77 | | Restricted share awards | 0.4 | $131.77 | | Performance share awards | 0.2 | $131.77 | [16. Segment and Geographic Data](index=20&type=section&id=16.%20Segment%20and%20Geographic%20Data) Net Sales by Segment (Q1 FY24 vs Q1 FY23) | Segment | Q1 FY24 (in millions) | % of Total Q1 FY24 | Q1 FY23 (in millions) | % of Total Q1 FY23 | | :--- | :--- | :--- | :--- | :--- | | Transportation Solutions | $2,373 | 62 % | $2,259 | 58 % | | Industrial Solutions | $1,025 | 27 % | $1,060 | 28 % | | Communications Solutions | $433 | 11 % | $522 | 14 % | | **Total** | **$3,831** | **100 %** | **$3,841** | **100 %** | Net Sales by Geographic Region (Q1 FY24 vs Q1 FY23) | Region | Q1 FY24 (in millions) | % of Total Q1 FY24 | Q1 FY23 (in millions) | % of Total Q1 FY23 | | :--- | :--- | :--- | :--- | :--- | | EMEA | $1,411 | 37 % | $1,326 | 34 % | | Asia–Pacific | $1,379 | 36 % | $1,407 | 37 % | | Americas | $1,041 | 27 % | $1,108 | 29 % | | **Total** | **$3,831** | **100 %** | **$3,841** | **100 %** | Operating Income by Segment (Q1 FY24 vs Q1 FY23) | Segment | Q1 FY24 (in millions) | Q1 FY23 (in millions) | | :--- | :--- | :--- | | Transportation Solutions | $478 | $282 | | Industrial Solutions | $141 | $156 | | Communications Solutions | $79 | $64 | | **Total** | **$698** | **$502** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=22&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's financial condition, operational results, segment performance, and liquidity for the first quarter of fiscal 2024 [Overview](index=22&type=section&id=Overview) - TE Connectivity Ltd is a global industrial technology leader providing connectivity and sensor solutions[89](index=89&type=chunk) - Solutions enable distribution of power, signal, and data for next-generation transportation, renewable energy, automated factories, data centers, and medical technology[89](index=89&type=chunk) [Summary of Performance](index=22&type=section&id=Summary%20of%20Performance) - Net sales were essentially flat in Q1 FY24 compared to Q1 FY23, with an **organic net sales decrease of 0.7%**[91](index=91&type=chunk) - Transportation Solutions net sales increased **5.0%** due to automotive market growth, while Industrial Solutions decreased **3.3%** and Communications Solutions decreased **17.0%**[91](index=91&type=chunk) - Net cash provided by operating activities was **$719 million** in Q1 FY24[91](index=91&type=chunk) - The company mitigated inflationary cost pressures through productivity and prior pricing actions and is managing costs through restructuring and other initiatives[92](index=92&type=chunk) [Outlook](index=23&type=section&id=Outlook) - Expected net sales for Q2 FY24 are approximately **$3.95 billion**, a decline from $4.16 billion in Q2 FY23, with sales declines across all segments[94](index=94&type=chunk) - Expected diluted earnings per share from continuing operations for Q2 FY24 is approximately **$1.75 per share**[94](index=94&type=chunk) - The outlook reflects a negative impact of foreign currency exchange rates on net sales of approximately **$13 million** and on EPS of **$0.05 per share** in Q2 FY24[94](index=94&type=chunk) [Acquisition](index=23&type=section&id=Acquisition) - In Q1 FY24, TE Connectivity acquired approximately **98.7% of Schaffner Holding AG for CHF 302 million ($349 million, net of cash acquired)**, integrating it into the Industrial Solutions segment[95](index=95&type=chunk) [Divestiture](index=23&type=section&id=Divestiture) - In Q1 FY24, the company sold one business for net cash proceeds of **$38 million**, resulting in a pre-tax loss on sale of **$11 million**, reported in the Transportation Solutions segment[96](index=96&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) [Net Sales](index=24&type=section&id=Net%20Sales) - Net sales slightly decreased by **$10 million, or 0.3%**, in Q1 FY24 compared to Q1 FY23, driven by a **0.7% organic net sales decline** and a **0.7% negative impact from acquisitions/divestitures**, partially offset by a **1.1% positive impact from foreign currency translation**[99](index=99&type=chunk) - Pricing actions initiated in fiscal 2023 positively affected organic net sales by **$68 million** in Q1 FY24[99](index=99&type=chunk) Change in Net Sales by Segment (Q1 FY24 vs Q1 FY23) | Segment | Net Sales Growth (Decline) ($M) | Net Sales Growth (Decline) (%) | Organic Net Sales Growth (Decline) (%) | | :--- | :--- | :--- | :--- | | Transportation Solutions | $114 | 5.0 % | 5.0 % | | Industrial Solutions | $(35) | (3.3)% | (4.9)% | | Communications Solutions | $(89) | (17.0)% | (17.0)% | | **Total** | **$(10)** | **(0.3)%** | **(0.7)%** | Change in Net Sales by Geographic Region (Q1 FY24 vs Q1 FY23) | Region | Net Sales Growth (Decline) ($M) | Net Sales Growth (Decline) (%) | Organic Net Sales Growth (Decline) (%) | | :--- | :--- | :--- | :--- | | EMEA | $85 | 6.4 % | 2.5 % | | Asia–Pacific | $(28) | (2.0)% | (0.4)% | | Americas | $(67) | (6.0)% | (5.0)% | | **Total** | **$(10)** | **(0.3)%** | **(0.7)%** | [Cost of Sales and Gross Margin](index=26&type=section&id=Cost%20of%20Sales%20and%20Gross%20Margin) - Gross margin increased by **$137 million** in Q1 FY24 compared to Q1 FY23, primarily due to improved manufacturing productivity and positive impact of prior year pricing actions, partially offset by lower volume[105](index=105&type=chunk) Cost of Sales and Gross Margin (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Cost of sales | $2,507 | $2,654 | $(147) | | As a percentage of net sales | 65.4 % | 69.1 % | | | Gross margin | $1,324 | $1,187 | $137 | | As a percentage of net sales | 34.6 % | 30.9 % | | Average Raw Material Prices (Q1 FY24 vs Q1 FY23) | Material | Q1 FY24 Price | Q1 FY23 Price | | :--- | :--- | :--- | | Copper | $3.87/Lb. | $4.18/Lb. | | Gold | $1,943/Troy oz. | $1,821/Troy oz. | | Silver | $23.15/Troy oz. | $24.26/Troy oz. | | Palladium | $1,500/Troy oz. | $2,083/Troy oz. | [Operating Expenses](index=27&type=section&id=Operating%20Expenses) - Selling, general, and administrative expenses increased by **$32 million** in Q1 FY24, primarily due to inflation, partially offset by savings from prior restructuring actions[108](index=108&type=chunk) - Net restructuring and other charges decreased by **$90 million to $21 million** in Q1 FY24 from $111 million in Q1 FY23[108](index=108&type=chunk) - A new restructuring program was initiated in fiscal 2024 to optimize manufacturing footprint and cost structure, primarily in Industrial Solutions and Transportation Solutions segments, with expected annualized cost savings of approximately **$3 million** from Q1 FY24 actions[110](index=110&type=chunk) [Operating Income](index=27&type=section&id=Operating%20Income) Operating Income and Margin (Q1 FY24 vs Q1 FY23) | Metric | Q1 FY24 (in millions) | Q1 FY23 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Operating income | $698 | $502 | $196 | | Operating margin | 18.2 % | 13.1 % | | - Operating income increased by **$196 million**, primarily due to improved gross margin and lower restructuring and other charges[112](index=112&type=chunk)[113](index=113&type=chunk) [Non-Operating Items](index=28&type=section&id=Non-Operating%20Items) - The company recorded an income tax benefit of **$1,105 million** in Q1 FY24, a significant change from an $87 million expense in Q1 FY23, resulting in an effective tax rate of **(158.1)%**[114](index=114&type=chunk) - The income tax benefit was primarily driven by an **$874 million** net income tax benefit from a Swiss tax credit and a **$262 million** benefit from the revaluation of deferred tax assets due to a Swiss corporate tax rate increase[67](index=67&type=chunk) - The OECD's **15% global minimum corporate tax** rules are expected to affect the company starting in fiscal 2025[115](index=115&type=chunk) [Segment Results](index=28&type=section&id=Segment%20Results) [Transportation Solutions](index=28&type=section&id=Transportation%20Solutions) - Net sales increased by **$114 million, or 5.0%**, in Q1 FY24, driven by **5.0% organic net sales growth**[118](index=118&type=chunk) - Automotive organic net sales increased **8.1%**, with strong growth in Asia-Pacific (**13.4%**) and EMEA (**7.4%**), partially offset by declines in the Americas (**4.0%**)[120](index=120&type=chunk) - Sensors organic net sales decreased **9.2%** due to market weakness and strategic exits of lower margin product lines[120](index=120&type=chunk) - Operating income increased by **$196 million** in Q1 FY24, with operating margin improving to **20.1%** from 12.5%, primarily due to improved manufacturing productivity and prior year pricing actions[119](index=119&type=chunk) [Industrial Solutions](index=31&type=section&id=Industrial%20Solutions) - Net sales decreased by **$35 million, or 3.3%**, in Q1 FY24, primarily due to a **4.9% organic net sales decline**[122](index=122&type=chunk) - Industrial equipment organic net sales decreased **26.3%** due to reduced demand and inventory corrections, while Aerospace, defense, and marine (**12.5% growth**) and Medical (**15.6% growth**) showed strength[123](index=123&type=chunk) - Operating income decreased by **$15 million** in Q1 FY24, with operating margin at **13.8%** (vs 14.7%), primarily due to lower volume, partially offset by prior year pricing actions[124](index=124&type=chunk) [Communications Solutions](index=32&type=section&id=Communications%20Solutions) - Net sales decreased by **$89 million, or 17.0%**, in Q1 FY24, entirely due to a **17.0% organic net sales decline**[128](index=128&type=chunk) - Data and devices organic net sales decreased **15.2%**, and Appliances organic net sales decreased **20.2%**, both impacted by market declines and inventory corrections[132](index=132&type=chunk) - Operating income increased by **$15 million** in Q1 FY24, with operating margin improving to **18.2%** from 12.3%, largely due to improved manufacturing productivity and lower restructuring charges, offsetting lower volume[128](index=128&type=chunk)[129](index=129&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - The company believes cash generated from operations and other funding sources will be sufficient to meet anticipated capital needs, including the payment of **$350 million** of senior notes due in August 2024[131](index=131&type=chunk) [Cash Flows from Operating Activities](index=33&type=section&id=Cash%20Flows%20from%20Operating%20Activities) - Net cash provided by operating activities increased by **$138 million to $719 million** in Q1 FY24 from $581 million in Q1 FY23, primarily due to higher pre-tax income[132](index=132&type=chunk) - Income taxes paid, net of refunds, were **$100 million** in Q1 FY24, compared to $98 million in Q1 FY23[132](index=132&type=chunk) [Cash Flows from Investing Activities](index=34&type=section&id=Cash%20Flows%20from%20Investing%20Activities) - Capital expenditures were **$151 million** in Q1 FY24, down from $183 million in Q1 FY23, with fiscal 2024 capital spending expected to be approximately **5% of net sales**[133](index=133&type=chunk) - Acquisition of businesses, net of cash acquired, increased to **$349 million** in Q1 FY24 from $109 million in Q1 FY23[135](index=135&type=chunk) - Received net cash proceeds of **$38 million** from the sale of one business in Q1 FY24[134](index=134&type=chunk) [Cash Flows from Financing Activities and Capitalization](index=34&type=section&id=Cash%20Flows%20from%20Financing%20Activities%20and%20Capitalization) - Total debt was **$4,198 million** at December 29, 2023, slightly down from $4,211 million at September 29, 2023[136](index=136&type=chunk) - Commercial paper outstanding decreased to **$261 million** at December 29, 2023, from $330 million at September 29, 2023, at a **5.50% weighted-average interest rate**[137](index=137&type=chunk) - The company has a **$1.5 billion** unsecured senior revolving credit facility with no borrowings outstanding and is in compliance with all debt covenants[138](index=138&type=chunk)[139](index=139&type=chunk) - Repurchased approximately **3 million** common shares for **$420 million** in Q1 FY24, compared to 2 million shares for $233 million in Q1 FY23, with **$1.8 billion** remaining under authorization[141](index=141&type=chunk) [Summarized Guarantor Financial Information](index=34&type=section&id=Summarized%20Guarantor%20Financial%20Information) - TEGSA's payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed by its parent, TE Connectivity Ltd[142](index=142&type=chunk) Summarized Guarantor Balance Sheet Data (Dec 29, 2023 vs Sep 29, 2023) | Metric | Dec 29, 2023 (in millions) | Sep 29, 2023 (in millions) | | :--- | :--- | :--- | | Total current assets | $1,117 | $1,632 | | Total noncurrent assets | $3,485 | $2,857 | | Total current liabilities | $940 | $1,303 | | Total noncurrent liabilities | $8,710 | $7,592 | - Total noncurrent assets include **$3,454 million** of intercompany loans receivable from non-guarantor subsidiaries, and total noncurrent liabilities include **$5,070 million** of intercompany loans payable to non-guarantor subsidiaries as of December 29, 2023[144](index=144&type=chunk)[149](index=149&type=chunk) [Guarantees](index=35&type=section&id=Guarantees) - The company provides various guarantees for third-party performance, asset dispositions, and financial commitments, which are not expected to have a material adverse effect on financial results[145](index=145&type=chunk)[146](index=146&type=chunk) - Outstanding letters of credit, letters of guarantee, and surety bonds totaled **$196 million** at December 29, 2023[147](index=147&type=chunk) [Commitments and Contingencies](index=35&type=section&id=Commitments%20and%20Contingencies) - This section refers to Note 9 of the Condensed Consolidated Financial Statements for detailed information on legal proceedings, trade compliance matters, and environmental matters[148](index=148&type=chunk) [Legal Proceedings](index=35&type=section&id=Legal%20Proceedings) - The company is subject to various legal proceedings and claims, including patent infringement, product liability, and environmental matters, but does not expect a material effect on its financial position or results[149](index=149&type=chunk)[150](index=150&type=chunk) [Trade Compliance Matters](index=37&type=section&id=Trade%20Compliance%20Matters) - The company has made voluntary disclosures of apparent U.S. trade controls violations to BIS and DDTC and is cooperating with ongoing investigations, including contact from the U.S. Department of Justice[151](index=151&type=chunk) - The timing and final outcome of these investigations are unpredictable, and while potential fines and penalties are reserved for, the final amounts may differ[151](index=151&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The preparation of financial statements requires management to make estimates and assumptions, particularly for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans[153](index=153&type=chunk)[154](index=154&type=chunk) - There were no significant changes to critical accounting policies and estimates during Q1 FY24[154](index=154&type=chunk) [Accounting Pronouncements](index=37&type=section&id=Accounting%20Pronouncements) - Refer to Note 1 to the Condensed Consolidated Financial Statements for additional information regarding recently issued and adopted accounting pronouncements[156](index=156&type=chunk) [Non-GAAP Financial Measure](index=37&type=section&id=Non-GAAP%20Financial%20Measure) - The company presents 'organic net sales growth (decline)' as a non-GAAP financial measure, excluding the impact of foreign currency exchange rates and acquisitions/divestitures, to provide useful information about underlying business trends[158](index=158&type=chunk) - Management uses this measure to monitor and evaluate performance and in decision-making processes, and it is a significant component in incentive compensation plans[159](index=159&type=chunk) [Forward-Looking Information](index=38&type=section&id=Forward-Looking%20Information) - The report contains forward-looking statements based on management's beliefs and assumptions, which involve risks, uncertainties, and assumptions that could cause actual results to differ materially[162](index=162&type=chunk)[163](index=163&type=chunk) - Key risks include global economic conditions, demand in the automotive industry, goodwill impairment, competition, raw material costs, foreign currency fluctuations, and geopolitical instability[164](index=164&type=chunk)[167](index=167&type=chunk) - The company does not have any intention or obligation to update forward-looking statements after filing this report, except as required by law[163](index=163&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=40&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) There have been no significant changes in TE Connectivity's exposures to market risk during the first quarter of fiscal 2024 - No significant changes in exposures to market risk during Q1 FY24[166](index=166&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=40&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=40&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, with the participation of the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 29, 2023[167](index=167&type=chunk) [Changes in Internal Control Over Financial Reporting](index=41&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control over financial reporting during Q1 FY24[168](index=168&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) There have been no material developments in the company's legal proceedings since the filing of its Annual Report on Form 10-K for fiscal year 2023 - No material developments in legal proceedings since the Annual Report on Form 10-K for FY23[171](index=171&type=chunk) [ITEM 1A. RISK FACTORS](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year 2023 - No material changes in risk factors from those disclosed in the Annual Report on Form 10-K for FY23[172](index=172&type=chunk) - Additional risks and uncertainties not currently known or believed to be immaterial may also impair business operations, financial condition, and liquidity[172](index=172&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=42&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased approximately 3.4 million common shares for $446 million during the first quarter of fiscal 2024 Issuer Purchases of Equity Securities (Q1 FY24) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | September 30–October 27, 2023 | 813,638 | $121.46 | | October 28–December 1, 2023 | 1,490,417 | $128.43 | | December 2–December 29, 2023 | 1,135,361 | $137.42 | | **Total** | **3,439,416** | **$129.75** | - Total purchases include **3,239,941** common shares through open market purchases under the share repurchase program and **199,475** shares to satisfy tax withholding requirements[174](index=174&type=chunk) - At December 29, 2023, **$1.8 billion** of availability remained under the share repurchase authorization[174](index=174&type=chunk) [ITEM 5. OTHER INFORMATION](index=43&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section details the adoption of a Rule 10b5-1 trading arrangement by an executive officer during the first quarter of fiscal 2024 [Rule 10b5-1 Trading Arrangements](index=43&type=section&id=Rule%2010b5-1%20Trading%20Arrangements) - Shad Kroeger, President, Industrial Solutions, adopted a Rule 10b5-1 trading plan on November 17, 2023, for the potential exercise and related sale of up to **18,750** common shares via stock options across three dates in 2024[175](index=175&type=chunk) [ITEM 6. EXHIBITS](index=43&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications and Inline XBRL documents - Exhibits include the TE Connectivity Ltd 2007 Stock and Incentive Plan (amended and restated as of December 12, 2023)[176](index=176&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[176](index=176&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents) are furnished[176](index=176&type=chunk) [SIGNATURES](index=44&type=section&id=Signatures) - The report was signed on behalf of TE Connectivity Ltd by Heath A Mitts, Executive Vice President and Chief Financial Officer, on January 26, 2024[180](index=180&type=chunk)

Financial Data and Key Metrics - Q1 sales were $3.83 billion, in-line with guidance, with flat revenue growth [105] - Adjusted operating margins expanded to 19.1%, up 290 basis points year-over-year, driven by strong operational performance [98][109] - Adjusted EPS was $1.84, up 20% year-over-year, ahead of guidance [109] - Free cash flow reached a record $570 million in Q1, building on strong cash performance from the previous year [91][119] Business Line Data and Key Metrics - Transportation segment sales grew 5% organically, driven by 8% growth in the auto business, with 13% growth in Asia and 7% in Europe [100] - Industrial segment sales were down 5% organically, with growth in Aerospace, Defense & Marine (AD&M), Medical, and Energy, but weakness in Industrial Equipment [118] - Communications segment sales were down 17% organically, with destocking now occurring only in pockets, and growth expected in the second half driven by AI applications [107][125] Market Data and Key Metrics - Global auto production was slightly over 22 million units in Q1, with stronger production in China offsetting weakness in Europe and North America [96] - EV production is expected to grow 25% this year, with two-thirds of EVs produced in Asia, where the company has a strong position [129][139] - Industrial Equipment destocking is expected to continue into the second half of the fiscal year, impacting organic growth [86][123] Company Strategy and Industry Competition - The company is focused on secular growth trends, including EV adoption, renewable energy, and AI applications [93][101] - Portfolio optimization and footprint consolidation have contributed to margin expansion, particularly in the Transportation segment [89][113] - The Schaffner acquisition expands the company's product portfolio in factory automation, with expected revenue of $40 million per quarter [152][168] Management Commentary on Operating Environment and Future Outlook - The company expects a slow global economic environment but remains confident in its ability to deliver strong margin expansion and earnings growth [84][120] - Q2 sales are expected to increase to $3.95 billion, driven by growth in the Industrial segment, partially offset by a slight decline in Transportation [94] - The company anticipates adjusted operating margins to remain in the high-teens for the Communications segment and mid-teens for the Industrial segment [133][149] Other Important Information - The company was included in the Dow Jones Sustainability Index for the 12th consecutive year, reflecting its commitment to sustainable business practices [95] - Restructuring charges for FY2024 are expected to be approximately $100 million, well below prior years, with future charges driven by bolt-on acquisitions [127] Q&A Summary Question: Can you elaborate on the factors driving the strong margin performance this quarter? [124] - Answer: Margin expansion was driven by operational execution, footprint consolidation, portfolio optimization, and price actions to offset higher input costs, particularly in the Transportation and Communications segments [124][132] Question: How is the company managing pricing in the Transportation segment, especially in automotive? [67] - Answer: The company has maintained neutral pricing by focusing on input costs and has successfully implemented price actions to offset inflationary pressures [67][68] Question: What is the outlook for EV adoption and its impact on the auto business? [144] - Answer: EV production is expected to grow 25% this year, with two-thirds of EVs produced in Asia, where the company has a strong position. The company expects 4-6% content outperformance in the auto business [129][139] Question: Can you provide more details on the Schaffner acquisition? [157] - Answer: Schaffner expands the company's product portfolio in factory automation, with expected revenue of $40 million per quarter. The acquisition is expected to improve profitability over time [152][168] Question: How is the company managing destocking in the Industrial Equipment business? [123] - Answer: Destocking in Industrial Equipment is expected to continue into the second half of the fiscal year, impacting organic growth. The company is focusing on direct customer relationships to mitigate the impact [123][128] Question: What is the outlook for AI-related revenue in the Communications segment? [165] - Answer: The company expects $200 million in AI-related revenue in FY2024, with growth expected in the second half of the year. AI applications are expected to drive higher content and revenue in the Communications segment [165][169]

Q1 2024 Financial Performance - Net sales were $3831 million, a slight decrease compared to $3841 million in Q1 2023 [20] - Adjusted EPS increased by 20% year-over-year to $184 [39] - Adjusted operating margin increased by 290 basis points year-over-year to 191% [39] - Free cash flow reached a record $570 million in Q1 [39] Segment Performance - Transportation Solutions net sales increased to $2373 million, up 5% organically [7, 48] - Industrial Solutions net sales decreased to $1025 million, down 5% organically [7, 62] - Communications Solutions net sales decreased to $433 million, down 17% organically [7, 89] Orders and Backlog - Total orders were $38 billion, up 4% year-over-year [29] - Transportation orders reflect stable global production and a strong backlog position [57] Q2 2024 Guidance - Expect sales of approximately $395 billion [29] - Expect adjusted EPS of approximately $182, up 10% year-over-year [56] Balance Sheet and Cash Flow - Ending cash balance was $1170 million [82] - Free cash flow was $570 million [100] - $600 million was returned to shareholders [73] - $350 million was used for the Schaffner acquisition [73]

Part I [Business](index=5&type=section&id=Item%201.%20Business) TE Connectivity is a global industrial technology leader providing a wide range of connectivity and sensor solutions across its Transportation, Industrial, and Communications segments - TE Connectivity is a global industrial technology leader specializing in connectivity and sensor solutions for harsh environments, serving markets like transportation, industrial applications, medical technology, energy, data communications, and home appliances[17](index=17&type=chunk) - The company operates through three reportable segments: Transportation Solutions, Industrial Solutions, and Communications Solutions[20](index=20&type=chunk) **Net Sales by Segment (% of Total Net Sales)** | Segment | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Transportation Solutions | 60% | 56% | 60% | | Industrial Solutions | 28% | 28% | 26% | | Communications Solutions | 12% | 16% | 14% | | **Total** | **100%** | **100%** | **100%** | - The Transportation Solutions segment is a leader in connectivity and sensor technologies for automotive, commercial transportation, and sensor applications[22](index=22&type=chunk)[24](index=24&type=chunk) - The Industrial Solutions segment supplies products for connecting and distributing power, data, and signals across markets like industrial equipment, aerospace, defense, marine, energy, and medical[25](index=25&type=chunk)[27](index=27&type=chunk) - The Communications Solutions segment provides electronic components for data and devices (e.g., data centers, smartphones) and appliances[26](index=26&type=chunk)[28](index=28&type=chunk) **Net Sales by Geographic Region (% of Total Net Sales)** | Region | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Europe/Middle East/Africa (EMEA) | 39% | 35% | 37% | | Asia–Pacific | 32% | 35% | 36% | | Americas | 29% | 30% | 27% | | **Total** | **100%** | **100%** | **100%** | - Sales are conducted primarily through direct selling, which accounted for **approximately 80% of total net sales** in fiscal 2023, and also via third-party distributors[34](index=34&type=chunk) **Backlog by Reportable Segment (Fiscal Year End)** | Segment | 2023 (in millions) | 2022 (in millions) | | :--- | :--- | :--- | | Transportation Solutions | $2,981 | $3,179 | | Industrial Solutions | $2,448 | $2,432 | | Communications Solutions | $617 | $885 | | **Total** | **$6,046** | **$6,496** | - As of fiscal year-end 2023, the company employed approximately 90,000 people worldwide and has set a goal to have **30% of leadership roles filled by women** by fiscal 2026[44](index=44&type=chunk)[45](index=45&type=chunk) **Key Sustainability Goals** | Goal | Baseline Fiscal Year | Targeted Fiscal Year of Achievement | | :--- | :--- | :--- | | 70%+ reduction in absolute GHG emissions (Scopes 1 & 2) | 2020 | 2030 | | 15% reduction in water withdrawals at high-stress sites | 2021 | 2025 | | 15% reduction in hazardous waste disposed | 2021 | 2025 | | 80% renewable electricity use in operations | n/a | 2025 | [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from macroeconomic conditions, industry cyclicality, operational challenges, and complex global regulatory environments - **Macroeconomic Risks:** The business is affected by global economic conditions, trade tensions (U.S., China, EU), inflation, and higher interest rates, which could lead to customer order delays or cancellations and potential goodwill impairment charges[62](index=62&type=chunk)[63](index=63&type=chunk) - **Foreign Currency Risk:** Approximately **60% of fiscal 2023 net sales** were in non-U.S. dollar currencies, and a stronger U.S. dollar adversely affects reported results as this exposure is not hedged[65](index=65&type=chunk) - **Geopolitical and China-Specific Risks:** The company has 17 manufacturing sites in China, and **approximately 20% of fiscal 2023 net sales** were to customers in China, making it vulnerable to volatile economic conditions and trade policies[71](index=71&type=chunk) - **Industry-Specific Risks:** The company is highly dependent on the cyclical automotive industry (**43% of FY2023 net sales**), which is subject to significant price pressure and market downturns[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - **Operational Risks:** The company is sensitive to raw material availability and cost, particularly for metals like copper, gold, and silver, and faces risks from product liability, cybersecurity, and supplier reliance[88](index=88&type=chunk)[90](index=90&type=chunk)[94](index=94&type=chunk) - **Regulatory and Legal Risks:** The company is investigating past compliance with U.S. trade controls and has made voluntary disclosures to the BIS and DDTC, which could result in fines or penalties[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - **Swiss Jurisdiction Risks:** As a Swiss corporation, TE Connectivity faces less flexibility in capital management, and distributions to shareholders may be subject to Swiss withholding tax[115](index=115&type=chunk)[118](index=118&type=chunk)[121](index=121&type=chunk)[128](index=128&type=chunk) - **Tax Risks:** The OECD's 15% global minimum corporate tax, effective in Switzerland on January 1, 2024, is expected to materially increase the company's cash taxes and effective tax rate starting in fiscal 2025[129](index=129&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that there are no unresolved staff comments - None[132](index=132&type=chunk) [Cybersecurity](index=35&type=section&id=Item%201C.%20Cybersecurity) This item is reported as not applicable - Not applicable[133](index=133&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) The company operates 104 principal manufacturing facilities globally, occupying approximately 27 million square feet of owned and leased space - As of fiscal year-end 2023, the company owned approximately **17 million sq. ft.** and leased **10 million sq. ft.** of floor space worldwide[134](index=134&type=chunk) **Principal Manufacturing Facilities by Segment and Region (FY2023)** | Region | Transportation Solutions | Industrial Solutions | Communications Solutions | Total | | :--- | :--- | :--- | :--- | :--- | | EMEA | 20 | 20 | 2 | 42 | | Asia–Pacific | 9 | 6 | 9 | 24 | | Americas | 10 | 26 | 2 | 38 | | **Total** | **39** | **52** | **13** | **104** | [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings that are not expected to materially affect its financial condition - The company is subject to various legal proceedings and claims in the normal course of business but does not expect the outcomes to have a material effect on its results, financial position, or cash flows[136](index=136&type=chunk)[137](index=137&type=chunk) - An environmental matter at the Silicon Microstructures, Inc. (SMI) site in California is being addressed with authorities and is not anticipated to have a material adverse effect[138](index=138&type=chunk)[139](index=139&type=chunk) [Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is reported as not applicable - Not applicable[140](index=140&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common shares trade on the NYSE, and it actively repurchased shares during the fourth quarter of fiscal 2023 - The company's common shares are listed on the New York Stock Exchange (NYSE) under the trading symbol 'TEL'[143](index=143&type=chunk) **Cumulative Total Shareholder Return Comparison (FY2018-2023)** | | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | TE Connectivity Ltd. | $100.00 | $107.73 | $113.20 | $173.60 | $135.02 | $153.89 | | S&P 500 Index | $100.00 | $103.72 | $117.72 | $161.39 | $131.92 | $160.44 | | Dow Jones U.S. Electrical Components and Equipment Index | $100.00 | $96.28 | $100.92 | $146.51 | $121.47 | $153.94 | **Issuer Purchases of Equity Securities (Quarter Ended Sep 29, 2023)** | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans | | :--- | :--- | :--- | :--- | :--- | | Jul 1–Jul 28, 2023 | 428,261 | $142.15 | 428,200 | $999,101,703 | | Jul 29–Sep 1, 2023 | 1,067,083 | $133.55 | 1,060,900 | $857,423,534 | | Sep 2–Sep 29, 2023 | 964,156 | $126.54 | 963,800 | $735,467,902 | | **Total** | **2,459,500** | **$132.30** | **2,452,900** | | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2023 saw a slight sales decrease to $16.03 billion but organic growth of 1.0%, while operating income declined due to higher costs and restructuring charges [Overview](index=40&type=section&id=7.1%20Overview) Fiscal 2023 net sales decreased 1.5% to $16.034 billion, though organic sales grew 1.0% driven by pricing actions and cost controls - Fiscal 2023 net sales decreased 1.5% from fiscal 2022, but **increased 1.0% on an organic basis**, driven by a decline in Communications Solutions offset by growth in Transportation Solutions[156](index=156&type=chunk) - The company has been mitigating inflationary cost pressures for transportation, energy, and raw materials through price increases and productivity measures[155](index=155&type=chunk) - In August 2023, the company agreed to acquire Schaffner Holding AG, a Swiss-based leader in electromagnetic solutions, for approximately **$350 million**, with the deal expected to close in Q1 fiscal 2024[160](index=160&type=chunk) - For the first quarter of fiscal 2024, the company expects net sales of approximately **$3.85 billion** and diluted EPS from continuing operations of approximately **$1.59**[157](index=157&type=chunk) [Results of Operations](index=42&type=section&id=7.2%20Results%20of%20Operations) Net sales fell 1.5% to $16.034 billion due to negative currency translation, while operating margin contracted to 14.4% from 16.9% **Fiscal 2023 vs. 2022 Net Sales Change Analysis (in millions)** | Segment | Net Sales Growth (Decline) | Organic Net Sales Growth (Decline) | Translation | Acquisitions (Divestiture) | | :--- | :--- | :--- | :--- | :--- | | Transportation Solutions | $369 | $665 | $(296) | $— | | Industrial Solutions | $61 | $153 | $(78) | $(14) | | Communications Solutions | $(677) | $(648) | $(48) | $19 | | **Total** | **$(247)** | **$170** | **$(422)** | **$5** | - Net sales decrease of 1.5% in fiscal 2023 was primarily due to a **2.6% negative impact from foreign currency translation**, partially offset by 1.0% organic growth driven by **$607 million in pricing actions**[165](index=165&type=chunk) **Key Financial Metrics (FY2023 vs FY2022)** | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $16,034M | $16,281M | $(247)M | | Gross Margin | 31.5% | 32.2% | -0.7 p.p. | | Operating Income | $2,304M | $2,756M | $(452)M | | Operating Margin | 14.4% | 16.9% | -2.5 p.p. | | Effective Tax Rate | 16.0% | 11.2% | +4.8 p.p. | - Restructuring and other charges increased significantly to **$340 million** in fiscal 2023 from $141 million in fiscal 2022, contributing to the decline in operating income[169](index=169&type=chunk) - The company is monitoring the OECD's 15% global minimum corporate tax, which is expected to be effective in Switzerland on Jan 1, 2024 and impact the company in fiscal 2025, potentially materially affecting its tax rate and cash taxes[180](index=180&type=chunk) [Segment Results](index=48&type=section&id=7.3%20Segment%20Results) Transportation and Industrial segments grew organically, while the Communications segment experienced a significant sales decline due to market weakness **Transportation Solutions: Net Sales by End Market (in millions)** | End Market | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Automotive | $6,951 | $6,527 | | Commercial transportation | $1,525 | $1,582 | | Sensors | $1,112 | $1,110 | | **Total** | **$9,588** | **$9,219** | - Transportation Solutions **organic net sales grew 7.2%**, led by a 10.2% increase in the automotive market due to global vehicle production growth and increased content per vehicle[186](index=186&type=chunk)[188](index=188&type=chunk) **Industrial Solutions: Net Sales by End Market (in millions)** | End Market | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Industrial equipment | $1,706 | $1,904 | | Aerospace, defense, and marine | $1,178 | $1,087 | | Energy | $883 | $804 | | Medical | $784 | $695 | | **Total** | **$4,551** | **$4,490** | - Industrial Solutions **organic net sales grew 3.4%**, with strong performance in aerospace (up 12.8%), medical (up 13.1%), and energy (up 9.6%) offsetting an 8.1% decline in industrial equipment[193](index=193&type=chunk) **Communications Solutions: Net Sales by End Market (in millions)** | End Market | Fiscal 2023 | Fiscal 2022 | | :--- | :--- | :--- | | Data and devices | $1,162 | $1,606 | | Appliances | $733 | $966 | | **Total** | **$1,895** | **$2,572** | - Communications Solutions **organic net sales decreased 25.2%**, with a 27.2% decline in data and devices and a 21.8% decline in appliances, both due to reduced demand from inventory corrections and market declines[200](index=200&type=chunk)[202](index=202&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=7.4%20Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position, with operating cash flow increasing to $3.13 billion and $1.67 billion returned to shareholders - Net cash provided by operating activities increased to **$3,132 million** in FY2023 from $2,468 million in FY2022, primarily due to changes in working capital levels[208](index=208&type=chunk) - Capital expenditures were **$732 million** in FY2023, and are expected to be approximately 5% of net sales in fiscal 2024[210](index=210&type=chunk) - Total debt was **$4.21 billion** at fiscal year-end 2023, stable with the prior year, following the issuance of $500 million of 4.50% senior notes[213](index=213&type=chunk)[214](index=214&type=chunk) - The company has a **$1.5 billion revolving credit facility** maturing in June 2026, which was undrawn at year-end, and was in compliance with all debt covenants[215](index=215&type=chunk)[217](index=217&type=chunk) - In fiscal 2023, the company returned significant capital to shareholders, paying **$725 million in dividends** and repurchasing 8 million common shares for **$946 million**[219](index=219&type=chunk)[222](index=222&type=chunk) - As of fiscal year-end 2023, approximately **$2.6 billion of cash**, cash equivalents, and intercompany deposits held by foreign subsidiaries are considered permanently reinvested[207](index=207&type=chunk) [Critical Accounting Policies and Estimates](index=62&type=section&id=7.5%20Critical%20Accounting%20Policies%20and%20Estimates) Key accounting estimates involve revenue recognition, goodwill impairment, income taxes, and pension plan assumptions - **Revenue Recognition:** Revenue is recognized when control of products transfers to customers, with estimates for variable consideration like rebates based on expected values and historical data[237](index=237&type=chunk)[239](index=239&type=chunk) - **Goodwill and Intangibles:** Goodwill is tested for impairment annually at the reporting unit level using a discounted cash flow approach, and the Q4 2023 test found no impairment[242](index=242&type=chunk)[243](index=243&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) - **Income Taxes:** The company has significant deferred tax assets, against which a **valuation allowance of $7.4 billion** was recorded at year-end 2023 due to uncertainty about their realization[248](index=248&type=chunk)[249](index=249&type=chunk)[458](index=458&type=chunk) - **Pension Plans:** Pension obligations and expenses are determined using actuarial assumptions, with a 25-basis-point change in the discount rate estimated to impact pension obligations by approximately **$57-60 million**[252](index=252&type=chunk)[254](index=254&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company uses derivative instruments to manage exposure to foreign currency, interest rate, and commodity price risks - The company uses derivative financial instruments, including cross-currency swaps and forward contracts, to manage exposure to foreign currency, interest rate, and commodity price risks[268](index=268&type=chunk) - **Foreign Currency Exposure:** A hypothetical 10% change in underlying currencies would alter the unrealized value of foreign currency derivative contracts by **$368 million**, which would generally be offset by gains or losses on the underlying transactions[270](index=270&type=chunk) - **Commodity Exposure:** The company uses commodity swap contracts to hedge expected purchases of key metals, with hedges having a notional value of **$459 million** at fiscal year-end 2023[273](index=273&type=chunk) [Financial Statements and Supplementary Data](index=70&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section references the consolidated financial statements, related notes, and the independent auditor's report - This item references the location of the company's Consolidated Financial Statements, related notes, and the report of the independent registered public accounting firm, Deloitte & Touche LLP[275](index=275&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of September 29, 2023 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 29, 2023[277](index=277&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of September 29, 2023, based on the COSO framework (2013)[278](index=278&type=chunk) - Deloitte & Touche LLP issued an unqualified attestation report on the company's internal control over financial reporting as of September 29, 2023[280](index=280&type=chunk) [Other Information](index=71&type=section&id=Item%209B.%20Other%20Information) Two executive officers adopted Rule 10b5-1(c) trading plans during the fourth quarter of fiscal 2023 - In the quarter ended September 29, 2023, CEO Terrence R. Curtin and President of Communications Solutions Aaron K. Stucki each adopted a Rule 10b5-1(c) trading plan for the sale of company securities[282](index=282&type=chunk)[285](index=285&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=72&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information is incorporated by reference from the 2024 Proxy Statement, and the company has adopted a Guide to Ethical Conduct - Information required for this item is incorporated by reference from the company's definitive proxy statement for its 2024 Annual General Meeting of Shareholders[287](index=287&type=chunk) - The company has adopted a Guide to Ethical Conduct that applies to all employees, officers, and directors, and meets the requirements of a 'code of ethics' as defined by SEC and NYSE rules[288](index=288&type=chunk) [Executive Compensation](index=72&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the company's 2024 Proxy Statement - Information regarding executive compensation is incorporated by reference from the 2024 Proxy Statement[289](index=289&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=72&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership is incorporated by reference, with details provided on equity compensation plans **Equity Compensation Plan Information as of Fiscal Year End 2023** | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 7,223,872 | $107.36 | 12,555,452 | | Equity compensation plans not approved by security holders | 415,435 | $82.54 | — | | **Total** | **7,639,307** | | **12,555,452** | [Certain Relationships and Related Transactions, and Director Independence](index=73&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2024 Proxy Statement - Information for this item is incorporated by reference from the 2024 Proxy Statement[293](index=293&type=chunk) [Principal Accountant Fees and Services](index=73&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information concerning principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - Information for this item is incorporated by reference from the 2024 Proxy Statement[294](index=294&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=74&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section provides an index of all exhibits filed with or incorporated by reference into the Form 10-K - This section lists the financial statements, financial statement schedules, and exhibits filed as part of the annual report, including governance documents, debt agreements, and management compensation plans[297](index=297&type=chunk) [Form 10-K Summary](index=80&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that there is no Form 10-K summary - None[302](index=302&type=chunk) Financial Statements [Reports of Independent Registered Public Accounting Firm](index=84&type=section&id=Reports%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued unqualified opinions on the financial statements and internal controls, identifying the realizability of deferred tax assets as a critical audit matter - Deloitte & Touche LLP issued an unqualified opinion, stating the financial statements are fairly presented in conformity with U.S. GAAP[313](index=313&type=chunk) - The firm also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of September 29, 2023[314](index=314&type=chunk)[323](index=323&type=chunk) - A **critical audit matter** was identified concerning the realizability of deferred tax assets, due to significant management judgment required to estimate future taxable income needed to realize a portion of the company's **$10.2 billion in gross deferred tax assets**, which have a **valuation allowance of $7.4 billion**[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk) [Consolidated Financial Statements](index=88&type=section&id=Consolidated%20Financial%20Statements) Fiscal 2023 net sales were $16.034 billion with net income of $1.910 billion, and the company generated $3.132 billion in cash from operations **Consolidated Statement of Operations Highlights (in millions, except per share data)** | | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Net sales | $16,034 | $16,281 | $14,923 | | Gross margin | $5,055 | $5,244 | $4,887 | | Operating income | $2,304 | $2,756 | $2,434 | | Net income | $1,910 | $2,428 | $2,261 | | Diluted earnings per share | $6.03 | $7.47 | $6.79 | **Consolidated Balance Sheet Highlights (in millions)** | | Fiscal Year End 2023 | Fiscal Year End 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,661 | $1,088 | | Total current assets | $7,892 | $7,268 | | Total assets | $21,712 | $20,782 | | Total current liabilities | $4,463 | $4,632 | | Total liabilities | $10,057 | $9,885 | | Total shareholders' equity | $11,551 | $10,802 | **Consolidated Statement of Cash Flows Highlights (in millions)** | | Fiscal 2023 | Fiscal 2022 | Fiscal 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $3,132 | $2,468 | $2,676 | | Net cash used in investing activities | $(768) | $(878) | $(1,037) | | Net cash used in financing activities | $(1,793) | $(1,684) | $(1,386) | [Notes to Consolidated Financial Statements](index=94&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key financial activities, including restructuring charges, acquisitions, debt, and significant tax considerations - **Restructuring:** In fiscal 2023, the company recorded **net restructuring charges of $260 million**, primarily for cost structure improvements across all segments, with total restructuring reserves at year-end of $320 million[381](index=381&type=chunk)[382](index=382&type=chunk)[390](index=390&type=chunk) - **Acquisitions & Divestitures:** During fiscal 2023, one business was acquired for $110 million and three were sold for $48 million, while a pre-tax impairment charge of $68 million was recorded for a business held for sale[391](index=391&type=chunk)[394](index=394&type=chunk) - **Goodwill:** The carrying amount of goodwill was **$5.463 billion** at fiscal year-end 2023, and the annual impairment test in the fourth quarter determined that no impairment existed[399](index=399&type=chunk)[401](index=401&type=chunk) - **Debt:** Total debt was **$4.211 billion** at year-end 2023, and the company's $1.5 billion revolving credit facility was undrawn[406](index=406&type=chunk)[407](index=407&type=chunk) - **Income Taxes:** The company has gross deferred tax assets of **$10.2 billion**, primarily from $8.5 billion in tax loss and credit carryforwards, against which a **valuation allowance of $7.4 billion** has been recorded[457](index=457&type=chunk)[458](index=458&type=chunk) - **Shareholder Returns:** In fiscal 2023, the company paid **$725 million in dividends** and repurchased 8 million shares for **$946 million**, with $735 million remaining under the share repurchase authorization at year-end[474](index=474&type=chunk)[476](index=476&type=chunk) - **Share-Based Compensation:** Total share-based compensation expense was **$123 million** in fiscal 2023, with **$135 million** of unrecognized compensation expense related to nonvested awards at year-end[481](index=481&type=chunk)[484](index=484&type=chunk)[487](index=487&type=chunk)[491](index=491&type=chunk)

TE Connectivity Fourth Quarter 2023 Earnings Non-GAAP Financial Measures Q4 Sales in line with Expectations & Adjusted EPS Exceeded Guidance • Generated record quarterly Free Cash Flow of $945M • Sales of $16.0B, ~flat on a reported basis Y/Y despite FX headwinds of ~$430M • 3% organic growth Y/Y driven by the Transportation and Industrial segments November 1, 2023 EVERY CONNECTION COUNTS Forward-Looking Statements and Non-GAAP Financial Measures Forward-Looking Statements Where we have used non-GAAP financ ...

TE Connectivity Ltd. (NYSE:TEL) Q4 2023 Earnings Conference Call November 1, 2023 8:30 AM ET Company Participants Sujal Shah - VP, IR Terrence Curtin - CEO Heath Mitts - CFO Conference Call Participants Mark Delaney - Goldman Sachs Wamsi Mohan - Bank of America Steven Fox - Fox Advisors Chris Snyder - UBS William Stein - Truist Securities Amit Daryanani - Evercore Joe Cardoso - JPMorgan Joe Giordano - TD Cowen Luke Junk - Baird Scott Davis - Melius Research Christopher Glynn - Oppenheimer Shreyas Patil - Wo ...