Te Connectivity Plc · NYSE:TEL
Te Connectivity — Q2 2020 Earnings Presentation
32 slides from Te Connectivity's earnings presentation, Apr 28, 2020
Slide 1: Q2 2020 Earnings
Q2 2020 Earnings April 28, 2020
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Forward-Looking Statements and Non-GAAP Financial Measures 2 Forward-Looking Statements This presentation contains certain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act
Slide 3: Key Messages
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. • Delivered Q2 sales that were in-line with guidance and Adjusted EPS that was above the high end of our guidance range • Adjusted operating margins were above 16% and reflect the diversity of our portfolio and the early exe
Slide 4: Sales at midpoint of guidance and Adjusted EPS above the high end
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Sales at midpoint of guidance and Adjusted EPS above the high end of guidance • Sales of $3.2B, down 6% on a reported basis and down 5% organically Y/Y; FX headwind of $60M • Transportation down 5% organically, with weakness
Slide 5: Segment Orders Summary
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reported FY20 FY20 Growth March & April Order Trends Q1 Q2 Q1 to Q2 Transportation 1,867 1,849 (1)% Erosion in Auto and Commercial Transportation Industrial 965 1,051 9% Erosion in CommAir; Stability in Defense, Medical & En
Slide 6: Q2 to Q3 Sequential Sales Drivers
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. $3,195 Q2 2020 Q3 2020 Q2 to Q3 Sequential Sales Drivers 6 $ in Millions • Auto production expected to decline ~33% from ~18M vehicles produced in Q2 to ~12M in Q3 • Expect reduction in CommAir market of ~33% as a result of
Slide 7: Transportation Solutions
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Y/Y Growth Rates Reported Organic Automotive $1,365 (4)% (2)% Commercial Transportation 294 (9)% (11)% Sensors 198 (11)% (15)% Transportation Solutions $1,857 (6)% (5)% $ in Millions Q2 Sales Q2 Business Performance Reported
Slide 8: Industrial Solutions
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Y/Y Growth Rates Reported Organic Aerospace, Defense and Marine $318 (4)% (3)% Industrial Equipment 280 (14)% (13)% Medical 186 6% 6% Energy 178 2% 6% Industrial Solutions $962 (5)% (3)% $ in Millions Q2 Sales • AD&M decline
Slide 9: Communications Solutions
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. 18.0% 13.8% Q2 2019 Q2 2020 $434 $376 Q2 2019 Q2 2020 Y/Y Growth Rates Reported Organic Data & Devices $218 (13)% (13)% Appliances 158 (14)% (12)% Communications Solutions $376 (13)% (13)% $ in Millions Q2 Sales • Communicat
Slide 10: Q2 Financial Summary
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. ($ in Millions, except per share amounts) Q2 FY19 Q2 FY20 Net Sales $ 3,412 $ 3,195 Operating Income (Loss) $ 530 $ (415) Operating Margin 15.5% (13.0%) Acquisition Related Charges 9 12 Restructuring & Other Charges, net 42
Slide 11: Q2 Financial Performance
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Q2 Financial Performance 11 Adjusted Operating Margin Free Cash Flow $413 $554 YTD 2019 YTD 2020 $3,412 $3,195 Q2 2019 Q2 2020 Sales Adjusted EPS $1.42 $1.29 Q2 2019 Q2 2020 Adjusted EBITDA Margin 22.0% 21.9% 17.0% 16.2% Q2
Slide 12: Free Cash Flow & Liquidity
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. $64 $69 $243 $223 $344 $311 $443 $515 $670 $688 2018 2019 2020 Q1 Q2 Q3 Q4 $350 $635 $500 $605 $350 $605 2020 2021 2022 2023 2024 2025 As of 3/27/2020 12 Free Cash Flow & Liquidity • Remain committed to quarterly dividend •
Slide 13: Expectations Going Forward
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Strong portfolio position and early cost actions enabling TE to navigate a challenging demand environment Expectations Going Forward 3Q20 Expectations Market Assumptions 13 Actions We Are Taking • Expect Q3 sales to decline
Slide 14: Additional Information
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Additional Information 14
Slide 15: Q2 2020 Sales and Adjusted EPS Bridge
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Y/Y Q2 2020 15 Sales (in millions) Adjusted EPS Q2 2019 Results $3,412 $1.42 Operational Performance (157) (0.10) FX Impact (60) (0.02) Tax Rate Impact -(0.01) Q2 2020 Results $3,195 $1.29 Adjusted EPS is a non-GAAP financia
Slide 16: Q2 Balance Sheet & Cash Flow Summary
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. ($ in Millions) Q2 2019 Q2 2020 Beginning Cash Balance $505 $742 Free Cash Flow 344 311 Dividends (149) (153) Share repurchases (220) (269) Net increase in debt 27 383 Acquisition of businesses, net of cash acquired 8 (244)
Slide 17: Appendix
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Appendix 17
Slide 18: Non-GAAP Financial Measures
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. 18 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
Slide 19: Non-GAAP Measure Descriptions
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. 19 • Adjusted EBITDA and Adjusted EBITDA Margin - represent net income (loss) and net income (loss) as a percentage of net sales, respectively, (the most comparable GAAP financial measures) before interest expense, interest
Slide 20: Segment Summary
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. 20 Segment Summary Transportation Solutions $ 1,857 $ 1,971 $ 3,725 $ 3,957 Industrial Solutions 962 1,007 1,889 1,935 Communications Solutions 376 434 749 867 Total $ 3,195 $ 3,412 $ 6,363 $ 6,759 Transportation Solutions $
Slide 21: Reconciliation of Net Sales Growth
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Net Sales Growth 21 Transportation Solutions (3): Automotive $ (60) (4.2) % $ (29) (2.1) % $ (31) $ - Commercial transportation (30) (9.3) (36) (11.1) (8) 14 Sensors (24) (10.8) (33) (14.9) (3) 12 Total (11
Slide 22: Reconciliation for the Quarter Ended March 27, 2020
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Quarter Ended March 27, 2020 22 Operating income (loss): Transportation Solutions $ (606) $ 10 $ 18 $ 900 $ - $ 322 Industrial Solutions 142 2
Slide 23: Reconciliation for the Quarter Ended March 29, 2019
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Quarter Ended March 29, 2019 23 Acquisition- Restructuring Related and Other Tax Adjusted U.S. GAAP Charges(1) Charges, Net (1) Items (2) (Non-
Slide 24: Reconciliation for the Six Months Ended March 27, 2020
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Six Months Ended March 27, 2020 24 Operating income (loss): Transportation Solutions $ (290) $ 15 $ 22 $ 900 $ - $ 647 Industrial Solutions 257
Slide 25: Reconciliation for the Six Months Ended March 29, 2019
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Six Months Ended March 29, 2019 25 Operating income: Transportation Solutions $ 648 $ 7 $ 45 $ - $ 700 Industrial Solutions 237 8 52 - 297 Comm
Slide 26: Reconciliation for the Quarter Ended June 28, 2019
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Quarter Ended June 28, 2019 26 Operating income: Transportation Solutions $ 308 $ 6 $ 53 $ - $ 367 Industrial Solutions 156 3 8 - 167 Communica
Slide 27: Reconciliation for the Year Ended September 27, 2019
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures for the Year Ended September 27, 2019 27 Acquisition- Related Charges Restructuring and Other and Other Tax Adjusted U.S. GAAP Items (1)(2) Charges, Ne
Slide 28: Reconciliation of Free Cash Flow
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Free Cash Flow 28 Net cash provided by operating activities: Net cash provided by continuing operating activities $ 481 $ 555 $ 892 $ 883 Net cash provided by (used in) discontinued operating activities - 1
Slide 29: Reconciliation of Free Cash Flow (Quarterly)
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Free Cash Flow 29 December 27, September 27, June 28, March 29, December 28, September 28, June 29, March 30, December 29, 2019 2019 2019 2019 2018 2018 2018 2018 2017 Net cash provided by operating activit
Slide 30: Adjusted Return on Invested Capital (ROIC)
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Adjusted Return on Invested Capital (ROIC) 30 Operating income (loss) $ (415) $ 471 $ 444 $ 520 $ 530 $ 484 $ 570 $ 554 Acquisition-related charges and other items 12 7 23 9 9 6 5 5 Restructuring and other charges, net 22 24
Slide 31: Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin 31 Net income (loss) $ (456) $ 439 (Income) loss from discontinued operations 4 (10) Income tax expense 42 91 Other income, net (11) (1) Interest expense 11 15 Int
Slide 32: Ratio of Consolidated Total Debt to Consolidated EBITDA
TE Connectivity Confidential & Proprietary. Do not reproduce or distribute. Ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility)* 32 Consolidated Total Debt (as defined in the Credit Facility) (1): Short-term debt $ 601 Long-term debt 3,765 Consolidated Total D