安費諾 (APH) 2020 Q2 法說會逐字稿

Hello, and welcome to the Second Quarter 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 your 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 second quarter 2020 conference call.

As a reminder, during the call, we may refer to certain non-GAAP financial measures and may make certain forward-looking statements.

So please refer to the relevant disclosures in our press release for further information.

The company closed the second quarter with sales of $1.987 billion and with GAAP and adjusted diluted EPS of $0.85 and $0.81, respectively.

Sales were down 1% in U.S. dollars and were flat in local currencies compared to the second quarter of 2019.

From an organic standpoint, excluding both acquisitions and currency impacts, sales in the second quarter decreased 3%.

Sequentially, sales were up 7% in U.S. dollars and local currencies inorganically.

Breaking down sales into our 2 segments.

The interconnect business, which comprised 96% of our sales, was down 1% in U.S. dollars and was flat in local currencies compared to last year.

Our cable business, which comprised 4% of our sales, was down 1% in U.S. dollars and up 3% in local currencies compared to the second quarter of last year.

Adam will comment further on trends by market in a few minutes.

Operating income was $357 million in the second quarter of 2020.

And operating margins were 18%, which was down 230 basis points compared to the second quarter of 2019.

Similar to last quarter, the year-over-year reduction in operating margin reflected a higher negative conversion rate than our typical 30% downside conversion due to the continued negative impact of the COVID-19 pandemic on production and productivity, particularly due to various government restrictions that have limited our ability to adjust costs in certain geographies.

Compared to the first quarter of 2020, operating margin increased 100 basis points and reflected a strong sequential conversion margin on the higher sales levels.

From a segment standpoint, in the interconnect segment, margins were 20% in the second quarter of 2020, which was down compared to 22.2% in the second quarter of 2019, but up from 19.1% in the first quarter of 2020.

In the cable segment, margins were 9.4%, which was down compared to 9.7% in the second quarter of 2019, but up from 7.6% for the first quarter of 2020.

Given the continued unprecedented challenges created by the COVID-19 pandemic, we are proud of this quarter's performance.

Our team's ongoing ability to minimize the negative margin impact resulting from the crisis is a direct result of the strength and commitment of the company's entrepreneurial management team, which continues to foster a high-performance, action-oriented culture and thereby allows us to capitalize on opportunities and maximize profitability in an uncertain market environment.

Interest expense for the quarter was $30 million, which was unchanged compared to the second quarter of last year.

The company's adjusted effective tax rate was 24.5% for both the second quarter of 2020 and 2019.

The adjusted effective tax rate for the second quarter of 2020 excludes an excess tax benefit of $12 million associated with the stock option exercises during the quarter.

And the adjusted effective tax rate for the second quarter of 2019 excludes the impact of an excess tax benefit associated with stock option exercises during the quarter, partially offset by the tax impact of acquisition-related costs.

The company's GAAP effective tax rate for the second quarter of 2020, include the items -- including the items just mentioned, was 20.7% compared to 21.3% in the second quarter of 2019.

Adjusted net income was 12% of sales in the second quarter of 2020, another confirmation of the strength of the company's financial performance.

On a GAAP basis, diluted EPS declined by 9% in the second quarter to $0.85 compared to $0.93 in the second quarter of 2019.

Adjusted diluted EPS declined 12% to $0.81 in the second quarter of 2020 from $0.92 in the second quarter of 2019.

Orders for the quarter were $1.971 billion, which was down 2% compared to the second quarter of 2019 and resulted in a book-to-bill ratio of just under 1:1.

Despite the unprecedented challenges in the current environment, the company continues to be an excellent generator of cash.

Cash flow from operations was $368 million in the second quarter or 150% of adjusted net income.

And net of capital spending of $67 million, our free cash flow was $301 million or 123% of adjusted net income.

From a working capital standpoint, inventory, accounts receivable and accounts payable were $1.4 billion, $1.7 billion and $928 million, respectively, at the end of June.

And inventory days, days sales outstanding and payable days were 89, 74 and 60 days, respectively.

While DSO and DPO were both within our normal range, DSI was slightly elevated.

Due to the current crisis, we expect inventory days to remain somewhat elevated, but to come back down to more normal levels as business returns to a more typical pattern.

During the second quarter, our cash flow from operations of $368 million, along with proceeds from our recently completed bond offering of $543 million, proceeds from the exercise of stock options of $123 million and cash, cash equivalents and short-term investments on hand of $1.1 billion, net of translation, were used primarily to fund repayments under our various credit facilities of $1.35 billion, fund repayments of senior notes of $400 million, fund net repayments under our commercial paper programs of $135 million, fund payment of contingent acquisition-related obligations of $75 million, fund dividend payments of $74 million, fund net capital expenditures of $67 million and fund new debt financing cost of $5 million.

As communicated in our April earnings release, due to the significant economic uncertainty and volatility in the credit and capital markets created by the COVID-19 pandemic, in March, the company had proactively borrowed $1.25 billion under our revolving credit facility and reduced our reliance on commercial paper markets.

As the credit and capital markets stabilized during the second quarter, we repaid the amounts borrowed under our revolving credit facility with cash on hand as well as the proceeds from the $500 million -- EUR 500 million bond offering completed in May.

As such, as of June 30, 2020, there are no balances outstanding under either our revolving credit facility or our commercial paper programs.

As a result, at June 30, cash and short-term investments were $1.3 billion, the majority of which is held outside of the U.S. And total debt at June 30 was $3.8 billion, with no maturities before the third quarter of 2021.

Net debt at June 30 was $2.5 billion, which decreased from $2.7 billion as of March 31, 2020, and December 31, '19.

Total cash on hand as well as the remaining availability under our credit facilities was $3.8 billion at the end of the quarter, which leaves the company in a very strong liquidity position.

The second quarter of 2020 EBITDA was $444 million, and our pro forma net leverage ratio was 1.3x.

In summary, although this continues to be a challenging environment, we finished the quarter in a position of continued financial strength with a very strong balance sheet and liquidity position.

We believe this financial strength, coupled with the company's broad market and geographic diversity, positions us well for the currently volatile environment, which is characterized by continued uncertainty across global markets.

I will now turn it back over to Adam, who will provide some commentary on current market trends.

Well, thank you very much, Craig, and allow me to extend my welcome to everybody here on the phone today.

And first, I just want to also offer my hope and wishes that, for all of you on the call here, that you, your family, your friends as well as your colleagues have remained safe and healthy over the course of the last quarter.

As Craig mentioned, I'm going to highlight some of our achievements in the second quarter.

I'm also going to discuss the trends and progress across our served markets.

And then finally, I'll make some comments on our outlook for the third quarter.

With respect to the second quarter, as Craig just detailed, our sales reached $1.987 billion, which was a reduction from prior year of just 1% in U.S. dollars, it was actually flat in local currencies and down just 3% organically.

And this was driven by reductions in the automotive, commercial air, mobile networks and military markets, which were essentially offset by growth that we saw in the IT datacom, mobile devices and industrial markets.

The declines that we saw in the quarter were largely related to the weakness in demand, disruptions and government-mandated factory shutdowns that resulted all from the COVID-19 pandemic.

We're, in particular, very pleased to have realized 7% sequential growth from the first quarter, which is substantially higher than our original expectations.

The company booked $1.971 billion in orders, representing a book-to-bill of just under 1:1.

And very importantly, despite the significant disruptions to our operations in the quarter related to the pandemic, operating margins reached 18%, a very strong performance given this environment.

As Craig just mentioned, Amphenol's financial position remains extremely strong, and that is reflected very well in our operating cash flow of $368 million in the quarter.

I just want to say that I'm extremely proud of our team around the world.

And our performance this quarter, once again, is a great reflection of the discipline and agility of Amphenol's entrepreneurial organization who has continued to perform well amidst the unprecedented challenges that have arisen throughout the COVID-19 pandemic.

We're very pleased in the quarter to announce that we, just last week, closed the acquisition of Onanon, Inc.

Onanon is based in California and has annual sales of approximately $20 million.

And the company designs and manufactures a wide array of high-technology connectors and cable assemblies for customers in the industrial market and with a particular focus on medical-related applications.

As we welcome this outstanding new team to Amphenol, I remain very confident that our acquisition program will continue to create great value for the company.

In fact, it is our ability to identify and execute upon acquisitions and successfully bring these new companies into Amphenol that remains a core competitive advantage for the company.

Now turning to our progress across our served markets.

I just want to comment first that the value of the company's balanced and broad end market diversification has become even more evident during the COVID-19 pandemic.

While several of our end markets were negatively impacted by the pandemic in the second quarter, that impact was essentially offset by growth that we achieved in other markets.

Our diversification continues to mitigate the impact of volatility that can be seen in individual end markets and geographies while, at the same time, exposing us to new opportunities as well as important new technology developments wherever they may arise across the electronics industry.

In a dynamic and unpredictable environment like we're experiencing today, this diversification is a truly great asset for the company.

Now first, the military market represented 10% of our sales in the quarter.

Sales were down by 12% compared to prior year as certain of our facilities faced production restrictions from government measures put in place to control the COVID-19 pandemic.

Sequentially, our sales decreased as we had expected by about 20%.

Looking into the third quarter, we expect sales to increase back to our first quarter levels as we look to recover to full production at most of our facilities that work in support of military customers.

Our team, focused on the military market, has worked hard for many years to strengthen Amphenol's broad technology position while increasing our capacity to serve customers across all segments of this important market.

Given the ongoing and continuing favorable military spending environment, the Amphenol team continues to solidify our leadership position by ensuring that we can execute on this increased demand, even amidst the disruptions that we experienced here in the second quarter.

This enables us to continue to support the many next-generation technologies that are required for modern military hardware.

The commercial air market represented 3% of our sales in the quarter.

Second quarter sales declined by 41% from prior year as the commercial aircraft market saw unprecedented declines in demand for new aircraft due to the disruptions to the global travel industry related to the COVID-19 pandemic.

Sequentially, our sales decreased also by 41% from the first quarter.

As we look ahead, we expect the commercial air market to continue to be negatively impacted by the significant reduction in demand for air travel that we are seeing across the world.

Accordingly, we expect a further approximately 20% sequential reduction in our sales in this market in the third quarter.

Regardless of the difficult environment in the commercial air market, our team remains committed to leveraging the company's strong technology position across a wide array of aircraft platforms and next-generation systems that are integrated into those aircraft.

And we remain well positioned when this market ultimately returns to growth.

In fact, it is in challenging times like this that our steadfast and reactive support for customers can create the most long-term value and thereby position us for long-term success.

The industrial market represented 23% of our sales in the quarter.

And our performance in the second quarter was stronger than we had expected, with sales increasing by 12% in U.S. dollars and 8% organically.

This growth was driven in particular by strength in the medical instrumentation and heavy equipment segments, together with some contributions from our acquisitions that we completed last year.

On a sequential basis, sales increased by a very strong 17% from the first quarter.

I'd like to emphasize how proud I am of our team, in particular, working in support of medical applications within the industrial market.

That team continues to work tirelessly to ramp up our production of sensors, connectors and interconnect assemblies to meet demand from a broad array of customers, producing equipment that's used in support of medical treatment for COVID-19 patients.

We're just very proud of them.

This month's acquisition of Onanon further strengthens our broad high-technology offering for the medical equipment market.

As we look into the third quarter, we expect a modest decline from these higher levels of sales.

Nevertheless, we remain very pleased with the company's strong position in the worldwide industrial market.

Through both our acquisition program as well as our organic innovations, we've developed a broad range of products across a diversified array of exciting industrial segments.

We're proud of this success and look forward to realizing the benefits from our efforts in the industrial market for many years to come.

The automotive market represented 11% of our sales in the quarter.

Sales declined by a very significant 42% in U.S. dollars and 41% in local currency as stay-at-home orders around the world reduced customer demand for new cars, and at the same time, as government restrictions across many countries resulted in factory shutdowns by automakers and their suppliers.

Sequentially, our automotive sales decreased by 35%.

As we look towards the third quarter, we now expect sales to the automotive market to substantially improve compared to the second quarter as the industry begins to recover and as factories ramp up their production levels.

However, we do not yet expect sales to reach last year's levels as the global automotive industry continues to experience somewhat lower demand in the face of the COVID-19 pandemic.

Regardless of this very challenging time period for the automotive market, we remain confident in Amphenol's long-term position.

We've expanded our range of interconnect, sensor and antenna products, both organically and through acquisitions, to enable a wide array of onboard electronics across a diversified range of vehicles made by auto manufacturers around the world.

This consistent strategy will continue to benefit us as the automotive market recovers.

The mobile devices market represented 14% of our sales in the quarter.

Our sales to mobile device customers increased by 20% from prior year as demand recovered after the 3-week shutdown and subsequent month-long ramp-up of production that we saw in China during the first quarter.

Sequentially, our sales in mobile devices increased by a very strong 47%, which was substantially better than our expectations had been coming into the quarter and which did reflect some catch-up of production after the first quarter shutdowns in China.

Looking to the third quarter, we now expect a modest increase from these elevated second quarter levels.

While 2020 has thus far seen substantial impacts on the mobile devices market from the pandemic, our long-term position in this market remains very robust.

Amphenol's leading array of antennas, interconnect products and mechanisms continues to enable a broad range of next-generation mobile devices.

And while there's no doubt that this market will always remain one of our most volatile, our outstanding and agile team is poised as always to capture any opportunities for incremental sales that may arise in 2020 and beyond.

The mobile networks market represented 7% of our sales in the quarter.

Sales in this market decreased by 20% from prior year and 23% organically as we were impacted by reduced demand from wireless OEMs, particularly related to the U.S. government restrictions on certain Chinese entities that we discussed extensively in previous quarters.

On a sequential basis, our sales increased by a stronger-than-expected 9% from the first quarter, driven essentially by higher sales to equipment manufacturers.

For the third quarter, we expect sales in the mobile networks market to moderate from these levels on lower demand from both OEMs and service providers.

Regardless of any near-term challenges in the mobile networks market, we're confident in the company's long-term position in this important and exciting industry.

Our team continues to work aggressively to expand our opportunity with next-generation equipment and networks.

As customers ramp up their investments for these advanced systems, we look forward to benefiting from the increased potential that comes from our unique position with both equipment manufacturers and mobile service providers around the world.

The information technology and data communications market represented 27% of our sales in the quarter.

And sales in the second quarter for this market were much better than expected, rising from prior year by a very strong 37% in U.S. dollars and 32% organically as increased data traffic drove both our OEM and service provider customers to significantly increase their demand across virtually all segments of the IT datacom market.

Sequentially, our sales increased by a very strong 43% from the first quarter.

I just can't tell you enough how proud I am of our team working in the IT datacom market, who, despite facing production restrictions related to the COVID-19 pandemic in certain geographies, was still able to react quickly to satisfy the significant increase in demand from our customers.

As we look towards the third quarter, we now expect a roughly mid-teens sequential decline from the second quarter's very high levels.

Our team's continued efforts at developing industry-leading products across a wide array of technologies, including, in particular, high-speed and power products, has positioned us to benefit from the continued demand for increased bandwidth that is likely to persist as individuals, companies, students and governments adjust to interacting remotely.

We remain encouraged by the company's strong technology position in the global IT datacom market.

And especially given this increased demand for bandwidth, our customers around the world are driving their equipment to ever higher levels of performance in order to manage these dramatic increases in demand.

In turn, our team remains singularly focused on enabling this continuing revolution in IT datacom through their ongoing development of a wide range of next-generation products.

The broadband market represented 5% of our sales in the quarter.

Sales increased by 3% in U.S. dollars and 5% organically from prior year, driven by stronger demand for home installation-related equipment from broadband operators.

On a sequential basis, sales increased by 12% from the first quarter.

We expect sales in the third quarter to remain roughly at these levels, as our operator customers continue to upgrade capacity in their networks to support the significant increase in demand for bandwidth driven by online video and other remote school and work tools.

We remain encouraged by the company's continually expanding range of products for the broadband market, together with our strong positions with customers around the world.

And we continue to position ourselves as the most flexible supplier, thereby ensuring that the company can benefit as operators increase their network investments.

Now turning for a moment to our outlook.

The continued and significant economic and public health uncertainties created by the COVID-19 pandemic make it difficult to accurately forecast our performance in the second half of 2020.

Accordingly, we will once again not be providing full year guidance.

However, considering the current demand environment and assuming no new material disruptions from the pandemic as well as constant exchange rates, for the third quarter, we now expect sales in the range of $1.960 billion to $2 billion, and we expect adjusted diluted EPS in the range of $0.84 to $0.86.

This guidance represents a sales decline versus prior year of 5% to 7% in U.S. dollars and a decrease versus prior year adjusted diluted EPS of 9% to 12%.

Now let me just say, I'm extremely pleased by Amphenol's performance here in the second quarter, particularly in light of the many challenges our team has faced related to the COVID-19 pandemic.

I remain very confident in the ability of our outstanding management team to meet these challenges and to navigate these challenges, while capitalizing on the many current and future opportunities to grow our market position and expand our profitability.

The Amphenol team around the world remains committed to fighting hard to secure the company's financial performance, all while dedicating ourselves to protecting the safety and health of all of our employees during this pandemic.

And I would just like to finish by taking this opportunity to thank each and every one of the Amphenolians around the world for their dedication and their outstanding efforts here in the second quarter.

And with that, operator, we'd be very happy to take any questions that there may be.

(Operator Instructions) Our first question is from Amit Daryanani from Evercore.

I guess I have a question and a follow-up.

First one here, if I think about the implied operating margins you guys are guiding for September quarter, it's around 19%, slightly less than that, I think, on about $2 billion of sales.

I'd love to understand because if I go back to the first half of '19 when revenues were in this $1.95 billion to $2 billion range, you guys were doing well over 20% operating margins.

What's this 100 basis points delta attributed to?

Is this just a cost of COVID as we go forward and more structural?

Or do you think it's more transient as you go forward?

Sure.

Thanks, Amit.

Yes, I know.

First, I think we're really happy with the operating margins we certainly had in the second quarter reaching 18% with the significant cost that we had due to the COVID-19 pandemic, the government mandates and the restrictions that impacted certainly our production and productivity.

As we look into the third quarter, we still expect to have some of those costs impacting us, I mean, certainly, to a lesser extent.

We had some improvements.

We saw some improvements as we came through the second quarter, but we still have some of those headwinds as we're moving into the third quarter, just to a lesser degree.

But -- and you could see that by the sequential, from second quarter to third quarter, improvement that we're kind of implying.

I think your math is not so far off in terms of our implied margins as we look into the third quarter.

If you look -- to your question in terms of the impact from the first quarter of '19 or even if you look at the fourth quarter of '19, there's a couple of things that are impacting our margins in the third quarter.

One would be certainly the COVID costs that we're still going to be incurring in the third quarter, albeit to a lesser degree.

And then the other thing, if you're comparing to earlier in 2019, we still do have a little bit of headwind on margin related to certainly some of the acquisitions we did.

We did 9 acquisitions in 2019, all of which were -- or many of which were below our average margin, and that we're still continuing the journey to bringing up to the company average.

As you can imagine, as we're going through a pandemic and all the things that they have to deal with to ensure that their businesses are maximizing their profitability and given the -- in many cases, the revenue reductions, some of these actions aren't necessarily easy to implement in the current time.

But we certainly have full expectations in the longer term that we still should be able to get them back up to the company average.

So that really would be the bridge if you kind of were comparing earlier 2019 quarters to essentially the third quarter of 2020.

But I have to say still, I'm extremely proud of the team, achieving 18% in the second quarter and then taking the actions that are needed to really sequentially get up to these higher levels that we do expect in the third quarter.

We're really happy with those results.

(Operator Instructions) We'll proceed to Mark Delaney from Goldman Sachs.

Congratulations on the good results.

I was hoping to better understand what the company has seen in the mobile devices end markets and to what extent are there opportunities for the company to participate in more sophisticated designs, especially around 5G, in the second half of this year.

In some of the past years, when the company's had good participation on new program launches, you've seen a pretty big sequential increase in the third quarter.

I realize there's a base effect of where you're coming in off of the 2Q levels.

But just trying to understand to what extent you're able to participate in some of those opportunities in 3Q.

Is there anything around just timing and maybe it's more 4Q this year?

Or what's the opportunity set that's maybe playing into the guidance there?

Well, thanks very much, Mark.

Look, I talked already in my prepared remarks about the fact that in the second quarter, there was some degree of catch-up from the first quarter.

And I just want to credit our team for what a fabulous job they did in recovering from the shutdown.

As you know well, our mobile devices business, virtually all of that is manufactured in China.

And so when that was really having that comprehensive shutdown in the first quarter, that had a disproportionate impact on our mobile devices team and also on the manufacturing of our customers, in fact, at the same time.

So our team did a fabulous job of recovering, getting all the workforce back in place by really the beginning of March and then was able to really catch up with that demand here in the second quarter.

And normally, we would not see a 47% increase in the second quarter, in fact, the second quarter -- sequentially, the second quarter tends to be a little bit more of a lull in the mobile device market, as you know, having followed the company for quite some time.

So I think if you take that out, that sort of anomaly here in the first half, we still have, in the second half, great participation in many new programs.

And whether those are 5G-related or otherwise, just the devices continue to get more complex, our team continues to do a great job in helping to enable those devices for a wide array of customers and ultimately puts us in a very strong position.

I would say with the pandemic that there does appear to be a little bit of slippage in some programs that maybe would have normally launched a little bit earlier.

That maybe combined with that disproportionate second quarter that we saw, I think if you factor all that out, you probably get to a little bit more normal looking sequential outlook for mobile devices.

But we continue to have a very strong position.

We're excited about these next-generation programs that are coming, the new functionalities that are being put into the phones.

And while we're never going to win everything, every new program is kind of a new jump ball for us, our team has just done a fabulous job of supporting customers in good times and bad.

And where normally, we have come to bat for our customers when they have a new launch and when others maybe can't support as well the ramp-ups, here we came to bat for our customers during a pandemic when everything was very chaotic in the first half.

And our team just kept their heads down, kept focused, made sure that we had the right resources in place, the right capabilities to meet what our customers needed.

And I think that puts us in a strong position to the extent that there are opportunities for incremental volumes or incremental programs.

In the near and the long term, I think we'll be well positioned to take advantage of those.

Our next question comes from Craig Hettenbach from Morgan Stanley.

Adam, I guess, good to see kind of a thaw in the M&A environment after the first half of the year.

So just curious to get your take on that small tuck-in and just how you see things set up in terms of opportunity set and ability to execute on M&A as those opportunities arise.

Yes.

Well, thanks so much, Craig.

I mean, we're really excited.

It's not a big company, Onanon, but it's a great company.

And I think it is a wonderful reflection of our approach to acquisitions.

We have taken for a long, long time that very patient approach of incubating relationships with a wide array of companies around the industry and around the world, developing relationships, developing real mutual trust between us and the owners of these entrepreneurial companies, such that when it is appropriate and when they have to sort of cross the kind of canyon, if you will, of deciding that they want to sell their company, we don't have to build that trust from scratch, we've already established those wonderful relationships.

Because the fact is in a pandemic when we're all socially distancing, creating new relationships from scratch is harder.

It's much harder to do.

And so this was not in the case of Onanon a book that showed up from a banker, and we said, "Well, who are these people?

Well, you can't meet them." None of that happened.

We had long-standing interactions with the entrepreneurs who founded this company and who, by the way, stay on as now the general manager of that company going forward.

And so we're very excited about that.

The second thing is this is a company that has just a really unique technology proposition, unique products that go into exciting areas of the industrial market, in particular into medical technology.

And we -- I talked earlier about the strength of our medical business in the quarter, it's not that we saw that strength and thereby said, "Oh, let's go buy Onanon, because it's a medical company." That's more coincidental.

But I think the fact is is they are a company that is present in next-generation electronics used in a wide array of applications that are exciting and that are important.

And we're very proud to bring them into the Amphenol family.

The overall M&A environment in a pandemic, it's different, as you can imagine.

You're going to be more careful.

You're going to make sure you know the people.

You're going to make sure that the business has resilience to it in a time like this.

But all that being said, we continue to have a strong pipeline.

And Craig mentioned before, we acquired 9 companies last year.

I don't know that we're going to do that this year with the pandemic so far in the first half.

But we're very pleased that we were able to make this one and bring them into the Amphenol family, and we're very hopeful that there will be more to come in the future.

Our next question comes from Matt Sheerin from Stifel.

A question, Adam, regarding the industrial sector.

You had very strong results there.

You talked about some of the end markets, particularly medical.

Did you see any signs of maybe some pull-in inventory building at customers?

We're hearing that from some semiconductor company and other component companies.

So I'm wondering if you're seeing any of that.

And then within the medical markets, are you beginning yet to see a shift from COVID-related demand and products versus elective surgeries?

Thanks so much, Matt.

Great question.

Look, I don't know that I would call the demand a pull-in.

But I would call the demand that we saw for COVID-related medical equipment, in particular things like ventilator, respiratory therapy devices, patient monitoring for new hospital construction, things like that, that was very, very significant demand.

There's no doubt about it.

Is that a pull-in?

I mean it didn't exist before, this demand.

So it was all new demand.

The world never built as many ventilators as the world is now building.

And I don't know that pull-in would be necessarily the right term for that, but there was definitely a rush to build.

And from our perspective, what our team just did such a great job of is massively increasing their capacity to support that demand when oftentimes our competitors could not do so.

And I can't tell you the number of calls I've had with customers, letters of gratitude from customers, dozens, if not hundreds, of programs in support of COVID where our team just pulled out all the stops and made it happen.

And we've worked with companies who never built medical equipment before.

We've worked with long-term medical companies.

We've worked directly with governments around the world who are building strategically their medical infrastructure.

And these are all things that were not just sort of a onetime situation, but rather is an ongoing recognition that the world just didn't have enough of a certain type of medical equipment to deal with a respiratory-borne pathogen.

And I'm guessing that that is not a situation that people around the world want to face again.

Now are we seeing a shift from more COVID-focused medical equipment to the more elective surgical?

I mean there's no question that early in the quarter, we did see a little bit softer demand for products that are used in purely elective fashion.

I wouldn't say that that was material.

And obviously, despite that, our medical business within industrial did really, really well.

I mean this is outstanding performance.

Is that balancing a little bit more here coming into the third quarter?

Yes, I guess that would probably be a fair way to put it.

I mean we expect -- as I said earlier, in the third quarter, we expect our sales to be at or a little bit below the levels that they were in the second quarter.

These are very, very high levels of consumption.

And our team continues to work hard to make sure that we can satisfy that demand.

And if there's a little bit of a more broad demand for some of those things that were earlier pushed back, that may be the case.

But look, we're just really proud of what the team has done here in medical.

Our next question comes from Samik Chatterjee from JPMorgan.

I just wanted to see, given the order number that you had, which looks like for the first time in a while it's below the $2 billion number.

If you can give us a bit more kind of visibility into what the cadence was through the quarter, particularly kind of exiting the quarter, what was the cadence like?

And curious if you're seeing any big differences in terms of order activity between the regions given that the different regions seem to be in different places relative to containment of COVID.

Yes.

Thanks so much, Samik.

Look, I think that we came into the quarter, as you will recall, on the heels of very, very significant orders that we had in Q1.

We had the highest book-to-bill in the history of the company and the third highest orders, absolute order volume, in the history of the company.

I think it was $2.150 billion.

And so it's not surprising to me, it was not surprising to us that our orders would more level at or around our sales levels here in the second quarter.

In fact, I would have told you that after such a big order number, it wouldn't have surprised me if the orders were actually a little bit lower than the sales levels.

And that was probably our expectation coming into the quarter that orders would have been a little bit lower.

So I'd say that the fact that we outperformed on sales and met -- nearly met those sales levels with orders is a good reflection of the demand from our customers.

In terms of the cadence throughout the quarter, I wouldn't say that there's anything so notable.

The middle of the quarter is probably a little lighter than the beginning and the end of the quarter.

That's maybe the only thing I would say.

And regional, I don't think there was anything abnormal or anomalous from a regional perspective relative to orders.

Our next question comes from Wamsi Mohan from Bank of America.

Your Q3 guide is clearly above consensus and quite strong.

But when you adjust for the $5 million in M&A and the incremental FX benefit, the guide is also somewhat subseasonal.

Can you talk about what sort of dynamics are causing that?

Did you see -- I know you addressed this on industrial, but more broadly, did you see any pull forward, if so, in any of the end markets and how large that might have been?

Yes.

Thanks so much, Wamsi.

Well, I'll point to a couple of markets to describe this and maybe with a little bit more specificity.

I talked already about mobile devices where I would say that the demand that we saw in the second quarter did reflect some catch-up from the disruptions that we experienced in China in the first quarter.

So that's maybe one piece of the puzzle.

I think the second is, I would talk about IT datacom, and I mentioned that we expect IT datacom, expect that market to be down in the kind of mid-teens quarter-to-quarter, and that is just a reflection of the extraordinary level of demand that we had here in the second quarter.

I mean these are still very, very high levels of IT datacom demand in the third quarter.

Traditionally, you would see IT datacom strengthening into the second half.

And the fact that there was this very significant, and I would say, incremental demand, not pull ahead per se.

Again, this is that nuance of a pull-in, the bandwidth requirements that emerged in the second quarter and even late in the first quarter was not customers around the world saying, "Oh, we had originally planned to put this bandwidth in in the second half, let's put it in the first half." This is a new demand for bandwidth because all of us are on video calls all the time, because all of us are working from home, schools are teaching remotely, governments are working remotely, hospitals are communicating remotely.

I mean just an intense demand for bandwidth that nobody knew was going to exist as of January 22, which was the day before Wuhan was locked down for the pandemic.

And so that's -- I wouldn't call that a pull-in, I would call that incremental demand that was very significant in the second quarter that we uniquely were able to satisfy from our customers and that moderates somewhat in the third quarter, but moderates still to a very high level of demand.

And I think those are probably the biggest areas where -- which impact the sequential guidance into the third quarter.

Without that, otherwise, you would probably be looking at a much more typical and even a little bit of recovery coming into the second quarter because I also talked about the fact that we see a strong recovery in military in the second quarter.

We see a very strong recovery in automotive.

Those 2 markets which were more dramatically impacted.

Where we don't see that recovery is in commercial air.

Luckily, for us, that's a much smaller percent of our sales and has much less impact.

But if you think about the markets that were deeply impacted by the pandemic in the quarter, we see very strong recoveries from both military and from automotive, but not from com air.

So I think you take all that together, kind of put it into the calculator and you end up with a guide that we have, which I think is a very strong guide, but does reflect essentially at similar levels -- roughly similar levels to what we achieved here in the second quarter.

Our next question comes from Nikolay Todorov from Longbow.

Just -- can you guys speak a little bit about your assessment of customer inventories?

And I know we're going back to just questions of pull forward and not so.

But I'm particularly interested in the IT datacom, mobile devices and industrial end markets.

As I look at the mobile devices and combine kind of the guide through the third quarter, essentially implies that your sales are going to be roughly flattish where production is down about 15%.

And I understand part of this is content growth.

But similarly, on the industrial side, if we assume that some of that medical demand is going to subside or at least flatten into the second half, what are you seeing in your nonmedical industrial customers in terms of inventory situation at their docks?

Yes.

Well, thanks so much, Nikolay.

I mean as I've said before, we don't have perfect visibility into our customers' warehouses and to how much inventory they have.

We get a little bit of visibility from our distributors, but distributors represent just a bit over 15% of our sales.

And I would tell you, vis-à-vis our distributors, the inventory levels are very healthy.

There's nothing abnormal about them.

I wouldn't say that they ticked up or ticked down in any meaningful way here in the second quarter.

I mean as it relates to IT datacom, again, I don't know the numbers, but I can tell you, I would be pretty surprised if our customers in IT datacom put anything that we ship to them on the shelf of a warehouse.

I mean this was a dramatic need for product to be put in the field so that people like you and I would not see a spinning circle when we turn Netflix on in the evening.

And if it's sitting in -- if our product is sitting in a warehouse, it's not helping someone get bandwidth.

And so I would be very surprised if any of that stuff ended up building inventory.

Mobile devices is really -- there's very little inventory in the whole channel.

So I don't think that that's one that I would note.

And relative to industrial, I think industrial is the one market for us, especially when you take out medical, where we have a little bit of a higher proportion of distribution.

And so there, I guess, I could be -- have a little bit more visibility than normal, and I would tell you that the inventory levels seemed healthy and reasonable and no abnormal changes as we came into or out of the quarter, at least relative to the distribution side of our industrial business.

Our next question comes from Deepa Raghavan from Wells Fargo Securities.

Are you able to speak specifically to Chinese -- to China's trends versus overall?

And my question is more geared towards gauging how much of the forward momentum in China is predicated on U.S. and Europe recovery supporting that?

And I guess the second part of the question is, are there any verticals -- are there some verticals that are more at risk if these developed nations remain pressured?

I mean just -- it doesn't feel like China has enough there to decouple from Europe or U.S.

Thank you very much, Deepa.

Well, look, it should not surprise anybody that after the first quarter where because of the pandemic, our China operations were shut down for 3 weeks and then ramping up over the course of the following month that there was significant sequential increase in our sales in Asia and in general and specifically in China.

I mean that is normal.

And mobile devices is the best example of that, which is essentially all fulfilled in China, and that grew 47% sequentially.

You talked about, is that momentum tied to the U.S. and Europe or just broadly around the world, all -- most of the mobile devices in the world are made in China, the vast majority.

And so to the extent that people in U.S. or Europe buy more or less phones, that's going to impact demand there.

So I guess in that market, I would say that's the case.

The IT datacom market is another one where there is more -- there's a certain degree of production in China that's shipped around the world.

And so again, I think that would be one where it's not just a Chinese domestic market.

Now I know you've alluded to kind of decoupling and -- which is a little bit of a different topic than just the kind of recovery in the second quarter.

And I'll just say one thing about that.

We read the papers like everybody.

We're very close to all of the geopolitics of the moment.

And I've said before, and I will just say it again here today, the way that we organize our company has always been, we are a global company, but we rely on local management around the world to execute, that is we give authority to our more than 120 general managers around the world to make all the decisions that they need to make to -- in order to adapt to their local markets.

And we don't have expats.

We have local people in every geography.

We have Indians in India, Germans in Germany, French people in France and Chinese people in China, Americans in the U.S. And that approach has always been a very, very successful approach in a globalizing world, but it is equally successful and equally powerful in a world which is decoupling, so to speak, or fragmenting or becoming more nationalistic or whatever -- however you would like to term that.

And our people in every country that they operate are viewed very much as a local supporter of those customers.

Even if behind them, the customers know that they have the strength, the breadth, the financial stability, the resources of a global company.

And that puts us in really a best of both world's position.

And so to the extent that the relations between one country and another start to deteriorate, whatever that is, we at Amphenol remain very agnostic to that.

I mean yes, do I want -- do I think the world personally is better if everybody gets along?

Sure.

That I would be lying if I said the opposite.

But can Amphenol succeed regardless, there's no doubt about it.

That's how we've tuned this company.

That's how we've built the culture of this company.

That's how our organization is equipped.

And I think in the current world, it really creates actually an opportunity for our company long term.

We're not going to shy away from the fact that we're an American headquartered company, that we're traded on the New York Stock Exchange.

But we are always going to make sure that our customers in every geography get from us the superior presence of a local team and all what that entails.

And so I think to the extent that this decoupling happens, it is what it is.

It's well above my pay grade, I can tell you.

But we're going to make sure that our team can manage either way to find great success.

Our next question comes from Steven Fox from Fox Advisors.

I was just wondering, you touched on some of the dynamics going on with IT datacom.

I was wondering if you could do the same thing for the outdoor markets with wireless infrastructure and broadband.

How would you sort of compare and contrast the need for bandwidth there and your content gains going forward for the rest of the year?

Thanks so much, Steve.

Look, I would say that if you compare broadband and mobile networks in kind of the acute situation of the last, let's call it, 4 months, 5, 4.5 or so months where everybody has been working from home, I think the pressure has been more on the core Internet, the pressure has been more on the broadband service providers than it has been necessarily on the mobile service providers.

And I say that because the fact is the real bandwidth constraints have come from people at home, where the vast majority of the people still today at home are not using wireless broadband as a means to deliver high-speed Internet to their house.

Now that can change.

And I think maybe this whole situation is going to be a catalyst for that long term to change because I can tell you, myself, and I won't name my cable operator, they're all wonderful, but it was not always easy over the last 4 months.

When I had 2 or 3 kids in the house, all on Zoom calls, when I was on Zoom Call, my wife was on Zoom call, I mean -- or Teams or Google or whatever, I mean, we're all on video calls and that was not always perfect.

And then my son decides to play a video game and all of a sudden, the whole thing just freezes up.

And so the fact is there is a real rush to help that at-home capacity over the last quarter.

And I think that was reflected more in what we saw with broadband growing 12% quarter-to-quarter as opposed to mobile networks.

Because in mobile networks, what we saw was really a growth from our OEM customers, and we grew 9% sequentially, which was very strong given that.

Some of that a little bit coming out of China where the -- some of the equipment providers in China were, of course, shut down.

But in terms of our work directly with service providers, the strength really came in broadband and in IT datacom in the second quarter.

Now what does that mean long term?

I do believe that long term, the fact of this pandemic coming at the same time as 5G is really beginning to be constructed, is probably a good thing.

It's going to mean ultimately that we're going to have a variety of means to get broadband data to our homes.

And that is not just confined to cable systems, to telco operators, to mobile operators, but there's also satellite Internet being put up in a relatively big way by certain pretty famous operators.

I mean there's a lot going on here to make sure that our -- that homes can have much better bandwidth capacity than they may have had in the past.

And regardless of where it is, you know this well, you've covered us for a long, long time, Steve, I mean, our approach has never been to bet on one of those ways of getting high speed.

It's been -- our approach has always been, let's make sure we're present everywhere.

Let's make sure we're present with the broadband operators.

Let's make sure we're present with the mobile network operators.

Let's make sure we're present with the web service providers.

Let's make sure we're present with satellite-based Internet.

Whatever it may be.

And I think as long as we maintain that high-technology partnership with customers across each of those areas, we're going to be well positioned as the world continues to build the infrastructure for bandwidth to homes, to offices, to governments, to hospitals and everywhere around the world.

Our next question comes from William Stein from SunTrust.

I'm wondering if you can elaborate, Adam, on capacity.

I think you mentioned that this was still somewhat of a constraint in the quarter.

Did I mishear?

I thought that as of the end of last quarter that these issues had been resolved at least internally, maybe it's more a matter of your customers' capacity.

Any sort of clarification would be great.

Well, thanks, Will.

No, I mean, I would tell you that as we came out of last quarter, I mean you'll recall, the first quarter was really a story of China and the very significant kind of on/off of the factories there.

It was without equal.

There was no essential business.

There was nothing.

It was just -- they were shut down for 3 weeks.

And then you had to reopen through a very complex and cumbersome process actually to prove that you were protecting your people, and we did just a great job of that, and thereby, were able to open maybe a little bit faster than some others.

But as the virus spread around the world to the nearly 40 countries in which we operate, there was a whole range of restrictions that ultimately did impact our capacity, our productivity in a whole variety of countries.

And not just the nearly 40 countries, but even here in the U.S., we operate in dozens of states in the U.S. and every state had a slightly different approach.

I remember very well the day that the very first restrictions were taken, and that was not even a state level restriction, it was a county where Contra Costa, and I think it was Alameda counties in California adopted the very first real significant business restrictions to enable better social distancing and to stop the spread of the virus.

And so our teams around the world in our more than 200 facilities, it's hard to find one where we didn't, at one point, face something during the quarter where the team had to somehow navigate a government restriction or actually just us taking measures to protect the people that were important and appropriate measures to protect our people.

And so no doubt about it, in the quarter, there were significant expenses that we incurred.

Craig talked about those.

And there was also impact on our capacity in a variety of ways.

And I talked about that in a few of our markets, but the one in particular that I mentioned was in military, where our sales were down 20%, and that had nothing to do with demand.

That was all to do with navigating the variety of restrictions that were put in place in a variety of countries and our team just did a fabulous job of doing so.

Now as we came out of the quarter, I would say that it's a much better situation.

It's not totally done.

We still have a number or, let's say, several places around the world that are still facing some restrictions.

And who knows to the extent that the later part of the year or the latter part of the year brings a further acceleration of the virus?

Ultimately, we all know that the only way to control this virus is for people to wear masks and to have social distancing.

And that ultimately may require governments to implement, again, restrictive measures that can have an impact on our customers and can have an impact on us.

And that's one of the levels of uncertainty that, to be honest, makes it difficult for us to give a full year guidance.

So who knows what will come?

I cross my fingers and my toes that it doesn't get worse, but I'm realistic enough to know that this is a virus that doesn't just kind of stop magically.

It stops through social distancing.

It stops through mask wearing.

That's what our people are doing.

And to the extent that governments around the world have problems that they face where the virus gets out of control, it won't surprise me, if ultimately, there is an impact on the production of products, on businesses being able to operate.

And we're not necessarily immune to that.

But regardless, there's no doubt about it that in this kind of very unique world, a world where we've never had to deal with governments telling you, you can or cannot open your factories, our team just did an amazing job of navigating those very tricky shoals here in the quarter.

And if something else were to come, I'm sure they'll do the same great job.

Our next question comes from Joseph Spak from RBC Capital Markets.

I wanted to maybe just zoom out a little bit for a second because over the past couple of months, we've seen the market really dive in and pay a lot of attention, increasing attention, I'd say, to alternative powertrains for transportation, be it for the lighter commercial vehicle markets, but also things like hydrogen for industrial uses, particularly with the news out of Europe.

So these are clearly long-term trends, but maybe sometimes market enthusiasm can get out over its skis on the opportunity.

So can you speak to what you're seeing from your customer on these sort of things and whether something like hydrogen is even an opportunity for Amphenol?

Well, look, these are all exciting things.

And I remember years ago, when we were working on the first electric cars that we worked on, everybody said, "Boy, I wonder if there's ever going to be an electric car that people will actually own and drive." And now I look out in our parking lot here because I have a beautiful view of our parking lot out of my office window, and I see a few of these electric cars, more than I ever did before.

So you talk about something like hydrogen or fuel cells, you talk about alternative energy sources of whatever for cars, I think long term, there will be new drivetrains.

I think there will be new technologies.

And I think regardless of what it is, the great thing about these revolutionary new technologies is that they always require a new type of interconnect.

They require a more ruggedized, they require a higher technology solutions.

And so they create opportunities for our company.

They create opportunities for our whole industry.

And I think that's a really good thing.

Now I thought you're going to ask, Joe, that given the pandemic and social distancing, is that going to have an impact on these things?

I think there's a chance.

Look, I'm not the one to tell you which way the auto market is going to go and which way drivetrains are going to go.

But these last 6 months here, and it is really 6 months ago from tomorrow that Wuhan was shut down, these have been really unbelievable, an unbelievable time period of change.

It's causing people to reassess everything.

I compare it at home to it's like someone throws a bag of flour in the air, and you just don't know where the flour is going to land, but it will eventually land somewhere.

And I do believe that people are totally reassessing aspects of their life.

And some of those may ultimately result in driving these trends to accelerate a bit more.

And what do I mean by that?

Well, take public transport.

I'm a huge fan of public transport.

Anybody should be.

But the fact is, once you know that an invisible thing like a virus can be spread through a dense public transport, on the margin, it's going to probably cause people to use public transport a little bit less, and that's not great for the environment.

But at the same time, people are waking up to these kind of existential threats.

Having a pandemic really makes you very quickly get clarity on things that can affect your life, and the environment is clearly one of those things.

And I believe that it will be a missed opportunity for people not to sort of wake up a little bit about the environment.

So you take that combination of maybe people wanting to be a little bit more in the privacy and the sanctity of their own vehicles, together with a little bit of a wake-up call about existential threats to humanity, would make one think a little bit more about a hydrogen fuel cell, for example, or electric vehicle or something like that.

Now I don't want to go totally off the reservation on this discussion, but the fact is, this time period can be a catalyst for change, and a lot of that change can be very exciting change.

And regardless of what it's going to be, our company, I believe, is very well positioned to take part in that, to capitalize upon it and help to enable it.

Our next question comes from Shawn Harrison from Loop Capital.

Adam, I wanted to dig in just on your comments on kind of the wireless networks business, and you said it would weaken both at the OEM as well as the service provider level in the back half.

How much of the weakness is just a tough sequential comparison versus maybe some pauses you're seeing in deployments?

And if you are seeing any pauses, is that just through the end of the calendar year and then '21 looks better for that business?

Any kind of commentary would be appreciated.

Yes.

I mean, look, I guess there's a little bit of each, Shawn.

I would say that if you're a big company who is dealing with massive increases of bandwidth demand and you're facing kind of constrained capital, you may be allocating some of that capital towards that bandwidth as opposed to expansion of a next-generation mobile network.

And I think there's a little bit of that on the margin.

There's been a lot of corporate goings and comings.

I think a lot of those things have been settled now.

But I think it's a little bit of each as we come here into the third quarter.

Look, I think long term, our outlook for this market remains to be a very positive one.

We have a strong position, both with OEMs and operators.

And in particular, a strong position on next-generation systems.

We've had that difficult comparison for a couple of quarters now because of the restrictions that were put in place in China, and that will continue here for really through this year.

But by and large, I would tell you that we still have a very positive outlook for the market long term.

And those couple of dynamics that you described are probably a pretty good way to capture what's happening here in the third quarter.

Next question comes from Jim Suva from Citigroup Investment Research.

Adam, in the past, sometimes there have been times where, like in mobility, there have been like integration of connectors and integration of antennas and integration of sockets.

And then there's times when there's cyclically like expansion of those sockets, whether it be technologies like 4G or 3G or integration of, say, WiFi and all these different things.

As you look forward, say, in the mobility segment, at times where you've mentioned there's been some integration that has kind of been pressured.

I wonder with 5G, can you give us any color about -- does that give you a chance for like more socket wins and more content per item versus in the past?

Or how can we think about that?

Thanks so much, Jim.

Well, look, 5G, and I think I've talked about this in the past, the good news about 5G is 5G is not a replacement to prior modes of devices communicating with networks, it's a supplement.

Because you cannot just have a device which only communicates using 5G.

It would be useless outside of just a couple of areas.

And you have this kind of chicken and egg that you can't -- the network is not useful without the devices, but the devices are also not useful without the network.

And thus, the devices have to be backwards compatible all the way through all of the generations.

You drive from Manhattan to San Francisco and in between there, you're going to go through a lot of areas that may not even have 4G LTE, may not even have 3G.

Maybe it will still be 2G kind of a communication.

And so -- but your phone still have to work.

You still have to be able to call 911 and you still have to be able to look on Google Maps and these kind of things.

And so the fact is, adding a 5G functionality increases the complexity of the device.

Now that's a generality.

Obviously, each device itself, each customer, each program is going to have a different architecture, a different approach to designing that.

And whether that's going to cause more connectors or cable assemblies or less, more antennas or less, more mechanisms or less, you cannot draw just a very perfect generalization about that.

You can say that in its totality, you would expect 5G to add to the complexity and you would expect that, that would create further opportunities.

But you can't assure yourself that on each program, that's going to be the case.

So I think 5G net-net is a great positive, and it's a great positive for us not just in the devices, but it's also a positive because we work in the networks.

And it's also a positive because we work in the core, at the core Internet where we have such a strong position as well.

And so we think 5G has the potential to impact virtually all of the segments of our business.

You talk about Internet in factories and you talk about adopting high-speed data into new medical devices, you talk about how it works even in the military, what the military is going to do when you have 5G functionality, all of these things are creating new applications, new functionalities, which ultimately are going to need new interconnect solutions that Amphenol can provide.

So the long-term prospects, I think, from 5G are very pervasive and very positive.

Ultimately, is a given phone or a given tablet going to have more or less of the things that we sell, it's impossible to say in the short term.

Our next question comes from David Kelley from Jefferies.

A question on automotive.

And Adam, you talked about visibility to substantial sales improvement in Q3.

Do you foresee any supply chain risk to meeting that ramp?

And then realizing that it's unlikely to impact the near term.

But given the magnitude and timing of this rebound, is this an opportunity for Amphenol to take market share from competitors that might still be feeling, let's call it, deeper effects from the Q2 disruption?

Thanks so much, David.

Look, I think from our perspective, I don't see a risk to our team ramping up.

Our team is just so nimble.

They're flexing their capabilities.

We saw that even during the course of the second quarter.

If you think about the trajectory of the auto market, just within the second quarter, I can tell you, April was not the most fun month to be an automotive interconnect supplier, that's for sure.

But by the time we came into June, we were already starting to see some recovery of momentum, and our team is able to flip a switch and really be running to satisfy that demand.

Now your question about market share, I will tell you, and I'm going to broaden this to be beyond automotive, this is an existential crisis for many.

I talked during my prepared remarks and we've talked so many times about the strength of the diversity of Amphenol.

And you couple that with the financial fortitude that Craig has just done such an amazing job of ensuring inside this company and that has created ultimately a resilience to Amphenol that is, I believe, second to none.

There are many in our industry and in other industries, but in our industry, who are more focused.

And those focused companies, to the extent that they're on the wrong side of the market volatility, that can create a more existential threat, and it can create in the eyes of customers a perception of an existential threat.

And that ultimately may, over time, create a kind of a draw to those customers to work with a company that demonstrates resilience in the time of true crisis.

And I think in that respect, Amphenol comes out really passing that test with flying colors.

And so I wouldn't just confine that to automotive, I would say, across all of our markets, our customers have seen in Amphenol, a company that can deal with the crisis like no other, and they want to have that.

There's been so much talked about supply chain resiliency and as opposed to sort of efficiency versus longevity kind of that debate that people have had.

And I think we've always strived to give our customers both, tried to give them a great offering of the best products at competitive prices, but also from a company that's going to be around regardless of what crisis hits us.

And I think that can be a positive long term.

And in particular, in a crisis that was -- where the catalyst for that crisis is a public health emergency, it almost brings more focus to that dynamic than ever before.

And so I think long term, that can create an opportunity for our company across all the markets, including automotive.

And our last question for today comes from Joe Giordano from Cowen.

Just wanted to dig in on the industrial.

We've touched on it a little bit, but can you maybe put a finer point on what the nonmedical piece did or what that would have looked like without the benefit from medical or maybe you want to size the scale -- the size of medical for us in some fashion?

Yes.

Thanks so much, Joe.

I mean, look, we don't break out every detail of all of our industrial market.

It would be -- it would make this phone call to go for hours.

But I will tell you that we had strong performance in a number of our important industrial segments beyond medical.

I mentioned specifically instrumentation, heavy equipment.

We had great performance also in our sort of battery-related applications for heavy vehicles.

And conversely, we had other parts of the industrial market that were more impacted, things like oil and gas, as I referred to before.

But medical was not the only story in industrial.

And I think we would have still had a good performance in industrial even without that medical, especially if you think about it on a sequential basis, growing 17% sequentially in that market.

I mean that could not have come from just one piece of that industrial puzzle, which was medical.

So I think we still have strong positions across industrial.

And what has really been the basis of our industrial market is the diversification within that very, very broad market.

And what ties industrial altogether remains, these are just harsh environment applications where you're taking high-technology interconnect and sensor products, antenna products, and you're putting them into very inhospitable environments, everything from down an oil well to a very clean ICU in a hospital and everything in between.

And we have great performance in many segments of that market.

And the diversity within that market, I think, helps us to have that strong performance.

Thank you speakers.

As of this time, we don't have any further questions on queue.

I'll hand the call over to you for closing remarks.

Well, thank you very much, and thanks to everybody for your attention to Amphenol today.

And just like to take this opportunity to wish you all a good summer.

I hope you get some well-deserved vacation time this summer.

You'll need it to come back fully recharged for the second half, and Craig and I look forward to speaking to you all 90 days from now.

Thanks again.

Thank you.

Thank you for attending today's conference, and have a nice day.