Amphenol Corporation
Q3 2021 Earnings Call Transcript

Published: 27 Oct 2021

[Operator:]

Hello, and welcome to the Third Quarter Earnings Conference Call for Amphenol Corporation. Following today's presentation, there will be a formal question-and-answer session. Until then all lines will remain in a listen-only mode. At the request of the company, today's conference is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to introduce today's conference host, Mr. Craig Lampo. Thank you, sir. You may begin.

[Craig Lampo:]

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 third quarter 2021 conference call. Our third quarter 2021 results were released this morning. I will provide some financial commentary, and then Adam will give an overview of the business as well as current trends, and then we'll take some questions. As a reminder, during the call, we may refer to certain non-GAAP financial measures and may make certain forward-looking statements. Please refer to the relevant disclosures in our press release for further information. In addition, all data discussed during this call will be on a continuing operations basis unless otherwise noted. The company closed the third quarter with record sales of $2.818 billion and GAAP and adjusted diluted EPS of $0.67 and $0.65 respectively. Sales were up 21% in U.S. dollars, 20% in local currencies and 13% organically compared to the third quarter of 2020. Sequentially, sales are up 6% in U.S. dollars in local currencies and organically. Orders for the quarter were $3.016 billion, which was up 33% compared to the third quarter of 2020. And down 3% sequentially resulting in a very strong book-to-bill ratio of 1.07

[Adam Norwitt:]

Well, thank you very much, Craig, and like to extend my welcome to everybody here on the phone today. And I hope that all of you had an enjoyable and healthy summer and are staying dry here if you're in the Northeast today. As Craig mentioned, I'm going to highlight some of our achievements here in the third quarter. I will discuss the trends and our progress across our served markets. And then finally I'll make some comments on our outlook for the fourth quarter and for the full year of 2021. And of course we'll have time at the end for questions. As Craig went over, our results in the third quarter were substantially better than we had expected coming into the quarter. We exceeded the high end of our guidance in sales, as well as an adjusted diluted earnings per share. Our sales grew a very strong 21% in U.S. dollars and 20% in local currencies reaching a new record $2.818 billion. On an organic basis, our sales increased by 13% with broad-based growth across most of our served markets, as well as contributions from the company's acquisition program. Orders in the quarter were robust, again, more than $3 billion, $3.016 billion. And this represented another strong book-to-bill at 1.07

[Operator:]

Thank you. The question-and-answer period will now begin. Our first question is from Amit Daryanani with Evercore. Sir, you may go ahead.

[Amit Daryanani:]

Thanks a lot and good afternoon. Adam, there's been a fair amount of talk, a lot of talk maybe around just supply chain challenges, inventory build and everything else. Yes, love to get your perspective, what are you seeing from that basis across your customer base? Are you starting to see your order the demand start to moderate a bit of customers being less eager to expedite orders or anything you're seeing variation between the channel and OEM demand trends? Just anything you see from that basis would be helpful.

[Adam Norwitt:]

Yes, thanks very much, Amit. I mean, no doubt about it. A lot of chatter, a lot of news, you can't pick up the paper without reading about supply chains. I think for the first 22 years of my so far 23 year career, I don't recall that the front page was plastered with things about the supply chain. And now it seems to be virtually every day that you read something about it. And no question throughout the quarter, there remained just a number of real significant challenges that our team fought through and really fought through. I think when you see the results in particular growing sequentially by 6% in the quarter which was above our expectations, amidst, what I would say we are continued serious supply chain impediments, some of which even worsen throughout the quarter, whether that's availability of logistics and freight, the cost of raw materials, the availability of raw materials, even talking about things like labor shortages, which are there are pockets of that around the world as well. And so no question that those are all dynamics that our team faced and across that entrepreneurial Amphenol organization, our team just made it happen. Now in terms of inventory builds and orders moderating, I mean, we've still had strong orders in the quarter. There's no doubt about it. And even though our book-to-bill was a bit lower 1.07 compared to the second quarter, most of the reasons why our book-to-bill was lower because our sales grew into the level of the bookings. Orders were down by maybe 3% from the second quarter. But sales were up by 6% thus the slightly lower, but still robust book-to-bill. In terms of inventory, I mean, you saw for sure that our inventory was up a little bit and I think many have seen a little bit elevated inventory, which is not surprising given both our growth as a company, very significant growth, but also the very significant supply chain impediments that are out there. To the extent that our customers have more inventory. We don't always have perfect visibility into that. I will say what we do have visibility to, which is in particular in distribution, we haven't seen really abnormal levels of inventory amongst our distributor for our products. In fact, I think what we've seen is continued strong sell-through of the products into customers around the world. And knowing that our distribution business is predominantly industrial and aerospace business, we've seen continued really strong demand in particular across the industrial market. What – in terms of the customers and their willingness to pull product, we talked about last quarter in the automotive market, for example, that we probably could have shipped more if customers wanted it. And I think we continue to see some instances anecdotes where customers, because they don’t have all the components that they need to make their finished product be it a car or a truck or otherwise. They in the end don’t take our product as opposed to necessarily building the inventory of our product. They just tell us not to ship it. So a lot going on, but I think at the end of the day, amidst all these challenges, the performance of the company has shown very brightly.

[Operator:]

And our next question is from Steven Fox from Fox Advisors. You may go ahead.

[Steven Fox:]

Hi, good afternoon. Adam, I was wondering if you could just maybe touch on IT datacom a little bit more. It’s been a very good year for that market for you guys. And after what seems like better expected quarters each quarter, you seem to sort of look for it to slowdown. So I’m just curious, like where are you seeing maybe concerns, where are you seeing more opportunities, whether markets or share trends or new products, et cetera. Thanks.

[Adam Norwitt:]

Yes. Well, thanks so much, Steve. I mean no doubt about it. It’s been a very, very strong year and I would almost say a very strong couple of years for our team work in the IT datacom market. I mean not forgetting that last year, we grew in that market by 15%. And this year, continuing to exceed our expectations with sales in this quarter in particular are growing by 28% and 10% sequentially. So no question about it. And I think when I look into the fourth quarter, we’re coming from very elevated levels of demand. And we’re not guiding to like a catastrophic reduction. We’re talking about a modest sequential decline in the fourth quarter, which I think given the overall environment, given the overall demand from our customers and in particular customers in web service where we’ve seen just really strong growth and whether you call them cloud or web service providers and we’ve seen outstanding growth in that business over the last couple of years. And once in a while, you could have a moderation. There could even be a little bit of seasonality that could come into that. So I don’t think that this fourth quarter guide is at all a turnaround in that business. It would still by the way in the fourth quarter reflect very, very strong year-over-year growth in that IT datacom market. And in the end, I think would be a very, very strong year for that market, for our teamwork in that market.

[Operator:]

And our next question is from Wamsi Mohan with Bank of America. You may go ahead.

[Wamsi Mohan:]

Yes. Thank you. Adam, you guys have done a tremendous job maintaining profitability through so many difficult cycles. As you look at the cycle here, and through 2021, how much would you say your ability to raise prices has offset some of these inflationary pressures? And as you look into 2022, it sounded from some of the comments, especially in cable, that there was room to raise pricing some more to catch up. If you could just characterize sort of 2021, 2022 from ability to sort of recapture some of that, potential inflationary elements and how you think about it into 2022. That’d be great. Thank you.

[Craig Lampo:]

Hey Wamsi, this is Craig. I think that if we think about our profitability, we’re certainly very proud of our achievement in the quarter. And certainly, this year given the significant challenging costs environment. And certainly at that cost environment has been increasingly, I’d say gotten worse over the course of the year. And I think that we have done a good job of neutralizing that worsening environment, given the actions we’ve been able to take during the year. And one of those actions clearly is being able to pass on some of that cost to our customers, to the degree that we can offset it in other ways. And so certainly the management team, I think has done a really good job of that. Different markets are more challenging than other markets and certainly things like distribution is easier to pass on pricing and other markets are a little bit more difficult, our channels are difficult to impress on pricing. But I think overall, we’ve done a pretty good job and most of the markets are passing on some of the pricing. I wouldn’t make the exception and you comment on cable. And certainly that, that market is a different type of market from a competitive environment, as well as the products are a little bit different more – they’re certainly more cost sensitive and certainly more impacted by logistics costs, which we’ve seen a significant increase of. And there’s been quite an quick increase of those types of costs that absolutely have had an impact that we haven’t necessarily been able to offset at this point and the team’s doing certainly a good job of working through that. And we do think over some period of time, they’ll be able to offset those cost pressures, but that’s something that in that market, you can’t really do or in overnight, other markets, like automotive aren’t so easy, but certainly I think the team’s done a good job of starting those conversations and there’s other markets that are easier. So I think that we’ve done a good job. I think that we’ve been able to offset the majority certainly of the sequential increases that we’ve seen during the year of the cost environment. And we’re not guiding into 2022 at this point, but I do believe that the cost environment is not going to get any easier any time soon. So the team certainly has been tasked with and I think they’re doing a good job of continuing those conversations with their customers. And all of the markets, some of which are easier and some of which are harder. And in terms of being able to ultimately pass on those cost increases to our customers and to be able to continue to leverage and increase our margins as we continue to grow.

[Adam Norwitt:]

I would just add Wamsi to that one important principle here, pricing is an art, it’s not just you issue a price increase and off it goes. And the beauty of how we’re organized is that we’re not making those pricing decisions here at headquarters, rather we have 125 general managers around the world, and those general managers are best suited to make the right decision around pricing, because they know the strength of their own position. They know their competitive position. They know their technology position. And they also can go to a customer and say, look, I have tried everything else. And the only remaining thing I can do is raise the price to you. And then it’s a genuine, it’s a reasonable discussion. And it’s one that’s grounded in fact, and basis as opposed to in corporate policy. And I think that’s why we’ve always been maybe a little bit more successful in moderating the impacts of these, because our general managers have every tool available to them. All of the functions, all of the inputs are part of their responsibility. And thus, they’re able to go out and make it happen. And just because the cost of materials is up, or the cost of logistics is up, it does not give absolution to an Amphenol general manager for their performance, not in our company. I mean no matter what the cycle is, we have absolute standards for performance and they have to hit that and they’ll figure it out. And if that means, having those tough discussions with customers, then that’s what they’re going to do.

[Operator:]

And our next question is from Samik Chatterjee from JPMorgan. You may go ahead.

[Joe Cardoso:]

Thank you. This is Joe Cardoso on for Samik. So broader question, I guess, the setup and guidance for 3Q seems there very similar to what we are seeing now for 4Q. However Amphenol was able to outperform the high end of the guide in terms of both revenue and earnings in 3Q. I guess can you help investors understand why they shouldn’t expect a similar level of outperformance this time around, for example, are there headwinds around supply and costs intensifying or were there any materials surprises you would point out in 3Q that are not sustainable into 4Q? Any color around the puts and takes there as would be appreciated. Thank you.

[Adam Norwitt:]

Sure. Thanks very much, Joe. I mean, look, we always give guidance with the information at hand just as we did 90 days ago, we’re doing here today. And so I wouldn’t point to some different dynamic nor would I say that one should expect that we’re going to be by the same amount that we beat last quarter. Our team is always going to strive to maximize our results, amidst, whatever environment we’re in. And as we’ve talked at nauseam, it’s a very dynamic environment and they’re going to continue to push, till the last minute of the last hour of the last day of the year in supporting our customers and executing amidst this environment. And if that ends up that we – that that this guidance is exceeded and that will be what it will be, but right now we’re giving guidance based on what we see in the marketplace.

[Operator:]

And our next question is from William Stein with Truist Securities. You may go ahead.

[William Stein:]

Great. Thank you for taking my question. Adam, I wanted to ask about lead times and expedites. It doesn’t really sound like you’re significantly stretched from a lead time perspective. So maybe you can provide some context, I’m aware in every end market, every company within the Amphenol umbrella has different characteristics and so, an average might not be meaningful, but however you can describe the current lead time situation relative to how might’ve been, let’s say a quarter ago and versus what would be sort of a middle of the cycle sort of dynamic. And then the degree to which expedite requests might have change. There are some companies in the supply chain talking about the level or number of expedited parts falling significantly in the last quarter. I’m wondering if you’re seeing that same dynamic. Thank you.

[Adam Norwitt:]

Thanks so much, Will. I mean relative to our lead times, I mean, it should not be surprising that maybe we have a little bit of extra lead times now than we would have had a year ago. It is a very constrained environment. Sometimes even just getting materials in from overseas, if you need to have to do that, whatever there’s just a lot of sort of sand in the gears of the global supply chain and that can lead to extra lead times. Also I’ve talked about our orders, maybe not even because of our own lead times, but just customers opening up the aperture of their order window a little bit longer and that has led to some of the higher levels of orders that we’ve seen in addition to just overall robust demand. As it relates to expedite requests, I don’t know that I can give you a good read on that more thoroughly or systematically across the company. I mean we continue to have some customers who really need product. I mean to the extent that we are using a material that is really constrained, and there are certain cases of that, I continued to see the odd expedite request here and there. I don’t know that I have a good read on whether it’s less or more the same. I mean I guess I would say it’s kind of the same over the last 90 days. Nothing that I would take note of really.

[Operator:]

And our next question is from Mark Delaney with Goldman Sachs. You may go ahead.

[Mark Delaney:]

Yes. Good afternoon, and thanks very much for taking the question. I was hoping to get an update on what the company has seen in China both from a demand and an operational perspective. There’s been a number of headlines around companies having a more difficult time operating in China things like electricity, shortages, certain materials constraints. And I’m hoping you could elaborate on what Amphenol seeing there. Thank you.

[Adam Norwitt:]

Thanks so much, Mark, and good afternoon to you. I think one thing that I would just point out from this last quarter is actually our growth on a year-over-year basis was very balanced across all the geographies. I mean almost extremely balanced on an organic basis virtually every region grew by that, that 13% organically. And that, that was really nice to see actually a bit surprising given the sort of dynamics, whether they be pandemic related, supply chain related, electricity related or otherwise. And our team in China continues to do a fabulous job of managing through whatever challenges come their way and that did include in the quarter some challenges related to the availability of electricity. But fortunately for us, our approach operationally around the world, and that is the same approach that we have in China is never and not to put all our eggs in one basket. People are sometimes surprised that we have so many facilities around the world, something like 200, 250 facilities, and that includes something like 50 facilities in China that are spread across the country. And so when there are pockets of challenges over the last year and a half, whether that be from COVID-related shutdown, supply chain challenges, or even the electricity issues that you’ve heard about in China, that’s not having a material impact across the company, but rather may create a single challenge for one or another operation. And the local management team just makes it happen. And that’s a – that’s kind of the approach that we take.

[Operator:]

And our next question comes from Nik Todorov with Longbow Research. You may go ahead.

[Nik Todorov:]

Yes. Thanks and congrats on great results. I have a question on auto. Adam, if you look at your auto numbers, it seems like they again outperform relative to peers. And you – I think you’ve talked about seeing upside in the quarter relative to expectations. So why in your view, you continue to see upside in the quarter. Maybe going back to the expedite, do you continue to see expedites in auto? I’m just curious because your lead times are relatively maybe they’d be a little bit extended, but they’re still nothing compared to what symptoms they saw and I’m sure you don’t – you’re not the one that are constraining the auto production. So why do you think you continue to see upside things?

[Adam Norwitt:]

Yes. Thanks. Thanks very much, Nik. Look, this is a long story for us, which is that we’ve been growing our automotive business for more than a decade through a consistent strategy of growing both organically and through acquisitions, into new electronics applications, new applications in the car. Throughout the course of that time, we expanded our product offering from simple connectors and cable assemblies to sensors and antennas, complex center assemblies and the like. And through it all, our strategy has not been to just take share out of incumbents, but rather to participate in the expansion of electronics in the automotive market. And that expansion of electronics has really accelerated throughout that time. As I highlighted in my prepared remarks, one area of expansion for electronics has been across the electrification of vehicles, both electric and hybrid vehicles, where we've leveraged our strong legacy and high voltage capabilities to really be a strong participant in that area. And that's been a great growth driver for us for many quarters. And that included in the quarter that just completed. Have we seen expedites in the automotive market? I would actually say we've seen this quarter and last quarter more of the opposite of expedites. We've seen that customers have pushed out demand because of supply shortages that they're seeing from other types of commodities. You mentioned semiconductors as one example, as opposed to expedites that of customers pulling in. And – but for those other supply chain shortages, I'm sure automotive business would have been even more robust than it was.

[Operator:]

Our next question is from Luke Junk with Baird. You may go ahead.

[Luke Junk:]

Good afternoon, everyone. Adam, I've got another auto question. This one may be a little bigger picture. A lot of the discussion around your business these days is around EVs and rightly so. But what I wanted to ask you about is knock on effects that you're seeing on some other factors, some of the industry have talked about a so-called Tesla halo, i.e., the fact that consumer expectations for tech in the vehicle are just simply much higher in an EV. And I'm wondering as you look across your business and the growth that you're seeing, both right now and over the few years, how does this accelerated proliferation of technology inside the vehicle plates, the company strengths and positioning relative to electrification?

[Adam Norwitt:]

Well, look, it's a great question. And it's a question that I wouldn't even confine to EVs. I mean, you point out the consumer expectations for technology in EVs, but I would just say consumer expectations for technology in vehicles has expanded and has continued to accelerate over many years. I mean, I just look at, my kids, when we get in a car, you've got like a spaghetti of cables that people want to plug in to various parts of the car. And then you now have car companies coming and putting in things like wireless charging and outlets in different places as opposed to. We having one of these massive things that every kid has to plug their thing into a cigarette lighter. Now everybody has their little connectors all over the car and things like that. And whether it'd be navigation systems, communication systems, safety systems, passenger comfort systems we have seen. And I think we are living through a revolution of electronics in vehicles and that's all vehicles because we shouldn't forget like in the global automotive market, I don't know, hybrid and EVs. I'm not perfectly familiar with every one of these numbers, but I think they still represent less than 10%. And that's if you include hybrid of all total vehicle volumes, but I would say all vehicles are adopting more electronics because the car companies have realized not only that their customers want these things, but actually they can make more money on these things. These type of features are things that people will actually pay more for and thereby allow the car companies to make more profit from their products and look, it's great news for anybody working in the automotive electronics market. It's – and for our company where again, our strategy has not been to go take share out of others, but rather to work on the new things that are happening in the car. I think our company comes out of that very well positioned.

[Operator:]

And our next question is from Jim Suva of Citigroup. You may go ahead.

[Jim Suva:]

Thank you. I just have one question and I don't know if it's for Craig or Adam, but either one is fine and that is on your cable products, operating margins, of course, raw materials of copper, aluminum, and all that have gone up. It sounds like you've mentioned you are putting in price increases, which is fair and good to hear, but the operating margins of below 4%, that's pretty what's the right word, unprecedented in a opportunity to see upside from there, as opposed to things about overall concern. So, do you think we're kind of at the lowest level here, or do you think they're going to be at these while – level of suppression for a while, but if you can just kind of talk about the profitability of that segment, because it seems like while a small part of a company overall, it is materially challenged right now, but I think there could be potential there. Thank you.

[Adam Norwitt:]

Yes. Thanks Jim. Yes, there's no doubt that the profitability of the cable segment is at the lowest level it's been in certainly in my memory. And I think, but when we talk about it being unprecedented, I think we're also in an unprecedented environment from a cost perspective. And especially as it relates to things that impact that segment, which are things like logistics and things like certain commodity costs that have always had a more of a significant impact on that segment. We've talked about commodities and cost environment impacting that segment more. And when you're in a more unprecedented environment where the costs have just increased so quickly and so significantly. And then you're in a market where it's not as easy to overnight increase prices, even in an precedent cost environment due to the competitive dynamics and other factors within those – within that market, that it just becomes an unfortunate situation that it does have a more significant impact in the short-term here. There's no doubt that the team is working hard on pricing actions, and we're confident that there will be successful over some period of time. Don't forget this is 4% of the company right now. It's relatively small, but for the businesses that are you involved in dealing with this that's – this is impactful for them as it is for any other operations. So it's not that it's not meaningful, but it certainly has a lower impact on the overall company, but there's no doubt as the new management team is extremely focused on this. We are optimistic that over some not so long-term period of time and this shorter term, we'll be able to get these margins back up. Whether or not it's next quarter or the quarter after, I think time will tell, but we are optimistic that it will. We are on the lower end of the scale in terms of profitability in this market. And it will improve over those coming quarters.

[Operator:]

And our next question is from Chris Snyder with UBS. You may go ahead.

[Chris Snyder:]

Thank you. So I have another one on auto. I mean, the company was up over 20% organic against the backdrop of high teens declines and auto production. So very, very substantial levels of outgrowth. I understand all powertrains are seeing content gains, but this outgrowth inflection we've seen over the last year kind of really lines up with ramping EV production. So I guess the question is, would you guys be able to provide maybe what percentage of auto revenues are coming from high voltage today? So we could try to kind of see how that's lining up against EV units?

[Adam Norwitt:]

Yes. Thanks. Thanks very much, Chris. I mean, look, we give a lot of details across the company. And I think we haven't publicly talked about the specific numbers of what makes up, what different powertrains make up, what different sales of our automotive market. But what we have said very consistently, and I would say it again this quarter is that the growth in our EV business, whether that's an auto or also our industrial electrification business have been significant drivers of our out-performance. So, you can imagine that after a number of quarters of doing so that business represents a lot more today than it did many quarters ago. And it's a meaningful piece of the business. It has a real impact on the business and it continues to have great potential for the future.

[Operator:]

Our next question is from David Kelley with Jefferies. You may go ahead.

[David Kelley:]

Good afternoon, Adam and Craig. Thanks for taking my question. Maybe if we could dig a bit deeper into the industrial strength. You noted growth across a number of your end market exposures there. So how should we think about the end market dynamics in some nation? And again, realizing there's a lot of puts and takes there versus Amphenol is kind of content opportunity and some of your market share gains. And then if I may, how should we think about some of the moderation and to your end, is there a specific end market where you expect to see that?

[Adam Norwitt:]

Yes. Well, thanks very much, David. I mean, you said it the industrial market is for us a very, very diversified range of segments. Now, everything from medical to heavy vehicles, to oil and gas, things like marine, factory automation that the battery and heavy electric vehicles, alternative energy. I mean, even an area like building automation where we've seen a lot of strong growth. I mean, what I think really unique here in the third quarter was virtually every one of those segments grew in the quarter. So, you don't always see that usually there's some sort of counter cyclicality across one or another of those segments, and we thought really strong performance across all of them. And when I think about why the company has really done such an excellent job in industrial, I mean, I'd point to a few factors. Number one is, our strategy for many years has been to build out a range of products that make us more important to customers across the industrial world. And again, remembering that what ties those products together is that they're all harsh environments solutions. So whether they be discreet connectors of value add interconnect assemblies center, antennas, or the like. These are all products that have to be ruggedized. They have to be fit to an environment that maybe as an ultra clean environment in an operating theater, or maybe an ultra dirty environment in an oil and gas drilling setup, or in an alternative energy on an offshore windmill or something like that. So all of these have just really uniquely challenging environments around them and what we see in common across these customers and where a lot of our growth has come from. This is really the second factor is that customers across the industrial market are adopting electronics at an increasing pace. So the same discussion that we add in the auto market, just a few moments ago, we see that really broadly across the industrial market as customers adopt next generation electronic systems and put those systems into tougher and tougher environments. I would also say that the industrial market is a very fragmented market from a competitive perspective. And so while for sure we're taking advantage of new things in this market like we are in automotive. I think there's also the fact that we continue to gain position against competitors who either don't have the breadth of offering, don't have the geographical position to support customers on a global basis. Don't have the diverse and resilient footprint that has been able to support those customers during the pandemic or during all the other disruptions that have come along and thereby customers have come increasingly to us to solve their problems, and we've not disappointed them. And that creates a positive feedback loop. So it's a market that I think we're very excited about. I think our team working in this market is just doing a great job. If you look into the fourth quarter for sure, you can look at that fourth quarter kind of through the prism of saying, well, we're guiding it to be down slightly. But in fact, on a year-over-year basis, it's going to be an outstanding fourth quarter as well. So, I think the team just continues to excel, and we're very excited about the industrial market for many years to come.

[Operator:]

And our next question is from Joe Giordano from Cowen. You may go ahead.

[Joe Giordano:]

Hey, good afternoon guys. Adam, you've articulated your position in overall views of operating in China many times on these calls. But I don't want to give you the chance to do it again, just in light of the ramp ups intentions. And is it more challenging for companies to do business? Like I understand how you guys are positioned there. It clearly works. You have to on the margins, think about things slightly different as to how you deploy capital or how you do incremental – grow incrementally in a region like that. Is how increasing escalation here impacted the way you do things?

[Adam Norwitt:]

Well, look, I mean, we're not blind to the world around us. So there's no doubt about it. I mean, the geopolitical tension that has been present for a number of years has certainly not gone away. And for one would fully advocate that countries like the U.S. and China, the world's two largest economies should for sure get along. There's lots and lots of reasons why we shouldn't. By the way, firstly, I'm very optimistic that long term that is going to be the case. But as it relates to our position in any country, including China, I mean, I would just remind everybody, we have a very unique operating strategy. We rely on local managers in every country that we operate and we operate in more than 40 countries around the world. And in each of those places, we have local general managers who have the authority to run their business as they need to run it in that region to be most successful. And so our general managers in China are able to tailor make how they do business, obviously within the confines of ethics and law and everything that it means to be a global company. But they're able to meet their customers on a level playing field with their local competitors. But in fact, it's not a level playing field, because then they're able to bring the totality of Amphenol capabilities to bear in support of those customers. And that's where the advantages is. We bring the best of both worlds of both being a local partner, but also a global company who has global resources, global breadth and global capabilities. And that's why we've been successful in India. That's why we've been successful in China. That's why we've been successful in France, in Germany and the UK. And of course here in the U.S. It's a very unique operating model that is, that works really, really well in a world where everybody's getting along, but it also works really well in a world where people aren't necessarily getting along. In terms of how we deploy our capital, we're always careful about deploying capital in every country in the world. We're always going to incorporate all the sort of risks and opportunities into our calculus about what we're going to invest in and what we're not going to invest in. And ultimately those investment ideas are all coming up from below, not sort of dictated from above. But for sure, we're going to apply appropriate scrutiny to investments in every place in the world, using sort of the full picture of the environment into which we're investing.

[Operator:]

And our last question comes from Joseph Spak with RBC Capital Markets. You may go ahead.

[Joseph Spak:]

Thanks Adam. I just to follow on one more on China. Are you seeing any impact either direct or indirect from some of the power shortages that that have been going on and how's that impacting the business?

[Adam Norwitt:]

Thanks Joe very much. Look, I think we've seen a lot of challenges and I talked a little bit about this earlier. But – and those challenges have included in China, a few power shortages. But I think like I described, luckily for us, our approach is to not put all our eggs in one manufacturing basket. And so while we've had maybe an odd power shortage in one location or another. It hasn't had a meaningful impact on the company. And our local team is doing a fabulous job of mitigating any impact that there could be of such shortages. It gives everybody something else to think about in a time where there's a lot going on.

[Operator:]

And I would now like to turn the call back to Mr. Norwitt for closing remarks.

[Adam Norwitt:]

Well, thank you so much. And I'd like to just extend my best wishes to everyone here on the phone. Thank you so much for taking the time with us. And we will talk to you after the holiday season. So I will be the first to wish everybody a happy holiday season and a happy and successful end of the year. And we'll talk to you in 2022. Thanks so much.

[Craig Lampo:]

Thank you. Have a great day.

[Operator:]

And this concludes today's conference. Thank you for participating. You may disconnect at this time.