Everyone, thank you for standing by and welcome to the TE Connectivity Third Quarter Results Call for Fiscal Year 2024. 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 third quarter 2024 results and outlook for our fourth quarter. 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. We ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will be using 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, due to the number of participants, 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 I also appreciate everybody joining us today for the call. As I'd like to do before we get into the slides and the details, I do want to take a moment to provide some performance highlights, along with what we're seeing versus our call just 90 days ago. As we've shared in our calls throughout this year, we continued to be in a dynamic global economic environment. I just want to take a few minutes of explaining what that means when you think about where TE is positioned. First off, in our largest market Automotive, we're seeing stability on a global basis. In our Industrial Solutions segment, we continue to see growth in three out of our core businesses, and those businesses are focused on aerospace and defense, energy, as well as medical applications. In our Communications segment, like we talked last quarter, we have returned to growth, and we are benefiting from acceleration in Artificial Intelligence applications. Now, against these growth areas, we are still being offset by ongoing weakness in just the general industrial markets, and we'll highlight where they are throughout the call and the Q&A. Within this backdrop, our sales in the third quarter were in line with our guidance and roughly flat year-over-year. I am pleased that we delivered strong adjusted margin expansion of 200 basis points year-over-year and adjusted EPS that exceeded our guidance. As we look at our performance year-to-date, our teams have delivered record adjusted operating margins and earnings per share, even in a dynamic market environment, which demonstrates our strong operational performance. Our results continue to reflect successful execution against the key initiatives we committed to coming into this fiscal year. We anticipated a slow demand environment overall in our markets, so our focus has been on…

Thank you, Terrence and good morning everyone. Please turn to Slide 8. Before I get into the details of the financials, I want to reiterate something that Terrence said earlier. We are dealing with a slower market environment. We've talked to you about that throughout the year, but our focus this year as discussed has been on improving margins and earnings, and I'm pleased to be able to sit here and say that we have set TE records for quarterly adjusted operating margins and earnings per share in the third quarter, and we feel good about the momentum going forward. Now, the details. Adjusted operating income was $766 million with an adjusted operating margin of 19.3%. GAAP operating income was $755 million and included $5 million of acquisition-related charges and $6 million of restructuring and other charges. Year-to-date restructuring charges were $57 million, and for the full year we continue to expect restructuring charges to be approximately $100 million. Adjusted EPS was $1.91 and GAAP EPS was $1.86 and included restructuring, acquisition and other charges of $0.05. The adjusted effective tax rate was 23% in the third quarter, slightly higher than our guidance due to some jurisdictional rate adjustments. And for the fourth quarter and for the full year, we now expect our adjusted effective tax rate to be approximately 22%. Importantly, as always, I just want to remind you that we continue to expect our cash rates to stay well below our adjusted ETR for the full year. Now, if you turn to Slide 9, we delivered strong margin and EPS expansion along with record year-to-date free cash flow with sales that are roughly flat year-over-year. Sales of $4 billion were down 1% on a reported basis, up 2% on an organic basis year-over-year, and we are continuing to…

Thanks, Heath. Brianna, could you please give the instructions for the Q&A session?

Thank you. [Operator Instructions]. Your first question comes from the line of Amit Daryanani with Evercore ISI. Your line is open.

Good morning. Thanks for taking my question. I guess, Terrence, really impressive momentum on the IS side, especially with AI centric business. This is clearly a big topic for investors that are focused on. So, I was wondering if you could just talk about what is driving the expectation for higher growth, both for this year and next year, versus what you had talked about 90 days ago. And perhaps if you could also just touch on what does your customer mix look like on the AI side and where is the momentum coming from?

Thanks, Amit. I appreciate the question. First off, I'll get into the different elements. We have to realize, this starts with the hyperscalers and cloud CapEx. When you look at it, that just continues to accelerate. It is incremental CapEx, and you are seeing it get put towards AI applications. As you know, we built a strong position with the cloud customers previously, and it's translating into a strong position with AI and the design wins are across customers. There isn't one customer here. It is across the hyperscalers and that's what I get excited about the most on it, the breadth of it. Now, as you said, you can see on the order slide I went through earlier, you saw the acceleration, the Communication orders that were up 50% or so sequentially. When we see these orders and design wins coming in, it does take, we talked 200 last quarter, some of that will schedule in for this year, so that's really why you're seeing the increase to the 250. But with the design wins we've gotten, it gives us confidence to take up -- it's going to at least double on that 250 in the next year with the wins we have. Just to build on who we deal with, these engagements are with the hyperscale customers and realize some of them develop their own AI solutions. We also have to work with the semiconductor companies, including both the processor companies and the other semi-players that make the acceleration chips and other silicon solutions that are so necessary to really make sure you get to these high-speed, low-latency applications. The growth that we're seeing is across this entire ecosystem. It's not just one customer. As I said before, I do think this is a space where a few of us really will benefit from because of the investment needed to scale the engineering and the manufacturing coupled with the technology that needs to happen here. So, I do view the momentum is real. These are real design win and orders, and we'll continue to keep you updated as we have calls. But certainly like that traction going into ‘25 as a growth driver on top of the other ones we always talk to you about.

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

Out next question comes from Wamsi Mohan with Bank of America. Please go ahead your line is open.

Yes, thank you so much. Clearly this was very outstanding margin performance in the quarter. I’m just wondering, maybe if you could talk about the margin outlook, both in terms of what you are expecting for the segment and how incremental margin should trend in communications in light of this AI momentum. Maybe you could just wrap the rising commodity pricing environment in that. I know you guys hedge, but if you could share some color of how we can think about the impact from that as we look over the next three to four quarters. Thank you so much.

Yes Wamsi, this is Heath. I'll take this. So, I guess, you heard our prepared comments and some of the color around margins. Our focal point as we entered this year and we were very transparent externally as well as our focus was on margin expansion, which translates into earnings growth as well. We've had some areas of support and some areas of weakness on the top line, but net-net we're hammering through the year. Our focus has been on the non-volume lever. So that's getting returns on some of their past restructuring actions that we've done. Let's make sure that price is sticking in terms of enough to offset the inflationary pressures and then optimizing the portfolio at certain pockets to improve growth and ultimately margins. So, we're running in that 19% range right now, and my thoughts in terms of as we go into ‘25 and beyond, in terms of how we – where those go, our largest opportunities in the industrial segment. So we continue to target high teens, margins and industrial. We are running right now in the mid-teens and have been here for a while, which is kind of in line with where we would expect given the pressure that we see in our industrial equipment business. That is our highest margin piece of the segment. So as we think about that business being down, we're holding our head in the mid-teens due to the performance of the rest of the segment, which would be aerospace, energy and medical. But as we return to growth and particularly the industrial equipment business next year, we would expect some margins to improve and support the overall company margin number. In Communications, I think Wamsi if you look at, when you go back over the past three or…

All right. Thank you, Wamsi. May we have the next question please?

Your next question comes from Joe Spak with UBS. Please go ahead. Your line is open.

Good morning. Thanks for taking the question.

Hey Joe.

I was wondering, back to AI, we've been hearing a little bit more about some cross licensing deals between interconnect players for AI. I'm just wondering what you can tell us there. How common is that in other areas of the business? Mechanically, like how would this actually work if it does occur? If you manufacture some of your license, is that a lower margin profile business or is it relatively even?

No, Joe. Hey, one is due to the size of this and the ramping that's going to be required, in areas where you have this, dual sourcing and cross licensing is very common. There is IP here that the different players have and we work together on how do we make sure we bring the best solution together to our customers. We have said, we would expect in this area due to the volumes, the ramping, as well as our customers, making sure they have certainty of supply. You would see some dual sourcing elements as well as cross licensing. So no, that is reality in here. In this space of our data and devices space, this is not new. This has existed for a long time. So this is not a new phenomenon.

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

Your next question comes from Joe Giordano with TD Cowen. Your line is open.

Hey, good morning guys.

Hey, how are you Joe?

Apologies if you went through some of this. I had to join a couple minutes late from another call. But Terrence I'm just curious to hear like your updated thoughts, like maybe over the kind of very near term and maybe over like the next 12 to 18 months around hybrid versus EVs. GM's talking about not building a plant, but they were talking about building. So where do you think that fits and what do you do from a CE standpoint to like adapt and adjust to the changing end market?

Yeah, no. So thanks Joe for the question. One of the things that I said in my opening comments were, you know production is very stable in automotive. But I think it's important when you think about EVs, EV production this year, and I say EV, I say battery electric, plug-in hybrid and hybrids. They are up 20% this year. So when you have global auto production flat, all of the electrified powertrains are up significantly. Beginning the year, we would have thought that would have been 25 million units. It's going to be close to 24 million units, whereas last year was 20 million units. So with some of the news that you mentioned, sometimes it makes it feel like electrified powertrains are declining. They are not declining, they continue to accelerate, and you see different trends around the world. I know on this call I always have to remind you, 70% of the electric vehicles made in the world are in Asia. It's one of the things with our global position, it's very important that that's where you see the content outperformance, and you don't see some of the bumps that maybe you read in the West. But in Asia overall, the electrified powertrain continues. So in Asia, battery electrics are up 20%, hybrids are up 20%, plug-in hybrids are up 50%. And certainly China drives that, but we also have to realize when you get into hybrids, which are in the West, it benefits some of our non-Chinese OEM customers, whether they are the Japanese or the Koreans, that have really nice product sets and we benefit from that. What you see in the Americas and Europe, you do see people moving more towards pure hybrids. In U.S., Americas, they are up 40%. So consumers are making choices more towards hybrids, and you also see they are up 20% in Europe. So you continue to see penetration increase, and any of those are good for content for us. So we always tell you a nice engine probably has about $70 on it. A full battery electric is $140, plug-in hybrid about $120, and certainly when you get into a hybrid, its $105, $110. So all of that is good for us, and even as we look forward and we're in planning now, we're going to expect auto production to be flattish, and we expect the trends that you are going to see in EV production probably continue to increase like that 20% next year as we move forward. So it's still a very constructive environment. I just always ask you, make sure you are keeping a global perspective on it, not just the Western view on it, because that's where the majority of the action is.

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

Your next question comes from Mark Delaney with Goldman Sachs. Your line is open.

Yes. Good morning and thanks for taking my question. Following-up on the auto end market, hoping to better understand the ability for TE to see revenue benefit in 4Q and into next year from that content growth you were just describing Terrence. I understand the theoretical content increase TE has on hybrids and BEVs, but at times, companies in the supply chain are affected by new vehicle launch delays, maybe their own key customers aren't selling as many cars, or there's inventory corrections. And so, as you think about all of those cross-currents, I'm hoping to better understand, do you think TE can actually see the 4 to 6 points of targeted outgrowth in automotive show up in its revenue when you think about your own customer exposure and that content potential? Thanks.

No, thanks Mark, and let me just start with the punch line. The answer is, yes. We feel very confident with it. I just spent there with Joe a little bit talking about the powertrain differences, and the powertrain is an important content driver, but it's not the only content driver. When you sit there and you think about it. I mentioned it in my prepared comments. When you get data connectivity that's needed in the vehicle for autonomy, that's also needed for all the other data that you need in the vehicle, that creates an additional architecture that also benefits content. And the other thing is, as people continue to look at other features that are added around safety applications, they continue to evolve the architecture around the traditional backbone 1248 volt, to really make sure the vehicle comes to life for the features a consumer expects. And all three of those elements benefit our content. I know we call one electrification and the other one electronification, but we benefit from both of those. And I think you look at this quarter, this quarter with the 5 points of outperformance, we grew in a declining auto production environment. It basically, iView proves it, and we feel confident it'll continue to build moving forward. The other thing that, hey, you will have some lumps of time like you said, due to platform changes, things like that. But one of the great things about TE is because we're essentially on every car in the world, you really never hear us talk about that. It's where our great global position really comes into play, and I think it really is important to our customers as we bring them technology, but also as an investor, you don't get to – you never hear us talking about this customer or that platform impacting us. So I feel very good about the 4 to 6 and feel very good about the design wins we continue to get in automotive.

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

Your next question comes from Samik Chatterjee with J.P. Morgan. Your line is open.

Yep. Hi. Thanks for taking my question. I guess I was going to ask this more on a company sort of aggregate revenue level. All through the year, your revenues have been in the sort of $3.8 billion to $4 billion range, even as sort of AI revenues have ramped. I mean, as we go into next year, when we put AI aside, where do you think we are in the cyclical recovery where you should see growth? What drives that confidence? Because when we look at the sort of revenue track record this year, it's been fairly sequentially flat. Outside of AI, how should we think about growth really sort of from a cyclical perspective in some of these end markets? What kind of magnitude of growth should we be thinking about? What drives that confidence? Thank you.

So Samik, thank you for the question. I think first thing, AI we laid out very clearly. I think the other thing that you're going to have – that you have to be there is, the 4 to 6 points on top in automotive. We do think we should be planning and we're planning a flattish environment. So I do think you are going to see that. On top of that, I wouldn't be lost on the trends that are really being masked right now in our industrial segment due to the stocking. If the stocking will end, you even see it in our appliance business, it is very important. So you've seen our appliance business return to growth. Some of that is the stocking ending. You are going to see that in industrial equipment. And then some of the other industrial cycles may be a little bit middle to later in the year, but it is very important that as you sit there, the stocking has had a big impact on our revenue this year, earlier in the year probably pushing $100 million of headwind. So they are the types of things that I think build. Some of them are content. Some of those are certainly market, but I think they are the things that get us excited about the growth momentum. And I know I said flattish earlier. I meant flattish production in automotive from a planning, not content. Content will be on top of the production environment. So, just to correct that sentence, I didn't complete my thought, so. Thanks Samik.

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

Your next question comes from Asiya Merchant with Citigroup. Your line is open.

Great. Thank you for taking my call, my question. On the cash flow, obviously a great quarter here. As you guys think about revenues ramping here and especially in the AI segment, maybe if you could talk to us about your CapEx commitment as you look into fiscal ’25, and I think you're talking about AI revenues more than doubling now. Thank you.

Sure, and I appreciate the question. First of all, our CapEx runs roughly from a modeling perspective about 5% of revenue. In different times we'll run just under that. In different times we'll run just modestly over there, but that's a good planning assumption. Inside that, in that run rate, you have to assume all of the growth areas that we've been talking about today have been supported. So whether that's the things around the content outperformance relative to automotive, which is largely driven by the electronification as well as the adoption of the various power trains. Some of that CapEx has supported tooling and product lines that we've had to put in place that are in those, so that's not going to be incremental pressure as we move forward. Now, we are ramping up a little bit in CapEx to support some of the AI applications, particularly coming out of Asia. We've opened up a facility in the Philippines. Some of that is in our run rate as well. And there will be other tradeoffs that we make as we do across the portfolio, but I don't see anything that's putting incremental pressure on our CapEx that's going to materially change that planning assumption, because some things that will come on, that will need a support for the AI applications and product lines. There will be other things that come off because we've completed some expansion in other areas, whether that's in industrial or otherwise. So it's kind of always a rolling process for us, but I still think we can absorb this within our CapEx profile.

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

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

Thanks. Good morning, everyone.

Hey Chris.

I wanted to ask generally about order patterns and any particular insights into markets under the quarter or under the book-to-bills. In particular, I think you have the positive book-to-bill at Industrial Solutions with still industrial equipment destocking. So it seems like the persistence at the other markets is pretty high visibility, but maybe take that question where you will.

Thanks Chris. What you presume about industrial is right on. And in Communications, clearly you see the benefit of the AI orders as well as our appliance business had nice growth as well. So tying back to where we see the stocking ending, you are seeing that strength and getting back to at least market and then some. When you look across the other dynamics that we continue to see, number one is there was a point in time probably three quarters ago we would talk about backlog. Our backlog continues to be strong, and what you see is the service levels, our service levels to our customers come up. You see people saying, hey, I want to work out my backlog a little bit. Why do I need something if it was an eight to 10 week lead time? Why do I need backlog out this far? So we do see that, those effects happening, in those areas where our service levels are very strong. So you know, in places like auto, our service levels have returned above pre-COVID levels. So you see some of those factors. And then in the general industrial spaces, and that is our industrial equipment market. That is our commercial transportation market. In our sensors business that we have pivoted to transportation and industrial, the industrial piece, you just see ongoing weakness that's pretty global and I would also say just sort of moving sideways. So if you peeled those out, you would say, ‘boy, your orders look really strong, really nice position.’ But they are just areas where we're seeing pockets of the stocking. It is both with OEMs as well as distribution partners. And we are seeing some signs that's starting to move sideways, which is a good first sign, but it still seems like it's taking a little bit longer to work through in that general industrial space, but it will come to an end here. They always do. It's just, I can't give you the exact date.

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

Your next question comes from Saree Boroditsky with Jeffries. Your line is open.

Hi. Thanks for taking my question.

Good morning.

Going back to the AI conversation you previously talked about $400 million in sales next year. I think you just increased that to $500 million. Given this increase, could you just give us an update on the $1 billion sales estimate and what's the timeframe for that? Thank you so much.

No. I think when you look at that, clearly with the trajectory that we have, that will probably move in a little bit. We're going to continue to keep you updated on that as we have design wins. You do have an element here. We are taking your next year's up versus the $400 million we just told you 90 days ago. So I think, the $1 billion is definitely confident, but the timing will be split in a little bit and we'll continue to keep you updated on it.

All right. Thank you, Saree. Can we have the next question, please?

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

Good morning. Thanks for taking the questions. Terrence, one of the things you highlighted in your remarks that I thought was interesting around auto investment specifically was miniaturized products for next-gen architectural shifts. Can you just double-click on that trend with respect to potential impacts to content? And it sounds like its more engineering-intensive and maybe margins as well. You know this is an area, of course, that's gotten a lot of attention, architecture that is, in the [inaudible] review of EV’s. So maybe we could just revisit that overall trend for TE as well. Thank you.

Yeah. No, it does create content opportunity, and it's one of the things I think is important when you talk about content. Clearly, we get a benefit as you move to high-voltage architectures around the power train, but you have to realize there's a whole other architecture that exists to move data around, as well as power and signal around in the car, and both of those trends impact every vehicle, not just an electric vehicle. So data I think is clear, but as everybody continues to want more features and functionality in the car, whether you get into zonal architecture, whether you want to get into centralized compute, while that simplifies and rationalizes the harness, the interconnects get more miniaturized and much more complex. And in those situations, that does – it is part of the content driver we have. So anytime you think and you sit in a car, forget about the engine running, but every other feature you sit there when you move to a new vehicle that you expect, there's connectivity associated with it, because power and signal and data need to move around, whether it's sensing something on the front end of the car, its sensing something in the braking system, it needs to transmit that power signal and data someplace, and all of that are real hard architectural problems. And our engineers at the design centers where our OEM customers are, that's where we design. It’s really where that magic occurs that drives that content growth. And these are things that don't stop because people are only working on electric vehicles. That's architecture that helps OEMs compete. It also gets people, consumers what they want, and it's where our teams excel. So sometimes I think it's taken for granted when we talk about content, but that's the electronification element of content, and that's why we feel so confident about the 4 to 6, both the electrification and electronification that happens in the vehicle really help drive that content.

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

Your next question comes from Colin Langan with Wells Fargo. Your line is open.

Oh, great. Thanks for taking my question. I'm actually just going to follow-up on the zonal architecture question. I know there's been talk that if you go to zonal, there's actually less wires and connectors. I think that's when you put in these big domains. It sounds like you don't see an impact there. Is it really just the wiring that's impacted as you go to zonal, and you are actually still seeing the same or higher content connectors, or is there a little bit of a content loss as you shift from a traditional architecture to the future zonal?

No, it's a great question. Actually, when you go from – you get wire reduction and harness simplification. You don't get connector simplification, but you are still going to need a power signal or data transfer that occurs. It may be in a simplified wire structure or a different type of cable, but what you come into when you get into that zonal is you have a much more complex connector. Something that might have been only transmitting one signal, you might have something that's transmitting 400 different signals, and that gets into a higher contact count, more complex connector into that compute, and that's actually areas where we actually drive content increase. When you get into those areas of zonal and things like that, that everybody talks about and has been talking about for a long time, typically you’ll get into more complex, more engineered connectors that drive more increased content for us. It certainly simplifies the harness, but it does not simplify the connectivity.

All right. Thank you, Colin. Can we have the next question, please?

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

Great. Thank you for taking my question.

Hi Will.

Hey. In the prepared remarks, I think it was Heath who mentioned the potential for bolt-on M&A a couple of times. We've seen one of your competitors really accelerate M&A investments recently, and in a number of years you guys haven't been very visible. I'll say there may have been tuck-ins that perhaps you didn't announce, or maybe I didn’t get them, but I wonder if you can just remind us of your strategy and tactics when it relates to just your perhaps in-market focus or technology focus, returns, metrics, hurdles, anything that you can help us understand and maybe did you mention is the opportunity for. Thank you.

Thanks Will. This is Heath. I think, and I appreciate the question. Listen, our comment around bolt-on M&A being a focus is not new. We've been talking about that here for a couple of years. When we say bolt-on, it doesn't always necessarily have to mean small though. Bolt-on’s mean they are things that are kind of – are similar to what we do, in markets that we do, in technologies that we understand, and in production environments that we understand. And so those tend to be things like the ERNI acquisition in industrial equipment or the Schaffner acquisition we completed in December, which is also in the industrial equipment business, things that enhance our portfolio and give us an opportunity to drive value through some of the operational and sales synergies. So when we say bolt-on, it doesn't always have to be small. It just means that it's not very far adjacent to us. Now, our focus is across the businesses, but admittedly, there are some businesses that we have been focused on a little bit more internal self-help. And as we progress through those things and that is reflected in some of the margin improvement that you've seen, we will, in certain businesses, be pivoting a little bit more towards M&A focus. I would tell you that the pipeline, particularly in the industrial spaces, and that's not just the industrial equipment, but the industrial spaces in general in that segment, the pipeline is more robust than it has been in a very long time. A lot of cultivation activities, and we feel very good about our ability to see an uptick in transactions there. Now, I'm not about to go on record and try to quote a dollar amount, because although that would be a more satisfying answer…

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

Our final question comes from Shreyas Patil with Wolf Research. Your line is open.

Hey, thanks so much for taking my question.

Hey Shreyas.

Hey Heath, you talked about the strengths you are seeing in transportation, particularly on the profitability side. Just trying to think about the puts and takes from here. I mean, typically incremental margins are in the low 30’s. Commercial transportation volumes should improve at some point next year, and there are additional restructuring savings in the pipeline coming in 2025 and 2026. So what are we missing as we think about the puts and takes and how margins could actually go from here? And then maybe just to put a finer point on the earlier question on the new automotive architectures, are you seeing wins today in this area? There are a few OEMs that are ahead of the curve, so just curious what you are seeing with them as well.

Yeah, let me answer the second part, and then I'll let Heath, Shreyas, answer your first part. We're absolutely seeing these wins. We've been working on these designs. In some cases, some designs never made it for decades. So when you think about these architectural changes, we are working on them. Even with the EV move, some OEMs around the globe actually jumped to some of these architectures, because they weren't evolving legacy architectures. So that is part of our content story. We are seeing it. What's great is our teams see that content uplift when you have these moves. But certainly, it's by OEM-by-OEM, and also by the platform design evolutions that they are going through, but clearly see that in our turbines. And I'll hand it over to Heath for the first part of your question.

Yeah, listen Shreyas. When I think about the margin journey that transportation has been on, a lot of it has been self-helped around restructuring. And we have moved, over the last several years, a fair amount of activity in terms of production environments out of Western markets, in terms of where production is, and into places where we can take advantage of our scale, in places like Eastern Europe, Morocco, Mexico, and in parts of Asia. So that has had a nice uplift, and it has not been cheap or painless. The team has executed well, and we appreciate our owners' patience as we've spent some of their money to do some of this restructuring. Now, you do see some of that reflected in the margins. The other piece is around price, and price is something that historically we’ve kind of been – kind of, I don't know what normal is anymore, but if you go pre-pandemic years, we would have said price is kind of minus 1%, minus 1% to 2% a year, particularly in automotive. Certainly, we've tightened that up. Price is not a tailwind, but it's not as much of a headwind, and as we think about where that will track very closely to where we see input costs and inflations there, both on the labor and on the material side. And the team, is new in last couple of years. There's a much tighter discipline there around our thinking. Now, having said all that, you have to remember, it wasn't but this time last year when people were asking the same question you are, but they were asking, when do you get from the high teams up to 20%. And we put a lot of legwork in, and the team has executed really well this year to put us to the point we are. We will continue to evaluate that. I think your 30% incremental is probably a good number. The recovery of the commercial transportation market as you mentioned, is a nice help for us. But you also have to remember that even though commercial transportation has been down from a top line, they've held their head internally on the margin front. And so there's opportunity there, and quite honestly, there's opportunity in our centers business to continue to improve margins as we've exited some lower margin net programs. So when you add all that up, yes, your math would suggest that we are going to move above 20. But give us the opportunity to work through there and contemplate everything before we start issuing new targets. So I do appreciate your questions Shreyas.

All right. Thank you, Shreyas. If there's no further questions, I'd like to thank everybody for joining us today. If you have additional questions, please contact Investor Relations at TE. Thanks everyone, and have a nice day!

Today's conference call will be available for replay beginning at 11:30 a.m. Eastern Time today, July 24th, on the Investor Relations portion of TE Connectivity's website. That will conclude the conference for today. Thank you for your participation. You may now disconnect.