TE Connectivity(TEL) - 2025 Q3 - Quarterly Results

TE Connectivity Third Quarter Fiscal 2025 Results Third Quarter FY25 Performance Highlights TE Connectivity achieved record Q3 FY25 results, exceeding guidance with double-digit sales and EPS growth, led by Industrial segment Q3 FY2025 Key Financial Metrics | Metric | Value | Year-over-Year Change | | :--- | :--- | :--- | | Net Sales | $4.5 billion | +14% Reported, +9% Organic | | GAAP Diluted EPS | $2.14 | +15% | | Adjusted EPS | $2.27 | +19% | | Orders | $4.5 billion | Up YoY and Sequentially | | Operating Margin | 18.9% | - | | Adjusted Operating Margin | 19.9% | - | | Operating Cash Flow | ~$1.2 billion | - | | Free Cash Flow | $962 million | - | - The strong performance was primarily driven by 30% sales growth in the Industrial segment, particularly from high-speed connectivity solutions for AI applications and the energy business[3][5] - The Transportation segment saw increased sales despite declines in overall vehicle production, attributed to strength in Asia and innovations in electrification and next-generation vehicle data connectivity[5][6] - Significant capital deployment year-to-date includes the completion of the Richards acquisition for $2.3 billion and returning $1.5 billion to shareholders[4] Fourth Quarter FY25 Outlook The company anticipates continued momentum into Q4 FY25, projecting double-digit sales and adjusted EPS growth Q4 FY2025 Guidance | Metric | Expected Value | Year-over-Year Change | | :--- | :--- | :--- | | Net Sales | ~$4.55 billion | +12% Reported, +6% Organic | | GAAP EPS | ~$2.18 | +140% | | Adjusted EPS | ~$2.27 | +16% | Consolidated Financial Statements Consolidated Statements of Operations Q3 FY25 net sales increased to $4.53 billion, operating income to $857 million, and diluted EPS grew to $2.14 Q3 FY2025 vs Q3 FY2024 Income Statement (in millions, except EPS) | Metric | Q3 2025 | Q3 2024 | | :--- | :--- | :--- | | Net Sales | $4,534 | $3,979 | | Gross Margin | $1,600 | $1,386 | | Operating Income | $857 | $755 | | Income from Continuing Operations | $638 | $573 | | Diluted EPS from Continuing Operations | $2.14 | $1.86 | Consolidated Balance Sheets Total assets increased to $24.87 billion as of June 27, 2025, driven by acquisitions, with total liabilities rising to $12.34 billion Balance Sheet Comparison (in millions) | Account | June 27, 2025 | September 27, 2024 | | :--- | :--- | :--- | | Total Assets | $24,866 | $22,854 | | Cash and cash equivalents | $672 | $1,319 | | Goodwill | $7,251 | $5,801 | | Total Liabilities | $12,342 | $10,368 | | Long-term debt | $4,846 | $3,332 | | Total Shareholders' Equity | $12,381 | $12,355 | Consolidated Statements of Cash Flows Nine-month operating cash flow was $2.72 billion, with $3.30 billion used in investing activities for acquisitions, and $63 million in financing activities Nine Months Ended June 27, 2025 Cash Flow Summary (in millions) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $2,718 | | Net cash used in investing activities | $(3,298) | | Net cash used in financing activities | $(63) | | Net decrease in cash | $(647) | - Investing activities were dominated by $2.63 billion used for the acquisition of businesses, net of cash acquired, over the nine-month period[23] - Financing activities included $910 million in share repurchases and $594 million in dividend payments, partially offset by $2.23 billion in proceeds from debt issuance[23] Segment and Sales Analysis Segment Data In Q3 FY25, Industrial Solutions sales grew 30% to $2.12 billion with a 20.4% adjusted operating margin, while Transportation Solutions sales increased modestly Q3 FY2025 Segment Performance (in millions) | Segment | Net Sales | YoY Change | Adj. Operating Income | Adj. Operating Margin | | :--- | :--- | :--- | :--- | :--- | | Transportation Solutions | $2,418 | +2.8% | $469 | 19.4% | | Industrial Solutions | $2,116 | +30.0% | $432 | 20.4% | Reconciliation of Net Sales Growth Q3 FY25 total net sales growth was 13.9%, with 9.1% organic growth, 1.7% from currency, and 3.2% from acquisitions, primarily driven by Industrial Solutions Q3 FY2025 Net Sales Growth Breakdown vs Q3 FY2024 | Component | Growth % | Value (in millions) | | :--- | :--- | :--- | | Organic Net Sales Growth | 9.1% | $361 | | Translation (FX) | 1.7% | $68 | | Acquisitions | 3.2% | $126 | | Total Net Sales Growth | 13.9% | $555 | - Within the Industrial Solutions segment, the Digital Data Networks business grew 81.9% organically, and the Energy business grew 20.2% organically[28] - The Transportation Solutions segment experienced modest organic growth of 1.1%, with Automotive growing 1.5% organically while Sensors declined 3.8% organically[28] Non-GAAP Financial Measures and Reconciliations Explanation of Non-GAAP Measures TE Connectivity uses non-GAAP measures to provide supplemental information, enhancing understanding of operating performance and business trends by excluding certain items - The company presents non-GAAP measures to help investors understand performance in the same way management does for internal planning and forecasting[10] - Key non-GAAP measures include Organic Net Sales Growth (excludes currency, acquisitions/divestitures), Adjusted Operating Income (excludes special charges), Adjusted EPS, and Free Cash Flow (FCF)[11][12][15][16] Reconciliation of GAAP to Non-GAAP Measures Q3 FY25 GAAP operating income of $857 million was reconciled to an adjusted $901 million, and GAAP diluted EPS of $2.14 to an adjusted $2.27 Q3 FY2025 GAAP to Non-GAAP Reconciliation (in millions, except EPS) | Metric | U.S. GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating Income | $857 | +$44 | $901 | | Operating Margin | 18.9% | - | 19.9% | | Diluted EPS | $2.14 | +$0.13 | $2.27 | - Adjustments primarily consist of acquisition-related charges, restructuring costs, and other net charges[30] - Forward-looking guidance for Q4 FY25 reconciles a GAAP EPS of $2.18 to an Adjusted EPS of $2.27, with adjustments for restructuring and acquisition-related charges[44] Other Information Conference Call and Webcast The company held an investor conference call on July 23 to discuss quarterly results, with replay access available via its investor relations website - An investor conference call was held at 8:30 a.m. ET on July 23[8] Forward-Looking Statements The earnings release contains forward-looking statements subject to various risks and uncertainties, including business interruptions, economic conditions, and currency fluctuations - The report includes forward-looking statements based on current management expectations, which are subject to risks and uncertainties[17] - Key risk factors mentioned include business interruptions, demand conditions, competition, currency and commodity price fluctuations, and geopolitical instability[17][18]