Ladies and gentlemen, thank you for standing by, and welcome to the TE Connectivity Second Quarter 2023 Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today’s call is being recorded. I would now like to turn the conference over to our host, Vice President of Investor Relations, Sujal Shah. Please go ahead.

Good morning, and thank you for joining our conference call to discuss TE Connectivity’s second quarter 2023 results. With me today are Chief Executive Officer, Terrence Curtin; and Chief Financial Officer, Heath Mitts. During this call, we will be providing certain forward-looking information and we ask you to review the forward-looking cautionary statements included in today’s press release. In addition, we will use certain non-GAAP measures in our discussion this morning and we ask you to review the sections of our press release and the accompanying slide presentation that address the use of these items. The press release and related tables, along with the slide presentation, can be found on the Investor Relations portion of our website at te.com. Finally, during the Q&A portion of today’s call, we are asking everyone to limit themselves to one question and you may rejoin the queue if you have a second question. Now, let me turn the call over to Terrence for opening comments.

Thanks, Sujal. And I do appreciate everyone joining us today to cover our results for our second fiscal quarter along with our outlook for our third quarter. Through the details on the slides, I want to take a moment to discuss our performance this quarter within the backdrop of what remains a dynamic market environment along with what we’re seeing versus our last call 90 days ago. We continue to operate in a world with cyclicality and certain end markets as well as impacts from foreign currency exchange and inflation. At the same time, [Technical Difficulty] so the strategic positioning of our portfolio around key secular trends, these include global growth in electric vehicle adoption, momentum and renewable energy adoption, growth in interventional medical procedures and wins in the artificial intelligence space. Growth from these trends are enabling us to offset the impacts from [Technical Difficulty] we delivered 8% organic sales growth that was above our guidance and adjusted earnings per share that was ahead of our guidance as well. We remain on our journey to expand margins through a combination of growth, price increases and cost reduction actions. As we discussed back in the first quarter, our plan was to drive margin improvement from the beginning of this year as we enter next year. We are executing to this plan and you see this in the sequential margin progression in our Transportation segment in the second quarter and the sequential margin expansion at the company level that’s implied in our third quarter guidance. You all know that an important part of our business model is strong cash generation. With supply chain [Technical Difficulty] driving our inventory levels down and along with our team’s strong operational performance, inventory reduction helped to drive free cash flow improvement of over 35% year-over-year…

Thank you, Terrence, and good morning, everyone. Please turn to Slide 8, where I will provide more details on the Q2 financials. Adjusted operating income was $664 million, with an adjusted operating margin of 16%. GAAP operating income was $537 million and included $62 million of restructuring charges, $57 million of other non-cash charges related to divestiture activities and $8 million of acquisition related charges. Year-to-date, we have taken $166 million of restructuring charges and would expect full year restructuring charges to now be approximately $250 million as we continue to optimize our manufacturing footprint and improve the cost structure of the organization. Adjusted EPS was a $1.65 and GAAP EPS was a $1.34 for the quarter and included restructuring acquisition and other charges of $0.31. The adjusted effective tax rate was approximately 20% in Q2. For the third quarter and for the full year, we now expect our adjusted effective tax rate to be approximately 20%. Importantly, as always, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. And let’s turn to Slide 9. Sales of nearly $4.2 billion were up 4% reported and up 8% on an organic basis year-over-year. Currency exchange rates negatively impacted sales by $155 million and adjusted EPS by $0.15 versus the prior year. We expect FX to have a modest negative impact for both sales and EPS again in our third quarter on a year-over-year basis. Adjusted operating margins were 16% in the second quarter, price and perspectives, we saw about 200 basis points of headwind to our adjusted operating margins year-over-year as a result of lower volumes in our Communications segment combined with the impacts from currency exchange rates. As we go forward, we remain confident about margin expansion in the second…

Thank you, Heath. Chris, can you please get the instructions for the Q&A session?

Certainly. [Operator Instructions] The first question is from Mark Delaney with Goldman Sachs. Your line is open.

Yes. Good morning. Thanks for taking the question. Could you comment more detail on…

Hey, Mark.

Good morning. Could you comment in more detail on your end market expectations for the balance of the year and how that’s being impacted by the various cyclical cross currents and content drivers? And then on the topic of content, maybe elaborate if you could please on China in particular and how TE’s content per vehicle and share compares between China domestic auto OEMs and then your content with the multinational OEMs.

All right. Yes, thanks, Mark. Let me start with the first part of that, which is what are we seeing in the various markets and some of this will be repetitive but I’ll add a little bit of color. Clearly, there is unevenness of what we’re seeing and I think with what we see in orders as well as the markets, it is – most of the industrial space continues to be very strong. You have stability in transportation and you have communication markets where you do have inventory correction, it’s market weakness. So I think you have to keep it in the framing of those big buckets. I think if you click down and I think about transportation, transportation is still – an automotive is still well below the 90 million plus or minus units have been back in 2019 and we’ve sort of been now for three years in a row around 80 million units. So we’re still off 11% or so on the production side. But one of the things that you can see comes through and it’s been built up over time is, our automotive business is up about $1.5 billion over the same period while production’s down. And it is the content trends we talk about every quarter. It is about [Technical Difficulty] and it’s also about the chunk of that. The vast majority comes out of electric vehicles. And I think it shows, where we position the business and also we do expect this year in excess of $2 billion of our automotive revenue will be from electric vehicles. And that’s something we’re proud of and it also proves the content. And even with production staying flat as we’ve said, we’re going to continue to see that content growth. Now the one thing we…

Okay. Thank you, Mark. We have the next question, please.

The next question is from Chris Snyder with UBS. Your line is open.

Thank you. So the auto business was up 16% organically in the first half of the year. So about double-digit outgrowth versus production, 2x the targeted levels. How should we expect this trend into the back half of the year? The company in the prior response, you just called out about 300 basis points of price, I believe for auto this year. Is the back half stronger than the first half as the recent price increases are implemented or is that roughly flat throughout the year? Thank you.

No, thank thanks for the question. And what I’m probably going to say first is, please be careful looking at content in any quarter or short period of time, because you do get into supply chain elements as you get in there. I do think to your comment around price, I do think 300 basis points you’re going to – is going to be the benefit as we continue and as price rolls in. And that will continue to take for the year, drive us above the four to six range that we normally talk about. Price will be a part of that, when we look at this year. I think the other thing, and I know it’ll be a little bit probably redundant what I just said. We continue to expect that electric vehicle’s going to be 25% of global production. So I do think you’re going to continue to see that set up be very good. And I think overall content per vehicle and how it trends over time is the most important factor to look at. So we talked about this a lot on these calls a few years ago back in 2018, we were in the low-60s, we’re in the low-80s today, that just proves it’s due to electric vehicle content and as well as supply chains continue to improve and our service levels go up. You’re going to have some of these into quarter impacts at times, but net-net feel very good about where we’re positioned on content growth.

Okay. Thank you, Chris. Can we have the next question, please?

The next question is from Wamsi Mohan with Bank of America. Your line is open.

Yes, thank you. Good morning. I was hoping to get some incremental color on the margins in Q2, where you made progress in transport, but industrials turned a bit lower. Also the detrimental margins on a year-on-year basis was much higher than normal. What drove that and how should we think about the overall margin and conversion margin trajectory through the course of this year? Thank you.

Hey Wamsi, this is Heath. I’ll take this one. Listen, I think the single biggest impact we look at the TE margins on a year-over-year basis is the pretty significant decline in the Communications segment. But you have to remember, if you go back a year ago, we kind of framed up the Communications segment margins as a bit overheated and it kind of showed how much volume leverage you could get at those types of volumes you were getting. And we have a business that goes from roughly a quarterly run rate of between $600 million and $650 million down to $450 million to $500 million, that deleveraging is steep. And you get brought back to reality pretty quickly. So we expected this, we were certainly didn’t expand our cost structure or anything when our revenue was higher, knowing that it would cycle down at some point. Net-net and then if you add in the impact of FX, those together are over 200 basis points of impact year-over-year to the company margins. And quite honestly, if you go back and look at our third quarter, which is our June quarter that we’re guiding to now, and you look at that from last year, we’re going to have similar kind of impact. And that impacts both, whether you want to say the year-over-year margins, that’s going to have that same impact. So that’s implied in our guidance as you can see. But if you take a broader picture and say, where does it look like going forward from here, right? We’re kind of running in this $4 billion range of revenue, plus or minus, I’m not guiding that’ll be beyond the quarter that we just gave, but let’s just assume we’re kind of in that range. So Transportation is kind…

Thank you, Wamsi. We have the next question, please.

The next question is from Amit Daryanani with Evercore. Your line is open.

Perfect. Thanks. I guess, I was hoping if you folks could spend a better time just talking about from a supply chain perspective, what are you seeing from a component availability and then also the inflation side. And really on the inflation side, I’d love to understand if you think the price increases so far are adequately offsetting this or do you think more that needs to be done here? And then just secondly, if I could get the clarification, could you just remind me what are you estimating from an auto production perspective in the June quarter? I think IHS is that 21.5 million units. So I’d love to get a sense of what are you kind of taking into the guide to auto production side. Thank you.

Yes, sure. Let me do the last one first, all year, we’ve sort of said, we’re going to be around 20 million units on of auto production to 80 million in total. And it’s just going to be a flat environment and that hasn’t changed from the beginning of the year. So that’s pretty much how we think about it. And I know there’s some differences of heavy vehicles that are in the IHS number that we put in our commercial transportation, but we’ve viewed flat. On your [Technical Difficulty] about supply chain inflation and price, I want to give a little bit before I get into supply chain is service levels of how we’re servicing our customers. Because I do think whether it is supply chain, whether it is the orders that I talked about earlier is they’re all interrelated. And it’s why when we talk about some markets being stronger stable, it does come into how we’re servicing our customers. And what I would tell you at the overall TE level, our service levels are back to 2019 at the overall TE level. Some people are higher, some people were servicing better as supply chain has improved. There are markets like commercial air and medical, which were late in the recovery. I would tell you our service levels still need to improve. And the main reason the service levels need to improve is we’re still seeing supply chain impacts. But at the big picture, what I would tell you is the availability across the global supply chain has improved. Our customers are feeling it from us. And I think that’s a key element that also explained why we see some stabilization and backlog and I think our orders going up sequentially is a positive factor. Now from an inflationary impact, what I could tell you is places like freight and logistics, we have seen deflationary impacts. I would tell you elsewhere, it’s sort of just moving sideways. I wouldn’t say it’s getting worse. I wouldn’t say it’s getting better. And it’s why when we feel with the things that we’ve done on pricing, especially in transportation where we’re lagging, we do think we’re really in a mode of recovering the inflation that we’ve incurred over the past two years. And that’s why we feel good about the margin impact and we do expect that the pricing will stink.

Okay. Thank you, Amit. Can we have the next question please?

The next question is from Joe Giordano from Cowen. Your line is open.

Hey guys, good morning.

Hey Joe.

One just a quick clarification and then a question on an industrial and some of your other markets here. Just in China on EV, do you have a big spread between like, a high-end Tesla type vehicle and a low end kind of local manufacturer in terms of content. And then bigger picture, if I look at something like industrial equipment or IT obviously those are moderating here, but even with moderations, there’s still up a lot even adjusted for inflation or M&A from like a pre-COVID level. So like if those markets – like how much of a real reset should we think is reasonable in like an economic downturn for something like that, that’s moderating now but still up a lot over a like a fairly short period. Thanks.

Yes. Let me take both of those. So first off, when you think about content per vehicle, I think what you have to start with, especially, with China is anytime you move from an electric vehicle to from a combustion engine, that’s a content growth element for us, because we’re on both multinationals and locals. So I do think the bigger thing is to be thinking about not comparing content between, it’s really about it drives content growth, because we have a good position on them. And depending upon classic car, you’re always going to have, whether it’s a combustion or electric vehicle’s going to come into the features of what’s in the vehicle. So I think the real thing is as I think China’s over 20% of new car sold or electric vehicles, all that is good for us. And it’s really a key driver to our growth and we’ve always said Asia overall is the growth driver of electric vehicles. So the 25% of the 80 million units that we’ve always, that we say we think it’s going to be at this year, 70% of those units are going to be in Asia and certainly China, China is the largest. So it’s only positive for us. One industrial equipment, I think the element that you come into and let me add a little bit of color to your question is, industrial equipment’s a very broad space. There’s factory automation, there’s building automation things that go into construction, there’s process automation, there’s a number of different buckets and what I would tell you, in areas around factory automation that supports consumer electronics, that – there will be some element of where that will downdraft areas around building automation. Also, we’ve seen weakening there where you get into the commercial construction side. So I don’t expect it’ll be what we see in our Communications segment, but you will see it come down a little bit as some of those markets moderate. There’s also the element of our service levels have improved across that market as well, even though it’s up and we are seeing some of our OEM customers pull out some buffer stock. So we do think there can be some moderation, right now you can probably think about it, the growth and the other three businesses can offset some of that moderation. But we got to continue to watch it and make sure it stays contained in some of the submarkets in the industrial space.

Hey, thank you, Joe. Can we have the next question, please?

The next question is from Scott Davis with Melius Research. Your line is open.

Hey, good morning, guys.

Hi, Scott.

I want to switch gears a little bit. And you mentioned AI a couple times in the prepared remarks, but how material is this upgrade cycle? Is this kind of a nice to have or is this something that could be kind of a multi-year pretty powerful demand driver for you guys?

No, super, Scott. So yes, Scott, we talked about it and we talked about some of the design wins because it’s really just the next extension of what you get into high speed. So one of the things that’s nice is where we position ourselves in cloud that will be a multi-year cycle is you get into those higher speeds and also the importance of like I said the low latency you need. So those design wins we’re getting today will start in 2024 and I think it could be very similar to the cloud cycle that we saw over the past three years to four years. So I think as we work through the whole communications and the telecom and the cloud inventory work off, once that settles, I think you’re going to continue to see content growth that will be both from reinvigorated cloud investment plus the AI element that will really drive our D&D business as you get into 2024, 2025 and beyond.

Okay. Thank you, Scott. Can we have the next question, please?

The next question is from Christopher Glynn with Oppenheimer. Your line is open.

Yes, thanks. Good morning. Just wanted to dig into Transportation revenues a little bit more. Looks like it was well above your guidance production maybe in line with guidance, but there’s always some timing around supply chain and EV launches pull forward or more likely push out a little bit. So sounds like you expect consistent revenue in the back calf. So just curious what really changed there with the volumes that came through versus expectations.

Yes. So when you look at it, one of the things we saw is that a lot of our over performance in this past quarter was really out of Europe. And Europe was an area that coming into this year and I don’t think we were a typical of anybody else between what was going on from a utility perspective and energy cost as well as the war. And I would tell you in our Transportation business and our OEM customers, they’ve been building more aggressively than we would’ve thought when we came into it. China’s a little bit slower, which sort of gets you to the flattish and really not changing our view, but what’s really nice is, we were able to service them when they wanted it here. And on the back half, the back half isn’t that much different. When you go first half, second half, and when you think about we’re going to be down sequentially a little in Transportation that’s really just due to the choppiness I talked about in China.

Okay. Thank you. Chris. Can we have the next question, please?

The next question is from Matt Sheerin with Stifel. Your line is open.

Yes. Thanks, and good morning, everyone.

Hey Matt.

I had a question regarding your distribution channels Terrence, I know that you’ve got a big concentration of distribution within your industrial markets and I imagine you’re seeing some feedstocking at the industrial equipment market, but are you seeing that play out anywhere else or expectations that that the distributors are going to start to cut inventories, particularly as lead times continue to come in?

Sure. So couple of things Matt, just to frame everything, when you really look at where we play in the distribution channel, certainly in our Communication segment, a big chunk goes through to our channel partners and you’re exactly right, a big chunk goes through in our industrial business and our aerospace business. Now what I would tell you is in our aerospace business, as that continues to ramp, orders continue to grow, backlog builds and certainly we need to continue to increase our output to service the backlog and get service levels where they were before the pandemic. So what you see is you sort of see trends in the distribution channel that do mirror what we talk about in our different business verticals. So we’ve been seeing already, and it’s started a few quarters back with our distribution partners, those that were around our Communication segment units. Order levels have come down. They have been trying to manage their inventory, it’s probably at – it’s at the higher end of their range. And that’s something that when we talk about what we’re going to be at a $450 million in the next couple of quarters, that includes OEMs bringing down inventory, ODMs bringing down inventory, and certain our distribution partners getting to a better inventory level. I would tell you in the Industrial space, we have seen some impacts, but I would also say part of it comes to service levels. So during COVID, when we could not meet service levels due to supply chain, certainly our customers would go to our distribution partners to get product, which is part of the role they play. We have seen as our service levels improve, you’ve seen buffer stocks taken out and we have seen order levels weaken in certainly those industrial markets. It’s not even across all of them like we see in communications, it’s around the markets that we talked about that can be building automation and things like that. And we do see that the inventory levels are at the higher end of the range that our distribution partners would want to be at. So that’s why their inventory levels are a little bit down but not to the extent that we see in the Communication segment.

Okay. Thank you. Matt. Can we have the next question, please?

The next question is from Samik Chatterjee with J.P. Morgan. You line is open.

Yes. Hi, thanks for taking my question. I guess thanks for all the color about the individual end markets. I was just trying to think of it in more aggregate terms when we take all your outlook for the different end markets auto activity here. Are we comfortable that in relation to cycling pass trough in relation to aggregate autos as you sort of match all those outlooks up by the end markets? And maybe if you can touch on autos there particularly, I know you mentioned choppiness in China, but I just also has a pretty material step up in production in China all through the year. Is that what you sort of are maintaining more caution around or are you seeing it in the orders yet? Thank you.

Yes, no, so a couple of things. As I said on our orders in Transportation, they were actually up 12%. And I think the other thing we have to realize, the China automotive market does a big build in our December quarter. So typically, you do have a step down in China and we sort of view China auto production for the rest of our fiscal year being pretty flat to where it was in the second quarter. So we don’t see an acceleration of build, but I do want to highlight that typically the December quarter Chinese auto producers do a big build to meet production targets. And as we look forward, it is choppy right now. We’re watching it. Certainly, the price activity that certain OEMs are doing in China, I think is creating a little bit of pause for consumers to say, hey, how does this settle out? The Chinese consumer is an intelligent consumer when it comes to price. So there are some things that are creating some near-term choppiness, but we view it’s going to be flat from here when we look at auto production in China for the rest of our fiscal year.

Okay. Thank you, Samik. Can we have the next question, please?

The next question is from Steven Fox with Fox Advisors. Your line is open.

Hi, good morning. I was just curious on the restructuring charges that you’ve taken year-to-date and plan to date for the full year. How those are flowing through the income statement? When are you getting to benefits? What kind of return on it? It looks like more is going into Transportation and other segments based on what I saw in the slides, any color there would be helpful. Thanks.

Sure. Thanks, Steven. Yes. We did, as you recall, when we went out early part of the year back in our initial view into 2023, we said the restructuring would be somewhere around $150 million, which was flat from prior year. And then in the last call 90 days ago, I said we were reevaluating that and we did and in the discussions with our business and obviously with our Board, we’ve increased that by about $100 million to $250 million. Now you are right. There is chunks, it is just in Transportation, there is some incremental things we’re doing to adjust some cost structure, as you can imagine in this more accelerated downturn in both the Communications and in the Industrial equipment business that is driving some of that in addition to accelerating some of the rooftop consolidations and other parts of TE that had been planned that we want to go ahead and pull in and get done sooner that we’ve determined we have the capacity to handle. So that’s part of it. Now, a bigger chunk of this has been the trend over the past couple of years has been a little bit more in Europe based. And the payback, when you start getting into Europe based restructuring activity is a little bit longer than what you would think of in other parts of the world and it just has to do with the demographics that you’re dealing with and country constructs and statutory requirements. So if you’re looking at it, I would say nor and historically we’ve said that the payback on our restructuring has been just inside of two years. That’s been traditionally kind of how it’s blended together. It’s a little bit longer for that, especially for this incremental piece. It’s probably stretching out to 2.5 maybe not quite three years on the payback of this, but it does give us structural benefits in terms of fixed cost reductions and that’s what we’re really aiming for to lower the fixed cost side of the thing and give us more nimbleness to flex the business.

Okay. Thank you, Steve. Can we have the next question, please?

The next question is William Stein from Truist Securities. Your line is open.

Great. Thanks for taking my question. You all have done an excellent job of highlighting the content growth opportunity in EV and executing against it. At Tesla’s recent Analyst Day, they showed how in the Cybertruck and then also in the next-gen platform, their transitioning the lower voltage part of the vehicle to a 40 volt architecture. And this looks like it consumes significantly as content in terms of cabling and I suspect connectors as well. Can you talk about the degree to which this might have already become a trend at other OEMs or if it’s brand new and still on the com and what the impact if any you think this will have in your business? Thank you.

Thanks. Thanks, Will. So when you get into this, I think the first thing is even if you take a Model 3, which has a simplified harness versus the Model S, we have more content on it. So I appreciate harnesses being showed, but you really need to look at, when you look at a harness, not the wire, you need to look at the functionality. And in some cases what certainly they’re trying to achieve is how do they approve assembly, assembly quality as well as they do over the top updates. But when you’re bringing data power and signal together and it’s coming together and what may look like it’s a simplified harness. The interconnects on that harness are a lot more complicated, higher pin count and a higher pin count means an individual contact or connection point. So what you get into while the harness simplifies and yet if we made cable or we were a harness maker would probably be bad for us. What occurs is you move to a lot more complicated interconnect [ph], which typically have data power and signal running through them, which create a whole bunch of other demons in the architecture that engineers need to solve for. And what we get excited about that actually while it may lower the amount of interconnects themselves, the more complex interconnects in there are higher content, more highly engineered and really what you get rid of as some of the commodity interconnects that are out there. So – and the same goes through if you jump from not only a simplified harness, you get into zonal architecture, all of that plays into part of the content increase we talk about when we talk about electronification. So the trend for us, we like it. It does get into what we do and what we do well, and we’ve dealt with this for decades and it’s going to continue to evolve. And I think certainly when you get to an electric vehicle that allows you to look at the architecture with a clean sheet versus a nice vehicle, and that’s what we’d like to do. So net-net, it’s a positive for us. Appreciate you bringing up the question.

Thank you, Will. Can we have the next question, please?

The next question is from Luke Junk with Baird. Your line is open.

Good morning. Thanks for taking the question. Question for Heath this morning. Heath, as you saw the change in mix developed during the quarter in Industrial. I’m wondering how the margins within the sub segments performed or levered versus your excitation in the areas that are exciting right now, so differently, should we view adverse mixes being more mechanical or are there levers you can pull to get to that better volume leverage out of those higher growth areas that you’re envisioning in the back half? And maybe if you could put a finer point on what you think margins might look like in Industrial in the back half, that’d be great too. Thank you.

Sure, Luke. Listen, I mean, the thing we’re coming off of is a pretty significant, what we’re worried about in terms of our worry beads as a mix of that of obviously less of the industrial equipment business, which it can run anywhere from 500, 800 basis points more profitable than the combination of the other businesses in that segment if you combine those all up. Now, the challenge then is obviously we’ve enjoyed a nice part of the cycle and the margins that that has helped drive for the segment overall is to minimize that impact on the way down and some of the restructuring undertaking that I just mentioned is going to help with that. The other side is getting more volume leverage out of the pieces as you mentioned that were growing through. And there’s a lot of moving parts in that that I won’t want to air in terms of how we’ve layered in acquisitions and the impact from those acquisitions is also some of the rooftop consolidations and things that don’t get captured restructuring, but drive near-term margin pressures. But I do feel confident, as I think about our aerospace defense business to continue, we’ve seen it, although we don’t share those margins at the business unit level externally. We have seen that business begin to improve as commercial air has come off of a pretty steep decline and is starting to work its way back, but still not back to pre-pandemic levels. Our medical business is not nearly as profitable, but as we’ve seen the volume get back to pre-pandemic levels we’ve started to see volume leverage there. And then the other piece is our energy business, which is more of a steady state margin business. So there is some challenge that we have as we look at it on the near-term as I look at it and look at where the growth is coming from and how that mix impact goes. I could see it if I was to frame it up the industrial equipment business could run another let’s say 50 to 100 basis points higher as we work our way through into the second half. But the ultimate goal here and if the team was here to show it, I mean the ultimate goal was still high margins within this segment. And we know that we do a lot of acquisitions in this segment. Sometimes they’re small for TE, but they’re more meaningful for the segment. That resets it down some, but the goal is still to get the operating footprint in the right place where it needs to be as well as getting the overall cost structure where it needs to be. So I feel good about where we’ll get to on this mix impact in the near-term is a bit of a pinch point for us.

Okay. Thank you, Luke. Can we have the next question, please?

The next question is from Shreyas Patil with Wolfe Research. Your line is open.

Hey, thanks so much. In the past, you’ve talked about typical price downs that you pay customers. I think normally it’s in the 1% to 2% range, especially within your automotive business. You have been taking price over the last couple of years through recoveries. But with the supply chains broadly stabilizing, I’m wondering if you expect that you’ll have to start those price downs with customers again. And if so, are you able to extract productivity from your own supply base or drive restructuring savings to kind of help mitigate that?

So Shreyas, thanks for the question. I do think there’s an element there that and where does price really occur, like you sort of say, it’s typically in our automotive and our D&D business is where you really see those types of impacts, like you stated. I don’t think we’re close to that yet, and with where inflation’s at for TE and still we’re in a recovery mode that’s the discussions that we’re having with our customers. I think there – if there was things like deflation, real deflation and things like that, we may get back to those traditional patterns because it does come into how do we drive productivity that helps our customer if they hit the volumes in places like auto. But that’s not going to be something we’re seeing in the second half, but as cost comes down around the world, that is something we could get back into in outer years.

Okay. Thank you, Shreyas. Before we wrap up, we have heard from some of you that we had patchiness of audio cutting in and out, so we are going to publish our earnings script on the Investor Relations portion of the website and that should be up shortly. Thank you everyone for joining us today. And if you have any questions, please contact Investor Relations at TE. Have a nice morning. Thank you

Ladies and gentlemen, today’s conference call will be available for replay beginning at 11:30 AM Eastern Time today, April 26, 2023, on the Investor Relations portion of TE Connectivity’s website. That will conclude today’s conference for today.