Amphenol Corporation (APH) Q3 2020 Earnings Report, Transcript and Summary

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

Thank you. 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 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 third quarter with record sales of $2,323 million, and record GAAP and adjusted diluted EPS of $1.12 and $1.09 respectively. Sales were up 11% in U.S. dollars and up 10% in local currencies compared to the third quarter of 2019. Sales in the third quarter increased by 9% organically, and sequentially, sales were up 17% in U.S. dollars and 15% in local currencies inorganically. Breaking down sales into our two segments, the interconnect business which comprised 96% of our sales was up 11% in U.S. dollars and 10% in local currencies compared to the third quarter of last year. Our cable business which comprised 4% of our sales, was up 2% in U.S. dollars and 5% 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 $476 million in the third quarter of 2020. Operating margins were 20.5%, which was up a very strong 250 basis points sequentially, and up 80 basis points compared to the third quarter of 2019. The strong sequential improvement in margins reflected a healthy conversion on the higher sales levels, as well as an expected significant reduction in the impact of COVID-related costs. The year-over-year improvement in operating margin reflected a strong conversion on the higher sales levels. From a segment standpoint, in the interconnect segment, margins were 22.4% in the third quarter of 2020, which increased from 21.7% in the third quarter of 2019, and 20% in the third quarter - in the second quarter of 2020. In the cable segment, margins were 10.7%, which increased from 10.2% in the third quarter of 2019, and 9.4% in the second quarter of 2020. Given the unprecedented challenges related to the COVID-19 pandemic, we are extremely proud of this quarter's performance. Our team's ability to manage through all the impacts of this 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 which has enabled us to capitalize on opportunities and maximize profitability in an uncertain market environment. Interest expense for the quarter was $28 million, which was down from $30 million in the third quarter of last year. The company's GAAP effective tax rate for the third quarter of 2020, including an excess tax benefit of $11 million associated with stock option exercises during the quarter was 22.1% compared to 24.5% in the third quarter of 2019. Excluding the excess tax benefit just mentioned, the company's adjusted effective tax rate was 24.5% for both the third quarter of 2020 and 2019. Adjusted net income of $336 million was 14% of sales in the third quarter of 2020, another confirmation of the strength of the company's financial performance. On a GAAP basis, diluted EPS increased by 22% at $1.12 in the third quarter of 2020 compared to $0.92 in the third quarter of 2019. Adjusted diluted EPS increased by 15% to $1.09 in the third quarter of 2020 from $0.95 in the third quarter of 2019. Orders for the quarter were $2,275 million, which was up 9% compared to the third quarter of 2019, and up 15% sequentially, resulting in a book-to-bill ratio of 0.98 to 1. The company continues to be an excellent generator of cash, cash flow from operations with a strong $398 million in the third quarter or 119% of adjusted net income. Our free cash flow was $330 million or 98% of adjusted net income. From a working capital standpoint, inventory and accounts receivable and accounts payable were $1.4 billion, $1.9 billion, and $1.1 billion, respectively at the end of September. And inventory days, days sales outstanding and payable days were 79, 72 and 61 days, respectively. All improved from the second quarter levels and all within our normal range. During the third quarter, our cash flow from operations of $398 million, along with proceeds from the exercise of stock options of $104 million were used primarily to repurchase 1.9 million shares of the company's stock for $202 million or an average price of $108, fund dividend payments of $75 million, fund net capital expenditures of $68 million, fund acquisitions of $50 million and fund net purchases of short-term investments of $9 million. As mentioned in today's earnings release, the company's Board of Directors has approved a 16% increase in the quarterly dividend on the company's common stock from $0.25 to $0.29 per share. This increase is effective for payments beginning in January of 2021. At September 30, cash and short-term investments were $1.5 billion, the majority of which is held outside of the U.S. Total debt at September 30 was $3.8 billion with no maturities before the third quarter of 2021 and net debt at September 30 was $2.4 billion. Total cash on hand, plus the remaining availability under our credit facilities was $4 billion at the end of the quarter. And third quarter EBITDA was $568 million and our pro forma net leverage ratio was 1.2 times. I will now turn it back to Adam who will provide some commentary on current trends.

Well, Craig, thank you very much, and I'd like to extend my welcome to everybody here today at the time of our third quarter earnings release. And first and foremost, I hope that all of you on the call here today, together with your family, your friends and your colleagues are staying safe and healthy throughout the pandemic. As Craig mentioned, I'm going to highlight some of our achievements in the third quarter, and most importantly, discuss the trends and progress across our served markets. I'll then make a few comments on our outlook for the fourth quarter as well as for the full year of 2020. With respect to the third quarter, and amidst what has been clearly an unprecedented and volatile year, I'm truly proud that we at Amphenol achieved record sales and adjusted earnings per share in the third quarter, realizing level significantly above our guidance that we issued just 90 days ago. Sales reached $2,323 million, an increase from prior year of 11% in U.S. dollars, 10% in local currencies, and 9% organically. The strong growth was driven by increases in mobile devices, IT datacom, industrial, military, broadband and the automotive markets, and was offset partially by declines in the commercial air and mobile networks markets. We are particularly proud to have achieved a very robust 17% sequential growth from the second quarter which was significantly higher than our original expectations. As Craig mentioned, the company booked $2,275 million in orders and that represented a book-to-bill of 0.98 to 1. Now despite experiencing some continued operational challenges related to the pandemic, we generated excellent operating margins of 20.5% in the third quarter, and this was a full 250 basis point increase from our second quarter levels. Just want to say that the company's financial position remains extremely strong, with our operating cash flow of $398 million, and that was particularly notable given the stronger than expected sequential growth from the second quarter. And we continue to leverage that financial strength to return capital to our shareholders, both through our repurchase last quarter of 1.9 million shares of the company's stock, as well as the Board of Directors' approval of a 16% increase in our quarterly dividend that we are announcing today. I'm extremely proud of the Amphenol team. No question in my mind that the record results this quarter clearly demonstrate the true value of the agility, the discipline, and the drive of our entrepreneurial organization. Now turning to the trends across our served markets, I would just comment that as we've seen this year so far, Amphenol's balanced and broad end market diversification is a uniquely valuable asset, especially in times of heightened economic uncertainty. As many of our markets began to recover in the third quarter, we were able to quickly capitalize on the growth opportunities in those markets, while still retaining our broad exposure to new opportunities and new technology developments across all areas of the electronics industry. The military market represented 12% of our sales in the third quarter. Sales in this market increased by 6% from prior year, driven in particular by growth in military vehicles, naval, space, communications and airframe applications. Sequentially, our sales increased by a strong 30% as we recovered from the impact of production restrictions that hit certain of our facilities related to government measures implemented in the second quarter to control the COVID-19 pandemic. Looking into the fourth quarter, we expect sales to increase slightly from these levels, and for the full year of 2020, we expect a low single-digit increase in sales from prior year. This full year performance reflects our leading market position and strong execution, offset in part by the impact of the pandemic related production restrictions we experienced in the first half of 2020. I'm very proud of our team working in the military market around the world. They have maintained a singular focus on ensuring that our defense industry customers have uninterrupted access to our leading high technology interconnect products which are - which are critical to our customers' equipment. We are encouraged both by the accelerating adoption of electronics in these systems together with the overall favorable defense spending environment. The investments that we've made over the last several years in both new technologies and the capabilities to produce them at volume have positioned us very strongly to be able to capitalize on these trends for many years to come. The commercial aerospace market represented 2% of our sales in the third quarter. Sales were down by 40%, a very significant level, as the commercial aircraft market once again experienced unprecedented declines in demand for new aircraft due to the pandemic related disruptions to the global travel industry. Sequentially, our sales were a bit better than expected, rising 4% from the second quarter. As we look ahead though, we expect the commercial air market to continue to be negatively impacted by the significant reduction in demand for air travel, which is occurring around the world. Accordingly, we expect an approximately 20% sequential reduction in our sales to this market in the fourth quarter. And for the full year 2020, we expect a roughly 35% decline from prior year due to the unprecedented demand disruptions that our customers are experiencing. No question that these are difficult times for the entire travel industry and that that's having a serious impact on the market for commercial airplanes in the near term. Nevertheless, our team remains committed to leveraging the company's strong technology position across a wide array of aircraft platforms and next generation systems integrated into those airplanes, and we remain well positioned when this market eventually does return to growth. The industrial market represented 22% of our sales in the quarter, and our sales to the industrial market exceeded our expectations, increasing by 21% in U.S. dollars and 18% organically, a very strong performance. This robust growth was driven especially by the instrumentation, medical, industrial battery, heavy equipment, alternative energy and rail mass transit segments, really a broad base of growth that we saw in the industrial market. Although we had expected sales to be modestly lower than the second quarter, we actually realized 11% sequential growth during the third quarter, a very strong performance. Looking into the fourth quarter, we expect a modest decline from these third quarter sales levels. Nevertheless, for the full year 2020, we expect a low double-digit increase in sales from 2019 levels, an outstanding performance given the overall market environment. I'm truly proud of our team working in the industrial market, whether enabling the growth in volumes of a wide array of medical equipment, managing through significant increases in demand for semiconductor capital equipment or executing on unprecedented demand for next generation batteries, our global organization has reacted quickly to ensure that our customers around the world are fully supported regardless of the many operational challenges that have arisen throughout the COVID-19 pandemic. As we look towards the long-term, I'm confident that our performance through this crisis has positioned us very strongly for the future. And importantly, we continue to drive our leading development of next generation interconnect sensor and antenna products in support of our customers in the industrial market, who in turn are accelerating their adoption of next generation technologies. The automotive market represented 17% of our sales in the third quarter. After a truly challenging second quarter during which the global automotive industry was deeply impacted by the COVID-19 pandemic, we were very pleased to have seen a very strong recovery here in the third quarter, with results much better than we had originally anticipated coming into the quarter. Our team's outstanding execution led to an increase in sales from prior year by 4% in U.S. dollars and 1% organically, well ahead of our expectations. Sequentially, our sales increased by truly significant 78% from the second quarter, as our team was able to execute quickly on a recovery in demand from automotive customers in all regions. Looking now into the fourth quarter, we expect automotive sales to further increase in the mid-single digits from these levels. For the full year 2020, we expect a low double-digit reduction in sales, which does reflect the severe and sudden pandemic-related downturn and demand from automotive OEMs that we saw in the first half. I'm extremely proud of our team working in the automotive market, who has clearly demonstrated, both agility and resiliency in realizing the strong sequential growth levels. In fact, our performance through this crisis makes me even more confident in our long-term prospects in the automotive market. We've continued to expand our range of interconnect sensor and antenna products, both organically and through acquisitions, all with the goal of enabling a wide array of onboard electronics across a diversified range of vehicles made by auto manufacturers around the world. This consistent strategy will no doubt continue to benefit us as the automotive market recovers. The mobile devices market represented 16% of our sales in the quarter and our sales to mobile device customers increased by a stronger than expected 25% from prior year, driven in particular by increased sales of products incorporated into laptops, tablets and wearables, and this was offset in part by slightly lower year-over-year sales to smartphones. Sequentially, our sales increased by a much stronger than expected 37%, and this was driven by higher sales across all the products that we serve. Looking to the fourth quarter, we expect a slight increase from these already strong third quarter levels, and for the full year, we anticipate sales to grow in the low double digits from 2019. And I would just note that this is well above our original expectations as we came into the year before we were hit with the pandemic. While mobile devices will always remain one of our most volatile markets, our outstanding agile team is poised as always to capture any opportunities for incremental sales that may arise here in the fourth quarter or beyond. Our leading array of antennas, interconnect products and mechanisms continue to enable a broad range of next generation mobile devices, and this positions us well for the long-term. The mobile networks market represented 6% of our sales in the quarter, and sales decreased as we had expected from prior year by 19% in U.S. dollars and 21% organically, driven by lower sales to wireless operators, as well as some continued impact from the U.S. government restrictions on certain Chinese entities that we have previously discussed. On a sequential basis, our sales reduced by 9% on overall lower spending by both operators and OEMs. Looking into the fourth quarter, we expect a further seasonal sales reduction of approximately 25% related to both OEMs and service providers. And for the full year, we expect a high teens reduction in sales, which reflects the impact of the U.S. government restrictions, as well as the COVID-19 pandemic. Regardless of the near-term challenges in the mobile networks market, we're confident in the company's long-term position in this important and exciting industry. Our team continues to work aggressively to expand our opportunity with next generation equipment and networks. As customers ramp up investment of 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 around the world. The information technology and data communications market represented 21% of our sales in the quarter. Sales in the third quarter once again much better than we had anticipated, rising from prior year by a very strong 24% in U.S. dollars and 21% organically. And this growth was really driven from increased demand for data traffic that continue to prompt both our OEM and service provider customers to increase their demand across virtually all segments of the IT datacom market. Sequentially, sales were down by a less than expected 10% from our extremely strong second quarter. As we look towards the fourth quarter, we expect a mid-teens sequential decline from these very strong third quarter levels, and for the full year 2020, we expect sales to increase in the low teens, reflecting the significant upside in demand we experienced in both the second and third quarters, offset in part by the pandemic-related disruptions we saw in the first quarter. Our team working in support of the IT datacom market has clearly distinguished themselves this year, reacting quickly to capitalize on unprecedented demand for our industry-leading high-speed and power products. At the same time, we've not slowed down our efforts to further develop our broad range of industry-leading interconnect products in support of data communications networks around the world. Indeed, we remain very encouraged by the company's strong technology position in the global IT datacom market. Our customers continue to drive their equipment to ever higher levels of performance in order to manage the dramatic increases in demand for bandwidth and processor power. In turn, our team remains singularly focused on enabling this continuing revolution in IT datacom. The broadband market represented 4% of our sales in the quarter. Sales increased by 5% from prior year, driven by stronger demand for home installation related equipment from broadband operators. On a sequential basis, sales increased by a stronger than expected 13%, as our customers continue to upgrade their networks in support of the increased demand for high-speed data. We expect sales in the fourth quarter to moderate from these levels on typical end of the year seasonality. And for the full year 2020, we expect sales to be roughly flat with prior year, and this reflects the pandemic-related disruptions we experienced in certain geographies, offset by increased investments by our customers in support of higher bandwidth demand. Now turning to our outlook for the future. While our performance in the third quarter was very strong, there still remain significant uncertainties in the global market related to the COVID-19 pandemic, which does appear to be worsening in some regions of the world. Assuming no new material disruptions from the pandemic, as well as constant exchange rates, for the fourth quarter, we expect sales in the range of $2,160 million to $2,200 million, and adjusted diluted EPS in the range of $0.98 to $1. This represents both sales and adjusted diluted EPS growth versus prior year of flat to up 2%. Our fourth quarter guidance also represents an expectation for full year sales of $8,333 million to $8,373 million, and full year adjusted diluted EPS of $3.59 to $3.61. This outlook represents sales growth versus prior year of 1% to 2%, and an adjusted diluted EPS decline of 3% to 4%. The expected decline in our earnings relates directly to the significant cost and disruptions associated with the COVID-19 pandemic that the company faced particularly during the first half of 2020. Now let me just say that I'm extremely pleased by Amphenol's performance in the third quarter, especially our team's achievement of these new quarterly records in both sales and earnings. Most importantly, I remain very 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. I just want to assure you that our entire organization remains committed to fighting hard to secure the company's financial performance, all while dedicating ourselves wholeheartedly to protecting the safety and health of each of our employees around the world. And as a final note, I would just like to take this opportunity here today to thank every one of our Amphenolians around the world for their outstanding efforts here in the third quarter. And with that, operator, we'd be very happy to take any questions.

[Operator Instructions] Our first question is from Amit Daryanani from Evercore. Your line is open.

Thank you and congrats on the strong execution you guys. I guess, my question is really, when I look at the strength, we saw in September quarter, I think it was one of the largest B2C in out of you guys in a few years. I guess, Adam, could you just touch upon what surprised you and drove the upside versus 90 days ago? Was it just better end demand or did you see inventory build happy at customers or perhaps is more allocation shift that came your way since competition couldn't execute? It would be helpful to get some context on what drove this impressive 10% to 11% growth and sort of how would you characterize that, because the question I keep getting asked is, why aren't we seeing a follow - follow through of this growth in the December quarter guide?

Sure. Well, thank you very much, Amit. Look, I think you listed a few factors, and I think there is a little bit of each of them in the third quarter with maybe the exception that I can't tell you that we saw any inventory build of significance so that we had at least visibility to in the quarter. But no question, in several of our markets, demand was much stronger than we had anticipated. I think we outperformed maybe some of our peers in certain of those areas where we were able to capitalize on the demand in a faster fashion. So you take the example of mobile devices where we came into the quarter expecting a relatively modest sequential growth, and mobile devices is always the market that's very hard to anticipate, but our team drove 37% sequential growth in mobile devices and that came both from volume demands from our customers, but also from the fact that there were instances where our customers couldn't get everything they needed from other folks, and they could get it from us. And I think that's something that we've demonstrated in many years in the past. Our teams have the outstanding agility in reacting to unexpected levels of demand. We clearly did not anticipate coming into the quarter that we would have such significant sequential growth in automotive, and in fact, we have grown on a year-over-year basis in automotive after that just very, very challenging second quarter that we all saw was a real testament again to the agility of our team to satisfy what was unexpected levels of demand. But look - as you look at our guide for the fourth quarter, and I know you, as you mentioned Amit, why does that - what is going on with that guide, we do this as we always have done. We talk to our customers and this is a bottoms-up approach to how we forecast. There are certain markets where there were real surges in demand earlier in the year. IT datacom another example of that, where we've guided IT datacom to be down in kind of the mid-teens in the fourth quarter, it was down a lot less than we anticipated here in the third quarter. There was the real surge in demand for data bandwidth - for bandwidth upgrades and support of data traffic to support all of the work from home and study from home requirements around the world related to the pandemic. And that's normally not a market that would be down by so much in the fourth quarter, but it's also normally not a market that would have grown so much in the second and third quarters. So we've done our best here amidst this environment to take everything that our customers say. We add that up to the outlook that we've given you. And knowing full well that there - we are not out of the woods relative to the pandemic, there is still a pandemic going on. It is in fact worsening in certain areas. And I think our customers are sensitive to that, and our team is prepared if there is some further surprise, further operational challenges that will come, but we think this is actually a very, very strong outlook relative to the extraordinary strength that we saw here in the third quarter.

Our next question is coming from Luke Junk from Baird. Your line is open.

My question is on the auto business, and I'm just curious in the wake of COVID, whether you're seeing a shift and focus in your auto customers, given your engineering labor relationships. Just wondering if anything has shifted in terms of focus related to electrification, autonomous driving or similar as far as you can see?

Well, thanks so much, Luke. Look, I think that that shift towards new drivetrains, towards autonomous, other new technologies that are going into the car, I mean, we have continued to see that for many years. I wouldn't necessarily say that we've seen an acute change in the trajectory of that evolution here in 2020 due to COVID. I think what we saw in the third quarter was customers really scrambling to get back into their production levels, and customers probably buying more cars than people anticipated. There seems to have developed some degree of pent-up demand for automotive production. I have heard anecdotes about inventory levels being low, that it's difficult to get a pick-up truck in Michigan and things like this. And I'm sure, Luke, you know you're closer to this market than we are, and you know very well, some of those dynamics. But there's no question that there is real demand from customers and they continue to drive new programs that have been in the pipeline. But is the pandemic itself responsible for a kind of distinct shift, I wouldn't say that is. Now, I would also just add that our team around the world has done a fabulous job in positioning ourselves in these new platforms, while we haven't forsaken the traditional drivetrains, the internal combustion engines, and otherwise, we continue to support our customers who are manufacturing these would still represent the vast majority of vehicles that are being produced around the world. But our team has done such a great job on developing new products, expanding our relationship with customers really in all geographies such that to the extent there is an acceleration of that shift, I think, Amphenol is well positioned to benefit from it.

Next question is coming from Mark Delaney from Goldman Sachs. Your line is open.

Yes, good afternoon, and thanks for taking the question, and congratulations on the very strong 3Q results. So I mean, to better understand the EBIT margins, I mean, there have been some constraints the company was facing, acquired companies that came in initially at lower margins, and some extra costs around COVID that have been weighing on margins earlier this year, but the company had very strong EBIT margins in the third quarter. So I'm going to better understand to what extent there are still headwinds that the company is trying to contend with? Clearly on an overall basis was able to overcome those, but are there still any challenges around integrating that new assets or COVID costs that are still a drag to EBIT margins? And perhaps if you could talk about it with some perspective on how to think about that going forward? And you mentioned there is still some increase in COVID cases. Is there anything we need to be thinking about around COVID weighing on margins either in 4Q or potentially into next year? Thank you.

Great. Thanks, Mark. Thanks for the question. No - I mean, no doubt, we are really proud of our ability to achieve these strong operating margins of 20.5% here in the third quarter and 250 basis point improvement over Q2 or 18% and certainly 80 basis points even over the last year when COVID really wasn't a thing. So we're certainly very proud of that. I mean, as I did mention in my prepared remarks, we did have strong conversion on our higher kind of sales levels that certainly had a benefit from a profitability perspective, but it also reflected sequentially our expected reduction in COVID related costs in the quarter. I mean, we certainly still are experiencing some turbulence in the business related to COVID and the cost that that creates, but certainly it is at a much lower level than it was in the first and second quarter. But there is no doubt, there still is some costs that we are experiencing. The team is doing an outstanding job of navigating that and minimizing that to the extent possible, but there are certainly also puts and takes within the P&L. And as an example, there is other costs such as T&E, as an example, that does have some offsetting impact at this lower level of COVID cost. So what I would say is, from a net impact in the third quarter, really that COVID related and kind of these puts and takes, some talking about really didn't have a meaningful impact kind of in the third quarter on our margin. So you mentioned acquisitions - any acquisition impact, I would say that, although we continue to spend time on that, this year, certainly due to the pandemic, we haven't been able to make certainly the progress that we would hope to have made in this year related to some of the acquisitions we acquired in '19. So I wouldn't say that really has had so much of impact in the third quarter either. If you kind of look at year-over-year, it's really more of that leverage on the sales increase. And going forward, I think that I would expect kind of our normal conversion on the upside and downside, you know that 25%, 30% on the downside, which I think I would expect. And that assumes certainly that we don't have this resurgence, you know that of significance in the pandemic. We - always certainly if we do have additional costs, we're going to work hard to continue to mitigate those, but I'm certainly real proud of what the team has done so far to do that and we'll keep an eye on that in the future. But again, real outstanding performance here in the quarter. The team has done a fantastic job of navigating all these things that are happening in the world.

Next question comes from Wamsi Mohan of Bank of America. Your line is open.

If you step back to pre-COVID at the beginning of the year, your thought that you would do about $8.3 billion in revenue and $3.80 in EPS. Now you expect fairly similar revenue, EPS is about $0.40 lower for the year. Is all the differential, just incremental costs associated with COVID, and if so, should we expect that next year we should see faster EPS growth as your conversion margins now overcome the COVID headwinds as you did in the third quarter? And if I could, in the fourth quarter, mobile devices, Adam, you had mentioned in 3Q that you were slightly down on smartphones and laptops, tablets and wearables drove the growth. I was wondering if those similar comments also hold for the fourth quarter guidance? Thank you.

Yes, thanks Wamsi. Yes, I would say that, all that differential really is the COVID related costs that we incurred in the first half. And if you kind of look at the first half year-over-year from an EPS versus - perspective and kind of conversion on those sales differentials that really is all the COVID related cost, you know we talked about that in the last couple of quarters. So, yes, as we go into 2021, we're not giving guidance here, but certainly we would expect at least at this point based on the - guidance for Q4 that those costs would not be in there. But again, we talked about a minute ago about these potential resurgences throughout the world, so will give our guidance in January and certainly we'll talk about what we expect there. But it is all COVID related and we're really happy to be kind of at those pre-COVID profitability levels here in the third quarter, and again, proud of what the team has done thus far.

Yes. And Wamsi just a short answer to your second question. I mean, it's hard enough to forecast mobile devices and learn to forecast it based on the individual components of it. I wouldn't think anything is categorically different in the fourth quarter than the third quarter, but it - we have - anyway it's a hard time to forecast it in general. So I wouldn't get too far out ahead of myself in saying which individual segments are going to be strong in the fourth quarter.

Next question is from Samik Chatterjee from JPMorgan. Your line is open.

Adam, I just wanted to kind of ask you on a more broad level, and I think you touched on this a couple of times passingly, like, how are customers responding to the risk of a second wave here on the pandemic and what are you baking in, in terms of your guidance for the fourth quarter related to that, because the reason I ask is, we've seen a bit more volatility in the order trends this year and what in hindsight looks like, you had a strong 1Q order trend moderating in 2Q. Should we expect something similar to repeat if we have a second wave in 3Q and 4Q of this year?

Yes, thanks. Thanks so much, Samik. Look, I don't know that anybody is handicapping in their production plan. What a second wave will be, what the magnitude of a second wave can be, and more importantly, what are the consumer reaction to that and what are the governmental reactions to whatever second wave will be. We certainly are not trying to guess across all of those variables what that can be. But as I pointed out in my prepared remarks, we're very sensitive to the fact that there may be further disruptions. And thus, it's not about preparing yourself by saying, well, I'm going to add inventory, subtract inventory or otherwise, it's making sure that your entire organization is on their toes. It is remaining nimble, agile, reactive and prepared physically, psychologically for whatever may come our way. And I think that's where the Amphenol team has really excelled this year. It's not that we guessed which way the trajectory of the pandemic was going to come and thus we were able to achieve these results. It's that we were ready regardless of how it came. And I think the third quarter is just a wonderful indication of that. We didn't come into the quarter anticipating, for example, that mobile devices would grow 37% sequentially or anticipating that automotive would grow 78% sequentially or that our military business would be up 30%. But we were ready in case it were to happen, because our team was able to flex. So what do our customers - how our customers integrating a second wave into their expectations, I actually don't know. Maybe some are, maybe some are not, but how we approach this is we take what our customers tell us, and then we're ready regardless. Are we going to be right at the numbers that we have guided here? Hard to say. That's the best that we can tell right now, but this - if this year has taught us anything, it's to expect the unexpected and to be ready regardless of what comes our way. And I think that's what the Amphenol team, where we sit today here in the third week of October, we're ready for whatever comes along. We continue to prioritize the health of our people. That's been number one by the way throughout this - that's what's enabled us to support our customers, that's what's allowed us to then drive the strong results. And we're going to continue to do that. And if more demand comes, we will satisfy, and if less demand comes, we will react to that as well.

Next question is from Nick Todorov from Longbow Research. Your line is open.

Just wanted to go back to the mobile markets, and I just wanted to see a reference of comment. Adam, I think you made last quarter, as you guys are poised to capture any incremental opportunities in 2020? So what I'm hearing from you is that you're not necessarily seeing any contribution towards this year low double-digit growth from the mobile - from the smartphone space specifically. I just wonder if anything changed here as we go into the fourth quarter and we know that some of the builds have been delayed? Has anything changed in your position or your view in specifically the smartphone market and how you play in that role?

Yes, I mean, look, I think what I've always said and I said that last quarter, and I think I probably said it again here this quarter is, this is a hard market to forecast and to the extent that demand is higher than we anticipate, we're very much - our team is very much poised to capitalize upon that, and that's exactly what we did here in the third quarter. And while it's true that on a year-over-year basis, our growth came not from necessarily smartphones, but rather from things like laptops and tablets and wearables and otherwise. In the fourth quarter, it may very well be a different situation. We'll see as it comes. We did grow sequentially across all of those products, including strong double-digit sequential growth in our sales of products that go into smartphones. And so, our team is for sure capitalizing on whatever incremental demand there may be in smartphones. And when we talk about the incremental performance that we had in this quarter, again, growing 37% sequentially instead of just a modest growth, some of that upside was in fact coming also from smartphones even if that didn't represent growth on a year-over-year basis.

Our next question is from Jim Suva from Citigroup Investment Research. Your line is open.

Thank you, very much and good job, at really adjusting to a dynamic world.

Thank you, Jim.

The question I had was a little unique question I haven't asked before, focused on it much, because it hasn't changed much and that was the book-to-bill. Normally, this quarter has been above 1. Normally, the company has seen above 1 book-to-bill. Obviously, you had - you crushed your expectations in a positive way for revenues and EPS this quarter, because some of that play into the book-to-bill or why would we see a book-to-bill given your results and also the outlook which were stronger than expected? And we trying to triangulate around that, like, if there - or is there inventory restocking going on that maybe you don't feel comfortable is going to continue or I'm trying to triangulate the book-to-bill versus your strong results and outlook and all the commentary?

Sure. Thanks, Jim. Look, one thing I would just say about the book-to-bill, I mean 0.98 to 1 is pretty close to 1. On a year-to-date basis, if you include our very strong book-to-bill that we had in the first quarter, our book-to-bill year-to-date is 1.04 to 1, which is very, very strong compared to maybe other years. But look, does that - what does that mean for the fourth quarter, I think, we've already talked about what the - how we've gone - coming up with our fourth quarter guidance. I think these are strong bookings. They far exceeded what we thought coming into the quarter. And the fact that the book-to-bill is little bit below one is I think just a reflection that some customers placed upon us much stronger orders early in the year and there are some markets where the lead times are a little bit longer, places like military, for example, where we have very substantial order books that were shipping out of, but I wouldn't read anything abnormal into that. I think last year in the third quarter, our book-to-bill was kind of 1 to 1. So considering that this is a year where very little is normal, actually I'd say, a 0.98 to 1 book-to-bill is pretty normal compared to last year when all is said and done. And again, we shipped so strongly in the quarter. And so, the fact that we were able to execute on the backlog that we had. Had we not executed on that, we'd be talking about a positive book-to-bill. And so, I think, these were very strong bookings, but those shipments were even stronger.

Our next question is from Matt Sheerin from Stifel. Your line is open.

Yes, thanks. Hello, Adam and Craig. My question is on the defense and aerospace markets. On the military side, you talked about seeing a return to growth, but it sounds like there is still some COVID related constraints there. So would love some commentary there? And on the aerospace segment where you're guiding down again, are you getting a sense at all that we're at a bottom there or any signs of stabilization?

Thanks very much Matt. Look, I think, on the military side, we clearly had a lot of constraints in the second quarter and that was reflected in our performance in the second quarter. We have to go back a little bit and understand we've been dealing with a very, very robust military market. You'll recall, 2019 we grew 23% in military, which is really substantial in that market. And net 23% in military required us to step up quite significantly our capacity expansions in support of this very, very strong levels of demand. And so, as we came into COVID, there was still strong demand, but then we lost a lot of production in the second quarter because of the various shutdowns in places like the U.S., in places like Mexico, places like India, and otherwise in Europe as well. And getting that back so rapidly is not as easy in the military market, when we were already running at very high levels of capacity. Now I can tell you this, we are supporting our customers in an outstanding fashion. We have not disappointed. We have not let down customers. We're not creating any problems for our customers. But overall, we are running here again in the third quarter at a very high level of production relative to capacity, and there is still significant demand that is out there. So when does that return to growth? I think our outlook for the full year to be in the kind of low single digits is a reflection of strong performance where there is one quarter where we really lost a fair bit of production in that quarter. Now relative to commercial air, I don't - I can't be the one to call a "bottom here". We came into this quarter thinking that our sales would sequentially be down, in fact, they were not. We were up a little bit sequentially. But what we hear from our customers for the fourth quarter is clearly that it will be down, and that's why I talked about an outlook of being down about 20%. We'll see how the year comes. It's a very difficult time period. I would - where if you call it an unprecedented disruption in demand in that market, because this demand that is disrupted, not just because of production problems but the end customers are just not using the product right now. And you just look at any area of the travel industry, and you do not have demand. And how that ultimately filters through to the aircraft unit demand going forward, I think it's too early to tell. Regardless, our team will be ready. We continue to support our customers around the world. And ultimately, one day, there will be a recovery in this demand, and our team will be well positioned to take cover. Until such time, you can bet that everybody working in commercial air in Amphenol is doing what they have to do, to deal with lower volumes, cutting cost, reallocating resources, re-dedicating technologies to other markets, all the sort of standard playbook of an Amphenol Entrepreneurial General Manager, and they're doing that in spades right now.

Our next question is from Joseph Spak from RBC Capital Markets. Your line is open.

Wanted to dive a little bit deeper into high-voltage connectors for electric vehicles, because clearly, you've - you've mentioned that a tailwind for you and we're now seeing more programs coming to market and even more being quoted. So now that you have a little bit more experience here, can you break down what the source of that tailwind? And is it the number of connectors going up or is it - is it the same number of connectors but a higher dollar content or is it both or any additional color you can provide on that now that we're deeper into the electrification move would be helpful?

Sure. Well, thanks very much, Joe. Look, I think, we've talked about it, I know many others have talked about the fact that the interconnect architecture and electric vehicle is very, very different from that, which is in a typical internal combustion engine vehicle, and that starts with the reality that you're moving power around the car at very high voltage and that requires a degree of technology in the interconnect that is just very different than what one saw in traditional cars. And when you have a more complex technology, when you have a technology that carries with it more risk that it has to be a good connector. Of course, that's going to - that's going to have an implication that that product should have. All things being equal, more value to it. Now is every electric car design the same? No. Is every hybrid car design the same? No. Is every internal combustion engine car design the same? For sure, not. And so, you can't say a specific model is going to have X more content than another specific model, but all things being equal, the interconnect system inside an EV car can have more value. Is that because there is more connectors while there's certainly more high-voltage connectors and those high-voltage connectors, again in general, should have greater technology embedded in them than a typically low voltage connector or cable assembly that goes into a car. So I think that that's - it's a pretty straightforward actually dynamic. Now the real rubber meets the road, so to speak, in - are you working with the breadth of customers, do you have the right technology, do you have that proven track record in high voltage products, maybe not in cars, for example, in industrial, in military like we do, and do you have the relationships with customers where you can promote those products to those customers? I think there, our team has done a really good job of that, and they've done a good job really in all the regions to make sure that customers understand that great legacy that Amphenol has in high voltage products outside of the automotive industry, coupled with our ability to service the automotive industry which has its unique requirements in terms of fulfilling the demand of customers. So I think it's a very positive for the long-term for the company, and I think we've been taking good advantage of that also here in the relatively shorter term.

Next question is from Chris Snyder from UBS. Your line is open.

Can you impact the auto segment a bit? You reported sales up nearly 80% sequentially, and while auto production is recovering quite sharply, it seems like you guys outperformed production by a pretty wide margin during the quarter. So was this outgrowth the reflection of maybe low OEM component inventories at the start of the quarter, share gains from Amphenol or maybe potential inventory building by the OEMs during the quarter as there could be concerns of another COVID supply chain disruption as we head into the winter?

Yes, Thanks so much. Look, I don't know about the inventory that you mentioned. It doesn't appear to me that there is a massive amount of inventory being built. Was there low dealer inventory coming into the quarter? For sure. And is that driving automakers to try to ramp up their production levels? I think that's very, very clear. Did our team to a great job to react to the demand that was put upon us by our customers? I think they did. But look, I think, it's all too early to say what the overall market is going to be here. I don't pay much heat to the various consultant reports that are put out there. I think we'll see it when we see it what the overall demand is. But this is an industry that really just shut down almost for a quarter, at least for a month or two in that quarter, and restarting into an environment where there seems to be some end demand for cars. People want to have cars and trucks and SUVs, and all of those things. And so, I think it's natural that there is a desire to quickly ramp back up and how much of our gain came because of end volumes, how much came because of share gains, how much came because of readjusting to more normalized inventory levels, it's hard for us to know what the various components of that would be.

Our next question is from Craig Hettenbach from Morgan Stanley. Your line is open.

Yes, thank you. Adam, could you discuss just the M&A environment, I mean, certainly this year there's been a lot of external factors for Amphenol targets to navigate around as well as internally. So just how you're seeing things today, and as business does start to kind of stabilize a bit, does that change in terms of what could be actionable from an M&A perspective?

Yes, thanks very much, Craig. I think we've talked about this during the more acute phases of the pandemic. And what for us has been a real advantage is, we view M&A as a very long-term process of developing and incubating relationships, keeping in touch, developing a sense of mutual trust and awareness with companies that we would be interested one day in inviting into the Amphenol family. And because of that, we've been able to do that even with the social distancing and the inability to travel. And so, our pipeline remains very strong. The relationships with the companies that we've been developing for a long time remain very robust and current. But at the same time, I think, if you're an entrepreneur, and you are - you may think twice about selling in an environment like this, because there is still a lot of uncertainty. And so, the fact that we've completed this year just two acquisitions, they are both relatively small. Last year, you know, we completed nine acquisitions, it's not surprising given that we're in a kind of once in a lifetime pandemic right now. I fully believe that as the world normalizes, whatever normal shall be, that our acquisition program will remain a really strong value creator for the company. And the fact of our performance during the pandemic, the resilience of Amphenol, our ability to capitalize on opportunities to manage through this pandemic in a way that we have becomes only a great asset in those discussions that we continue to have with potential acquisition targets and makes Amphenol incrementally a more attractive home for these companies, for their organizations. And so long-term, I actually think this might turn to a positive in terms of the wherewithal that we have to ultimately complete these acquisitions. Now when are we going to close on the next acquisition? You know well, I'm woefully unable to predict that. There are so many factors that go into when somebody ultimately signs on the dotted line, but I'm confident that over the long-term, this will be a real great part of how Amphenol grows. Over the long-term, acquisitions have represented roughly a third of our growth and we see no reason to think that that should change going forward.

Our next question is from Shawn Harrison from Loop Capital. Your line is open.

Clarifications, if I may, and then just a question on kind of the bookings linearity. Does the guidance reflect any kind of incremental entity list headwinds for Amphenol? And then on the bookings linearity, if you could just kind of talk about the upside you saw, was it's something where it spiked mid quarter, end of quarter, then tailed off into October, just kind of how linear the quarter was after you guys initially guided during July?

Yes, I mean, look relative to the end of the list, I think as we said a year ago, it's not that like on one day, May 19th, everything shut off. And so, there is a process of this that over time the impact can grow a little bit, and I think we continue to see that relative to the linearity of the quarter. Look, I think it shouldn't come as a terrible surprised that as we got farther from the acute phase of the pandemic which was really in the second quarter that there was some strengthening over the course of the quarter. And typically in the third quarter, September would be a really strong month, and I think this year was not different from other years in the respect that the quarter finished a bit stronger than it started.

Our next question is from Deepa Raghavan from Wells Fargo. Your line is open.

My question is on buyback. It looks like some of the deal potential - Adam, based on your comments, it looks like some of the deals potential is being pushed out, which then clearly leave some room for further buybacks to happen perhaps even above trend. Can you comment on that? Plus, Craig, you mentioned there is - the majority of this $1.5 billion in cash is held outside the U.S., can you help us understand how much is in the U.S. and how that can influence share buybacks - share buyback potential? And also if you don't mind, please comment on how much cash you need for operations? Thank you.

Yes, thanks Deepa. I would - just to the point of that cash, I would say in the U.S. and how that impacts our buybacks, I would say, it really doesn't have any impact on what buybacks we do. We have plenty of liquidity in the U.S., outside of the U.S. So it really has no impact on our buyback rhythm. In terms of the amount of cash we have, and whether or not doing less M&A or more M&A has an impact on our buybacks, I mean, honestly, I would say that we have a pretty strong balance sheet, a very strong balance sheet. We've had a very strong balance sheet for a long time. I would say that regardless of the M&A that we've had over a period of time, we've been able to have a pretty balanced capital deployment rhythm in regards to share - return of capital to shareholders and our M&A. We always say that we prefer to do M&A, to the extent possible, but the reality is, is that we are able to typically do all of the three because of such a strong balance sheet, the amount of cash flow we generate. We generated almost $1 billion of free cash flow this year. So I wouldn't say that, you know, doing less M&A is necessarily going to have us accelerate our buyback. We've done 1.6 billion out of the 2 billion under our buyback program. So we're well on track to finish our buyback program in the allotted time, which certainly were on phase four. So I wouldn't necessarily say that we would per se accelerate that. M&A will continue to be a significant part of our strategy as Adam just mentioned. The timing is certainly unpredictable and - but there is no doubt that we have a great pipeline and we have certainly the capital to fund it.

Next question is from Steven Fox from Fox Advisors. Your line is open.

Adam, I was just wondering if you could talk a little bit about the industrial market guidance that you gave. I understand the conservatism, but the strength in Q3 was really good. I think it was better than you thought and it was so broad. Why the slight decline is in terms of expectations for Q4? Thanks.

Yes. Thanks so much Steve. I mean, look, no doubt about it. Third quarter for our industrial market was really strong and it came on the heels of a second quarter that also surpassed our expectations. And you'll remember in the second quarter, the real driver was the strength in medical. In this quarter, it was more broad, including medical, but not only including medical. And so, it was really quite a bit outperforming. We anticipate that we came into the third quarter anticipating that sales would actually be a little bit down on a sequential basis, and in fact, they grew by 11%. So it's a very, very strong outperformance. And as we look into the fourth quarter, in the fourth quarter traditionally, there can be some seasonal moderation in the industrial market in certain years, together with the fact that we had this very, very strong surge in demand, in particular, related to medical in the second and third quarters. I think it's very natural that there would be a slight easing of that into the fourth quarter. But all that being said, even with this outlook in the fourth quarter, on a year-over-year basis, we would expect to be growing in a pretty strong fashion in the fourth quarter and then our full year outlook still to grow in the low double digits, is a very, very strong outlook for a year where you had a global pandemic, which did have certain impacts on the overall industrial market. And it's a credit to our team to really quickly redeploy our resources on interconnect products, value add interconnect and sensors to those areas of the industrial market where there was indeed strength this year. It's interesting. I look into the third quarter, you know we service, I don't know, it's like a dozen or so different end segments of the industrial market. And I talked about the ones that were up, but we had also some that were down. I mean, you can imagine that a segment like an oil and gas was not very strong here in the third quarter. We had other areas that were also not very strong in the third quarter, but those were more than offset by the really excellent demand that we saw in the segments that I already discussed. So I think it's a very favorable outlook actually for the fourth quarter and for the full year, and we're just really pleased with how our team working in the industrial market has capitalized on the breadth of opportunities, some of which were really unexpected as we came into 2020.

Our next question is from William Stein from Truist Securities. Your line is open.

Thanks, and thanks for squeezing me in. Adam, I'm hoping, you know we can address the mobile networks and market. We normally think of Amphenol as a company that finds growth even when the end markets aren't exhibiting it. And this is an end market that's gone through some changes in the last couple of years with the roll out of 5G. Last year, there was a pretty big roll out. This year, there was as well, and yet we're seeing last year revenue was flat in this end market, this year we're looking at down double-digits. Is there something that's preventing the company from exhibiting it's sort of normal pattern of finding growth even if it's - even if end markets aren't cooperating either a change in who you can and can't sell to or the change in technology that works against you in some way? Thanks for any update in this area.

Thanks so much, Will. Look, I think the easiest explanation and the simplest thing here is, if you look at this year and last year, what has been the biggest change that has impacted and that's when we've talked about it are in fact that there are some customers who we traditionally sold to, who this year we are selling less to and even into the latter part of last year we were selling less to, and this is related to the Department of Commerce restrictions on the certain entities in China that we've talked about. I think that's the biggest story here. Now on an overall basis is capital spending with our operator customers, for example, going up or going down, yes, it remains to be seen for the year, but I think there is one thing which is that as we got into the pandemic, there was a rush to expand bandwidth. And I think in certain respects that rush to expand bandwidth came at the expense of the capacity and coverage that oftentimes is a bigger driver of just the end nodes of the mobile network investment which can drive our mobile networks business. And so, when you look at the growth that we've had in IT datacom, for example, some of that growth is coming ultimately from customers who also manage and build wireless networks in support of the bandwidth of their core networks, because people are working from home, they're studying from home, they're soaking up bandwidth that maybe was not expected, for sure, it was not expected. And so, I think that there is some of that dynamic. But the biggest and probably the most simple explanation to what you've described is, in fact, those Department of Commerce restrictions. And as we head into next year, I think that our team remains very confident in our position with customers around the world. We have strong position on next generation equipment, and we'll see how it goes, and we'll try to give a good assessment of this market as we come into - as we come into 2021. But no doubt, I mean, this has been a little bit more of a challenging market for us here in this year because of those - because of those factors that we've discussed.

Our next question is from David Kelley from Jefferies. Your line is open.

Maybe just stepping back from the end market specific discussions. I was curious if you could talk about just broadly what you're seeing as it relates to demand and order patterns in China? Are we fully back of, let's call it, pre-COVID levels across your exposures in the region today?

Yes, it's a great question. I would say that our performance in Asia, in general, in China being the largest factor for us in Asia, and for most in Asia, was really outstanding in the third quarter on a year-over-year basis. And so, I would say, back to pre-COVID and beyond in terms of the demand levels that we've seen. And I think that's true in the industrial market, I think that's true in the automotive market, I think that's true in the communications markets, all with the caveat related to the question that we will just ask relative to mobile networks and the restricted entities list. But beyond that, I would say that we've seen just great demand, and it is amazing. Craig and I, we have a lot of calls and now we do Zoom calls or Teams or Google Meetings or all of these different video calls with our customers - with our team, and you do that with people in China now and they're all sitting around the conference room together, nobody is wearing masks, because the virus is essentially not there. It is being kind of stopped at the border through a very rigorous approach to quarantining and testing. And so, I think that that has allowed, in particular China, to kind of get back to normal. People are going to movies, people are going to grocery stores, people are buying cars, people are riding on planes and trains, and all of this. And we see that on our computer screens, and I would be lying if I said I didn't have a little bit of jealousy to watch a group of 10 people sitting around the conference room table like we used to be here, but that will come here again. We will get there in other parts of the world as well, but it started earlier in China. We are actually two days from now we'll be exactly nine months since Wuhan was shutdown, how time does fly here in 2020. And we all know how tough that was in China in the first quarter, shutting everything down, every one of our 50 factories, every one of our than 35,000 people stuck at home for three weeks, the rigor with which the reopening happened, and we talked it back in the - at the end of the first quarter and the second quarter, how proud we were of the speed with which our team was able to implement measures to protect people and thereby secure a more rapid reopening of our operations. And I think now, here we are, nine months later, and things are relatively back to normal in China, and that includes the demand environment. And I'm very proud of our team working in China. All of them are local. And that's one thing I just want to emphasize once again. How we participate in every market where we work around the world is with local organizations, people who are from that country to whom we give full authority, we see to them the entrepreneurial authority to make appropriate decisions for their business on a day-to-day basis, that becomes even more critical in a year like this, where we cannot fly in and out of China, we can't go hold people's hands. We have to sort of talk to them on video calls, communicate with them as best that we can, but then have confidence that they are making the right decisions to capitalize on whatever opportunities are there in the market. And here's where the unique structure of Amphenol, I think, has shown its extraordinary agility and strength that in that place where the world has become more normal. We have an extraordinary team of dedicated individuals who can make decisions on the ground to capitalize on success and to deal with challenges. And that is in its essence, one of the key values. And the really the pillars of why Amphenol has been successful for many, many decades.

Our next question - and our last question rather for today is from Joe Giordano from Cowen. Your line is open.

Thanks for sneaking me in here. Most of what I want to ask is, I think, over here, but I'm curious, Adam, understanding the nature of your military business and why the shift towards tactical and why you guys are able to kind of grow so fast - so much faster than budgets, how does that though process change or does it not change and how do you think about the sizing of your business potentially out of couple of years in a different administration?

Yes, I mean, look, I think the - our strength in military and its root comes from two things. Number one, it comes from the fact that we have the deepest and broadest array of technologies in the industry, there is no doubt about it. I mean, we are the leader in this industry, we have been in this industry for 100 years, us or our predecessor companies, and that strength that we have across all product technologies is so critical. But the second piece of it is our ability to execute. And I talked about that earlier. The fact that last year we were able to execute on a really almost unprecedented increase in demand, 23% sales growth last year that we were able to continue to support our customers even with all of the disruptions that we saw in the second quarter. And as we look at the broader military market, the defense market, I think, you alluded to a shift to tactical. I would actually say a shift from tactical, because I've talked about this for quite a while now that the militaries of the world, and whether that's in our country or in the allies of the U.S. and other countries, there was, for many years, a focus on this kind of whack-a-mole of catching stateless actors. And that was a very tactical move, which didn't require necessarily significant investments in military technology that I think has changed quite significantly, and we've seen that change happening slowly and maybe one could even say that this year that change has even a little bit accelerated where the real concern for militaries, those that we work with has become a much more strategic concern. And at the end of the day, strategic military tension leads to the adoption of technology. You're not dealing with trying to hunt down a terrorist needle in a haystack, rather you're trying to create defense systems, aggressive systems, whatever those may be to do battle with very formidable and known adversaries. And I think in that case, the real asset that the military takes advantage of is technology. And so, look, I'm not going to prognosticate about what elections are going to matter and which countries and how that's going to ultimately directly or indirectly affect military budgets. But what is for sure is that the geopolitical world that we are in today, it's a different one than we were in five years ago and certainly 10 years ago. And it's one that I believe is more reliant disproportionately on the innovations of our military customers and thereby our ability to enable those innovations with next generation technologies. So regardless of what election results come, I actually feel good about the prospects for our business in the military market because of our unique position there. And we'll see, we are reactive, we are agile in that market, and we'll deal with whatever comes our way. But I think the geopolitics of the moment and which have been building actually create a more favorable environment. Very good. Well, Joe, thank you for your last question. And I would like to just take this opportunity to thank everybody for your time and your attention to Amphenol today. And most importantly, since we won't get a chance to talk to most of you until 2021, unbelievably, I do want to wish everybody that you should stay safe and continue to stay vigilant as we come into the fall. We need you all healthy, and I wish you, your family, your friends and your communities, all the best as we come into the fall and winter season. And we look forward to speaking to all of you again in the new year. Thanks so much to everybody.

Thank you.

Thank you, speakers. And thank you all for attending today's conference. And have a nice day.