Amphenol Corporation (NYSE:APH) Q2 2019 Earnings Conference Call - Final Transcript
Jul 24, 2019 • 01:00 pm ET
Thank you. The question and answer period will now begin. The first question is coming from Amit Daryanani with Evercore. Your line is now open.
Thanks a lot. Good afternoon, guys. I have two questions. I guess the first one Adam, when I look at the revenue reduction in the back half of $230 million or so maybe $300 million with the deals factored in, how much of that do you think is really attributed to tariff -- the tariff outlook or the US government putting restrictions on certain Chinese entities kind of things that are driving that versus driven by just lower end demand and things like industrial market that might be a little bit more segregated from that perhaps?
R. Adam Norwitt
Sure. Well, thanks very much. Good afternoon, Amit. I think the way we think about this reduction in the back half is -- roughly two-thirds of that reduction is coming from the communications end markets and -- of that communications end market, I would say you can call it somewhere around half or a little bit more is maybe related to the specific restrictions that were put in place the direct and indirect effects of those and maybe the rest is more, a more broad market and distribution element. And then of the remaining call it roughly third, I would say, that's relatively balanced between industrial and automotive.
That's really helpful. I guess, Craig, if I hold you towards the end of your comments, you talked about undertaking a swift cost reduction plan. I don't know, you guys normally take these as a one-time charge, so perhaps, help me understand when I think about margins going down in Q3 which implying mid-19%, 80 basis points down sequentially operating margins, that's my mouth. How much of that is really driven by these cost reduction initiatives that -- most companies would call as a one-time, but you're not versus just revenue de-leverage in the model?
Craig A. Lampo
Yeah. Thanks, Amit. As you know, we don't call these types of things out in normal course. So this is something that we do include and we hold ourselves accountable as our General Managers hold themselves accountable for the results. But in regards to the amount. So I'm not going to probably talk about specific amounts. But what I would say is, if you look kind of sequentially kind of our implied conversion, there's a few things that kind of are happening and they -- the acquisitions clearly have some impact from a growth perspective, they're contributing a certain amount and those are contributing. I would say, operating margin lower than the average of the company today and certainly over time, we do expect to get those up, but they will not contribute to the level that we would expect as a normal kind of conversion going into the third quarter.
The other thing that's happening is I would -- is these costs related to these restructuring kind of charges that are in these results and I