APH - NYSE

Hello, and welcome to the First Quarter 2026 Earnings Conference Call for Amphenol Corporation. [Operator Instructions] At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Craig Lampo. Sir, you may begin.

Thank you very much. Good afternoon, everyone. This is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO. We would like to welcome you to our first quarter 2026 conference call. Our first quarter results were released this morning, and I will provide some financial commentary, and then Adam will give an overview of the business and current market trends, and then, of course, we'll take your questions. 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 first quarter of 2026 with record sales of $7.6 billion and GAAP and adjusted diluted EPS of $0.72 and $1.06, respectively. First quarter sales were up 58% in U.S. dollars, 57% in local currencies, and 33% organically compared to the first quarter of 2025. Sequentially, sales were up 18% in U.S. dollars and in local currencies and up 4% organically. Adam will comment further on trends by market in a few minutes. Orders in the quarter were a record $9.435 billion, up a strong 78% compared to the first quarter of 2025 and up 12% sequentially, resulting in another very strong book-to-bill ratio of 1.24:1. This impressive book-to-bill was driven by robust bookings in all of our end markets with every end market having a positive book-to-bill this quarter. GAAP operating income was $1.8 billion in the quarter and GAAP operating margin was 24%. GAAP operating margin included $249 million of acquisition-related costs primarily related to the acquisition of CommScope, which closed at the beginning of January. These acquisition-related costs included $179 million of noncash amortization related to the value of acquired backlog and inventory step-up costs as well as a $70 million charge related to external transaction costs. Excluding acquisition-related costs, adjusted operating income and adjusted operating margin were $2.1 billion and 27.3%, respectively. On an adjusted basis, operating margin increased by a strong 380 basis points from the prior year quarter and was down 20 basis points sequentially. The year-over-year increase in adjusted operating margin was primarily driven by robust operating leverage on the significantly higher sales volumes, which more than offset the dilutive impact of acquisitions. On a sequential basis, the decrease in adjusted operating margin was primarily driven by the dilutive impact of acquisition, partially offset by robust operating leverage on the higher organic sales volumes. I'm very proud of the company's operating margin performance in the first quarter, which reflects continued strong execution by our team. Breaking down the first quarter results by segment compared to the first quarter of 2025, sales in the Communications Solutions segment were $4.5 billion and increased by 88% in U.S. dollars and 47% organically and segment operating margin was 30.6%. Sales in the Harsh Environment Solutions segment were $1.7 billion and increased by 34% in U.S. dollars and 23% organically and segment operating margin was 28%. Sales in the Interconnect and Sensor Systems segment were $1.4 billion and increased by 23% in U.S. dollars and 17% organically as segment operating margin was 20.2%. The company's GAAP effective tax rate for the first quarter was 42.7%, and the adjusted effective tax rate was 27%, which compared to 22.7% and 24.5% in the first quarter of 2025, respectively. As the typical practice, our adjusted tax rate excludes the tax effect of acquisition-related costs and the excess tax benefit from stock option compensation as well as other discrete tax items. Specifically, the first quarter includes $130 million tax accrual related to the previously disclosed tax matter in China. The company recently received unfavorable tax determinations from certain relevant tax authorities in China, and this accrual, together with the $100 million accrual, the company booked in the fourth quarter of 2025 covers the full amount of the tax payment notices received. In addition, as a result of this matter together with the continued shift in income to higher tax jurisdictions amidst the company's high levels of growth, the company increased its effective tax rate to 27% in the first quarter and expect that rate to remain for the remainder of 2026. The recent developments with respect to the China tax matter also resulted in the company reassessing certain tax-related assumptions applied to prior period results, not subject to the China tax inquiries. This reassessment resulted in an adjustment to our tax provision of $160 million, which is recorded in the first quarter. The $130 million accrual together with the $160 million additional tax provision have been excluded from the company's first quarter 2026 adjusted tax rate and adjusted diluted EPS. GAAP diluted EPS was $0.72 in the first quarter, up 24% compared to the prior year period. And on an adjusted basis, diluted EPS was a record $1.06 and increased by 68% compared to $0.63 in the first quarter of 2025. This was an outstanding result. Operating cash flow in the first quarter was $1.1 billion or 120% of net income and free cash flow was $831 million or 89% of net income. These were strong results for first quarter, which typically has somewhat softer cash generation. We continue to expect strong cash flow generation in 2026 with free cash flow conversion remaining within our typical range over time. From a working capital standpoint, inventory days, days sales outstanding and payable days were all within a normal range. During the quarter, the company repurchased 1.3 million shares of common stock at an average price of approximately $140. And when combined with our normal quarterly dividend, total capital returned to shareholders in the first quarter of 2026 was approximately $485 million. Total debt at March 31 was $18.7 billion, and net debt was $14.2 billion. Total liquidity at the end of the quarter was $7.6 billion, which included cash and short-term investments on hand of $4.6 billion plus availability under our existing credit facilities. As previously noted, we expect quarterly interest expense net of interest income to be approximately $200 million for the remainder of 2026. First quarter 2026 EBITDA was $2.3 billion and our net leverage ratio was 1.6x at the end of the first quarter. We are very pleased with the company's financial position. 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 hope it's not too late to extend my welcome to all of you on the call today from a beautiful spring day here in Wallingford, Connecticut. As Craig mentioned, I'm going to highlight some of our achievements in the quarter with our very strong start here to the year in 2026. I'll talk about our trends across our served markets. Then I'll comment on our outlook for the second quarter. And of course, we'll have time for questions at the end. Look, I just want to say that our organization, the Amphenol organization drove outstanding performance here in the first quarter. Our results were stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per share. Our sales grew from prior year by 58% in U.S. dollars, 57% in local currency reaching a new record of $7.6 billion. On an organic basis, our sales increased by a very strong 33% with growth across nearly all of our served markets, and I'll talk about those markets here in a few moments. The company booked a record $9.4 billion in orders in the first quarter and that represented a robust book-to-bill of 1.24:1. Orders grew by a very strong 78% from prior year and were up 12% sequentially. I'm very pleased that our order growth in the quarter was broad-based with all of our end markets realizing book-to-bill of at least one, and this was driven in particular by strength in IT datacom, defense, commercial air and industrial. We're also pleased to have delivered adjusted operating margins of 27.3% in the quarter, an increase of 380 basis points from prior year and down just 20 basis points sequentially. These impressive results were achieved despite the margin dilutive impact of the CommScope acquisition in the quarter. I would just add, though, that we're very pleased with the CommScope acquisition, and we do expect the business' performance to continue to improve as part of the Amphenol family. Adjusted diluted EPS grew 68% from prior year and reached a new record of $1.06. And finally, as Craig mentioned, the company generated operating cash flow of $1.1 billion and free cash flow of $831 million in the quarter, both clear reflections of the quality of the company's earnings. I can't express enough how proud I am of our team here in this very strong start to 2026. Our results this quarter once again reaffirm the value of the drive, discipline and agility of our entrepreneurial organization as we continue to perform well amidst a very dynamic environment. Now turning to our served markets. I just want to comment that we're pleased that the company's end market exposure remains diversified, balanced and broad. And this diversification continues to create great value for Amphenol, enabling us to participate across all areas of the global electronics industry. All while not being disproportionately exposed to the volatility of any given application or market. I will say that there's no doubt that with the extraordinary investments being made in artificial intelligence, or AI, coupled with our team's outstanding work and capturing a significant share of this unique interconnect opportunity that this has resulted in the IT datacom market in the quarter, representing just over 40% of our sales. Nevertheless, we remain committed to continuing to broaden our portfolio across markets, customers, applications and products as we build on the company's momentum and we further strengthen Amphenol's position across all areas of the global electronics industry. The defense market in the quarter represented 8% of our sales, and sales grew from prior year by a strong 44% in U.S. dollars and 25% organically. I will say this is driven by really broad-based growth across virtually all segments of the defense market and all of our served geographies. Sequentially, sales grew by 2%, which was in line with our expectations coming into the quarter. And as we look into the second quarter, we expect sales in the defense markets increased in the high single-digit range sequentially. 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. Amidst the current dynamic geopolitical environment, countries around the world are increasing their investments in both current and especially next-generation defense technologies. With our expanded product offerings, both in discrete connectors as well as value-add interconnect, as well as the significant capacity expansions we've made in recent years, we're positioned better than ever to capitalize on this long-term demand trend. The commercial air market represented 4% of our sales in the quarter, and sales in this market increased by 22% in U.S. dollars and 20% organically from prior year and that was really driven by broad-based strength across commercial aircraft manufacturers. Sequentially, our sales moderated by 3% from the fourth quarter, which was better than our expectations coming into the quarter. As we look to the second quarter, we expect a slight sequential -- a slight further sequential moderation in sales. I'm truly proud of our team working in the comm air market. With this ongoing growth in demand for next-generation aircraft, our efforts to expand our product offering, both organically and through our acquisition program continues to pay real dividends. 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 20% of our sales in the quarter, and our sales to industrial increased by 52% in U.S. dollars and 16% organically as we continue to see accelerating demand across most segments of the diversified industrial market. In fact, virtually all of those areas of the industrial market that we service grew organically in the quarter, and we also saw organic growth in all three major geographies. On a sequential basis, our sales were up 29% from the fourth quarter as we benefited from the addition of CommScope's building connectivity business. Organically, sales were up a strong 6% from the fourth quarter, better than our expectations as we entered the quarter. Looking into Q2, we expect sales in the industrial market to increase in the high single digits from these already strong first quarter levels. I would just comment that we remain encouraged by the company's strength across the many diversified segments of the important industrial market. And with the addition of CommScope, we're now seeing new opportunities for growth in the exciting building connectivity market. Over the long term, I'm confident in our strategy to expand our high-technology interconnect antenna and sensor offerings, both organically and through continued complementary acquisitions. This strategy has enabled Amphenol to capitalize on the many electronic revolutions that continue to occur across the diversified industrial market thereby creating continued opportunities for our outstanding team working in this important space. The automotive market represented 11% of our sales in the quarter. Sales in automotive grew by 7% in U.S. dollars and 2% organically, as organic growth in North America and Europe was somewhat offset or partially offset by somewhat softer sales in Asia. Sequentially, our sales declined by 7% from the fourth quarter, which was a bit better than our expectations coming into the quarter. For Q2, we expect sales to increase modestly from these first quarter levels. I remain very proud of our team working in the global automotive market. While there are clearly some areas of demand uncertainty, our team continues to be focused on driving new design wins with customers who continue to increase the content of new electronics being integrated into their next-generation vehicles. We look forward to benefiting from our strengthened position in the automotive market for many years to come. The communications networks market represented 12% of our sales in the quarter, and sales in this market grew from prior year by 91% in U.S. dollars and that was really driven by the additions of ANDREW and CommScope. On an organic basis, our sales were flat from prior year as growth in wireless applications was offset by some moderations in broadband demand. Sequentially, our sales in the quarter grew by 57% from the fourth quarter, driven by the addition of CommScope. On an organic basis, sales were flat to prior year -- or to prior quarter, which was better than our expectations. As we look into the second quarter, we expect sales to remain at these first quarter levels. With our expanded range of technology offerings following the acquisitions of both CommScope and ANDREW, we are very well positioned with both service provider and OEM customers across the communications networks market. Our deep and broad range of products coupled with our global manufacturing footprint, have positioned us to support customers around the world. As the accelerating volume of data traffic drives demand for expanded and upgraded networks in the future, we look forward to enabling these systems for many years to come. The mobile devices market represented 4% of our sales in the quarter, and sales in this market grew by 2% in U.S. dollars and 1% organically from prior year as growth in laptops and accessories was somewhat offset by moderating demand in handsets and wearables. On a sequential basis, our sales actually -- while declining by 22% was a better-than-expected decline compared to the fourth quarter as we had expected. Looking into the second quarter, we expect a modest sales decline from these levels on typical seasonal patterns. I'm very proud of our team working in the always dynamic mobile devices market as their agility and reactivity has once again enabled us to outperform our expectations in the quarter. I'm confident that with our leading array of antennas, interconnect products and mechanisms that are designed in across a broad range of next-generation mobile devices, we are well positioned for the long term. And finally, the IT datacom market represented, as I mentioned earlier, 41% in the fourth (sic) [ first ] quarter. Sales in this market grew by a very strong 99% in U.S. dollars and 81% organically. And this was driven by the continued acceleration in demand for our products used in AI applications, together with continued strong growth in our base IT datacom business. On a sequential basis, our sales increased by 27% from the fourth quarter, which was substantially better than our expectation for a low double-digit increase. On an organic basis, our sequential growth reached 16%, a very strong number. And virtually all of this organic sequential sales growth was driven by growth in AI-related products. Looking ahead, we expect a further sequential sales increase in Q2 in the low teens level as investments in AI data centers accelerate and its enterprise and cloud customers continue to expand their demand for traditional IT datacom products. Just want to say that we're more encouraged than ever by the company's position in the global IT datacom market. Our team has just done an outstanding job, both of securing future business on next-generation IT systems with a very broad array of customers but also in executing on these exciting programs. The revolution in AI continues to create a unique opportunity for Amphenol, given our leading high-speed and power interconnect products. And now with the addition of CommScope, we have the industry's broadest range of high-speed copper, power and fiber optics interconnect products, all of which are critical components in these next-generation systems and in the next-generation architectures of our customers. This creates a continued long-term growth opportunity for Amphenol. Turning to our outlook and assuming current market conditions as well as constant exchange rates, for the second quarter, we expect sales in the range of $8.1 billion to $8.2 billion and adjusted diluted EPS in the range of $1.14 to $1.16. This would represent strong sales and EPS growth of 43% to 45% and 41% to 43%, respectively, compared to the second quarter of prior 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 Amphenol's market position all while driving sustainable and strong profitability for the long term. Finally, I want to take this opportunity to thank our entire global team for their truly outstanding efforts here in this very special first quarter. And in particular, I just want to express my gratitude to the folks working in our factories around the world. This growth doesn't come easy. And the folks working on our factory, those amazing Amphenolians, they continue to amaze me and delight our customers with their extraordinary and hard work. And with that, operator, I'd be very happy to take any questions that there may be.

[Operator Instructions] We have a question from Mark Delaney with Goldman Sachs.

Congratulations on the strong results. I appreciate that Amphenol is able to address data center customer need, both for copper and optics, especially post the CommScope acquisition, and that's certainly apparent with the orders and revenue that you reported for the IT datacom segment. However, I'm hoping, Adam, you can help investors better understand implications for Amphenol as CPO plays a bigger role over the next 2 to 4 years. And specifically, as Amphenol is engaged with customers on designs that will utilize CPO, what does that mean for Amphenol's revenue and profit potential on a directional basis relative to current designs, especially now that you have CCS.

Yes. Thanks so much, Mark. I appreciate the question, and thanks for your kind words here. Look, I mentioned earlier, and I'll just reiterate that we now have the broadest range of products for customers in the IT datacom market. And that starts with high-speed products. It continues on with power products, which are very, very important products for all architectures, current and next and the next after that generation. And now with CommScope, together with previous and prior capabilities that we already had in optics, we now have a very, very broad suite of products in optics and capabilities, capacities. And so we now sit in a unique position with customers where we're really a leader across the board in all the technologies that they're thinking about for the future. And I can just tell you we're working with all the players here up and down the stack of the AI ecosystem from the folks who are spending the money and outfitting the data centers and also in many cases, designing their own architectures to the systems manufacturers, the equipment makers who are participating very strongly all the way down through to the chip makers who are also creating their own unique architectures. And we worked very strongly across that entire ecosystem on current next and next generation thereafter. Very specifically, as you allude to CPO and the potential evolution of things towards higher speeds and towards optical solutions. And you can imagine, we're working with customers on a broad array of solutions, including CPO for the future that create great opportunities for Amphenol in the long term. What are our customers trying to achieve? Our customers are trying to achieve higher bandwidth, lower latency, higher density, higher transfer speeds so that ultimately, these AI systems can operate much as a human brain can do. Comparing everything to everything else and doing that in extremely fast time periods. And when you see the evolution of how these AI systems are, we're really enabling those systems today, and we're working with our customers on future generations, years and years from now, kind of generations both on copper and on optical solutions. And what does that mean in terms of the quantum of the business? I mean, that all, I think, remains to be seen, but what's very clear is as we talk to our customers and even as our customers speak publicly, our customers are not talking about these kind of either/or solutions. What they're talking about is more interconnect, no matter what. And so as we approach them with now that broader suite of products, we also approach them with another advantage in our back pocket, and that is the proven ability to execute. I mean what you see this quarter, growing 81% organically. What you saw last year with us growing our IT datacom business by 124% year-over-year. And obviously, AI growing even faster than that. These have not been trivial initiatives to ramp up and meet the moment for our customers. And we have proved that time and time again with customers up and down the stack. And so you can imagine that as our customers, think about the future, whatever that architecture may be, Amphenol is going to have a very strong seat at the table in all of those architectures, not just because we have the suite of products but also because we have the proven capability of executing and making sure that they can hit their incredible aspirations and that our products don't become a bottleneck in that. And so that combination of the suite of products, the proven execution capability, we think puts Amphenol in a very strong position for the future. And look, who knows what the cadence of AI investments will be and when and whether it will be ups and downs, of course, there will be ups and downs. But I think the long-term prospects for this industry and for this market and for Amphenol's position are very strong.

We have a question from Andrew Buscaglia with BNP Paribas.

I just wanted to, along the lines of the discussion, hear a little bit more about what these customers, the hyperscalers are saying to you intra-quarter and as the year progresses, do you think you should see continued acceleration of growth in that segment as presumably you have increased share or content in future generations. And then maybe project out to '27 or so and talk about what you think the implications are of your fiber portfolio will be on the next generation.

Yes. Look, I mean I'm going to be careful not to give guidance beyond the quarter that we've talked about here in the second quarter. But you can imagine, I mean, we've had very strong orders, really strong across-the-board orders here in Q1, I mean, interestingly, you can imagine we had strong IT datacom orders, but they actually weren't much stronger than, for example, the orders we had in defense in terms of the book-to-bill. But we have had strong IT datacom orders. We had strong orders also in the fourth quarter where we had a book-to-bill even higher than this very unique 124 that we had here this quarter, I think 131 in the fourth quarter. And so we have good momentum really across the board and including in IT datacom. And all I can tell you is when we talk to our customers across the board in the IT datacom market, in particular, those customers who are heavily focused on these next-generation AI build-outs, they want more product. And I think our team's ability to satisfy that has really been a fabulous asset to the company. Look, in terms of 2027, I'm not going to try to give a prognosis for 2027, except what I will say is this. We look at the CommScope business today and its performance. And it's also performing as a company very, very strongly. I mean I would just tell you that obviously, we bought the company, not right on January 1. But on a like-for-like basis, in the first quarter, CommScope growth was largely similar to the organic growth that we had across Amphenol. And that's a business that is a diversified business across data center and communications networks and industrial. So they have very, very strong performance here in the quarter, and we're really pleased and proud with their performance. And that's performance really in the here and now because they're opening up to us, a complementary part of the data center opportunity that we hadn't participated as strongly in before. And that's connecting from rack to rack and across the data center and even, of course, between data centers through the networks and that's really exciting for us. And again, going back to sort of how I talked about the first question, that makes us again more important to our customers because as soon as the signal gets into the building, we're helping our customers move that signal around, across and within the racks and ultimately helping to create these unique AI architectures. So I think CommScope puts us in a very strong position going forward. And I'll just reiterate, our customers make a lot of trade-offs as they think about their architecture, and we can sit with them at the table and help them make those trade-offs with expertise and a breadth of an expertise that's really unique in this industry.

We have a question from Amit Daryanani.

Really impressive set of numbers here. Adam, one of the things we're starting to see a lot in the AI ecosystem is hyperscalers are engaging in these long-term capacity expansion plans with the suppliers to really ensure they can get whatever capacity they need across the tech stack. And I think you've seen this from a lot of companies, I think Corning talked about three such large deals on their call. As you look at this unprecedented growth you're seeing in IT datacom, I think you said 81% organic growth. How do you think about funding the capacity for these ramps as you go forward? And to the extent you can talk about it, are Amphenol, CommScope being approached for these multiyear capacity agreements, how do you view them? And would they ever make sense for Amphenol?

Yes. Thank you very much, Amit. I really appreciate the comments and the question. I mean, look, you know that in our company, you followed us for a very long time. We pride ourselves on agility and the ability to react quickly to our customers. And that generally means that our customers can rely upon us, whether or not they give us kind of a long-term agreement, so to speak. Now all that being said, and we've talked about this in the past, we have talked about the fact that there are more meaningful investments, and you've seen that in our capital spending, which still is very reasonable as a percent of our sales. But our sales run rate has doubled here over a 2-year period from Q1 of '24 to Q1 of this year, we've more than doubled in our size. And so our CapEx has also increased substantially. And so you can imagine that we work with customers when we make these kind of investments to make sure that we have security around those investments and that can mean participating in the investments, and we're very grateful to our customers for their willingness. To do that in certain cases, it can also mean opening the aperture of orders and the commitments that they make to us. So are those long-term supply agreements, I wouldn't call it that, but I would call it more commitments that our customers are making, which then give us the confidence to make the capacity increases that we have, the massive increase in automation for these ultra high-precision products for example, that we are making. And so I would say that there's more of that going on today than there has been in the past. I mean you're probably not going to hear us talk about it very explicitly, but no doubt about it. We're working hand-in-hand in partnership with our customers as they do this incredible thing called enabling AI.

We have a question from Joe Spak with UBS.

Maybe I wanted to build on some of that prior commentary, Adam, because just as the entire value chain for data center expands and matures, I'm just wondering how you're sort of thinking about a desire from some, ultimately, customers to sort of really bring in new players, maybe diversify some of their risk. So how are you thinking about that? How does your relationship change there? I know you're in there helping them sort of design that and maybe, in some cases, that leads to licensing opportunities for you. But does that meaningfully change your sort of profit opportunity here as that ecosystem expands?

Yes. Thanks very much, Joe, and I will correct your name, Joe Spak. We all know that very well. Sorry for the mispronunciation of your surname there. Look, this is not a new phenomenon. I mean we have always worked in this market and many others in a world where our customers want to mitigate risk. And that's no different. That's -- we have been doing that all along here as we prosecute these unique opportunities that have arisen through AI. I mean we are not a sole source in any respect. But what we are is we're very uniquely able to execute. We do have a lot of unique technology that creates value for our customers. And so we welcome actually other participants in the market. And again, there are plenty of participants in the market. We partner with those companies. And yes, sometimes we have licensing agreements with them. But the end of the day, that unique Amphenolian ability to execute is ultimately what our customers value equally to the technology that we offer them. And so we don't see any meaningful change to that. This is no different from how we've always prosecuted our business. We've always gone out and had to win business. We've always had to go out and out-execute our competition and thereby satisfy and even delight our customers, and we can just continue to do that. You can imagine, we've also built extraordinary capabilities right now. Over the course of these last 3 years, as we've been managing through these extraordinary ramp-ups and 81% organic growth here in this quarter, 124 last year, we have built an extraordinary capability around the world to support customers in these unique technologies. And fortunately, we're in that virtuous cycle where the company does generate strong profitability. We convert that profitability into cash, and we reinvest that cash into product development, number one, capability development, number two, and capacity, number three, that ultimately allows us to be more important and to meet the moment for our customers. And so look, we welcome more participants. We also welcome that when you have more participants, that also mitigates in some ways, the risk of volatility for everybody, and that's a good thing. And that's how this industry has worked for a long time, and we've prospered in that environment for many, many, many years, decades really.

We have a question from Samik Chatterjee with JPMorgan.

Adam, if I can just ask you more specifically around CCS. Obviously, you sounded pretty positive in terms of what you're seeing for demand there. If you go back to the time when you announced the acquisition and gave some guidance around it, I think you were assuming more sort of mid-teens growth for this year. How are you seeing sort of that demand progress relative to those early milestones that you gave us? And are you seeing any supply constraints when it comes to sort of bare fiber or preform in relation to your ability to sort of meet some of the customer demand that you see for the CCS business?

Well, thanks very much, No, you're absolutely correct. When we announced this deal, I think we did talk about it at the time as roughly a $3.5 billion, maybe $3.6 billion business with sort of mid-teens growth expectations. And as I mentioned, here at least here in the first quarter, they achieved a growth level, largely at the same pace of Amphenol's own organic growth, which is really impressive and really outperforms what we would have thought back when we signed the deal. And we continue to expect the company to deliver this year, as we said, roughly $4.1 billion in sales and $0.15 of accretion. I can tell you the team, this is a team of fighters. I mean it's so amazing. I mean they came from a very different culture, obviously, a very different corporate background over the 50 years that CommScope has been around. But the thing they have in common is this just desire to win. I mean this is a team of extraordinary capable individuals who want to win. And that means knocking down whatever impediments may come along, along the way. And look, you mentioned there's no doubt a lot of demand for fiber right now around the world. And I can tell you that our team is doing a fabulous job of supporting their customers' demand, meeting kind of the expectations that we had growing the company by a very significant extent. And they're doing that by being real entrepreneurs. And that's a phenomenal thing. And it's really satisfying to see that for a group of people who've only been part of Amphenol for now less than 5 months. And so I have really high expectations for them in the future. There's no doubt that they will manage through whatever dynamics arise in the marketplace. And now I will just say this, they're now part of a company that has a very different balance sheet, a very different approach to growth than what they may have had in the past. And so we are very much willing to support their growth with investments as we always have in Amphenol, getting them on that same virtuous cycle that our organization has been on for so many years, what I described earlier and no doubt about it, the folks at CommScope are really excited to have such a supportive -- to be part of such a company that's so supportive of their growth aspirations and their growth aspirations are pretty significant.

We have a question from William Stein with Truist Securities.

Congrats on the great results and outlook, really excellent as we've grown accustomed to from you. But the question I have is that it's not just co-package optics we tend to hear about from some of the bigger customers in the AI data center supply chain. It's various trade-offs between passive copper, active copper. And then within optical, we hear all the buzzwords about pluggables, near package optics, silicon photonics, co-package optics, even optical interposers and then some of these technologies being used in scale up, some in scale out. Should Amphenol have -- should we think about the company as having similar ability to succeed in all of those technologies? Or are there certain ones of those where your opportunity will be more limited or would potentially accelerate?

Thanks, Will. Well, look, let's -- we'll talk about this one more time, and I think you alluded to one aspect of it that we haven't talked about, which is the active aspect. We certainly have a broad array of active and passive product offerings in both copper and optics. And I think I didn't mention the active piece of that with the other several questions on this topic. But there's no doubt. I mean, we have developed that active capability both on copper very strongly and also through our acquisition program on optics. And so when I talk about the breadth of products that we have to offer to our customers, it's not just that we offer high-speed copper, power and passive optics, but we also offer active copper. We also offer active optics. Now do we have every single part number that exists in the universe? No, of course, not. But we have a breadth of capabilities across those -- all of those categories, if you call them sort of the two categories of copper and optics in the subcategories of passive and active. And I would just say that there's really no company, at least that I can think of here on the spot who can say that, who can say that they have that breadth of offering to help the customers as they face this sort of amazing smorgasbord of different choices that they're facing. Now is each sort of dish on the smorgasbord going to have the same impact to our company. Are we going to have the same part numbers, that's very hard to give a prognosis about that. But what I do know is what I said earlier. No matter what, there's going to be more interconnect. There's going to be more connections, more synaptic connections across these neural networks. And that's going to lead to a higher degree of interconnect products, which is going to be good for the whole industry. And then it's up to us to continue to execute with the breadth of our products to take more than our fair share of that. And so far, we've been able to do that. And the building blocks of why we've been able to do that are still very strongly, if not more strongly than ever in place. And so that gives me a dose of confidence for however these architectures evolve. And then the last thing I'll say is, I think we should be very careful that there is not just going to be a single architecture, a single moment. Customers are looking at lots of different things. They're looking at lots of different directions, and we'll have a lot of different customers doing a lot of different things architecturally in the future which is, again, why we believe it's very important to be with those customers with the full breadth of offerings for them as they approach these next generations.

We have a question from Asiya Merchant with Citigroup.

Great set of results here. If I can, there's been a lot of talk about component, energy, inflation. You guys delivered very strong margins here. If you could talk a little bit about prices -- pricing ability to pass through those costs. And if you saw, there was more ability to raise prices here relative to historical. And if I can squeeze one more on just the book-to-bill in orders and lead times here. Very strong book-to-bill again, similar to last quarter. Are we seeing like extended lead times here? Just help us understand on the book-to-bill, what's driving that.

Yes. Thanks, Asiya. I think I'll take the first part and maybe let Adam talk about the book-to-bill here. But I think in regard -- certainly, we're super happy with our margins here in the quarter, 27.3%, just slightly under kind of record margins we had in the second half of last year. And that's inclusive of CommScope, which had a great quarter, but ultimately, certainly still as a margin -- has some margin dilution. And as we would expect. And over time, we certainly are very confident that we'll get them closer to the company average. But this 27.3% in the quarter was just an outstanding result, given some of that pressure. That resulted in a few things, and I'll talk about costs in a second. But I mean, certainly, we just executed really well in the quarter on that really strong growth we continue to have. And that execution, combined with the cost discipline we have within the company, has just enabled us to leverage at a pretty impressive level from a margin perspective across our business, including places like that serve the defense market, industrial, otherwise, I mean you see this across our segments and the improvement in the margins we've had there. So it's really just been kind of, I would say, almost across the board margin improvement story here. And certainly, the ones that are growing faster than some of these markets are certainly contributing strongly as well. The cost environment certainly hasn't been supportive. I mean, I wouldn't say -- I would say on the margin, that's been, I guess, forgive the term there. I mean kind of on the -- to a lesser degree, that's been some impact. But I think we've done a great job of offsetting most of that through things we do in the factory productivity, things with our vendors. And certainly, as we kind of drive those other levers, the last lever is pricing. And pricing is just a function of ultimately the value you bring to your customers with the technology, with the execution with all these other things that Adam has talked about. And we've been able to offset some of the things around cost, tariffs and otherwise over time. With these things, our general managers have just done a fantastic job. Some businesses are more impacted than others in some ways. And that we don't do this from the top level. We let their general managers kind of make the decision to make relative to each of the businesses. And that's the result of kind of what you see in our margin line. So super proud of that. And certainly, we expect going forward, as you can see in our guide, we certainly expect strong margins going forward.

And just real briefly on book-to-bill. I wouldn't tell you that we see anything categorically with the only kind of proviso being that as I talked about earlier, we do have some customers who, because of investments that we're making, have opened up their order apertures. And that's something we've talked about for a number of quarters. But I wouldn't say anything more broadly about extended lead times.

We have a question from Steven Fox with Fox Advisors.

Adam, I was wondering if you could talk a little bit about commercial buildings. You highlighted in your prepared remarks now with CommScope being there. You also mentioned antennas and sensors. So how do you think 1 plus 1 equals 3 between you and CommScope as you now include commercial buildings in your portfolio?

Yes. Thanks so much, Steve. No, we're -- actually, this building connectivity business, as we call it and as they call it, is something really exciting, and it is really complementary and new to Amphenol. There's no doubt that we're sitting in our old building here. And as many of you who have come to Wallingford, would not be surprised to hear. I wouldn't say that we have a "smart building" here in Wallingford, but many companies who are less cheap than we are about their headquarters building are really making new investments and all the new functionalities that you can bring into a building. And when you say building, you're talking about residential, you're talking about commercial office. You're also talking about factories and smart factories and all of the like. And so what we're especially excited about is not only the leading position that CommScope has in that market but the channel that they have because it's a very unique channel with unique distributors. They sell into nearly every country on earth. I think it is more than 150 countries at least. Any place where they're building buildings, they need the connectivity to enable all of these next-generation things that go in a next-generation smart building. And with CommScope's position, what we're very excited is that there are other interconnect products, and you mentioned specifically antennas and sensors where we have a very strong position and where we haven't necessarily had that open door into a market like this where I do think long term, that can create value creation for Amphenol, the kind of 1 plus 1 equals 3 that you alluded to. So it's a really exciting area, and we look forward in the years to come to getting to know that market better getting to forge the strategic distribution relationships that they have on a broader basis across Amphenol and ultimately taking advantage of the revolutions that are happening in this area.

We have a question from Wamsi Mohan with Bank of America.

Amphenol work with the leading GPU player in the market on design for scale up connectivity and has earned that leading market share over there in copper-based scale up. So as you think about this transition to optical, there are many more players there. Maybe there's a later start date within underinvested CommScope portfolio, which I'm sure you will change. But how are you thinking about the share and competitive landscape and the potential to have perhaps similar share in scale-up solutions in optical over time?

Yes. Look, Wamsi, let me just say this. I mean we are not the only player in copper or high-speed copper interconnect. But we have executed in a way that has ultimately led to us taking more than our fair share of that opportunity. And you mentioned one company, and we obviously have done that with many companies. And so to the extent that some of those architectures evolve into optics or some hybrid solutions, we will have also competition and maybe it will be the same or maybe it will be different, but we've always had competition, a very healthy competition, let me say, where we have to go earn that business every day of the week. And our team will go out there and work to earn it just as they have on the copper side.

We have a question from Scott Graham with Seaport Research Partners.

Congratulations on another great quarter. I really just wanted to talk about industrial, where your organic was plus 16%. And in the past, Adam, you've been kind enough to unbundle a couple of the pieces of that. I'm hoping you can do that again, maybe delineate for us which end markets within there may be led and perhaps the 1 or 2 markets where the organic was less than the 16%.

Well, thanks, Scott, and thanks for your kind words. Look, industrial has been really on a great momentum here in the recent quarters. And like I mentioned earlier, we're seeing that kind of accelerate with 16% organic growth. And one of the things that I find most encouraging is we look at a lot of different subsegments of the industrial market internally. And the vast majority of those subsegments actually have grown organically on a year-over-year basis. I mean, where did we see the strongest performance? I mean, a lot of different places. We saw that in instrumentation. We saw that in electrification. We saw that in oil and gas, even areas like lighting, medical, we saw strong performance, heavy equipment, factory automation, I mean, those are all like strong double-digit organic growth. I mean where did we see a little bit less. I don't know we saw a little bit less performance in like an RMT, marine, but pretty modest. And then there's this category which we call Other. And it's funny, Other is a big category inside industrial where it goes into just the vast universe of harsh environment applications from companies large, medium and small, and that grew very strongly in double digits as well. And so I think what we're seeing is a real broad-based reacceleration of the adoption of electronics in harsh environments in what we call the industrial market. And that's what ties all of our industrial together is it's unique electronic applications in places that aren't very hospitable. Everything from an operating theater to a corn field to an offshore oil well to a train going 400 kilometers an hour and everything in between. And so it's very broad-based growth, in fact.

We have a question from Luke Junk with Baird.

Adam sitting in front of what seems really like a once-in-a-generation supply chain restocking event in both the U.S. and Israeli defense industry. Just hoping you can help us understand Amphenol's leverage within your defense electronics platform, especially thinking of interceptors, munitions, those sorts of things that are going to be exposed to the supply chain dynamic?

Yes. Thanks very much, Luke. I mean, look, let me just start by expressing my hope that the current ceasefire in the Middle East holds. We continue to monitor our employees who are in the Middle East, whether in Israel or in the Gulf region, and we've continued to support them and hold them in our thoughts because it's not easy being in a war zone for a couple of months here. And I know that's been stressful for many. But there's no doubt that the world is not a safer place today than it was 5, 10 years ago. And there's a particular focus on things like missile defense on things like smart munitions. And we saw that during the Ukraine war, which tragically continues as we sit here today. And there's also a question that in the current very dynamic geopolitical environment that countries around the world are planning, are making but are also planning long term significant upgrades in their own military spending and also in the nature of what they're spending their money on. Spending it on next-generation technologies. And by the way, not only from traditional defense contractors, but from a whole new generation of defense contractors who are really kind of the disruptors in this market, and if we look at our position as the world leader in defense interconnect, having expanded significantly the scope of that position with the acquisition of Trexon and others over the years expanding to more advanced RF interconnect active and passive and all of what we have done, we have just become more important to all of our customers in all those regions. Both existing customers as well as the next generation of customers with whom we're working very intensively. And I think we've done a very smart thing along the way, which is we have invested not only in bringing new products, broadening our suite of products, but also in the capabilities to build those products and the capacity to meet the demands of our customers now and into the future. And when you see now the urgency with which many of these defense departments ramp up their own procurement budgets and that includes potentially here in the United States. We sit in a relatively unique position as a company that has the breadth of products but also the capacities and the capabilities to meet that demand. And our team takes up very seriously, not just because it's a good thing for Amphenol's business, but we know that lives depend on it. And there is a mindset across our entire team of folks working in the defense interconnect market that this is more than just delivering numbers and revenues and profit, but we're also delivering critical things to our customers. And I'm really proud of what they've done. I mean growing that business as we have done, 25% organically last year for the full year, 21% organically. It's not a trivial initiative because making these products requires an enormous amount of technology. There's regulations of how you open new things. There's qualifications and all of the like. It's not as simple as just adding some machines and off you go. So look, we look -- we're very proud of our defense business. We're excited for the future. And to me, it feels like this is potentially a long-term structural shift in the demand dynamics in a market where we position ourselves very well to take advantage of that.

We have a question from Joe Giordano with TD Cowen.

I know we're not going to get into specific numbers here, but there's a lot of questions that people are trying to struggle with when you think about new architectures and data centers and on racks from -- as you move into higher voltages and what are the -- like the interplays between price -- like ASPs that you guys can charge versus like the pounds of wire or the lengths of wire. And can you maybe just talk generally like as you get into these more complex, more streamlined types of architectures like the interplay between what the value of those products are versus like what might be going away in terms of, like I said, like pounds of copper or length of cabling in that sense. Like how do we get to a net of all that?

Yes. Look, Joe, I'm probably going to frustrate you here with my answer. I'm not going to -- because I couldn't give you kind of the fill in the spreadsheet so to speak, on pounds of this and length of that. But you mentioned one thing. And you mentioned that there's new architectures with new approaches. You mentioned, for example, higher voltage. And there's no doubt about it that our team is working to enable these next-generation systems which will need new energy. And we talk a lot about the data part of AI data centers, but I think we should also talk a lot about the power part of them. And again, we come into that with the broadest array of power interconnect from discrete connectors to very complex power cable assemblies, bus bars, liquid cooled bus bars. And you can imagine that our team is doing an enormous amount of things, making sure that as our customers shift to higher and higher power capacities inside their racks, inside their data centers, that Amphenol is their core partner. And I'm really proud of what the team has done there. And we'll continue to see great opportunities across the board. But I'm not going to be able to give you a pound and length kind of metric here.

That concludes our Q&A session. So I will hand back to Mr. Norwitt for closing remarks.

Well, thank you all very much. We truly appreciate everybody's interest in the company today, and we look forward to talking to you all here in 90 days, and I hope you all have a wonderful spring and start to your summer. Thanks so much. Thank you.