Everyone thank you for standing by and welcome to the TE Connectivity Fourth Quarter and Final Year Results 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 fourth quarter and full year results for fiscal 2023 and outlook for our first quarter of fiscal 2024. 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. I also want to remind you that our Q4 results in fiscal 2022 included an extra week. In this call, year-over-year income statement and orders comparisons for Q4 and fiscal 2023 are made excluding this extra week. You will find related reconciliations in the press release and presentation tables. Finally, during the Q&A portion of today's call, we're 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.

Thank you, Sujal and we appreciate everyone joining us today. And to start off, I am pleased with what -- that we delivered revenue in line with our guidance and earnings per share that was ahead of guidance, driven by strong execution by our teams across our segments in what continues to be a dynamic market environment. Before we get into the slides, I do want to take a moment to discuss our performance for the full year, along with what we're seeing in the markets versus our last call. When we look back on fiscal 2023, we set out to accomplish three key initiatives that we shared with you. First was to continue to demonstrate the strategic positioning of our portfolio through alignment to secular growth trends. Second was to deliver strong free cash flow with a focus to drive down inventory levels. And lastly, to improve our margin performance through both cost reduction and pricing actions to offset inflation. As Heath and I will discuss on today's call, our teams executed successfully on all of these initiatives during the year, and it sets up for a good jumping off-point as we enter 2024. When we think about the performance of the portfolio, our results demonstrated continued growth in the Transportation and Industrial Solutions segments, which offset market weakness in Communications and headwinds from a stronger dollar. We generated growth above the market and a number of our businesses as we continue to benefit from secular trends, including increased global production of electric vehicles, adoption of renewable energy, and applications for cloud as well as artificial intelligence. We delivered record free cash flow of $2.4 billion for the year which represents over 110% conversion, and we also returned $1.7 billion to shareholders for the year. We drove down our…

Thank you, Terrence, and good morning, everyone. Please turn to Slide 8, where I will provide more details on the fourth quarter and fiscal 2023 financials. Sales of $4 billion were flat on a reported basis year-over-year. Adjusted operating income was $699 million with an adjusted operating margin of 17.3%. GAAP operating income was $635 million and included $57 million of restructuring and other charges and $7 million of acquisition-related charges. For the full year, restructuring charges were approximately $260 million, which were in line with expectations. Our restructuring efforts over the last several years have enabled a more efficient operating footprint, while continuing to localize to support our customers in the regions of the world where they operate. I expect restructuring charges to decline significantly in fiscal 2024 and to be approximately $100 million for the year. Adjusted EPS was $1.78 and GAAP EPS was $1.75 for the quarter and included a noncash tax-related benefit of $0.16 related to a decrease in the valuation allowance. Additionally, we had restructuring, acquisition and other charges of $0.19. The adjusted effective tax rate was approximately 19% in both Q4 and fiscal 2023, which was as expected. For Q1 and for fiscal 2024, we expect our adjusted effective tax rate to be roughly 20%. And as always, importantly, we continue to expect our cash tax rate to stay well below our adjusted ETR for the full year. Turning to Slide 9 for additional information on our full year performance. Fiscal 2023 sales were $16 billion, while sales were flat year-over-year, we had 9% organic growth in Transportation segment and the Industrial segment grew 5% organically despite the softening in the Industrial Equipment business. However, the growth in these two segments was offset by roughly $1 billion of headwinds from the cyclical weakness in…

Audra, can you please give the instructions for the Q&A session.

Thank you. [Operator Instructions] We'll take our first question from Mark Delaney of Goldman Sachs.

Yes, good morning and thanks for taking my question. There's been so many crosscurrents and various end markets including in the UAW strike, inventory destocking in industrial and content opportunities like AI and electrification. So, I'm hoping you could help us better understand in a bit more detail key trends by end market and what you expect going forward, including your assumptions by end market in 1Q guidance?

Sure. Thanks Mark. So, let's talk about quarter four first a little bit because we went through a lot there and I think when you look at on the top line, it came in exactly as we expected. What was a little bit better than we would have expected, certainly, automotive, where we had growth in all three regions of the world as well as in our D&D and our Communications segment was a little bit stronger due to the ramps of artificial intelligence that I mentioned in my comments. The area that was a little bit weaker was Industrial Equipment. And we highlighted for you last quarter, we were seeing some inventory destocking around channel partners. I would say that was a little bit worse and we think that's going to be with us for a little bit. And then certainly, we were head on EPS, and that was really driven on the conversion side in all operational. When you look at quarter one and our guide, in many ways, it's going to look a lot like quarter four. We're going to continue to have growth in Transportation. Three strong markets in industrial with the inventory stocking and Industrial Equipment. And then you still have some tough compares that we have in the Communications segment, but net-net, it's going to be flat on the top line year-over-year, and you're going to see margin that looks like the fourth quarter, and you're going to see really nice EPS growth year-over-year, that's 10%. So, orders have been coming in as we expected this quarter to 3.9, have been stable even with some of the destocking we're seeing, orders are staying stable. And I think that just shows the trends that you highlighted as we go into 2024. So, thanks for the question, Mark.

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

We'll go to Wamsi Mohan at Bank of America.

Yes, thank you. Good morning. Terrence, can you sort out some of the puts and takes in autos, given all the recent news around the D3 companies paring back on EV ambitions and potentially slower adoption rates of EVs? And also, you didn't explicitly call out the UAW strike. Did you not see any impact? Or is it yet to come in terms of any impact from that? Thanks so much.

Thanks Wamsi for the question. And you really had two very different questions there. So, let me take the latter part first, around the UAW. UAW impact on TE's negligible both in what, in the fourth quarter as well as the first quarter. And just to remind everybody, our global position is what's special about our automotive business. 80% of our business is outside the United States. And let's face it, that has no impact from the UAW. So, when you sit there, I don't -- we did not talk about it because it did not have a significant impact, and we don't expect it to have a significant impact in the first quarter. Now, let's move on to your EV question. And probably similarly, I'm going to remind everybody that we need to make sure when we think about EVs. EVs got up to 20 million units produced globally this year with two-thirds of those EVs made in Asia. And once again, reinforcing our global position. And EV adoption is never going to be a complete straight line up to the right. But what's really nice is you see with 20 million units made and on the road, the technology is working. It is being adopted. And the other thing you have is you certainly have consumers have choices and some EVs consumers are going to like, some EVs they're not going to like. And I think when you think about our opportunity, it is to build upon how the content opportunity that goes up that you saw this year -- and when as EVs grow next year, we're going to continue to get that. And in a full electric vehicle, we get 2x the content of a combustion engine. If it's a hybrid vehicle, it's about 1.5x. And we expect you're going to continue to see electric vehicles grow globally again next year. Maybe it won't be a 40% clip like this year, but it will increase next year. And let's face it in Asia, the biggest market is China. And China EV sales this year are up over 30%. On top of that, I'll remind you that China local OEMs have over 50% market share. They've continued to gain share versus Western OEMs. And what's really nice for TE, our content on a local EV by China OEM is strong, and our market share is strong. So, we don't have the phenomena we only are with the multinationals and not the local OEMs. So, feel very good about our position. I feel that EV trend is going to continue to have production growth globally as well as you're going to see that benefit like you saw this year and for the past couple of years, it's going to drive top line growth opportunity for TE as well.

Okay. Thank you. Wamsi -- thanks Wamsi. Can we have the next question, please?

We'll go to Steven Fox at Fox Advisors.

Hi, good morning. I was just wondering if you could dig in a little bit more into free cash flows. Obviously, you guys overperformed over 10%. Can you just talk about some of the dynamics that went into that? And then the expectations for cash flow this year, any of the dynamics and maybe talk a little bit about use of excess cash. It seems like it's -- the strategy is the capital allocation is consistent, but you did do an acquisition during the quarter. So, maybe that was [indiscernible]. Thanks.

Well, Steve, thanks for the question. This is Heath. I'll take it. So, we talked a fair amount about free cash flow during the year, and it was during our fiscal 2023, and it was a focal point for us internally as well as what we've talked to you about. We know that we had to deal with the supply chain issues in the prior couple of years and we had to buffer some inventory as part of that. As we went into this year and as demand flow and so forth begin to stabilize and then our supply chain with our vendors begin to stabilize some. It allows us the opportunity to get really focused on driving working capital down despite some of the market conditions. So, I'm pleased with how we did, how we finished the year, but also provides some confidence as we go into FY 2024, which we're in right now, starting here in October that we're going to be able to maintain that momentum. The 112% conversion that we did in FY 2023 was a little rich, If I am being honest, it's a little bit richer than I would have thought we would have finished, but proud of our performance. As we think about 2024, I'm confident we can cover around a 100% mark in terms of cash conversion, which is a bit of a step-up from where we historically have trended. And it does avail a lot of optionality for us. You mentioned, Steve, that our capital allocation strategy is unchanged, and that is absolutely true. You should expect that we will continue to be diligent with the cash flow that's available to us. We will get back to our shareholders as appropriate and step up repurchase activity where it makes sense and when there's dislocations in the market relative to valuations. And so I don't think there's anything there that's different. You mentioned the acquisition we have coming up at the end of December. That's about a $300 million use of cash that will come off the balance sheet. But we also expect to be generating cash as we go along here in the first quarter as well. So yes, it's very, very positive momentum along those lines. Hopefully, I answered your question.

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

We'll move next to Chris Snyder at UBS.

Thank you. I wanted to ask on supply chain inventory levels. You guys have been pretty consistent around destock headwinds for data appliance and industrial equipment. So, I guess maybe for those three sub verticals, can you just talk about where are we in the respective destock cycles. And beyond those three, is there anywhere else maybe where you're starting to see more risk around destock relative to three or six months ago? Thank you.

No, thanks for the question, Chris. And I think let's talk about destocking a little bit. So, first off, is, as you all know, being a Tier 2, this is not a phenomenon that isn't uncommon. And after you get strong cycles, you will have this. But I do think there's -- when you think about these three -- there is one thing they have in common, which is close to 50% of their sales go through our distribution partners. And let's face some of these are fragmented markets that they help us cover. So, when you think about the three, that's about -- while it's big for their business units, total TE is only about 20% goes through the channel. And the one thing I want to highlight maybe the last part of your question is where else are we seeing it? Actually, for the 80% of our business that we touch customers directly, it's very stable, and we're growing. So, when you think about the 80% that we aren't highlighting, it's really -- that's where we touch the customers most directly, and we have growth. Now, we have these destocking pockets that certainly very much with our distribution partners that, hey, they fill the need when maybe we weren't delivering as consistently as we should have during the supply chain challenges he talked about. So, when you look at those three, what I would tell you where we are, what hitting we're in -- and hey, this is best guess stuff. What's nice is in both D&D and appliances, usual our orders have increased sequentially. So it feels like we're stable at the bottom. And what's nice in D&D, you see the driver of AI as those move up. In regard to industrial equipment, that started later. We started to highlight that to you over the past couple of quarters. I would say we're more in the middle of innings of that. And I think both of them will be around in the first part of next year. But then I also view that they'll turn into a tailwind once they get behind us, and we don't expect major destocking elsewhere into how we have our direct relationship with our customers.

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

We'll move next to William Stein at Truist Securities.

Hey thanks for taking my question. I understand you're only guiding for a quarter, but I'd like to sort of give you an opportunity to help us sensitize our models as we consider what the trajectory will be in 2024 in terms of revenue growth and margin expansion? Thank you.

Thanks Will. And I guess one part of it, let me talk about it maybe how we think about some of the trends we position ourselves out, knowing that we aren't guiding beyond the first quarter, and I'll let Heath maybe talk about margin. So, first one is similar to this year, where we have the secular growth trends, they really were the things that helped us cover some of the destocking, things that we dealt with and I think they'll be evident again next year. So, first off, if you start with our largest segment, Transportation, we're sort of viewing auto production is going to be around 21 million units a quarter, so mid-$80 million production. And I think what you're going to see is our business model that we've shared with you once again demonstrated this year, we continue to expect four to six points of outgrowth versus the market due to the content we're going to get, and that's going to be driven by our leading position in EV, also ongoing electronification trends in the vehicle that will benefit from. And so that's where we sort of see Transportation. In our Industrial segment, and I know I mentioned it on the call, we have three markets that have really good growth momentum. We expect them to continue. You get places like comm air. We're still in recovery mode. And [indiscernible] as it grows, we have more content on that, so that’s good. And then in Communications, I would tell you the growth will really be driven by these AI ramps that we've highlighted to you, and we think they'll build up as we go through the year and they can be well over $100 million of incremental revenue contribution through the year. Now, one thing I just talked about, back to Chris' question on destocking, de-stockings affecting three of our businesses, that's going to be with us in the early part of the year. That will come to an end. I mean you can probably make as good of a judgment as I can on when that will end. So, that's certainly there. And then the only last two pieces that probably I would highlight. First one being, and Heath talked about it, the dollar strengthening is going to be a headwind into next year. We have a big headwind this year, probably going to be about $250 million next year. And then the last thing I would just say is right now, with where input costs are in the world, we would expect pricing at total TE to be net neutral next year. There are elements where metals and things like that are still elevated. There are some places where you have the deflationary impacts and no different than what inflation drove us to do in pricing. Input costs will be the driver of price going forward. So, with that, I guess that's some of the ways that you can think about it.

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

We'll go next to Amit Daryanani at Evercore.

Good morning. Thanks for taking my question. I guess I have one and, I guess, Terrence and Heath, either one of you. You've also made some really good progress in terms of expanding your operating margins in the back half of fiscal 2023. But I'm curious, as you think about the exit rate of operating margins across the three segments. Can you maybe talk about what does it take for TEL to get to your target margins across those three segments -- the delta from where you are to targeted you made. Is it volume? Is it cost optimization? Would love to get a sense on the path from here towards those target margins. Thank you.

Okay. Amit, this is Heath and I'll certainly take this. We highlighted on the call, and you just referenced it as well, that we exited the year in a better position over the second half of fiscal 2023, than our first half performance. And just candidly, we were not pleased with our margin performance in the first half of the year, and there was a lot of work involved to get those up as we exited. However, we are still well below our target operating margins at the company and at the segment level. Transportation made good strides this past year, and we feel good about the momentum there. But the business model target for Transportation is still 20%. So, we're still trending below that and we know there are some things that we still need to do. There's still a little bit of self-help left there but some volume support coming out of auto production would be healthy. And then the other thing that's a drag on Transportation margins is -- our commercial transportation business is in the downside of a cycle, and that's obviously a very profitable business for us. So, as we think about that, I think we're going to make good progress in Transportation margins in FY 2024. As we move forward, but we've got some work to do. Industrial segments, the business model target is high-teens operating margin. Obviously, we're trending right now in the mid-teens. There's some reasons for that, the biggest of which is our Industrial Equipment business, which is our highest margin business. is obviously at the bottom of the cycle. And Terrence just talked about that. We do believe, as we work our way through FY 2024, that we'll see those segment margins improve as some of this destocking gets behind…

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

We'll move next to Samik Chatterjee at JPMorgan.

Hey, good morning and thanks for the question. This is Joe Cardoso on for Samik Chatterjee. As it relates to your AI opportunity, and maybe this is more of a medium-term question in nature, but there has been increasing discussions or debates around the various architectures these cloud providers can take beyond just GPUs or underlying switch fabrics as it relates to TEL's business and where you participate in these AI deployments I was hoping if you could just touch on that topic and discuss the breadth of the company's portfolio? And whether you see yourself agnostic to whatever route your customers decide to take on their future architectural decisions there? And if there's any areas of the portfolio that you think you could bolster or are you looking to bolster going forward? Thank you.

Thanks for the question. And one of the things that's great about the space we play in is when somebody makes an architectural decision as they're building an AI cluster, that's where connectivity comes in and is very important depending upon what is that architectural decision. And that creates a lot of customization. So, as everybody is trying to figure out how to get the compute power, also the thermal elements and maximize the design. Really, the things you just highlighted are things we really get excited about. And it's where companies like ourselves, we really need to be playing with both the semi players as well as the cloud architects as well to really say, as they make these happen and certainly bring them to market at pace. So, when you think about all the accelerators that you hear on every semiconductor call, really, they are the things that we get excited about and even in our quarter we just had, you saw earlier ramps than even we expected. And I think, if anything, we're probably going to be more pleasantly surprised and negatively surprised as we go forward. The other thing that's nice, like even that we see on that, I know last quarter, we talked about $1 billion of pipeline wins even in just where we've gone to up to $1.3 billion in just three months. And their programs are going to be out over three, four years, and that will ramp but everything when you think about how are you moving in these clusters data around, that has a need for connectivity and that connectivity and what we do is very high speed because if you have latency around that connectivity, that is a problem for an AI cluster. So, I feel really good with the traction and where our teams are playing to get these wins. And I think it's going to be one of the drivers as we move off from destocking as we get CS back on the growth here, will be something that we're going to continue to talk to you about.

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

We'll go next to Joe Giordano at TD Cowen.

Hey, good morning guys.

Hey, good morning Joe.

Yes, I just want to follow-up on the AI discussion there. One, can you just let us know how revenue in this quarter in AI specifically looked relative to last quarter? And then just more broadly, how do you think about AI cannibalization of business you otherwise would have had on a more standard offering? Like if there's -- I'm guessing this is a mix positive for you like on a content standpoint, but if your customers have a finite dollar spend available to them? How much -- is this like a transition of spending rather than like an increase in total spending?

Well, certainly, you're going to have -- there's only so many dollars when you win a CapEx budget. It's pointed here. And what's really nice is the content elements incremental. You still need a lot of servers and stuff to make an AI cluster work from a compute side. So, yes, there is some cannibalization, but is a net-net positive, Joe, when you look at it. And really, when you look at I know when we guided, we probably said we would have thought the segment and Communications would have been flat with the quarter before. All the upside in the quarter was due to AI application and ramps. So, when you look at that build is very important, probably as we start the new year, we'll have a little bit of lumpiness just due to how the calendar works. But I think through 2024, you're going to continue to see that AI number work up and ramp as we continue to ramp for our customers.

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

We'll move next to Luke Junk at Baird.

Good morning. Thanks for taking the question. Terrence, just wondering if you could put a finer point on how you're thinking about our growth potential in auto in 2024. I guess I'm especially thinking about EV-related impacts amid maybe some flattening overall in adoption but set against what has been generally rising content for you, maybe even a little upside versus that 2x multiple? And maybe more importantly, just your overall breadth and auto and EV that could limit your impact to any one customer? Thank you.

Yes. So, you have a lot of questions in that question. So, I'm going to try to do my best there. So, thanks for the question. I think the first thing is let's talk about 2023 out growth. I think that's important that we all get aligned about it. Our auto business grew over 12% in 2023 versus auto production of 3%. So, you saw 900 basis points of outperformance. And I think you got to take that into two buckets. Two-thirds of that 9% were content, one-third was the pricing that we did. So, I do want to make sure we're all just baselined on that. As we look forward, we feel very good about the 4% to 6% over production. And I think to the point you said you never hear us talk about one OEM or one platform other over another. That is something when you look at what we do. Our view is, hey, EVs are always something that needs to scale. Automotive is a scale business. There is a lot of customization going on right now. But we really sit there as the agnostic supplier being a Tier 2 of how do we bring the best connectivity solution for the globe to really make sure this technology gets adopted. And I think you continue to see that with the outgrowth we've had, so I don't think that's going to change by any means, and it's why you see the growth, and that's something we work very hard on to make sure we're everywhere in the world. And that's why we always like to say other than a few exceptions where we're not allowed to play by governments, we're essentially on every card in the planet. And that's a special position that where our engineers design with the customers, where their design centers are and we're bringing solutions to really make sure we continue to help bring EVs to further penetration globally.

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

Next, we'll go to Scott Davis at Melius Research.

Hey Scott.

I wanted to dig a little bit more into the cost structure. I mean you guys have done a fair amount of heavy lifting on I would imagine fixed costs are kind of lower than they were just a couple of years ago. But when you think about the ebbs and flow of your cost structure going into 2024, apples-to-apples kind of fixed cost plus you got some labor inflation. Is your cost position similar in 2024 as it was in 2023? Or is it actually lower?

Well, it's a good question, Scott. And there's a lot of buckets there that I can think about no different than everybody else in the globe. You mentioned labor inflation, which is real and it's always going to be part of our equation. So, that has a little bit of variability to it. But when I think about kind of our fixed cost base, we're obviously going in with a little bit lower based on some of the restructuring that we have done, and that's around rooftop consolidations, particularly in Europe. As we've continued to move more of our operating activities out of Western Europe and into places where the supply chain has migrated for our customers, that could be Eastern Europe, that could be Northern Africa and Morocco, certainly some more activity in parts of Asia. And then within North America, it's a little bit more focused to Mexico. So, that has that element and gives us more confidence as we jump into it. And then you kind of get into the inflationary pressures for everything else. And I would say not getting worse but not dramatically coming down. There's buckets of areas like freight spend that have come back in line as certain capacity on certain types of freight have increased and allowed for some pricing competition. So, that's been healthy. But when I think about the input cost around metals and resins, it really depends on where the world is and what we're buying. We're still dealing with a fairly inflated environment there for a lot of the things that we have to buy. And so when I think about it versus 2023, I'd say it's stable. But I wouldn't say that, that's our biggest driver in 2024 in terms of margin expansion. We've got a lot of material productivity activity underway that we have a lot of confidence about. But that's not pricing coming down. That's just the efforts of our team to source different ways in different parts of the world. So, there's a lot of buckets there, Scott, net-net, if I just trying to sum it up, I'd say we're in a better position in 2024 than we were this time last year, staring at our overall cost structure. But we've got work to do, and we still need to offset the inflation around labor and so forth.

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

We'll go next to Christopher Glynn at Oppenheimer.

Thanks. Good morning. Was curious about the non-auto parts of transportation commercial, what are you seeing in terms of cycle there? What do you expect for next year, maybe first half, second half split? I know you're very broadly based across platforms, customers and applications and commercial. And then just Sensors, I think you have a little bit of attrition, ski-rationalization -- data play on that, please. Thank you.

So, let me break those into two pieces there. So, let's talk about what we've seen this year in Industrial Transportation. And really -- and then I'll talk about probably how we're thinking into next year. First off, in commercial transportation this year, both in North America and Europe and commercial transportation is -- I want to remind everybody, it's heavy truck, construction equipment, ag equipment, for TE globally. It's in all those applications, which we have a leading share. And we saw Europe and North America actually have nice production growth this past year and certainly drove our growth but China was very weak. And China was very weak in 2023, especially around construction equipment. So net-net, while we would say, if you took the number of units made on the planet of all those different types of vehicles, it was flat. China was very weak and really Western World offset that. And let's face it, when we think about China into next year, we expect construction to be flat again or weak next year, maybe some recovery in the truck and bus side. We do expect in the early half of this year, we do expect Europe and North America to slow, and we've seen that. You see that in our organic growth here. So, we do expect at least for the first half, that's going to be a market that is slower going into next year. And we will have content outperformance, I will buffer some of that. But it's also nice that China, we probably have the weakness of China is more behind us than in front of us.

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

I am sorry, you also asked about Sensors. I apologize. On Sensors, there is pruning that we're doing. I know when I made my prepared comments, we talked about growth and automotive and declines in industrial, next year, there will be about a $50 million exit rate of where we're really getting that focus as we improve the margin there and make sure that the wins that we get in automotive and industrial applications, really where we're positioning that business longer term as we've been talking to you about. So sorry, I didn't touch the Sensors piece in my first comments.

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

We will go next to Shreyas Patil at Wolfe Research.

Hey thanks a lot for taking the question. So, looking at the Industrial Equipment business, I mean, you talked about the destocking trends but curious what you're seeing in terms of CapEx deployments. We have heard from some automakers deferring EV investments, and I believe that has been an important driver supporting the business. And then also, if you can talk about the payback on restructuring investments. I believe you had sizable restructuring that should be in 2021 and 2022. So, should we start to see the payback from that into 2024?

So, let me take the Industrial Equipment piece because there is, hey, as supply chains improved, I do think you see throughout the industrial equipment, and that's a very broad and fragmented space, as we've always talked to you about. You see everybody tightening up their buffer stocks. And we're in the middle of that. You also see areas where you see CapEx continuing to roll. You see EV battery plants. You just sold Toyota, their expansion to their North Carolina campus. So, you see pockets like that. But certainly, you see warehousing certainly around consumer electronics remains weak in Asia. There is a lot of automation that goes in there. So, I do think it's a very mixed picture depending upon where your focus on in Industrial Equipment, I do think you see strong backlogs by our customers. And I do think we have to work through the destocking and see what the CapEx levels are running once we get through the destocking. Heath, why don't you talk about the restructuring?

Sure. On the restructuring front, I think a good rule of thumb is about a two-year payback on the restructuring charges that we take in terms of when you see those pay for themselves in the P&L. So, it's a little bit longer in Europe, a little bit shorter in other parts of the world, but it averages out to about two years on average in terms of the payback and certainly layering that in to the P&L as we move forward into 2024 and 2025 for the charges that we took in 2023 would -- is one of the things that gives us some confidence here.

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

We'll take a follow-up from Wamsi Mohan at Bank of America.

Hi, thanks for taking the follow-up. I think you mentioned in your remarks, you're expecting $250 million headwind for revenues for fiscal 2024 from FX movements. What should we think about the EPS impact commensurate with that? And Terrence, I think you mentioned a very strong 10% EPS growth in the first quarter. price actions will ramp year-over-year in the second half. So just curious how you're thinking about stockability growth first half versus second half next year?

You broke up on that, Wamsi, a little bit. Can you repeat the key questions that you had there? I'm sorry, you broke up on our end.

I'm sorry. So, first question was around the headwind from FX on revenue. It was $250 million for the year. Wondering what the EPS impact is. And then just the first half versus second half profit growth for next year, you noted 10% in 1Q, but you wrap on some of your price initiatives in the second half.

Yes. Thank you. Sorry about that. Thank you for repeating yourself. Heath will take those.

And Wamsi the $250 million of FX, the way we're looking at is about $0.20 of EPS headwind that we have and from an earnings per share perspective related to that foreign exchange. And of course, that's as snapping the line in the sand where rates are more or less today. And as rates change throughout the year, we'll continue to update you on those assumptions. In terms of first half to second half, the second half of -- and we're going to -- I'm referring to fiscal 2023, the second half certainly did benefit from some of the pricing catch up that we needed to do, particularly in the Transportation business and the team did execute on that well. As we pivot into the first half versus second half of I think we're not guiding out that far, but you should expect our margin performance to -- as we've implied in our guidance for the first quarter to be somewhere in the mid-17 similar to the last quarter, the Q4 quarter, you should expect us to continue to grow from there in the first half to the second half, some of that related to some of the destocking normalizing, as I mentioned earlier on the call and then some of the other initiatives otherwise.

Okay. Thank you, Wamsi. We don't have any further questions. So, please contact Investor Relations at TE if you do have additional questions. Thank you for joining us this morning and have a nice day.

Today's conference call will be available for replay beginning at 11:30 A.M. Eastern Time today, November 1, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today. You may now disconnect.