Te Connectivity Plc · NYSE:TEL
Te Connectivity — Investor Presentation (November 2018)
41 slides from Te Connectivity's investor presentation, Nov 7, 2018
Slide 1: Forward-Looking Statements and Non-GAAP Financial Measures
2 Forward-Looking Statements and Non-GAAP Financial Measures Forward-Looking Statements This presentation contains certain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and
Slide 2: Industrial Technology Company Creating a Safer, Sustainable, Productive and Connected Future
3 INDUSTRIAL TECHNOLOGY COMPANY CREATING A SAFER, SUSTAINABLE, PRODUCTIVE AND CONNECTED FUTURE TE CONNECTIVITY Automotive Sensors Commercial Transportation Data & Devices Appliances WORLD LEADER in connectivity and sensor solutions with the broadest range of technologies Highly engineered products a
Slide 3: The Levers of Our Business Model
4 THE LEVERS OF OUR BUSINESS MODEL ORGANIC REVENUE GROWTH EPS GROWTH LOWER OPERATING EXPENSES M & A BALANCED CAPITAL STRATEGY Strategic M&A, Share Buybacks, Dividend increases, ROIC in mid-teens, strong FCF IMPROVED OPERATING MARGINS Expand 30-80 basis points annually Organic revenue growth, Operati
Slide 4: Business Model Performance Through the Cycle
5 BUSINESS MODEL PERFORMANCE THROUGH THE CYCLE Expectations: Transportation ~20% Adjusted Operating Margins Industrial continues migration to high teens Adjusted Operating Margin Cash generation remains a focus Committed to capital deployment and returns to shareholders REVENUE $ Billions ADJUSTED E
Slide 5: Where We Are Winning
6 WHERE WE ARE WINNING Appliances Data and Devices Energy / Utilities Medical Industrial Equipment Aerospace, Defense and Marine Sensors Commercial Transportation Automotive END MARKET TRENDS EV adoption globally, driven by OEM & Government initiatives Safer, more autonomous vehicles Heavy truck con
Slide 6: Mid-High Single Digits Growth: All Segments Contributing
MID - HIGH SINGLE DIGITS GROWTH: ALL SEGMENTS CONTRIBUTING FOCUS Top Line Growth Growth and margin expansion Consistency Cash Flow Generation 7 TE PORTFOLIO POSITIONED FOR 4 – 6% ORGANIC GROWTH TRANSPORTATION INDUSTRIAL COMMUNICATIONS Very strong position in a market with content growth drivers Stro
Slide 7: Capital Strategy: Balanced Deployment
8 CAPITAL STRATEGY: BALANCED DEPLOYMENT DIVIDENDS PER SHARE Share Repurchases $7.7B Acquisitions* $7.6B Dividends $4.5B MAJOR CAPITAL DEPLOYMENT** FY08 through FY18 Denotes dividends paid during the fiscal year. BNS Proceeds $2B Free Cash Flow is a non-GAAP financial measure; See Appendix for descri
Slide 8: Capital Strategy: Balanced Deployment
CAPITAL STRATEGY: BALANCED DEPLOYMENT MAJOR CAPITAL DEPLOYMENT DIVIDENDS PER SHARE FY08 through FY18 Dividends $4.58, vio FYI FYI2 FYI3 FYt4 FYIS FYI6 FYI7 FYIB EXPECT TO RETURN ~2' OF FREE CASH FLOW TO SHAREHOLDERS OVER TME EXPECT TO UTILIZE ~19 OF FREE CASH FLOW AS AN ADDITIONAL LEVER FOR REVENUE
Slide 9: Transportation Solutions
TRANSPORTATION SOLUTIONS 72.5M CONNECTED cars sold by 2023 95% of trucks with cleaner engine by 2025 (EU6) UP TO 50% of new cars sold with electrified powertrain by 2030 >$250 Available sensor content in average vehicle billion In sales in FY18 $8.3 Mid – High SINGLE DIGIT LONG TERM ORGANIC GROWTH R
Slide 10: Our Global Leadership Position in Automotive
OUR GLOBAL LEADERSHIP POSITION IN AUTOMOTIVE CONTENT PER VEHICLE (CPV) 40% ~$50 $22 TODAY 42% ~$75 ASIA EMEA AMERICAS % OF TE AUTO REVENUE GLOBAL 18% ~$55 ~$62 100% LONG TERM PRODUCTION GROWTH ~2% ~1% ~2% ~2% $1B business Partnering with ~50 OEMs CPV has doubled over past 5 years AUTOMOTIVE GROWTH D
Slide 11: Key Drivers of Electronic Content Growth
KEY DRIVERS OF ELECTRONIC CONTENT GROWTH ~6% TE content CAGR over the next 5 years * Includes Sensors. Content per vehicle may vary based upon foreign currency exchange rates $50 $27 $7 YESTERDAY 5 YEARS AGO INTEGRATED SOLUTIONS RELIABILITY MINIATURIZATION TE CAPABILITIES $84 5 YEARS FROM NOW CONNEC
Slide 12: TE Enables Next Level Driving Automation
13 LEVEL 0 LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5 NO AUTOMATION DRIVER ASSISTANCE PARTIAL AUTOMATION CONDITIONAL AUTOMATION HIGH AUTOMATION FULL AUTOMATION Driver controls it all Increased need for sensors and data connectivity 3 GB / second communications between driver assistance systems Ethernet
Slide 13: China Will Be a Major Driver for EV
14 CHINA WILL BE A MAJOR DRIVER FOR EV Consumer purchase incentives Local mandates to offer EVs Easy to acquire license plates Government wants to establish Chinese OEMs as global leader STRONG PUSH FROM GOVERNMENT Small share can represent high volumes Many cities with strong demand Emerging middle
Slide 14: TE Is Winning Globally with EV OEMs
15 TE IS WINNING GLOBALLY WITH EV OEMS Tesla Model 3 EXPANDING OUR TECHNICAL EXPERTISE NIO New Energy Vehicle EXPANDING OUR CONTENT & OUR CUSTOMER BASE CPV $500+ CPV $100+ CPV SUSTAINABLE $120 TE EV AVERAGE
Slide 15: Uniquely Positioned to Deliver End to End Solutions for Electric Vehicles
16 CHARGING CABLES & INLETS TEMPERATURE SENSORS CONNECTORS CABLES CURRENT SENSORS E-MOTORS MULTI-COIL RESOLVER RESOLVER ROTARY POSITION SENSOR TEMPERATURE SENSOR CABLE ASSEMBLY CONNECTORS BATTERY PERFORMANCE BATTERY DISCONNECT UNIT HIGH VOLTAGE CONNECTORS RELAYS & CONTACTORS RESISTORS UNIQUELY POSIT
Slide 16: TE Integrated Solutions for EV Batteries
TE INTEGRATED SOLUTIONS FOR EV BATTERIES BATTERY DISCONNECT UNIT SERVICE DISCONNECT CONNECTION ASSEMBLY CONNECTOR CONTACTORS RESISTORS & SENSORS (THERMAL & CURRENT) INTEGRATED CELL CONNECTION SYSTEM SENSORS (THERMAL & CURRENT) CONNECTOR TRADITIONAL Connector Only Content $20 INTEGRATED Content $200
Slide 17: Sensors: Portfolio Positioned for Growth
SENSORS: PORTFOLIO POSITIONED FOR GROWTH AUTO DESIGN WINS PROPELLING STRONG GROWTH INDUSTRIAL COMMERCIAL TRANSPORTATION AUTOMOTIVE INDUSTRIAL COMMERCIAL TRANSPORTATION AUTOMOTIVE +$2B AUTO DESIGN WINS (TERP) FY16 to FY18 POSITION PRESSURE SPEED HUMIDITY TEMPERATURE QUALITY Organic Growth HIGH-SINGLE
Slide 18: Sensors: Portfolio Positioned for Growth
SENSORS: PORTFOLIO POSITIONED FOR GROWTH Lee , HIGH-SINGLE DIGIT ter = ‘Organic Growth wer MID-SINGLE DIGIT ‘Organic Growth suroworne i +$2B AUTO couenca | | ‘ieansrontarion f] _ DESIGN WINS (TERP) FY16 to FYI8 TRANSPORTATi *POSITION + HUMIDITY INoUSTRIAL moUsTRA “PRESSURE + TEMPERATURE “SPEED QUALI
Slide 19: Industrial Solutions
INDUSTRIAL SOLUTIONS 5% growth in global AIR TRAVELERS 15% TAVR market growth (Aortic Valve Replacement) 16% Mid Single Digit LONG-TERM ORGANIC GROWTH RATE High Teens TARGET ADJUSTED OPERATING MARGIN billion In sales in FY18 $3.9 billion Market $40 KEY TRENDS DIGITAL CONNECTED FACTORIES AGING DEMOGR
Slide 20: Driving Operating Margins to the High Teens
TOP LINE DRIVERS 21 DRIVING OPERATING MARGINS TO THE HIGH TEENS Footprint consolidation Productivity enhancement with TEOA SG&A expense reduction Market growth accelerating in Medical, Factory Automation and Defense Content driving growth above market OPERATIONAL DRIVERS HIGH TEENS OI% 2/3 1/3
Slide 21: Content Growth in Factory Automation
22 CONTENT GROWTH IN FACTORY AUTOMATION Safety enhancements Increased capability / motion Sensors and data capture Connectivity and remote access TAM expansion with acquisitions CONTENT INCREASE DRIVEN BY: $20 $170 YESTERDAY TODAY 8X Increase in Content Per Robot DATA CONNECTOR DATA CONNECTOR DATA C
Slide 22: Our Medical Business
OUR MEDICAL BUSINESS Portfolio mix shifting towards the more attractive Interventional and Surgical segments Ablation TRENDS DRIVING INTERVENTIONAL GROWTH 2017 2022 2012 Aging population Reducing hospital stay Shorter patient recovery Cost effective treatments PATIENT CABLES SURGICAL INTERVENTIONAL
Slide 23: Content Drives Commercial Aerospace Growth
CONTENT DRIVES COMMERCIAL AEROSPACE GROWTH $420k PER 2022 Widebody $110k Per 2022 narrowbody >15% INCREASE IN AVERAGE Content / Aircraft by 2022 NARROWBODY WIDEBODY A320 NEO B737 MAX C-Series C919 2017 16% 2022 17% 2017 2022 A330 NEO A350 B777X B787 TE Avg. Content per Aircraft Produced (‘000s) 24 $
Slide 24: Communications Solutions
COMMUNICATIONS SOLUTIONS 25
Slide 25: Communications Solutions Segment
COMMUNICATIONS SOLUTIONS SEGMENT 27% datacenter traffic growth reaching 15ZB in 2020 150M 5G global subscribers by 2021 25B Connected devices by 2020 KEY TRENDS HIGH-SPEED SOLUTIONS IOT AND CONNECTED LIFE GROWTH IN ASIA EMERGING APPLICATIONS Low Single Digit LONG-TERM ORGANIC GROWTH RATE Mid Teens A
Slide 26: Communications Solutions Transformation
27 COMMUNICATIONS SOLUTIONS TRANSFORMATION GROW CONTENT REPOSITION PORTFOLIO WIN IN ASIA-PACIFIC WIN WITH HYPERSCALE RATIONALIZE FOOTPRINT STRATEGIC PRIORITIES HYPERSCALE SPENDING US Telco Capex Hyperscale Players REPOSITIONED TO GROWTH MARKETS MIX SHIFT TO ASIA 2011 2017 53% 47% 41% 59% US/EMEA ASI
Slide 27: Appliances Overview
APPLIANCES OVERVIEW Global portfolio with strong penetration in the fast-growing Asia region and in emerging applications TRENDS DRIVING APPLIANCES GROWTH Safety Efficiency Miniaturization WESTERN WORLD ASIA-PACIFIC EMERGING HOME CONTENT GROWTH DRIVEN BY: Value-add assemblies Integrated solutions Ne
Slide 28: Data and Devices Overview
DATA AND DEVICES OVERVIEW Portfolio shifting to growing high-speed applications with complex technological challenges TRENDS DRIVING DATA AND DEVICES GROWTH Data explosion High-speed Infrastructure shifts e.g. 5G HIGH-SPEED TELECOM, ENTERPRISE CONSUMER HYPERSCALE TRUSTED PARTNER TO LEADING CUSTOMERS
Slide 29: Data and Devices Overview
DATA AND DEVICES OVERVIEW HYPERSCALE Google AMAZON EEricoso LA <2 (Sh Bree ineg io growing high-speed HIGH-SPEED TELECOM, eae comp | i eae $4 TOK UZ NOKIA Feta technological challenges CONSUMER 2012 2017-2022 ~$40k content / chassis at leading cloud provider ‘TRENDS DRIVING DATA AND. DEVICES GROWTH
Slide 30: Non-GAAP Financial Measures
31 Non-GAAP Financial Measures We present non-GAAP performance and liquidity measures as we believe it is appropriate for investors to consider adjusted financial measures in addition to results in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These non-GAAP financia
Slide 31: Free Cash Flow (FCF) Definition
32 Free Cash Flow (FCF) – is a useful measure of our ability to generate cash. The difference between net cash provided by continuing operating activities (the most comparable GAAP financial measure) and Free Cash Flow consists mainly of significant cash outflows and inflows that we believe are usef
Slide 32: Reconciliation of Net Sales Growth – FY18 vs. FY17
33 Reconciliation of Net Sales Growth – FY18 vs. FY17 Translation (2) Acquisitions Transportation Solutions (3) : Automotive 864 $ 16.5% 434 $ 8.2% 213 $ 217 $ Commercial transportation 283 28.4 233 23.2 50 - Sensors 104 12.8 72 8.9 32 - Total 1,251 17.8 739 10.5 295 217 Industrial Solutions (3) : I
Slide 33: Reconciliation of Net Sales Growth – FY17 vs. FY16
34 Reconciliation of Net Sales Growth – FY17 vs. FY16 Acquisitions Translation (2) (Divestiture) Transportation Solutions (3) : Automotive 316 $ 6.4% 349 $ 7.1% (33) $ - $ Commercial Transportation 172 20.8 181 21.9 (9) - Sensors 48 6.3 23 3.0 (5) 30 Total 536 8.2 553 8.5 (47) 30 Industrial Solution
Slide 34: Impact of Additional Week in FY16 including Net Sales Growth to FY17
35 Impact of Additional Week in FY16 including Net Sales Growth to FY17 Adjustment Adjustment Adjustment 53 Weeks Impact of 52 Weeks 53 Weeks Impact of 52 Weeks 53 Weeks Impact of 52 Weeks U.S. GAAP 53rd Week (Non-GAAP) (1)(2) U.S. GAAP 53rd Week (Non-GAAP) (1)(2) (Non-GAAP) (2) 53rd Week (Non-GAAP)
Slide 35: Impact of Additional Week in FY16 including Net Sales Growth from FY15
36 Impact of Additional Week in FY16 including Net Sales Growth from FY15 Adjustment Adjustment Adjustment 53 Weeks Impact of 52 Weeks 53 Weeks Impact of 52 Weeks 53 Weeks Impact of 52 Weeks U.S. GAAP 53rd Week (Non-GAAP) (1)(2) U.S. GAAP 53rd Week (Non-GAAP) (1)(2) (Non-GAAP) (2) 53rd Week (Non-GAA
Slide 36: Reconciliation of Forward-Looking Non-GAAP Financial Measures
37 Reconciliation of Forward-Looking Non-GAAP Financial Measures to Forward-Looking GAAP Financial Measures Outlook for Quarter Ending December 28, Outlook for 2018 (1) Fiscal 2019 (1) Diluted earnings per share from continuing operations (GAAP) $1.09 - $1.13 $5.20 - $5.40 Restructuring and other ch
Slide 37: Reconciliation for the Year Ended September 28, 2018
38 Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 28, 2018 Acquisition Restructuring Related and Other Tax Adjusted U.S. GAAP Charges (1) Charges, Net (1) Items (2) (Non-GAAP) (3) Operating Income: Transportation Solutions 1,578 $ 12 $ 33 $ - $
Slide 38: Reconciliation for the Year Ended September 29, 2017
39 Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 29, 2017 Acquisition Restructuring Related and Other Tax Adjusted U.S. GAAP Charges (1) Charges, Net (1) Items (2) (Non-GAAP) (3) Operating Income: Transportation Solutions 1,294 $ 3 $ 69 $ - $ 1
Slide 39: Reconciliation for the Year Ended September 30, 2016
40 Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 30, 20161 Restructuring Acquisition and Other Related Charges Tax Adjusted U.S. GAAP Charges (2)(3) (Credits), Net (3) Items (4) (Non-GAAP) (5) Operating Income: Transportation Solutions 1,209 $
Slide 40: Reconciliation for the Year Ended September 25, 2015
41 Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 25, 20151 Acquisition Restructuring Related and Other Tax Adjusted U.S. GAAP Charges (2)(3) Charges, Net (3) Items (4) (Non-GAAP) (5) Operating Income 1,659 $ 94 $ 149 $ - $ 1,902 $ Operating Mar
Slide 41: Reconciliation for the Year Ended September 25, 2015
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 25, 2015' Operating Income A), Case ea Operating Marin 1604 toe rhe come (pease Net fo es ee Income Tas Beas som san sa sce sy ce Tx Rae awe 27 Income rom Condasing Opraom $u$ Sms ws ited arnings pe
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