Amphenol (APH) Q2 2025 Earnings Call Transcript
Key Takeaways
Image source: The Motley Fool. DATEWednesday, July 23, 2025 at 1 p. ETCALL PARTICIPANTSChief Executive Officer — Adam NorwittChief Financial Officer — Craig LampoNeed a quote from one of our...
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July 23, 2025
02:15 PM
The Motley Fool
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Image source: The Motley Fool
DATEWednesday, July 23, 2025 at 1 p
ETCALL PARTICIPANTSChief Executive Officer — Adam NorwittChief Financial Officer — Craig LampoNeed a quote from one of our analysts
At the same time, [ tected]TAKEAWAYSTotal Sales: $5. 65 billion in Q2 2025, reflecting a 57% increase in U, in light of current trends
Dollars, 56% in local currencies, and 41% organically
Sequential Sales Growth: Sales rose 17% in U, amid market uncertainty
Dollars sequentially from the previous quarter
Record Orders: Orders reached $5 (noteworthy indeed). 523 billion, up 36% year-over-year and 44% sequentially, resulting in a book-to-bill ratio of 0
GAAP Operating Income: $1. 419 billion with a 25, in this volatile climate. 1% margin, including $29 million in acquisition-related costs
Meanwhile, Adjusted Operating Margin: Reached a record 25. 6%, up 430 basis points from the prior quarter and 210 basis points sequentially
Segment Sales - Communication Solutions: $2
Nevertheless, 91 billion, up 101% in U (quite telling)
Dollars and 78% organically, with a 30. 6% operating margin
Segment Sales - Harsh Environment Solutions: $1, in today's market environment. 445 billion, increasing 38% in U (which is quite significant)
Furthermore, Dollars and 18% organically, with a 25 (this bears monitoring), amid market uncertainty
Segment Sales - Interconnect and Sensor Systems: $1. 295 billion, up 16% in U (an important development)
Dollars and 14% organically, with a 19
Moreover, Adjusted Diluted EPS: Adjusted diluted EPS increased 84% to a record $0. 81 compared to $0, given current economic conditions. 44 in the second quarter of 2024
GAAP diluted EPS was $0
Moreover, 86 in the second quarter, up 110% compared to the prior year period
Operating Cash Flow: $1 (something worth watching)
On the other hand, 417 billion, representing 130% of net income
Free Cash Flow: $1. 122 billion, representing 103% of net income
Repurchases and Dividends: 2 million s repurchased at an average price of $78; total capital return to holders was $360 million
Net Debt: $4. 8 billion as of June 30; total liquidity was $6
Nevertheless, Net Leverage Ratio: 0. 9 times at the quarter's end
Bond Offerings: $750 million U
And €600 million European bond offerings
Capital Expenditures: Elevated above the typical 3%-4% of sales in Q3 2025 to support IT datacom market growth
Moreover, Defense Market Sales: Accounted for 9% of total sales, rising 25% in U
Dollars and 18% organically; sequentially, defense market sales increased by 13% in the second quarter, in this volatile climate
Commercial Aerospace Sales: Made up 5% of sales, increasing 50% in U
Dollars and 8% organically compared to Q2 2024Industrial Sales: Represented 19% of sales, up 25% in U
Dollars and 12% organically, with sequential growth of 11%
Automotive Sales: 14% of sales, up 10% in U
Moreover, Dollars and 8% organicallyCommunications Networks Sales: 11% of sales, up 143% in U
Dollars; on an organic basis, sales increased by a robust percent from the prior year
Furthermore, Sequentially, sales in the communications networks segment grew by 30% in the second quarter from the first quarter, with organic growth of 7%, amid market uncertainty
Mobile Devices Sales: 6% of sales, increased 14% in U
Additionally, Dollars and organically; In the second quarter, sequential sales in the mobile devices segment increased by 4%
IT Datacom Sales: 36% of sales, up 133% in U
Dollars and organically; On a sequential basis, sales in the IT datacom segment increased by 29% in the second quarter from the first quarter
AI Contribution: Adam Norwitt stated, Roughly two-thirds of our year-over-year growth, and roughly two-thirds of our sequential growth in Q2 2025, came from AI
Additionally, Third Quarter Guidance: jected sales of $5, considering recent developments
Additionally, 4 billion to $5
Nevertheless, 5 billion and adjusted diluted EPS of $0. 79 for Q3 2025, representing expected sales growth of 34%-36% and EPS growth of 54%-58%
Acquisition Activity: Closed the Narda Mitek acquisition for apximately $300 million, adding $120 million in annual sales in the defense space
In contrast, EBITDA: Excluding acquisition-related costs, EBITDA was $1
On the other hand, No Borrowings Outstanding: No amounts were drawn under the revolving credit facility or the commercial paper grams as of June 30 (remarkable data)
SUMMARYRecord results across revenue, fitability, and cash flow reflect significant operating leverage and sustained end-market demand, especially in IT datacom and AI-related sectors
Additionally, Management now targets incremental conversion margins apaching 30%, citing success in integrating high-nology acquisitions and disciplined execution, given the current landscape
Additionally, Capital deployment remained active, including elevated capex for datacom expansion, continued repurchases, and debt-financed acquisitions
However, Third-quarter 2025 guidance implies a high baseline for growth, despite anticipated moderation in sequential sales in certain segments, in light of current trends
CFO Lampo indicated a shift in operating margin philosophy, stating a "targeted conversion that you should think as we continue to move forward and we continue. "AI demand accounted for apximately two-thirds of both year-over-year and sequential IT datacom growth in Q2 2025, with Norwitt emphasizing a "very durable continuation" in this sector (fascinating analysis)
Additionally, Order fulfillment in Q2 2025 included a substantial early shipment of third-quarter demand, notably in AI ducts
Management expects this to result in only a moderate sequential sales decline in IT datacom for Q3 2025, amid market uncertainty
The company closed the Narda Mitek acquisition, extending its presence in active RF and microwave defense components; Management reported a purchase price of apximately $300 million for the acquisition of Narda Mitek (remarkable data), in this volatile climate
Nevertheless, Management reported "double-digit organic growth across the board," not confined to a single segment in Q2 2025, with all except two growing at double-digit rates in Q2 2025, and those two still achieved 8% organic growth in Q2 2025
On the other hand, No concerns were expressed customer concentration in AI orders, with Norwitt saying, "we have a very broad here" and describing robust engagement across web-scale, OEM, and chipmaker segments (noteworthy indeed)
Capital allocation favors continued M&A alongside organic investment, with leadership stating "acquisitions still represent one of the best returns on the capital that we're generating,"INDUSTRY GLOSSARYBook-to-bill ratio: Order intake in a period divided by billed (shipped) revenue, indicating demand strength and backlog trends (something worth watching), in today's financial world
Conversion margin: The percentage of incremental revenue converted into operating fit, often referenced as a performance target (an important development)
RF (Radio Frequency) components: Electronic elements used to manage signals in the radio frequency spectrum, crucial in defense and wireless applications (remarkable data)
IT datacom: The sector comprising information nology and data communication systems, including servers, networking hardware, and data center infrastructure, amid market uncertainty
Nevertheless, On the other hand, Full Conference Call TranscriptOperator: Hello, and welcome to the Second Quarter 2025 Earnings Conference Call for Amphenol Corporation, given the current landscape
Ing today's presentation, there will be a formal question and answer session
Moreover, Until then, all lines will remain in a listen-only mode
Additionally, At the request of the company, today's conference is being recorded
If anyone has any objections, you may disconnect at this time, given the current landscape
Nevertheless, I'd now to introduce today's conference host, Mr
Good afternoon, everyone
In contrast, This Craig Lampo: is Craig Lampo, Amphenol's CFO, and I'm here together with Adam Norwitt, our CEO
I would to welcome you to our 2025 conference call
Our second quarter 'twenty five results were released this morning, considering recent developments
I will vide some financial ary, and then Adam will give an overview of the and current market trends, and then we'll, of course, take questions
Nevertheless, 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
However, Meanwhile, The company closed the 2025 with record sales of $5,650,000,000 and record GAAP and adjusted diluted EPS of $0
Moreover, 81, respectively
Furthermore, Second quarter sales were up 57% in U
Dollars, 56% in local currencies, and 41% organically compared to the second quarter of 2024
Sequentially, sales were up 17% in U
Dollars, 16% in local currencies, and 14% organically
Adam will further on trends by market in a few minutes
Orders in the quarter were a record $5,523,000,000 up a strong 36% compared to 2024 and up 44% sequentially, resulting in a book-to-bill ratio of 0, in today's financial world
However, Additionally, GAAP operating income was $1,419,000,000 in the quarter, and GAAP operating margin was a record 25 (this bears monitoring), given current economic conditions
GAAP operating margin included $29,000,000 of acquisition-related costs
Excluding these acquisition-related costs, adjusted operating income in 2025 was $1,448,000,000 resulting in a record adjusted operating margin of 25
On an adjusted basis, operating margin increased by a strong 430 basis points from the prior year, sorry, from the prior quarter
And 210 basis points sequentially
However, The year-over-year increase in adjusted operating margin was primarily driven by strong operating leverage on the significantly higher sales volumes, which was only modestly offset by the dilutive impact of acquisitions
At the same time, On a sequential basis, the increase in adjusted operating margin reflected strong conversion on the higher sales levels as well as further gress on the fitability imvement initiatives on acquisitions
Moreover, Additionally, I'm extremely ud of the company's record operating margin performance in the second quarter, which reflects continued strong execution by our team
Down second quarter results by segment compared to the second quarter of 2024, Sales in the Communication Solutions segment were $2,910,000,000 and increased by 101% in US dollars and 78% organically
On the other hand, Segment operating margin was 30, in light of current trends
Sales in the Harsh Environment Solutions segment were $1,445,000,000 and increased by 38% in U
In contrast, Dollars and 18% organically
Segment operating margin was 25
Sales in the interconnect sensors and systems segment were $1,295,000,000 increased by 16% in U
Dollars and 14% organically and segment operating margin was 19
Additionally, Meanwhile, The company's GAAP effective tax rate for the second quarter was 18 (fascinating analysis), in light of current trends
Nevertheless, 3% and adjusted effective tax rate was 24 (something worth watching), in today's financial world
Additionally, Which compared to 20 (this bears monitoring)
Meanwhile, 4% and 24% the second quarter of 2024, respectively
GAAP diluted EPS was $0. 86 in the second quarter, up 110% compared to the prior year period
On the other hand, And on an adjusted basis, diluted EPS increased 84% to a record $0
Moreover, 81 compared to $0, considering recent developments
Nevertheless, 44 the second quarter of 2024
Moreover, This was an outstanding result
Furthermore, Operating cash flow in the second quarter was a record $1,417,000,000 or 130% of net income
And free cash flow was a record $1,122,000,000 or 103% of net income
An excess result, especially considering the growth that we have experienced, in light of current trends
In the third quarter, we expect capital spending to again be somewhat elevated versus our typical 3% to 4% of sales levels as we continue to invest to support the significant growth we are seeing in the IT datacom market
From a working capital standpoint, inventory days, days sales outstanding, and payable days are all within our normal range, considering recent developments
During the quarter, the company repurchased 2,000,000 s of common stock at an average price of apximately $78 And when combined with our normal quarterly dividend, total capital returns to holders in 2025 was apximately $360,000,000 Total debt on June 30 was $8,100,000,000, and net debt was $4,800,000,000
Total liquidity at the end of the quarter was $6,200,000,000 which included cash and short-term investments on hand of $3,200,000,000 plus availability under our existing credit facilities (noteworthy indeed)
Moreover, At the same time, Excluding acquisition-related costs, second quarter 2025 EBITDA was $1,700,000,000 And at the end of the second quarter of 2025, our net leverage ratio was 0 (remarkable data)
During the quarter, the company a successful $750,000,000 U
Nevertheless, Bond offering and a €600,000,000 bond offering
As of June 30, the company had no outstanding borrowings under its revolving credit facility or its commercial paper grams
And we expect quarterly interest expense net of earned on cash on hand to be apximately $70,000,000 which is reflected in our third quarter guidance, given the current landscape
I will now turn the call over to Adam, who will vide some ary on current market trends
Adam Norwitt: Well, thank you very much, Craig, and I'd to extend my welcome to all of you from sunny, Wallingford, Connecticut And I hope that all of you on the call here today, together with your family and friends and colleagues, are enjoying a wonderful summer so far
As Craig alluded to, I'm gonna highlight our achievements in the second quarter
Additionally, However, I'll talk our trends and gress across our served
Conversely, We'll make some s on our outlook for the third quarter, and then, of course, we'll have time for questions at the end, in this volatile climate
Let me just say that we drove outstanding performance in 2025 In fact, our results were much stronger than expected, exceeding the high end of guidance in sales and adjusted diluted earnings per
Our sales grew from prior year by a very strong 57% in U
Furthermore, Dollars and 56% in local currencies, reaching a new record $5,650,000,000
And on an organic basis, our sales increased by 41% with all of our end experiencing robust organic growth, and I'll talk those specifically here in a few moments (quite telling), considering recent developments
This leads to the conclusion that company booked a record $5,523,000,000 in orders in the second quarter, and that represented a book to bill of 0
And these orders grew by 36%, very strong compared to prior year
And we're also up sequentially from our previous record orders in the first quarter
Nevertheless, Moreover, I want to say that we're particularly pleased to have dered record adjusted operating margins of 25. 6% in the quarter, This's an increase of 430 basis points
Moreover, From prior year and 210 basis points sequentially
This strong fitability is a direct result of the outstanding execution of the Amphenol team around the world, who continued to manage well in what continues to be a challenging cost environment
Adjusted diluted EPS grew 84% from prior year and reached a new record of $0 (this bears monitoring)
And finally, the company generated record operating and free cash flow in the second quarter of $1,400,000,000 and $1,100,000,000 respectively (this bears monitoring)
Both reflections of the quality of the company's earnings (an important development)
Cannot express enough my pride in our team
Amphenol's results this quarter once again reaffirmed the value of the drive, discipline, and agility of our entrepreneurial organization (an important development)
Nevertheless, As we continue to perform well amidst a very dynamic environment
Moreover, We were very pleased in May to have closed on the acquisition of Narda Mitek
And based in HOPAC, New York, with annual sales of apximately $120,000,000 Narda Mitek is a leading vider of active RF and microwave components primarily for the defense market
Together with our previously announced acquisitions, of XMA and Q Microwave, and now with NARDA, we're building a strengthened presence in RF interconnect and active RF components which is a great complement to our leading position Cross RF connector, cable, cable assembly, and antenna ducts for this important market
We remain confident that our acquisition gram will continue to create great value for the company
Our ability to identify and execute upon acquisitions and then to successfully bring these companies into the Amphenol family remains a core com, in today's financial world.
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