TE Connectivity - Q1 2017
January 25, 2017
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by. Welcome to the TE Connectivity First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. If you should require assistance during the call, please press star then zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Vice President of Investor Relations, Mr. Sujal Shah. Please go ahead.
Sujal Shah (VP of Investor Relations)
Good morning. Thank you for joining our conference call to discuss TE Connectivity's first quarter 2017 results. With me today are Chairman and Chief Executive Officer Tom Lynch, President Terrence Curtin, and Chief Financial Officer Heath Mitts. During the course of this call, we will be providing certain forward-looking information. We ask you to review the forward-looking cautionary statements included in today's press release. In addition, we will use certain non-GAAP measures in our discussion this morning. We ask you to review the sections of our press release, the accompanying slide presentation, that address the use of these items. Press release and related tables, along with the slide presentation, can be found on the investor relations portion of our website at te.com.
Finally, for participants on the Q&A portion of today's call, I would like to remind everyone to limit themselves to one follow-up question to make sure we're able to cover all questions during the allotted time. Now, let me turn the call over to Tom for opening comments.
Tom Lynch (Chairman and CEO)
Thanks, Sujal, and thanks, everybody, for joining us today. We had an excellent start to fiscal 2017, delivering revenue growth, margin expansion, and earnings growth well above the midpoint of our guidance. Improving markets, coupled with strong execution across our segments, drove this performance. I'll provide some highlights and context for our Q1 results, and then I'll turn it over to Terrence to provide more detail on our performance and outlook. TE strategy has been driven around three key pillars for some time now. First, our focus on harsh environment applications. These applications demand engineering and manufacturing excellence, which provides competitive differentiation. TE stands out as a company with a broad range of harsh application knowledge and products that can provide solutions to customers anywhere in the world.
Second, driving our TEOA operating system throughout the company to improve customer service and productivity and reduce our fixed cost footprint. You can see and feel the benefits across the company and through feedback we receive from our customers. Third, consistently execute on our balanced capital allocation strategy, which has enabled us to make strategic acquisitions that have expanded our harsh environment portfolio, while consistently increasing dividends and buying back significant amounts of stock. Since becoming a public company in 2007, we've returned approximately $12 billion to shareholders and bought back 184 million shares. We expect to maintain our balanced capital strategy, returning 2/3 of free cash flow to shareholders and using 1/3 for acquisitions.
The cumulative effect of this strategy enabled us to grow share in the markets we serve and transform our portfolio with more growth opportunities, while consistently returning capital to our owners through a strong cash return business model. The net effect is that a dollar of revenue today drives 50% more adjusted EPS than five years ago. This quarter's results reflect the benefits of this strategy. Organic sales growth was 7%, driven primarily by strong demand throughout our businesses in Asia. Adjusted operating margins exceeded 17% and adjusted EPS was $1.15, well above the midpoint of our guidance. We delivered another strong quarter of orders growth, with growth across all three segments. We continue to perform very well in harsh applications and are getting growth and profit contributions across the portfolio.
In the Communications segment, we saw year-over-year organic growth in Data and Devices earlier than our expectations. This is driven by ramps of High-Speed Solutions at Cloud Infrastructure customers. I am pleased that the multiyear transformation of D&D has resulted in a refocused portfolio that will drive growth and higher profitability for the segment. We're also performing well in our acquired businesses with a growing design win pipeline that gives us confidence for future growth. The first quarter demonstrates the strength of our business model. For the full-year, we are expecting to expand adjusted operating margins by 50-70 basis points on 4% organic growth, with margin expansion being driven by all of our three segments.
Versus our prior view 90 days ago, we are raising our full-year organic revenue outlook by 100 basis points and our adjusted EPS guidance to $4.40 at the midpoint. Currency exchange rates are expected to impact full-year adjusted EPS by $0.16 versus our prior view, and this is factored into our guidance. I am pleased that we are growing adjusted EPS 11% year-over-year, even with the negative impact of the stronger dollar. Terrence and Heath will go through the moving pieces in more detail as we go through the call. Terrence, I'll turn it over to you.
Terrence Curtin (President)
Thanks, Tom, and good morning, everyone. Before we get into the segment results and updates that I typically go through, I wanna cover our orders for the quarter, which help provide the foundation for the trends that we're seeing, as well as our expectations going forward. If you could please turn to slide four, which shows our order trends excluding our SubCom business. Demonstrating our continued momentum that started late last year, orders were up 11% year-over-year, with a book-to-bill of $1.06.
And our organic basis, orders grew 10%. We saw organic orders growth across all three of our segments in quarter one, excluding SubCom. We also saw orders growth in all regions, with particular strength in Asia, which grew 26% year-over-year, with strength in China. In Europe and the Americas, orders grew approximately 3% and 1%, respectively. In transportation, orders increased 12% year-over-year and were up 4% sequentially, as China OEM increased production ahead of the expected expiration of government incentives at the end of the calendar year. Industrial orders grew 15% year-over-year due to the Creganna and Intercontec acquisitions, and organic orders grew 4%, with growth across each of our three industrial businesses.
In Communications, excluding SubCom and the sale of our circuit protection business last year, we saw year-over-year organic orders growth of 14%, including 7% growth in Data and Devices as we begin ramping high-speed connectivity that is benefiting from cloud applications, as Tom mentioned. Please turn to slide five, so we can discuss our results by segment, and let me start with Transportation. The first quarter was an excellent quarter for our segment, with sales growing double digits year-over-year and adjusted operating margins expanding 340 basis points on increased volume and productivity improvements. Segment sales exceeded expectations due to strength in China and Korea.
Our auto sales were up 13% organically in the quarter, well ahead of auto production growth of 5%, due to increased content from the secular trends we talked to you about around safe, green, and connected, coupled with our very strong global leadership position. Growth was led by demand from China, as the expected expiration of government incentives spurred demand in the quarter. Note that these incentives are now being phased out over the course of the year, so as we look forward, we expect that vehicle production growth in China will continue to be front-end loaded in the first half of 2017. For the full-year, we expect 4% growth in vehicle production in China and 2% growth in auto production globally.
While this assumption of 2% auto production growth globally is an increase from our prior view of 1%, this upside comes from the strength in the first half in China, with our outlook for the second half production being the same as our view 90 days ago. For the full-year, we expect to continue to outpace the growth of production due to the continued benefit of content growth as well as share gain. Turning to commercial transportation, our team delivered another very strong quarter against still a tough backdrop. This was outperformance versus the market, with organic revenue up 16%, driven by a very strong heavy truck market in China, content growth due to the adoption of new emission standards and regulations, as well as share gains. In our sensors business, the acquisition last year of JKE drove 3% growth overall.
The business declined slightly on an organic basis, with growth in automotive applications and industrial applications being offset by softness in the North American heavy truck applications. We are expecting organic growth for the year in sensors and continue to expect a further growth in collection as we go into 2018, as further auto applications ramp to volume. For the segment, adjusted operating margins of 22% were up 340 basis points year-over-year, with strong pull-through on the double-digit organic sales and increase in productivity improvements. When you think about the segment margin, our margin expectations remain the same for the segment, and you should continue to think of steady-state transportation operating margins as 20% ±1.
Please turn to slide six, so I can discuss our Industrial Solutions segment, which performed in line on both the top line and on the margin side in quarter one. Industrial Solutions sales grew 12% on a reported basis, driven by the Creganna and Intercontec acquisitions, and generated 30 basis points of adjusted operating margin expansion, despite the 80 basis points of headwind from the declines in Oil and Gas. If we had owned Creganna and Intercontec in the year-ago period, our growth for these businesses would have been 16% year-over-year, demonstrating strong performance of these acquired businesses. Industrial equipment, we grew 1% organically, driven by a strengthening market and around the factory automation area, as well as growth in medical. Aerospace and Defense remained strong, with 4% organic growth, driven by increased content on new airframe builds, as well as momentum in defense programs.
Oil and gas declined 24% as expected, due to the weakened market conditions. We feel that our oil and gas business has now bottomed and expect this business to remain stable at the current level as we benefit from new programs ramping later in the year. Our energy business declined 3% organically, with growth in North America and Asia more than offset by softness in Europe. Adjusted operating margins were in line with expectations and expanded 30 basis points year-over-year to 11.3%, which includes the oil and gas impact I mentioned earlier. Going forward, we do expect the industrial segment operating margins to expand over prior year levels in the second quarter and then further in the second half throughout the segment.
I'd also like to note that we're also including adjusted EBITDA margins on the chart to show margins and margin expansion, excluding the impact from the acquisition-related amortization. You can see in the segment that the year-over-year adjusted EBITDA margins expanded 100 basis points to 16.4%. Please turn to slide seven, so I can talk about Communications Solutions. Quarter one was a solid quarter for the Communications segment, including our achievement of a key milestone in our Data and Devices business. D&D has returned to organic growth following three years of decline from product exits as we refocused the portfolio within the business. Organic growth is occurring six months sooner than we expected in the business.
I'd also like to highlight that we also had a very strong quarter of growth in our appliances business, and we saw continued operational improvement throughout the segment that I'll talk more about in a little bit. Organically, sales were up 3%, with reported segment sales down 4% year-over-year, due primarily to the sale of the circuit protection business in March of last year. Our appliance business had very strong quarter growth, with 14% organic growth year-over-year, driven by China market growth, share gains, and strength in North America. The growth in D&D is the result of new ramps at cloud customers and the completion of our multi-year journey to refocus the product portfolio on key growth applications. D&D grew 2% organically in the quarter, and now we expect organic growth for the full fiscal year.
In addition to the growth that we're excited about, Data and Devices also doubled its operating adjusted margin from a year ago, and we expect this business to be an increasing contributor to the profitability of the communication segment going forward. On SubCom, the business declined slightly in the first quarter as a result of program timing. Our momentum continues through this growth cycle, and we continue to expect SubCom to grow approximately 5% in fiscal 2017, based upon our very strong backlog. For the communication segment, adjusted operating margins were 13.2% for the quarter, down 70 basis points year-over-year. And if you remember, this time last year, we had a one-time benefit in our SubCom business related to an early program completion, which raised our first quarter 2016 margins in the segment by approximately 400 basis points.
If you normalize for this impact, communications adjusted operating margins expanded significantly in the first quarter of 2017. To really illustrate the progress that we've made in the segment over the past four quarters, adjusted operating margins have expanded from approximately 8% in the second quarter of last year to 13% in the quarter we just completed, and we're proud of that accomplishment. Let me turn it over to Heath, and he'll cover the financials.
Heath Mitts (CFO)
Thanks, Terrence, and good morning, everyone. Please turn to slide eight, where I will provide more details on Q1 earnings. Adjusted operating income was $536 million, with an adjusted operating margin of 17.5%, driven by strong organic growth of 7%, productivity improvements and favorable mix. GAAP operating income was $486 million and included $47 million of restructuring charges and $3 million of acquisition-related charges. For the full-year, we expect restructuring charges of approximately $150 million, driven by footprint consolidations from recent acquisitions and structural improvements. GAAP EPS was $1.13 for the quarter. Adjusted EPS was a new record for the first quarter at $1.15, which was up 37% year-on-year and significantly above our guidance range set 90 days ago.
Additional demand from China and productivity improvements drove the performance above our guidance midpoint of $1. The 37% growth above prior year was driven by all the levers we have in our business model. We benefited from volume fall through on increased sales, acquisition support, share buyback, and a lower adjusted effective tax rate of 19.2%. Versus our guidance view of Q1, the currency exchange headwind was greater than expectations at $45 million of revenue and $0.02 of EPS. As a point of reference, our guidance assumed a dollar to euro conversion of 1.10, and the dollar strengthened significantly against the euro and against most major currencies in the quarter. For the full-year, we are expecting currency exchange rates to unfavorably impact revenue and adjusted EPS by $300 million and $0.16, respectively, versus prior guidance.
I continue to expect full-year adjusted effective tax rate of 20% for fiscal 2017, which is higher than the ETR last year. While nothing has changed in our tax rate assumptions, I want to point out that year-over-year, we get an EPS benefit in the first half of fiscal 2017 and have an EPS headwind in the second half of fiscal 2017. Remember, 2016 and fourth quarter of 2016 tax rates were 17% and 13% respectively. With our 20% tax rate assumption this year, we expect to see year-over-year EPS headwind in the second half of approximately $0.13 due to the difference in our tax rates. This is not a change versus our guidance from 90 days ago, but I wanted to provide some color on the timing.
Page 16 of our slide deck contains a bridge that provides these details for the first half and second half. We turn to slide nine. As Tom mentioned in his opening remarks, our solid results reflect the impact of our transition to a higher margin, harsh environment portfolio, our focus on TEOA, and our capital strategy. Our businesses are generating higher operating leverage as a result of the strategy, and each dollar of sales generates 50% more adjusted EPS today than it did five years ago. Adjusted gross margin in the quarter was 34.8%, a 140 basis point improvement from prior year, driven by volume fall through on increased volumes, productivity improvements, favorable mix, and savings from portfolio actions we have completed.
As noted earlier, adjusted operating margins were 17.5 in the quarter, up 180 basis points year-over-year. In the past, we have discussed how our business model outlines that TE can generate 50 basis points of adjusted operating margin expansion on organic growth of 5%-7%. However, with the transformation of the portfolio and continued successful execution of our TEOA initiatives, we believe that we can generate 50-70 basis points of adjusted margin expansion in 2017 on 4% organic growth, which demonstrates our strong organic model. We will also increasingly discuss adjusted EBITDA at the segment level to help explain the cash earnings of our businesses, as this excludes the impact of amortization from acquisitions.
For TE, adjusted EBITDA margins in Q1 were strong at 22.7% and up 190 basis points year-on-year. To show the progress that we have made, adjusted EBITDA margins are up over 500 basis points from five years ago. Cash from continuing operations was $404 million, and free cash flow was $218 million in the quarter. We returned $234 million to shareholders through dividends and share repurchases in the quarter. Looking ahead, we continue to expect free cash flow to approximate net income, capital expenditures to be approximately 5% of sales. We remain committed to our disciplined long-term capital strategy of a balanced return of free cash flow to shareholders, while still having ample free cash flow for acquisitions.
As a point of reference, we have increased the dividend per share by approximately 300% since becoming a public company. Our balance sheet is strong, with reasonable debt levels and an ability to continue to support the return of capital and acquisitions going forward. We have added a balance sheet and cash flow summary in the appendix for additional details. Now with that, I will turn it back to Terrence.
Terrence Curtin (President)
Thanks, Heath. So now I'll get into our guidance for the second quarter as well as for the full-year 2017. So if you could please turn to slide 10, and I'll talk with the quarter two outlook. We expect second quarter revenue of $3.025 billion-$3.125 billion, and adjusted earnings per share of $1.05-$1.09, representing sales growth of 4% on both a reported and on an organic basis, and 19% EPS growth at the midpoint. This guidance does include the impact of a stronger dollar, which we expect to be a $60 million headwind to sales and a $0.03 headwind to EPS on a year-over-year basis.
Following two consecutive quarters of record-adjusted earnings per share and strong orders in the first quarter, we expect our second quarter adjusted EPS to also be a quarterly record, and our guidance represents a strong first half of fiscal 2017. By segment, we expect Transportation Solutions to grow mid-single digits organically and low single digits on a reported basis due to the impact of the dollar. This is above expected auto production growth levels of 2% in the second quarter, which that growth will be driven by Asia and Europe. Commercial Transportation growth is expected to be driven by China. In Industrial Solutions, we expect to grow mid-single digits overall due to the Creganna and Intercontec acquisitions, and will be up low single digits organically. And in Communications Solutions, we expect mid-single digit organic growth, with growth in all three of our businesses.
Now, if you could turn to slide 11, and let me cover full-year guidance. Relative to our prior review 90 days ago, we are raising our organic growth expectations for 2017 by 100 basis points and raising the midpoint of our adjusted EPS guidance, with better operational performance more than offsetting the headwinds from the strengthening dollar that Heath highlighted. While we are raising our guidance for the full-year, we are maintaining our previous view in the second half by keeping our second half organic growth expectations consistent with our view 90 days ago. I believe this is prudent given the uncertainty in the macro environment, and when you look at the implied trends for first half to second half, please keep in mind the impact of the stronger dollar and the tax dynamics that Heath mentioned earlier, and we have some slide details [inaudible]
full-year, we expect revenue in the range of $12.2 billion-$12.6 billion, and adjusted EPS of $4.30-$4.50 a share. This represents 3% reported growth, 4% organic growth on the top line, and 11% adjusted EPS growth at the midpoint versus 52 weeks of fiscal 2016. Relative to our prior view of revenue guidance, reported revenue growth is down 200 basis points due to the $300 million impact from the currency exchange rates, but organic growth is up 100 basis points, reflecting improvement in the Transportation and Communications segments.
We are raising the midpoint of adjusted EPS from $4.34 to $4.40, which in essence includes a $0.22 increase due to operational improvements and better performance from our acquisitions. This is offset by a $0.16 headwind from stronger dollar. Really highlighting the strong business model Heath Mitts and Tom talked about. I do feel very good about our ability to drive 4% organic growth, expand the operating margins by 50-70 basis points, and generate double-digit adjusted EPS growth in this uncertain macro environment. This is an improvement and demonstrates that the portfolio is delivering, while we continue to benefit from the secular trend of content growth across our businesses.
While much of our operating margin expansion in the past few years have been driven by our Transportation segment, I'm pleased that in 2017, our operating margin expansion will be driven by all three segments, with more contribution from Communications and Industrial. So for the full-year guidance and thinking through the segments, we expect Transportation Solutions to be up mid-single digits organically on 2% auto production growth, reflecting content growth trends and share gains. We also expect commercial transportation to outperform its end market again this year, benefiting from content expansion in the heavy truck market. And we expect Sensors to grow mid-single digits in total year-over-year.
Industrial Solutions organic growth guidance is not changing from 90 days ago, and we continue to expect growth to be up low single digits organically, with continued gains in commercial aerospace and defense, as well as medical. Communications is expected to be up mid-single digits organically, an increase versus our prior year view due to the strength in appliances and data and devices. And as I mentioned earlier, we have hit a milestone of improved performance for our D&D business, progress and growth and profitability is ahead of our prior expectations. We now expect organic growth for D&D in fiscal 2017 in the low single digits, and momentum in SubCom remains strong. And we continue to expect growth in the mid-single digits for the year in SubCom.
Before I turn it back to Tom for closing comments, I do want to highlight that this is Tom's last earnings call as our CEO, after doing about 40 of these earnings calls with you all. I do want to say, on behalf of the leadership team, as well as our 70,000 employees, I want to publicly thank Tom for his leadership over the past 10 years. With that, Tom, I'll turn it back over to you for closing comments.
Tom Lynch (Chairman and CEO)
Thanks, Terrence. I appreciate that. Well, to sum things up, this was a great quarter and positions TE for another very good year of performance. Our portfolio is focused on the right markets, and we are the leader in the vast majority of these markets. We are consistently improving our customer satisfaction, growing margins and earnings per share, and returning capital to shareholders. Most importantly, though, we have a strong, passionate organization across the globe that really is dedicated to providing our customers with an extraordinary experience. It's making a difference. Our customers are giving us the feedback, they're giving us more opportunity, and it's definitely showing up in the financials. As this will be, as Terrence mentioned, my last earnings call, hard to believe, where does the time go?
I also want to take a moment to thank all of our investors and the analysts who have covered us. I really have enjoyed our relationship over the past 10+ years. It's been very rich. And most importantly, I want to thank the entire TE team for the greatest experience of my career. It's hard to imagine that you could be this fortunate to work with a team like this for this long. In March, Terrence will succeed me as CEO in a very well-planned transition. Terrence is uniquely positioned to take TE to the next level of performance, and I really just couldn't feel any better about this succession. I'm really, we've worked together for, since the beginning.
He's been a driving force in building this company, and he has a clear vision for where to take it and a really strong team to work with to go there. So I will miss it, for sure, but it is the right time to turn it over to this team. So with that, let's open it up for questions.
Operator (participant)
Okay, ladies and gentlemen, if you'd like to ask a question, please press star then one on your touchtone phone. You will hear a tone indicating you have been placed in queue. You may remove yourself from queue at any time by pressing the pound key. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press star one at this time. And in order to get through as many questions as possible today, please limit yourself to one question and one follow-up. One moment, please, for your first question.
.Your first question comes from the line of Wamsi Mohan from Bank of America. Please go ahead.
Wamsi Mohan (Managing Director and Senior Equity Research Analyst)
Yes, thank you. Good morning. Hey, Tom, good luck. It's been a pleasure, and, hey, you're handing over the reins here on a high note with all-time margin highs. So for my question, you know, you had really strong auto revenue performance relative to production growth in the quarter, reflecting some really strong content growth. I was wondering if you could share some color around this content growth, where that was strongest regionally and some of the drivers that supported it, any color around that? And looks like when I look at your full-year guide for the auto segment revenues relative to production, it looks like the relative growth delta sort of slows down through the course of the year.
So is that just conservatism, or what, what are the dynamics that you're seeing there? And I have a follow-up.
Terrence Curtin (President)
Yeah, Wamsi , let me take that.
Wamsi Mohan (Managing Director and Senior Equity Research Analyst)
Go ahead.
Terrence Curtin (President)
When you look at it, you know, the first quarter was a very strong quarter, and it was driven out of Asia. We saw, I think, continued trends around sort of North America being flat, but we also did have growth in Europe. When you think through the content, it's broad-based. It is not one application, and I think really what it comes into is both the content and the share gains and represents our strong global position that we have throughout automotive. I think when you look at the year, like I said in the guidance, you know, we did expect automotive in the second half of the year, production to slow down versus the first half, and we kept that the same.
We still feel when you get to the second half, while production globally, we assume to be relatively flat, we're gonna still drive mid-single-digit organic growth, which proves that organic content and growth story. So it's just one of the elements of how production is with the strong Asia part in the first half, a lot of it driven by China, but the content along all the trends we have, whether it's the electrification of the car, how the car gets more connected, or around the green side of the car as emissions and electronics get put on. So it isn't one specific area, it's really the culmination of all the trends that we talked about.
Wamsi Mohan (Managing Director and Senior Equity Research Analyst)
Okay, great. Thanks for ,thanks for that color, Terrence. And, as my follow-up, any early thoughts here on the potential impact from a border-adjusted tax? Or, or more broadly, maybe you can just talk about your manufacturing footprint today and how, how that might possibly change under different scenarios that might play out here with the new administration. Thanks.
Terrence Curtin (President)
Hey, Wamsi, it's Terrence again. So, you know, as you know, we produce where our customers consume. So when you look at our footprint and a lot of the work that we've done to get our capacity to the right part, that Tom and Keith talked about in their prepared comments, we feel very good about where our footprint is aligned with where our customers are. So we are fairly balanced when it comes in to that element. How the border tax comes out, I think we all have to sit there and wait to see how that does. You know, when we sit there today, we like where we're positioned manufacturing-wise, and we'll keep you all updated. Clearly, on things in tax related to repatriation, being a Swiss company, that doesn't really impact us positively or negatively.
From that viewpoint, when we look at the guidance we gave you, it's pretty much a steady state guidance as we think about it.
Wamsi Mohan (Managing Director and Senior Equity Research Analyst)
Okay, great. Thanks a lot, Terrence, and good luck, guys. Great, great results.
Tom Lynch (Chairman and CEO)
Thanks.
Terrence Curtin (President)
Thanks, Wamsi.
Thanks, Wamsi. Can we have the next question, please?
Operator (participant)
Next question comes from the line of Craig Hettenbach from Morgan Stanley. Please go ahead.
Craig Hettenbach (Executive Director)
Yes, thanks. First question, just wanted to touch on kind of the near-term environment. As you said, you're maybe taking a hopefully conservative approach to the back half of the year and not flowing this through. But just, I feel like we've been here in the last few years, a couple times, where there's been some glimmers of expansion and it kind of fades. So anything different you're seeing from customers or any types of inflections, design-ins, things like that, that you'd kind of compare and contrast where we are today versus the last few years?
Terrence Curtin (President)
So I would say, Craig, I think there's a couple of things. One of the things that if you look at the quarter, it's very broad-based across all our businesses, and that's something you haven't seen in a while. I would also say, both through our direct customer relationships, I would also say our channel partners, you see some confidence in some of their activity. The other thing that I would say is, it is across, you know, our orders grew in all three regions. So there is, to your view, some glimmer of, I think, a constructive background around our markets. But I would also say there's still uncertainty in the macro when you deal with things like the currency rates, that's why we have kept our back half the way it is from where we guided.
So when we sit there, I do think you're gonna continue to see improvement. Clearly, you're gonna see improvement in our industrial and communications segment as we go through the year. I think the order trends and some of the comments we made, you know, show very strong trends that we're excited about. And then also the element around D&D growth. You know, that's not a headwind after we did a lot of pruning to get that business focused on applications where we thought we could get paid for the great engineering and serve our customers for that we do. So I do think there are some positive glimmers and momentum, not only in the business, but in the markets we serve.
So I do think it feels a little different from a backdrop than it was a year ago or even during certain times last year.
Craig Hettenbach (Executive Director)
Got it. Thanks for the color there. And then just as a follow-up, I know the company's highlighted from an integrated product perspective, the opportunity in transmission applications. Just wanted to get an update, kind of where you are there. And then really even beyond that, are there other types of applications within autos where you see the potential for some integrated products?
Terrence Curtin (President)
Certainly, when you think about integrated products and where we bring, sort of, giving much more than just an interconnect product, but other technologies like sensors, and sometimes even some of our cable technology and material science, it does go broader than transmission. I know we use the transmission example as one to bring it to life, but it is in brake applications, it is in e-track applications. It's throughout, the auto is where we get those. So it is much broader than that, and probably what we should do is bring some of those others to life as we talk to investors.
I know we've been talking a lot about the transmission example, but Craig, I think the important point is, when you see the content growth that we're driving above production like we did in the first quarter and what we've guided for the year in auto, it's those integrated solutions that help drive that content up. That's why we have confidence that over time, what we do around $60 today, over the next five years, we can take up to that $80 range, not only from the trends that we benefit from, but also bringing those integrated solutions to our customers, and we become more important to them, and serve them anywhere they are in the world.
Craig Hettenbach (Executive Director)
Okay, thanks.
Terrence Curtin (President)
Thanks, Craig.
Heath Mitts (CFO)
Thanks, Craig.
Terrence Curtin (President)
Your next question, please.
Operator (participant)
Your next question comes from the line of Amit Daryanani from RBC Capital Markets. Please go ahead.
Amit Daryanani (Equity Research Analyst)
Yep, thanks. I have two as well, but first, congratulations and best of luck, Tom, on your next chapter.
Tom Lynch (Chairman and CEO)
Thanks, Amit.
Amit Daryanani (Equity Research Analyst)
You know, I guess, just to start with on the transportation side, you know, Terrence, could you just quantify, did you say 20% op margins plus or minus 100 or 22% for the rest of the year? And within that, I'm curious, what sort of headwind do you think you have in transportation right now from sensor segment margins being below the transportation averages? And if you would quantify that part for us.
Terrence Curtin (President)
Sure. My comment was 20%, plus or minus a percent, so I, I appreciate you being aggressive. And well, on the sensors, you know, sensors, actually, you know, we all know that that's running single digit as we continue to invest ahead of the ramps we have ahead of us that will begin in 2018. So we do think that that will be a lever over time as those programs ramp, but we still have significant investment in those programs. So as we've talked to you, we do think that that will get up to mid-teen EBITDA over time, but we are gonna make the investments to win and ramp those programs, and we are, from a margin perspective, investing ahead.
So I do think that's something that will have a little bit more of a tail on it, but it will help the transportation margins over time.
Amit Daryanani (Equity Research Analyst)
Got it. So eventually, it will be 22% ±100, just not right now. You know, I guess, maybe a follow-up. You know, if I look at your full-year guide, right? Either on the op margin expansion that you guys are talking about or really the EPS growth, it all seems very first half heavy to me. The back half margins, I think, are implied flat. EPS is probably down, I think, in the back half, and I get the tax rate adjustment is a big factor there. But, you know, I guess just talk to me about, given the strength you're seeing in end demand, your order book is really good, your book-to-bill is really strong. It doesn't seem like you're extending this positivity into the back half of the year.
What holds you back, and what refrains you from doing that right now?
Heath Mitts (CFO)
Amit, this is Heath. You know, I think we're taking a prudent view of the back half of the year, just with the certainly, we're benefiting the first half from some very strong Asia auto, but the broadening strength across the portfolio is encouraging. And, you know, we'll continue to update you as we move along throughout the year. I would say we just wanted to make sure that people well understand the second half impact of the higher assumed tax rate relative to some lower tax rates we had the prior year in the second half. And then the FX, the anticipated FX headwind is more significant in the back half. So from a those will impact how we think about year-over-year second half EPS.
From a margin perspective, you know, we admittedly, the 17.5 is everything pointing in the right direction from a mix and everything else in the quarter. And we're taking a prudent view as we look through the back half of the year. But there's nothing that I'd say artificially inflates that 17.5, and nor do we expect something that comes in that is, you know, significantly unfavorable other than just the operating activities in the back half of the year, so.
Amit Daryanani (Equity Research Analyst)
Perfect. Thanks a lot, and congratulations on a nice win, guys.
Terrence Curtin (President)
Thanks.
Heath Mitts (CFO)
Thank you.
Terrence Curtin (President)
Thanks. Can we have the next question, please?
Operator (participant)
Your next question comes from the line of Jim Suva from Citi. Please go ahead.
Jim Suva (Managing Director)
Thank you very much. Many of the questions and comments before this were focused on the auto sector and transportation, which is rightfully so. So I think my follow-up questions I'll ask on the other segments, and that is, two questions, and I'll ask them at the same time. First, on industrial, you know, we do note that oil prices are up year-over-year, so one would hope that maybe that would help out with, say, the industrial segment some. Is that starting to kick in? Or maybe I'm off on what the key performance leading indicators are that you're looking at, or how should we think about that? And especially with the new presidential Trump administration signing in things like Keystone product, you know, EPA changes and things like that, how should we think about it?
And then my follow-up question is on the SubCom business. You mentioned, you know, last year you got a benefit, of course, but your, your guidance on SubCom looks a bit different than, say, some of the other customers and competitors who are seeing extremely strong SubCom pipelines. And, I'm just kind of curious about what you're seeing on the, on the SubCom side. Thank you.
Terrence Curtin (President)
Sure, Jim, let me take both of those. So let's start with oil and gas. Number one is, when you look at our oil and gas business, we basically are seeing stabilization. And that stabilization, we're happy to see. Certainly, we hope upside comes as oil moves, but right now I would say, as we see it from the programs we're exposed to, it's much more around stabilization than I would say any ramp up. The other element that I would say, when you think about our oil and gas business, it is very much around oceanic oil. So pipelines, land-based, we are not as strong in that. So on that, it is important to understand ours is really around offshore oil and gas, and the indicators around that are really offshore rigs.
So where we see things right now is it's still stable and our guidance is still stable, and hopefully, we get some benefit from some of the things that President Trump is talking about, that those kick in and help them, that to give us a little bit more upside in the industry. But that's not assumed right now. On SubCom, feel very good about where we're at. Similar, really, not much has changed since last quarter. Our guidance for the year is to be up 5%, you know, that will put us well over $900 million in revenue. Our backlog, we are booked for the year. So really, when we look at the programs that we win throughout this year, it's really around 2018. So 2017 is very locked and loaded.
Our team's working very hard to execute to the backlog with where we are from an execution perspective, and really program, I'd say, it's a pipeline of programs that we're quoting and trying to win. It's still very active, so we still think we're in a growth phase, but I would just say right now, the 5% that we talked about last quarter, being up year-over-year, even though we were down a little bit due to timing in the first quarter, we feel right in front of us, and it's really around execution for us this year. So, clearly benefit from cloud applications, not only in SubCom, you heard it in D&D, where we've also had that benefit of the hyperscale customers, and we're getting benefits in both the segments from this.
Jim Suva (Managing Director)
Okay, thank you for the details. Much appreciated.
Terrence Curtin (President)
Thank you, Jim.
Tom Lynch (Chairman and CEO)
Thanks, Jim.
Operator (participant)
Your next question comes from the line of Sean Harrison from Longbow Research. Please go ahead.
Sean Harrison (Senior Research Analyst)
Hi, good morning. Wanted to just, I guess, get the earlier recovery within Data and Devices and maybe just kind of, you know, what brought about the earlier recovery? You know, did the wins ran faster? And maybe just, you know, what could be the growth rate within that business going forward, since we really don't have a comp for the past couple of years, given the pruning and the business sales and everything else?
Terrence Curtin (President)
Yeah, sure, Sean. If you look at it, it really comes down to penetration on high-speed applications and with the growth on how they're ramping with some of our the cloud infrastructure providers and hyperscale customers. So really, when you look at it, those customers are probably about 20% of our Data and Devices businesses today. We've been focused on it, and the adoption that we're seeing and the ramps that they have done have been a little bit quicker than we expected. So I think the momentum that you've been waiting for and we've been waiting for, we're very pleased it's six months ahead, and it actually shows the design wins and the execution momentum we're getting in the business again to drive growth.
90 days ago, we told you we were probably gonna be flat in Data and Devices for the year organically, with growth in the second half. We posted 200 basis points here. We do think it'll be in the low single digits for the year, but I think you're gonna get growth throughout the year. And I think the real thing that you should assume right now is that we believe this business can be a low single digit organic grower right now, and it's really gonna be as we continue to build our product focus there, how much higher can we take it? But I would still say, what's great is we're at that inflection point that we've been waiting for, and it's a real testament to the team getting that momentum sooner and certainly been focused on the customer organization.
So really pleased with where we are with it, because it's also focused on the right customers and getting wins with the right customers, everywhere in the world.
Sean Harrison (Senior Research Analyst)
That's helpful, Terrence. And then, if I may, a follow-up for Heath. I think that the restructuring charge for the year may have went up a bit, maybe I'm wrong, but I was hoping you could actually speak now that you've been there for more than a few, a month or so, I think the last with the last call. Just to kind of maybe some opportunities in terms of just, you know, maybe leaning out the organization and how you're going to approach M&A going forward. Maybe some, you know, are there opportunities like Intercontec that are out there in the TE portfolio, you know, TE kind of funnel that, you know, we could see close during the year? So if you could just touch on those topics, that'd be great.
Heath Mitts (CFO)
Sure. Well, a couple of different angles there. We did inch up the restructuring comments from 90 days ago. And largely, you know, that's. There's not one item on there that drives it. There's a list of several things, particularly around some footprint consolidation that continues to go on for deals for acquisitions that have been completed over the last few years. And largely, that's facility consolidation. And then there are some structural things that we look at and will continue to be ongoing, I'd say for this year and probably into the early part of next year, just in terms of how we're organized and the layers within the company.
So, more to come on that, but I think we're sharpening our pencils, certainly. Not all $150 million of that. But, you know, on the M&A side, certainly we're active. You know, Intercontec has been a great performance out of the gate. We're also very pleased with the performance on the medical side. Creganna is, they're well, both of those are well ahead of the deal model expectations, and are executing very well. And Creganna, we will anniversary here a little bit later this quarter in terms of the first full-year in our portfolio. That medical space has continued to have legs to it.
So looking at things along that, maybe not the same size, necessarily, of a Creganna-type transaction, but some things that are a little bit closer to Intercontec size, or something, plus or minus in that range, that have good margins and where we can get to a return on invested capital, maybe a little quicker than historically we have. So, lots of opportunity out there, but we'll be choosy and spend the shareholders' dollars wisely.
Sean Harrison (Senior Research Analyst)
All right. That's great. Well, congrats on the quarter, and Tom, thanks for all the help over the years. I appreciate it.
Tom Lynch (Chairman and CEO)
You're very welcome. Thank you.
Sean Harrison (Senior Research Analyst)
Appreciate your time.
Terrence Curtin (President)
Thanks. May we have the next question, please?
Operator (participant)
Your next question comes from the line of William Stein from SunTrust. Please go ahead.
William Stein (Managing Director and Senior Equity Research Analyst)
Great. Thanks for taking my question. Congrats to everyone on the new roles, especially Tom. You've really transformed this thing from the old Tyco. But I did
Terrence Curtin (President)
Thank you.
William Stein (Managing Director and Senior Equity Research Analyst)
Have a question on the sensor demand. It sounds like you're lowering that outlook modestly. We had thought that this would be sort of an accelerating market for content, share, and integration. Can you offer us, offer us a little bit more detail on how that market's progressing for you and how it's- how you expect it to perform over the next several quarters?
Terrence Curtin (President)
Yeah, a couple things. Well, thanks for the question. Our expectations around sensors has not changed for this year. Overall, we expect growth to be mid-single digit. The only change we would have would be due to FX. So our expectation has not changed versus where we were. I think when you look at it, you know, certainly, we did get impacted in our sensor business by the same thing that impacted our industrial business since we bought Measurement. And Measurement was very much focused on industrial applications. So as there was the industrial recession going on that impacted our industrial segment, it did also impact the Measurement asset that the growth was a little bit slower.
What we really get excited about was when we bought Measurement, we basically signed up to scale it and use our go-to-market to take that great measurement technology into different markets, like automotive, into places like industrial transportation. Really, those program wins and that momentum there is very strong. That program pipeline is strong, but as you know, those programs don't you don't win them today and ship them in three months. They're programs that we've been building over the past couple of years, and really, you're going to see the growth of that really in 2018, is when we're going to start having some of our launches. It's why we're investing ahead in sensors in front of those programs, and, you know, in some cases, that they are integrated products.
They're not just a sensor element, they are things that also have additional things on them. So we feel very good that we're leveraging our go-to-market to get those wins. Certainly, you're not seeing them in the numbers yet, and 2018 is when you're going to start to see those come through in revenue, and, you know, I'm going to be excited to show it to you in 2018. It's just you're not going to see it in 2017. It's just not where the program ramps are.
William Stein (Managing Director and Senior Equity Research Analyst)
That's actually really good color, and my follow-up's related to that. It's, it's pretty brief. Those gains that you're ramping now in terms of the design wins, where we'll see revenue in 2018, would you expect those to wind up coming at the expense of another company already in that space, or are these brand-new applications? And I assume it's mostly in automotive.
Terrence Curtin (President)
Yeah, no, they are, you know, a big chunk are in automotive, and they're among many technologies. So they're humidity, they're temperature, they're pressure, they're among many different technologies. And in the sensor space, the fragmentation around the sensor space really makes it that, you know, you compete against different people, not one competitor. So what's really great about the programs we've won is they're among varying technologies. They're in different regions of the world, which really shows the strength of our go-to-market, and it also proves out some of the business case that when we bought Measurement to get these technologies, how do we leverage our go-to-market in places where we have very exceptional leadership positions, like in our transportation segment. We're leveraging it.
We'll continue to share those as they ramp, but 2018 will be the year where you'll start seeing it in the numbers versus just our words.
William Stein (Managing Director and Senior Equity Research Analyst)
Thanks, and congrats again on the great print.
Terrence Curtin (President)
Thanks, Will. Thank you.
Heath Mitts (CFO)
Thank you, Will.
Operator (participant)
Your next question comes from the line of Mark Delaney from Goldman Sachs. Please go ahead.
Mark Delaney (Managing Director and Senior Equity Analyst)
Yes, good morning. Thanks very much for taking the questions. Congratulations on the good results, and Tom, let me add my best wishes for you going forward.
Terrence Curtin (President)
Thanks, Mark.
Mark Delaney (Managing Director and Senior Equity Analyst)
The first question is just specifically on Asian auto. You know, there's talk about some potential slowdown there, on the call. I mean, if we strip out the FX impact, you know, $440 becomes $456 for full-year guide, and you guys are on a $460 run rate. So it seems even excluding FX, there is some slowdown baked into to the business as we go through the year. Is there anything you're actually seeing in the Asian automotive business that's starting to slow down, either in terms of orders or customer conversations, or is that just you're doing your best to forecast a potential change there for the back half?
Terrence Curtin (President)
When you look at it, Mark, similar to last quarter, we knew there was this China incentive that was ending at the end of the first quarter. We expected sort of being phased out throughout the year, we do expect production to still stay strong into the second quarter, but there still is an element of when you have incentive, it is a pull forward of demand. And so when we look at it, in talking to our customers, they have told us they expect production to moderate in the second half versus this very strong level we're gonna have in the first quarter and continue a little bit in the second quarter. So it's not really different than what we thought before. It's just we're getting a little bit of just increased production due to the incentive being phased out.
So when we look at the second half, the second half is identical to where we were 90 days ago, and if there's more incentives around China, I would expect we would benefit from it, but they're not there yet, and we're really aligned with our customers. So, you know, like we said, we expect auto production in our third and fourth quarter to be relatively flat globally, but we expect organic growth in our automotive business, even in a flat environment, due to our content and share gain. So when you look at that, year-on-year, we do expect growth in transportation in a flat backdrop production launch right now.
Mark Delaney (Managing Director and Senior Equity Analyst)
That's helpful. The follow-up question is on margins. I mean, gross margins in particular came in very nicely, 34.8%. I think it's all-time high, certainly more than I was looking for. I think there's comments there was nothing unusual in there, but there's guidance that seems assumes margins moderate as we go through the year. Can you just tell us specifically, how should we think about the gross margin line and, and what, what sort of factors helped you get to that 34.8%? And, and why should we expect it to come down as we move through the year on, on the margin level?
Heath Mitts (CFO)
Well, I think it's similar to the same answer that I provided earlier on the overall operating margin. I mean, I think in the quarter, certainly, we benefited from the volume being higher than maybe what we certainly guided earlier. And then we also got some favorable mix in the quarter in terms of just geographically where things were delivered. So, you know, I don't think we're looking at a significant drop in gross margins, but you could be within a point or so.
Mark Delaney (Managing Director and Senior Equity Analyst)
That's helpful. Thank you very much.
Terrence Curtin (President)
Thank you, Mark.
Thank you, Mark. We have the next question.
Operator (participant)
Your next question comes from the line of Steve Fox from Cross Research. Please go ahead.
Steve Fox (Managing Director)
Thanks. Good morning. First of all, Tom, not to date myself too much, but if I think back to what you were handed when you took the job, I never would have thought you would have been this successful with the business, but congratulations
Tom Lynch (Chairman and CEO)
Thank you very much.
Steve Fox (Managing Director)
on everything you did.
Tom Lynch (Chairman and CEO)
I appreciate it.
Steve Fox (Managing Director)
Truly one of the better managing jobs I've ever seen. So in terms of just big picture question, if I could, one of the things I noticed at the last CES I attended in January, was that a lot of the tier one OEMs are sort of moving further up the stack, and I'm thinking of guys that also make sensors and connectors. And as they do that, it seems like they're looking to put more turnkey solutions out there, integrating some of the products that you're focused on. And I was curious if you think that that's either a competitive threat, maybe pressure to margins, or how you would deal with that in your own roadmap going forward? And I know that's a longer term question, but I was just curious what you thought. Thanks.
Terrence Curtin (President)
Tom, do you want to start with that, and I'll jump in then?
Tom Lynch (Chairman and CEO)
No, I think you should take this one, Terrence. Go ahead.
Terrence Curtin (President)
Yeah, no, when you look at it, clearly we view that as an opportunity. When you get into any integration, and one of the things that's great about the business that we've always had is, we benefit from electronics trends, but we also get, you know, integrated out due to electronics trends. You know, connectors can be integrated out by semiconductors and so forth, but because there's more electronics happening, it also creates a net content opportunity. I think when we look at it, Steve, it's really around, it creates more opportunity because of the abilities we have and the value we provide to our customers.
So as we sit there, it's why we get excited about our content in auto being able to grow from the 60 to the 80 that we talk about, because what sensors brings to it, how we integrate these things in, I mean, we probably aren't to a turnkey level like you described or how I think about it, but that integration we provide to allow somebody to get to a turnkey level is very important, and that drives the content growth opportunity. And the stickiness we have with our customers and via our engineers basically creates so much more opportunity. So we view it as a net-net opportunity. We don't view it as displacement, because we are very close to the architecture of the vehicle, what we do. And that is a very important factor as people continue to evolve the architecture.
The role that we play in partnering with the OEs and the tier ones, both of them are our customers, is really what we get excited about, and why we're so buoyant on the content opportunity. So it's all plus.
Steve Fox (Managing Director)
That's helpful, Terrence. And then just a quick follow-up to that. I guess as it applies to acquisitions, would you envision acquisitions still being focused on sort of discrete sensor and connector technologies? Or are there other materials and integration skills that you may add through deals?
Terrence Curtin (President)
I think when you look at it, I think you can always think that we will always have priority towards the component side, but even when you take a Creganna, that is doing more than just a component. So I think you will see things over time that can add integration type skills. But I think it'll be a balance of both, and it'll be how does it tie into our strategies in the different markets? I think you've seen us move into that with Creganna, where we had more of the components. They had much more of a fuller assembly and integration capability than we had, and that's one of the things we get excited about because our customers in medical wanted that, and we could bring it up organically alone.
So I think you'll see a little bit of a different answer at different markets.
Steve Fox (Managing Director)
Great. Thank you very much.
Terrence Curtin (President)
Thanks, Steve. Thanks, Steve. We have the next question.
Operator (participant)
Thank you. Your next question comes from the line of Matthew Sheeran from Stifel. Please go ahead.
Alvin Park (Analyst)
Yes, hi, this is Alvin Park speaking on behalf of Matt Sheeran. First of all, Tom, congratulations and wish you the best of luck.
Terrence Curtin (President)
Thanks very much.
Alvin Park (Analyst)
Yeah, just on, in terms of commodity pricing, prices have been increasing, particularly for copper. So could you give some insight into how that might affect gross margins going forward for the rest of the year? And if you'll be able to pass those costs along to the customers?
Heath Mitts (CFO)
Well, in, as we think about fiscal 2017, we do not anticipate a material impact from that, but that's largely because of our hedging programs that we have in place that protect us in the near term. We will obviously monitor that as we go forward, more thinking about the impact of 2018, and how we want to handle that from both a hedging as well as how we incorporate that into our cost pricing structure. But for 2017, at this point, there's enough back balance and back and forth in terms of where we're seeing the different commodities move, as well as where we have our programs in place that we don't anticipate that being an impact.
Alvin Park (Analyst)
I see. Then another quick follow-up. On D&D, you talked about cloud infrastructure, and I think in a previous question, you mentioned that the cloud infrastructure opportunity represents roughly 20% of D&D. And I think you mentioned hyperscale and the likes, but could you give some more color and details in terms of what areas of penetration and what opportunities you look to see going forward?
Terrence Curtin (President)
When we look at it, we very much have focused portfolio around high-speed applications. So if you went back five years ago, we would've talked to you about consumer electronics, devices, and it's very much as we've gone through our journey there, the reposition has been very much around high-speed applications and the great product breadth we have around that, which also includes miniaturization with high speed being coupled together. So when we sit there, it is really around the hyperscale provider, be certainly the big four, and the people that also help them build out the cloud. So that's the ones that we've been penetrating very well. We're very pleased with that they're 20% of our D&D business today, and that's gonna be the area we continue to invest in on the high-speed side.
Alvin Park (Analyst)
Thank you. Thank you very much.
Heath Mitts (CFO)
Thank you.
Terrence Curtin (President)
We have the next question, please.
Operator (participant)
Your next question comes from the line of Sherry Scribner from Deutsche Bank. Please go ahead.
Sherry Scribner (Director and Senior Research Analyst)
Hi, gentlemen. Thank you. I just wanna ask a question sort of at a high level. If you think about the update that you're giving us versus 90 days ago, it sounds like there's a bigger FX headwind than originally thought due to the stronger dollar. But your organic outlook for transportation and industrial is really unchanged, maybe a bit more front-end loaded. But on the communication side, it sounds like you have a bit more of a positive outlook for the full-year. Is that driven by sort of a re-acceleration in SubCom through the year, or is that driven by the better outlook in data devices? So I guess, one, is that sort of the right way to think about it, and two, what's driving that better outlook in communications?
Heath Mitts (CFO)
Well, I think the first part of your assumption is accurate. Obviously, the strengthening dollar in the quarter versus our prior guidance has added some headwind to the year. We're quantifying that at roughly the current rates about $300 million versus our prior guidance on revenues. In terms of our outlook by segments, your comment, you know, we're still projecting Transportation to be mid-single digits, but on the higher side of mid-single digits than what we had thought 90 days ago. Industrial, right on track in terms of what our prior guidance is, and you're correct on Communications. We have moved that from low single digits up to mid single digits in terms of organic growth for the Communications segment.
That's largely, that increase is largely driven by appliances and D&D, though. SubCom is unchanged since our last projection. We feel good about the SubCom number. It's all down to execution. That's fully booked up. But the change there, with the bias towards the upside, is coming from the better projections out of D&D and plans.
Sherry Scribner (Director and Senior Research Analyst)
Okay, great. And then can you just give us some high-level thoughts on what you're seeing geographically in the industrial business? Thanks.
Terrence Curtin (President)
Sure, Sherry. One of the things I mentioned was, I'm very pleased globally, geographically, that across the TE, we had growth in all regions. When you look at the industrial segment, we talked a lot about Asia with communications and transportation during our comment. We also had nice growth in industrial in Asia. We're about 6% organically in Asia in the quarter, and orders were up about 18% in Asia as well, so on an organic basis. So we saw it there. We continued to see Europe in a nice position organically, you know, sort of low single digits. And lastly, on an order side, in North America still is relatively flattish in the industrial space for us organically, and we do expect that through the year, with some of the Com Air programs and medical, that will tick up.
But really, we saw a lot of strength in Asia.
Sherry Scribner (Director and Senior Research Analyst)
Thank you.
Heath Mitts (CFO)
You're welcome.
Terrence Curtin (President)
Okay. Thank you, Sherry.
Tom Lynch (Chairman and CEO)
Thanks, Sherry.
Terrence Curtin (President)
If you have further questions, please contact Investor Relations at TE. Thank you for joining us this morning, and have a nice day.
Operator (participant)
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