Amphenol Q3 2021 Earnings Call Transcript

Participants

Corporate Executives

• Craig A. Lampo, Senior Vice President and Chief Financial Officer
• R. Adam Norwitt, President and Chief Executive Officer

Analysts

• Amit Daryanani, Evercore ISI
• Steven Fox, Fox Advisors
• Wamsi Mohan, Bank of America Merrill Lynch
• Joseph Cardoso, J.P. Morgan
• William Stein, Truist Securities
• Mark Delaney, The Goldman Sachs Group, Inc.
• Nickolay Todorov, Longbow Research
• Luke Junk, Robert W. Baird
• Jim Suva, Citigroup Investment Research
• Chris Snyder, UBS Group AG
• David Kelley, Jefferies Financial Group Inc.
• Joseph Giordano, Cowen and Company
• Joseph Spak, RBC Capital Markets

Presentation

[Operator]

Hello, and welcome to the Third Quarter Earnings Conference Call for Amphenol Corporation. [Operator Instructions]

I would now like to introduce today's conference host Mr Craig Lampo. Thank you, sir, you may begin.

[Craig A. Lampo, Senior Vice President and Chief Financial Officer at Amphenol]

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 2011 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 will take 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 and continuing operations basis unless otherwise noted.

The company closed the third quarter with record sales of $2,818,000,000 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 were up 6% in U.S. dollars, in local currencies and organically.

Orders for the quarter were $3,016,000,000, 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 to 1. Breaking down sales into our two segments, the Interconnect segment which comprised 96% of sales was up 21% in U.S. dollars, and 20% in local currencies compared to the third quarter of last year. Our Cable segment which comprised 4% of our sales was up 18% in U.S. dollars and 17% in local currencies compared to the third quarter of last year. Adam will comment further on trends by market in a few minutes.

Operating income was $571 million in the third quarter. Operating margin was 20.3%, which decreased by 20 basis points compared to the third quarter of 2020, but increased by 30 basis points sequentially when compared to the second quarter 2021 adjusted operating margin. The year-over-year decline in operating margin was primarily driven by the impact of the more challenging commodity and supply chain environment in 2021, together with the slight margin dilution of recent acquisitions, including MTS which are currently operating at a lower operating margin than the company average. The sequential increase in operating margin compared to the second quarter -- adjusted operating margin was driven by normal conversion on the increased sales levels.

From a segment standpoint, in the Interconnect segment margins were 22.4% in the third quarter of 2021 which was equal to the third quarter of 2020, an increase from 22% in the second quarter of 2021. In the Cable segment margins were 3.8%, which decreased from 10.7% of third quarter of 2021, and 6.1% in the second quarter of 2021. Our margins in the cable segment continue to be particularly impacted by the ongoing and sudden increase in commodity and logistics costs, which have not yet been offset by pricing actions.

Given the dynamic economic environment, we are very proud of the company's performance. Our team's ability to effectively manage many challenges 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. The company's GAAP effective tax rate for the third quarter of -- was 22.2%, which compared to 22.1% in the third quarter of 2020. On an adjusted basis, the effective tax rate was 24.5% in the third quarter of both 2021 and 2020. GAAP diluted EPS was $0.67, an increase of 20% compared to $0.56 in the prior year period. And adjusted diluted EPS was a record $0.65, an increase of 18% compared to $0.55 in the third quarter of 2020. Operating cash flow in the third quarter was $328 million or 81% of adjusted net income. Net of capital spending, our free cash flow was $238 million or 59% of adjusted net income. Cash flow in the quarter was a bit lower than we would typically expect primarily due to the higher-than-typical increase in inventory levels driven by the continued -- challenging supply chain environment.

From a working capital standpoint, inventory days, days sales outstanding and payable days were 91, 70 and 61 days, respectively. While days sales and payable days were both within our normal range inventory days at the quarter end were elevated for the reasons just mentioned, as well as the impact of recent acquisitions which have inventory days that are currently significantly above the company average.

As mentioned in today's earnings release, the company's Board of Directors has approved a 38% increase in the company's quarterly dividend to $0.20 from $0.145 per share, effective for payments beginning in January of 2022. During the quarter, the Company repurchased 2.3 million shares of companies -- of common stock for approximately $171 million at an average price of approximately $73. And at the end of the quarter, total debt was $5.2 billion and net debt was $3.9 billion. Total liquidity at the end of the quarter was $2.9 billion, which included cash and short-term investments on hand of $1.3 billion plus availability under our existing credit facilities.

Third quarter 2021 GAAP EBITDA was $686 million and our net leverage ratio was 1.6 times. As previously discussed, due to the pending sale of the MTS Test & Simulation business, that business is being reported as a discontinued operation and therefore it's expected results are excluded from our Q4 guidance. In addition, the company will incur certain additional cash, tax and other acquisition-related cost upon the divestiture of the Test & Simulation business, which is not included in income from continuing operations.

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

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Well, thank you very much, Craig, and I'd 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 in 20% in local currencies, reaching a new record $2,818,000,000. 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, $3,016,000,000, and this represented another strong book-to-bill of 1.07 to 1.

Now despite the many operational challenges that we have continued to face throughout the quarter, including continued cost increases related to commodities, supply chain and other logistics pressures, we were very pleased to deliver robust operating margins of 20.3% in the quarter and as Craig detailed, that was a 30 basis point sequential improvement. Our EPS, adjusted diluted EPS grew strongly from prior year, increasing by 18% to a new record $0.65, and that's just an excellent reflection, once again, of our organization's continued strong execution.

The company generated operating and free cash flow of $328 million and $238 million in the third quarter and we're very pleased that the Board of Directors just approved yesterday, an increase in our dividend of 38% effective in January of next year. Coming out of this quarter, I'm just extremely proud of our team around the world. These results once again reflect the discipline as well as the agility of our entrepreneurial organization as we continue to perform well amidst the very dynamic and challenging environment.

Now turning to our trends and progress across our served markets, we're very pleased that the company's broad and balanced end-market diversification continues to create value for Amphenol. Very importantly our diversification mitigates the impact of the volatility of individual end-markets while also at the same time exposing us to leading technologies wherever they may arise across the electronics industry. And these are both important benefits, especially amid such a dynamic market environment.

Turning first to the Military market, this market represented 10% of our sales in the third quarter. Sales grew by 7% from prior year and declined by 4% organically, which was a little bit lower than our expectations heading into the quarter. On an organic basis growth in ordinance, airframe and space-related products was more than offset by moderations of our sales of products that are used in vehicle, naval and communications applications. Sequentially sales declined by about 3%.

Looking into the fourth quarter, we now expect to see sequential sales increase. And for the full year 2021, this would imply a mid-teens increase in sales from last year's levels. We continue to be excited by the strength of Amphenol's position in the military market as defense customers around the world continue to adopt next generation technologies at an increasing pace. Our industry-leading breadth of high technology Interconnect and Sensor products positions the company strongly across essentially all major defense programs, and this gives us confidence for our long-term performance.

The commercial aerospace market represented 2% of our sales in the quarter. Sales were flat compared to prior year, and declined by about 19% organically as the benefit of our recent acquisitions was offset by continued declines in demand from aircraft manufacturers. As we expected coming into the quarter, our sales declined by about 3% sequentially.

Looking into the fourth quarter, we are happy that -- to now expect a mid-teens increase in sales compared to these levels, and for the full year 2021, this would imply roughly 10% sales decline compared to last year, a clear reflection of the pandemic related headwinds that have impacted the travel industry and thus the commercial aircraft market during the COVID-19 pandemic. Regardless of this challenging environment so far, our team working in the commercial aerospace market remains committed to leveraging the company's strong Interconnect and Sensor technology position across a wide array of airplane, platforms and next generation systems, integrated into those aircraft. As personal and business travel continues to recover from the pandemic impacted lows, we do look forward to benefiting as jet manufacturers expand their production and in turn expand their procurement of our components.

The industrial market represented 26% of our sales in the quarter. Sales increased by a very strong 44% in U.S. dollars and 24% organically. This excellent growth was broad based across most segments of the worldwide industrial market, including in particular the battery and heavy electric vehicle, factory automation, oil and gas, rail mass transit, heavy equipment, alternative energy and instrumentation segments, together with the contributions from our recent acquisitions. On a sequential basis, sales increased by 4% from the second quarter, which was much better than our expectations coming into the quarter. Looking into the fourth quarter, we expect sales to moderate from these levels, but for the full year 2021, we expect sales to increase more than 40% from prior year, a very strong performance.

I remain extremely proud of our global team working in the industrial market. Our long-term strategy to expand our high technology Interconnect, Antenna and Sensor, offering both organically and through complementary acquisitions has positioned the company to capitalize on the many revolutions that are occurring across the industrial electronics market. We look forward to realizing the benefits of the strategy for many years to come.

The automotive market represented 19% of our sales in the quarter and despite the widely reported challenges across the automotive market, our sales actually came in higher than expectations in the quarter growing a strong 31% in U.S. dollars and 26% organically. This strong performance reflected our automotive team's excellent execution in the face of numerous supply chain challenges, as well as robust growth of our products used in electric and hybrid electric vehicles. This is another clear confirmation of our global team's long term efforts at designing in high voltage and other Interconnect and Sensor products into these next-generation platforms.

On a sequential basis, sales were flat compared to the second quarter. The widely reported supply chain challenges in the auto industry continued to impact demand from vehicle manufacturers around the world. Accordingly, we do expect in the fourth quarter, a high-single digit sequential moderation in sales. For the full year 2021, this implies sales will increase by more than 40% compared to last year, driven by our expanded position in next generation electronics integrated into cars, including in particular, those electric and hybrid drivetrains. I remain extremely proud of our team working in the automotive market, who has continued to demonstrate a high degree of agility and resiliency in both driving a significant recovery from last year as reduced sales levels, while also expertly navigating the myriad of supply chain challenges that the entire automotive industry is facing. We look forward to benefiting from their efforts long into the future.

The mobile devices market represented 13% of our sales in the quarter and our sales in this market declined from prior year by 5% as modest growth in sales of products incorporated into smartphones and laptops was more than offset by declines in wearables and tablets. Sequentially sales increased by a stronger than expected 36% driven by higher sales across virtually all product categories that we serve. Looking into the fourth quarter, we expect a continued mid to high single-digit increase in sales from these third quarter levels, and for the full year, we anticipate sales to grow modestly from 2020, which is in fact an impressive achievement given last year's robust demand. I remain very proud of our team working in the mobile devices market. Their unique agility continues to enable the company to react quickly to changing demand in this most volatile of markets. With our leading array of Antennas, Interconnect products and mechanisms enabling a broad range of next generation mobile devices, we're positioned well for the long term.

Turning to the mobile networks market, this market represented 5% of our sales in the quarter and sales increased by 11% from prior year and 7% organically. And this sales growth was really driven by our sales to mobile service providers, which was offset by a small moderation of sales to OEMs. On a sequential basis, our sales increased just slightly, which was largely in line with our expectations coming into the quarter. For the fourth quarter, we expect another slight sequential increase in sales as mobile networks customers continue to ramp up their investments in 5G and other next generation networks. And for 2021, this would imply that our sales would grow by approximately 10%. Our team continues to work aggressively in the mobile networks market to realize the benefits of our efforts to expand our position in next generation 5G equipment and networks around the world. As our customers ramp up their investments into 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.

The information technology and datacom market represented 22% of our sales in the quarter. Sales in this market rose from prior year by a very strong 28% in U.S. dollars and 26% organically. This was driven by increased demand from OEMs, and in particular, increased demand from web service providers. Sequentially our sales grew by a better than expected 10% from second quarter levels. As we look into the fourth quarter we do expect a slight decline from these elevated levels, and for the full year 2021, we expect sales to increase in the low 20% range. We remain encouraged by the company's outstanding position in the global IT datacom market. Our OEM and service provider customers continue to drive their equipment and networks to ever higher levels of performance in order to manage the continued dramatic increases in demand for bandwidth and processor power. In turn, our team remains highly focused on enabling this continuing revolution in IT datacom with industry leading high speed power and fiber optic Interconnect products. We look forward to realizing the benefits of that leading position for many years to come.

And finally, the broadband market represented 3% of our sales in the quarter. Sales declined by 5% from prior year and 10% organically as cable operator procurement moderated. On a sequential basis, sales decreased by a slightly better than expected 3%. For the fourth quarter, we now expect a further moderation in sales from these levels, and for the full year 2021, we anticipate that sales will grow in the mid-single digits. Despite this more challenging environment in the broadband market we continue to look forward to supporting our service provider customers around the world, all of whom are working to increase their bandwidth to support the expansion of high-speed data applications to homes and businesses.

Now turning to our outlook, there's no question that the current market environment remains highly uncertain with significant supply chain and inflationary challenges as well as the ongoing pandemic. Given this, and assuming constant exchange rates, for the fourth quarter, we expect sales in the range of $2,690,000,000 to $2,750,000,000, and adjusted diluted EPS in the range of $0.61 to $0.63. This would represent year-over-year sales growth of 11% to 13% and adjusted diluted EPS growth of 7% to 11%.

Our fourth quarter guidance represents an expectation for full-year sales of $10,540,000,000 to $10,600,000,000, and full year adjusted diluted EPS of $2.39 to $2.41. This outlook represents full year sales and adjusted EPS growth of 23% and 28% to 29%, respectively. I remain confident in the ability of our outstanding management team to adapt to the continued challenges in the marketplace and to capitalize on the many future opportunities to grow our market position and expand our profitability. In addition, our entire organization remains committed to delivering long-term sustainable value, all while prioritizing the continued safety and health of each of our employees around the world. Most importantly, I'd like to take this opportunity to once again thank the entire Amphenol team for their truly outstanding efforts here in the third quarter.

And with that, Operator, we'd be very happy to take any questions.

Questions and Answers

[Operator]

Thank you. [Operator Instructions] Our first question is from Amit Daryanani with Evercore. Sir, you may go ahead.

[Amit Daryanani, Analyst at Evercore ISI]

Thanks a lot, and good afternoon. Yeah, I guess, Adam, there's been a fair amount of talk, a lot of talk maybe around just supply chain challenges, inventory build and FPLs. What would be 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, are customers being less eager to expedite orders or anything you seeing, variation between the channel and OEM demand trends? Just tell me, even that base would be helpful.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Yeah, 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 chain. 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, 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 were continued serious supply chain impediments, some of which even worsened throughout the quarter, whether that's availability of logistics and freight, the cost of raw materials, the availability of raw materials, even talk 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 bills and orders moderating, I mean, we saw strong orders in the quarter. There is 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 reason why our book-to-bill was lower because our sales grew into the level of the bookings, but 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 in -- to customers around the world, and knowing that our distribution business is predominantly industrial and aerospace, Mil-Aero business, I mean 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 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 shone very brightly.

[Operator]

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

[Steven Fox, Analyst at Fox Advisors]

Hi, good afternoon. 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 seemed like better expected quarters, each quarter you seem to sort of look for it to slow down. So I'm just curious like where you're seeing, maybe, concerns, where are you seeing more opportunities whether markets or share trends or new products, et cetera? Thanks.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

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 working 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 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 can have a moderation. There could even be a little bit of seasonality that could come into that. But 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 and for our team working in that market.

[Operator]

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

[Wamsi Mohan, Analyst at Bank of America Merrill Lynch]

Yes, thank you. Adam, you guys have done a tremendous job maintaining profitability through many difficult cycles. As you look at this 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 would be great. Thank you.

[Craig A. Lampo, Senior Vice President and Chief Financial Officer at Amphenol]

Hey, Wamsi, this is Craig. I think if we think about our profitability, we're certainly very proud of our achievements in the quarter and certainly this year, given the significant challenging cost environment, and certainly 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 that in other ways.

And so, certainly, the management team, I think has done a really good job of that. Different markets are more challenging and other markets and certainly things like distribution is easier to pass on. Pricing and other markets are a little bit more difficult, or channels are difficult to pass on pricing. But I think overall, we've done a pretty good job. And most of the markets that 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. They are certainly more cost sensitive, and certainly more impacted by logistics costs, which we've seen a significant increase of, and has been quite 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 is doing certainly a good job of working through that. And we do think that over some period of time, they will be able to offset those cost pressures, but that's something that in that market, you can't really do overnight. The other markets, like automotive, aren't so easy, but certainly, I think the team has done a good job of starting those conversations. And there is 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 anytime 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 in all of the markets, some of which are easier and some of which are harder, in terms of being able to ultimately pass on those, cost increases to our customers, and be able to continue to leverage and increase our margins as we continue to grow.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

And 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 are 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 is grounded in fact and basis as opposed to incorporate policy. And I think that's why we've always been, maybe a little bit more successful in moderating the impact 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 are able to go out and make it happen.

And just because the cost of materials is up or the cost of logistics is up, 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 and that's what they're going to do.

[Operator]

And our next question is from Samik Chatterjee with JP Morgan. You may go ahead.

[Joseph Cardoso, Anlyst at Amphenol]

Thank you. This is Joe Cardoso on for Samik. So, a broader question, I guess the setup in guidance for 3Q seems very similar to what we are seeing now for 4Q. However, Amphenol is 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 cost intensifying or were there any material surprises you would point out in 3Q that are not just sustainable into 4Q? Any color on the puts and takes there would be appreciated. Thank you.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Sure. Thanks very much. I mean, look, we always give guidance with the information at hand. Just as we did 90 days ago, we are 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 beat 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 that nowadays 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 this guidance is exceeded then that will be what it will be, but right now we are giving a 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, Analyst at Truist Securities]

Great. Thanks for taking my question. Adam, I wanted to ask about lead times and expedites. You know, 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 had different characteristics and so an average might not be meaningful but however you can describe the current lead time situation relative to how it might have 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 changed. 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.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Thanks so much, Will. I mean, relative to our lead times, I mean -- 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 from overseas, if you need to have to do that, whenever, 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 continue 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, Analyst at The Goldman Sachs Group]

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 is seeing there. Thank you.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

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 13% organically, and that was really nice to see actually, and a bit surprising given the 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 kind of the approach that we take.

[Operator]

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

[Nickolay Todorov, Analyst at Longbow Research]

Yeah, 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 outperformed relative to peers, and I think you 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'll be a little bit extended, but there are still nothing compared to what are, and I'm sure you don't -- you're not the ones constraining the auto production. So why do you think you continue to see upside in auto? Thanks.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Yeah, thanks. Thanks very much, Nick. 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 sensor 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 of electronics has been across the electrification of vehicles, both electric and hybrid vehicles, where we've leveraged our strong legacy in 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. But for those other supply chain shortages, I'm sure our automotive business would have been even more robust than it was.

[Operator]

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

[Luke Junk, Analyst at Robert W. Baird]

Good afternoon, everyone. Adam, I've got another auto question. This one, maybe a little bigger picture. A lot of the discussion on 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 and some other factors. Some of the industry have talked about so called Tesla here little by 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 outgrowth that you're seeing, both right now and over the last few years, how does this accelerated proliferation of technology inside the vehicle places the company's strengths and positioning relative to electrification?

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Well, Luke, it's a great question, and it's a question that I wouldn't even confined 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, full stop, 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 into various parts of the car. And then, you now have car companies coming in putting in things like wireless charging and outlets in different places as opposed to me having one of these massive things that every kid has to plug thing into a cigarette lighter. Now everybody has their little connectors all over the car, and things like that. And whether it 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 hybrids, of all total vehicle volumes. But I would say all vehicles are adopting more electronics because the car companies have realized not only do 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, we're -- 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 with Citi Group. You may go ahead.

[Jim Suva, Analyst at Citigroup Investment Research]

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 map. Cable products, operating margins, of course, raw materials of copper, aluminum and all that have gone up. It sounds like you 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, are -- do you think we're kind of at the lowest level here or do you think they're going to be at these while -- levels suppression for a while? But if you could just kind of talk about the profitability of that segment, because it seems like while a smaller part of the company overall, it is materially challenged right now, but I think there could be potential there. Thank you.

[Craig A. Lampo, Senior Vice President and Chief Financial Officer at Amphenol]

Yeah. Thanks, Jim. Yeah, there is no doubt that the profitability of the cable segment is at the lowest level it's been it, 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 were 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 into 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 unprecedented cost environment, due to the competitive dynamics and other factors within those -- within that market, that -- it just becomes an unfortunate unfortunate situation that it does have a more significant impact in the short term here.

There is no doubt that the team is working hard on pricing actions, and we're confident that they 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 involved in dealing with this, this is impactful for them as it is for any other operation. So it's not that it's not meaningful, but it's certainly has a lower impact on the overall company. But there is no doubt as the management team is extremely focused on this. We are optimistic that over some, not so long-term period of time, in a shorter-term, we'll be able to get these margins back up. Whether or not it's quarter or the quarter after, I think time will tell, but we are optimistic that it will -- we are at the lower end of the scale in terms of profitability in this market, and it will improve over over these coming quarters.

[Operator]

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

[Chris Snyder, Analyst at UBS Group]

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 in 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.

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Yeah, thanks. Thanks very much, Chris. I mean, look, we give a lot of details across the company, and I think we're -- we haven't publicly talked about the specific number 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 in auto or also our industrial electrification business, have been significant drivers of our outperformance. 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, Analyst at Jefferies Financial Group]

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 is a lot of puts and takes there, versus Amphenol as kind of content opportunity in some of your market share gains? And then if I may, how should we think about some of the moderation in the year-end? Is there a specific end-market where you expect to see that?

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Yeah. Well, thanks very much, David. And I mean you said it. The industrial market is for us, a very, very diversified range of segments. Everything from medical to heavy vehicles to oil and gas, things like marine, factory automation, the battery in heavy electric vehicles, alternative energy, I mean even in an area like building automation, where we've seen a lot of strong growth, I mean what was 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 is some sort of counter cyclicality across one or another of those segments. And we saw 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 1 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 are all harsh environment solution.

So, whether they be discrete connectors, value add interconnect assemblies, centers 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 and in oil and gas drilling setup, or in an alternative energy, on and offshore windmill or something like that. So all of these just really unique -- uniquely challenging environment 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 industrial market are adopting electronics at an increasing pace. So the same discussion that we had in the auto market just a few moments ago, we see that really broadly across the industrial market as customers adopt next generation electronics 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, well, for sure, we're taking advantage of new thing in this market like we are in automotive, I think there is 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, this is 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 with Cowen. You may go ahead.

[Joseph Giordano, Analyst at Cowen and Company]

Hey, good afternoon guys. So 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 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. Do 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? How has increasing escalation here impacted the way you view things?

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Well, look, I mean we're not blind to the world around us, Joe. There is no doubt about it. I mean, the geopolitical tension that has been present for a number of years has certainly not gone away, and I for one would fully advocate that countries like the U.S. and China, the world's two largest economies should for sort get along. There is lots of, lots of reasons why we should. And 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 are -- 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 are 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 are able to bring the totality of Amphenol's 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 had 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, in the U.K. 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 while deploying capital in every country in the world. We're always going to incorporate all of 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 that -- 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, Analyst at RBC Capital Markets]

Thanks. I just have a follow on, one more on China. Are you seeing in the impact, either direct or indirect, from some of the power shortages that have been going on, and how is that impacting the business?

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

Thanks very much. Look, I think we've seen a lot of challenges. 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. But it gives everybody something else to think about in a time where there's a lot going on.

Okay. Well...

[Operator]

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

[R. Adam Norwitt, President and Chief Executive Officer at Amphenol]

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 A. Lampo, Senior Vice President and Chief Financial Officer at Amphenol]

Thank you. Have a great day.

[Operator]

[Operator Closing Remarks]