Hello, and welcome to the Fourth Quarter 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.

Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to welcome you to our fourth quarter 2020 conference call. Our fourth quarter and full year 2020 results were released this morning. I will provide some financial commentary and then Adam will give an overview of the business as well as current trends. Then we will take questions. As a reminder, during the call, we may refer to certain non-GAAP financial measures and may make certain forward-looking statements, so please refer to the relevant disclosures in our press release for further information. The Company closed the fourth quarter with record sales of $2.426 billion, and record GAAP and adjusted diluted EPS of $1.15 and $1.13, respectively. Sales were up 13% in U.S. dollars and up 11% in local currencies and organically compared to the fourth quarter of 2019. Sequentially, sales were up 4% in U.S. dollars and 3% in local currencies and organically. Breaking down sales into our two segments. The interconnect business, which comprised 96% of our sales, was up 14% in U.S. dollars and 11% in local currencies compared to the fourth quarter of last year. Our cable business, which comprised 4% of our sales, was down 4% in U.S. dollars and 2% in local currencies compared to the fourth quarter of last year. For the full year 2020, sales were $8.599 billion, which was up 5% in U.S. dollars, 4% in local currencies and 2% organically compared to 2019. Adam will comment further on trends by market in a few minutes. From a segment standpoint, in the interconnect segment, margins were 22.5% in the fourth quarter of 2020, which increased from 22.0% in the fourth quarter of 2019 and 22.4% in the third quarter of 2020. In the cable segment, margins were 10.3%, which increased from 10% in the fourth quarter of 2019 and decreased from 10.7% in the third quarter of 2020. For the full year 2020, adjusted operating income was $1.650 billion, which was slightly up from 2019 and resulted in a full year 2020 adjusted operating margin of 19.2% compared to 20% in 2019. This 80 basis point decline reflects the challenges and resulting impacts related to the COVID-19 pandemic, primarily in the first half of the year. Given the unprecedented challenges we saw this year, we are extremely proud of the Company's performance. Our team's ability to effectively manage through this crisis is a direct result of the strength and commitment of the Company's entrepreneurial management team, which continues to foster a high-performance, action-oriented culture, thereby enabling us to capitalize on opportunities and maximize profitability in an uncertain market environment. The Company's GAAP effective tax rate for the fourth quarter was 21.7%, which compared to 20.3% in the fourth quarter of 2019. On an adjusted basis, the effective tax rate was 24.5% for both the fourth quarter of 2020 and 2019. For the full year, the Company's GAAP effective tax rate for 2020 and 2019 was 20.5% and 20.2%, respectively. On an adjusted basis, the effective tax rate for both the full year 2020 and 2019 was 20.5% - 24.5%. On a GAAP basis, diluted EPS increased by 12% to $1.15 in the fourth quarter compared to $1.03 in the prior year period. Adjusted diluted EPS increased by 15% to $1.13 in the fourth quarter of 2020 from $0.98 in the fourth quarter of 2019. For the full year, GAAP diluted EPS was $3.91, a 4% increase from 2019 GAAP diluted EPS of $2.75. Adjusted diluted EPS was $3.74 for 2020, which remained unchanged compared to 2019. This was a strong performance considering the significant challenges and related incremental costs resulting from the pandemic. Orders for the quarter were $2.512 billion, which was up 14% compared to the fourth quarter of 2019 and up 10% sequentially, resulting in a book-to-bill ratio of 1.04 to 1. The Company continues to be an excellent generator of cash. We are proud that operating and free cash flow for both the fourth quarter and full year 2020 were all records for the Company. Cash flow from operations was a strong $441 million in the fourth quarter, or 124% of net income. Net of capital spending, our free cash flow was $371 million, or 104% of net income. Cash flow from operations for the full year was $1.592 billion, or approximately 132% of net income. And net of capital spending, our free cash flow for 2020 was $1.328 billion, or 110% of net income. From a working capital standpoint, inventory days, days sales outstanding, and payable days, were 79, 72, and 61 days, respectively, all within a normal range. During the quarter, the Company repurchased 1.5 million shares of common stock for approximately $182 million under the $2 billion open market stock repurchase plan, bringing total repurchases for the year to 6 million shares or $641 million. Total debt at December 31 was $3.9 billion and net debt at the end of the year was $2.1 billion. Total liquidity at the end of the quarter was $4.2 billion, which included total cash and short-term investments on hand of $1.7 billion, plus the availability under our credit facilities. Fourth quarter and full year 2020 EBITDA was approximately $600 million and $2 billion, respectively. And at December 31, 2020, our net leverage ratio was 1.1 times. Lastly, the Company announced a 2-for-1 stock split, which will be effective as of March 4, 2021. I will now turn it back to Adam, who will provide some commentary and current trends.

Well, Craig, thank you very much. And I'd like to extend my welcome to everyone here on the phone today, and I hope it's not too late to wish everybody a Happy New Year, as we're still here in the month of January. First, I just want to express my hope that all of you on the call here today, that you, your family, your friends, and colleagues are all staying safe and healthy throughout the pandemic. I'm going to highlight our achievements in the fourth quarter and the full year. As Craig mentioned, I'll discuss our trends and progress across our served markets. I'll then make some comments on our outlook for the first quarter and then, of course, we'll have time at the end for questions. Now, with respect to the fourth quarter and amidst what has, no doubt, been an unprecedented and volatile year, I'm truly proud that we finished 2020 with record sales and adjusted earnings per share in the fourth quarter, both of which were significantly above our guidance. Sales grew 13% in U.S. dollars and 11% organically, reaching a new record of $2.426 billion. This organic growth, which was very strong, was driven by growth in mobile devices, industrial and automotive end markets in particular. The Company booked a record of $2.512 billion in orders in the fourth quarter, and that's a strong book-to-bill of 1.04 to 1. Despite continuing to face some operational challenges related to the ongoing pandemic, adjusted operating margins were strong in the quarter, reaching 20.6%, a 10 basis point increase from third quarter levels and 60 basis points from the prior year. Craig already highlighted the operating and free cash flow of the Company, which was very strong at $441 million and $371 million, respectively, in the fourth quarter. Both are excellent reflections of the quality of the Company's earnings. I just want to say, with this fourth quarter, how proud I am of our team around the world. Our results this quarter once again reflect the discipline and agility of our entrepreneurial organization, as we continue to perform well amidst an environment that still presents challenges. Our small acquisition team was also very busy in the fourth quarter and here in the last few weeks of January. As we announced on December 9, we're very pleased to have signed an agreement to acquire MTS Systems, a leading supplier of advanced test systems, motion simulators, and precision sensors, for $58.50 a share. The MTS acquisition continues to be subject to MTS shareholder approval, certain regulatory approvals, as well as customary closing conditions. In addition, last week, we announced that we had entered into an agreement with Illinois Tool Works, under which ITW will acquire MTS' Test & Simulation segment following the closing of our acquisition of MTS. The sale is also subject to certain regulatory approvals and other customary closing conditions. We continue to expect that both the acquisition of MTS, as well as the follow-on sale of the Test & Simulation business to ITW, will both occur approximately in the middle of 2021. I can just say that we've long been attracted by the outstanding technology and deep entrepreneurial culture of MTS Sensors and look forward to welcoming this wonderful team of people into the Amphenol family. This acquisition, which is highly complementary to our current sensor offering, represents a further broadening of our high technology sensor offering to customers across the automotive, industrial, military and commercial air industries. We expect the addition of MTS Sensors to add approximately $350 million in revenues and to generate approximately $0.10 per share of earnings accretion in the first year post-closing. Now here in the last few weeks of January, we're also pleased to have closed two additional acquisitions of outstanding entrepreneurial companies, which we purchased for a combined price of $160 million. First, Positronic is a provider of high-reliability harsh environment connectors for customers primarily in the military aerospace, IT datacom, and industrial markets. Based in Springfield, Missouri, with also operations in France, India, and Singapore, and with annual sales of approximately $80 million, Positronic represents a great addition to our harsh environment product offering. Next, El-Cab, which is based in Poland, is a manufacturer of cable assemblies and related interconnect products, primarily serving the industrial market, and has annual sales of approximately $55 million. What I'm very pleased by is that both Positronic and El-Cab are private, family-owned companies with rich histories, leading technologies, and excellent positions with customers in their target markets. As we welcome the outstanding Positronic and El-Cab teams to the Amphenol family and as we look forward to eventually welcoming the talented MTS Sensors organization in the coming months, we remain confident that our acquisition program will continue to create great value for Amphenol. Our ability to identify and execute upon acquisitions and successfully bring these new companies into Amphenol remains a core competitive advantage for the Company. Now, if we just look back on 2020 and some of the highlights from the year, despite the many challenges we all faced in 2020, from both a personal and a professional standpoint, Amphenol's dedicated entrepreneurial team performed just incredibly well. And I just could not be more proud of our performance this year. Sales reached a record $8.6 billion, growing 5% in U.S. dollars and 2% organically, and actually surpassed our pre-pandemic outlook that we had given back a year ago. Our full year adjusted operating margins of 19.2%, did decline 80 basis points from the prior year, but this decline was due to the significant cost challenges we experienced in the first half of 2020, after which our team was able to return to more typical profit levels in the second half. And that enabled us to achieve adjusted diluted EPS of $3.74, which was the same level as we achieved in 2019. No question, an impressive result given the circumstances. We generated record operating and free cash flow of $1.592 billion and $1.328 billion, respectively. Excellent confirmations of the Company's superior execution and disciplined working capital management, even in these most unprecedented of times. Our acquisition program remains strong, despite the challenges related to the pandemic, with two new companies added to the Amphenol family in 2020, EXA Thermometrics and Onanon, as well as Positronic and El-Cab here in January and the signing of MTS that we already discussed. These acquisitions expand our position across a broad array of technologies and markets while bringing outstanding and talented individuals into the Amphenol organization. We're particularly excited that these acquisitions represent expanded platforms for the Company's future performance. In addition, in 2020, we bought back over 6 million shares under our buyback program and increased our quarterly dividend to 16%. And as Craig mentioned, we're announcing today, a 2-for-1 stock split of the Company's shares. So, while the overall market environment in 2020 was highly uncertain, our agile entrepreneurial management team is confident that we have built further strength from which we can now drive superior long-term performance. Now, turning to the trends and our progress across our served markets, I would just comment that we remain very pleased that the Company's balanced and broad end-market diversification continues to create value for the Company, with no single end-market representing more than 22% of our sales in the year 2020. We believe that this diversification mitigates the impact of the volatility of individual end markets. That was particularly important here in 2020, but while also exposing us to leading technologies wherever they may arise across the electronics industry. The military market represented 11% of our sales in the fourth quarter and 12% of our sales for the full year. Sales in the quarter grew modestly from the prior year, increasing by approximately 1% in the fourth quarter, with growth in naval, space, and avionics applications offset in part by moderate declines in ground vehicles, rotorcraft, and airframe. Sequentially, our sales increased as we had expected coming into the quarter by 3%. For the full year 2020, our sales grew by 3% in U.S. dollars and 2% organically, reflecting our leading market position and strong execution across virtually all segments of the military market, offset in part by the impact of the pandemic-related production disruptions that we experienced in the first half of 2020. Looking ahead, we expect sales in the first quarter to decrease modestly from these fourth quarter levels. I just want to say that our organization working in the military market has worked long and hard for many years to strengthen our broad technology position while increasing our capacity to serve customers across all segments of this important market. Our performance in 2020, especially given the many disruptions related to the pandemic, is a great reflection of the results of those efforts. Given the ongoing and favorable military spending environment, our team continues to solidify our leadership position by ensuring that we execute on the demands of our customers by supporting the many next-generation technologies that are required for modern military hardware. The commercial air market represented 2% of our sales in the fourth quarter and 3% of our sales for the full year. Not surprisingly, fourth quarter sales were down significantly, reducing by approximately 50%, as the commercial air market continued to experience unprecedented declines in demand for new aircraft due to the pandemic-related disruptions to the global travel industry. Sequentially, our sales were a little bit better than expected, declining 10% from the third quarter, and for the full year 2020, sales declined by 34%, reflecting that significant impact of the pandemic on travel and aircraft production. Looking into the first quarter of 2021, we expect a sequential moderation in sales from these levels. Look, there is no doubt that these are difficult times for the entire travel industry, which is seriously impacting the market for commercial airplanes. Nevertheless, our team, who has just been so resilient over the course of this year, remains committed to leveraging the Company's strong technology position across a wide array of aircraft platforms, as well as next-generation systems that are integrated into those airplanes, and we remain well positioned when this market ultimately returns to growth. The industrial market represented 22% of our sales in the quarter and in the full year of 2020. Our sales in this market significantly exceeded expectations that we had coming into the quarter, increasing by a very strong 29% in U.S. dollars and 24% organically from the prior year. This robust growth was driven, especially by the battery and electric vehicle, instrumentation, heavy equipment, factory automation, and medical segments of the industrial market. On a sequential basis, sales increased by 4% from the third quarter. We are really pleased with our results in industrial for the full year, with sales growing 15% in U.S. dollars and 11% organically, as we saw strong demand in those same markets: battery and EV, instrumentation, heavy equipment, also alternative energy, and of course, medical, which was a very strong segment in the year. Looking into the first quarter, we expect a slight moderation from the strong fourth quarter sales levels. I'm truly proud of our team working in the industrial market, whether enabling the growth in volumes of a wide array of medical equipment or managing through significant increases in demand for semiconductor capital goods and next-generation batteries, our global organization has reacted quickly to ensure that our customers are fully supported regardless of the many operational challenges that have arisen during the pandemic. The automotive market represented 20% of our sales in the fourth quarter and 17% of our sales for the full year 2020. Sales in this market were also much stronger than we had expected coming into the quarter, with revenue growing by 24% in U.S. dollars and 19% organically in the fourth quarter, and that was really driven by broad-based growth across all geographies in the automotive market. Sequentially, our automotive sales increased by a very strong 22% as we continue to benefit from the broad recovery in the global automotive market. For the full year 2020, our sales declined by 6% in U.S. dollars and 8% organically, which reflected the significant challenges in factory shutdowns experienced by the auto industry in the first half of the year related to the pandemic, but was partially offset by our strong recovery that we drove in the second half. Looking into 2021, we do expect a sequential moderation from these high sales levels in the first quarter. Look, no doubt about it, the automotive industry faced one of the most difficult periods in recent memory during the first half of 2020, in particular in the second quarter, and that was followed by an unexpectedly robust recovery here in the second half. I'm just so proud of our team working in this important market, who clearly demonstrated their agility and resiliency through these most turbulent times and thereby secured the Company's position with our customers across the automotive market. Regardless of this most dynamic of years, we have continued to expand our range of interconnect, sensor, and antenna products, both organically and through acquisitions, to enable a wide array of onboard electronics across a diversified range of traditional fuel and electric-powered vehicles made by auto manufacturers around the world. This consistent strategy will continue to benefit us long into the future. The mobile devices market represented 18% of our sales in the fourth quarter and 15% of our sales for the full year. Our sales in the quarter to mobile device customers increased by a much stronger-than-expected 32% from the prior year, with strength in all product types, but particularly in wearables and laptops. Sequentially, our sales increased by 15%, driven by higher sales to smartphones and wearable devices. For the full year 2020, sales in the mobile devices market increased by a very strong 16%, as we continued to benefit from our agility in reacting to changes in demand in this dynamic market. For the full year, we saw particularly strong sales growth in products incorporated into laptops, tablets, wearables, and other accessories, while production-related products were offset in part by a slight moderation of sales of products incorporated into smartphones. Looking into the first quarter, we anticipate a typically significant seasonal sequential decline of approximately 40%. While mobile devices will always remain one of our most volatile of markets, our outstanding and agile team is poised, as always, to capture any opportunities for incremental sales that may arise in 2021 and beyond. Our leading array of antennas, interconnect products, and mechanisms continues to enable a broad range of next-generation mobile devices, positioning us well for the long term. The mobile networks market represented 5% of our sales in the quarter and 6% of our sales for the full year of 2020. Sales in the quarter decreased from the prior year by 8% in U.S. dollars and 9% organically, with declines in sales to both equipment manufacturers as well as operators. Sequentially, our sales did increase by a bit less than we had expected, 12%. For the full year 2020, sales declined by 16% from the prior year, which reflected the impact of the U.S. government restrictions on certain Chinese customers that had been imposed in 2019, as well as other impacts related to the COVID-19 pandemic. Looking ahead, we expect sales in the first quarter to increase from this quarter's levels as operators expand their investments in next-generation mobile networks. Regardless of the challenging demand environment in the mobile networks market in 2020, we are confident in the Company's long-term position in this important and exciting industry. Our team continues to work aggressively to expand our opportunity with next-generation equipment and networks. As customers ramp up investments in these advanced systems, we look forward to benefiting from the increased potential that comes from our unique position with both equipment manufacturers and mobile service providers around the world. The information technology and data communications market represented 18% of our sales in the quarter and 21% of our sales for the full year of 2020. Sales in the quarter were stronger than expected, rising by 3% in U.S. dollars and 2% organically from the prior year, as stronger sales of networking equipment and server-related products were offset by lower sales of storage-related products. Sequentially, our sales declined by 8% from our very robust third quarter. We are very pleased with our performance for the full year in IT datacom, with our sales growing a very strong 15% in U.S. dollars and 11% organically, as we capitalized on increased demand from our OEM and service provider customers as they work to accelerate bandwidth capacity expansions, in particular to support home-based work, school, and entertainment. Our team working in support of these customers has clearly distinguished themselves this year, reacting quickly to capitalize on unprecedented demand for our industry-leading high-speed and power products. At the same time, we've not slowed down our efforts to further develop that broad range of leading interconnect products in support of data communications networks around the world. Looking into the first quarter of 2021, we expect a typical seasonal moderation of sales here in the quarter. But nevertheless, we remain very encouraged by the Company's strong technology position in the global IT datacom market. Our customers around the world continue to drive their equipment to ever higher levels of performance in order to manage the dramatic increases in bandwidth and processor power. In turn, our team remains singularly focused on enabling this continuing revolution in IT datacom. The broadband communications market represented 4% of our sales in the quarter and 4% for the full year. Sales increased by 3% in the fourth quarter from the prior year, driven by stronger demand for home installation related equipment from our broadband operators. On a sequential basis, sales decreased as expected by 9% from the third quarter. For the full year of 2020, sales were flat, and that's despite the significant disruptions to production and demand that we experienced in the first quarter, offset by the accelerated investments in support of bandwidth later in the year. Looking into the first quarter, we expect sales to moderate from these levels and we remain encouraged by the Company's position in the broadband market. With our expanded range of products, together with strong relationships with customers around the world, we look forward to benefiting as operators increase their network investments in the future. Now just to summarize, there is no question that 2020 was one of the most challenging years we've all experienced. But in the face of these challenges, I'm just so proud of the entire team of Amphenolians around the world, who have managed extraordinarily well throughout the pandemic and the related disruptions to the economy. Through our dual-pronged approach of growing both organically and through our acquisition program, the Company continues to expand our market position while strengthening our financial performance. Amphenol's superior performance is a direct reflection of our distinct competitive advantages, our leading technology, our increasing position with customers across our diverse end markets, worldwide presence, a lean and flexible cost structure, a highly effective acquisition program and I can say, most importantly in this pandemic-impacted 2020, an agile and entrepreneurial management team. Now, turning to our outlook and regardless of our strong performance in the fourth quarter, there still remain significant economic uncertainties related to the COVID-19 pandemic. Accordingly, we will not be providing full-year guidance at this time. Assuming no new material disruptions from the pandemic, as well as constant exchange rates, for the first quarter, we now expect sales in the range of $2.120 billion to $2.180 billion and adjusted diluted EPS in the range of $0.90 to $0.94. I would note that on a post-split basis, this adjusted diluted EPS guidance would be $0.45 to $0.47. This guidance represents sales growth in the first quarter of 14% to 17% year-over-year and adjusted diluted EPS growth of 27% to 32%, again compared to the first quarter of 2020. I remain confident in the ability of our outstanding management team to adapt to the continued challenges in the marketplace and to capitalize on the many future opportunities to grow our position and expand our profitability. Our entire organization remains committed to delivering strong financial results, all while prioritizing the continued safety and health of each of our employees around the world. Most importantly, I'd like to take this opportunity to thank the entire Amphenol team for their truly heroic efforts here in the fourth quarter and throughout the entirety of 2020. And with that, operator, we'd be very happy to take any questions that there may be.

Thank you. The question-and-answer session will now begin. Please be reminded that questioners are only allowed to ask one question. Our first question is from Mark Delaney of Goldman Sachs.

Thank you so much for taking my question. I was hoping to better understand the orders that the Company reported and the strong book-to-bill of 1.04. To what extent do you think those orders are to help sort of true end demand? And do you think any of the orders that the Company is receiving are potentially customers placing longer-dated backlog because of some of the supply chain challenges that have really impacted semiconductors, but perhaps, is impacting orders to electronics companies more broadly? Any other factors that may be influencing the orders other than some of the more typical drivers like increasing content per unit? Thanks.

Thanks so much, Mark. Look, customers place orders with us and we can't always exactly pinpoint what the demand is, except we know that when they tell us they want the product. I wouldn't tell you that we've seen any dramatic lengthening of lead times or longer-dated orders per se. You mentioned the widely reported discussions around semiconductor availability in a variety of markets. I think our customers are pretty smart. And while they may be chasing lots of semiconductors or trying to put orders on those kinds of products, they know that our products are available for them. We haven't disappointed them throughout this year, even with the disruptions early in the year and even with the significant increases in certain of our markets in the second half. So, I wouldn't necessarily say that customers are lumping us into that kind of semiconductor category. I think that customers are looking to us, no question about it, on the basis of the fact that we were there for them when they needed us most. In particular, as many of our customers coming out of the pandemic had certain parts of their supply chain that still had a lot of disruptions. The excellent job that our team did in recovering from those disruptions, whether that was early on in the year, with bringing all of our factories in China back to full production substantially earlier than many, or continuing in through the later part of the year with the recoveries that we saw, for example, in automotive, industrial, and other markets. So I think that our team is doing a good job of making sure that we get more than our fair share of our customers' bandwidth and orders, and we're going to keep driving for that.

Thank you. Our next question is from Amit Daryanani of Evercore.

Thanks for taking my question. Wanted to follow up on what Mark was talking about and maybe more specifically the industrial and automotive, kind of the non-tech markets, where growth rates have been extremely strong. I think the concern is starting to become that are we starting to over-ship versus end demand and suddenly 20%, 24% organic growth is much better than what the underlying end demand is. Just on those two segments, I'd love to understand how does one get conviction that a strong first half may not result in a bigger correction in the second half of the year?

Yes. I mean, look, it's a fair question, Amit. I think we had just outstanding performance in the fourth quarter in both of those markets, as you know, 29% and 24% organic growth in industrial, 24% and 19%, respectively, in automotive. I think that we are outperforming by any measure, I would say, the various markets. But does that mean that they are taking our product and putting it on the shelf? No. I mean, we don't see that whatsoever. But at the same time, there is still uncertainty in the marketplace. We're not giving guidance for the full year. We have done an outstanding job of supporting our customers when they needed us in the ramp-up after the various disruptions. Regardless of what happens in end demand, I believe that our position with customers is stronger than ever. Now, I should also mention that, whether it's in industrial or in automotive, and obviously, industrial has a lot of different segments within it, we see continued content gains in both of those areas, which are greater than just end unit demand. That's the trend of adoption of electronics into all types of systems, equipment, and products. If anything, we've seen that adoption accelerate over the course of this year for a variety of reasons, and much has been reported about the acceleration, for example, of electric drivetrains in cars, where we benefited greatly from that. But we've seen many of those very similar dynamics across the multiple segments within the industrial market. So, look, what does this mean for the second half of 2021? Again, we're not giving guidance for the year. There is a lot of uncertainty related to the pandemic, but I think our position with our customers is stronger than ever before.

Thank you. Our next question is from Joe Giordano from Cowen.

Good afternoon. So, there's a lot of debate in auto about, longer term, what applications should be hard-wired versus when wireless is most appropriate. I know your portfolio seems to be intentionally structured to benefit, kind of, no matter what the answer to that question is or that trend is. But can you talk about how you think that plays out? What are your customers thinking like? Is there a limitation on what can be wireless?

Yes. I mean, without getting into too deep of a technical discussion here, I think you already kind of answered the question as I would answer it, which is, we are agnostic. The fact is, we are a significant supplier of interconnect products, antennas, and sensors into the automotive market. To the extent that there are next-generation developments, new architectures in the car that create a kind of an open field to help enable that, that's always been a benefit for Amphenol in the long term. And so I would expect the same that to the extent things become, how you say, more, less wired, or more wired, more wireless. The fact that we are a manufacturer of interconnect antennas and sensors positions us very well regardless of what that outcome is.

Thank you. Our next question is from Craig Hettenbach from Morgan Stanley.

Yes, thank you. Adam, can you just touch on or follow up on the MTS acquisition? I mean, it's pretty unique in terms of the size of the business that you're acquiring here? And also maybe expand on just, you talked about some of the complementary nature, kind of what it does to your portfolio as you go out in time?

Thank you very much, Craig. I believe the most distinctive aspect of MTS is that it is our first public company acquisition. In terms of acquisition scale, it's worth noting that we acquired FCI around six years ago when we were a considerably smaller company. FCI had a purchase price of about $1.2 billion, while this acquisition is $1.7 billion, excluding the proceeds from the Test & Sim business. So, the size itself isn't particularly unique, but the public company acquisition process does set it apart. The strategic review we conducted led to the successful negotiation of selling the Test & Simulation segment to Illinois Tool Works, or ITW, which is an exceptional company. MTS is also an outstanding company, and we hold Amphenol in high regard. This represents a beneficial arrangement for all parties involved, including MTS shareholders, Amphenol, and ITW. The MTS Sensors business, which drew us to MTS, is highly complementary to our offerings, with virtually no overlap. Its products are designed for extremely harsh environments and are utilized in advanced technology applications such as force and vibration, pressure, and position. They operate at top reliability levels with complex interconnect systems. The complementary nature of the MTS Sensors business excites us, especially considering the outstanding management team we've encountered at MTS. We've been thoroughly impressed by everyone at MTS, particularly the Sensors team. Our relationship with this entrepreneurial organization has been longstanding, and we are eager to welcome them into the Amphenol family once we obtain shareholder approvals, regulatory clearance, and meet other closing conditions.

Thank you. Our next question is from Samik Chatterjee from JPMorgan.

Hi, thanks for taking my question. Adam, I wanted to use the last question here on MTS as an excuse to ask you about Cable Products. I mean you didn't want to be in the Test business and that led to the decision of selling that MTS asset to ITW. I mean, on the same lines, how should I think about the longer-term reasons to be in Cable Products and Solutions, which you report as a separate segment? I can see the margins are quite a bit below your other segments, and we haven't seen strong growth for a while here. So, what's the longer-term opportunity you see? How does it fit in with the rest of the business or do you see it as a core part of your portfolio overall?

Yes, the straightforward answer to your question about whether we see it as a core part of our portfolio is definitely yes. It's quite distinct from our experience with MTS. We were attracted to MTS for its sensor business and were very impressed with the Test & Simulation team, but that represented a fundamentally different business for us, which is why we discussed a strategic review. Ultimately, the sale to ITW was a positive outcome for all parties involved. Regarding our Cable Products, they are a crucial part of an interconnect system designed primarily for delivering high-speed bandwidth to customers and companies. We've maintained that while the Cable Products segment might currently underperform in terms of margins, we don't want to be in a position of choosing which methods will succeed in providing Internet connectivity to homes, businesses, universities, and governments. We aim to support all potential avenues for achieving that, and our relationship with cable operators and MSOs is strategically vital for Amphenol. This significance extends into our interconnect segment, where our reputation and capacity to serve these service providers—compared to OEMs—has proven to be immensely beneficial as markets increasingly shift towards the service provider landscape. For example, in the IT datacom market, we previously focused on selling products directly to equipment manufacturers. However, in the past several years, we've observed a growing demand from web service providers. Collaborating with service providers differs significantly from working with OEMs who manufacture equipment in factories. Our experience in Cable Products has been crucial in enabling our team to adapt swiftly to changing demand patterns, which are characteristic of any service provider business. This year, particularly in IT datacom, we experienced robust demand from service providers, and our ability to respond promptly reflects a mindset that we originally developed in our Cable business. This illustrates the broader value we see in that segment, despite its current lower margins and its smaller role in our overall business. It remains an essential component of Amphenol's strategy.

Thank you. Up next for questions is Nick Todorov from Longbow Research.

Yes, thanks. Hi, Adam. Hi team. I want to touch upon the outlook on the mobile devices. Adam, I think you mentioned seasonal about down 40%. Can you maybe give us a little bit more color, because as we are looking at the data points, smartphone sales are strong, PC sales remain strong, as well as all the consumer electronics. So, maybe you can talk about what you're seeing that the first quarter is going to be more seasonal than anything else? Thank you.

Yes. Well, thanks very much, Nick. I think this is not an abnormal guidance that we see. Look, we had very, very strong performance in mobile devices this year. We came into the year with an expectation of the market being flat. I will tell you, I mean, we didn't give guidance at the time, but had you asked me at the end of Q1, what would mobile devices be for the year? I probably would have thought it would be down given the disruptions that we saw in the first quarter to our China facilities. The vast majority, if not all, of our mobile device production is really in China and all of those factories were shut down, as you know, for the better part of three weeks due to the early stage of the coronavirus. Our team just did an unbelievable job of reacting to the strength in the market. The strength this year, well, there was, on a sequential basis in the fourth quarter, strength in smartphones, we really saw a lot of strength this year, perhaps unsurprisingly, in devices that are needed by people when they are working, learning, and being entertained at home. So, things like laptops; things like tablets; we saw a lot of strength in wearables. I know a lot of people got on health kicks, and perhaps these wearables can be very useful there; a lot of strength in things that go in your ears, hearable devices as we call them, and probably because many people are working and schooling from home and they might have other people in the same house and they want to have some privacy. Whatever the reason is, there was just a great amount of strength, and our team was able to react to quite unexpected demand. So, as you go into the first quarter, I think we would expect normally some relaxation of that demand. Anecdotally, I tried to buy Christmas presents for my wife and my daughter of a computer because they both have really old computers, and I totally failed as a father and a husband, and they each got their present; one got it about a month late and the other one still hasn't gotten hers. There was a real demand back in the fourth quarter in particular for these devices, and I think we wouldn't expect such a continuation here in the first quarter.

Thank you. Up next for questions is Luke Junk from Baird.

Good afternoon, everyone. My question, I was wondering about the Company's ability to, I guess, you could say, cross-pollinate between the industrial as it relates to batteries and electric vehicles and your core auto business. I guess, I'm wondering, does that sort of the two-pronged approach open additional doors for Amphenol?

Yes, actually Luke, it's a great question. The simple answer is, yes. Our team works in industrial, and our team works in automotive, and there's a lot of crossover, by the way, in those teams. There is an enormous amount of interaction from a technology and from a customer perspective to ensure that we're maximizing our position with customers, whether they are making an electric bus or an electric sports car. That interaction, as you call it cross-pollination, we call it inside Amphenol collaboration, is something that we're doing all the time. That's collaboration from product development, making sure that we're bringing a full suite of products to customers in each of those markets, and really capitalizing on that trend of electrification that we're seeing, again, not just in automotive, but we're seeing that trend very significantly in the industrial market as well. When you look at our performance in both of those end markets, which we talked about with one of the earlier questions, it's not totally coincidental that we're seeing those strong content growth in both of those markets, some of which is being driven by this trend of electrification.

Thank you. Next for our question is Wamsi Mohan from Bank of America.

Hi. Yes, thank you. Adam, if we step back a couple of years over here, the Company was operating north of 20% operating margins. You're slightly below that, embedded in your guidance over here, on slightly higher revenues versus the first quarter of 2019. Clearly, these are unprecedented times. There's been a lot of cost inefficiencies that have crept in because of COVID. Can you maybe characterize if that is the reason why the margins are where they are? I mean, clearly, very strong in the face of what has transpired, but still below a couple of years ago. And I'm wondering if, a, you could help us think through what the reasons are, if it is truly COVID inefficiencies, and if it is, how large are these and how long do you expect them to persist, after which we should start to see sort of back to historical levels of margin?

Wamsi, thanks for the question. Yes, I think if you look back at the first quarter of 2019, we were operating at very strong profitability at that point. Honestly, we finished the fourth quarter at very strong profitability levels, so I guess I wouldn't necessarily just kind of look back into '19 to see a time where we are operating at strong profitability levels. If you look at the fourth quarter, we already reached 20.6% here in the quarter. We certainly still see some disruption related to the pandemic, and that's certainly embedded in those numbers, maybe slightly offset by some other benefits we have and things like T&E. I think I said last quarter that we kind of see a relatively neutral impact in the second half of the year. As we go into the first quarter, our guidance really reflects, I would say, a sequential seasonal decline, and we talked about approximately a 10% kind of seasonal decline in sales. That implies a conversion rate maybe slightly higher than our normal 30% downside, which would get to the profitability level in the 19% range. I think that's probably the basis of your question. I mean, I wouldn't say this conversion is so significant, given the level of sequential decline we are seeing going into the first quarter. Additionally, combined with a continued challenging kind of cost environment, we are still seeing COVID-related inefficiencies. The Company has done a great job thus far, as you saw in 2020, of dealing with those inefficiencies and really snapping back in profitability level. We are seeing a little bit of a decline going into the first quarter from a sales perspective, which is going to have some impact. I think the team has done a great job dealing with that and we'll continue to deal with that. I'm really proud of where we ended up in 2020 and I have no doubt that we will get back to those levels. The other thing that's happening in the first quarter, certainly, is the acquisitions we just closed on here in January, are having some small effect on the conversion if you look sequentially into the first quarter. The ones we did in 2019 certainly haven't made the progress that maybe we would have expected in 2020 for very understandable reasons as we dealt with the pandemic during 2020. I think there are a few reasons. But all in all, we're very happy with where we are at profitability, certainly in the second half year of 2020, and quite honestly, even in the first half given the challenges we had. I am really confident that as we go into 2021, you'll see those levels snap back to normal levels once COVID is behind us.

Thank you. Up next for questions is David Williams from Loop Capital.

Hey, good afternoon, and thanks for letting me ask a question. I just wanted to touch a little bit on the automotive market maybe and what your outlook is there. I know you're not providing full-year guidance, but if you're kind of thinking about the automotive market in terms of the total growth this year and then maybe the mix of EV versus traditional vehicles, what are your thoughts around that perhaps?

Yes. I mean, you said it David, we're not giving an outlook for the year. I couldn't actually quote for you exactly how much of our business is related to EV versus traditional. I don't have the numbers close at hand. What I can tell you is that we are seeing higher growth from EV applications over the last several years, and EVs definitely represent a higher proportion today than they did a year ago, two years ago, or three years ago, and we would expect in the coming year or two for that trend to continue. EVs not only tend to have potentially a little more content, but the nature of the content can be more attractive and more interesting for a company because of the high reliability, the harsh environment, and the high-power aspects of those vehicles. We'll see how the year progresses. We're not giving guidance again, but we have seen good strength in EV, and we would expect to see that going forward.

Thank you. Up next for questions is Chris Snyder from UBS.

Thank you. I have a follow-up on auto. Can you talk a bit about the EV versus ICE competitive environment? Are you seeing new entrants, given the different product mix and high voltage focus? Conversely, does the shift carry any implications from maybe some of the smaller competitors who could struggle to invest in EV solutions, at least in the early days? I'm just asking because the Company's outperformance on the auto side has been very strong in the last couple of quarters. I just wanted to see if there are any share shifts going on?

Yes. I mean, look, I don't know specific share shifts. What I do know is we're outperforming the market, so by definition, we're taking some share. Part of the reason for that is EVs, and part of the reason is other applications. Are there different competitors in an EV versus an internal combustion engine? There may be. I mean, there's different competitors for all different systems in the car. You have to remember in our industry, there is not a monolithic competitive landscape. There are obviously some companies that are publicly traded and well-known, which are excellent companies, but there is a whole diaspora of competitors in the interconnect industry. Each application may have a different landscape of competitors than the application before it. So I guess, by definition, yes, you're going to have some different competitors. I think our strength in EV, in part, stretches back to the fact that we've been making high-power, high-voltage connectors for really the entire history of Amphenol. That has been a legacy, you would call it even a birthright of Amphenol with our military, our industrial business. Our ability to collaboratively share some of those underlying core technologies across our teams, a little bit like we discussed just a few moments ago, has really positioned the Company well to be an enabler of those next-generation systems, which are really mission-critical. We're very happy to have a whole diaspora of competition across all our markets, and that includes automotive.

Thank you. Our next question is from Steven Fox from Fox Advisors.

Thanks, good afternoon. Adam, I was wondering if you could just dig into the weeds on the two acquisitions you just closed in January. You've mentioned one was around harsh environments, and we know you're already a leader in that area, and then the other one was tied to cable assemblies, and we know you have a pretty broad offering there. Can you just sort of get into what attracted you to the businesses from a product standpoint? Thank you.

Sure. Thanks so much, Steve. Look, these are both outstanding companies. We've known them both for a long time. The family who founded and still until we closed recently Positronic, I've known that family for, I don't know, a decade and a half. It's an outstanding company, Positronics. A real marquee brand in the interconnect industry, known specifically for harsh environment, in particular board-level power connectors and some data connectors. These are IO connectors that go on the board. They are used in a wide variety of systems in the military, as well as in datacom for power and industrial applications, and it's very complementary. A lot of the products that they have, Positronics, they have just a real proprietary position across their customer base. Sometimes you look in admiration at the strength of a company's position because of the uniqueness of their technology, and that's something we've done for many years with Positronics. El-Cab is a little bit of a different story. First of all, El-Cab is our first company that's really fully based in Poland. Poland is an outstanding location for low-cost manufacturing with proximity to all of Europe, and they have an excellent position in cable assemblies for industrial applications, and in particular, next-generation electric-powered industrial vehicles, whether that's buses, trucks, delivery vehicles, and they are also involved in marine-related cable assemblies. What really attracted us to them is their leading position in this sort of EV revolution, industrial EV revolution. That's something we've done a great job of in Asia, we've done a great job of in North America, and we've done a good job in Europe. This accelerates our position in that electrification of industrial vehicles in Europe. Again, a fabulous team, family-owned company, great management, great products, great position; those are the factors that we always look for in acquisitions. I think both Positronics and El-Cab deliver wholeheartedly in all those areas.

Thank you. Our next question is from Joseph Spak from RBC Capital Markets.

Thank you very much. Adam, you mentioned battery factories a couple of times, and there are likely to be trillions of dollars of CapEx spent to build terawatts of capacity, not only for electric vehicles but storage and other uses. It's probably one of the faster-growing market opportunities out there. Is there anything you could tell us about Amphenol's opportunity and positioning in the market? Are there some regional differences? Because I think a lot of the capacity right now is in Asia, but there probably need to be factories built all over the globe?

Yes. I think, maybe, it might have been contemplated a little bit, Joe. I think what I talked about was battery and EV and factory automation, but not necessarily together. The fact is, you raised a very good point, which is for sure, whenever you have a massive build-out of factories, be that for batteries where there is a lot of automation, next-generation vehicles, whatever, we've seen a lot of build-out of factories, by the way, semiconductor factories as well. You've seen the strength that we've had in instrumentation. Our position in factory automation and instrumentation, test equipment, and otherwise interconnect for all of those puts us in a very strong position to benefit from the expansion of these facilities. When we talk about our sales of industrial products into battery applications, it's really actual interconnect sensors that get integrated into these high-technology high-voltage battery systems, both to allow the signal of the battery, the power to come in and out of the battery, and also the control systems for these batteries, which is a wonderful opportunity where there is a lot of kind of interconnect and sensor applications that we are selling to customers just a complete solution to allow them to manage these batteries to get more efficiency and safety out of them once they're integrated into vehicles.

Thank you. Up next for questions is William Stein from Truist Securities.

Great. Thanks for taking my question. There's always been quite a focus on the trend to EV. When we think about U.S. federal energy policy, it looks like there is perhaps a shift in the works to favor more renewables versus carbon-based. I wonder, Adam, if you can sensitize us to the potential impact of your business. Are renewables a good market for Amphenol relative to downhole, which I understand is very harsh and typically high-margin, high ASP sorts of connectors? Thank you.

Yes. I mean look, we're agnostic, Will, to whatever that may be, if it's traditional oil and gas versus renewables versus all that's related to renewables, the battery storage that Joe just asked about and otherwise. We're really agnostic. I mean, if you look as an example, last quarter, we had strong growth in alternative energy. That was offset by relatively strong decline in oil and gas. I think that's a good indication of the value and strength of the diversified position we have really across all areas of whether that be power generation, power consumption, or power storage. We've made sure to not place a bet on kind of one trend or another, but rather to be present, supporting customers across the board. We are still supporting our oil and gas customers for sure. I mean, that's an important market and I don't think the world is totally detaching from fossil fuels. If the trend is away from them, we're well-positioned either way.

Thank you. Our next question is from Jim Suva from Citigroup.

Thank you very much. Adam and Craig, you've seen a lot of success with your Company in automotive. It used to be about 5% of the Company; now it's 20% of the Company. Is most of that success coming from like the infotainment in the cabin, the safety along the bumper, or the batteries in it or the electronic motors? I'm just trying to see, because there are some big trends that are going on. I'm trying to see, where has been the most part of your strength in automotive?

Jim, thank you very much. I think you listed a lot of them. I mean the fact is, if I look over the long term and you've followed us for a very long time, you have a great sense of the arc of the progress of our automotive business over these many years. We started out in automotive many, many years ago as the innovator of airbag connectors, and that was kind of our first thing we did a long time ago. I think the first airbag was like in 1990 or something like that. So, we're talking a 30-year time period. Over time, we developed into interconnect products for satellite radio and GPS and other infotainment. We built through acquisitions and other means, presence in emissions control and engine control, other electronics. As the car adopted new electronic systems, we were positioning ourselves, as these new systems were developed, to be there for customers for Tier 1s, Tier 2s, whomever. I think that's been very successful over all these years. We believe there is still a lot more potential left in our automotive business. The growth in content in the car is truly outstanding, and we're not the only ones to talk about that. In many ways, to me, a car is becoming kind of a datacenter on wheels, an electric powertrain on wheels. I mean, you name it. Each of those new systems, many of which you mentioned, are contributors to the growth of the Company. I wouldn't say that any of them are disproportionate to our long-term success in that market. I think it's been actually a relatively balanced contribution to that long-term success that we've seen over the last decade.

Thank you. Next for a question is David Kelley from Jefferies.

Good afternoon, Adam and Craig. Just wanted to ask about the industrial trajectory. You discussed and highlighted several secular opportunities. It feels like, from a broad cyclical standpoint, industrial equipment seems to be ramping back up. But we're also going to be coping against some difficult medical comps through the year. So can you just talk about what you're seeing or what you do see as the biggest drivers for industrials in 2021?

Yes. I mean look, again, we're not giving guidance for 2021. When I look at the breadth of our performance here at the end of the year as we closed out the year, as well as throughout the course of the year, there is no single story to the strength. Yes, great performance in battery EV, great performance in instrumentation, great performance in medical. I could give you a long list of the positive contributors to our industrial market. Will there be some areas where there will be a little bit of a tougher comparison? Obviously, the second quarter was a particularly acute quarter for medical, where our team, I just cannot emphasize enough how proud we were to be a contributor to the fight against COVID through our reactivity to the demand for new medical equipment, whether that be respiratory therapy devices and the sensors interconnect products contained therein or hospital equipment to outfit ICUs and other patient care devices. That is something that we at Amphenol will forever be proud of: the contributions that our team made to the fight against COVID to protect lives and enable countries around the world to have a fighting chance against this virus. Yes, will there be a little bit less maybe of those more acute care things? There could be, but who knows? There were also, as many have talked about, reductions in elective procedures, which actually reduced demand for certain medical equipment in some areas too, and so maybe that has the chance to come back. I think there is insufficient visibility today, which is why we are not giving guidance for the year, to say which of those segments, as we go through the course of the year, are going to have the stronger or the weaker performance. But for sure, we have positioned ourselves with our customers by being there for them when they needed us most in the most critical time periods such that, to the extent that they have business to give, I would expect that they will give at least, if not more than, our fair share to Amphenol.

Thank you. As of this time, we don't have any further questions on queue. I'll turn the call back to Mr. Lampo for his closing remarks.

Well, this will be Mr. Norwitt for one last remark here. And listen, thank you all for all of your great interest in the Company. We really appreciate everybody's support through this 2020. We know this was not an easy year for all of you, working from home and being cooped up and not being able to come visit us, for example. Craig and I, no doubt about it, look forward to the day where we get to meet you in person again, host you here in our modest headquarters in Wallingford, Connecticut, where we are today. We look forward to great success and wish you all good health as we continue into 2021. Thank you so much.

Thank you.

Thank you for attending today's conference, and have a nice day.