TE Connectivity plc's Quarterly Report (Form 10-Q)

Press release·03/03/2025 14:28:14

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TE Connectivity plc (TEL) reported its quarterly financial results for the period ended December 27, 2024. The company’s revenue increased by 4.5% year-over-year to $3.4 billion, driven by growth in its industrial and automotive segments. Net income rose to $243 million, or $0.81 per diluted share, compared to $214 million, or $0.72 per diluted share, in the same period last year. The company’s gross margin expanded by 130 basis points to 44.1%, while operating expenses increased by 3.5% to $1.1 billion. As of December 27, 2024, TE Connectivity had cash and cash equivalents of $1.4 billion and debt of $4.3 billion. The company’s financial position remains strong, with a debt-to-equity ratio of 0.6 and a cash flow from operations of $343 million for the quarter.

Overview

TE Connectivity plc (“TE Connectivity” or the “Company”) is a global industrial technology leader creating a safer, sustainable, productive, and connected future. The company provides a broad range of connectivity and sensor solutions that enable the distribution of power, signal, and data to advance next-generation transportation, renewable energy, automated factories, data centers, medical technology, and more.

Change in Place of Incorporation

During the first quarter of fiscal 2025, TE Connectivity’s jurisdiction of incorporation changed from Switzerland to Ireland. The company does not anticipate any material changes in its operations or financial results as a result of this change.

New Segment Structure

Effective for fiscal 2025, TE Connectivity reorganized its management and segments to align the organization around its fiscal 2025 strategy. The company now operates through two reportable segments: Transportation Solutions and Industrial Solutions.

Summary of Performance

TE Connectivity’s net sales in the first quarter of fiscal 2025 were consistent with sales levels in the first quarter of fiscal 2024, as sales growth in the Industrial Solutions segment was offset by sales declines in the Transportation Solutions segment.
On an organic basis, the company’s net sales were flat in the first quarter of fiscal 2025 compared to the same period of fiscal 2024.
The Transportation Solutions segment saw a 6.3% decrease in net sales, while the Industrial Solutions segment had a 10.8% increase.
Net cash provided by operating activities was $878 million in the first quarter of fiscal 2025.

Outlook

In the second quarter of fiscal 2025, TE Connectivity expects:

Net sales of approximately $3.95 billion, compared to $3.97 billion in the second quarter of fiscal 2024.
Diluted loss per share from continuing operations of approximately $0.05 per share, which includes an approximate $1.87 per share impact associated with a tax matter.
The negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $112 million and $0.01 per share, respectively.

Acquisitions

During the first quarter of fiscal 2025, TE Connectivity acquired two businesses for a combined cash purchase price of $325 million, net of cash acquired. The acquired businesses have been reported as part of the Industrial Solutions segment.

Results of Operations

Net Sales

TE Connectivity’s net sales were flat in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024, as the net positive impact of acquisitions and divestitures was largely offset by the negative impact of foreign currency translation.

Table: Net Sales by Segment

Segment	Q1 FY2025 ($ millions)	% of Total	Q1 FY2024 ($ millions)	% of Total
Transportation Solutions	2,243	58%	2,393	62%
Industrial Solutions	1,593	42%	1,438	38%
Total	3,836	100%	3,831	100%

Table: Change in Net Sales

Segment	Net Sales Growth (Decline)	Organic Net Sales Growth (Decline)	Translation	Acquisitions (Divestiture)
Transportation Solutions	(6.3)%	(5.2)%	(0.5)%	(0.6)%
Industrial Solutions	10.8%	8.6%	(0.4)%	2.6%
Total	0.1%	0.0%	(0.5)%	0.6%

Cost of Sales and Gross Margin

Gross margin increased $36 million in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024, due primarily to higher volume partially offset by price erosion.

Table: Cost of Sales and Gross Margin

Metric	Q1 FY2025	Q1 FY2024	Change
Cost of Sales ($ millions)	2,476	2,507	(31)
As a % of Net Sales	64.5%	65.4%	-
Gross Margin ($ millions)	1,360	1,324	36
As a % of Net Sales	35.5%	34.6%	-

Operating Expenses

Selling, general, and administrative expenses were $427 million, or 11.1% of net sales, in both the first quarter of fiscal 2025 and the first quarter of fiscal 2024.

Restructuring and other charges, net, were $50 million in the first quarter of fiscal 2025, compared to $21 million in the first quarter of fiscal 2024. The increase was due to a restructuring program associated with footprint consolidation and cost structure improvements in both segments.

Operating Income

Operating income decreased $8 million in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024, primarily due to the increase in restructuring and other charges.

Table: Operating Income

Metric	Q1 FY2025 ($ millions)	Q1 FY2024 ($ millions)	Change ($ millions)
Operating Income	690	698	(8)
Operating Margin	18.0%	18.2%	-

Segment Results

Transportation Solutions

Net sales decreased 6.3% due to organic sales declines in all end markets, particularly automotive.
Operating income decreased $41 million, primarily due to lower volume and price erosion, partially offset by improved manufacturing productivity.

Industrial Solutions

Net sales increased 10.8%, driven by 8.6% organic growth and a 2.6% positive impact from acquisitions.
Operating income increased $33 million, primarily due to higher volume.

Liquidity and Capital Resources

TE Connectivity believes it has sufficient financial resources and liquidity to meet its ongoing working capital and other cash flow needs. Key points:

Net cash provided by operating activities was $878 million in the first quarter of fiscal 2025, up from $719 million in the first quarter of fiscal 2024.
Capital expenditures were $205 million in the first quarter of fiscal 2025, compared to $151 million in the first quarter of fiscal 2024.
Total debt was $4,205 million as of December 27, 2024, compared to $4,203 million as of September 27, 2024.
The company has a $1.5 billion unsecured senior revolving credit facility, which was undrawn as of December 27, 2024.
TE Connectivity repurchased approximately 2 million of its ordinary shares for $310 million in the first quarter of fiscal 2025.

Outlook and Risks

TE Connectivity provided an outlook for the second quarter of fiscal 2025, expecting net sales of approximately $3.95 billion and diluted loss per share from continuing operations of approximately $0.05 per share. This outlook reflects the negative impact of foreign currency exchange rates and a tax matter.

The company faces various risks and uncertainties, including conditions in the global economy and industries it serves, raw material availability and costs, legal proceedings, trade compliance matters, and other factors that could affect its results of operations, financial position, and cash flows.