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Heath Mitts

Thank you, Terrence, and good morning, everyone.
Please turn to slide 7. For the quarter, adjusted operating income was $805 million with an adjusted operating margin of 19.4%. GAAP operating income was $748 million and included $12 million of acquisition-related charges and $45 million of restructuring and other charges.
For the full year, our view of restructuring is unchanged at around $100 million. Adjusted EPS was $2.10 and GAAP EPS was $0.04 for the quarter and included a one-time non-cash tax charge of $1.91 due to a change in tax law as well as restructuring, acquisition, and other charges of $0.14.
RB versus guidance was driven by strong operational performance in both segments. The adjusted effective tax rate was approximately $0.22 in Q2 and we expect both the third quarter and the second half adjusted tax rate to be in the 24% to 25% range.
The higher tax rate will result in a $0.06 sequential headwind to EPS in the third quarter. For the full year, the adjusted tax rate is expected to be roughly 24%. And as a reminder, the increase versus the prior year is primarily related to the impact of the Pillar Two global min tax and jurisdictional mix of our earnings.
Importantly, and as always, we anticipate our cash tax rate to be well below our adjusted ETR.
Now if you turn to slide 8. Sales of $4.1 billion were up 5% organically year over year. Adjusted operating margins were 19.4% in the second quarter, expanding 90 basis points year over year. Adjusted earnings per share were $2.10, a company record and up 13% year over year driven by revenue growth and margin expansion.
Turning to cash flow. Cash from operations was $653 million and free cash flow was $424 million. Through the first half of the fiscal year, cash flow was $1.1 billion. We continue to expect our free cash flow conversion to be over 100% this year.
While we are in a dynamic environment, I feel comfortable with where we are as a company and our ability to effectively navigate through this. Our cash generation and healthy balance sheet positioned us well and provides us optionality with uses of capital.
Through the first half of this fiscal year, we returned approximately $1 billion to shareholders and as Terrence mentioned, we recently made an announcement to raise our dividend by 9%. And also as Terrence mentioned, earlier this month, we deployed $2.3 billion of cash for the Richards acquisition in our energy business.
All this activity demonstrates the strength of our balance sheet and the confidence we have in our cash generation model. We will continue to monitor the environment as we make decisions on capital deployment going forward.
And let me add a couple of other details on our third quarter guidance that Terrence shared. First, we are including Richards, which contributes roughly $70 million to sales and is roughly neutral to adjusted EPS, including the impact on financing.
The second item I want to cover is the tariff impact that is factored into our Q3 guidance. For those products that are affected by enacted tariffs, we estimate a cost impact of approximately 3% of sales. We anticipate that about one-third of this impact will be mitigated by sourcing changes by TE and our customers, and we expect to recover the vast majority of the remaining two-thirds of the tariff impact through pricing actions, which will represent about 2 points of price related to tariff recovery in the third quarter.
These are the actions that we can control with the direct impact, and we will continue to work with our customers as they evolve their supply chain strategies.
Before I turn it over to questions, let me reinforce that we are executing well to deliver strong results and have positioned the company to successfully navigate the current dynamic environment.
So with that, let's open it up for questions.

Sujal Shah

Ellie, can you please give the instructions for the Q&A session?

Question and Answer Session

Operator

(Operator Instructions)
Scott Davis, Melius.

Scott Davis

Congrats on the numbers and on all this. It's encouraging.
I have to ask on the tariff stuff just because it's so topical right now and what people are focused on. But there's another kind of concern that people have, and that is an anti-American sentiment in the supply chain that perhaps certain regions may favor local suppliers versus US suppliers.
And talk through us. And I guess the other kind of natural question is that it sounds like it's easier to get price within your auto contracts. Is that because specifically in your auto contracts, they -- it allows for changes in pricing if there's tariffs?
I just want some clarity on that, but I'm more interested really in the geopolitical challenges and what that does perhaps to the US company like TE.

Terrence Curtin

So twofold. Let me take the second part first, Scott, on the pricing. The tariff impact that we have is much more in our industrial segment than our transportation segment. Because of our global scale and how much we make in region, the tariff impact that we even talk about is much more in our industrial segment where we have more fragmentation and a little bit where you're crossing borders.
So when you look at it, there will be elements where we will be doing surcharges for tariffs and transportation. But in the numbers, Heath highlighted, the vast majority relates to our industrial segment, and we've been working with our automotive customers for that part on mitigation, sourcing, how do we do supply differently as well as moving tools.
So I want to make sure that's clear. On your anti-American sentiment, I think there's a couple of things that are important that our teams are viewed very locally. When you think about how our business model works, it is local teams designing with the design centers.
It's also manufacturing and sourcing that's done from a localization. So you get that feel. That's very local. We are an extremely global company. Yes, we have American executives at the top. But when you look at really what our customers see, it is very much driven down into those local markets, whether that is in China, whether that's in Germany, whether that's in Japan, whether that's Brazil, everywhere.
And localization has always been a big part of our strategy that how we do business. As you see in our China auto results as well as China overall, we have good traction. We have not seen anti-American sentiment around what we do.
But it is certainly something we always keep in front of us. And it's something that we've run locally for a long time and that's why that tariff amount is as low as it is because we've always said we want to be tied to the design center locally as well as to the supply chain locally and we don't export things from the United States elsewhere to the world.
I think that's a key element when you look at it. These tariff impacts are really where for what we do in the United States, which is about $4 billion of our $16 billion-plus of revenue, it really is things that we bring in from scale from elsewhere in the world.
And we'll have to look at do we move some of that tooling to be much more local here as we work through our mitigation strategies.

Sujal Shah

Can we have the next question, please?

Operator

Mark Delaney, Goldman Sachs.

Mark Delaney

I'm hoping to better understand how tariffs are affecting your outlook by end market and to what extent that's informed by your recent customer conversations and order patterns, including in April. And importantly, as you think about how tariffs are affecting your views by end market, what gives you confidence that there isn't a material amount of pull in sales occurring in the near term due to tariffs?

Terrence Curtin

Yeah. Let me talk about the pulling question and then I'll get into some of the market dynamics. First off, while there were discussions with customers about maybe thinking about, hey, do they pull some things forward, I would tell you they were just scenario planning.
We did not see anything meaningful, whether it be from our direct customers or our distribution customers. So when you look at it, I think in an environment where lead times are relatively normal, there's inventory available because we've been through the supply chain elements as well as uncertainty.
It's not something where people say, hey, I want to pull things forward, and we did not see pullings meaningfully. As I said on the call, our orders have been remaining stable. There are a lot of customer discussions of how do you work through the mitigation strategies where you do have tariffs.
And our teams have continued to work with our customers on the things that they have choices they can make. We also have things that we're proposing to say how do we work through, to say how do you do as much as you can to localize, to eliminate it.
I also have to be very honest with you, we are a small part of the bond. Some of our customers have bigger things they have to figure out. We are not involved in all those discussions. We're just trying to figure out how do we help them.
And we're very much running the business on what we see in our orders and these customer discussions. And when we look at what I said on the call, and let me just recap it a little bit, in industrial, there's areas we just see momentum that continues to crank, DDM, the AI ramps, what we see, those ramps have accelerated.
We told you in the call that we expect that to be over $700 million versus $600 million we just told you last quarter. In energy, the growth factors around hardening and renewables, we continue to see further strengthening there. Richards will add to that.
In aerospace and defense, continues to crank along. The space applications continue to crank along. We really haven't seen no pauses there. And then one bright spot that I would say in the quarter in our ACL business, it finally returned to growth, but we're taking a view due to what's going on that we think that's going to stay flat line.
And then in transportation, we just sort of view -- we don't view ICT and sensors to improve near term with the dynamics going on. And in automotive, we do expect auto production to go down sequentially. We do expect auto production to be down 5% year over year.
And that's going to be the trends continue that we saw in the second quarter. Growth in Asia, declines in the West that are probably pushing closer to 10%. So it's still a very mixed environment. I think those are feel right based upon what we're seeing and do view their balanced.
But it isn't everything. It's just going up. And I think our team's operating well in this uneven environment and hopefully, that gives you a flavor of how recap in the markets that we see today.

Sujal Shah

Can we have the next question, please?

Operator

Amit Daryanani, Evercore ISI.

Amit Daryanani

I just have a question on the margin expansion. And I think you've seen some really good margin expansion over the last few quarters, in fact, the last couple of years. As you go forward, can you just talk about if margin expansion and the EPS growth can sustain, especially if it ends up in a more difficult, choppy end market environment?
I'm just hoping you would flush out marginal expansion vectors that peak and leverage across both transport and industrial segments and how much of that going forward do you think is demand versus self-help driven.

Heath Mitts

Well, I'm Heath. I'll take this. Obviously, I think we've covered this first half hour here this call, some of the volatility in the markets. We do have some markets that are growing nicely. We have some that are kind of more stable and we have some that are weak.
If you add it all up and it's a fairly even or uncertain market, if you will. We're not getting a lot of support there at the aggregate level. However, we have over the last several years, as you're aware, reduced our manufactured footprint.
And we have taken sites offline and this is part of our localization strategy that is aligned with where our customers want us to be and in end markets where we can also then get scale and get leverage. So I do feel good about our ability to continue to ramp margins.
It is a huge focal point here. Over the next year or so, the bigger jump is going to be -- continue to be in the industrial segment as industrial continues its journey. And that's a combination of a variety of factors. A lot of that is volume and continued rationalization of locations.
But I continue to see that. Our transportation business has been hovering between 20% and 21% here for the last several quarters. I feel good about where they can be. Obviously, Terrence just outlined softer markets there.
And so our ability to hold our head there above the 20% line feels like the right place to be until we can get back into a situation where we're growing the top line. So we've got a series of different operational levers that we're pulling in terms of protecting both margins and growing in the industrial segment as well as how that converts into EPS.
So our business model contemplates where we sit today, where we had a good quarter. We have our outlook for the third quarter is good. We look to finish strong in FY25 and then jump into '26 without a lot of certainty of what these markets are going to do.

Sujal Shah

Can we have the next question, please?

Operator

Wamsi Mohan, Bank of America.

Wamsi Mohan

Terrence, can you address how you're thinking now about content growth for the year given your commentary on production trends getting worse and obviously, it's been a slower start in the first half of the year from a content perspective?
And a quick clarification for Heath if I could. The 3% of cost impact that you're noting for next quarter, how much of that is direct impact from tariffs versus your own cost increases or maybe operations or logistics or just in managing these tariffs? And how should we think about it going forward as well?

Terrence Curtin

Yeah, Wamsi, let me -- I'll take both of those just for ease. First of all, being on auto production, I think the one thing that we've talked to you all about with content this year is with Europe being extremely weak, Europe is our strongest content region historically.
And when you look at European production this year, like last quarter, it was down basically 10%. That has pressured our content and we had about a 2 point outperformance in this past quarter over production. Asia is very strong.
So we're feeling a little bit uneven by region and just a different regions have different content levels. As I said on the call, as we look through the remainder of the year, we're expecting to be at that low end of the 4 to 6 points.
We have ramps that are going on in Asia that we feel very good about. We talked about to you last quarter some of them. The data momentum around data connectivity in the car. I know years ago, it was a lot about electrified powertrain.
The data connectivity growth, and the programs that we've run around the world as people get ready for autonomy and software to find you need ethernet architecture in the car to really make this happen, and that's what we mean by data connectivity.
That's going to be the element that allows us to get it up to the low end of the 4 to 6 points, but right now, we are being impacted by Europe being weak and being our higher content per vehicle region, it is creating a little bit of headwind of what you see overall.
On your second part of your question, that I'll just jump right on to, when you look at the impacts that we have, there, the tariff costs that we have, that 3% of sales, they are things and most of what we have due to our localization is just where we source something -- could be something from Germany or Japan that we bring over here that we have scale advantage on that create the tariff impact so it is tariff surcharge and that's based upon the tariffs that are enacted today.

Sujal Shah

Can we have the next question, please?

Operator

Luke Junk, Baird.

Luke Junk

Terrence, hoping you can maybe just parse out what you're seeing in automation and connected living between those two subsegments, the inflection this quarter. So we think that automation within that is also inflecting.
And maybe if you could also comment just what you're seeing geographically across those two parts of the business, including maybe indirect tariff impacts. I'm thinking appliances in China especially.

Terrence Curtin

Yeah, certainly. So when you look at it, appliance has been growing and continued to grow. And I would tell you that's been growing pretty much in all regions. The big area that we were running behind was in the automation side of it.
And what we saw in the quarter loop, which was really nice and took the entire unit up to growth overall was we saw orders started to pick up. You saw in Europe, they started to inflect upward. Certainly, saw them also inflect upward in Asia.
North America was steady. So right now, when you look at them, the order trends started to show an inflection point. Right now, what we're assuming with everything going on with tariffs and this is capital goods, we sort of have an outlook that we expect our sales to sort of stay where they were in the second quarter because we'd like to see that momentum stick a little bit longer just knowing what's going on the tariff uncertainty.
And this is one of the markets where when we talk about impacted by tariffs, you do have a lot of supply chain crossover that happens because of the fragmentation here. So we've probably taken a more conservative view than the orders we saw.
But it is something right now hopefully, we can tell you next quarter, we continue to see momentum in the orders from what we saw just this last quarter.

Sujal Shah

Can we have the next question, please?

Operator

Samik Chatterjee, JPMorgan.

Samik Chatterjee

Maybe if I can just ask you on the AI momentum that you're seeing on that front, I know that the first three months of this year, there's been a lot of concern from investors about sort of pull back from customers and related to their sort of spend on data centers and expansion of data centers as well as new bids.
But maybe if you can clarify what's driving the higher guide on your front, are you seeing some of the orders come in much higher than expected or was this more about you being conservative initially with the numbers and raising it with more higher visibility.
And just any more color on what you're hearing from the customer there primarily just in the backdrop of the investor concerns we're hearing.

Terrence Curtin

I think one of the things that's important in our second quarter, we saw a 150% increase in our orders. So these are real orders. Certainly overall, AI CapEx continues to grow. And certainly, I know some of the players have made different comments, but I think what's important is these are ramps of programs that we've won.
So these are ramps that we're working with our customers on and the hyperscalers are the ones that we're working with here across our customer base. And the increase that you saw was about $50 million more than we had in the second quarter.
So some of the beat that I said was broad-based was due to us being able to ramp quicker for our customers. And then you're going to have the remaining increase in the next couple of quarters. And it's really about ramping quicker on programs we've won and orders coming in with higher demand on it.
So that's something that we get excited about. And I know we talked earlier, probably two or three quarters ago about where do we go there. We're closer to that $1 billion number. That we'll probably be running at next year in '26 as we continue to have these ramps increase.
So the momentum is real. The programs are real. And certainly, working hard with our customers, making sure we ramp to their needs as they're trying to deploy their AI servers.

Sujal Shah

Can we have the next question, please?

Operator

Joe Giordano, TD Cowen.

Joe Giordano

I wanted to talk on the automation side. It's good to hear the commentary that Europe is getting better. I mean arguably, off very low levels. In the US, I'm curious like are you just still seeing kind of a pause in customers wanting to move forward with things until they know what the rules of engagement are from a policy standpoint?

Terrence Curtin

No. What I would say there is uncertainty, Joe. Yeah. Let's face it. Everybody's trying to figure out their supply chains right now. So there is a lot of effort that are going on to say, how do I work on supply chains, how do I work upon what's in front of me.
So that uncertainty, let's face it, we all have the same number of people, pre-tariffs than we have today. So it does create a distraction of what people work time on. I would tell you, we did see orders pick up in the United States and automation.
I think the element that we're just being a little bit cautious with our guide is really, it was -- this was the first quarter in a long time. We do worry just as where do people take their CapEx plans. Very honestly, our CapEx plans are not changing meaningfully.
We have to ramp AI programs. We have other programs we have to ramp. The facilities we need to build to support those. But I do just think the amount of effort going in around how do we make sure we make what we can, I think is pretty prevalent across every company as they're trying to figure this out.
So it does create a little bit of a distraction and another focus area for people to figure out real-time. And typically, people that are working -- the automation plans are the same people that are in the manufacturing area trying to figure everything else out on capacity and so forth.
So it's just why we have probably a little bit more of an uncertain tone around it in some of our other markets.

Sujal Shah

Can we have the next question, please?

Operator

Saree Boroditsky, Jefferies.

Saree Boroditsky

Maybe turning to medical. Obviously, another tough quarter on destocking. Could you just update us on channel inventory and how you expect this market to play out for the remainder of the year? And then just a way to estimate, what underlying demand is first what you're seeing in your sales?

Terrence Curtin

Sure. Yeah. Where we position our medical business, it's around a mid single digit market. We did have coming out of COVID and our first quarter, we expected, so that's a December quarter, we saw customers pull back majorly around all the supply chain inventory.
What's really nice is you saw about a 20% sequential increase in that business. We view that inventory elements over and you're going to continue to see us have a second half sequential improvement over the first half in that business as we work out of that.

Sujal Shah

Can we have the next question, please?

Operator

Colin Langan, Wells Fargo.

Colin Langan

I mean it sounds like you're pretty well-positioned on tariff risk given you're pretty local within reach. I guess we'll find out over the next few months how things settle in. But do you think that could be an advantage over time or are your competitors, do they all have pretty similar footprints?
Yeah, any thoughts there in terms of maybe how that shapes up going forward?

Terrence Curtin

No. Well, it's very much competitor by competitor. But we do view we're advantaged. The localization that we've invested in, it has been significant. And some of the things we did when we invested in restructuring to get things, we took capacity offline in certain regions of the world to make it much more localized is an advantage.
We do have some competitors that only make in one region of the world, some of our middle and smaller competitors. So we very much for you as we deal with our customers and we look at mitigation strategies, this is something that can be advantaged as we move forward and as we help work them through it.
So we have a very positive competitive tone going through this. And how do we help our customers work through it and also show we might have more options than others.

Sujal Shah

Can we have the next question, please?

Operator

Christopher Glynn, Oppenheimer.

Christopher Glynn

A lot of good panoramic topics covered. I was curious about space. It's a relatively small market, but it's scaling. Just wondering if you could help us understand the scope of that and that is it something that's kind of doubling from a small base or just kind of the contours of what's going on with space and how that might contribute over the next couple of years really.

Terrence Curtin

Chris, I appreciate you using the word panoramic. I don't think I've ever had that on an earnings call. Space is important. So when you sit there and it -- where we serve it is really in our aerospace defense and marine, not surprisingly.
And one of the things that is nice is where this is where you get a convergence with how the space field has changed with who actually builds current space vehicles happen. Also what happens in low Earth satellites benefit us in space.
So it is an area that has morphed a lot. It's an area where data speeds, things that we talked to you about in AI, similar data speeds, you need to continue to work to. And we leverage what we do in our DDM business, but clearly, the environment is much different than the space application.
And it's where some of the standards that are there and the materials you have to use get very specialized, and it's areas where we excel at. So it has been a driver. It is something you said it very well. It's multiplying at a very quick pace. But it's on a lower base.
While you also benefit from redundancy in these applications. But you do have compute that's increasing massively. And that's areas when we look at high speed, high power. And then have to do the packaging that exists in a space application.
It is a vector that is a smaller vector in our AD&M space, but a vector that we've been benefiting from, and we expect we're going to continue to talk to you about.

Sujal Shah

Can we have the next question, please?

Operator

Asiya Merchant, Citigroup.

Asiya Merchant

If you can just talk a little bit about commercial transportation. I think the guide is for it to be kind of flattish. Just how we should think about the trajectory of that segment, subsegment, if it is higher margins? And when we should start to see some recovery in that, that could possibly be a positive driver for your transportation segment margins?

Terrence Curtin

No, certainly. So we have told you for numerous quarters now, we see an environment. And when we do commercial transportation, that's Class 8 truck, that's ag equipment. That's also construction equipment. And the ag environment has been tough. Certainly, financing has hit some of these markets.
And in Europe and North America, you've seen that softness play out more while this year, we do expect that places like India and China have had increases in unit production. So really there's catalysts that are out there for Europe and North America, certainly with North America around some of the emission changes that are coming up in 2017.
How does that all impact with some of the uncertainty? We do think that will create at some point an inflection point. And we just don't know if that's going to be two quarters out, three quarters out. Right now, we see our business. The orders are staying very stable.
So we've got it into the third quarter to stay stable. But I do think what you'll get is as some of those emission things play in, you will see a more traditional cycle for the Class 8 trucks, and your point is very valid of this does run a higher margin and you'll expect a higher quality when that volume comes.

Sujal Shah

Can we have the next question, please?

Operator

Joe Spak, UBS.

Joseph Spak

I just wanted to maybe dive in a little bit more to the industrial orders, which were strong. But are you including any of the Richards acquisition in that growth? And I know you sort of made some comments about AI as well.
So I'm just trying to get a sense of like what the underlying organic like old core historical orders -- industrial orders were because you also made a comment about I guess in the US, you saw a pick up, but like my understanding is a lot of that equipment for factory automation comes from overseas.
So it seems like they're -- it is going to get more expensive under this regime. So just want to understand how you're thinking about that sort of order trends there.

Terrence Curtin

No. When you look at our order trends in the industrial segment, pretty much across the board, we had orders growth year over year. So I just want to make sure that when you look at that, that was across the board strong order growth.
It was an automation. It was in the appliance area. And this would be only where we serve local customers, Joe. So if we're serving a German factory automation player, we would be getting that in our European business, not in our US business.
So the growth is very broad. There is no Richard orders and/or orders that we didn't close that till April, so that we'll start getting that. And the growth was also, you said there, it was across the board with Europe actually getting closer to zero than where it was before.
So it was very broad geographically around the world, across all the business units. And you even saw that in our results sequentially. Our sales were up across all our business units from quarter one to quarter two.

Sujal Shah

Can we have the next question, please?

Operator

Stephen Fox, Fox Advisors.

Steven Fox

Terrence, I was wondering if you could just more broadly talk about your pricing power going forward from two aspects. One, you sell into a lot of large OEMs that may be feeling demand pain down the road in addition to like all the tariff questions.
And then two, like you mentioned, there's a lot of different types of competitors out there that you may run into regional, smaller, large, global, otherwise. And just sort of how responsible you think they will be on pricing?

Terrence Curtin

Yeah, no, good question, Steve. I think when you look at it, this year, before the tariffs hit us, our pricing is neutral at the total TE level. We are price positive in our industrial segment. And just a little negative in the transportation segment.
So one of the things that we've had this year, let's face it, that certain input costs have gone up on certain materials. We've been very disciplined on that as well as the tariffs that we talked about today. So I tend to think that the pricing environment will continue to be dictated by where input costs go and also the tariff impacts.
And I feel our team has done a good job managing it as well as the other things that we can do to help our customers like we talked about on the mitigation actions. Are there things we localize, move tools on, the way we have our supply chain set up with our customers, is there things we can do together?
And they're the ideas we're going that are also ways we provide value. That's a little bit different than we talked to you about in a certain environment like that. So that's the benefit that we have in this uncertain time. But I feel good how the teams are managing through the pricing aspects and I do think it's different than how we used to do it.

Sujal Shah

Can we have the next question, please?

Operator

William Stein, Truist Securities.

William Stein

But I'd say Paul's also hydromatic. The question is about AI data center business. Industry consensus do reflect a pretty pulling meaningful in activity that went on to some degree during calendar Q1, but more so that's sort of accelerating.
I wonder how certain you are about your earlier comments about not seeing meaningful pull ins. I wonder what your visibility is to that. And also I'm hoping you can comment on the customer concentration or dispersion and any anticipated change in that.

Terrence Curtin

So well, on the AI side, we do play across the hyperscalers. We also partner with the other semiconductor companies that would be more of our peers in that space that do some of the signal elements on a semiconductor.
So our focus is more on the hyperscaler side. I would say we did not see pull-ins related to this. This has been very much a function of ramping, ramping with our customers on the AI side, which gives us confidence of what they're telling us, as well as how we're working with them together to continue to ramp up, that gives us confidence in the over $700 million.
So we did not see pull in from the AI customers at all.

Sujal Shah

Can we have the next question, please?

Operator

Shreyas Patil, Wolfe Research.

Shreyas Patil

Just maybe to put a finer point on a previous question, how should we think about the pace at which you can get recoveries in the auto end market? I believe in the past, we've talked about how it takes longer than industrial, but I'm wondering if you'd expect recoveries to be faster in this scenario.
And then maybe just on capital allocation, curious how you're thinking about the priorities there between buybacks and M&A, especially following this this Richards acquisition.

Terrence Curtin

I'll let Heath take this, but I do want to stress what I said earlier that the bulk of our tariff exposure is more in our industrial segment than our transportation segment. So I know I said that a couple of times. I want to make sure that comes through where if certainly, in the industrial segment, we have more pricing levers.
Heath, things you want to add on capital over that.

Heath Mitts

I just think on the capital allocation, obviously, we did deploy a significant amount of capital, with the Richards deal. It was $2.3 billion. So you've seen that and you'll see that result in a modest amount of increase in our debt levels as well.
Having said that, as we look forward, we still feel very confident in our cash generation model. Our ability to generate cash in this environment has been fairly resilient. And we feel good about it. So an M&A engine is not something you just turn on and off, it's something you have to cultivate over time.
And so we're always active in that. Having said all that, there's opportunities to buy our shares as well. So you'll see a balance of that as we go through the year. I don't mean intend to be too vague here. But deals kind of come in a lumpy format.
They're never -- it's never a linear process in terms of when acquisitions get done. But we have a lot of sticks in the fire right now with that and looking at things not of the same size as Richards though. So but it's still in the bolt on category of things that we look at.
And in the meantime, we're in the market every day with the share buyback.

Sujal Shah

If you have further questions, please contact Investor Relations at TE. I want to thank everybody for joining us this morning and have a nice day.

Operator

Today's conference call will be available for replay beginning at 11:30 AM Eastern time today, April 23 on the Investor Relations portion of TE Connectivity's website.
That will conclude today's conference call. Have a good day.