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Connecting the electronics world, the corporation is a primary producer of connectors and cables such as fiber optics and coaxial cables in the U.S.

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Amphenol Corporation designs, produces, and markets electrical, electronic, and fiber-optic connectors, which are used to transmit signal and power. In addition to connectors and connector systems, the company sells circuit boards, antennas, and power cables. Amphenol’s clients include automotive, broadband communication, and information technology companies.

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Amphenol (APH): Company Profile, Stock Price, News, Rankings

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Amphenol

amphenol

Hello, and welcome to the First Quarter twenty twenty five Earnings Conference Call for Amphenol Corporation. Following today's presentation, there will be a formal question and answer session. Until then, all lines will remain in a listen only mode. At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Thank you very much. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norrit, our CEO. We would like to welcome you to our first quarter twenty twenty five conference call. Our first quarter twenty twenty five results were released this morning.

I will provide some financial commentary, then Adam will give an overview of the business and current market trends, and then we will take questions. As a reminder, during the call, we may refer to certain non GAAP financial measures and make certain forward looking statements, so please refer to the relevant disclosures in our press release for further information. The company closed the first quarter of twenty twenty five with record sales of 4,811,000,000 and GAAP and record adjusted diluted EPS of $0.58 and $0.63 respectively. First quarter sales were up 48% in U. S.

Dollars, 40 9 percent in local currencies and 33% organically compared to the first quarter of twenty twenty four. Sequentially, sales were up 11% in U. S. Dollars, 12 percent in local currencies and 6% organically. Adam will comment further on trends by market in a few minutes.

Orders in the quarter were a record 5,292,000,000 up a strong 58% compared to the first quarter of twenty twenty four and up 6% sequentially, resulting in a book to bill ratio of 1.1:one. GAAP operating income was $1,025,000,000 in the quarter and GAAP operating margin was 21.3%. GAAP operating income included $105,000,000 of acquisition related costs primarily related to the acquisition of the Andrew business from CommScope, which closed at the February. Excluding these acquisition related costs, adjusted operating income in the first quarter of twenty twenty five was $1,130,000,000 resulting in a record adjusted operating margin of 23.5%. On an adjusted basis, operating margin increased by two fifty basis points from the prior year quarter and 110 basis points sequentially.

The year over year increase in adjusted operating margin was primarily driven by strong operating leverage on the higher sales volumes, which is modestly offset by the dilutive impact of acquisitions. On a sequential basis, the increase in adjusted operating margin reflected strong conversion on the higher sales levels as well as meaningful progress on profitability improvement initiatives on certain acquisitions. I am very proud of the company's record operating margin performance in the first quarter, which reflects continued strong execution by our teams. Breaking down first quarter results by segment compared to the first quarter of twenty twenty four. Sales in the Harsh Environment Solutions segment were $1,260,000,000 dollars an increase by 38% in U.

S. Dollars and 8% organically, and segment operating margin was 24.5%. Sales in the Communication Solutions segment were $2,414,000,000 and increased by 90% in U. S. Dollars and 73% organically, and segment operating margin was 27.4%.

Sales in the Interconnect and Sensor Systems segment were $1,129,000,000 and increased by 5% in U. S. Dollars and 6 percent organically, organically, and segment operating margin was 18.1%. The company's GAAP effective tax rate for the first quarter was 22.7%, and the adjusted effective tax rate was 24.5%, which compared to sixteen point seven percent and twenty four percent in the first quarter of twenty twenty four, respectively. We continue to expect our adjusted effective tax rate to be approximately 24.5% for the full year 2025.

GAAP diluted EPS was $0.58 in the first quarter, up 32% compared to the prior year period. And on an adjusted basis, diluted EPS increased 58% to a record $0.63 compared to $0.40 in the first quarter of twenty twenty four. This was an excellent result. Operating cash flow in the first quarter was $765,000,000 or 104% of net income, and free cash flow was $580,000,000 or 79% of net income, an excellent result considering the growth we have experienced. We expect to again have somewhat elevated levels of capital spending in the second quarter as we continue to invest to support the significant growth we are seeing in the IT datacom market.

And as we have discussed previously, we have worked with certain customers to support these investments in a variety of ways. From a working capital standpoint, inventory days, days sales outstanding and payable days were eighty, sixty nine and fifty nine days, respectively, all within normal levels. During the quarter, the company repurchased 2,700,000.0 shares of common stock at an average price of approximately $68 When combined with our normal quarterly dividend, total capital return to shareholders in the first quarter of twenty twenty five was approximately $380,000,000 Total debt on March 31 was $7,200,000,000 and net debt was $5,500,000,000 Total liquidity at the end of the quarter was 4,000,000,000 which included cash and short term investments on hand of $1,700,000,000 plus availability under our existing credit facilities. Excluding acquisition related costs, first quarter twenty twenty five EBITDA was $1,319,000,000 At the end of the first quarter of twenty twenty five, our net leverage ratio was 1.2 times. As a result of the closing of the acquisition of Andrew, we now expect quarterly interest expense, net of interest income earned on cash on hand, to be approximately $70,000,000 which is reflected in our second quarter guidance.

We are very pleased that the company's financial conditions remain strong by any measure. I will now turn the call over to Adam, who will provide some commentary on current market trends.

Well, thank you very much, Craig, and it's a pleasure to welcome you all here on a beautiful spring day in Wellingford, Connecticut. The daffodils are popping, the tulips are up, and we're very excited to report to you on at the time of Amphenol's earnings here in the first quarter. I'm going to highlight our first quarter achievements, discuss some trends and progress across our served markets, and then make some comments on our outlook for the second quarter. And of course, we'll have time for some questions. So turning to the first quarter Craig just reviewed, we really drove excellent performance in Q1.

Our results were much stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. Sales grew from prior year by 48% in U. S. Dollars, 40 9 percent in local currencies, reaching a new record of $4,811,000,000 And on an organic basis, we're very pleased that our sales increased by a very strong 33% with growth across most of our served markets. Craig alluded to, we booked a record $5,292,000,000 in orders in the first quarter, which was a very healthy book to bill of 1.1 to one.

Orders grew by a very strong 58% from prior year and were up 6% sequentially. I would just comment that our orders were really strong across the board, with all of our end markets reaching book to bills of at least one:one. We're particularly pleased to have delivered record adjusted operating margins of 23.5% in the quarter. This was up two fifty basis points from prior year and 110 basis points sequentially. There's no doubt that the superior profitability is a direct result of the outstanding execution of the Amphenol teams around the world.

Adjusted diluted EPS grew 58% from prior year to reach a new record of $0.63 And then finally, we converted our earnings into cash, generating strong operating cash flow of $765,000,000 and free cash flow of $580,000,000 in the quarter, both clear reflections of the quality of the company's earnings. I just cannot express enough my pride in our team for this quarter's results. These results once again reaffirm the value of the drive, discipline and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment. Now as we announced on February 3, we're also excited that we completed the acquisition of CommScope's OWN and DAS businesses, which we are now calling by the company's original name of Andrew. We're actually very proud to bring back this storied brand, which stretches back to the company's original founding by Victor Andrew in 1937.

The acquisition of Andrew brings Amphenol an industry leading portfolio of innovative and advanced RF antenna and interconnect technologies for the communications networks market. I'm especially excited that we get to welcome the nearly 4,000 talented employees of Andrew to the Amphenol family, and I look forward to further supporting our customers who are developing next generation wireless networks around the world. As we announced at the time of the closing in February, the Andrew business was expected to generate full year sales of $1,300,000,000 and approximately $06 of accretion to Amphenol in 2025. We're very pleased with the performance of the Andrew team in their first few months as Amphenolians, and accordingly, we now anticipate that the acquisition will add approximately zero nine dollars to our earnings this full year. During the quarter, we also closed on the acquisition of LifeSync, a leading provider of interconnect products for medical applications with annual sales of approximately $100,000,000 As we welcome the outstanding Andrew and Lifesync teams to Amphenol, we remain confident that our acquisition program will continue to create great value for the company.

Our ability to identify and execute upon acquisitions and then successfully bring these new companies into Amphenol remains a core competitive advantage for the company. As our organization has evolved and scaled, so too has our ability to effectively manage a greater number of acquisitions of all sizes. Now turning to the trends across all of our served markets, I would just note, as usual, that we're very pleased with the company's end market exposure because it remains highly diversified, balanced and broad. I would just note that this diversification continues to create great value for the company because it enables us to participate across all areas of the global electronics industry while not being overly or disproportionately exposed to the volatility of any given market or application. So turning first to the defense market.

Our sale defense sales represented 9% of our sales in the quarter and grew from prior year by a strong 21% in U. S. Dollars and 14% organically. This was essentially driven by broad based growth across virtually all segments within the defense market and importantly across all geographies. Sequentially, sales grew by 2%, which was a bit better than our expectations coming into the quarter.

As we look into the second quarter, we expect sales to increase in the high single digit range sequentially. And we remain encouraged by the company's leading position in the defense market, where we continue to offer the industry's widest range of high technology products. Amidst the current and very dynamic geopolitical environment, countries around the world are expanding their spending on both current and next generation defense technologies. With our investments in the development of a broad array of new interconnect products as well as the capacity to build them, we're well positioned to capitalize on this long term demand potential. The commercial aerospace market represented 5% of our sales in the quarter, and sales increased by a strong 106% in U.

S. Dollars as we benefited from the addition of CIT. On an organic basis, sales declined modestly by 3% from prior year as procurement volumes from Jetliner customers moderated. Sequentially, our sales moderated by 4% from the fourth quarter, which actually was a bit better than we had expected coming into the quarter. And as we look into the second quarter, we expect our sales to remain roughly at similar levels as in the first quarter.

I'm truly proud of our team working in the commercial air market. With the ongoing growth and demand for airliners, our efforts to expand our product offering, both organically and through our acquisition program, have paid real dividends. In particular, I would just tell you we're very encouraged by the progress of the CIT team as part of Amphenol, and we look forward to further capitalizing on our expanded range of product solutions long into the future. The industrial market represented 20% of our sales in the quarter, and our sales increased by 20% in U. S.

Dollars and 6% organically as we continued to see improvements across the diversified industrial market. In particular, organic growth in the medical, instrumentation, alternative energy and rail mass transit markets more than offset moderations in heavy equipment and factory automation. In addition, our organic growth was driven by expansions in Asia and North America, Europe was down just slightly, a bit better than it had been in the prior quarters. On a sequential basis, sales were up 1% from the fourth quarter, which is better than we had expected coming into the quarter. Looking into the second quarter, we expect sales in the industrial market to remain at roughly these levels.

I would tell you that we remain encouraged by the company's strength across the many diversified segments of this important market. While demand in Europe has been challenging, I am confident that our long term strategy to expand our high technology interconnect antenna and sensor offering, both organically and through complementary acquisitions, has positioned us better than ever to capitalize on the many electronic revolutions that will no doubt continue to occur across the industrial market. This creates exciting opportunities for our outstanding team working in this important area. The automotive market represented 16% of our sales in the quarter, and sales were slightly down by 2% in U. S.

Dollars and just barely down 1% organically as growth in North America and Asia was more than offset by a moderation of sales in Europe. Sequentially, our sales were down by 3% from the fourth quarter, but this was better than our expectations, and it reflected really strong execution by our team working in the automotive market. For the second quarter, we expect a slight sequential moderation in sales. Despite some near term challenges, I remain proud of our team working in the automotive market. While the market is no doubt uncertain, our team continues to be focused on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles.

We look forward to benefiting from our strong position in the automotive market for many years to come. Now as I noted last quarter, we have combined now our broadband and mobile networks markets into a new market that we will call communications networks. Our sales in this market primarily go to telco operator and OEM customers across the global communications industry. So the communications network market represented 10% of our sales in the first quarter, and sales grew from prior year by 107%, driven primarily by the addition of Andrew to the Amphenol family. On an organic basis, though, sales did increase by 11% from prior year as we benefited from increased spending by communication network operators as well as wireless equipment manufacturers.

Sequentially, our sales in the first quarter grew by 81%. That was driven by the Andrew acquisition. And on an organic basis, our sales moderated by 4%, which was better than we had expected. We had come into the quarter expecting a mid teens sequential decline. Looking into the second quarter, we expect sales to increase in the high teens range sequentially as we benefit from the full quarter addition of Andrew.

With our expanded range of technology offerings following the acquisition of Andrew, we are well positioned with both service provider and OEM customers across the global communication networks market. Our deep and broad range of products, coupled with an expansive manufacturing footprint, have positioned us to support customers wherever they are around the world. And as those customers continue to drive their systems to ever higher levels of performance, we look forward to supporting them for many years to come. The mobile devices market represented 7% of our sales in the quarter, and our sales grew by 20% in U. S.

Dollars and organically from prior year as strong growth in smartphones, laptops and wearables was only partially offset by a moderation in sales related to tablets. Sequentially, our sales declined by a better than expected 26% compared to the typically seasonally stronger fourth quarter. We do believe that some of this outperformance in the first quarter was driven by a slight pull in of demand from certain customers. Looking to the second quarter, we expect sales to moderate in the high teens as customers adjust production in preparation for product launches in the second half of twenty twenty five. I'm very proud of our team working in the always dynamic mobile devices market as their agility and reactivity has once again enabled us to capture incremental sales in the quarter.

I'm confident that with our leading array of antennas, interconnect products and mechanisms designed in across a broad range of next generation devices, we are well positioned for the long term. And now turning to the IT datacom market. It represented 33% of our sales in the quarter. And sales in the first quarter grew by a very strong 133% in U. S.

Dollars and 134% organically. And that was really driven by continued acceleration in demand for our products used in artificial intelligence applications together with continued robust growth in our base IT datacom business. On a sequential basis, sales increased by 34% from the fourth quarter, substantially better than our expectation for a mid single digit increase. This growth was driven by sales of AI related products as well as growth in our base IT datacom business. Looking ahead, we expect sales to increase further from these first quarter levels in the high single digit range as investments in AI related data centers as well as the underlying IT investments continue to accelerate.

Look, we're more encouraged than ever before by the company's position in the global IT datacom market. Our team has simply done an outstanding job securing future business on next generation IT systems, particularly those enabling AI. The revolution in artificial intelligence continues to create a unique opportunity for Amphenol, given our leading high speed and power interconnect products. And whether high speed, power, or fiber optic interconnect, our products are critical components in these next generation networks, and this creates a continued long term growth opportunity for Amphenol. Now turning to our guidance and, of course, assuming current market conditions as well as constant exchange rates.

For the second quarter, we expect sales in the range of $4,900,000,000 to $5,000,000,000 and adjusted diluted EPS in the range of $0.64 to $0.66 This would represent sales growth of 36% to 39% and adjusted diluted EPS growth of 45% to 50% compared to the second quarter of twenty twenty four. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow our market position while driving sustainable and strong profitability over the long term. And finally, I'd like to take this opportunity to thank our entire global team of Amphenolians for their truly outstanding efforts here in the first quarter. And with that, operator, we'd be very happy to take whatever questions there may be.

Thank you, Mr. Norwood. The question and answer period will now begin. Please limit to one question per caller. We have a question from Andrew Buscaglia with BNP Paribas.

the question is around, you you can imagine around tariffs. You know, you guys are a very global company, and I know a lot of your business is, you know, somewhat, strategically set up, I think, for a situation like this. But I'm wondering what you have to you have to have some incremental costs you're factoring in and, I would expect. And can you can I can I identify what market, those would be in and and what is embedded in your q '2 guide and and anything we should model in thereafter?

Yeah. Well, thank you very much, Andrew, and, I'm not surprised to get a question on tariffs. Look. Our organization, and you alluded to it, in many ways, is purpose built for a time like this. It's purpose built in the sense that we push down through the organization, through our entrepreneurial organization, the authority, all the levers of running these businesses, and then we can hold those folks accountable.

And that's the sort of ampullary in entrepreneurship. And at a time when you have such a dynamic new policy environment like like tariffs. And and, you know, everybody talks about tariffs here, but, you know, there's there's, various measures being taken by a variety of governments around the world. And without expressing any opinions about those, about those measures, they are what they are. And so it's really up to our organization, wherever they may be, to, number one, work in every possible way to mitigate the impact of those tariffs and then to the extent that we can't fully mitigate it, to work with our customers to pass on to them pricing impacts of these tariffs.

And we are a very local company around the world. We have more than 300 facilities in more than 40 countries. And our general principle is that we support our customers close to where they are in whatever region. But look, to the extent that there are some impacts of these tariffs, is there some pressure to some of our general managers that they have to work with customers to find a way to pass that on? Of course, that's happening.

And I wouldn't say that it's specific to one or another of our end markets. And I'd say that there's a slight let's say that there's a slight impact pricing as we go into the second quarter, and our team is going to work really well to moderate whatever impact could be on the bottom line. And I think implicit in our guidance is that our margins are still very strong in the second quarter. So that must not be a tremendous impact.

Thank you. Our next question comes from Amit Daryanani with Evercore ISI. Please go ahead.

Good afternoon, everyone. Thanks for taking my question. I guess, Adam, you folks had really sizable upside in the March revenue numbers and some of it maybe a couple of hundred million is from Andrews, but rest of it seems organic. Can you just spend some time on what is enabling this size of organic beat? And given the discussion you just had on tariffs, how do you get comfort that there wasn't a high degree of revenue getting pulled in into the March because of customers potentially trying to avoid the tariff scenario?

Well, thank you very much, Amit. Mean, look, the first thing I want to say is you kind of alluded to it in your question. I mean, this is a very, very strong organic performance in the quarter, and it's a testament to the ability of our team to execute on this level of demand from customers. It is not easy. I mean, if you think about some of these markets, I mean, the most acute one, IT datacom growing 134% on a year over year basis, 34% sequentially.

I mean, that's an enormous amount of effort by our teams to ramp up in the face of that level of customer demand. And I just can't can't stop thanking them for all of their efforts. Now to your question on a pull in, I mentioned in my prepared remarks that we saw a slight pull in in mobile devices, but that was really the only place where we saw any signs of anything that was very specific to a pull in. Is that related to tariffs? I I know folks have written nice reports about that, company included.

And so maybe in that market, there was a little again, I would classify that as a slight pull in of demand. And we've reflected that as well in our outlook in the second quarter for mobile devices. But if you look at our outlook in some of the other markets, in particular IT datacom, where we still have a very strong outlook as we head into the second quarter, I would tell you that our customers are not pulling in. They're working very hard to equip as much as they can these advanced computing data centers related to AI and also responding to demand on the base IT datacom business that is there. The only other area that one could think about as potential with a little bit of pull in would be in distribution.

But honestly, I can't tell you that we saw anything meaningful there. In fact, our overall distribution business from Q4 to Q1, it was up a little bit, but it didn't show any sort of anomaly that would lead one to think that that was a pull in demand. Now look, Amit, I mean, at the end of the day, this was a quarter of tremendous execution by our team. We've done a fabulous job to position ourselves to capitalize and take more than our fair share of a lot of exciting revolutions going on around the electronics industry. And then our team just delivered by executing, which was not hard work but was very impressive or which was very hard work and it was very impressive.

Thank you. Our next question comes from Joe Spak from UBS. Please go ahead.

Thanks so much. Adam, I was wondering, in prior quarters within the industrial business, I think some of the commentary was Europe was a little bit of the laggard. I'm wondering if anything has sort of changed there, if you're seeing any sort of further green shoots in Europe within that segment. And then while you're on that business as well, if you're seeing any sort of change in order patterns in North America or in Asia given some of the new tariff policies.

Yes. Well, thanks very much, Joe. Look, I think I alluded to the fact that Industrial, we're encouraged. We've had two straight quarters of 6% organic growth overall, but that has been really driven by North America and Asia, and that was clearly the case last quarter. That was the case again this quarter.

If we want to say is there a little bit of a green shoot from Europe, I would say that the European rate of decline is much lower this quarter. It's just slightly down actually on an organic basis year over year in Europe in industrial. And on a sequential basis, actually, we did start to see growth in Europe. So yes, green shoot here in spring with all the beautiful flowers outside of our windows. Sure.

I guess there's a daffodil or two in Europe as well. In terms of order patterns, look, we had a positive book to bill in industrial, not our strongest book to bill, by the way. I'd say our strongest book to bill was in defense. That's clearly not related to tariffs, I should tell you. That's just a robust demand across the defense market globally.

But we had a strong book to bill in industrial, and I think it's a sign more of maybe a few of these greener shoots and maybe an occasional flower popping up here in the spring. But it's a little early to tell. I mean, still, Europe is down year over year slightly. And as we go through the course of this year, we'll see whether we see that improving further.

Thank you. Our next question comes from the line of Luke Junk with Baird. Please go ahead.

Good afternoon. Thanks for taking the question. Adam, maybe more of a philosophical question for you today. Just reflecting on the facts that IT datacom has had just such incredible growth rising to 33 of sales this quarter, maybe even up another couple of points into next quarter. Just how you think about that relative to an exposure being that big as a percentage of the company if I think historically maybe individual markets have gotten up to kind of the most 25

both. Maybe from a capital allocation standpoint going forward, if it has any implications? And maybe also from a just a risk management standpoint and thinking about the diversity that you like to drive in the model? Thank you.

Well, Luke, that's a philosophical question that's very close to my heart because, as you know, what I love about our company and I still love, especially in this quarter, is the breadth and balance of our exposure across the electronics industry. And that's been a great asset for Amphenol long term. And while it hasn't driven capital allocation specifically, I would say, and I have said this many times, that we would never make an acquisition if that acquisition ended up driving a dramatic overexposure to and us upsetting that breadth and balance of the market. What I've never said is the following. We would capitalize on every growth opportunity that is available to us in the electronics industry.

And no matter what revolution is happening across, you know, my whole now, you know, more than twenty six years in the company, we have always, with with the full drive of the Ample organization, sought to take advantage of that. And it just so happens that today, in in this revolution that is called AI and and all what is going on around that, that our team's done a fabulous job of capturing a disproportionate share of what is a truly unique revolution in the electronics industry. I would put it, you know, on the scale of kind of electrification, on the scale of the Internet when it was first being built out, on the scale of when when when the personal computer and and the the the sort of democratization of computing that happened, you know, many years ago. And I think the acceleration of computing and its manifestation in these extraordinary investments being made in in AI, machine learning, generative AI, and the like, is another one of those sort of moments in the development of the electronics industry, which is a unique opportunity. And in this case, moreover, it's it is a revolution that creates for our industry a disproportionate opportunity because of the unique nature of the architecture and the intensity of the interconnect solutions that are associated with that architecture.

And so when you stack that all together, it's a great revolution. It's a more interconnected, intensive revolution, and we've taken more than our fair share of that. The result has been that our IT datacom business has grown very robustly. Do I think that that upsets breadth and balance of Amphenol? Not at all.

This hasn't happened because of a capital allocation decision, an acquisition. It's happening because our team's done a phenomenal job. And we're never going to shy away from organic growth opportunities even if it means that a market, for at least right now, is at this size. Now also I would think back and think about the fact that in the last nine quarters, we've made, I think, close to 15 acquisitions. And those acquisitions have also been across all of our end markets, including our two largest acquisitions, CIT and Andrew, one of which has a big exposure to the defense and commercial air and industrial market and the other one to our, as we now call it, communications networks market.

So we're constantly trying to make sure that the company has that breadth and balance. And I think where we've exercised our balance sheet to make these acquisitions, those have always been in furtherance of a really wonderful balance in the company. So we feel great about this, I think, philosophically or otherwise, and we're not going to shy away. We're certainly not going to turn down orders from customers, and we're not going to try not to win everything possible.

Thank you. Our next question comes from Samik Chatterjee from JPMorgan. Please go ahead.

Hi. Thanks for taking my question. Hi, Adam. Hi, Craig. Maybe, Adam, you in the IT datacom business, just to follow-up on the last question, you now have a significant step up in the revenue from 4Q to 1Q, and you're guiding to another increase into 2Q.

And clearly, a part of that's a part of the strong organic growth that the total business has as well. How much visibility should we think you have in terms of that sort of growth continuing sequentially from these high levels versus vis a vis being very dependent on customer product cycles or benefiting for the time being from certain product cycles for the customers that maybe moderate over time? And then just a a longer term question associated with that. I mean, one of your big customers has talked about adopting something that's more a co packaged op optic solution in the future that moves away from, connections, on the back plane to a certain extent. How do we how should we think about the longer term implications of that in terms of connected or connectivity content on that platform?

Yes. Thanks very much, Samik. Look, relative to organic growth, and we've tried to give guidance here for the second quarter, It's a very dynamic world. So we are not giving guidance beyond the second quarter. But I think what we know in IT datacom in general and as well what we know in the specific portion of IT datacom which is AI is we have a very strong position with our customers.

I just mentioned in that last to the last question, not only is this a transformation of how compute works, but it's more interconnect intensive, and we've taken more than our fair share of that. And the breadth of our products, which include high speed products, power products and fiber optic products, is such coupled with our ability to execute on behalf of those customers is such that we're in a great position for them for the long term. Now could there ever be an air pocket in the overall spending patterns of any of our markets, including IT? Of course, there can be. And that's the agility of Amphenol to manage, to maximize our position on the upside and to protect the company if there ever is a kind of an air pocket.

The other thing I'll say about this AI in particular, and we've said this before, is we have a very broad exposure across up and down the stack of the folks who are involved in creating this exciting new technology, starting with those who are spending the money, the web service providers to the OEMs who are making extraordinary products that we're so privileged to be able to play a role in and all the way down to the chip manufacturers who are either specifying or, in certain cases, building parts of the systems themselves. And so that breadth of our exposure without a disproportionate reliance on one or another customer is also another important aspect of that. Now, look, you asked this final piece about a very specific technology on a very specific customer. I'm not going to answer specific questions about specific customers and specific technologies, but I will say this, which is that interconnect products in these new systems play a very significant role. And whether it's copper, whether it's power copper high speed, power fiber optics, what we care about is that there's more of everything.

And that more of everything and our ability to capitalize and take more than our fair share of that more than everything, in other words, the higher content, that's really what makes me most excited about this opportunity over the long term.

Thank you. Our next question comes from Asiya Merchant from Citigroup. Please go ahead.

Great. Thank you. Congratulations on a great quarter. Adam, if you can just double click a little bit on the non AI portions of the business. I think you called that out that there was strength there.

So if you can just kind of elaborate on that a little bit, where the strength is coming from? Is it specific regions, customers? How to think about that? And visibility, just looking ahead. Thank you.

Well, thank you very much, Asiya. And when you talk about non AI, I assume you're talking about also within IT datacom, but I'll answer it in kind of both ways. We're very encouraged to see strength not just in those customers focused on AI but across all of our IT datacom customers. I mean, strong. I mean, I would tell you that of our IT datacom growth on a year over year basis, we would say roughly two thirds of that has been from AI on a year over year basis and maybe a little more than half of the sequential growth.

So that's really outstanding growth of our non AI related IT datacom business. And I wouldn't specify that that's one region or another or one set of customers. It's been a pretty broad piece. And I can a little bit understand that. I mean, customers around the world, enterprise, operator and otherwise, are realizing the importance of an IT backbone and what that can create for you and the value of that, the payback on those investments.

And so I think that that makes a lot of sense. Now if the question is really outside of even IT datacom, look, even if you take away this extraordinary performance that we had in IT datacom, and specifically that extraordinary performance that we had with with AI, the company still delivered outstanding organic growth on a year over year basis or on a sequential basis. And and I think that that you know? And, you know, if I wanted to put some some sort of, scale around that, I mean, you're talking about, you know, high, you know, growth, the mid teens kind of organic growth in an environment like we're facing today. And I think that's just a testament to the fact that it's not just that the company is winning in AI, but we're winning really across all of our diversified end markets.

Thank you. Our next question comes from Joe Giordano from TD Cowen. Please go ahead.

Hey, guys. Good afternoon. I Adam, I'm not I'm not sure even how to answer this question, but I think it's worth asking anyway. Like, for for the commentary you made about pull ins and you're not seeing it really much outside of the mobile device, like, how would you know? Like, what is the possibility because I feel like a lot of channel checks that people have done suggest there is pull in, and then a lot of the public companies who have reported say there's none.

Is it possible that what looks like the numbers look normal to you, like, to anyone. So maybe it doesn't feel like pulling, just the numbers aren't out of whack. But what if, like, pulling is looking is appearing like normal demand? Is there a risk of that?

Yeah. Look. Do I think, Joe, your question is really do we are we confident in in what we don't have visibility over? And I would say, look. I there are all we can judge by is what we see.

And we know in mobile devices, and we saw in mobile devices, there was a slight pull in. What we know in IT datacom is that our customers are are not only buying our product, but they want more. I mean, if if we could have shipped more and by the way, we shipped a lot more than anybody expected us to ship in the quarter, but they probably would have taken even more if we could have done it. When I look at the other markets, the one place that I would look very carefully at, and I mentioned that earlier, is distribution. And our sales to distribution from Q4 to Q1, which is when you would have expected maybe this pull in to be happening in anticipation of the policies that were broadly reported, it was a very modest kind of low single digit sequential growth that we saw in distribution.

Are there things that we don't see through the supply chain that could end up whatever, in hindsight, yes, maybe there was a little bit of a pull in here and there. Yes, I'm not going to say that that's impossible, Joe. So I think that it's hard for me to kind of say anything categorically. But just on the basis of what we've seen across those areas where it would be most likely for us to have seen it, we've tried to be specific that we saw it in mobile devices, and we don't think we've seen it. At least we haven't seen the evidence of it in the other spaces.

But that wouldn't mean that there could be some pull in, but we just haven't seen the clear evidence of

Thank you. Our next question comes from William Stein from Truist. Please go ahead.

Great. Thanks for taking my question. Incremental margins were quite a bit stronger than the typical 25%. I'm wondering if maybe it's time to revisit that target and perhaps think about a higher contribution margin level going forward, something on the order of 30%. I think you even beat that this quarter.

But any comment on go forward profitability and a metric for us to model it would be very helpful. Thanks.

Yes. Thanks, Will. Yes. There's no doubt. I mean, the team really just has done an excellent job driving margin expansion over time, but especially over the last year here, especially over the last couple of quarters.

As you mentioned, our kind of long term target for conversion has historically been the 25% level. More recently, we definitely have outperformed that benchmark. And given our continued momentum and strong execution, I believe we're really well positioned to maybe modestly even exceed that historical 25% target again here this year. And that's reflected in our guidance. If you look at our implied guidance here in the second quarter, we're guiding to a little bit better than that 25%.

With all that being said, the current environment is challenging. There's a

of things happening, obviously tariffs and the like. So we're certainly want to be prudent around kind of what our expectations are. There's but we do feel real good about these margins. We're growing pretty significantly. I mean the year over year growth is quite significant.

We're at levels of revenue. We're able to really execute well and leverage that. So I think that's right. I think that 25% is something we should continue to be able to exceed with these levels of growth, at least in here in the near term. We'll, at some point, maybe talk about a higher goal of 25% more formally.

But at this point in time, I wouldn't necessarily put a measure on that. There's no doubt we're executing better than that. And I would expect in here in the short to mid term us to continue to do that as we continue to execute and grow at the levels that we are right now.

Thank you. Our next question comes from Mark Delaney from Goldman Sachs. You may proceed.

Good afternoon. Thank you very much for taking my question and congratulations on the strong results including the record margins. Amphenol's sales and orders were extraordinarily robust in the data center market. That said, there's been several media reports that at least one hyperscaler, if not a few, could be slowing the pace of their investments going forward. So I'm hoping to better understand the breadth of the strength that Amphenol has been seen and has been broad based or a little bit more mixed amongst the key hyperscalers?

And what's your expectation for the breadth of customer demand in the data center market going forward? Thanks.

Yes. Thanks, Mark. I mean, look, simply put, we've seen really strong performance across the breadth of companies involved in building out AI. So whether that's the hyperscalers, whether that's the OEMs, the sort of sub tiers of those OEMs or the chip companies who are involved in that. So I wouldn't say that that is so concentrated in that sense.

Amphenol Q1 2025 Earnings Call Transcript | Fortune

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Amphenol (APH) Q1 2025 Earnings Call Transcript

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