Terrence R. Curtin
Chief Executive Officer and Board Member at TE Connectivity
Thanks, Sujal, and I do appreciate everyone joining us today to cover our results for our second fiscal quarter, along with our outlook for our third-quarter. Through the details on the slides, I want to take a moment to discuss our performance this quarter within the backdrop of what remains a dynamic market environment, along with what we're seeing versus our last call, 90 days ago.
We continue to operate in a world with cyclicality in certain end-markets, as well as impacts from foreign currency exchange and inflation. At the same time, [Technical issue] so the strategic positioning of our portfolio around key secular trends. These include global growth in electric vehicle adoption, momentum in -- momentum in renewable energy adoption, growth in interventional medical procedures and wins in the artificial intelligence space. Growth from these trends are enabling us to offset the impact from certain [Technical issue] We delivered 8% organic sales growth that was above our guidance and adjusted earnings per share that was ahead of our guidance as well. We remain on our journey to expand margins through a combination of growth, price increases and cost-reduction actions. As we discussed back-in the first-quarter, our plan was to drive margin improvement from the beginning of this year [Technical issue] as we enter next year. We are executing to this plan and you see this in the sequential margin progression in our transportation segment in the second-quarter and the sequential margin expansion at the Company level, that's implied in our third-quarter guidance.
You all know that an important part of our business model is strong cash generation. With supply-chain [Technical issue] driving our inventory levels down and along with our team's strong operational performance, inventory reduction helped to drive free-cash flow improvement of over 35% Year-over-Year in the first-half and enabled us to continued strong return of capital back to our owners.
So let me now provide some color on markets that we're seeing and other updates [Technical issue]. With the macro-environment we are experiencing, it is driving uneven impacts across our portfolio. We have some markets that are growing, some that are remaining very stable and some better cycling. And this is truly evident as we go through our second-quarter results today, where all our businesses and the transportation and industrial segments grew [Technical issue], while both of our business in the Communications segment declined.
Our view of the transportation end-markets remained consistent with our prior view, and we continue to expect auto production to remain roughly flat at approximately 20 million units per quarter, as we move through the second-half of our year. Our growth will continue to be driven by content outperformance and our [Technical issue] electric vehicles.
In our Industrial segment, when we spoke to you last quarter, all of our businesses were strong and our second-quarter sales results reflect this. We continue to see strength in three out of our four businesses. Our commercial air business continues to recover, our medical business had record quarterly sales. And our energy business [Technical issue] momentum in renewable applications.
In our Communications segment, orders and sales remained weak due to both the market weakness and inventory corrections across our customer supply-chain. Last quarter, we talked about being in a $450 million to $500 million quarterly revenue range and we now believe we will be at the lower-end of this range for the next couple of quarters [Technical issue] just to get worked off by our customers.
And finally, before I get into the slides, I do want to highlight the way we think about long-term value-creation and that has remained unchanged. It is built on the pillars of secular growth and increased content around the markets where we have positioned TE, strong free-cash flow generation, a disciplined [Technical issue] and levers, which will enable margin expansion as we move through this year, as well as longer-term.
So with that as a quick overview, let me get into the slides and discuss additional highlights that are on slide 3. Our sales in the second-quarter were $4.2 billion, and it was ahead of our guidance, driven by the transfer [Technical issue]. We saw organic growth of 12% in the transportation segment and 15% in the Industrial Solutions segment, with organic growth in all businesses in these two segments.
In our Communications segment, the decline was in-line with our expectations. On a reported basis, sales were up 4% Year-over-Year and included approximately [Technical issue] exchange headwinds. In the quarter, our orders grew 10% sequentially to $4 billion. And I will talk more about order trend dynamics I segment on the next slide.
Adjusted earnings per share was ahead of our guidance at $1.65 and included a $0.17 of currency exchange in tax headwinds versus the prior. Adjusted operating margins came in at 16%. Free-cash flow for the first-half of the year, was very strong at approximately $850 million, with nearly $800 million being returned back to our owners. And we do expect continued strong cash generation in the second-half, along with strong free-cash flow conversion this year.
We are expecting our third fiscal quarter sales to be approximately $4 billion and adjusted earnings per share to be around $1.65. Our guidance represents a sequential decline in sales of flat earnings per share, which implies margin expansion from the second to third-quarter. We continue to be confident in margin expansion as we move from the first [Technical issue], largely driven by our Transportation segment.
And just moving away from the financials for a second. We are pleased that we were named among Fortune's World's Most Admired Companies. This is the 6th consecutive year that TE has received this recognition, which measures a number of criteria, including company's investment value and product quality, [Technical issue] for responsibility.
So let's talk about orders and let's move to slide 4, and we'll talk about order trends as well as what we're seeing in the markets. The sequential growth of our orders to $4 billion reflects increased stability in the supply-chain, as well as our team's ability to improve the service levels to our customers. I think the key [Technical issue] is that we're continuing to see stability in transportation, overall strength in the industrial market and continued weakness in Communications.
Looking at orders by segment, our Transportation orders grew 12% sequentially and this reinforces the stability I mentioned. In the Industrial segment, we saw sequential [Technical issue] businesses with continued momentum around renewable applications in our energy business, improving trends in Commercial Air and as well as our medical business, where we continue to see recovery. One change that we've seen since last quarter, is that order patterns are indicating moderation in certain industrial equipment end-markets.
[Technical issue] segment, orders reflect the continued weakness in the data and devices that we've talked about for a few quarters now, as well as the expected moderation of the appliances market.
So with that brief overview around orders, let's get into the year-on year segment results that are highlighted on slides 5 through 7 and you can see the details on each of these slides. Starting with Transportation. Sales growth was strong, up 12% organically Year-over-Year, with organic growth across all businesses. Our auto business grew 14% organically versus auto production that was up low-single digits versus the prior year. The outperformance was driven by our leading position in electric vehicles, electronification trends in the vehicle, [Technical issue] from pricing.
As we previously discussed, we were lagging in the recovery of inflationary pressures, but we've implemented price increases, which help us enable margin expansion as we go-forward. While overall auto production is expected to remain flat for this fiscal year, we continue to expect production of hybrid and electric vehicles. It will be approximately 25 [Technical issue] in 2023. And as you know, we generate two extra content in EV platform versus ICE vehicles. So we expect our content per vehicle to continue to expand as we move through this year.
In Commercial Transportation, we saw 7% organic growth driven by North-America and Europe, partially offset by declines in China. We remain excited about our leading global position in electric vehicles for commercial transportation market. We continue to make significant progress with design-wins at all the key truck, bus and specialty vehicle OEMs. We are providing a broad range of high voltage connectivity products, which are enabling our customers to solve fundamental challenges that they face in the EV space. These [Technical issue] 1,000 volts throughout the vehicle, increasing the speed of battery charging and withstanding the harsh environment that's expected in a heavy truck application.
Turning to our Sensors business, we had 9% organic growth, which was driven by automotive applications, as we see increased volumes from our new design-wins. Adjusted operating margins were 16.6%, as expected. While the dynamics of price versus inflation caused Year-over-Year impacts to margin, we saw an 80 basis-point sequential improvement in the quarter, reflecting the progress that I mentioned. We expect adjusted operating margins to improve sequentially again in the third-quarter in the transportation segment to get back into the high-teens in the second half of the year.
Now, moving to the Industrial segment. Sales increased 15% organically Year-over-Year, with organic growth across all businesses. Our medical business sales in the quarter was a record at $200 million and it had 26% organic growth. The interventional medical market was depressed following COVID but now back to pre pandemic levels, and it's nice to be talking about growth in medical again.
In our energy business, we continue to see the growth momentum, with 28% organic growth and this is entirely driven by renewable applications. We continue to drive growth both from wind and solar applications and the addressable market for TD and renewable applications has a double-digit CAGR. We're helping enable utility-scale solar and wind farm deployments around the world. When you get into these renewable applications, we provide switchgear and high voltage connectivity products. And just to give you a little bit of perspective, when we talk about high voltage and energy, these are mentioned in kilowatt, kilowatts, not volts, like we talk about in the car. And it's very important that the application knowledge we bring on higher wattages are very important to enable these renewable applications. And through our broad product portfolio, we are helping our customers reduce installation and maintenance costs. And you can see our strong positioning playing out in the growth of the renewable applications and now in our energy business, it's going to represent nearly 25% of our total revenue.
Turning to our aerospace, defense and marine. Our sales were up 19% organically, with ongoing improvement in the commercial air market. And finally, in the Industrial Equipment business, our sales were up 3% organically, with growth in Europe, partially offset by weakness in the Americas and China. Adjusted operating margins for the segment came in at 14.6% and this reflects an impact from business mix as well as the impact from acquisitions and divestitures. We expect margins to expand sequentially into the third-quarter and continue to target high-teens margin for our industrial segment.
Now let me turn to the Communications segment, where our sales were down as expected, at 20% organically, but within the $450 million to $500 million range provided last quarter. The appliance market is down as we expected and declined across all regions. In Data and Devices, we were down due to market weakness and supply-chain inventory digestion, as I discussed earlier. Communications adjusted operating margins were 16.3%, as we expected.
As I mentioned earlier, we expect quarterly segment sales to be at the low-end of the range we gave and closer to the $450 million, and we think it's going to be there for the next couple of quarters. And we do think adjusted operating margins at the slow [indecipherable] we'll be able to maintain in the mid-teens.
As we look beyond the near-term, I do want to highlight that our DSD business continues our strong design-win momentum in next-generation platforms at serving the cloud datacenter market. When you get into the rising complexity in artificial intelligence, it drives low-latency architectures that need both high-performance processing as well as interconnect. I'm pleased that we're engaged with the key ecosystem providers, including leading semiconductor and cloud companies. We've already generated over $1 billion of new design-wins in AI and server applications, and expect new programs to begin ramping-up in fiscal '24.
So with that as a backdrop of our segment performance, let me turn it over to Heath, who will get into more details on the financials and our expectations going forward.
