Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q2 2016 Earnings Presentation
38 slides from Sensata Technologies's earnings presentation, Jul 26, 2016
Slide 1: Sensata Second Quarter 2016 Earnings Presentation
JULY 26, 2016 SENSATA SECOND QUARTER 2016 EARNINGS PRESENTATION
Slide 2: Forward-looking Statements
Forward–looking Statements In addition to historical facts, this earnings release, including any documents incorporated by reference herein, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward– looking statements relate to a
Slide 3: Q2 2016 GAAP Results
Q2 2016 GAAP Results Q2 2016 Q2 2015 Δ Revenue $827.5M $770.4M 7.4% Gross Profit $290.1M $252.6M 14.9% (% of revenue) 35.1% 32.8% R&D $32.3M $31.2M 3.3% (% of revenue) 3.9% 4.1% SG&A $77.7M $73.0M 6.4% (% of revenue) 9.4% 9.5% Profit from Operations $128.1M $93.2M 37.5% (% of revenue) 15.5% 12.1% Ne
Slide 4: Non-GAAP Measures
Non-GAAP Measures In discussing financial results and guidance, we refer to “Organic Revenue Growth,” “Adjusted Net Income (ANI),” “ANI Margin,” “Adjusted EPS,” “Organic ANI Margin,” “Core ANI Margin,” “Free Cash Flow,” “Adjusted EBIT,” “Adjusted EBITDA,” “Research, Development and Engineering expen
Slide 5: Non-GAAP Measures – continued
Non-GAAP Measures – continued Adjusted EBIT – represents Net income excluding Interest expense, net, Provision for/(benefit from) income taxes and certain non-GAAP adjustments including (1) restructuring and special charges, (2) financing and other transaction costs, (3) deferred losses/(gains) on o
Slide 6: Executing On Our Strategy
Executing On Our Strategy Q2 2016 ANOTHER QUARTER OF ADJUSTED NET INCOME MARGIN EXPANSION Revenue of $827.5M (increase of 7.4% y/y) and Adjusted EPS of $0.73 above the midpoint of guidance Adjusted Net Income (ANI) margins expand sequentially Creating shareholder value through repeatable, accreti
Slide 7: Positioned to Expand Margins in Challenging Market Environment
Positioned to Expand Margins in Challenging Market Environment Adjusted EPS, ANI Margin, Core ANI Margin Q2-16 Update Target ANI Margin: 20 - 23% • ANI margin improvement 20% expected sequentially throughout 2016 $2.75 $2.87 15% $2.38 • Q2 2016 Core* ANI margins $2.15 of 20.0% up 70 bps from 10% pri
Slide 8: Sensor-NITE Acquisition Delivered High Value
Sensor-NITE Acquisition Delivered High Value DIFFERENTIATED HIGH TEMP SENSORS USED IN DIESEL EXHAUST AFTER- TREATMENT SYSTEMS; TRANSACTION EBITDA MULTIPLE OF 9.8X FINANCIAL PERFORMANCE SIGNIFICANT VALUE CREATION • Expanded globally, esp. into China • Expanded ST’s low-cost manufacturing footprint to
Slide 9: We Continue to Drive Growth in Acquired Technologies Once Integration is Complete
We Continue to Drive Growth in Acquired Technologies Once Integration is Complete Q2-16 Business Win in Next Generation Drivetrain with a major European OEM Exciting New Business in Gasoline Particulate Filters as introduced at Investor Day 2015 Growing Applications in Exhaust Gas Recirculation
Slide 10: End Market And Business Trends
End Market And Business Trends ON BALANCE IN-LINE WITH EXPECTATIONS vs. Sensata (ST) Market Highlights Expectations H1 2016 H2 2016 • Stronger ST growth in China as expected in second half Automotive • Sensata view on market growth still below 3rd parties • BREXIT impact too early to predict • ST pe
Slide 11: Executing on Strategy To Win In Sensing
Executing on Strategy To Win In Sensing CONTENT GROWTH DRIVES MARKET OUTPERFORMANCE IN HVOR Q2-16 content win with leading European commercial truck OEMS for on-road TPMS solutions Leveraging acquired TPMS technology to enter new markets New content growth enables end- market outperformance
Slide 12: We Remain On-Track Heading Into H2-16
We Remain On-Track Heading Into H2-16 Solid progress in delivering on margin expansion Good content growth in Auto and HVOR Integration of acquisitions creating value for shareholders Strong free cash flow enables debt re- payment and creates financial flexibility On track to deliver on fu
Slide 13: Q2 2016 Financial Summary
Q2 2016 Financial Summary ADJUSTED NET INCOME GREW 9% ORGANICALLY Reported • Acquisitions, net of exited Q2 2015 Q2 2016 Growth businesses, add 8.5% revenue $770.4M $827.5M +7.4% growth Net Revenue Net Income $40.9M $65.5M +60.2% • Organic revenue growth flat Adjusted Net Income $124.6M $124.3M (0.2
Slide 14: Q2 2016 Review: Performance Sensing
Q2 2016 Review: Performance Sensing NET REVENUE PROFIT FROM OPERATIONS (PFO) 26.0% PFO EXCLUDING FX AND CST $606.4M $615.6M $153.0M $152.5M 25.2% 24.8% Q2 2015 Q2 2016 Q2 2015 Q2 2016 Q2 Growth y/y Reported Organic • Content growth in China and Europe driving automotive organic growth Automotive (in
Slide 15: Q2 2016 Review: Sensing Solutions
Q2 2016 Review: Sensing Solutions NET REVENUE PROFIT FROM OPERATIONS (PFO) 33.0% PFO EXCLUDING FX AND CST $212.0M $68.2M $164.1M $52.1M 32.2% 31.8% Q2 2015 Q2 2016 Q2 2015 Q2 2016 • CST acquisition driving revenue growth Q2 Growth y/y Reported Organic • Impressive margin expansion Sensing Solutions
Slide 16: Reduced Our Net Leverage
Reduced Our Net Leverage FREE CASH FLOW NET LEVERAGE GROWTH OF 33%: Q216 VS Q215 TARGETING 3.7X – 3.9X BY END OF FY 2016 $122m 4.6x 4.5x 4.3x $108m $102m 3.8x 3.5x $80m $60m Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q2 2016 EARNINGS SUMMARY 16
Slide 17: Q3 2016 Financial Guidance
Q3 2016 Financial Guidance Q3 2015 Q3 2016 Guide Reported Organic Excludes FX, CST, Exited businesses Net Revenue $727.4M $770 – $810M 6% – 11% (1)% - 3% Adj. Net Income $123.3M $120 – $130M (3)% – 5% 6% – 11% Adj. EPS $0.72 $0.70 – $0.76 (3)% – 6% 6% – 11% Diluted Shares Outstanding 171.6M 171.6M S
Slide 18: 2016 Financial Guidance
2016 Financial Guidance ON TRACK FOR FULL YEAR FY 2015 FY 2016 Guide Reported Organic Excludes FX, CST, Exited businesses Net Revenue $2,975M $3,170 – $3,250M 7% – 9% 0% – 2% Adj. Net Income $472.0M $480 – $505M 2% – 7% 7% – 11% Adj. EPS $2.75 $2.80 – $2.94 2% – 7% 7% – 11% Diluted Shares Outstandin
Slide 19: Sensata Remains Committed to Shareholder Value Creation
Sensata Remains Committed to Shareholder Value Creation Sensata Wins In Sensing, outperforming markets with leading margins Acquisitions diversify end–market exposure and provide earnings expansion Attractive long-term revenue and earnings CAGRs Strong cash generation and disciplined capital
Slide 20: Appendix
APPENDIX SENSATA SECOND QUARTER 2016 EARNINGS SUMMARY
Slide 21: Sensata Financial Metrics Dashboard
Sensata Financial Metrics Dashboard TSR from IPO 2015 TSR 2015 ROIC 13%* (12)% 13.0% CAGR (S&P: 11%) 2016 YTD: (16)%* LTM Q2 2016: 12.2% Cash Returned Acquired Revenue 2012–2016 (DeltaTech, Schrader, CST) $0.40 - $0.45 $500M 7.5% OF SHARES REPURCHASED $1.05B ACCRETION IN 2016E *As of July 22, 2016 Q
Slide 22: Q2 2016 Non-GAAP Results
Q2 2016 Non-GAAP Results Q2 2016 Q2 2015 Δ Revenue $827.5M $770.4M 7.4% Adj. Gross Profit $293.7M $266.7M 10.1% (% of revenue) 35.5% 34.6% R&D $32.3M $31.2M 3.3% (% of revenue) 3.9% 4.1% Adj. SG&A $76.6M $67.4M 13.7% (% of revenue) 9.3% 8.7% Adj. EBIT $175.3M $162.8M 7.7% (% of revenue) 21.2% 21.1%
Slide 23: H1 2016 GAAP Results
H1 2016 GAAP Results H1 2016 H1 2015 Δ Revenue $1,624.1M $1,521.1M 6.8% Gross Profit $558.3M $496.6M 12.4% (% of revenue) 34.4% 32.6% R&D $63.6M $62.0M 2.7% (% of revenues) 3.9% 4.1% SG&A $149.6M $137.4M 8.9% (% of revenue) 9.2% 9.0% Profit from Operations $241.7M $195.5M 23.6% (% of revenue) 14.9%
Slide 24: H1 2016 Non-GAAP Results
H1 2016 Non-GAAP Results H1 2016 H1 2015 Δ Revenue $1,624.1M $1,521.1M 6.8% Adj. Gross Profit $565.2M $519.9M 8.7% (% of revenue) 34.8% 34.2% R&D $63.6M $62.0M 2.7% (% of revenue) 3.9% 4.1% Adj. SG&A $146.9M $131.5M 11.7% (% of revenue) 9.0% 8.6% Adj. EBIT $339.4M $315.8M 7.5% (% of revenue) 20.9% 2
Slide 25: Q2 2016 Cash Flow Statement
Q2 2016 Cash Flow Statement Q2 2016 Q2 2015 Δ Net Income $65.5M $40.9M 60.2% Depreciation & Amortization $75.9M $72.0M 5.4% Changes in working capital ($49.7M) ($22.7M) (119.3%) Other $18.7M $18.8M (0.6%) Operating Cash Flow $110.4M $109.1M 1.2% Capital Expenditures ($30.2M) ($48.9M) (38.2%) Free Ca
Slide 26: H1 2016 Cash Flow Statement
H1 2016 Cash Flow Statement H1 2016 H1 2015 Δ Net Income $126.1M $76.3M 65.4% Depreciation & Amortization $152.4M $139.7M 9.1% Changes in working capital ($59.9M) ($48.6M) 23.2% Other $28.1M $44.9M (37.4%) Operating Cash Flow $246.6M $212.2M 16.2% Capital Expenditures ($64.5M) ($86.8M) (25.7%) Free
Slide 27: Balance Sheet
Balance Sheet June 30, 2016 June 30, 2015 Dec 31, 2015 Total Assets $6.3B $5.1B $6.3B Working Capital $0.567B $0.497B $0.413B Intangibles, Net & Other Long- $5.0B $3.9B $5.0B Term Assets Cash, Cash Equivalents & Short- $.309B $0.227B $0.342B term Investments Current Debt $0.139B $0.145B $0.300B Net
Slide 28: Reconciliation of Organic Revenue Growth
Reconciliation of Organic Revenue Growth 2016 Q2 YTD Sensata Net revenue growth 7.4% 6.8% Less: Effects of foreign currency movements -1.2% -1.6% 1 Less: Acquisitions, net of exited businesses 8.5% 8.7% Organic revenue growth/(decline) 0.1% -0.3% Performance Sensing Net revenue growth 1.5% 1.3% Less
Slide 29: Reconciliation of Net Income to Adjusted Net Income – Q2
Reconciliation of Net Income to Adjusted Net Income – Q2 Amounts in thousands (except per share amounts) Q2 2016 Q2 2015 $ EPS Margin $ EPS Margin Net income $ 65,510 $ 0.38 7.9% $ 40,900 $ 0.24 5.3% Non-GAAP adjustments: Restructuring and special charges 3,161 0.02 0.4% 22,023 0.13 2.9% Financing a
Slide 30: Reconciliation of Net Income to Adjusted Net Income – YTD
Reconciliation of Net Income to Adjusted Net Income – YTD Amounts in thousands (except per share amounts) YTD 2016 YTD 2015 $ EPS Margin $ EPS Margin Net income $ 126,122 $ 0.74 7.8% $ 76,255 $ 0.44 5.0% Non-GAAP adjustments: Restructuring and special charges 6,800 0.04 0.4% 23,179 0.13 1.5% Financi
Slide 31: Reconciliation of Net Income Percentage to Organic ANI Margin and Core ANI Margin
Reconciliation of Net Income as a Percentage of Net Revenue to Organic ANI Margin and Core ANI Margin Q2 2016 2015 Change Net income as a % of Net revenue 7.9% 5.3% 2.6% Non-GAAP adjustments: Restructuring and special charges 0.4% 2.9% -2.5% Financing and other transaction costs 0.0% 0.8% -0.8% Defe
Slide 32: Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow $ in thousands Q2 YTD 2016 2015 2016 2015 Net cash provided by operating activities $ 110,429 $ 109,089 $ 246,631 $ 212,199 Less: Additions to property, plant and equipment and 30,231 48,923 64,466 86,801 capitalized softw
Slide 33: Reconciliation of Net Income to Adjusted EBIT
Reconciliation of Net Income to Adjusted EBIT $ in thousands LTM'16 YTD'16 Q2'16 Q1'16 Q4'15 Q3'15 Q2'15 Net income $ 397,563 $ 126,122 $ 65,510 $ 60,612 $ 218,289 $ 53,152 $ 40,900 Interest expense, net 155,328 84,025 41,757 42,268 41,597 29,706 31,562 Provision for/(benefit from) income taxes (124
Slide 34: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA $ in thousands LTM'16 YTD'16 Q2'16 Q1'16 Q4'15 Q3'15 Q2'15 Net income $ 397,563 $ 126,122 $ 65,510 $ 60,612 $ 218,289 $ 53,152 $ 40,900 Interest expense, net 155,328 84,025 41,757 42,268 41,597 29,706 31,562 Provision for/(benefit from) income taxes (1
Slide 35: Reconciliation of RD&E Expenses as a Percentage of Net Revenue
Reconciliation of Research, Development and Engineering (RD&E) Expenses as a percentage of Net Revenue $ in thousands Q2 2016 Research and development expense $ 32,288 Non-GAAP adjustments: Add: Engineering expenses 32,260 Total Research, development and engineering expenses $ 64,548 % Net revenue 7
Slide 36: Reconciliation of Provision for Income Taxes to Adjusted Taxes
Reconciliation of Provision for Income Taxes to Adjusted Taxes $ in thousands Q2 YTD 2016 2015 2016 2015 Provision for income taxes $ 20,981 $ 8,609 $ 37,176 $ 19,127 Non-GAAP adjustments: Less: Deferred income tax and other tax 9,942 368 15,699 1,854 expense/(benefit) Adjusted taxes $ 11,039 $ 8,24
Slide 37: Reconciliation of Net Debt
Reconciliation of Net Debt $ in thousands 6/30/2016 Current portion of long-term debt, capital lease and other financing obligations $ 139,203 Capital lease and other financing obligations, less current portion 34,341 Long-term debt, net of discount and deferred financing costs, less current portion
Slide 38: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) $ in thousands Average 6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015 Shareholders' equity $ 1,604,710 $ 1,787,959 $ 1,716,289 $ 1,668,576 $ 1,446,397 $ 1,404,327 Long-term debt, gross of discount (or premium) 3,022,594 3,317,844 3,319,319 3,322,794 2,575,268 2,