10-QPeriod: Q1 FY2023

TE Connectivity plc Quarterly Report for Q1 Ended Dec 30, 2022

Filed January 27, 2023For Securities:TEL

Summary

TE Connectivity Ltd. (TEL) reported net sales of $3,841 million for the first quarter of fiscal year 2023, a slight increase of 0.6% compared to $3,818 million in the prior year period. This modest top-line growth was primarily driven by an 8.2% increase in organic net sales, indicating resilience in underlying demand across key segments. However, foreign currency translation headwinds significantly impacted reported sales, resulting in a negative currency impact of $299 million. Profitability faced pressure due to increased costs and foreign exchange. Operating income declined by $170 million to $502 million, with operating margin contracting from 17.6% to 13.1%. This was largely attributable to a substantial increase in restructuring and other charges, which rose to $111 million from $12 million in the prior year, alongside inflationary pressures on material and operating costs. Despite these challenges, the company maintained strong operating cash flow of $581 million.

Financial Highlights

51 data points
Beta

Revenue

$3.84B

30.9% Gross Margin

Net Income

$397.00M

10.3% Net Margin

EPS (Diluted)

$1.24

Total Assets

$21.35B

Cash & Equivalents

$793.00M

Free Cash Flow

$398.00M

Financial Statements
Beta
Revenue$3.84B
Cost of Revenue$2.65B
Gross Profit$1.19B
SG&A Expenses$392.00M
Operating Income$502.00M
Interest Expense$21.00M
Net Income$397.00M
EPS (Basic)$1.25
EPS (Diluted)$1.24
Shares Outstanding (Basic)317.00M
Shares Outstanding (Diluted)319.00M

Key Highlights

  • 1Net sales increased by 0.6% to $3.84 billion, driven by an 8.2% organic sales growth, demonstrating underlying demand.
  • 2Operating income decreased by 25.3% to $502 million, impacted by higher restructuring costs and inflationary pressures.
  • 3Restructuring and other charges surged to $111 million from $12 million in the prior year, primarily due to new cost structure improvement initiatives.
  • 4The Transportation Solutions segment saw a 4.7% increase in net sales, led by strong performance in the automotive end market.
  • 5The Communications Solutions segment experienced a significant decline of 14.1% in net sales, affected by market downturns in data/devices and appliances.
  • 6Foreign currency headwinds negatively impacted net sales by $299 million, highlighting global economic sensitivities.
  • 7The company generated strong operating cash flow of $581 million, indicating robust cash generation capabilities.

Frequently Asked Questions

The significant increase in restructuring and other charges to $111 million from $12 million in the prior year is primarily due to new restructuring programs initiated in fiscal year 2023 focused on cost structure improvements, particularly within the Transportation Solutions and Communications Solutions segments.

Foreign currency exchange rates had a substantial negative impact. For the quarter, it reduced net sales by $299 million and is expected to continue negatively impacting sales by approximately $400 million for the full fiscal year 2023 compared to fiscal year 2022.

The Transportation Solutions segment showed resilience with a 4.7% net sales increase, driven by the automotive sector. Conversely, the Communications Solutions segment faced significant headwinds, with net sales declining by 14.1% due to market weakness in appliances and data/devices.

For the second quarter of fiscal 2023, TE Connectivity expects net sales to be approximately $3.9 billion, representing a slight increase from the current quarter. Diluted earnings per share from continuing operations are projected to be around $1.44, which includes an anticipated negative impact from foreign currency exchange rates.