Amphenol Corporation (NYSE:APH) Q2 2020 Earnings Conference Call - Final Transcript

Jul 22, 2020 • 01:00 pm ET

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Amphenol Corporation (NYSE:APH) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Hello, and welcome to the Second Quarter Earnings Conference Call for Amphenol Corporation. Following today's presentation, there will be a formal question-and-answer session. [Operator Instructions] If anyone has any objections, you may disconnect at this time.

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

Executive
Craig A. 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 second quarter 2020 conference call. As a reminder, during the call, we may refer to certain non-GAAP financial measures and may make certain forward-looking statements, so please refer to the relevant disclosures in our press release for further information.

The company closed the second quarter with sales of $1.987 billion and with GAAP and adjusted diluted EPS of $0.85 and $0.81 respectively. Sales were down 1% in U.S. dollars and were flat in local currencies compared to the second quarter of 2019. From an organic standpoint, excluding both acquisitions and currency impacts, sales in the second quarter decreased 3%. Sequentially, sales were up 7% in U.S. dollars in local currencies and organically.

Breaking down sales into our two segments, the interconnect business, which comprise 96% of our sales was down 1% in U.S. dollars and was flat in local currencies compared to last year. Our cable business, which comprise 4% of our sales was down 1% in U.S. dollars and up 3% in local currencies compared to the second quarter of last year. Adam will comment further on trends by market in a few minutes.

Operating income was $357 million in the second quarter of 2020, and operating margins were 18%, which was down 230 basis points compared to the second quarter of 2019. Similar to last quarter, the year-over-year reduction in operating margin reflected a higher negative conversion rate than our typical 30% downside conversion, due to the continued negative impact of the COVID-19 pandemic on production and productivity, particularly due to various government restrictions that have limited our ability to adjust cost in certain geographies. Compared to the first quarter of 2020, operating margin increased 100 basis points and reflected a strong sequential conversion margin on the higher sales levels.

From a segment standpoint in the interconnect segment, margins were 20% in the second quarter of 2020, which was down compared to 22.2% in the second quarter of 2019, but up from 19.1% in the first quarter of 2020. In the cable segment, margins were 9.4%, which is down compared to 9.7% in the second quarter of 2019, but up from 7.6% for the first quarter of 2020. Given the continued unprecedented challenges created by the COVID-19 pandemic, we are proud of this quarter's performance. Our team's ongoing ability to minimize the negative margin impact resulting from the crisis is a direct result of the strength and commitment of the company's entrepreneurial management team, which continues to foster a high-performance, action-oriented culture and thereby allows us to