Amphenol Corporation

As a reminder, during the call, we may refer to certain non-GAAP financial measures and make certain forward-looking statements, so please refer to the relevant disclosures in our press release for further information. The company closed the second quarter of 2025 with record sales of $5,650,000,000 and record GAAP and adjusted diluted EPS of 86 cents and 81 cents, respectively. Second quarter sales were up 57% in US dollars, 56% in local currencies, and 41% organically compared to the second quarter of 2024. Sequentially, sales were up 17% in U.S. dollars, 16% in local currencies, and 14% organically. Adam will comment further on trends by market in a few minutes. Orders in the quarter were a record $5,523,000,000, up a strong 36% compared to the second quarter of 2024, and up 4% sequentially. resulting in a book-to-bill ratio of 0.98 to 1. Gap operating income was $1,419,000,000 in the quarter, and gap operating margin was a record 25.1%. Gap operating margin included $29,000,000 of acquisition-related costs. Excluding these acquisition-related costs, adjusted operating income in the second quarter of 2025 was $1,448,000,000 resulting in a record adjusted operating margin of 25.6%. On an adjusted basis, operating margin increased by a strong 430 basis points from the prior quarter and 210 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on the significantly higher sales volumes, which was only modestly offset by the diluted impact of acquisitions. On a sequential basis, the increase in adjusted operating margin reflected strong conversion on the higher sales levels, as well as further progress on the profitability improvement initiatives on acquisitions. I'm extremely proud of the company's record operating margin performance in the second quarter, which reflects continued strong execution by our team. Breaking down second quarter results by segment compared to the second quarter of 2024, sales in the communication solution segment were $2,910,000,000 and increased by 101% in U.S. dollars and 78% organically. Segment operating margin was 30.6%. Sales in the harsh environment solution segment were $1,445,000,000 and increased by 38% in U.S. dollars and 18% organically. Segment operating margin was 25.2%. Sales in the interconnect sensors and systems segment were $1,295,000,000 and increased by 16% in U.S. dollars and 14% organically, and segment operating margin was 19.5%. The company's GAAP effective tax rate for the second quarter was 18.3%, and the adjusted effective tax rate was 24.5%, which compared to 20.4% and 24% in the second quarter of 2024, respectively. GAAP diluted EPS was a record 86 cents in the second quarter, up 110% compared to the prior year period. And on an adjusted basis, diluted EPS increased 84% to a record $0.81 compared to $0.44 in the second quarter of 2024. This was an outstanding result. Operating cash flow in the second quarter was a record $1,417,000,000 or 130% of net income. And free cash flow was a record $1,122,000,000 or 103% of net income. An excellent result, especially considering the growth that we have experienced. In the third quarter, we expect capital spending to again be somewhat elevated versus our typical 3% to 4% of sales levels as we continue to invest to support the significant growth we are seeing in the IT datacom market. From a working capital standpoint, inventory days, day sales outstanding, and payable days are all within our normal range. During the quarter, the company repurchased 2 million shares of common stock at an average price of approximately $78. And when combined with our normal quarterly dividend, total capital return to shareholders in the second quarter of 2025 was approximately $360 million. Total debt on June 30th was $8.1 billion, and net debt was $4.8 billion. Total liquidity at the end of the quarter was $6.2 billion, which included cash and short-term investments on hand of $3.2 billion, plus availability under our existing credit facilities. Excluding acquisition-related costs, second quarter 2025 EBITDA was $1.7 billion, and at the end of the second quarter of 2025, our net leverage ratio was 0.9 times. During the quarter, the company completed a successful $750 million U.S. bond offering and a 600 million euro bond offering. As of June 30th, the company had no outstanding borrowings under its revolving credit facility or its commercial paper programs. and we expect quarterly interest expense, net of interest income earned on cash on hand, to be approximately $70 million, which is reflected in our third quarter guidance. I will now turn the call over to Adam, who will provide some commentary on current market trends.

Well, thank you very much, Craig, and I'd like to extend my welcome to all of you from sunny Wallingford, Connecticut. And I hope that all of you on the call here today, together with your family and friends and colleagues, are enjoying a wonderful summer so far. As Craig alluded to, I'm going to highlight our achievements in the second quarter. I'll talk about our trends and progress across our served markets. We'll make some comments on our outlook for the third quarter. And then, of course, we'll have time for questions at the end. Let me just say that we drove outstanding performance in the second quarter of 2025. In fact, our results were much stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. Our sales grew from prior year by a very strong 57% in U.S. dollars and 56% in local currencies, reaching a new record $5,650,000,000. And then on an organic basis, our sales increased by 41%. with all of our end markets experiencing robust organic growth. And I'll talk about those markets specifically here in a few moments. The company booked a record $5,523,000,000 in orders in the second quarter, and that represented a book to bill of 0.98 to one. And these orders grew by 36%, very strong compared to prior year. And we're also up sequentially from our previous record orders in the first quarter. I want to say that we're particularly pleased to have delivered record adjusted operating margins of 25.6% in the quarter. This is an increase of 430 basis points from prior year and 210 basis points sequentially. This strong profitability is a direct result of the outstanding execution of the Amphenol team around the world who continue to manage well in what continues to be a challenging cost environment. Adjusted diluted EPS grew 84 percent from prior year and reached a new record of 81 cents. And finally, the company generated record operating and free cash flow in the second quarter of 1.4 billion and 1.1 billion respectively, both clear reflections of the quality of the company's earnings. I cannot express enough my pride in our team. Amphidel's results this quarter once again reaffirmed the value of the drive, discipline, and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment. We were very pleased in May to have closed on the acquisition of NARDA MyTech, and based in HopHag, New York, with annual sales of approximately $120 million, NARDA MyTech is a leading provider of active RF and microwave components, primarily for the defense markets. Together with our previously announced acquisitions of XMA and Q Microwave, and now with NARDA, we're building a strengthened presence in RF interconnect and active RF components, which is a great complement to our leading position across RF connector, cable, cable assembly, and antenna products for this important market. We remain confident that our acquisition program will continue to create great value for the company. Our ability to identify and execute upon acquisitions and then to successfully bring these companies into the Amphenol family remains a core competitive advantage for the company. Now, turning to our served markets, we're very pleased that the company's end market exposure remains highly diversified, balanced, and broad. This diversification continues to create great value for the company, enabling us to participate across all areas of the global electronics industry while not being overly exposed to the volatility of any given market or application. The defense market represented 9% of our sales in the quarter. Sales grew from prior year by a very strong 25% in US dollars and 18% organically, and this was driven by broad-based growth across most segments within the defense market. Sequentially, our sales increased by 13%, which was better than our expectations coming into the quarter, for a high single-digit increase. Looking into the third quarter, we expect sales to increase modestly from these second-quarter levels, including the benefit of our acquisition. We remain encouraged by the company's leading position in the defense interconnect market, where we continue to offer the industry's widest range of high-technology products. With the addition of NARDA MyTech, we continue to diversify our already broad product offerings, to capitalize on the increasing adoption of electronics in defense equipment. Amidst the current dynamic geopolitical environment, countries around the world are expanding their spending on both current and next-generation defense technologies, and we're positioned better than ever to capitalize on this long-term demand trend. The commercial aerospace market represented 5% of our sales in the quarter, and sales increased by 50% in U.S. dollars and 8% organically from prior year, as we benefited from the addition of CIT last year, as well as our continued progress in expanding content on next-generation commercial aircraft. Sequentially, our sales grew by 6% in U.S. dollars from the first quarter, which was better than our expectations coming into the quarter. Looking to the third quarter, we expect our sales to be up in the low single digits from these second quarter levels. I'm truly proud of our team working in the commercial air markets. With the ongoing growth and demand for jetliners, our efforts to expand our product offering both organically and through our acquisition program are paying real dividends. In particular, we continue to be very encouraged by the progress of the CIT team as part of Amphenol, and we look forward to further capitalizing on our expanded range of product solutions for the commercial air market long into the future. The industrial market represented 19% of our sales in the quarter, And our sales in this market grew 25% in U.S. dollars and 12% organically, as we continue to see improvements across our diversified industrial markets. In particular, our organic growth was driven by expansions in alternative energy, instrumentation, medical, industrial EV, and factory automation. And I'm especially pleased that we grew organically in all of our CERB geographic regions during the quarter, including in Europe. On a sequential basis, our sales grew by much better than expected, 11% from the first quarter. Looking into the third quarter, we do expect sales to moderate slightly from the second quarter levels on typical seasonality. But we remain encouraged by the company's strength across the many diversified segments of this important market. As demand has continued to recover, I'm confident that our long-term strategy to expand our high-technology interconnect, antenna, and sensor offering both organically and through complementary acquisitions, has positioned us to capitalize on the many electronic revolutions that continue to occur across the industrial market. This creates exciting opportunities for our outstanding team working in this important area. The automotive market represented 14% of our sales in the second quarter, and sales in this market grew 10% in U.S. dollars and 8% organically, as we experienced growth really in all regions. Sequentially, our sales in automotive grew by 7% from the first quarter, which was also much better than our expectations coming into the quarter and really reflected strong execution by our team. For the third quarter, we expect sales to be slightly lower than these second quarter levels as customers plan for their traditional summer shutdowns. I remain proud of our team working in the automotive market. While there are still areas of uncertainty in this market, our team continues to be focused on driving new design wins with customers who are implementing a wide array of new technologies into their vehicles. We look forward to benefiting from our strong position in the automotive market for many years to come. The communications networks represented 11% of our sales in the second quarter, Sales grew from prior year by 143% in U.S. dollars, which was driven primarily by the addition of Andrew. On an organic basis, our sales increased by a robust 16% from prior year, as we benefited from increased spending by communications networks operators, as well as wireless equipment manufacturers. Sequentially, sales in the second quarter grew by 30% from the first quarter, driven in part by the Andrew acquisition. which was completed in the first quarter. Organically, our sales grew by a better-than-expected 7%. Looking into the third quarter, we expect sales to remain at these very strong Q2 levels. With our expanded range of technology offering, especially following the acquisition of Andrew, we are well-positioned with both service provider and OEM customers across the global communications networks markets. Our deep and broad range of products, coupled with an expansive manufacturing footprint, have positioned us to support customers around the world. As those customers continue to drive their systems to higher levels of performance, we look forward to supporting them for many years to come. The mobile devices market represented 6% of our sales in the quarter, and our sales grew by 14% in U.S. dollars and organically in the second quarter, as strength in smartphones and laptops was only partially offset by declines in products sold into tablets. Sequentially, our sales increased by 4%, which was actually much better than our expectations coming into the quarter for a high teens decline. As we look into the third quarter, we anticipate sales to increase in the high single digits compared to these strong second quarter levels. I'm very proud of our team working in the always dynamic mobile devices market as their agility and reactivity have once again enabled us to capture incremental sales in the quarter. I'm confident that with our leading array of antennas, interconnect products, and mechanisms designed in across a broad range of next generation mobile devices, we're well positioned for the long term. And finally, the IT Datacom market represented 36% of our sales in the quarter. Sales in the second quarter grew by a very strong 133% in U.S. dollars and organic. And this was driven by continued acceleration in demand for our products used in artificial intelligence applications, together with continued robust growth in our base IT Datacom business. I'm very proud of our team's outstanding execution in the second quarter, as we were actually able to outperform even our customers' very high expectations for deliveries of AI-related products. As a result, we shipped substantially more than expected, including some modest portion of third quarter demand. In fact, without this additional output, our IT Datacom sales would have represented roughly a similar percentage of overall company sales as we saw in the first quarter, or approximately 33%. On a sequential basis, our sales increased by a very strong 29% from the first quarter, substantially better than our expectation for a high single-digit increase, again, reflecting that outperformance of our team executing beyond what anybody expected. And this growth was driven by sales of AI-related products as well as growth in our base IT data comms. in our base IT Datacom business. As we look into the third quarter and due to the stronger than expected execution of our team in the second quarter, we expect our sales to moderate in the mid to high single digits from these very strong second quarter levels. But I got to tell you, we're more encouraged than ever by the company's position in the global IT Datacom market. Our team has done an outstanding job securing future business on next generation IT systems with a broad array of customers. And the revolution in AI continues to create unique opportunity for Amphenol, giving our leading high-speed and power interconnect products. In fact, whether high-speed, power, or fiber optic interconnect, our products are critical components in these next-generation networks. And this creates a continued long-term growth opportunity for Amphenol. Turning to our outlook and assuming current market conditions as well as constant currency exchange rates, for the third quarter, we expect sales in the range of 5.4 to 5.5 billion and adjusted diluted EPS in the range of 77 to 79 cents. This would represent sales growth from prior year of 34 to 36 percent and adjusted diluted EPS growth of 54 to 58 percent. compared to the third quarter of last year. I remain confident in the ability of our outstanding management team to adapt to the many opportunities and challenges in the current environment and to continue to grow our market position while driving sustainable and strong profitability over the long term. Finally, I'd like to take this opportunity to thank our entire global team for their truly outstanding performance here in the second quarter. And with that, operator, we'd be very happy to take any questions.

Thank you. The question and answer period will now begin. Please limit to one question per caller. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. The first question is from the line of William Stein with Truist. Your line's now open.