Perfect. Thank you everyone for joining us. My name is Varun Govindaraj. I'm the senior analyst at Bernstein covering multi-industrials. We have with us today, Terrence Curtin, Chief Executive Officer of TE Connectivity. Terrence, thanks so much for being here today. No, thank you. Thank you all for joining us this morning to learn a little bit more about TE. Perfect. Maybe just to start us off, you had your Investor Day recently, and you talked a bit about the 6%-8% through-cycle growth. Sure. Could you break that down for us a little bit more? Tell us the pieces and where all of that's coming from. A couple of things. Back in November, we did an Investor Day, and what's intriguing about that Investor Day, while it was back in November, it seems like a longer time with what's everything going on in the world. To your point, I think the key thing I'd like you to understand, we laid out a long-term growth rate of 6%-8%. That's about 50% higher than we had historically. A lot of things, it's about where we positioned ourselves about what we do and what we do well. When you think about TE and you think about the connection solutions we have as well as the sensor solutions we have, it's really about where do you have acceleration that's needed in the hardware architecture of what goes on with increased data needs as well as power needs. We've always talked about data needs, but power needs acceleration that we all know about, we're benefiting from. T hat we talked about, first off being when you think about data, and I know you're going to ask questions about it. Yeah. It starts with AI and what's happening in a data center. It's also just as important as how that data moves out and where it's changing the architecture and other key applications we focus on, even in the energy market where we serve utilities, how you're getting more intelligence that helps pull data out. Clearly, what happens in connected vehicles around the world, big growth driver for us. On the power side, what we do around energy connections, as well as how power in the AI rack continues to evolve to really make sure it can handle the data needs, whether that's going to 400-volt or 800-volt, we benefit from that, and certainly in electric vehicles, where we have a great position in Asia. When we think about growth, it is about where those data acceleration, power acceleration goes, and it's what gives us confidence. Right. We grow 6%-8% through a five-year cycle. That's going to have some of this like we always have because of the markets we play, but it sort of shows really good outperformance due to where we position ourselves on content [crosstalk] r elated to the end markets we serve. Now, when you think about the markets we serve, and we go back to Investor Day, things are playing out pretty much as we expected, which is pretty amazing considering really what's happened in the world over the past six, seven months. First off, when you think about our big markets, and I know you'll probably click down, Varun. Full steam ahead in AI and data center, our revenue momentum this year, which we thought six months ago would be $2 billion, is closer to $2.4 billion, and some of the growth targets we put out for next year just keep on sliding to the left. Traction's just full steam ahead, and we're going to grow about 70% in AI applications this year. Other key markets that benefit from CapEx cycle, not only AI, but what we see in the energy infrastructure. Our energy business is about 10% of the company this year. The CapEx trends that we see in North America and that power connections just continues to build, and strong double-digit growth there that we really believe is going to continue. We have some other markets that have been strong and continue to stay strong. Clearly, defense and also what we do in commercial air or aerospace and defense. Another $2 billion of revenue, roughly, continues this March, and we build backlog. We continue to see that in our orders. Then when you get into some markets that have been weak that are picking up. What's happening in automation in the factory floor and also commercial transportation, what we do in heavy truck connectivity? These two markets have been very weak for a couple of years. We're getting more of a cyclical pickup, and you're seeing the content outperformance in those. Lastly, an important business for us, automotive. The production market is the same as we said back at Investor Day. We thought it would be down slightly this year. It's down slightly this year. Pretty much down slightly all over the world. An important thing we said at Investor Day is we don't expect anything magical about auto production. We don't over this five-year period. We expect it to be flattish, but where we benefit from what happens in data getting built out in the car, electric vehicles adoption in Asia, let's be honest, that's where the driver is, and we have a very strong position. Lastly, what just happens in the electronification within the car, which is all the features we rely on, and it's going to drive content outperformance above market in a sideways auto world which we just have to accept that's what it is. When we go back to Investor Day, go back up to that 6%-8%, content outperformance about what do we do versus our underlying markets drive it due to power and data. Certainly this year, we're going to grow about $2 billion this year. I think one thing that's important about that $2 billion, yes, there's a big chunk due to where we're winning in AI. That's going to continue to drive nice growth, but it's only about half of our $2 billion of growth this year. Sure. The other $1 billion is much broader than that, and we're going to benefit from those trends. Got it. Super helpful. Thanks for laying that out by segment. Sure. Maybe we can dive into the one that everyone's most interested in, the data center side. Really? Yeah. Okay. Just want to make sure. Yeah. I guess first question there is just the debate around copper versus optical. Sure. Could you tell us a bit about how you're thinking about that and positioning? No, well, a couple of things. Let's face it, the copper versus optical discussion, for those of you that are familiar with what we do, is not a new discussion. One of the things that we believe, and we work with our customers on their next generation architectures, is you have to realize, it's going to be copper and optical. It's not a one or the other. You're going to continue to use copper as long as you can, and you will use copper when necessary. There's an element as we work with our customers, we see those inflection points. The other thing is, not every customer has the same view. Every customer's application is different. Their architectures are different. You see some that are pushing copper longer. You see some experimenting with optics more. The other thing that's important when you think about copper versus optics is you're going to continually see scale-out, when you go from switch out, is very much optics already. TE does not play much in that. We play in the rack, and you're going to see much more copper being the workhorse in the rack. You have some of the large players actually talk to that very openly. We're also well-positioned when optics does come into the rack. With what we do in optics as well as some technology acquisitions we do, the fiber attached to the co-packaged optics out to the [crosstalk] fiber backplane will benefit from that growth as that gets introduced, that's still scaling needs to be figured out. Certainly, cost point needs to be figured out. The trade-offs our customers make all the time because optics does require more power t han copper. They're trade-offs that we are working with our customers on. We feel the growth in AI is going to continue. I know people view it's copper or optics. It's copper and optics, and you're going to see hybrid systems that do that. It's something we feel the growth is going to continue. Certainly, you're going to get to law of large numbers. Sure. I'm not sure we're going to grow 70% every year, quite frankly. I wish I could stand up here and say that, but there's an element is it'll be $2.4 billion this year, have a really nice growth rate, and be a key contributor as we go forward. Got it. Super helpful. Any color on how different kinds of customers are sort of viewing the debate? Are you seeing certain groups leaning more copper, leaning more optical, or is it really a mix of both? It's very different. You have to realize when they look at it, some go for lowest cost. Some are making other trade-off decisions in the architecture. The other thing that's important, for those that are moving more optical, you're probably going to need more power in the rack. About 25% of our connections that we do in our digital data networks business, where we do AI work, is power connectivity. As you move up to an 800-volt rack, we can have 30+% content increase in an 800-volt rack versus today because you're creating separate power architecture, going from the board, whole new bus bars. You introduce liquid cooling [crosstalk] increases our content. There's not just the data side, which is where optics goes and the typical discussion is. It's also what happens with the power architecture, and you have some customers that say, "I'm not interested in 800-volt at all." Yeah. You have other ones that are experimenting, and it's all how they're thinking about how they compete against each other, and also some are, "Hey, I want to get to the lowest cost point." Got it. Some, however, I want to get to the fastest architecture. It's very different by customer. It's core to what we do, and it's also why it's important you understand, and we covered this a lot at our Investor Day. The engineering intensity of how we're serving our customers to those architectural decisions, we're right next to them as they're doing it. The other thing I would say is we're very broad across the hyperscalers. The other thing is, while that's a small universe, we have a pretty broad position there, and all our customers are growing this year it, w hich is another real positive point. Got it. It is a small universe that spends a lot on CapEx. It definitely does. No, no, makes sense. The other question that comes up whenever we talk about data centers is just supply and backlog and the ability to service that backlog. Sure. How do you sort of view that for TE? Especially with 70% order growth, it's tough to deliver, right? Well, that was sales growth. Yeah. Order growth is greater than that 70%. One of the things our customers are doing, because these are custom programs, because of some of the memory discussion that's going on. With what we do with our customers, as they think through their architecture, these are pretty custom programs we do. This isn't just making something that sits on a shelf. We make a custom connection solution that then we actually ship into their supply chain. From a supply side, we don't worry about material availability of what we need to do that. We don't worry about that. Certainly, every one of these are new ramps. Something's ramping down, something's ramping up. We've been investing ahead in both manufacturing capacity, certainly where we've done it historically, as well as China Plus One, do Southeast Asia and Mexico. Sure. Those ramps have very high expectations on them. I don't view it as much of supply. It's just really making sure we're keeping clip to the intercept points that our customers expect us to have. Our teams are doing a good job on it. Every program, every next generation is a new ramp that we're doing. Got it. How do you think about the product development side of this? When you look at R&D? Yeah. When you look at investment, any programs happening there on essentially these growth verticals that you're seeing? No, when you look at it, we have invested significantly both in the manufacturing side as well as the engineering side. At TE, we very much invest by the verticals I talked to you about. We've been increasing engineering to make sure we [crosstalk] can support the growth, increasing capacity in the manufacturing. We've even talked to our investors about how our CapEx will probably run about 6% of sales this year, and that's really to make sure we're getting ahead for the programs. Sure. We're also doing similarly in the AI investment for our engineering teams to make sure we're supporting what was $200 million of revenue years back. It's going to be well over $3 billion of revenue, and I think our team's been doing a nice job keeping up with the ramps because they're intense. Got it. No, super helpful. Super. I think that's more or less what I have on data centers, unless we get more questions. I'm sure it won't be my last question, on AI. Maybe we shift to the energy side. Sure. And the power side, o bviously, there's so much demand right now, and a lot of that is, again, to support data centers, but more broadly, power intensity [crosstalk] is going up. Totally. How do you think about your market position in that space and the plan for growth going ahead? It's a much more transitioning from AI and data center to energy. We're sort of going from concentrated customers to a utility landscape that is very much trying to catch up to what was always a sub gross domestic product [crosstalk] electricity growth, and we've been in the business for a long time, and one of the things I get really excited about is we did a lot of work to make sure how do we get focused in that business? How do we also get focused on the North American market? Sure. Really, when you look at our energy business today, it'll be about 10% of TE, and 2/3 of that is around North America. It's really a North American business, and we positioned ourselves around grid hardening, certainly grid connections. We're stronger in underground networks, and you've seen the growth, which has been pretty consistent, double-digit organic growth, and then we've done some acquisitions to really bolster the portfolio. What I feel really good about is, as we go forward, I think with the energy trends, where we positioned ourselves. To turn from a geography to more of a market application, about 20% of what we do in our energy business is focused on the power connections that come into the data center. Interesting. I know we talked a lot about data center, and we said, "Hey, TE plays in the rack in the data center." We get exposed to the power connections that are happening as data centers get moved, and you're bringing high voltage, and you're stepping down the medium voltage into the building, and that's something that we're benefiting from as well. We did a great job in solar and renewables. Certainly, that's moderated with some of a policy. We feel very good about what we've done around grid hardening with utilities, which is about 2/3 of our business. Also the 20% that we have that brings the energy into the power data center. Those two will make sure we can keep a good, strong growth rate going. It's a business that clearly I appreciate you asking about because sometimes it's sort of with the AI discussion, it sort of gets pushed to the back. Got it. No, no. The thing is, power itself is growing low double digits, right? Totally. It's a large business, and sometimes it's overshadowed by 70% growth. Oh, yeah. Totally worth talking about. I wanted to go a bit deeper into one of the things you said which was bringing power into the data center. Is that components in a solid-state transformer for 800-volt DC? No. What it would be, it's a great question. There's a lot of ways that power comes in, how power moves through a data center. When you're getting into a step-down, you'll have an industrial substation, you'll have connections in there. Sure. You'll also have connections that occur inside, especially as data center designs are being done differently than industrial designs that you would have in a factory because the hyperscalers are saying, "Hey, what do I need for this power that's happening in the data center?" They're typically more connections that are happening, medium voltage connections that occur that we talk high voltage in auto. Yeah. Voltage is not high voltage. This is medium voltage, much higher. You are talking about kilovolts. Got it. From that viewpoint, it's going to be the things that you would have in a traditional utility setting as you would step down. Now you're bringing it into a data center. We do not do switches and things like that like you talked about. Right. Got it. Got Got it. Are you seeing any pushback on the energy side? Oh, sorry, I'm bringing back the data centers [crosstalk] on the data center side, there's this narrative about a lot of states pushing back and projects getting delayed. Are you seeing that with any of your orders and any of your customers? We do not. We would be working when it's being designed, and then we would also be getting orders after it was approved. Sure. When you think where we play, and typically whether it's in where we serve an original equipment manufacturer or in the utility space, we're sort of going to be a step down. We would work with them on capacity planning, but if they don't get it approved, we'll never get an order. Got it. You look at the orders in our business, last quarter, our orders were up 25%. You see in energy, you see in aerospace defense, certainly in AI, you see orders getting placed out because they need the capacity getting put into place. Got it. The good thing there is there's no risk of orders getting canceled just because [crosstalk]. I don't believe that. Got it. Understood. The other big question I had was, we're in this environment where a bunch of players who had capacity and had supply have done really, really well over the last couple of years just because no one else was able to produce products. Yeah. For sure. Now we're at a point where new capacity is coming in because people are looking at the returns, and they like it. Yeah. When I think about TE's moat, specifically in these high growth verticals, right? Data centers, energy [crosstalk]. Sure. How do we think about that? How do we think about the competition for share that's inevitably going to happen over the next few weeks? One thing that is important that when you all think about TE, and we spend a lot of time on Investor Day, it all starts with how our engineers are co-located at the design centers. We are not a business that creates something centrally, makes a widget, and say, "Hey, world, come get to us." That is not our moat. Our moat is somebody's made a decision around a semiconductor. Somebody's made a decision around a power supply. Okay, how do I bring this together in the architecture? That creates more customization than you can imagine. I ask you, when you think about interconnects, I don't want you to think about the interconnects around your devices. We don't do that. We don't do anything in consumer. I want you to think about the interconnect that's happening with a graphics processing unit trying to connect to a GPU. Somebody trying to take an architecture saying, "Hey, I'm going to go for a low-cost version of that because I might be a hyperscaler," versus somebody doing high speed. There are different trade-offs that occur, and you're not going to change your interconnect after you make those. You're not going to change your semi or your power supply. In many ways, you get the semis, the brain, the power supplies, the heart. That's where we come in to say, "How does this all come together?" Sure. Not only from a technology perspective, but also ramping a supply chain. When you think about interconnects or typically things that are low-bound elements. You even think about some of these ramps we've done, it shows the scaling capability. That's also on the supply chain. You have to be technical. You have to be at their design center. That's a really big moat, and it's why interconnect companies, whether they're public or private, we don't all play in the same markets. Our capabilities, where we make those choices around design centers are very important, and then how do you scale it? That's the stickiness that really comes in. As you do that, honestly, somebody's not looking to change out an interconnect supplier when you're doing that right. Got it. There's other bigger problems that they would want to focus on than actually tinkering with that. You could have capacity, if you don't have that engineering at the architectural level. Sure. Nobody's going to use you. You need to have that engineering touch. That it's why we have 10,000 engineers. We increased them 25% over the past five years. It is where we've invested in, and it's all over the world at those design centers, so it's not sitting in one place. You asked a simple question. I gave you a long answer. No, appreciate it. It's essentially a trust-heavy business, right? Yep. The engineering matters, and once you have the component in place. Engineering definitely matters. Got it. Totally matters. No, super helpful. You touched upon automation and connected living and factory automation as well. Sure. Obviously, that's probably not been doing as well recently. Fair. Can you tell us what your outlook is and how you're thinking about it? This is our automation group, where the biggest part of what we do is we actually play into the interconnects that go into factory automation. That can be a motors drive. We're typically stronger in discrete applications, it's an area, quite frankly, the past two years, have been really malaise. Coming out of COVID, there was extra inventory. Certainly, our customers, the automation players of the world, were sort of just, "Hey, I hope in three months it's going to be better." Three months never came. I would tell you, it clicked into a real inflection point the past three to six months, it's also all over the world. One of the things about TE is we do play all over the world, in the automation side, we're seeing it in China, U.S., Europe. Everywhere you're seeing that step-up occur, and it does come back into, at least there's things that drive productivity. It also goes back to things that are needed to really drive data at the edge to really get it back [crosstalk] t hat the algorithms use. One of the things when we talk data, we can't underestimate the edge opportunity we have. Let's face it's spread throughout TE. It could be an edge opportunity where you need more data in an aircraft. Edge opportunity, you need more automation out of a car, or data out of a car. Automation's a great one. It's just areas that really, when we think about the whole AI element, how does data that you need from the edge continue to come up? We're going to benefit from that, and it's really nice to see the momentum broadly. Sure. You also see that in our customers, that they've seen a pickup in their order books. That's just getting started, and we're well below peak. Got it. Well below peak in that business. It's early inflection, right? Early. Yeah. I totally agree with that. Got it. Go ahead. No, go ahead. No, you see it in the purchasing managers' indexes and the Institute for Supply Management things from the broader industrial. The numbers are coming in stronger for sure. Yeah, sorry. I'm sorry. No, all good. We talked about data centers, we've talked about power, and we've talked about [ACL] now on the industrial side. When we look at margin and price cost for those three segments. Yeah. How does it vary? Are you seeing more profitability driven by certain segments versus others? Well, a couple of things. Let's talk price cost overall at TE. One of the things that I think is very important, because let's face it, we're in a new inflationary bump due to what's going on in the Middle East. We've dealt with tariffs. We've dealt with things that have really created material inflation. We're in a new material inflation. We're going out to all our customers right now. Sure. To be, "Hey, when it comes to material, we're going to get reimbursed for it." We're actually in the middle of price increases. Net-net, we're in a new inflation wave. We'll protect that. We typically get that as a cost recovery. There may be a little bit of timing, a quarter here or there. Sure. The teams are full steam ahead across every business in TE, not just the industrial businesses. Okay. Because these are types of things that honestly, when it comes to material inflation, when you have these events, TE will not absorb. Sure. You've even seen our prices gone positive. Our businesses overall have some variation, but it's not like one unit's here and everybody else is down there. Certainly industrial or DDN business is a little bit higher. Aerospace is always a nice profitable element. ACL has been down. That's working its way back up. Sure. We feel, one of the things I said earlier is every one of our units, we've improved margin over the past year. Yeah. You shouldn't view there's one doing better than the other. Also in our Transportation segment, that's been in a sort of sideways environment. We've been running it very well at 22% margin. Both businesses are sort of equal, and we feel we can continue to get good volume flow through at 30+% as we go forward. Got it. On the margin expansion story. Yeah. How much of that is your operating leverage versus structural improvements to the cost? Well, currently right now, it's more volume leverage. Got it. Structural improvements, yes. We have structural improvements in certain businesses, but it's a different discussion around TE than it was three years ago. Sure. We were doing very big roof consolidations. We were very focused on localization, which we're about 80% localized in manufacturing through supply chain around the world, within regions of the world. That's what you're seeing the benefit of today. Yeah. That you're getting it through the fall-through, and I think we're always going to have cost opportunities. That's what a continuous improvement culture does. The element is, it's less structural other than when we do acquisitions, you'll see us have some things where we say, "Hey, part of it's a cost plan." Net-net, it's much more how we're running the company today. From a volume perspective, that is what you're seeing. Got it. Super helpful. We will get to M&A. Okay. A little bit further down. Okay. Maybe shifting gears to your transportation segment. Sure. You started off by saying that your forecasts for auto have more or less been in line [crosstalk] with what you talked about at Investor Day. Sure. How do you look at it going ahead from here, so? The first thing is, I think when you think about auto, we sort of view auto's going to be a flat world production-wise. Coming out here, I think there's two things that are very important. One thing when you think about TE and you think about auto, you have to realize over 50% of our business is in Asia. Asia's the largest volume producer in the world. I will tell you they're the technology leader in the world. Guess what? When you think about what drives content for us, whether it's an electric vehicle, certainly autonomy in a car, they're the leaders in that, too. We feel very well positioned when you think about auto, and I know we all read The Wall Street Journal and read about U.S. auto. We really feel we have a very differentiated position because our customers, and maybe we won't see them in the United States, they're moving elsewhere in the world, and when they move, we're going to benefit from that Asia position. It is something that's very important, our Asia position and the innovation they bring. That also, when we learn from that, we also makes us more competitive in Europe [crosstalk] and North America because of our scale there. The second thing is we don't assume much about production. I know you mention it, I mention it. When you think about how we drive growth above production, it's into three pillars that are very evenly balanced. It's electric vehicle penetration in the world, but most of that's going to be in Asia. That's really, hey, Asia's going to drive 3 million or 4 million units of EV increased penetration this year. It's also around the data and the autonomy, Ethernet rings you need in a car as you move up different levels, level three. Sure. Level four i n a car. That's a completely different architecture. The third element is what happens as you change the electronification in the car. That could be a 48-volt architecture, safety systems, any comfort systems that happen. Any time you're adding that, you're adding electronics. When you add electronics, you need connectivity. Sure. That can even be zonal architecture, which increases content for us. I like to talk more about those things than auto production, because auto production [crosstalk] is lackluster. It's sideways, and we expect it to be. Got it. Essentially multiple trends that sit on top of that auto production. That's why we think the 4%-6%, that it's one thing we didn't change during Investor Day, as we increased our growth rate, really that growth rate increase was out of our industrial segment, but we feel very confident we can drive the 4%-6% due to those trends. Got it. No, makes a ton of sense. When we look at content for TE in an internal combustion engine vehicle [crosstalk] versus an electric vehicle. Yeah. How different is it? It's very different. It's close to 2x. Got it. When you sit there, and I think building on the architecture discussion we had this morning, when you take a [audio distortion]. We don't have anything when somebody puts a fuel [crosstalk] petrol into the engine. A charger inlet's a connector. It has electronics in it, how that works in the whole system, you take that power down, certainly you're going to the motors. You're actually switching back powers to go to the battery pack. All of that creates content opportunity for us that otherwise you don't really have a lot other than some electronic control units that are lower content in a combustion engine. Got it. As that moves, you get like a 2x increase over a combustion engine on the ICE side. I mean, EV versus ICE, sorry. Got it. Wow, that's quite significant. That's what drives it, and certainly Asia's the driver of it, and our customers, it's really good, the momentum we have with them in China. And maybe a double click on [crosstalk] China in particular. Obviously, a fast-growing market, EV penetration is super high. How do you think about local competition there? Are you seeing any trends? Frankly, local customers as well, just because you have so many people coming in. Well, the first thing I think is also important, and I'm glad you asked the question, was when you think about China, our market share with the locals is the same as the multinationals. I know it's not lost on those of you that have some coverage where people have auto, people typically say, "Oh, it's hard to do business with." We're very localized there. Are you running at their pace? You're talking six, 12-month car design cycles. If you want to live in a Western world of car design cycles, you're not going to win in China. Are you bringing them innovation? They're spinning models. They want innovation in every cycle. We work actually on three generations out. Sure. Wow. We know like, hey, if we worry about competitive, we drop the next generation down and work with our customers on how do we get that in? We always say we're pretty much on every car in the world that we're allowed to be on. The same holds true in China. The other thing that I would also be very honest, our content in China is higher than our content at TE overall. Got it. It's actually proof there between what happened in EV. They're also doing a great job on the data side. They typically, as they put autonomous rings in, or Ethernet connectivity in, they're putting it into all vehicles. They're not just putting it in the high end. We shared that during Investor Day, a little bit of, hey, how much content we have, and those that blow it through all. You could have $50-$70 of content just on data alone [crosstalk] in a vehicle of what we do, if that goes through all the platforms. Got it. Outside of China for the auto space, are you seeing any other growth levers, any other parts of the world that are interesting? Well, those trends are different. When you think about electrification of the powertrain, certainly Asia drives that. Data's across all three regions. Sure. Data connectivity happens in all three, and we're seeing really nice growth there. It's actually helped cover some of where you have softness in EV in North America, and then electronification is across the world, which is where that electronics suite in the car just continues to get bigger. Got it. great. It sounds like it's a great total addressable market and essentially [crosstalk]. Pulling TAM that's growing, and automotive's a scale business. We have the scale [crosstalk] w hich is what we like. There we go. Oil prices have been super elevated for a while now. Are you seeing any of that trickle into the EV outlook for the U.S.? I know it's a much longer development cycle, but just curious to see if you see any leading investors, leading indicators, or people willing to invest. Twofold. Let's just take it from a Western view. We've actually seen EV production actually pick up in Europe. We've actually seen that happen. You actually have seen the European OEMs, certainly they have, the China have sub 10% share in Europe. You've actually seen them come out with vehicles that have much better price points. You've actually seen for the first time in three or four years, EV trends pick up. Alternatively, North America. North America's still in that churn. Sure. You've seen the big announcements by the Big Three. They're trying to get old programs they were invested in, you've seen the write-offs. I think they're still trying to get their sea legs of where they play. Sure. North America was always going to be the lowest penetration of EV that we ever thought in the world. Got it. It actually being 1 million-2 million units out of 16, it could help growth. It's not going to be the primary growth for TE. There's a lot of things around structurals, incentives and so forth that would need to be worked out to really get it to kick in high. Got it. The expectation that this is not necessarily a growth market is largely baked into guidance and baked into everything that you've talked about. Our four to six, it's global. Certainly, Asia is going to be at the high end of the four to six, if not ahead. Yeah. You sort of have Europe and North America will be sort of at the lower end of that four to six that comes up to the big four to six at TE. Got it. No, super helpful. When you think about geopolitics and U.S.-China relations, has that played any impact on your China business outlook, or has it all been okay? No, it hasn't. One of the things is, it's also important you all understand, where do we play in China? While we're a global business, when we're in China, it's really automotive, and heavy truck is our leading positions in China. Where we play in factory automation is very important. You get those three. The last part of where we play in China is really where our hyperscale customers still have supply chain there. Our customers for that business is really the hyperscalers. Sure. They still use the Taiwanese, Chinese supply chains as they bring their equipment together. Sure. That's the last element, but it's more of a back end support of our customers. We don't service the local AI or data center market customers in China. Got it. They're the markets when you look at TE, that's how we play to win, and we're very localized. In China, we're probably 90% localized. Wow, okay. Around all the supply chain that we need to serve this market. It's been a conscious choice. Geopolitics, we watch, we monitor. There's some markets we aren't in because of geopolitics, because we don't want the risk. Sure. The markets we're in, we feel we can fully compete in and we're winning locally. Got it. Clearly the localization strategy is working, right? It is. It insulates you from a lot of. It's key. It's absolutely essential in the world that we're in, where nationalism pops up. Got it. A bit more on auto. Sure. The sector is notorious for just being very hard negotiators. You talked about price for the overall business. Is the commentary any different for the auto sector? No, it's not. We're having price discussions in auto now. The one thing I would say is different in auto, around metals and stuff, we typically have automatic riders already. When you get into resins and plastics, that's where we're having price discussions. Sure. Certainly, they're hard negotiators. I don't think any of our customers are, "Oh, just charge me whatever you want." Yeah. They're also feeling it all around them. Net, we're talking to our auto customers about pricing and what's going on from the oil complex. They understand what it is to move things around the planet. There's also opportunity to say, "How do we solve this together from, is there a better way that this should be positioned for the next five years versus how we did it for the past 10?" That also creates some value add ideas between us and our customers that we always look at, and it helps deepen our relationship. Sure. I will say, just the fact that oil has been so high for so long, [crosstalk] longer than people expected, there does seem to be a willingness even from the customer side to negotiate, because they're negotiating with their customers as well, right? Yeah. Exactly. It kind of flows down the chain. Exactly. Yeah. They're feeling it in a lot of sides. Other points in the electronic supply chain, certainly people are doing price increases due to supply and demand. Net, there are things that we feel very good we'll be able to offset the increased inflation. Got it. Super helpful. Last question on the auto side. Sure. We've talked a lot about passenger. Thoughts on commercial. Obviously, it's not been that great of a business recently. No. First off, it's a great business. It's a great business, and for us, it's our highest market share business in all of TE. Got it It is a great business, and the other thing that we really like about our industrial transportation business is it's even in all three regions. It is strong in Asia, it's strong in Europe, it's strong in North America. While it's been a tougher market globally, honestly, our strength outside the United States has been covering real weakness here in the United States. When we talk heavy truck, it's on-road heavy truck, it's agricultural equipment, it's mining equipment, so anything sort of heavy off-road. Ironically, similarly to how I talked about our automation business, this is another business that is turning supply chains being primed and the build happening, and North America has been getting better. It's one of those points we've been waiting for. That has actually been picking up, and we're getting the benefit of our position and you can see the content outperformance. Globally, we're probably at a 2% truck build in that definition of how I laid out. Sure. We grew double digits, and I think you're going to continue to see that outperformance as that's moving forward. The trends are the same. When we talk auto, we talk electrification. Just to be honest with you, in China, if you get the last mile delivery, it's all electric vehicles. Europe is up to 3%-4% of their truck fleet being electrified. Data in a truck is very important. Then certainly, all the other electronics that are needed for logging efficiency, if it's staying diesel or the Environmental Protection Agency electronics that are needed for emissions, all benefit us. It's a business close to $2 billion. I know I've used a $2 billion a lot, but it's a business that actually is starting to get the cyclical uptick. Got it. I guess maybe shifting gears a little bit. Sure. We talked about industrial, we've talked about automotive. Yeah. The next big chunk was just financial strategy and capital return. Sure. Maybe a quick overview of how you're thinking about it. I know 2/3 of cash was essentially designated for deployment. Yep. Max M&A. Has the story changed there from Investor Day? Any commentary? I think the first thing before we talk about capital deployment is how do we feel about the capital we generate? So, I know your question was a little bit different. One of the things that I think you can expect out of TE is that we're going to be running around 100% free cash flow, even with the conversion, even with some of the increased investments we're making [crosstalk] primarily into DDN as well as in energy, because we are expanding capacity in our energy business, and we have two expansions that are happening here in North America to support the energy market, which is extremely strong free cash flow. How do we think about using it? The first one, I'm going to go the reverse order of you. Okay. When we think about it, after first investments in the business, it comes back to about a third of free cash flow comes back to our owners as dividends. We just took our dividend up 10% a few months ago, and that will continue to build as we build free cash flow. The other 2/3 is really best use, whether that's return capital to share buyback or do we see bolt-on opportunities? Sure. When we think about opportunities, those opportunities are primarily going to be in our industrial segment. On Investor Day, we do view our industrial segment is going to be the growth segment for all the things we talked about today. Yep. Net, that's where I think you'll see the M&A. Still a space that's very fragmented. It's a space that we actually see opportunities to deploy capital in. You've seen us do that in the energy business. You've seen us do it in the ACL business. I think it will always be things that are core to what we do. I don't see us adding a new leg. Sure. That's why we use the word bolt-on. I know when people also hear the word bolt-on, they say, "Well, is that small?" That doesn't mean it's small. Like Richards, last year we did was $2.3 billion. Sure. It's what we did. We have a very strong cash model that we can support that if we're doing $2 billion deals every once in a while. Most of them will be smaller than that just due to the fragmentation, but we see that M&A will continue to be an accent to our growth rate on the organic engine that we laid out at Investor Day. Got it. Sure. The M&A piece, how do you think about integration? A lot of times, people buy a company, and then the integration gets botched, and it's really hard. Yeah. You clearly are doing this regularly. Sure. There seems to be a system. Can you talk us through that? It starts with: What is the strategy of how you create value? Sometimes if it's a pure margin play, it gets consolidated in. It is a cost play, and we've had some of those in ACL, which it is, we're taking out factories, taking out excess capacity. We may be actually helping them get global through our localization. Sure. Those types of things come in. Other ones, like Richards, we were very much of, "Hey, we want to keep that on the side because they're in the middle of massive ramps." Sure. We can't distract them, or we could impact their growth. Sure. We keep that a little bit to the side, and we actually are helping them on the capacity expansion, which being a family-owned business, that probably wasn't as natural for them. That's where we, it's a continuum along it, and it starts with where your strategy is to create value and return for the owners. Got it. As well as how do we touch the customers and don't screw up customer touch. We have a couple archetypes that we go through. Sure. It's along the whole continuum based upon the strategy. Got it. Again, right, so there's no one size fits all. No. You're kind of playing it based on the company, and that's why it works. Totally. What makes an attractive target? Is it purely synergy? Is it growth? What's the framework to evaluate an opportunity? We talked about the framework to integrate. Well, the answer is yes. The answer is yes. We talked about it, and our CFO talked about it. First off, is it aligned with our strategy? I think you'll see anything we buy and have bought is completely aligned with what we talked about today. Secondly, how are we going to add value to it? Is it more growthy? Is it more cost? Sure. In our case, we do have specific tax attributes that we can create value with, and that we've talked to our investors about. It is about that. We typically have a mid-teen return out of a five-year horizon. Got it. We've got to create value. Sure. We are pretty disciplined on that. We will do some technology investments at times to really make sure we're building our roadmaps out that support our organic. Net-net, it's been pretty tried and true to how we think about it. It starts through those elements and are we going to sit there and have a better business from our business unit focus in front of the customer with financial returns? We should be giving the money back to the shareholders, share repurchase. Sure. That's on the acquisition side, right? Naturally, with that strategy, you'll also be looking at parts of the business that may not be core for spinoffs and divestitures. Yeah. Is there any part of the business that you're sort of viewing right now, or are you comfortable with where it sits today? We always look at, hey, if there's an asset that could create value for owners, we would have to consider it. We do like our portfolio. We think, even with the growth rate we laid out at Investor Day, it's really about, do we have businesses that allow us to play offense. Sure. Improve the financial criteria, drive increased cash flow for compounding that we talked about all day. From that viewpoint, it isn't like where we were 10 years ago where we had to say, "Oh, what do we want to be in or not?" We feel good with the portfolio, but we would always be evaluating if there's something that creates value for owners. Got it. Super helpful context. Super. A couple of questions that came in [crosstalk] from the audience I want to run by you. One was just, how are you using AI in your business, right? Sure. Is that playing a role today in terms of R&D, anywhere else? Yeah. First off, thank you for the question. How we use it internally, it's interesting. We get so many questions on how [audio distortion]. We do. We've actually built an internal cloud. We actually focus on manufacturing and engineering. We believe we can be a fast follower when it comes to sort of back office things, as other people do that, but it's really how does it deepen our moat? It's mainly in the engineering, and it's not around reducing people. It's around how do we make our engineers be more efficient in regard to speed. Sure. And more throughput. That's how we're working it, we create 500,000 different stock keeping units. How do we help our engineers get more velocity on that and also make sure engineers don't create what we've already created? Sure. They like to tinker. Yeah. How does that come out in front of the customer? It's an area that we have targets that actually drive efficiency. What I'm proud of is how our teams are really experimenting. Sure. I think like most companies, we really like what we're working on, which are the ones that are really going to get to breakthrough scale. I think we're like a lot of others in trying to work through that, but investing in it, both from our internal teams. Sure. As well as external investment on the tools that are needed to really experiment with to see which ones are going to be our tools for the long term. Got it. The interesting thing here is there are just so many tools right now, so you're spoiled for choice at this point, right? Try stuff and see what works. The biggest thing with the tools are every employee wants a different tool. Let's face it, we have to make choices, and we pick some tools over others, and every employee wants their own little pet. Project, right? Tool. Yep. There we go. We have about a minute and a half left. Just want to hand it over to you, Terrence. Any other last messages you want to leave with folks? Yeah. Just the last message that I want to leave, I want to go back to what I started at the beginning. One of the things that we get very excited about is TE's growth vectors are very different than where they were. Even to increase a growth rate in a very sideways auto world, we're very confident about, and actually you see it this year. You see our growth rate being double digit this year, actually above. The breadth of the growth is really what gets excited around that data and power elements that I ask you not to lose sight on. It's not only the growth element. Sure. Certainly the other element, because we talked for a long time about we were self-help on the margin side. We're not done on margin. It may not be a restructuring program and structural that way like we talked about in the past, but our margin can continually move up, and how we operate the business from a free cash flow is going to create opportunities for return to you or increasing the growth rate from M&A. I actually feel the model that we've been working on and driving, you're seeing this year in a world that has a lot of moving parts in it, and I think our teams are doing a really good job managing it while also delivering the growth. I appreciate you all being here this morning. I know it's her early first meeting. I know I'll see some of you throughout the day today. Thank you for spending time with us and learning more about TE. Perfect. Thank you, everybody. Thank you so much, Terrence. Thank you