TE Connectivity plc 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements as a result of many factors, including but not limited to those under the heading “Forward-Looking Information” and “Part II. Item 1A. Risk Factors.” Our Condensed Consolidated Financial Statements have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The following discussion includes organic net sales growth (decline) which is a non-GAAP financial measure. See “Non-GAAP Financial Measure” for additional information regarding this measure. Ov erview TE Connectivity plc (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) is a global industrial technology leader creating a safer, sustainable, productive, and connected future. Our broad range of connectivity and sensor solutions enable the distribution of power, signal, and data to advance next-generation transportation, renewable energy, automated factories, data centers, medical technology, and more. Change in Place of Incorporation During the first quarter of fiscal 2025, our jurisdiction of incorporation changed from Switzerland to Ireland. We do not anticipate any material changes in our operations or financial results as a result of the change in place of incorporation. See additional information in Note 1 to the Condensed Consolidated Financial Statements. New Segment Structure Effective for fiscal 2025, we reorganized our management and segments to align the organization around our fiscal 2025 strategy. We now operate through two reportable segments: Transportation Solutions and Industrial Solutions. Prior period segment results have been recast to conform to the new segment structure. See additional information in Note 1 to the Condensed Consolidated Financial Statements. Summary of Performance ● Our net sales in the first quarter of fiscal 2025 were consistent with sales levels in the first quarter of fiscal 2024 as sales growth in the Industrial Solutions segment was offset by sales declines in the Transportation Solutions segment. Also, on an organic basis, our net sales were flat in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024. ● Our net sales by segment were as follows: ● Transportation Solutions —Our net sales decreased 6.3% in the first quarter of fiscal 2025 as a result of sales declines in all end markets. ● Industrial Solutions —Our net sales increased 10.8% in the first quarter of fiscal 2025 primarily as a result of sales growth in the digital data networks and the aerospace, defense, and marine end markets, partially offset by sales declines in the medical end market. ● Net cash provided by operating activities was $878 million in the first quarter of fiscal 2025. 20 Table of Contents Outlook In the second quarter of fiscal 2025, we expect our net sales to be approximately $3.95 billion, as compared to $3.97 billion in the second quarter of fiscal 2024. Sales declines in the Transportation Solutions segment are expected to be largely offset by sales growth in the Industrial Solutions segment. In the second quarter of fiscal 2025, we expect diluted loss per share from continuing operations to be approximately $0.05 per share, which includes an approximate $1.87 per share impact associated with the tax matter discussed below. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $112 million and $0.01 per share, respectively, in the second quarter of fiscal 2025 as compared to the same period of fiscal 2024. Also, this outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels. In January 2025, the Organisation for Economic Co-operation and Development released new guidance for the 15% global minimum corporate tax. We are reviewing the new guidance and related interpretations and, while our assessment is not complete, it is probable that we will need to reduce certain net deferred tax assets associated with a ten-year tax credit obtained by a Swiss subsidiary by approximately $600 million during the second quarter of fiscal 2025. See Note 17 to the Condensed Consolidated Financial Statements for additional information regarding the new guidance. Acquisitions During the first quarter of fiscal 2025, we acquired two businesses for a combined cash purchase price of $325 million, net of cash acquired. The acquired businesses have been reported as part of our Industrial Solutions segment from the date of acquisition. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions. Results of Operations Net Sales The following table presents our net sales and the percentage of total net sales by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ 2024 2023 ​ ($ in millions) Transportation Solutions ​ $ 2,243 ​ 58 % ​ $ 2,393 ​ 62 % ​ Industrial Solutions ​ 1,593 42 ​ ​ 1,438 38 ​ ​ Total ​ $ 3,836 100 % ​ $ 3,831 100 % ​ The following table provides an analysis of the change in our net sales by segment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales for the Quarter Ended December 27, 2024 ​ ​ versus Net Sales for the Quarter Ended December 29, 2023 ​ ​ Net Sales ​ Organic Net Sales ​ ​ ​ ​ Acquisitions ​ ​ Growth (Decline) ​ Growth (Decline) ​ Translation ​ (Divestiture) ​ ($ in millions) Transportation Solutions $ (150) (6.3) % $ (126) (5.2) % $ (12) ​ $ (12) ​ Industrial Solutions 155 10.8 ​ 123 8.6 ​ (6) ​ 38 ​ Total $ 5 0.1 % $ (3) — % $ (18) ​ $ 26 ​ Net sales were flat in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 as the net positive impact of 0.6% from acquisitions and a divestiture was largely offset by the negative impact of foreign currency translation of 0.5% due to the weakening of certain foreign currencies. Price erosion adversely affected organic net sales by $12 million in the first quarter of fiscal 2025. See further discussion of net sales below under “Segment Results.” 21 Table of Contents Net Sales by Geographic Region. Our business operates in three geographic regions—Europe/Middle East/Africa (“EMEA”), Asia–Pacific, and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate those currencies into U.S. dollars at the end of each fiscal period. Approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in the first quarter of fiscal 2025. The following table presents our net sales and the percentage of total net sales by geographic region (1) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ 2024 2023 ​ ​ ($ in millions) ​ EMEA ​ $ 1,229 ​ 32 % ​ $ 1,411 ​ 37 % ​ Asia–Pacific ​ ​ 1,603 42 ​ ​ ​ 1,379 36 ​ ​ Americas ​ 1,004 26 ​ ​ 1,041 27 ​ ​ Total ​ $ 3,836 100 % ​ $ 3,831 100 % ​ (1) Net sales to external customers are attributed to individual countries based on the legal entity that records the sale. The following table provides an analysis of the change in our net sales by geographic region: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales for the Quarter Ended December 27, 2024 ​ ​ ​ versus Net Sales for the Quarter Ended December 29, 2023 ​ ​ ​ Net Sales ​ Organic Net Sales ​ ​ ​ ​ Acquisitions ​ ​ Growth (Decline) Growth (Decline) Translation (Divestiture) ​ ​ ($ in millions) EMEA ​ $ (182) (12.9) % $ (189) (13.4) % $ (4) ​ $ 11 ​ Asia–Pacific ​ ​ 224 ​ 16.2 ​ ​ 216 ​ 15.7 ​ ​ (1) ​ ​ 9 ​ Americas ​ (37) (3.6) ​ (30) (2.9) ​ (13) ​ 6 ​ Total ​ $ 5 0.1 % $ (3) — % $ (18) ​ $ 26 ​ Cost of Sales and Gross Margin The following table presents cost of sales and gross margin information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ ($ in millions) ​ Cost of sales ​ $ 2,476 ​ ​ $ 2,507 ​ ​ $ (31) ​ As a percentage of net sales ​ 64.5 % ​ 65.4 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin ​ $ 1,360 ​ ​ $ 1,324 ​ ​ $ 36 ​ As a percentage of net sales ​ 35.5 % ​ 34.6 % ​ ​ Gross margin increased $36 million in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 due primarily to higher volume partially offset by price erosion. 22 Table of Contents We use a wide variety of raw materials in the manufacture of our products. Cost of sales and gross margin are subject to variability in raw material prices, which continue to fluctuate for many of the raw materials we use. The following table presents the average prices incurred related to copper, gold, silver, and palladium: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ ​ December 27, ​ December 29, ​ ​ Measure 2024 2023 Copper Lb. ​ $ 4.09 ​ $ 3.87 Gold Troy oz. ​ 2,305 ​ 1,943 Silver ​ Troy oz. ​ ​ 27.75 ​ ​ 23.15 ​ Palladium Troy oz. ​ 1,144 ​ 1,500 We expect to purchase approximately 185 million pounds of copper, 95,000 troy ounces of gold, 2.0 million troy ounces of silver, and 9,000 troy ounces of palladium in fiscal 2025. Operating Expenses The following table presents operating expense information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ ($ in millions) ​ Selling, general, and administrative expenses ​ $ 427 ​ ​ $ 424 ​ ​ $ 3 ​ As a percentage of net sales ​ 11.1 % ​ 11.1 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Restructuring and other charges, net ​ $ 50 ​ ​ $ 21 ​ ​ $ 29 ​ Restructuring and Other Charges, Net. We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed costs, and eliminate excess capacity. These initiatives are designed to help us maintain our competitiveness in the industry, improve our operating leverage, and position us for future growth. During fiscal 2025, we initiated a restructuring program associated with footprint consolidation and cost structure improvements in both of our segments. We incurred net restructuring charges of $43 million during the first quarter of fiscal 2025. Annualized cost savings related to the fiscal 2025 actions commenced during the first quarter of fiscal 2025 are expected to be approximately $35 million and are expected to be fully realized by the end of fiscal 2026. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal 2025, we expect total restructuring charges to be approximately $100 million and total cash spend, which will be funded with cash from operations, to be approximately $200 million. During the first quarter of fiscal 2025, we incurred costs of $10 million related to our change in place of incorporation from Switzerland to Ireland. See Note 1 to the Condensed Consolidated Financial Statements for additional information regarding the change. See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding net restructuring and other charges. 23 Table of Contents Operating Income The following table presents operating income and operating margin information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ ($ in millions) ​ Operating income ​ $ 690 ​ ​ $ 698 ​ ​ $ (8) ​ Operating margin ​ 18.0 % ​ 18.2 % ​ ​ Operating income included the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 27, ​ December 29, ​ ​ 2024 2023 ​ ​ (in millions) ​ Acquisition and integration costs ​ $ 5 ​ $ 8 ​ Restructuring and other charges, net ​ 50 ​ 21 ​ Taxes (non-income tax) recorded in selling, general, and administrative expenses ​ ​ — ​ ​ 4 ​ Total ​ $ 55 ​ $ 33 ​ See discussion of operating income below under “Segment Results.” Non-Operating Items The following table presents select non-operating information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ ($ in millions) ​ Income tax expense (benefit) ​ $ 178 ​ ​ $ (1,105) ​ ​ $ 1,283 ​ Effective tax rate ​ 25.2 % ​ (158.1) % ​ ​ Income Taxes. See Notes 12 and 17 to the Condensed Consolidated Financial Statements for discussion of income taxes. ​ Segment Results Transportation Solutions Net Sales. The following table presents the Transportation Solutions segment’s net sales and the percentage of total net sales by industry end market (1) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ 2024 2023 ​ ​ ($ in millions) ​ Automotive ​ $ 1,722 77 % ​ $ 1,796 75 % ​ Commercial transportation ​ 312 14 ​ ​ 356 15 ​ ​ Sensors ​ 209 9 ​ ​ 241 10 ​ ​ Total ​ $ 2,243 100 % ​ $ 2,393 100 % ​ (1) Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary. 24 Table of Contents The following table provides an analysis of the change in the Transportation Solutions segment’s net sales by industry end market: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales for the Quarter Ended December 27, 2024 ​ ​ ​ versus Net Sales for the Quarter Ended December 29, 2023 ​ ​ Net Sales Organic Net Sales ​ ​ ​ ​ ​ ​ Decline ​ Decline ​ Translation ​ Divestiture ​ ​ ($ in millions) Automotive ​ $ (74) ​ (4.1) % $ (55) ​ (3.0) % $ (7) $ (12) ​ Commercial transportation ​ (44) (12.4) ​ (41) (11.6) ​ (3) ​ — ​ Sensors ​ (32) (13.3) ​ (30) (12.6) ​ (2) ​ — ​ Total ​ $ (150) (6.3) % $ (126) (5.2) % $ (12) ​ $ (12) ​ Net sales in the Transportation Solutions segment decreased $150 million, or 6.3%, in the first quarter of fiscal 2025 from the first quarter of fiscal 2024 due primarily to organic net sales declines of 5.2%. Our organic net sales by industry end market were as follows: ● Automotive— Our organic net sales decreased 3.0% in the first quarter of fiscal 2025 as a result of declines of 17.2% in the EMEA region and 8.0% in the Americas region, partially offset by growth of 9.2% in the Asia–Pacific region. In the EMEA and Americas regions, our organic net sales were impacted by declines in vehicle production and a shift in platform mix consistent with consumer demand . Our organic net sales growth in the Asia–Pacific region was due to increased content per vehicle as well as vehicle production growth. ● Commercial transportation— Our organic net sales decreased 11.6% in the first quarter of fiscal 2025 due primarily to declines in the EMEA and Americas regions. ● Sensors— Our organic net sales decreased 12.6% in the first quarter of fiscal 2025 as a result of market weakness in both industrial and transportation applications . Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ ​ ​ December 27, ​ December 29, ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ ($ in millions) ​ Operating income ​ $ 446 ​ $ 487 ​ $ (41) ​ Operating margin ​ 19.9 % 20.4 % ​ ​ Operating income in the Transportation Solutions segment decreased $41 million in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024. Excluding the items below, operating income decreased in the first quarter of fiscal 2025 primarily as a result of lower volume and price erosion, partially offset by improved manufacturing productivity. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 27, ​ December 29, ​ ​ 2024 2023 ​ ​ (in millions) ​ Restructuring and other charges, net ​ $ 32 ​ $ 14 ​ Taxes (non-income tax) recorded in selling, general, and administrative expenses ​ ​ — ​ ​ 3 ​ Total ​ $ 32 ​ $ 17 ​ 25 Table of Contents Industrial Solutions Net Sales. The following table presents the Industrial Solutions segment’s net sales and the percentage of total net sales by industry end market (1) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ December 27, ​ ​ December 29, ​ ​ ​ 2024 2023 ​ ​ ($ in millions) ​ Automation and connected living ​ $ 479 30 % ​ $ 464 33 % ​ Aerospace, defense, and marine ​ ​ 334 ​ 21 ​ ​ ​ 290 ​ 20 ​ ​ Digital data networks ​ ​ 413 ​ 26 ​ ​ ​ 279 ​ 19 ​ ​ Energy ​ 216 14 ​ ​ 205 14 ​ ​ Medical ​ ​ 151 9 ​ ​ ​ 200 ​ 14 ​ ​ Total ​ $ 1,593 100 % ​ $ 1,438 100 % ​ (1) Industry end market information is presented consistently with our internal management reporting and may be revised periodically as management deems necessary. The following table provides an analysis of the change in the Industrial Solutions segment’s net sales by industry end market: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in Net Sales for the Quarter Ended December 27, 2024 ​ ​ ​ versus Net Sales for the Quarter Ended December 29, 2023 ​ ​ ​ Net Sales ​ Organic Net Sales ​ ​ ​ ​ ​ ​ ​ Growth (Decline) Growth (Decline) Translation Acquisitions ​ ​ ($ in millions) Automation and connected living ​ $ 15 3.2 % $ (21) (4.5) % $ (2) ​ $ 38 ​ Aerospace, defense, and marine ​ 44 ​ 15.2 ​ ​ 45 ​ 15.4 ​ ​ (1) ​ ​ — ​ Digital data networks ​ ​ 134 ​ 48.0 ​ ​ 134 ​ 48.0 ​ ​ — ​ ​ — ​ Energy ​ ​ 11 5.4 ​ 14 6.8 ​ (3) ​ — ​ Medical ​ (49) (24.5) ​ (49) (24.5) ​ — ​ — ​ Total ​ $ 155 10.8 % $ 123 8.6 % $ (6) ​ $ 38 ​ In the Industrial Solutions segment, net sales increased $155 million, or 10.8%, in the first quarter of fiscal 2025 as compared to the first quarter of fiscal 2024 due primarily to organic net sales growth of 8.6% and the positive impact of 2.6% from acquisitions. Our organic net sales by industry end market were as follows: ● Automation and connected living— Our organic net sales decreased 4.5% in the first quarter of fiscal 2025 due to continued weakness in factory automation applications, partially offset by strength in the appliances market . ● Aerospace, defense, and marine— Our organic net sales increased 15.4% in the first quarter of fiscal 2025 as a result of growth in all markets. ● Digital data networks —Our organic net sales increased 48.0% in the first quarter of fiscal 2025 primarily as a result of growth in artificial intelligence and cloud applications. ● Energy— Our organic net sales increased 6.8% in the first quarter of fiscal 2025 as a result of growth across all regions and strength in renewable energy applications. ● Medical— Our organic net sales decreased 24.5% in the first quarter of fiscal 2025 due primarily to reduced demand resulting from inventory corrections in the supply chain. 26 Table of Contents Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ ​ ​ ​ Quarters Ended ​ ​ ​ ​ ​ ​ December 27, ​ December 29, ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ ($ in millions) ​ Operating income ​ $ 244 ​ $ 211 ​ $ 33 ​ Operating margin ​ 15.3 % 14.7 % ​ Operating income in the Industrial Solutions segment increased $33 million in the first quarter of fiscal 2025 as compared to the same period of fiscal 2024. Excluding the items below, operating income increased in the first quarter of fiscal 2025 primarily as a result of higher volume. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the ​ ​ ​ Quarters Ended ​ ​ ​ December 27, ​ December 29, ​ ​ 2024 2023 ​ ​ (in millions) ​ Acquisition and integration costs ​ $ 5 ​ $ 8 ​ Restructuring and other charges, net ​ 18 ​ 7 ​ Taxes (non-income tax) recorded in selling, general, and administrative expenses ​ ​ — ​ ​ 1 ​ Total ​ $ 23 ​ $ 16 ​ ​ ​ Liquidity and Capital Resources Our ability to fund our future capital needs will be affected by our ongoing ability to generate cash from operations and may be affected by our access to capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements. We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of €550 million of 0.00% euro-denominated senior notes due in February 2025. We may use excess cash to purchase a portion of our ordinary shares pursuant to our authorized share repurchase program, to acquire product lines, to pay dividends on our ordinary shares, or to reduce our outstanding debt. We may also use excess cash and other funding to make strategic acquisitions. The cost or availability of future funding may be impacted by financial market conditions. We will continue to monitor financial markets and respond as necessary to changing conditions. We believe that we have sufficient financial resources and liquidity which will enable us to meet our ongoing working capital and other cash flow needs. Cash Flows from Operating Activities In the first quarter of fiscal 2025, net cash provided by operating activities increased $159 million to $878 million from $719 million in the first quarter of fiscal 2024. The increase resulted primarily from the impact of changes in working capital levels. The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2025 and 2024 was $49 million and $100 million, respectively. Cash Flows from Investing Activities Capital expenditures were $205 million and $151 million in the first quarters of fiscal 2025 and 2024, respectively. We expect fiscal 2025 capital spending levels to be approximately 5% of net sales. We believe our capital funding levels are adequate to support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and manufacturing capabilities. During the first quarter of fiscal 2025, we acquired two businesses for a combined cash purchase price of $325 million, net of cash acquired. We acquired one business for a cash purchase price of $349 million, net of cash acquired, 27 Table of Contents during the first quarter of fiscal 2024. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions. During the first quarter of fiscal 2024, we received net cash proceeds of $38 million related to the sale of one business. See Note 2 to the Condensed Consolidated Financial Statements for additional information. Cash Flows from Financing Activities and Capitalization Total debt at December 27, 2024 and September 27, 2024 was $4,205 million and $4,203 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt. As of December 27, 2024, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, had $345 million of commercial paper outstanding at a weighted-average interest rate of 4.50%. TEGSA had $255 million of commercial paper outstanding at a weighted-average interest rate of 4.95% at September 27, 2024. TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of April 2029 and aggregate commitments of $1.5 billion. TEGSA had no borrowings under the Credit Facility at December 27, 2024 or September 27, 2024. The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered. The Credit Facility and our other debt agreements contain other customary covenants. None of our covenants are presently considered restrictive to our operations. As of December 27, 2024, we were in compliance with all of our debt covenants and believe that we will continue to be in compliance with our existing covenants for the foreseeable future. In addition to the Credit Facility, TEGSA is the borrower under our senior notes and commercial paper. Payment obligations under TEGSA’s senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Switzerland Ltd., and its parent, TE Connectivity plc. Payments of ordinary/common share dividends to shareholders were $189 million and $183 million in the first quarters of fiscal 2025 and 2024, respectively. During the first quarter of fiscal 2025, our board of directors authorized an increase of $2.5 billion in our share repurchase program. We repurchased approximately two million of our ordinary shares for $310 million and approximately three million of our common shares for $420 million under the share repurchase program during the first quarters of fiscal 2025 and 2024, respectively. At December 27, 2024, we had $2.4 billion of availability remaining under our share repurchase authorization. ​ 28 Table of Contents Summarized Guarantor Financial Information As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Switzerland Ltd., and its parent, TE Connectivity plc. In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries. The following tables present summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity plc, TE Connectivity Switzerland Ltd., and TEGSA on a combined basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 27, ​ September 27, ​ ​ 2024 2024 ​ ​ (in millions) ​ Balance Sheet Data: ​ ​ ​ ​ ​ ​ ​ Total current assets ​ $ 1,320 ​ $ 1,164 ​ Total noncurrent assets (1) ​ 2,678 ​ 2,377 ​ ​ ​ ​ ​ ​ ​ ​ ​ Total current liabilities ​ 1,272 ​ 1,362 ​ Total noncurrent liabilities (2) ​ ​ 7,431 ​ ​ 10,738 ​ (1) Includes $2,596 million and $2,368 million as of December 27, 2024 and September 27, 2024, respectively, of intercompany loans receivable from non-guarantor subsidiaries. (2) Includes $4,144 million and $7,309 million as of December 27, 2024 and September 27, 2024, respectively, of intercompany loans payable to non-guarantor subsidiaries. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 27, ​ September 27, ​ ​ 2024 2024 ​ ​ (in millions) ​ Statement of Operations Data: ​ ​ ​ ​ ​ ​ ​ Income (loss) from continuing operations ​ $ 311 ​ $ (271) ​ Net income (loss) ​ 311 ​ (271) ​ Guarantees In certain instances, we have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from fiscal 2025 through the completion of such transactions. The guarantees would be triggered in the event of nonperformance, and the potential exposure for nonperformance under the guarantees would not have a material effect on our results of operations, financial position, or cash flows. In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows. At December 27, 2024, we had outstanding letters of credit, letters of guarantee, and surety bonds of $185 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business. In addition, as of December 27, 2024, we had $23 million of performance guarantees associated with the divestiture. We contractually agreed to continue to honor letters of credit and performance guarantees related to the business’ projects that existed as of the date of sale; however, based on historical experience, we do not anticipate having to perform on these guarantees. Commitments and Contingencies Legal Proceedings In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, 29 Table of Contents environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows. Trade Compliance Matters We have been investigating our past compliance with relevant U.S. trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the DDTC in its ongoing investigation. We are unable to predict the timing and final outcome of the agency’s investigation. An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties. Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigation into these matters has yet to be completed and the final outcome of such investigation and related fines and penalties may differ from amounts currently reserved. Critical Accounting Policies and Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses. Our accounting policies for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans are based on, among other things, judgments and assumptions made by management. For additional information regarding these policies and the underlying accounting assumptions and estimates used in these policies, refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024. There were no significant changes to this information during the first quarter of fiscal 2025. Non-GAAP Financial Measure Organic Net Sales Growth (Decline) We present organic net sales growth (decline) as we believe it is appropriate for investors to consider this adjusted financial measure in addition to results in accordance with GAAP. Organic net sales growth (decline) represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic net sales growth (decline) is a useful measure of our performance because it excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity. Organic net sales growth (decline) provides useful information about our results and the trends of our business. Management uses this measure to monitor and evaluate performance. Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our overall company. It is also a significant component in our incentive compensation plans. We believe that investors benefit from having access to the same financial measures that management uses in evaluating operations. The tables presented in “Results of Operations” and “Segment Results” provide reconciliations of organic net sales growth (decline) to net sales growth (decline) calculated in accordance with GAAP. Organic net sales growth (decline) is a non-GAAP financial measure and should not be considered a replacement for results in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly-titled measures reported by other companies. The primary limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using organic net sales growth (decline) in combination with net sales growth (decline) to better understand the amounts, character, and impact of any increase or decrease in reported amounts. 30 Table of Contents Forward-Looking Information Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, acquisitions, divestitures, the effects of competition, and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” and “should,” or the negative of these terms or similar expressions. Forward-looking statements involve risks, uncertainties, and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this report except as required by law. The following and other risks, which are described in greater detail in “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024, and in this report, could cause our results to differ materially from those expressed in forward-looking statements: ● conditions in the global or regional economies and global capital markets, and cyclical industry conditions, including recession, inflation, tariffs, and higher interest rates; ● conditions affecting demand for products in the industries we serve, particularly the automotive industry; ● risk of future goodwill impairment; ● pricing pressure and competition, including competitive risks associated with the pace of technological change; ● market acceptance of our new product introductions and product innovations and product life cycles; ● raw material availability, quality, and cost; ● product liability, warranty, and product recall claims and our ability to defend such claims; ● fluctuations in foreign currency exchange rates and impacts of offsetting hedges; ● financial condition and consolidation of customers and vendors; ● reliance on third-party suppliers; ● risks associated with current and future acquisitions and divestitures; ● global risks of business interruptions due to natural disasters or other disasters which have impacted and could continue to negatively impact our results of operations as well as customer behaviors, business, and manufacturing operations as well as our facilities and the facilities of our suppliers, and other aspects of our business; ● global risks of political, economic, and military instability, including the continuing military conflicts in certain parts of the world, and volatile and uncertain economic conditions and the evolving regulatory system in China; ● risks associated with cybersecurity incidents and other disruptions to our information technology infrastructure, including as a result of artificial intelligence; 31 Table of Contents ● risks related to compliance with current and future environmental and other laws and regulations, including those related to climate change; ● risks related to the increasing scrutiny and expectations regarding environmental, social, and governance matters; ● risks associated with compliance with applicable antitrust or competition laws or applicable trade regulations; ● our ability to protect our intellectual property rights; ● risks of litigation, regulatory actions, and compliance issues; ● our ability to operate within the limitations imposed by our debt instruments; ● the possible effects on us of various non-U.S. and U.S. legislative proposals and other initiatives that, if adopted, could materially increase our worldwide corporate effective tax rate, increase global cash taxes, and negatively impact our U.S. government contracts business; ● requirements related to chemical usage, hazardous material content, recycling, and other circular economy initiatives; ● various risks associated with being an Irish corporation; ● the impact of fluctuations in the market price of our shares; and ● the impact of certain provisions of our articles of association on unsolicited takeover proposals. There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.