01—Abstract
Summary
Summary of the 10-K filed November 12, 2024. Cited figures are marked; the original filing is the authoritative source.
TE Connectivity's fiscal 2024 10-K (filed November 12, 2024) shows a company with steady top-line results but a sharply higher reported profit, driven largely by a one-time tax benefit.
Net sales were $15,845 milliona, down 1.2% from $16,034 million, with organic sales flat (-0.2%) as currency translation (-0.7%) and divestitures/acquisitions (-0.3%) weighed on reported figures. Transportation Solutions (60% of sales) fell 2.0%, Industrial Solutions (28%) fell 1.5%, and Communications Solutions (12%) grew 3.7%. Gross margin expanded to 34.4% from 31.5%, and operating margin rose to 17.6% from 14.4%, supported by manufacturing productivity, pricing actions, and lower restructuring charges ($166 million versus $340 million).
Net income more than doubled to $3,193 millionb ($10.33 diluted EPS) from $1,910 million, but this was inflated by an income tax benefit of $397 million (effective tax rate of -14.2%). The benefit included a $636 million net gain tied to a $972 million ten-year Swiss tax credit (net of a $336 million valuation allowance), plus a $262 million revaluation benefit from a Swiss tax rate increase and a $118 million legal entity restructuring benefit. Investors should therefore treat fiscal 2024 earnings as non-recurring on the tax line; pre-tax income was $2,797 million, up about 23%.
Operating cash flow rose to $3,477 millionc, and free cash flow after $680 million of capex was roughly $2.8 billion, which funded $760 million of dividends and $2,062 million of share repurchases. The company completed its change in place of incorporation from Switzerland to Ireland on September 30, 2024, and will report a new three-segment structure in fiscal 2025.
Management guides Q1 fiscal 2025 net sales to about $3.9 billiond and diluted EPS from continuing operations to about $1.64. Risks flagged include a global minimum tax that could materially affect cash taxes starting fiscal 2025, a $8.3 billion valuation allowance against deferred tax assets, a pending DDTC trade-controls investigation with penalties not yet estimable, and exposure to China (about 20% of sales) and automotive (about 44% of sales).
02—Key points
Key Highlights
- Reported net sales fell 1.2% to $15.8 billion; organic sales were flat, with currency translation a 0.7-point drag.
- Gross margin rose to 34.4% from 31.5%, and operating margin improved to 17.6% from 14.4%, driven by productivity gains, pricing, and lower restructuring charges.
- Net income of $3.19 billion ($10.33 diluted EPS) was boosted by a $397 million income tax benefit, largely from a Swiss tax credit and a Swiss tax rate revaluation, so underlying earnings growth is much smaller than the headline figure.
- Operating cash flow increased 11% to $3.48 billion; capex was $680 million, and free cash flow was roughly $2.8 billion.
- Capital returns were substantial: $2.06 billion of share repurchases and $760 million of dividends, with a further $2.5 billion repurchase authorization added after year end.
- Redomiciliation from Switzerland to Ireland completed September 30, 2024; management expects no material operating or financial impact but notes Irish-law constraints on dividends and share repurchases.
- Outlook calls for Q1 fiscal 2025 net sales of about $3.9 billion (versus $3.8 billion a year earlier) and diluted EPS from continuing operations of about $1.64, alongside a new segment structure.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2024, TE Connectivity plc kept $0.20.
- Revenue$15.85B100.0%
- Cost of revenue−$10.39B65.6%
- Gross profit$5.46B34.4%
- Operating costs−$2.66B16.8%
- Operating income$2.80B17.6%
- Interest, other & tax$397.0M2.5%
- Net income$3.19B20.2%
Where FY2024 revenue went
$15.85B- Cost of revenue: $10.39B, 66% of revenue
- Operating income: $2.80B, 18% of revenue
- R&D: $621.0M, 3.9% of revenue
- SG&A: $1.73B, 11% of revenue
- Other operating costs: $307.0M, 1.9% of revenue
Kept 18% as operating incomeOther operating costs $307.0M · 1.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2024filed November 12, 2024Financial Statements
FY2024 against FY2023
| Line item | FY2024FY2023 | Change |
|---|---|---|
| Revenue | $15.85B$16.03B | −1.2% |
| Cost of Revenue | $10.39B$10.98B | −5.4% |
| Gross Profit | $5.46B$5.05B | +7.9% |
| R&D Expenses | $621.00M$593.00M | +4.7% |
| SG&A Expenses | $1.73B$1.67B | +3.7% |
| Operating Income | $2.80B$2.30B | +21.4% |
| Net Income | $3.19B$1.91B | +67.2% |
| EPS (Basic) | $10.40$6.06 | +71.6% |
| EPS (Diluted) | $10.33$6.03 | +71.3% |
| Shares Outstanding (Basic) | 307.00M315.00M | −2.5% |
| Shares Outstanding (Diluted) | 309.00M317.00M | −2.5% |
05—Questions
Frequently Asked Questions
Why did net income more than double in fiscal 2024 when sales declined?
Most of the increase came from the income tax line, which swung to a $397 million benefit from a $364 million expense in fiscal 2023. The benefit mainly reflects a $636 million net gain from a $972 million Swiss tax credit (partly offset by a $336 million valuation allowance) and a $262 million revaluation of deferred tax assets after a Swiss tax rate increase. Pre-tax income rose about 23% to $2.8 billion on higher gross margin and lower restructuring costs, which is the more representative measure of operating performance.
How strong is the company's cash generation and balance sheet?
Operating cash flow was $3.48 billion, and capex of $680 million left roughly $2.8 billion of free cash flow. Total debt was stable at about $4.2 billion, the company held $1.3 billion of cash, and it was in compliance with all debt covenants. The $3.5 billion deferred tax asset position, which includes $10.1 billion of tax loss and credit carryforwards, is a key balance sheet item because $8.3 billion is reserved with a valuation allowance.
What are the main risks investors should monitor?
Key risks include automotive end-market cyclicality (about 44% of sales), price erosion of 1% to 2% annually, China exposure (about 20% of sales, with 18 principal manufacturing sites), and currency effects, since about 60% of sales are invoiced in non-dollar currencies and are unhedged. Other items are the global minimum tax, which could materially raise cash taxes from fiscal 2025, an open DDTC trade-controls investigation with penalties not yet estimable, and a $131 million redeemable noncontrolling interest tied to First Sensor.
What does the Irish redomiciliation change for shareholders?
Shareholders received one TE Connectivity plc ordinary share for each TE Connectivity Ltd. share, and management does not expect material changes to operations or financial results. Dividends will be declared quarterly by the board rather than requiring shareholder approval, and the company will be subject to Irish law, including Irish dividend withholding tax (currently 25%) in certain circumstances and Irish stamp duty on certain share transfers outside DTC.
What should investors expect for fiscal 2025?
Management guides Q1 fiscal 2025 net sales to about $3.9 billion, up from $3.8 billion, with growth in Industrial Solutions partly offset by Transportation Solutions declines under the new segment structure. Diluted EPS from continuing operations is expected to be about $1.64 for the quarter. Restructuring charges are expected to be about $100 million, capex about 5% of sales, and pension contributions about $70 million. Management has also flagged potential cash tax increases from the global minimum tax beginning in fiscal 2025.
06—Continue