The operator introduces the First Quarter Earnings Conference Call for Amphenol Corporation and explains the format of the call. CFO Craig Lampo and CEO Adam Norwitt give an overview of the company's first quarter results, including sales, orders, and operating income. They also mention non-GAAP financial measures and forward-looking statements. Sales were up 9% in U.S. dollars and 10% in local currencies, with a book-to-bill ratio of 1.03:1. Operating margin increased compared to the previous year and quarter.

In the first quarter of 2024, the company's adjusted operating margin increased by 90 basis points from the previous year and decreased by 20 basis points sequentially. This was primarily due to strong operating leverage on higher sales volumes, offset by the dilutive impact of acquisitions. The company's operating margin performance reflects strong execution by its teams. Sales and operating margins also increased in each of the company's segments. The company's GAAP effective tax rate and adjusted effective tax rate both increased compared to the first quarter of 2023. GAAP diluted EPS increased by 23% and adjusted diluted EPS increased by 16%. Operating cash flow and free cash flow were both strong in the first quarter.

In the first quarter of 2024, the company had a strong free cash flow yield and expects to see increased CapEx in the coming quarters to support growth. Working capital levels were normal and the company repurchased 1.4 million shares of common stock and completed its $2 billion stock repurchase plan. The Board of Directors has approved a new $2 billion stock repurchase plan. Total debt and net debt were $4.3 billion and $2.3 billion, respectively, and total liquidity was $5.7 billion. EBITDA was $810 million and net leverage was 0.7 times. The company used cash on hand to repay maturing notes and completed a $1.5 billion bond offering to fund the pending acquisition of Carlisle Interconnect Technologies.

The company's first quarter results exceeded expectations, with sales and adjusted earnings per share exceeding guidance. Sales grew by 9% in US dollars and 10% in local currencies, with organic growth of 6% in various markets. The company also booked $3.348 billion in orders and saw a positive book-to-bill ratio. Profitability was strong, with adjusted operating margins reaching 21%, a 90 basis point increase from last year.

In the fourth quarter, Amphenol's adjusted diluted EPS grew by 16% to $0.80, and the company generated strong operating and free cash flow of $599 million and $506 million, respectively. The Board of Directors approved a new $2 billion stock repurchase program, demonstrating the company's balanced capital deployment. The company has announced the acquisition of Carlisle Interconnect Technologies for $2 billion in cash, which is expected to add $0.02 to earnings in the second half of 2024. This acquisition is expected to be completed by the end of the second quarter and is anticipated to create great value for the company.

The company's ability to identify and execute acquisitions of all sizes is a core competitive advantage. The company's end market exposure is highly diversified, which allows them to participate in all areas of the global electronics industry without being overly exposed to any specific market or application. In the defense market, sales grew by 13% in U.S. dollars and 11% organically, driven by broad-based growth. Sales in the commercial aerospace market increased by 20%. The company is well positioned to meet the increasing demand in these markets through new product development and increased capacity.

The company saw strong sales growth in the first quarter, driven by strength in the commercial air market and acquisitions in the industrial market. However, they expect a slight decrease in sales in the second quarter. The company remains optimistic about long-term opportunities in the commercial air market and is proud of their team's performance in both the commercial air and industrial markets.

The company is confident in their long-term strategy to expand their high-tech interconnect antenna and sensor offerings through organic growth and acquisitions. The automotive market has been a strong driver of sales, with an 18% increase in the first quarter and expectations for continued growth in the future. Sales in the mobile devices market were flat from the previous year, but saw a decline in the first quarter due to decreases in tablets, wearables, and other products. However, the company expects a mid-single-digit decline in the second quarter as customers prepare for new model launches in the second half of 2024.

The company's mobile devices market has declined in sales but they are prepared to capture any opportunities for growth in the future. They have a strong team and a leading array of products that positions them well for long-term success. Sales in the mobile networks market declined in the first quarter but are expected to increase in the second quarter due to increased demand from mobile operator customers. The company is focused on expanding their position in 5G equipment and networks and is poised to benefit from renewed wireless investments. The Information Technology and Data Communications market saw strong growth in sales, driven by demand for products used in Artificial Intelligence data centers.

In the first quarter, Amphenol experienced a 1% increase in sales and expects a low double-digit growth in the second quarter due to strong orders for AI-related interconnect products. The company is well-positioned in the global IT datacom market and is securing future business in next-generation IT systems, particularly those enabling AI. The broadband market represented 4% of sales and saw a 19% decline from the previous year, but sales remained flat sequentially. The company remains encouraged by its position in the broadband market and looks forward to supporting customers in increasing network coverage and bandwidth for high-speed data applications.

The company expects sales and adjusted diluted EPS growth for the second quarter, but the guidance does not include potential acquisitions. The CEO expresses confidence in the management team and thanks employees for their efforts. In response to a question about AI, the CEO discusses the company's products and solutions for AI infrastructure and notes that it is a growing focus for investors. He also mentions the potential for future growth in this area.

The speaker is excited about the recent investments in AI and their personal use of these products. They discuss the underlying technology of these systems and the need for high-speed, low-latency interconnect products to make them work. They also mention the importance of power efficiency in AI data centers. These products have been in development for over a decade and are critical for the good performance of AI.

Amphenol is heavily involved in the data center market, offering a wide range of power interconnect, fiber optic, and other products. They have been preparing for the growth in this market for years and have seen significant growth in their AI data center products. The company is well-positioned to meet the demands of this rapidly growing market.

The company's CEO, Adam Norwitt, discusses the positive book-to-bill ratio and strong bookings in IT Datacom and Commercial Air. He also talks about the recent acquisition of Carlisle Interconnect and the potential for improvement under the company's ownership.

The speaker expresses excitement about the acquisition of Carlisle Interconnect by Amphenol, stating that it is a complementary company with great technology and people. The combination of the two companies will allow for a total solution in interconnect needs for customers in various markets. The speaker also mentions the importance of reliability in the commercial air market and the profitability of CIT.

Amphenol operates in a holding company structure and has various sister and brother companies around the world that have expertise in accessing low-cost manufacturing and reducing the supply chain. The existing management team of CIT will continue to run the company, but will have access to collaborative interactions with other companies within Amphenol to improve performance. Amphenol has a track record of acquiring great companies that were not in the interconnect industry, and they have high hopes for the progress of CIT in the long-term. However, this will take time.

Adam Norwitt, CEO of Amphenol, is optimistic about the future of the company as part of the Amphenol family. He is patient but hopeful and has a strong vision for the company's future. In response to a question about pricing and growth in the AI market, Norwitt emphasizes the company's focus on delivering value to customers at the lowest price possible. He declines to give guidance for 2025, but reiterates the company's goal of maximizing value for customers.

The author discusses the importance of interconnect systems in AI and how it affects the speed and latency of building models. They emphasize the value of their products in creating functionality for customers and the need for intense testing and automation. The author acknowledges the hard work of their team in executing their plans.

Amphenol's production processes are complex and require high reliability, making the company grateful for its employees who work around the clock to support customers implementing AI data centers. The company's capital allocation strategy remains balanced and flexible, with a focus on returning about 50% of free cash flow to shareholders through a combination of M&A and share repurchases. The pending Carlisle Interconnect transaction will not impact this strategy.

Amphenol's dividend yield is around 1% and they plan to maintain this over time. Their share repurchase plan is also consistent with this goal. M&A continues to be a focus for driving returns, and they have a strong pipeline for potential acquisitions. They remain disciplined and will only make acquisitions that align with their strategy. Their financial condition is strong, with low leverage, allowing them to make larger acquisitions like CIT.

The speaker discusses the company's strong position in the auto market, citing their capability and appetite for growth. They mention the expanding content in cars and their advantage in areas such as electrified drivetrains, communications, connectivity, and engine control. They also note the continued demand for fuel-based engines.

Amphenol's sales in the automotive market are not affected by the type of drivetrain, but rather by the increasing demand for electronics in cars. The company expects to see continued muted demand in the industrial market due to both destocking and lower distributor orders. Amphenol is also making investments in AI and other areas to support its strong growth in markets like defense.

The speaker, Adam Norwitt, praises his team for their work and mentions a slight increase in CapEx. He then addresses a question about competition in the AI space and expresses confidence in his company's long-standing position as a leader in high-speed interconnect technology. He also acknowledges the strength of their competitors and the potential for multiple companies to benefit from the growth of AI.

The speaker discusses the challenges of new entrants in the interconnect industry and emphasizes the importance of using products that can meet high-performance requirements. The next question is about the trajectory of incremental gross margins and the impact of a recent acquisition on the company's profitability. The speaker is proud of the 21% operating margins achieved in the first quarter, which is significantly higher than the previous year and the sequential quarter. The company's 10 acquisitions from the previous year were below the company's average profitability, but the organic conversion rate was stronger than reported.

The team has shown strong execution in both growing and managing costs in challenging markets, leading to high profitability. Going forward, without the impact of CIT, the company expects to maintain normal profitability levels. However, with the acquisition of CIT, there may be a slight decrease in profitability in the short term, but the team is expected to improve it over time. The acquisition is seen as a great opportunity at a good price.

The speaker discusses the potential for margin dilution and the priorities for the integration of the holding company CIT into Amphenol. They hope to accelerate growth and take advantage of Amphenol's resources and expertise. They also mention the success of past companies that have joined Amphenol.

The Amphenol company has a unique culture that encourages entrepreneurship and accountability. They are confident that their recent acquisition, CIT, will be successful in the interconnect market due to their broad range of products and relationships. When it comes to their involvement in AI technology, the company's margins are based on the value they provide to customers. Amphenol is currently having intense discussions with customers about scaling and working together in this market due to the potential long-term benefits.

The Amphenol approach to allocating capital is an iterative and interactive process, involving general managers who are responsible for specific products. These managers are accountable for their decisions and have comprehensive authority, leading to wise decisions. This approach is unique and results in wise capital expenditures. The company's CEO concludes the call by thanking participants and wishing them a good spring.

This summary was generated with AI and may contain some inaccuracies.