Hello, and welcome to the third quarter earnings conference call for Amphenol Corporation. Following today's presentation, there will be a formal question-and-answer session. Until then, all lines will remain in a listen-only mode. At the request of the company, today's conference is being recorded. 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 begin.

Thank you very much. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO; and I'm here together with Adam Norwitt, our CEO. We would like to welcome you to our third quarter 2024 conference call. Our third quarter results were released this morning and I will provide some financial commentary, and then Adam will give an overview of the business and current market trends. And then, of course, 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 in our press release for further information. In addition, as a result of our previously announced two-for-one stock split completed in June of this year, all share and per share data discussed on this earnings call is on a split-adjusted basis. The company closed the third quarter of 2024 with record sales of $4.39 billion and record GAAP and adjusted diluted EPS of $0.48 and $0.50, respectively. Third quarter sales were up 26% in US dollars in local currencies and 15% organically compared to the third quarter of 2023. Sequentially, sales were up 12% in US dollars, 11% in local currencies and 8% organically. Adam will comment further on trends by market in a few minutes. Orders in the quarter were a record $4.412 billion, up 39% compared to the prior year and up 9% sequentially, resulting in a strong book-to-bill ratio of 1.09:1. GAAP operating income was $819 million and included $64 million of acquisition-related costs in the quarter, primarily related to CIT. GAAP operating margin was 20.3%. Excluding these costs, adjusted operating income was $883 million, resulting in a record adjusted operating margin of 21.9% in the third quarter of 2024. On an adjusted basis, operating margin increased by 110…

Well, thank you very much, Craig, and thank you all for joining our call here on a very beautiful fall day in Wallingford, Connecticut. And I hope that all of you are enjoying a very nice fall so far. As Craig mentioned, I'm going to highlight our achievements here in the third quarter. And in particular, we'll discuss the trends and progress across our served markets. And then I'll comment on our outlook for the fourth quarter and the full year 2024, and of course, we'll have some time at the end for questions. Our results in the third quarter were really strong and actually stronger than expected and exceeding the high end of our guidance in sales and adjusted diluted earnings per share. Sales grew from prior year by a very strong 26% in US dollars and in local currencies, reaching a new record of $4.39 billion. We're very proud to have that new sales record. On an organic basis, our sales did increase by 15%, driven by growth in the IT datacom, mobile networks, mobile devices, commercial air and defense end markets, and I'll talk about those details in a few moments. The company also booked record orders of $4,412 billion, representing a robust book-to-bill of 1.09:1. This was also driven especially by continued strength in the IT datacom market. Our adjusted operating margins reached a new record, 21.9%, in the quarter, and this represented a 110-basis-point increase from last year's third quarter. Adjusted diluted EPS grew 28% from prior year to reach a new record, $0.50, in the third quarter. And then finally, we generated operating and free cash flow of $704 million and $476 million, respectively, in the quarter, and this is yet another clear demonstration of the high quality of the company's earnings. I just…

Thank you. The question-and-answer session period will now begin. [Operator Instructions] Our first question is from Andrew Buscaglia with BNP. You may go ahead.

Hey, good morning, guys.

Good morning.

So obviously, a very robust quarter for IT datacom. And even you said slightly better than maybe you expected. So I think last quarter you were alluding to IT datacom, the non-AI portion, also starting to improve. So could you help us parse out how much of this sequential improvement is from AI versus non-AI?

Yeah. Well, Andrew, thanks so much for the question. Look, I think we did start last quarter being the second quarter to see a little bit of stronger performance. And I would tell you here in the third quarter, the underlying IT datacom, obviously, with the caveat that we -- it's not always exactly easy to tell what product goes into what application. But our best assessment of it is that the underlying IT datacom market did show actually very, very strong growth this quarter. Now I will tell you that roughly the AI -- the products that we sell into AI represented a bit more than half of our overall year-over-year growth and about the same in terms of sequential. So, very strong performance for anything related to AI. We have a very significant position in AI, as you know well, but we were encouraged, very encouraged to see that the underlying IT datacom demand has grown. And there's no doubt that there is today a real rush to equip data centers, enterprises, consumers, service providers with this next-generation compute power with all the switching that's associated with that and the like. And I think that is driving a bit of a recovery in these products in quite a significant way for us here in the quarter.

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

Great. Good afternoon. Thanks for taking the question. Adam, just hoping to double click on your automotive business. Clearly, a very dynamic market right now in terms of overall production volatility. You mentioned Europe, especially EV moderation, et cetera. Just given that backdrop, be curious what you're seeing in terms of the bookings pipeline right now, especially relative to your ability to continue to drive growth above market at or above the levels the company has driven historically. Is the market constraining your growth potential at all right now? Or the OEMs actually need more help from Amphenol in this environment? I appreciate the perspective.

Well, thanks so much, Luke. I mean a lot to unwrap there, but let me say this. I mean, I'm really proud of our team in automotive. I mean, on a year-to-date basis, we've just done a fabulous job of continuing to outperform and navigating what, as you term, is very much so a dynamic worldwide automotive market. And these dynamics are sort of multifaceted. There's the dynamic of drivetrain choice, and I'm not going to go down that rabbit hole, but for sure, the world is talking about this. There's also the dynamic of just overall demand in certain geographies and in particular, Europe, where it's been widely reported, and I'm probably not the first to say that there are some challenges in the overall European demand in automotive. And we see that on a related basis, I think in industrial. But what I'm really pleased with is, if you look this quarter, we did have still robust growth in Asia and North America on an organic basis on a year-over-year basis and that was offset in part at least by a moderation in Europe. So to your specific question about content and Amphenol continuing to outperform, we have every confidence that the momentum that we've had in gaining content, enabling new applications with our customers around the world, whether those be next-generation drivetrains, whether those be next-generation electronics in cars, connectivity, communications, antennas, sensors and the like, the breadth of the product offerings that we have, the capabilities to fulfill those offerings on a global basis, continues to put us in a very strong position with automotive OEMs, the world over. And our team just has to navigate those dynamics as they are. But the good news is, regardless of whether something is made in Europe, made in Asia, made in North America, regardless of whether something is a full electric vehicle, a hybrid or a full internal combustion engine, there is continuing to be a proliferation of electronics across all of those cars. And so it's up to us to make sure that we continue to drive our next-generation products into those platforms around the world. And I'm confident that our team is well positioned to do that.

Thank you. Our next question is from Amit Daryanani with Evercore. You may go ahead.

Thanks a lot and congrats on a nice quarter. I guess, Adam, there's been a fair amount of noise around your content when it comes to AI deployments. And if I sort of think of the number you just said about half of the year-over-year growth is AI-driven. Can you just talk about the breadth of your customer base when it comes to AI deployments? And if there's a way to maybe even think about how do your revenue stack up hyperscale versus XPU providers, and just the breadth of your offering there would be really helpful.

Yeah, Amit, thanks so much. I mean, look, we have really an outstanding breadth of offering into the IT datacom market and, in particular, into applications related to AI. And I think we've talked about this in the past. What's unique about AI is that we're working with customers throughout the entire stack of the chain. And that starts -- it starts with the people who have the money, and that's the web service providers. And there's only a limited universe of those, and we're very well-positioned with those companies. Through the OEMs, the people who outfit the data centers, the OEMs who make equipment to sell into those data centers all the way down to the chip companies who sometimes are creating designs and configurations of those things that are used. And I think that comprehensive aspect of our relationships has really served us well because it's not about an individual product, an individual program or whatever, it's about the collective efforts of the industry to build out artificial intelligence in kind of a big way. And I think that collective efforts are happening in so many different aspects. You have different types of chips being used, different architectures being used. But what ties them all together from an interconnect perspective is two things. They have to be high speed and low latency, and you've got to help them use less power. And those two things of the speed and latency on one side and the power efficiency on the other are where we come into play and we create value for our customers because we have the industry's leading high-speed products, the highest -- operating at the highest speed, the lowest latencies. We have industry's leading efficient power interconnect products, everything from power connectors, assemblies, bus bars and the like, everything that gets power all the way down to these power-hungry chips. And working on those complex architectures, as our engineers have done for many years, together with scaling out our capacity and capability on a global basis, so that we can meet this demand has really put us in a strong position with customers of the world over. And so I wouldn't get hung up on noise of one or another program or configuration, I would think much more about the overall opportunity that is here and the fact that we're, for sure, capturing more than our fair share of that.

Thank you. Our next question is from Samik Chatterjee with JPMorgan. You may go ahead.

Hi. Thanks for taking my question. And Adam, congrats on the strong results here. I guess, I'll follow-up to what Amit's question was. Adam, you talked in your prepared remarks about your team working hard to win or secure business in IT datacom on next-generation systems. Can you talk in relation to when you're seeing the robust growth numbers in IT datacom, what are we seeing in terms of content growth in of next-generation systems? How much visibility are you getting today in relation to what your content on a per unit basis, in some cases, looks like going to a next-generation system? And how are you positioned whether that next relation system uses more copper or fiber? How do you think about opportunities on both those fronts? Thank you.

Yeah. Thanks very much, Samik. I mean look, we've talked in the past about the fact that the unique architecture of these neural network, machine learning, AI, whatever you want to call them, systems, is that you essentially have to create a very high-speed, low-latency mesh fabric so that the chips can all talk to each other. And that's -- and I am not an electrical engineer, the farthest thing from it. But I can tell you that it is unbelievable the type of interconnection requirements that are going on these -- in these systems. And that just means there is greater content and a greater role. I mean, we use this word content, but let me change that to talk about just the role that interconnect plays in the functioning of these systems. Because the role of the interconnect becomes really fundamental to whether these systems can operate. If the chips can't talk to each other at a high enough speed and at a enough low latency, then to go out and build a complex large language model or whatever other model you're trying to do, it just takes too long and the thing becomes obsolete before it's even completed. And so the ability to have these rapid calculations and comparisons and probabilities that come across these chips is, in many ways, dependent on the interconnect as a link to that. And thus, the content opportunity regardless of who makes what chip, regardless of how someone chooses to architect that, that content has gone up and will continue to go up. And we have a very strong position with customers, again, across that that stack I described earlier. Relative to copper and fiber, the good news for Amphenol is we're present in both, and we've made great acquisitions and been a strong innovator in fiber as well as in copper. But I think you also know very well that there are advantages to each. And when you think about power, you want to use copper as much as possible because optics has a much higher usage of power. And so the value that we can create for our customers is by stretching the capabilities of copper such that it can meet these ultra-high bandwidth demand. And that's something we've been doing for more than two decades. When I think back on the acquisition of Teradyne Connection Systems 19 years ago, that brought us into a leadership position of high-speed over copper. Back then, we were talking about things like five gigabits as being kind of an aspirational or 10 gigabits as an aspirational speed over copper. Today, we're achieving things like 200 and aspiring to 400 and 800, and who knows maybe beyond over copper. And that's the incredible value that you can create for customers by stretching the capabilities of copper through your engineering expertise. This is real value that you can create through engineering and technology, and I think our teams are doing that.

Thank you. Our next question is from Asiya Merchant with Citi. You may go ahead.

Great. Thank you for taking my question and congratulations on the results. If I can a little a little bit on CapEx. I think Craig mentioned bit on elevated CapEx here. And so if you could help me understand how long do we expect this CapEx run rate to exist? Are we at the end of the CapEx that you guys are putting in to support the IT datacom growth? Thank you.

Yeah. Thanks, Asiya. So if you think about kind of our capital spend, we talked about this last quarter a bit, and we said we would expect to be kind of elevated for certainly the next couple of quarters being this quarter. And I just kind of reiterated that here in the fourth quarter, we expect to be kind of a little bit elevated levels to drive this and support the significant growth we're seeing in both IT datacom, as well as, to a certain extent, to the defense market as well. I mean we're not giving guidance yet for next year, so I'm not going to necessarily comment specifically on what we expect for capital spend for 2025. But we do certainly continue to target kind of that 3% to 4% of sales from a capital perspective. I think nothing structurally has changed over kind of the mid- or long-term from our expectation of capital spend to kind of maintain our business going forward. Certainly, in years, we're going to see strong growth such as 2024 here, and certainly in other years, we tend to be kind of at the higher end of that range in years that we see kind lower growth, yes, I would expect to be kind of more in the middle of that range or so. So I think that that's how we expect our capital at this point. Certainly, we'll talk about 2025 more specifically, if we see elevated levels as we enter the year next year.

Thank you. Our next question is from Joe Spak with UBS. You may go ahead.

Thanks so much, everyone. Maybe two quick ones. One, I just wanted to understand, in the aerospace guidance you gave, whether you assumed any impact from the ongoing strike and if that's at all significant? And then last quarter, you talked about some industrial green shoots, and I know you mentioned today that North America, Asia, okay, Europe tough. Just wondering if there's, I guess, any further sprouting, and if you're seeing any impact from any of the China stimulus in that region?

Yes. Thanks very much, Joe. I mean look, relative to your first question on aerospace and strikes, I mean, look, we wish for all of our customers that they have peaceful relations with their workforce. And without commenting specifically on any customer, I'll tell you that our guidance always incorporates all the information that we have from our customers around the world, including within that market. In terms of the industrial green shoots, it's absolutely the case. The last quarter, we did talk about seeing some green shoots in industrial. And look, I mean, this quarter, we did see some sequential growth on an organic basis from prior quarter. But I will say that our view of the trends in Europe are probably a little more muted than maybe they were a quarter ago. I mean we're pleased with what we've seen in North America and Asia. We grew in industrial organically in both regions, both on a year-over-year basis and sequentially, but we've probably seen an incremental tick down in Europe. And what to look for there, I mean I think we'll have to watch. The automotive industry and the industrial -- the automotive market and industrial market in Europe are fairly tied at the hip as you know well. You have a lot of factory automation and machine tool industries and the like, which are somewhat dependent on the investment cycles that come from the automakers, who are such a big component of the European economy. And so I think we'll have to watch that and see how it proceeds. But look, in our organization, I mean, not to be cavalier about this, but like it is what it is. Like we -- our team is very used to this scenario where you tighten your belt and you put your head up high and got and take some business. And so to the extent that there is, in Europe, a moderation in these -- in a place like industrial and automotive, our team know how to deal with that. We've got a playbook. And to the extent that there are opportunities in other geographies, we'll work to capitalize upon those and take more than our fair share as they come along.

Thank you. Our next question is from Mark Delaney with Goldman Sachs. You may go ahead.

Yes. Good afternoon. Thank you very much for taking the question. EBIT margins came in at a record high, even with a full quarter contribution of the CIT acquisition. So I'm hoping to better understand what led to the margin strength this past quarter? Maybe you can level set us on where CIT margins are running at this point, and if they're already at the levels you're targeting? And how should investors think about incremental margins going forward? Thank you.

Yes. Thanks, Mark. We're really, really proud of our operating margins here in the third quarter. I mean, this year, we really have done a great job of really execution, and this really goes without saying here in the third quarter. The CIT margins, I would say, ultimately, we're not going to talk so much specifically about their margins. But I would say, they're still on their journey. That really wasn't a strong contributor here in the third quarter to the margin improvement, really, the margin improvement here was just the execution of the team and the ability for team to really just maximize the profitability on the strong growth that we've seen. And I think that as we go forward, we talk about this 25% conversion margin. We've done clearly better than that recently. I still think, over the long-term, 25% is kind of the way we kind of think about things, but the team really has been executing very well on this the strong growth that we've seen over the recent quarters. And I would expect as we continue to grow, we'll continue to be able to kind of execute well and increase those margins as we grow. As it relates to how long it's going to take us to kind of get CIT at the company average, we're not going to really talk about so much how long exactly we think, but we're certainly very happy with the progress so far. And certainly, I would say, today, even versus 90 days ago, I would say, I'm even more optimistic that, ultimately, that CIT will get to the company average. But this is just a great team. They're extremely motivated. They're excited to be part of Amphenol. And I think they're really making some great strides to take the steps they need to get those really great goals.

Thank you. Our next question is from Guy Hardwick with Freedom Capital Markets. You may go ahead.

Hi. Good afternoon. Congratulations on the fantastic Q3 results.

Thank you, Guy.

Just -- obviously, it's great news that you can close Andrew a little bit closer than earlier than expected. Does that mean any sort of antitrust issues that you may have encountered or receiving?

Yes. Well, thanks very much. I mean, look, we never thought there were going to be any meaningful antitrust issues, but we knew that there would be a lot of filings to be done, because Andrew operates on a global basis in lots of different geographies. And you never know how long those things can take. And I think we're just encouraged by how the process is going and that gives us really the confidence to think that it's going be sometime in the first quarter as opposed to in the first half. But we -- again, just to reiterate, we never thought there were any substantive antitrust issues, but there's always a process to do.

Thank you. Our next question is from Steven Fox with Fox Advisors. You may go ahead.

Hi. Good afternoon Adam and Craig. I was wondering if you could step back on the mobile device market. You called out that you're now going to see high single-digit growth for the year, which is kind of an interesting data point, even if it's off of a down year in 2023. Can you just sort of talk about what that high single digits is comprised of, how much you think it's content growth, what you think the markets are doing and what it implies maybe for next few quarters, roughly? Thank you.

Yeah. Well, thanks very much, Steve. I will punt a little bit on your last part of your question, because I'm not very good at forecasting mobile devices even in one quarter, let alone the next several quarters. But let me do this, our team working in mobile devices has still done a fabulous job again this year. I mean, this is such a phenomenal organization. And you think about the technologies that we're working in, things like connectors, obviously, antennas, obviously, the mechanisms that we participate in. And there's no doubt that the content in many of these products, the breadth of content continues to expand. And if I think back on a phrase that I've used for many, many years, probably almost entirety my nearly 16 years here doing these calls as CEO. It's that when the hardware creates value for the customers, then our products can create value for our customers. And there's no question that you see continued innovations in the things themselves and the devices and those ultimately result in just really, really beautiful products that are coming out. And our team is helping to make those beautiful products. And the more functionality that comes into them, the more opportunity there is ultimately for us. Now look, all of that is with the caveat to tell you that this is a very fickle dynamic volatile market. And so we're guiding the market here in the fourth quarter to stay at these pretty robust levels that we achieved in the third quarter. And hopefully, I'll be right about that, but time has told that I'm usually not spot on in even guiding in a 90-day period on mobile devices. But there is no doubt. I mean -- and maybe I'm a power user of these mobile devices. I mean, I have them sitting all around me at all times. I use them constantly. We have learned, I think, the extraordinary things that you can do with mobile devices and what used to be just a phone becomes a tablet, a wearable, hearable device. The line gets blurred between all of these things, but ultimately, they allow you to communicate and to be productive. And I think that our customers continue to push the limits of that that productivity and communication such that consumers ultimately want to buy the product. So I think that's where we stand today. Next year, who knows what it's going to be, Steve, we still see.

Thank you. Our next question is from Scott Graham with Seaport Research Partners. You may go ahead.

Hey, good afternoon. Thanks for taking the question, and great quarter. I was hoping you would perhaps comment on organic orders in the quarter and maybe call out, which verticals were maybe stronger versus those, which were weaker?

Yeah. I mean we don't really talk about organic orders, like if you're talking about order growth or something like this. I mean, our book-to-bill is what it is because we acquire a company and they have bookings greater than their revenues, that's still organic book-to-bill, and I think our strong book-to-bill is a total reflection of the companies that we own, not being on prior to being part of Amphenol.

Thank you. Our next question is from Wamsi Mohan with Bank of America. You may go ahead.

Yeah. Thank you so much. Adam, I was wondering if you could maybe comment on the aperture of these orders, again, like a very strong order number, can you talk about maybe, one, the visibility that you have around these orders? And how far out maybe some of these orders are? Like how much would you fulfill current quarter versus maybe next? Are these stretched out even beyond that, that would be helpful? Thank you.

Yes. Well, thanks very much, Wamsi. I appreciate the question. Look, I have mentioned, I think, last quarter, and I'll reiterate it again this quarter that these are very strong books book-to-bill. And in particular, we see those strong books-to-bill in IT datacom first and probably defense and comm air to a somewhat lesser extent. And there's no doubt that we have seen a bit of the order aperture opening. And I would actually relate that also to the fact that we're spending more on capital spending. And Craig already talked about CapEx. And you can imagine, when we think about spending a little bit more than we're used to on capital that we work with customers to make sure that we have assurance that, that capital is going to be used, and that assurance often comes in the form of orders. It can also come in the form of contributions or guarantees. And so there's some extent of that order aperture that's a little bit longer that is there to give us the comfort and security that we'll be making those investments, which may be more significant than is typical. In terms of how far out, I mean, look, we'll never book anything -- we don't record any booking that's more than a year out in our numbers. That's a sort of even an accounting rule some sort internally. But the vast majority of our orders would be fulfilled within a couple of quarters. And I can't tell you are there some of those that poke out into three quarters out occasionally, that could be on an occasional basis. But I would say the vast majority would be within a couple of quarters.

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

Hey, guys. Thanks for taking my question. Adam, you hinted at this, and you've done it, you said calls historically about how you guys motivate your people to go find new business in new markets, if it's not in your current one. Like I'm just curious, what you're doing now in and the money you're spending there and the success you're having, like is there an ability to scale that to markets that are not currently using it? And I guess the other side of this, the people in that IT sector that are running full tilt it to meet demand now, like how do you prepare them for times when it's not going to be growing 50% a year to make sure that the business kind of stays at high levels and when growth ultimately kind of starts to moderate?

Yes, Joe. I mean, look, excellent question. I mean, first, what you get to here with -- you're talking about kind of two sides here, how do you motivate people to get new business maybe when they don't have it? And how do you motivate people to keep working as hard as they do, knowing that maybe there can be always volatility? And I think that's really the Amphenolians way. I mean if you get to the essence of our culture of entrepreneurship, it really boils down to agility, reactivity, flexibility, which is kind of -- those are three words that kind of mean the same thing. I understand that. And that just means you always thinking about -- in a difficult time, you're planting seeds, you're aggressively going out there and finding ways to proliferate your technology into other applications. And there may be a multitude of ways of doing that. I mean I still remember anecdotally, the folks in our business who worked in oil and gas at the time when the price of oil dropped by 60%, 70% from like more than $100 down to $40, and they realized that they weren't necessarily just selling oil and gas connectors, they were selling really high-voltage, high-power products that went into ultra-harsh environment. So, how do you go and find a new application for those ultra-high-voltage, ultra harsh environment products that may not be oil and gas. And then lo and behold, you do that work for some time, you may be develop some new opportunities for those technologies and along comes that market recovering once again. And now you've got a more stable base, kind of a second or third leg of the stool. By the same token, when you're in a really strong market and there's no…

Thank you. And that was our last question. I will turn it back to Mr. Norwitt for any closing remarks.

Well, thank you very much to all. And I'm really grateful to have all of you on the phone here today, and I wish that you have a great finish to the year. And hard to say it, but we'll talk to you all in 2025. Thank you.

Thank you very much.

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