Hello, and welcome to the First Quarter Earnings Conference Call for Amphenol Corporation. 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. 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 first quarter 2021 conference call, and our first quarter 2021 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. Please refer to the relevant disclosures in our press release for further information. In addition, as a result of our previously announced 2-for-1 stock split effective on March 4, 2021, all share and per share data discussed on this earnings call is on a post-split basis. The company closed the first quarter with sales of $2.377 billion and GAAP and adjusted diluted EPS of $0.53 and $0.52, respectively. Sales were up 28% in U.S. dollars, 25% in local currencies, and 23% organically compared to the first quarter of 2020. Sequentially, sales were down 2% in U.S. dollars, 3% in local currencies, and 4% organically. Orders for the quarter were $2.734 billion, which was up 27% compared to the first quarter of 2020 and up 9% sequentially, resulting in a very strong book-to-bill ratio of 1.15:1. Breaking down sales into our 2 segments: the interconnect business, which comprised 96% of sales, was up 28% in U.S. dollars and 25% in local currencies compared to the first quarter of last year. Our cable business, which comprised 4% of our sales, was up 17% in U.S. dollars and 18% in local currencies compared to the first quarter of last year. Adam will comment further on trends by market in a few minutes. Operating income was $465 million in the first quarter of 2021. Operating margin of 19.6% was down 100 basis points sequentially compared to the fourth quarter of 2020 adjusted operating margin and up a strong 260 basis points compared to the first quarter of 2020. The year-over-year improvement in operating margin was primarily driven by normal operating leverage on the higher sales volumes, combined with the benefit of a lower cost impact resulting from the COVID-19 pandemic, partially offset by the impact of a more challenging commodity and supply chain environment. The sequential decline in operating margin was driven by normal conversion on the reduced sales levels as well as a more challenging commodity and supply chain environment. From a segment standpoint, in the interconnect segment, margins were 21.5% in the first quarter of 2021, which increased from 19.1% in the first quarter of 2020 and decreased 100 basis points sequentially. In the cable segment, margins were 8.8%, which increased from 7.6% in the first quarter of 2020 and decreased from 10.3% in the fourth quarter. Given the continuing challenges posed by the COVID-19 pandemic, we are very 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 that has enabled us to capitalize on many opportunities for incremental sales while driving strong operating performance in this very dynamic market environment. The company's GAAP effective tax rate for the first quarter was 23.9%, which compared to 15.9% in the first quarter of 2020. On an adjusted basis, the effective tax rate was 24.5% in the first quarter of both 2021 and 2020. On a GAAP basis, diluted EPS increased by 33% to $0.53 compared to $0.40 in the prior year period. Adjusted diluted EPS increased by 49% to $0.52 from $0.35 in the first quarter of 2020. The company continues to be an excellent generator of cash. Cash flow from operations was $321 million in the first quarter or 97% of GAAP net income. And net of capital spending, our free cash flow was $243 million or 74% of net income. From a working capital standpoint, inventory days, days sales outstanding, and payable days were 85, 73, and 59 days, respectively, all within their normal ranges. During the quarter, the company repurchased 2.4 million shares of common stock for approximately $153 million. And during the month of April, the company repurchased a small amount of remaining stock authorized under our existing stock repurchase plan. As a result and as mentioned in today's earnings release, yesterday, the company's Board of Directors approved a new 3-year open market stock repurchase plan for the purchase of up to $2 billion of the company's common stock. At March 31, cash and short-term investments were $2.4 billion, of which $963 million was held in the U.S., with the remainder held outside of the U.S. The elevated level of cash on hand at the end of the first quarter was driven by borrowings under the company's U.S. commercial paper program in anticipation of the MTS closing in early April. Total debt was $4.6 billion, and net debt was $2.3 billion. Total available liquidity at the end of the quarter was $4.1 billion, which included total cash and short-term investments on hand. First quarter 2021 EBITDA was $559 million, and our net leverage ratio was 1.0x. Following the close of the quarter, on April 7, we completed the acquisition of MTS, which Adam will discuss in more detail in a moment. The MTS acquisition was funded by a combination of cash and cash equivalents on hand as well as additional borrowings under the company's U.S. commercial paper program. On a pro forma basis, including the MTS acquisition and the anticipated divestiture of the test and simulation business, total available liquidity and net leverage at March 31, 2020 would be $3.2 billion and 1.4x, respectively. Until the divestiture of the MTS test and simulation business has closed, we will account for and report the test and simulation business as a discontinued operation. As such, the expected sales and earnings of the test and simulation business are not included in our guidance. Our guidance also excludes cash and noncash expenses that will be expensed in the second quarter related to the MTS acquisition. These expenses, which we expect to total approximately $85 million or $0.12 per share, include costs related to the early extinguishment of debt, noncash purchase accounting-related expenses, external transaction expenses, severance, and other costs. In conjunction with the divestiture of the test and simulation business, the company will also incur certain additional cash tax-related and other acquisition-related costs, which will not be included in income from continuing operations. Our guidance does incorporate the expected results of the MTS Sensors business, which as previously announced, is expected to generate $350 million in sales and $0.05 in diluted EPS in the first 12 months after closing. I will now turn it over to Adam, who will provide some commentary on current market trends as well as our recently completed acquisitions.

Thank you very much, Craig. I'd like to welcome everyone on the call today and hope you, your family, friends, and colleagues are safe and healthy. I'll highlight some of our achievements in the first quarter, discuss trends and progress across our diverse markets, and share our outlook for the second quarter. We surpassed our expectations this quarter, exceeding the high end of our guidance in sales and adjusted diluted earnings per share. Sales increased by 28% in U.S. dollars and 25% in local currencies, with organic growth of 23%. We experienced growth in nearly all end markets, particularly in automotive, mobile devices, industrial, and IT datacom. We recorded orders of $2.734 billion, achieving a strong book-to-bill ratio of 1.15:1. Despite operational challenges from the pandemic and rising commodity costs, our operating margins reached 19.6%, a 260 basis point increase from last year. Our adjusted diluted EPS grew by an impressive 49% compared to the previous year, demonstrating the strong execution of the Amphenol team. We generated $321 million in operating cash flow and $243 million in free cash flow this quarter, reflecting the quality of our earnings. I'm incredibly proud of our team for their discipline and agility as we navigate this dynamic environment. Regarding our acquisitions, our small acquisition team was active this quarter, closing three more acquisitions, bringing our total this year to five. We were pleased to close the acquisition of MTS Systems earlier than expected, and we signed an agreement to sell the MTS test and simulation business to Illinois Tool Works for $750 million. This sale is pending certain post-closing adjustments and regulatory approvals. We're excited to welcome MTS Sensors to Amphenol, as we believe this addition will enhance our sensor product offerings and drive long-term benefits. We anticipate that MTS Sensors will contribute approximately $350 million in sales and $0.05 in adjusted diluted EPS in the first year following the closing. In February, we acquired Euromicron, a manufacturer of fiber optic interconnect solutions for the mobile networks and IT datacom markets, based in Germany with annual sales of around $25 million. In March, we completed the acquisition of Cabelcon, a Danish company that designs and manufactures high-tech connectors, also with sales of approximately $25 million. As we integrate these companies into Amphenol, I am confident our acquisition strategy will continue to create significant value. Now, regarding market trends, our diversified end-market presence mitigates the impact of fluctuations in individual markets while positioning us to take advantage of emerging technologies in the electronics industry. The military market comprised 11% of our sales, growing 3% year-over-year, with flat organic growth. We expect sales to grow in the low double digits in the second quarter, supported by MTS Sensors. The commercial aerospace market represented 2% of our sales and declined 47% from last year, though we anticipate a sequential improvement in the second quarter. The industrial market made up 24% of our sales and saw strong growth of 33% in both U.S. dollars and organically, driven by demand in several segments. We expect continued growth in the second quarter, aided by MTS Sensors' addition. The automotive market constituted 22% of our sales, growing 52% in U.S. dollars and 44% organically, driven by a recovery in electric and hybrid vehicles. We expect a slight sequential decline in the second quarter due to supply chain challenges. The mobile devices market represented 12% of our sales, increasing by 51% year-over-year. We've seen a typical seasonal decline in the first quarter, and we expect a high single-digit decline in the second quarter. The mobile networks market accounted for 6% of our sales, growing 4% year-over-year. We anticipate modest sales increases in the second quarter, benefiting from our acquisition of Euromicron. The IT datacom market represented 19% of our sales and showed strong growth of 25% year-over-year. We expect further mid-single-digit increases in the second quarter. The broadband market accounted for 4% of our sales, increasing by 16% year-over-year. We anticipate a strong sequential increase in the second quarter as we continue to respond to customer demand. Looking ahead, we expect sales in the range of $2.415 billion to $2.475 billion for the second quarter, with adjusted diluted EPS between $0.53 and $0.55, representing sales growth of 22% to 25% and adjusted EPS growth of 33% to 38% compared to the same quarter last year. I have confidence in our management team’s ability to navigate ongoing challenges while capitalizing on future growth opportunities. The entire Amphenol organization is committed to delivering long-term value while ensuring the safety and health of all employees. I would like to extend my gratitude to the Amphenol team for their outstanding efforts in the first quarter. Operator, we are now ready to take any questions.

Now our first question is from Chris Snyder of UBS.

I have a question about the supply chain. With the stronger-than-expected growth in the end markets, did you notice any inventory building in those markets? Additionally, regarding the supply chain, as we approach Q2, the top line guidance appears somewhat low compared to the Q1 orders and the 1.15 book-to-bill. Does this suggest that deliveries might be delayed due to the supply chain disruptions we are currently experiencing?

Thank you, Chris. Regarding the supply chain and our strong results in the first quarter, I want to emphasize that customers are eager for our products because their customers also require them. This includes providing IT datacom connectors to web service providers to meet the increasing demand for bandwidth, as well as automotive clients working hard to produce as many vehicles as possible due to low dealer inventories. We observed customers taking our products and incorporating them into their systems. While we do not have complete visibility into our customers' warehouses, we do have some insight into the distribution channel, where we did not witness any significant inventory increases or noticeable buildups. In fact, our growth in distribution was in line with the overall company performance. Looking ahead to the second quarter, we anticipate strong guidance for several reasons. Firstly, there are ongoing supply chain challenges, especially in the automotive industry, where we expect a slight decline in demand as some customers may temporarily halt production or reduce output due to these issues. Despite this, our second quarter guidance remains strong, projecting up to 25% growth, which follows a 7% sequential increase from last year’s second quarter. Additionally, we saw a strong rebound in our mobile devices business last year during the second quarter, making the 25% growth target even more impressive. Regarding orders, we indeed received robust orders this quarter. Some customers might be extending their order timelines due to caution stemming from reported challenges, which could lead them to place orders further in advance. Nevertheless, looking at our year-over-year order growth, it mirrors our sales growth at about 27%, reflecting solid demand for our products from customers we've consistently supported throughout these trying times. Overall, it is evident that customers are returning to us because we stood by them when they needed our support the most.

Now our next question is from Wamsi Mohan of Bank of America.

Adam, I was wondering if we could just step back perhaps, given your really broad diversified portfolio. How should investors think about the areas in which Amphenol can benefit from this proposed infrastructure plan?

Well, Wamsi, that's a great question. It’s still a proposed infrastructure plan, so I approach everything with some caution, especially given the current political climate in the U.S. However, I believe many of our businesses can play a role in upgrading the infrastructure in the U.S. Infrastructure is being defined broadly, not just limited to roads, highways, bridges, tunnels, and airports, which would drive demand for a variety of products we sell, including heavy equipment. Infrastructure also includes domestic production capabilities for electronic components, bandwidth, and access to data and devices. All these elements connect through the adoption of electronics, and our capability to support that adoption is crucial in modernizing various infrastructure aspects. Regardless of how this evolves in Washington, it's clear to me that electronics will play a significant role in this country's infrastructure upgrade, and we are well positioned in our end markets to contribute effectively.

Now our next question is from Amit Daryanani of Evercore.

I guess my question is really around, Adam, when I look at your growth rates for the first half of this year, they're about 25% or so. Much of this, I assume, is a cyclical market recovery. But I'm wondering if you could actually talk about if Amphenol is seeing share gains pick up as well in the first half of the year, especially as I imagine that your peers have not been able to ramp up capacity as quickly as demand has come back. And if that's true going forward, could that enable you to grow at a larger premium to the underlying industry growth rate and share gains become bigger for you, hopefully?

Well, thank you very much, Amit, and greetings to you as well. Look, I think the numbers here a little bit speak for themselves. When you look at our overall growth, growing 28% or 23% organically in the quarter, or when you look at some of the individual markets where we had significant growth in a number of our markets, clearly outpacing whatever the industry growth rate will be. And I'm not an expert in exactly what various industry growth rates are. But clearly, growing in industrial by 33% organically and automotive by 44% organically and mobile devices by 51% organically and IT datacom by 25%. Those are clearly ahead of the overall industry growth rates. And you're correct. I think there is a meaningful component of that growth, which is our ability to react quickly, despite a very challenging environment. It should not be understated. There still remain many challenges today in the world, both with COVID and with the supply chain. But our ability to react quickly in an entrepreneurial and agile fashion to satisfy the demand of customers when they need it has been, I think, through this whole cycle, an extraordinary advantage that we brought to bear. And as customers think for the long term about with whom do they want to partner, it's going to be very hard to forget who was there for you when the chips were down at the greatest moment. Who was there for you during the depths of the pandemic when bandwidth was at such a premium and factories were closing all over place because of shutdown orders and the spread of the virus, and who was there to react when you needed to help you support your end customers. And I think that is something that our customers reflect on, integrate into their buying behavior, and incorporate into their decisions about who should be their partner going forward. And so does that mean that we have a high potential to continue to outpace the market? And we've outgrown the market for now 2 decades. And I think that this just reinforces for our customers why having Amphenol as your first phone call is a really important principle and a very helpful way to run your supply chain.

Now our next question is from James Suva of Citigroup Investment Research.

And it's nice to see Amphenol continue to make acquisitions. In the past history, sometimes acquisitions have been companies that really needed a global footprint for sales or a global manufacturing footprint or helping to polish their operations. And others have been strategic to help the company grow in the future. But the recently announced acquisitions that you just talked about today, can you help us figure which they are more for the growth or health of operations and you can really improve their profitability or go to market? How do they fit into the Amphenol family?

Thank you very much, Jim. I mean, look, our criteria for acquisitions has always started with two things, and that's people and the products, in other words, the technology that those companies have. And so the very first test for us is, are we acquiring a company that has people who have passion, drive, integrity, and entrepreneurial spirit that we think will fit into the Amphenol organization. And then second, do they have unique enabling technologies that ultimately solve real problems for their customers. And then when we found those companies, we don't focus on either growth or on improvement in operating performance. We try to do both of those things. And our acquisition program, which has been so successful over so many years, has really been successful because we were able to find ways to accelerate the growth of those companies and find ways to improve their operating performance. And so I would say that the 3 acquisitions we're talking about today, of course, MTS being far and away bigger than Euromicron or Cabelcon, they all share that great potential, both from a top line growth perspective, taking advantage of being part of Amphenol, taking advantage of being part of a global company with strong partnership, preferred supplier relationships with customers across all of our end markets, but also being part of a company that has access to low-cost manufacturing when appropriate, who has access to collaborative initiatives across the company from a technology or sourcing perspective that ultimately can help to drive better operating performance. And so I would say, with these 3 companies, we think that they all have great growth and profitability improvement potential, despite their very different scales.

Now our next question is from Matt Sheerin from Stifel.

A question, Craig, regarding your commentary about some cost headwinds weighing somewhat on your margins. Could you quantify that in terms of maybe what in terms of basis points you've seen? And is that just an issue that you see persisting over the next couple of quarters that we're hearing from other suppliers as well?

Thank you, Matt. I want to begin by expressing our pride in achieving strong operating margins of 19.6% in the first quarter despite the challenging environment and ongoing COVID-related costs. Additionally, we have been facing a difficult commodity and supply chain situation. This accomplishment is significant, and I'm pleased with the general managers' performance in managing these rising costs. As we approached the first quarter, we anticipated a typical sequential downside conversion of nearly 30%. Most of this gap is due to the pressures from the commodity and supply chain challenges. There is also a minor impact from the acquisitions of Positronic and Euromicron, but overall, the primary concern remains the cost environment and headwinds we are experiencing. Looking ahead, our team is actively working to mitigate some of these pressures through cost-saving measures and potentially passing on some increases to customers if necessary. However, I don't believe we will fully navigate this situation in just one quarter. The headwinds we are facing are included in our guidance for the second quarter, but we have not provided guidance for the remainder of the year. Overall, I am satisfied with our efforts to offset some of these costs, but I expect that we will continue to deal with these challenges for at least another quarter.

And Matt, I would just add to that a little color. There are certain parts of this, which are pretty significant cost differences in commodities, for example. I mean, they're all very well reported. And the way that Amphenol operates is we have close to 125 general managers around the world, and each of them is really tuning their operation in light of the costs that are hitting them, in particular. So you take an example, a general manager in our cable business, which has a very high component of material cost, very significant in our cable segment, there's not a choice, but to go and work with customers and to make sure you take a leadership position in adjusting price to account for those commodity prices. And we would certainly expect that others in the industry would have that same dynamic. And that's just one example of how it goes. But the beauty is that these general managers have every tool available to them to adjust, whether it's from the price you sell to the customer, to every element of cost are all in the power of the general managers. And when you see a sudden increase in some of these things, it can take a short while to work through it. But Craig and I are confident that over time, our team is going to manage this, as they always have.

Now our next question is from Mark Delaney of Goldman Sachs.

This quarter clearly demonstrated Amphenol's leadership and operational flexibility. However, I am curious if you are considering any changes in your operations moving forward, particularly regarding your sourcing of materials, manufacturing locations, or inventory management. This reflection could be important due to the impact of COVID and trade issues on global supply chains, as well as the growth of Amphenol through recent mergers and acquisitions, including the latest one with MTS.

Thanks so much, Mark. I mean, look, the answer I'll give you is really 2 sides. The answer is no, we think that our approach, our culture, the unique entrepreneurial organizational structure that we have had in Amphenol for many decades is uniquely tailored to an environment like we've been in and to an environment like we're headed into. But the other answer is yes, every day, meaning we're making changes every day. We're not making those changes from here at headquarters. We're not deciding on a blanket approach like we're going to go out of one country and go into this country, or we're going to increase our inventory this much or we're going to change how we're sourcing things. But those general managers around the world are every day making course corrections. And some of them pretty significant course corrections in the moment to react to the environment that is around them. So when tariffs came in, you'll remember this already, it seems like so long ago that there was the thing called tariffs several years ago. But our team immediately reacted to that in every way possible from moving production to changing logistical flows, to doing lots of other things to passing on the price to customers when there was no other option. And that was a real-time, in the moment kind of transformation, but not at a corporate level, rather it was at the individual operating unit levels. And I think as we've gone through the pandemic, as we see the very robust demand coming out of this part of the cycle, we're making lots of changes every day to make sure that we remain the most competitive, that we are able to outperform the market at the highest degree possible and that we're able to deliver to the bottom line superior operating profitability and ultimately convert that to cash. And those are just day-to-day decisions that are made by our general managers, obviously, in some consultation with us. But ultimately, the proof, I think, is really in the pudding of that approach.

Now our next question is from Craig Hettenbach with Morgan Stanley.

Just questions on MTS. I think their operating margins are roughly in the mid-teens. And I know other acquisitions you've done in the past where they've been lower. There's a path to kind of get them to corporate average. So just curious if there's any similarities or differences in terms of that approach for this deal? And then, Adam, you mentioned a number of the key markets for MTS where they play. Any of those stand out in particular from a growth perspective that you're most excited about?

Thanks very much, Craig. I think you're roughly accurate about the operating margins with MTS. Obviously, there will be some amortization, and we include amortization in our numbers, so that they can have a little bit of downward impact on the operating margins. But you're right. I mean every company who comes into Amphenol thinks about how are they going to achieve, ultimately, that growth in margins to get up to the Amphenol corporate average or above. Obviously, an average is just an average, and there are some above and some below. And I would tell you that the management team in the MTS Sensors business is an extraordinarily capable team of individuals. The gentleman who leads that business, who led the business inside of MTS, who, by the way, led the predecessor family-owned company that was acquired by MTS, I mean this is a just truly outstanding individual who also likes to see that his company is doing as well as his sister companies. And there's no doubt about it that there's a little bit of peer pressure inside of Amphenol when you come in and see the margins of your peers. And something tells me that that's an organization that does not want to be below the average. And how long is that going to take? That's always a question. But when there's a will, there's a way. And I think this is a team that has an extraordinary will to make that happen. In terms of the markets with the MTS Sensors business, I talked already that they have strong positions in industrial and military and then in commercial air and automotive, roughly in that order, I would say, in terms of magnitude. And they participate in just some of the most exciting applications within those. MTS makes products that are really at the cutting edge of the harsh environment, high-performance requirements of some of these systems. So when you're making like a turbine, and that turbine, be it a gas turbine or a windmill, and you want to know that that thing is operating with good function and smoothly and that there are no issues inside the turbine. You're going to use a sensor from MTS, or a number of sensors, let me say, that are going to be in the most harsh of environments, hot, out in the middle of the ocean, you name it, that are going to ultimately tell you if your system is working or not and do you need to go maintain that. That's just one example of these extraordinary harsh environment vibration, force, pressure, and position sensors that they sell. I had the good fortune to go around to several of the factories just in the last couple of weeks. And had been there, of course, before. But going now as the owner is a little bit different. And not only do you see products that are truly at the high leading edge of sensor technology, but these are sensor products where the harsh environment interconnect packaging of those sensors is almost of equal importance to the good functioning of the product in the systems where they participate. And so we see just great opportunities in the industrial market, across many segments of the industrial market, in the military market, as I spoke earlier, where we have already a leading position in military interconnect. We're just really excited to now have a significant position also in sensors in the military market as well in automotive and in commercial air. And so we see great opportunities really across the markets of MTS and look forward to taking full advantage for many years to come.

Our next question is from William Stein of Truist Securities.

Congrats on the very good results today. I would like to ask you about the commercial aerospace end market. That end market was already in a pretty significant downturn because of the 737 MAX grounding, and then we had COVID obviously stopped travel and demand for planes. But I think you guided this segment up sequentially. And I wonder if that's an indication that you think we're past the bottom here. And I wonder what you're seeing in terms of recovery, what you're seeing in the order book, and maybe what you're hearing more anecdotally from your customers?

Thanks, Will. It's a challenging time in the commercial air market, which has been severely affected over the last 1.5 years. It now accounts for only 2% of our sales. We did provide a guidance for an increase sequentially in the upcoming quarter, primarily due to the MTS Sensors acquisition. However, I wouldn't say we're definitively at a bottom yet. The rate of decline is decreasing, with only a 3% drop sequentially this quarter, which is somewhat encouraging. Despite this, the commercial air market has a difficult journey ahead. Our team is committed to diversifying their business and ensuring that the products they sell are being adapted for other applications. We are reallocating resources to integrate these products into various uses so that when the commercial air market eventually recovers—and it will—we won't be reverting to previous methods but will be ready to fly again. I anticipate that this will happen soon after my second shot tomorrow morning with Craig. When the market rebounds, our operations will be stronger than ever, having utilized this opportunity to diversify their offerings and broaden their resource use. This is how we approach crises, and it aligns with the way Amphenol has always operated.

Now our next question is from Joe Giordano from Cowen.

We've seen various strategies and responses from companies this season regarding how they are managing sourcing for scarce components. Some companies have mentioned that leveraging their multiple individual businesses helps them gain an advantage with suppliers. However, it seems your approach is different. Can you explain how Amphenol's structure, with its smaller independent companies, gives them an edge in sourcing? Is it because these businesses have relatively small needs in terms of quantities? Could you elaborate on that in comparison to other strategies?

Yes, Joe, we aim to blend different sourcing strategies effectively. Ultimately, sourcing is managed by our 125 general managers across the globe. There are benefits to both small and large approaches, and we adapt to whichever is most advantageous at the time. Often, several general managers will collaborate to source common materials and approach vendors together, which is how we achieve our desired outcomes. In other situations, a local decision may occur, where a purchasing staff member discreetly requests materials from a local sales representative. Between these two approaches, there is a wide array of strategies and techniques that our worldwide supply chain team employs. The key principle is that disconnected supply chains from the business make it challenging to determine the best course of action. For example, if an engineering team and a sourcing team operate separately, the sourcing team may tell the engineering team that a part is unavailable, resulting in a lengthy process to secure redesign resources or persuade the engineer to modify the design. In contrast, our purchasing personnel are situated near the engineering staff and report to the same general manager, enabling them to collaborate immediately to resolve issues, redesign parts, and reallocate resources efficiently. This real-time, integrated approach is effective for managing shortages, logistical challenges, quality concerns, and design changes. We strive to adopt whatever strategy will lead to our greatest success.

Now our next question is from David Kelley from Jefferies.

Just hoping to follow up on automotive. Really robust growth versus underlying production in the quarter. You referenced electrification wins as a contributor. And then you mentioned broadly, you aren't seeing channel inventory build, but I would assume you delivered to market share gains and then probably benefited from favorable mix as well. Just hoping you can walk us through some of the drivers of you're really showing automotive performance in the quarter.

Sure. Well, thanks very much, David. I mean, you know the underlying market much better than I do. You could teach a master class on it, for sure. But what I would tell you is our team in all regions really performed very strongly here. And we saw great growth really across the board, across the regions. And we saw disproportionate growth from new programs that we've long worked to design ourselves in on relative to EVs. But it wasn't exclusively EVs. We saw growth in lots of other new platforms as well. And I think our long-term share gains in the automotive market, and I referenced this earlier, is really a function of us focusing our efforts on next-generation technologies in cars, next-generation systems, next-generation applications, everything from passenger comfort and connectivity to safety, to engine management, emissions control, and obviously, high voltage related to EVs and hybrid EVs. And I think all of those things are helping us to outperform the broader market in a quarter like we just had here in the first quarter, but also over a very long time period. We're really talking about the better part of the decade, where we have had a relatively consistent performance that is a decent amount, if not far in excess of the underlying unit production volumes that are out there. So there's not like 1 silver bullet to this. I think it's been a collective approach. It's been our acquisition program, where we've added new companies, both interconnect, antenna, and sensor companies. And it's a lot of work on engineering of next-generation systems that go into these cars across all of the regions. And I think when we put all that together, ultimately, we've seen strong performance.

Now our next question is from Samik Chatterjee of JPMorgan.

I wanted to get your views on mobile networks. You mentioned you had better revenue than you expected in the quarter. You're guiding to sequential improvement in revenues. And how should I think about visibility or sustainability of this improvement through the rest of the year? And how correlated is that going to be to some of the like 5G CapEx plans that the North American telcos recently outlined? How much of that is going to probably help sustain some of this growth through the rest of the year?

Thank you, Samik. Well, look, we're really pleased with the sequential growth that we saw in this market. Obviously, that's a market that, over the last year or 2, has not always had the most robust growth as the operators have somehow struggled. There's been a lot of corporate things going on, delays in investment last year. We also saw some redeployment of the investment towards really the core of the networks to support the massive growth in bandwidth. But we've always talked about the fact that our team has been working diligently over many years to design in our products into next-generation systems and networks, be they 5G or otherwise. And I think we start to see some early progress with that here in the first quarter. And to the extent that operators are expanding their investment, we would hope to benefit from that. It may not always be in a perfect quarter-to-quarter correlation. We don't have a position with absolutely every operator with the exact same degree of success. But we have a very strong position on the equipment that is really going to enable 5G for the long term. And so to the extent that 5G creates incremental capital spending, which, again, has yet to be perfectly articulated, then, for sure, we would feel like we would be in a good position to be able to benefit from that in the medium and long term.

Our next question is from Luke Junk from Baird.

Adam, you mentioned hybrids and electric vehicles especially as a growth driver in your end market discussion of both auto and industrial trends this afternoon. Could you help us better understand the span of EV-related products, especially across those two segments? And in particular, I'm wondering how might differentiate the company's opportunity set versus some of your connector peers that have a more auto-based focus.

Thank you very much, Luke. You made a great observation. We are involved in the electrification of both passenger and commercial vehicles, which have been significant contributors to our growth in recent quarters and years. In the industrial sector, we focus on industrial batteries and heavy vehicles. A variety of vehicles are experiencing electrification, including large trucks, postal vehicles, garbage trucks, buses, and delivery vans. All of these fall under what we define as battery-heavy vehicles in our industrial market. When we discuss automotive, we refer to hybrid electric vehicles, which are primarily passenger cars and related products. Additionally, we view charging infrastructure for electrification as a critical component within our industrial business. These areas have shown strong performance, particularly in the first quarter and over several years, and we are optimistic about future developments. It’s important to recognize that electrification extends beyond just passenger vehicles; it encompasses a broader aspect of the electronics revolution. Furthermore, we are collaborating with the Department of Defense in some countries on the electrification of military vehicles, which we anticipate will be a lengthy process. However, we believe this will serve as another growth opportunity along the overarching trend of electrification across all forms of transportation.

Now our next question is from Steven Fox from Fox Advisors.

Craig, I just wanted to talk a little bit more about your extra costs in the coming quarter. If I applied your analysis for Q1 to Q2, it looks like the pressure is about $20 million or so, similar to Q1. I imagine there's some M&A impacting your incrementals. But can you talk about whether that's in the ballpark and what you guys are doing to sort of reduce that $20 million nut going forward?

Yes, thank you, Steve. Your calculations are likely accurate. It's in the range we would agree with. As we examine the growth from Q1 to Q2, much of it stems from the acquisitions we've recently announced. Consequently, the sequential conversion rate is expected to be lower than usual since these acquisitions generally have a lower profitability level compared to the company's average. As we mentioned regarding MTS and the other two acquisitions, we anticipate being able to elevate their performance to the company average over time. Specifically for Q2, the sequential conversion is primarily influenced by these acquisitions. The cost impact you noted aligns with what we experienced in Q1, and we expect to see similar figures in Q2 as the team continues to address these matters and ultimately mitigate those effects over time.

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

Well, this is Mr. Norwitt. But anyway, thank you very much, and we truly appreciate everybody's time today on the call. And I did want to take a moment just to wish everybody good health here. And I hope everybody is getting the chance to be vaccinated soon, wherever you may be. And I wanted to make just a special comment and note about any of you who may have friends or family in India. We obviously have an organization in India, and we're very carefully attentive to the ongoing situation with the pandemic there and doing our part to help the communities in India. And I just wanted to send our best wishes to any of you on the phone here today with family and friends in India. It's a fabulous country, and I'm sure they're going to work their way through this difficult stage in the pandemic. Thank you all to everybody and wish you all good health, and we'll talk to you all in the next 90 days.

Thank you, everybody. Bye, bye.

Thank you. And thank you, everyone, for attending today's conference. Have a nice day.