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| Statement |
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| And to start off, I am pleased with what -- that we delivered revenue in line with our guidance and earnings per share that was ahead of guidance, driven by strong execution by our teams across our segments in what continues to be a dynamic market environment |
| We generated growth above the market and a number of our businesses as we continue to benefit from secular trends, including increased global production of electric vehicles, adoption of renewable energy, and applications for cloud as well as artificial intelligence |
| Second was to deliver strong free cash flow with a focus to drive down inventory levels |
| And lastly, to improve our margin performance through both cost reduction and pricing actions to offset inflation |
| As Heath and I will discuss on today's call, our teams executed successfully on all of these initiatives during the year, and it sets up for a good jumping off-point as we enter 2024 |
| When we think about the performance of the portfolio, our results demonstrated continued growth in the Transportation and Industrial Solutions segments, which offset market weakness in Communications and headwinds from a stronger dollar |
| Our sales growth remained strong |
| We delivered record free cash flow of $2.4 billion for the year which represents over 110% conversion, and we also returned $1.7 billion to shareholders for the year |
| We highlighted on the call, and you just referenced it as well, that we exited the year in a better position over the second half of fiscal 2023, than our first half performance |
| And at the same time, we improved our service levels to our customers |
| So, as we think about that, I think we're going to make good progress in Transportation margins in FY 2024 |
| We also worked to drive margin expansion in the second half of 2023, and we delivered on this commitment |
| We improved our exit rate on adjusted operating margins to above 17% as we close the year, despite our Communications segment being in the bottom of the cycle |
| Our growth will continue to be driven in Transportation by content outperformance that leverages our leading global position in this market |
| In our Industrial segment, three out of our four businesses continue to have growth momentum |
| You see our strong positioning in renewable energy with growth from both wind and solar applications |
| Commercial air sales continue to grow as this market recovers, and our medical business is benefiting from increases in interventional procedures |
| You've also made some really good progress in terms of expanding your operating margins in the back half of fiscal 2023 |
| It is built on the pillars of secular growth trends that will drive increased content in the markets where we position TE, strong free cash flow generation with discipline around how we deploy capital and certainly levers up to enable margin expansion as we move forward |
| What's nice is in both D&D and appliances, usual our orders have increased sequentially |
| Cash flow from operations was a very strong $1.1 billion and free cash flow was $945 million in the fourth quarter, and both of these were quarterly records for the company and I think this just reinforces a strong execution by our teams, I already highlighted |
| We do believe, as we work our way through FY 2024, that we'll see those segment margins improve as some of this destocking gets behind us, assuming most of that's over through the first half of our year |
| But on the margin side, the real highlight was that we expanded adjusted operating margins by 120 basis points from the first half to the second half of the year due to our team's execution |
| We do expect adjusted EPS expansion of over 10% in the first quarter and strong margin expansion as well year-over-year |
| We continue to benefit from markets with strong secular growth trends, and this is offsetting weakness in markets that are cycling or being impacted by inventory destocking |
| In our Industrial segment, and I know I mentioned it on the call, we have three markets that have really good growth momentum |
| And I think what you're going to see is our business model that we've shared with you once again demonstrated this year, we continue to expect four to six points of outgrowth versus the market due to the content we're going to get, and that's going to be driven by our leading position in EV, also ongoing electronification trends in the vehicle that will benefit from |
| Transportation orders grew both year-over-year and sequentially, reflecting ongoing stable global auto production |
| We do expect to make progress on further margin expansion and EPS expansion this year |
| Transportation made good strides this past year, and we feel good about the momentum there |
| Statement |
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| In our Commercial Transportation business, we did experience a 7% sales decline, which was in line with what we expected and was driven by market weakness in both North America as well as China |
| However, we are still well below our target operating margins at the company and at the segment level |
| Finally, in the Industrial Equipment business, our sales were down 21% organically driven by the continued inventory digestion in the distribution channel, a trend that is similar to what you're hearing from other companies |
| Adjusted operating margins were 15.9% in the quarter, reflecting the impact of expected volume declines in the Industrial Equipment business |
| China was very weak and really Western World offset that |
| Stronger dollar negatively impacted sales by approximately $430 million versus prior year |
| And China was very weak in 2023, especially around construction equipment |
| But certainly, you see warehousing certainly around consumer electronics remains weak in Asia |
| We do expect in the early half of this year, we do expect Europe and North America to slow, and we've seen that |
| And we highlighted for you last quarter, we were seeing some inventory destocking around channel partners |
| I would say that was a little bit worse and we think that's going to be with us for a little bit |
| And just candidly, we were not pleased with our margin performance in the first half of the year, and there was a lot of work involved to get those up as we exited |
| However, the growth in these two segments was offset by roughly $1 billion of headwinds from the cyclical weakness in the Communications segment that we've discussed, combined with the impacts from the stronger dollar |
| First one being, and Heath talked about it, the dollar strengthening is going to be a headwind into next year |
| We have a big headwind this year, probably going to be about $250 million next year |
| Transportation segment organic growth of 5% was offset by declines in Communications due to the ongoing market weakness that we've been discussing |
| I think you mentioned in your remarks, you're expecting $250 million headwind for revenues for fiscal 2024 from FX movements |
| Industrial order patterns reflect some seasonality across this segment as well as ongoing destocking in the Industrial Equipment end markets And I ask you to keep in mind that 50% of our Industrial Equipment business does go through the distribution channel, and we expect that destocking here to continue for the next couple of quarters |
| So, we're still trending below that and we know there are some things that we still need to do |
| Adjusted EPS was $6.74 and included a $0.45 headwind from currency exchange rates |
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