Perfect. Thank you everyone for joining us. My name is Varun Govindaraj. I'm the Senior Analyst at Bernstein covering multi-industrials. We have with us today Terrence Curtin, CEO of TE Connectivity. Terrence, thanks so much for being here today.

Thank you, and thank you all for joining us this morning to learn a little bit more about TE.

Perfect. Maybe just to start us off, you had your investor day recently, and you talked a bit about the 6% to 8% through cycle growth. Could you break that down for us a little bit more? Tell us the pieces and where all of that's coming from?

Yeah, so a couple of things. Back in November, we did an investor day. And what's intriguing about that investor day, while it was back in November, it seems like a longer time with what's everything going on in the world. But to your point, I think the key thing I'd like you to understand, we laid out a long-term growth rate of 6% to 8%. That's about 50% higher than we had historically. And a lot of things, it's about where we positioned ourselves about what we do and what we do well. And when you think about TE and you think about the connection solutions we have, as well as the sensor solutions we have, it's really about where do you have acceleration that's needed in the hardware architecture of what goes on with increased data needs as well as power needs. And, you know, we've always talked about data needs, but power needs acceleration that we all know about we're benefiting from. So that increase in that growth rate that we talked about, first off being when you think about data, and I know you're going to ask questions about it, you know, it starts with AI and what's happening in a data center. But it's also just as important as how that data moves out and where it's changing the architecture and other key applications we focus on. So even in the energy market where we serve utilities, how you're getting more intelligence that helps pull data out. clearly what happens in connected vehicles around the world big growth driver for us and then on the power side what we do around energy connections as well as how power in the AI rack continues to evolve to really make sure it can handle the data needs where that's going to 400 or 800 volt we benefit from that and certainly in electric vehicles where we have a great position in Asia so when we think about growth it is about where those power data acceleration power acceleration goes and it what it's what gives us confidence we grow six to eight percent through a five-year cycle that's gonna have some of this like we always have because of the markets we play but it's you know sort of shows really good out performance due to where we position ourselves on content got her related to the end markets we serve now when you think about the markets we serve and we go back to investor day you know things are playing out pretty much as we expect it which is pretty amazing considering really what's happened in the world over the past six seven months first off when you think about our big markets and I know you'll probably click down you know full steam ahead and AI and data center and actually our revenue momentum this year which we thought six months ago would be two billion dollars is closer to 2.4 billion dollars and some of the growth targets we put out for next year just keep on sliding to the left so traction is just full steam ahead and we're going to grow about 70% in AI applications this year other key markets that benefit from capex cycle not only AI but what we see in the energy infrastructure our energy business is about 10% of the company this year the capex trends that we see in North America and that power connections just continues to build and you know strong double-digit growth there that we really believe is going to continue. Then we have some other markets that have been strong and continue to stay strong. Clearly, defense and also what we do in commercial air or airspace and defense. Another $2 billion of revenue, roughly, continues this March. And we build backlog. We continue to see that in our orders. And then when you get into some markets that have been weak, that are picking up what's happening in automation in the factory floor and also commercial transportation, what we do in heavy truck connectivity. These two markets have been very weak for a couple of years. We're getting more of a cyclical pickup and you're seeing the content outperformance in those. And then lastly, you know, an important business, automotive, you know, the production market is the same as we said back at Investor Day. we thought it would be down slightly this year it's down slightly this year pretty much down slightly all over the world but an important thing we said at investor day is we don't expect anything magical about auto production we don't over this five-year period we expect it to be flattish but where we benefit for what happens in data getting built out in the car you know EV adoption in Asia let's be honest that's where the driver is and we have a very strong position and then lastly what just happens in the electronification within the car which is all the features we rely on and it's going to drive content outperformance above market in a sideways auto world which you know we just have to accept that's what it is so when we go back to investor they go back up to that six to eight content outperformance about what do we do versus our underlying markets drive it due to power and data and certainly this year We're going to grow about $2 billion this year, and I think one thing that's important about that $2 billion, yes, there's a big chunk due to where we're winning in AI, and that's going to continue to drive nice growth, but it's only about half of our $2 billion of growth this year. The other billion is much broader than that, and we're going to benefit from those trends.

Super helpful, and thanks for laying that out by segment. Maybe we can dive into the one that everyone's most interested in, the data center side. I want to make sure. Yeah. I guess first question there is just the debate around copper versus optical. Could you tell us a bit about how you're thinking about that and positioning?

No. Well, a couple of things. Let's face it. The copper versus optical discussion, for those of you that are familiar with what we do, is not a new discussion. And one of the things that we believe and we work with our customers on their next generation architectures is you have to realize it's going to be copper and optical. It's not a one or the other. You're going to continue to use copper as long as you can, and you will use copper when necessary. So there's an element, as we work with our customers, we see those inflection points. And the other thing is not every customer has the same view. Every customer's application is different. Their architectures are different. So you see some that are pushing copper longer. You see some experimenting with optics more. The other thing that's important when you think about copper versus optics is you're going to continually see scale out when you go from switch out is very much optics already. TE does not play much in that. We play in the rack, and you're going to see much more copper being the workhorse in the rack. You have some of the large players actually talk to that very openly. But we're also well-positioned when optics does come into the rack. You know, with what we do in optics, as well as some technology acquisitions we do, you know, the fiber attached to the CPO out to the fiber backplane will benefit from that growth as that gets introduced. But that's still scaling needs to be figured out. Certainly cost point needs to be figured out. And the tradeoffs our customers make all the time because optics does require more power than copper. So there are trade-offs that we are working with our customers on. We feel the growth in AI is going to continue. I know people view it's copper or optics. It's copper and optics. And you're going to see hybrid systems that do that. So it's something we feel the growth is going to continue. Certainly, you're going to get to law of large numbers. I'm not sure we're going to grow 70% every year, quite frankly. I wish I could stay up here and say that. But there's an element. It'll be $2.4 billion this year. have a really nice growth rate and be a key contributor as we go forward got it super helpful any color on you know how different kinds of customers are sort of viewing the debate are you seeing certain groups leaning more copper leaning more optical or is it it's it's very different so you have to realize when they look at it some go for lowest cost some are making other trade-off decisions in the architecture and the other thing that's important for those that are moving more optical you're probably gonna need more power in the rack about 25 percent of our connections that we do in our DDM business which where we do AI work is power connectivity so as you move up to an 800 volt rack you know we can have 30 plus percent content increase in an 800 volt rack versus today because you're creating separate power architecture going from the board whole new bus bars, you introduce liquid cooling, increases our content. So there's not just the data side, which is where optics goes in that typical discussion is. It's also what happens to the power architecture. And you have some customers that say, I'm not interested in 800 volt at all. You have other ones that are experimenting. And it's all how they're thinking about how they compete against each other. And also some are, hey, I want to get to the lowest cost point but somehow I want to get to the fastest architecture and it's very different by customer so it's core to what we do and it's also why it's important to understand and we covered this a lot at our investor day the engineering intensity of how we're serving our customers to those architectural decisions we're right next to them as they're doing it and the other thing I would say is you know we're very broad across the hyperscalers So the other thing is, while that's a small universe, you know, we have a pretty broad position there, and all our customers are growing this year, which is another real positive point.

I mean, and it is a small universe that spends a lot on CapEx. It definitely does. Makes sense. The other question that comes up whenever we talk about data centers is just supply and backlog and the ability to service that backlog. How do you sort of view that for TE? Especially with 70% order growth, it's tough to deliver, right?

Well, that was sales growth. Order growth is greater than that 70%. And one of the things our customers are doing, because these are custom programs, I guess the one thing I want to, because of some of the memory discussion that's going on, with what we do with our customers, as they think through their architecture, these are pretty custom programs we do. So this isn't just making something that sits on a shelf. We make a custom connection solution that then we actually ship into their supply chain. So from a supply side, we don't worry about that. Material availability of what we need to do that, we don't worry about that. Certainly, every one of these are new ramps. Something's ramping down, something's ramping up. And we've been vesting ahead in both manufacturing capacity, certainly where we've done it historically, as well as china plus one do southeast asia and mexico and those ramps you know have very high expectations on them so i don't view it as much of supply it's just really making sure we're keeping clipped to the intercept points that our customers expect us to have um and our teams are doing a good job on it but every program every next generation is a new ramp uh that we're doing got it and and how do you think about the product development side of this when you look at r d you you look at investment.

Any programs happening there on essentially these growth verticals that you're seeing?

No, when you look at it, and we have invested significantly both in the manufacturing side as well as the engineering side. At TE, we very much invest by the verticals I talked to you about. We've been increasing engineering to make sure we can support the growth, increasing capacity in the manufacturing. We've even talked to our investors about how our capex will probably run about six percent of sales this year and that's really to make sure we're getting ahead for the programs and we're also doing similarly in you know the ai investment for our engineering teams to make sure we're supporting what was a couple hundred million dollars of revenue years back you know it's going to be well over three billion dollars of revenue and i think our team's been doing a nice job keeping up with the ramps because you know they're intense.

Got it. No? Super helpful. I think that's more or less what I have on data centers unless we get more questions.

I'm sure it won't be my last question on AI.

Maybe we shift to the energy side and the power side. So obviously there's so much demand right now and a lot of that is again to support data centers, but more broadly power intensity is going up. How do you think about your market position in that space and the plan for growth going ahead?

Yeah, it's a much more transitioning from ai and data center to energy we're sort of going from concentrated customers to you know a utility landscape that is very much trying to catch up to you know what was always a sub gdp yeah electricity growth and and we've been in the business for a long time and one of the things you know i get really excited about is you know we did a lot of work to make sure how do we get focused in that business how do we also get focused on the north american market and really when you look at our energy business today it'll be about 10 percent of te and two-thirds of that is around north america it's really a north american business and we position ourselves around grid hardening certainly grid connections we're stronger in underground networks and you've seen the growth which has been pretty consistent double digit organic growth and then we've done some acquisitions to really bolster the portfolio So what I feel really good about is as we go forward, I think with the energy trends where we positioned ourselves and to turn from a geography to more of a market application, about 20 percent of what we do in our energy business is focused on the power connections that come into the data center.

Interesting.

So, you know, I know we talked a lot about data center and we said, hey, T.E. plays in the rack in the data center. this actually brings us we get exposed to the power connections that are happening as data centers get moved and you're bringing high voltage and you're stepping down to medium voltage into the building and that's something that we're benefiting from as well so we were we did a great job in solar and renewables certainly that's moderated with some of the policies but we feel very good about what we've done around grid hardening with utilities which is about two thirds of our business and then also the 20 percent that we have that brings the energy into the power data center those two will make sure we can keep a good strong growth rate going

and it's a business that you know clearly i appreciate you asking about because sometimes it's sort of with the ai discussion it sort of gets pushed to the back got it no no i mean the thing is power itself is growing low double digits right so it's it's a large business and sometimes it's overshadowed by 70% growth, but totally worth talking about. I wanted to go a bit deeper into one of the things you said, which was bringing power into the data center. So is that components in like a solid state transformer for 800 volt DC or?

No, what it would be, and it's a great question. There's a lot of ways that power comes in and then how power moves through a data center. When you have, and you're getting into a step down, you'll have an industrial substation, you'll have connections in there sure you'll also have connections that occur inside especially as data center designs are being done differently than industrial designs that you would have in a factory because the hyperscalers are saying hey what do i need for this power that's happening in the data center so they're typically more connections that are happening medium voltage connections that occur that you know we talk high voltage in auto yeah voltage is not high voltage this is medium voltage much higher you're talking about kilovolts so from that viewpoint it's going to be the things that you would have in a traditional utility setting as you would step down now you're bringing it into a data center you know we do not do switches and things like that like you talked about got it are you seeing any pushback on the energy side or sorry I'm bringing back the data centers on the data center side just from I mean there's this narrative about a lot of states pushing back and projects getting delayed are you seeing that with any of your orders in any of your we do not we would we would be working when it's being designed and then we would also be getting orders after it was approved sure so when you think where we play and typically whether it's in where we serve an oem or in the utility space we're sort of going to be a step down we would work with them on capacity planning but if they don't get it approved we'll never get an order and you look at the orders in our

business you know last quarter orders were up 25 percent you know you see an energy you see an aerospace defense certainly in ai you see orders getting placed out because they need the capacity getting put into place got it and the good thing there is there's no risk of orders getting canceled just because i don't believe that got it understood um the other big question i had was we're in this environment where a bunch of players who had capacity and had supply have done really really well over the last couple of years just because no one else was able to produce products but now we're at a point where new capacity is coming in because people are looking at the returns and they like it when i think about these moat specifically in these high growth verticals right data centers energy how do we think about that how do we sort of think about the competition for share that's inevitably going to happen over the next few weeks so one thing that is important that when you all think about TE and we spend a lot of time on Investor Day, it all starts with how our engineers are co-located at the design centers.

So we are not a business that creates something centrally, makes a widget and say, hey, world, come get to us. That is not our mode. Our mode is somebody's made a decision around a semiconductor. Somebody's made a decision around a power supply. Okay, how do I bring this together in the architecture, and that creates more customization than you can imagine. So I ask you when you think about interconnects, I don't want you to think about the interconnects around your devices. We don't do that. We don't do anything in consumer. I want you to think about the interconnect that's happening with a GPU trying to connect to a GPU. Somebody trying to take an architecture saying, hey, I'm going to go for a low-cost version of that because I might be a hyperscaler versus somebody doing high speed. there are different trade-offs that occur and you're not going to make change your interconnect after you make those first I mean you're not going to change your semi or your power supply so in many ways you get the semis the brain the power supplies the heart that's where we come in to say how does this all come together not only from a technology perspective but also ramping a supply chain and when you think about interconnects are typically things that are low bomb elements and you even think about some of these ramps we've done it shows the scaling capability that's also on the supply chain so you have to be technical you have to be at their design center and so that's a really big mode and it's why interconnect companies whether they're public or private we don't all play in the same markets because you know our capabilities where we make those choices around design centers are very important and then how do you scale it and you know that's the stickiness that really comes in as you do that honestly it's a pretty you know somebody's not looking to change out an interconnect supplier when you're doing that right got it it's you know there's other bigger problems that they would want to focus on than actually tinkering with that so you could have capacity but if you don't have that engineering at the architectural level sure nobody's gonna use you because you need to have that engineering touch that it's why, you know, we have 10,000 engineers, we increased them 25% over the past five years. It is where we've invested in, and it's all over the world at those design centers. So it's not sitting in one place. So you asked a simple question, I gave you a long time.

No, no, appreciate it. And I mean, it's essentially a trust-heavy business, right? And the engineering matters. Engineering definitely matters. Got it. Totally matters. Super helpful. You touched upon ACL and factory automation as well. Obviously, that's probably not been doing as well recently. Can you tell us what your outlook is and how you're thinking about it?

Yeah, so this is our automation group where the biggest part of what we do is we actually play into the interconnects that go into factory automation. That can be a motors drive. We're typically stronger in discrete applications. And it's an area, quite frankly, the past two years um have been really malaise you know coming out of covid there was extra inventory certainly um our customers the the automation players of the world were sort of just hey i hope in three months it's going to be better and three months never came um but i would tell you it clicked into a real inflection point the past three to six months and it's also all over the world You know, one of the things about TE is, you know, we do play all over the world, and, you know, in the automation side, we're seeing it, you know, in China, U.S., Europe, everywhere, you're seeing that step-up occur, and, you know, it does come back into, you know, at least there's things that drive productivity. It also goes back to things that are needed to really drive data at the edge to really get it back that the algorithms use. So one of the things when we talk data, we can't underestimate the edge opportunity we have. Let's face it, it's spread throughout to you. It could be an edge opportunity where you need more data in an aircraft. Edge opportunity, you need more automation out of a car, data out of a car. Automation's a great one. So it's just areas that really when we think about the whole AI element, how does data that you need from the edge continue to come up? And we're going to benefit from that. and it's really nice to see the momentum broadly. And you also see that in our customers that they've seen a pickup in their order books and that's just getting started and we're well below peak. Well below peak in that business. I mean, it's early inflection, right? I totally agree with that. So we've talked about... No, go ahead. No, and you see it in the PMIs and the ISM things from the broader industrial.

Yeah, the numbers are coming in stronger. No, no, all good, all good.

So we talked about data centers, we've talked about power and we've talked about acl now on the industrial side uh when we look at margin and price cost for those three segments how does it vary like are you know are you seeing more profitability driven by certain segments versus others well a couple of things let's talk price cost overall at te one of the things i think is very important um because let's face it we're in a new inflationary bump due to what's going on in the middle east um you know we've dealt with tariffs we've dealt with things that have really created material inflation we're in a new material inflation we're going out to all our customers right now sure to be hey when it comes to material we're going to get reimbursed for it so we're actually in the middle of price increases um so net net you know we're in a new inflation wave we'll protect that we typically get that as a cost recovery there may be a little bit of timing a quarter here or there but the teams are full steam ahead across every business and T not just the industrial businesses because these are types of things that honestly when it comes to material inflation when you have these events te will not absorb and you've even seen our prices gone positive you know our businesses overall have some variation but it's not like one units here and everybody else is down there so certainly industrial or DDM business a bit higher aerospace is always you know a nice profitable element ACL has been down so that's working its way back up but we feel one of the things I said earlier is every one of our units we've improved margin over the past year yeah so you shouldn't view there's one doing better than the other and also in our transportation segment that's been in a sort of sideways environment you know we've been running it very well at 22% margin so and both businesses are sort to equal and we feel we can continue to get good volume flow through at 30 plus percent as we go forward got it and on the margin expansion story how much of that is your operating leverage versus structural improvements to the for the cost well currently right now it's more volume leverage structural improvements yes we have structural improvements in certain businesses but you know it's a different discussion around te than it was three years ago you know we were doing very big roof consolidations. We were very focused on localization, which were about 80% localized and manufacturing through supply chain around the world, within regions of the world. And that's what you're seeing the benefit of today that you're getting through the fall through. And I think we're always going to have cost opportunities. That's what a continuous improvement culture does. But the element is it's less structural other than when we do acquisitions you'll see us have some things where we say, hey, part of it's a cost plan but net net it's much more how we're running the company today from a volume perspective that is what you're seeing got it super helpful and we will get to mna uh a little bit further down okay um maybe shifting gears to your transportation segment you started off by saying that your forecasts for auto have more or less been in line with what you talked about it in yesterday how do you look at it going ahead from here so so the first thing is I think when you think about auto we sort of view auto is gonna be a flat world production wise but coming out here I think there's two things that are very important one thing when you think about tea and you think about auto you have to realize over 50% of our businesses in Asia Asia is the largest volume producer in the world I will tell you they're the technology leader in the world and guess what when you think about what drives content for us whether it's an electric vehicle certainly autonomy in a car you know they're the leaders in that too so you know we feel very well positioned when you think about auto and i know we all read wall street journal and read about u.s auto we really feel we have a very differentiated position because our customers and maybe we won't see them in the united states they're moving elsewhere in the world and when they move we're going to benefit from that asia position so it is something that's very important our asia position and the innovation they bring that also when we learn from that we also makes us more competitive in europe and north america because of our scale there the second thing is we don't assume much about production and i know you mentioned it i mentioned it but when you think about how we drive growth above production it's into three pillars that are very evenly balanced. It's electric vehicle penetration in the world, but most of that's going to be in Asia. And that's really, hey, Asia is going to drive three or four million units of EV increased penetration this year. It's also around the data and the autonomy, Ethernet rings you need in a car as you move up different levels, level three, level four in a car. That's a completely different architecture. And then the third element is what happens as you change the electronification in the car that could be a 48 volt architecture safety systems any comfort systems that happen anytime you're adding that you're adding electronics when you add electronics unique activity and that can even be zonal architecture which increases content for us so i like to talk more about those things in auto production because auto production is lackluster, it's sideways, and we expect it to be. But essentially multiple trends that sit on top of that auto production. And that's why we think the 4% to 6% that it's one thing we didn't change during Investor Day as we increased our growth rate. Really, that growth rate increase was out of our industrial segment, but we feel very confident we can drive the 4% to 6% due to those trends. It makes a ton of sense. um when we look at content for te in you know an internal combustion engine vehicle versus an electric vehicle how different is it because it's it's it's very different it's close to 2x so when you sit there and i think building on the architecture discussion we had this morning you know when you take a ice vehicle you know we don't have anything when somebody puts a fuel petrol into the engine a charger inlet's a connector it has electronics in it how that works in the whole system you take that power down certainly you're going to the motors you're actually switching back powers to go to the battery pack all of that creates content opportunity for us that otherwise you don't really have a lot other than some ecus that are lower content in a combustion engine so as that moves you get like a 2x increase over a combustion engine on the ice side i mean ev versus ev versus ice sorry got it wow that's that's quite and that's what drives it and you know certainly asia's the the driver of it and our customers it's really good the momentum we have with them in china and maybe a double click on on china in particular obviously a fast growing market ev penetration is super high how do you think about local competition there are you seeing any trends um and frankly local customers as well just because you have so many people coming in well the first thing i think is also important and i'm glad you asked the question was when you think about china our market share with the locals is the same as the multinationals and i know it's not lost on me those of you that have some uh coverage where people have auto people typically say oh it's hard to do business with we're very localized there are you running at their pace you know you're talking six 12 month car design cycles if you want to live in a western world of car design cycles you're not going to win in china are you bringing them innovation they're spinning models they want innovation in every cycle and you know we work actually on three generations out sure well and we know like hey if we worry about competitive we drop the next generation down and work with our customers and how do we get that in And so, you know, we always say we're pretty much on every car in the world that we're allowed to be on. The same holds true in China. The other thing that I would also be very honest, our content in China is higher than our content at TE overall. So it's actually proof there between what happened in EV. They're also doing a great job on the data side. They typically, as they put autonomous rings in there actually, or Ethernet connectivity in, they're putting it into all vehicles they're not just putting in the high end and we shared that during investor day a little bit of hey how much content we have and those that blow it through all you could have 50 to 70 dollars of content just on data alone in a vehicle of what we do if that goes through all the platforms got it and outside of china for the autos auto space um are you seeing any other growth levers any other parts of the world that are interesting well those trends are different so when you think about electric electrification of the powertrain certainly asia drives that data is across all three regions data connectivity happens in all three and we're seeing

really nice growth there and it's actually helped cover uh some of where you have softness and evie in north america and then electronification is across the world which is where that electronics suite in the car just continues to get bigger got it so great sounds like it's a great time and and essentially that's growing and automotive to scale business so and we have to scale yeah that which is what we like there we go oil prices have been super elevated for a while now are you seeing any of that trickle into the EV outlook for the US I know it's a much longer development cycle but just curious to see if you see any leading investors people eating indicators or

people willing to invest um so twofold let's let's take it from both let's just take it from a western view we've actually seen ev production actually pick up in europe so we've actually seen that happen you actually have seen um the european oem certainly they have you know the china have like sub 10 share in europe but you've actually seen them come out with vehicles that are much better price points and you've actually seen for the first time in three or four years Evie trends pick up alternately North America North America is still in that churn sure you know you've seen the big announcements by the big three they're trying to get old programs they were invested in you've seen the write off I think they're still trying to get their sea legs of where they play so and North America was always gonna be the lowest penetration of Evie that we ever thought in the world it actually you know being you know one to two million units out of 16 it it's a it could help growth it's not going to be the primary growth for te there's a lot of things around structurals uh you know incentives and so forth that would need to be worked out to really get it to kick in high got it so the the expectation that this is not necessarily a growth market is largely baked into guidance and baked into everything that you've talked about our four to six you know it's global certainly asia is going to be at the high end of the four to six if not ahead yeah and then you sort of have europe and north america be sort of at the lower end of that four to six that comes up to the big four to six no no super helpful and then when you think about geopolitics and you know u.s china relations has that played any impact on your your china business outlook or has it all been okay no it hasn't and you know one of the things is it's also important you all understand where do we play in china while we're a global business When we're in China, it's really automotive and heavy truck is our leading positions in China. Where we play in factory automation is very important. So you get those three. And then the last part of where we play in China is really where our hyperscale customers still have supply chain there. Our customers for that business is really the hyperscalers, but they still use the taiwanese chinese supply chains as they bring their equipment together sure so that's the last element but it's more of a back-end support of our customers we don't service the local ai or data center market customers in china so they're the markets when you look at te that's how we play to win and we're very localized you know in china we're probably 90 localized around all the supply chain that we need to serve this market um it's you know it's been a conscious choice so geopolitics you know we watch we monitor there's some markets we aren't in because of geopolitics because we don't want the risk sure but the markets we're in we feel we can

fully uh compete in and you know we're winning locally got it and i mean clearly the localization strategy is is working right it insulates you from a lot of it's key it's it's absolutely essential um in the world that we're in where nationalism pops up got it um a bit more on auto So, you know, the sector is notorious for just being very, very hard negotiators. You talked about price cost for the overall business. Is the commentary any different for the auto sector?

No, it's not. I mean, we're having price discussions in auto. Now, the one thing I would say is different in auto. You know, in auto, around metals and stuff, we typically have automatic riders already. But, you know, when you get into resins and plastics, that's where we're having price discussions. Certainly, they're hard negotiators. I don't think any of our customers are just charge me whatever you want yeah but they're also feeling it all around them so net net you know we're talking to our auto customers about pricing and what's going on from the oil complex they understand what it is to move things around the planet and there's also opportunity to say you know how do we solve this together from is there a better way that this should be positioned for the next five years versus how we did it for the past time and that also creates um some value add ideas between us and our customers that we always look at and it helps deepen our relationship sure sure and i will say just the fact that oil has been so high for so long longer than people expected there does seem to be like a willingness even from the customer side to negotiate because they're negotiating with their customers as well right exactly flows down the exactly yeah they're and they're feeling and if in a lot of sides you know other point other points in the electronic supply chain certainly people are doing price increases due to supply and demand but net net you know there are things that we feel very good will be able to offset the increased inflation got it super helpful last question on the auto side so we've talked a lot about passenger thoughts on commercial i mean obviously it's not been that great business recently no first off it's a great business It's a great business, and for us, it's our highest market share business in all of TE. So it is a great business. And the other thing that we really like about our industrial transportation business is it's even in all three regions. It is strong in Asia. It's strong in Europe. It's strong in North America. And while it's been a tougher market globally, honestly, our strength outside the United States has been covering real weakness here in the United States. And when we talk heavy truck, it's, you know, it's on-road heavy truck, it's ag equipment, it's mining equipment, so anything sort of heavy off-road. And ironically, similarly to how I talked about our automation business, this is another business that, you know, is turning. You're seeing actually supply chains being primed, and the build's happening, and North America has been getting better. So it's one of those points we've been waiting for. um that has actually been picking up and we're getting the benefit of our position and you know you can see the content out performance you know globally we're probably at a two percent truck build in that definition of how i laid out you know we grew double digits and i think you're going to continue to see that outperformance as that's moving forward and the trends are the same when i when we talk auto we talk electrification just to be honest with you you know in China if you get the last mile delivery it's all electric vehicles Europe is up to three to four percent of their truck fleet being electrified data in a truck is very important and then certainly ever all

the other electronics that are needed for logging efficiency if it's staying diesel all the EPA electronics that are needed for emissions all benefit us so it's a business you know close to two billion dollars I know I've used a two billion dollars a lot but it's a business that actually is starting to get the cyclical uptick got it and um i guess maybe shifting gears a little bit to the uh so we talked about industrial we've talked about automotive the next big chunk was just financial strategy and and capital return maybe a quick overview of how you're thinking about it i know two-thirds of cash was essentially designated for deployment by max m&a um has the story changed there from investor day uh any

commentary i think the first thing before we talk about capital deployment is how do we feel about the capital we generate so you know i know your question was a little bit different one of the things that i think you can expect out of te is that we're going to be running around 100 free cash flow even with the um conversion even with some of the increased investments we're making primarily into ddn as well as in energy because we are expanding capacity in our energy business and we have two two expansions that are happening here in north america to support the energy market so which is extremely strong free cash flow and then how do we think about using it the first one i'm going to go the reverse order you um when we think about after first investments in the business um but then it comes back to about a third of free cash flow comes back to our owners as dividends we just took our dividend up 10 percent um a few months ago and that will continue to build as we build free cash flow and then the other two-thirds is really best use whether that's return a capital to share buyback or do we see both on opportunities and when we think about opportunities those opportunities are primarily going to be in our industrial segment I mean on investor day we do view our industrial segment is gonna be the growth segment for all the things we talked about today and that net that's where I think you'll see the M&A It's still a space that's very fragmented. It's a space that we actually see opportunities to deploy capital in. You've seen us do that in the energy business. You've seen us do it in the ACL business. I think it will always be things that are core to what we do. I don't see us adding a new leg. And that's why we use the word bolt-on. But I know when people also hear the word bolt-on, they say, well, is that small? That doesn't mean it's small. Like Richard, last year we did was $2.3 billion, and it's what we did. So, and we have a very strong cash model that we can support that if we're doing $2 billion deals every once in a while. Most of them will be smaller than that, just due to the fragmentation. But we see that M&A will continue to be an accent to our growth rate on the organic engine that we laid out at Amistadip.

And to go a bit deeper into the M&A piece, how do you think about integration?

A lot of times, you know, people buy a company and then the integration gets botched and it's really hard. yeah but you clearly are doing this regularly and there seems to be a system can you talk us through that it starts with what is the strategy how you create value mm-hmm you know sometimes if it's a pure margin play it gets consolidated in it is a cosplay and we've had some of those in ACL which it is we're taking out factories taking out excess capacity we may be actually helping them get global to our localization sure those types of things come in other ones like Richard's we were very much of hey we want to keep that on the side because they're in the middle of massive ramps so we can't distract them or we could impact their growth so we keep that a little bit to the side and we actually are helping them on the capacity expansion which being a family-owned business that probably wasn't as natural form so that's where we it's a continuum along it and it starts with where your strategy is to create value and return for the owners as well as how do we touch the customers and don't screw up customer touch so we have a couple archetypes that we go through um but it it's along the whole continuum based upon the strategy got it and and again right so there's no one size fits all you're kind of playing it based on the company and and that's why it works totally um

when you're looking at so what makes an attractive target is it um you know is it purely synergy is it growth? What's the framework to evaluate an opportunity? We talked about the framework to integrate.

Well, the answer is yes. The answer is yes. And we talked about it and our CFO talked about it. First off, is it aligned with our strategy? I think you'll see anything we buy and have bought is completely aligned with what we talked about today. Secondly, how are we going to add value to it? Is it more growthy? Is it more cost? Also, in our case, we do have specific tax attributes that we can create value with and that we've talked to our investors about. So it is about that. We typically have a mid-team return, have a five-year horizon. So we've got to create value. We are pretty disciplined on that. But we will do some technology investments at time to really make sure we're building our roadmaps out that support our organic. But net-net, it's been pretty tried and true to how we think about it. And it starts through those elements. And are we going to sit there and have a better business from our business unit focused in front of the customer with financial returns? Or then we should be giving the money back to the shareholders who share repurchase.

That's on the acquisition side, right? And naturally, with that strategy, you'd also be looking at parts of the business that may not be core for spinoffs and divestitures. Is there any part of the business that you're sort of viewing right now or are you comfortable with where it sits today?

We always look at, hey, if there's an asset that could create value for owners, we would have to consider it. But we do like our portfolio. We think, even with the growth rate we laid out at Investor Day, it's really about, do we have businesses that allow us to play offense, improve the financial criteria, drive increased cashflow for compounding that we talked about all day and so from that viewpoint it isn't like where we were 10 years ago where we had to say oh what do we want to be in or not we feel good with the portfolio but we would always be evaluating is there something that creates value for owners got it super helpful context super uh couple of questions that you know came in from the audience i want to run by you um one was just how are you using ai in your business right is that playing a role today in terms of r&d anywhere else you know so first off thank you for the question how we use it internally it's interesting we talk we get so many questions on how it's the customer that you did you know we do we've actually built an internal cloud we actually focus on manufacturing and engineering we believe we can be a fast follower when it comes to sort of back office things as other people do that but it's really how does it deepen our mode so it's mainly in the engineering and it's not around reducing people it's around how do we make our engineers be more efficient in regard to speed sure and more throughput so and that's how we're working it you know we create 500,000 different skews how do we help our engineers get more velocity on that and also make sure engineers don't create what we've already created sure there they like to tinker yeah and how does that come out in front of the customers so it's an area that we you know we have targets that actually drive efficiency and you know what I'm proud of is how our teams are really experimenting so I think like most companies we really like what we're working on which are the ones that are really going to get to break through scale I think we're like a lot of others and trying to work through that but investing in it both from our internal teams as well as external investment on the tools that are needed to really experiment with to see which ones are going to be our tools for the long term got it and i mean the interesting thing here is there are just so many tools right now so you're not you're spoiled for choice at this point right try stuff and see what works the biggest thing with the tools are every employee wants a different tool and let's face it that you know we have to make choices and we pick some tools over others and every employee wants their own uh own little pet project right tool yeah there we go we have about a minute and a half left just want to hand it over to you, Terrence.

Any other last messages you want to leave?

Just the last message I want to leave, I want to go back to what I started at the beginning. One of the things that we get very excited about is TE's growth vectors are very different than where they were. And even to increase the growth rate in a very sideways auto world, we're very confident about, and actually you see it this year. You see our growth rate being double-digit this year, actually above. but the breadth of the growth is really what gets excited around that data and power elements that I ask you not to lose sight on so it's not only the growth element but certainly the other element because we talked for a long time about we were self help on the margin side we're not done on margin now it may not be a restructuring program and structural that way like we talked about in the past but our margin can continually move up and how we operate the business from a free cash flow is going to create opportunities for return to you or increasing the growth rate from M&A. So I actually feel the model that we've been working on and driving, you're seeing this year in a world that has a lot of moving parts in it. And I think our teams are doing a really good job managing it while also delivering the growth. So I appreciate you all being here this morning. I know it's early, the first meeting. And I know I'll see some of you throughout the day today. So thank you for spending time with us and learning more about TE. Thank you, everybody. Thank you so much, Edens.