TE Connectivity(US:TEL)2026-01-21 14:32Financial Data and Key Metrics Changes - The company reported first-quarter sales of $4.7 billion, representing a 22% increase on a reported basis and a 15% increase organically year-over-year [7][20] - Adjusted earnings per share (EPS) reached a record $2.72, up over 30% compared to the previous year [8][20] - Adjusted operating margins improved to 22%, an increase of 180 basis points year-over-year [8][20] - Free cash flow exceeded $600 million, with 100% returned to shareholders [8][20] Business Line Data and Key Metrics Changes - Industrial Solutions segment sales grew 38% year-over-year, with digital data networks experiencing a 70% growth [11][12] - Transportation Solutions segment sales increased by 10%, with auto sales growing 7% organically [15][16] - The Energy business saw sales grow 88%, including contributions from the Richards acquisition, with organic growth of 15% [14] Market Data and Key Metrics Changes - Orders increased to a record level of over $5 billion, with a book-to-bill ratio of 1.1 [6][9] - Double-digit organic order growth was observed in all regions year-over-year [9][10] - The company expects global auto production to be approximately 88 million units for fiscal 2026, slightly down from the previous year [16][94] Company Strategy and Development Direction - The company is focusing on broadening growth drivers to capitalize on secular trends in data and power connectivity [5][6] - Investments in co-creation engineering models and global supply chain enhancements are aimed at driving product innovation and value for customers [5][6] - The long-term target is to achieve six to eight points of annual average growth, with expectations to exceed this in fiscal 2026 [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver growth ahead of the long-term target, supported by strong order momentum and improved operating resilience [6][7] - The company anticipates continued strong cash generation and margin expansion, with a focus on AI and digital data networks as key growth areas [6][20] - Management acknowledged ongoing macroeconomic challenges but emphasized strong execution and operational performance [6][7] Other Important Information - The company plans to increase capital expenditures to support the growing pipeline of customer awards for AI programs, expecting CapEx to be closer to 6% of sales this year [21][22] - The adjusted effective tax rate for Q1 was approximately 22%, with expectations to remain at this level for Q2 [19] Q&A Session Summary Question: AI revenue expectations and scaling - Management confirmed an increase in AI revenue expectations by $200 million compared to previous forecasts, driven by new program awards and strong order momentum [26][28] Question: Order trends and revenue implications - Management highlighted record orders and broad-based growth across segments, with expectations for sequential growth in Industrial Solutions despite typical auto production declines [34][36] Question: Drivers of AI revenue uptick - The increase in AI revenue expectations is attributed to new program awards and strong performance from existing programs, with significant investments needed to meet growing demand [41][42] Question: Supply chain tightness and inflation - Management indicated that while there is inflation in metal-related costs, they are able to procure necessary materials and pass costs through to customers effectively [62][63] Question: Commercial transportation outlook - Management noted that while last year's comparisons were easier, there is ongoing improvement in global truck builds outside North America, with expectations for continued growth [70][71] Question: EPS guidance and operating margins - Management explained that the slight decrease in EPS guidance is due to tax and interest expenses, while maintaining confidence in strong incremental margins for the year [73][75]