Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q2 2020 Earnings Presentation
35 slides from Sensata Technologies's earnings presentation, Jul 28, 2020
Slide 1: Sensata Second Quarter 2020 Earnings Presentation
SENSATA SECOND QUARTER 2020 EARNINGS PRESENTATION July 28, 2020
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures Safe Harbor Statement This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995, which relate to future events and are subject to risks and uncertainties. The forward-looking statem
Slide 3: Q2-2020 GAAP Results
Q2-2020 GAAP Results $ and shares outstanding in millions, except EPS Q2-2020 Q2-2019 B/(W) Revenue $576.5 $883.7 (34.8%) Gross Profit $164.1 $308.5 (46.8%) (% of revenue) 28.5% 34.9% R&D $30.2 $36.7 17.6% (% of revenue) 5.2% 4.2% SG&A $64.7 $72.0 10.1% (% of revenue) 11.2% 8.2% Amortization of Inta
Slide 4: Key Performance Highlights
Key Performance Highlights Ensuring safe • Continuing to implement preventative measures to protect our employees and the communities in which we operate from the spread of COVID-19 operations Outgrowth • Attractive outgrowth – despite organic revenue decrease of 22.3% in H1-20, achieved: • 840 bps
Slide 5: Second quarter organic revenue decrease of 33.9%; end markets contracted 39.9%
Second quarter organic revenue decrease of 33.9%; end markets contracted 39.9%; sequential monthly improvements within the quarter PERCENT OF REVENUES Industrial & Other Aerospace End Markets Org Growth End Markets Org Growth (14.6%) ~33% (15.2%) (32.0%) (39.4%) • Industrial outperformance led by gr
Slide 6: Significant progress made in Megatrend investments
Significant progress made in Megatrend investments ELECTRIFICATION • Additional $50M in New Business Wins in the second quarter; brings the first half to $108M • Government incentives like the EU Green New Deal driving growth in electric vehicles • New wins in electric vehicles drive average content
Slide 7: Enhancing foundation in HVOR ADAS Technology – PRECO Electronics acquisition
Enhancing foundation in HVOR ADAS Technology – PRECO Electronics acquisition AUTONOMY TECHNOLOGY LEADER – PRECO Electronics • Leader in radar solutions and object detection for critical safety applications (blind spot detection and side turn assist) for heavy vehicle, off-road markets • Technology c
Slide 8: Q2-20 Financials & Outlook
Q2-20 FINANCIALS & OUTLOOK Paul Vasington CHIEF FINANCIAL OFFICER
Slide 9: Q2-2020 Financial Summary
Q2-2020 Financial Summary $ in millions, except EPS Q2-2020 Q2-2019 ∆ • Revenue decrease of 34.8% composed of: Revenue $576.5 $883.7 (34.8%) • Organic revenue decrease: 33.9% Adjusted Op Income $75.0 $205.1 • Foreign exchange decreased (63.4%) % revenue 13.0% 23.2% revenue by 0.9% Adjusted Net Incom
Slide 10: Q2-2020: Performance Sensing
Q2-2020: Performance Sensing REVENUE SEGMENT OPERATING INCOME % OPERATING MARGIN $644.5M $173.4M $385.2M 26.9%* $60.8M 15.8%* Q2-2020 Q2-2019 Q2-2020 Q2-2019 Q2-20 REVENUE GROWTH REPORTED ORGANIC • Automotive market outgrowth of 890 bps partially Automotive (42.5%) (41.6%) offsets 50.5% end-market p
Slide 11: Q2-2020: Sensing Solutions
Q2-2020: Sensing Solutions REVENUE SEGMENT OPERATING INCOME % OPERATING MARGIN $239.2M $191.3M $77.7M $55.8M 32.5%* 29.2%* Q2-2020 Q2-2019 Q2-2020 Q2-2019 • Revenue decrease was largely due to impact of Q2-20 REVENUE GROWTH REPORTED ORGANIC COVID-19. Industrial was down 14.6% organically Sensing Sol
Slide 12: Q2-2020 Non-GAAP Results
Q2-2020 Non-GAAP Results $ in millions, except EPS Q2-2020 Q2-2019 B/(W) Revenue $576.5 $883.7 (34.8%) Adj. Gross Profit $165.4 $313.0 (47.2%) (% of revenue) 28.7% 35.4% R&D $30.2 $36.7 17.6% (% of revenue) 5.2% 4.2% Adj. SG&A $58.5 $69.6 15.9% (% of revenue) 10.1% 7.9% Adj. Operating Income $75.0 $
Slide 13: Continue to align cost structure to demand levels we anticipate
Continue to align cost structure to demand levels we anticipate to develop over the coming quarters COST CATEGORIES 10% reduction in Semi-Variable costs Variable: Material Spend, Direct Labor, Freight, Operating Supplies Semi-Variable: Indirect Labor & Spend, Outside Services, Utilities Fixed: Depre
Slide 14: Exiting Q2 in a stronger liquidity position than we entered
Exiting Q2 in a stronger liquidity position than we entered Sufficient financial resources to weather severe downturn $400M $45M $1.24B ~$800M Mar 31, 2020 Revolver Draw Down Free Cash Flow Jun 30, 2020 Generated Q2 • Strong Working Capital Management • Substantial buffer to debt covenants • Invento
Slide 15: Leading Financial Indicators for Q3-20
Leading Financial Indicators for Q3-20 Auto production ramping from Q2 Aerospace tracks with commercial Unemployment, consumer confidence indicators and defense production drive sales rates Passenger miles flown drives aftermarket New COVID-19 spikes may force customers to lower or shut down product
Slide 16: End-market environment expected to improve sequentially through balance of 2020
End-market environment expected to improve sequentially overall through balance of 2020 We are more conservative than IHS for North America and Europe Automotive production NORTH AMERICA AUTO EUROPE AUTO CHINA AUTO Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 4.3% (2–4%) (1–5%) (14–19%) (16–21%) (23–26%) (30–33%) (60
Slide 17: Q3-20 Financial Guidance
Q3-20 Financial Guidance $ in millions, except EPS Q3-19 Q3-20 GUIDANCE REPORTED COMMENTS • YoY Market contraction Revenue $849.7 $675 - $705 (21%) – (17%) expected to be (21%) to organic (20%) – (17%) (25%) • FX expected to decrease revenue by ~$4.4M Adj. Op Income $199.5 $110 – $124 (45%) – (38%)
Slide 18: Key Messages – Looking Forward
Key Messages – Looking Forward We are effectively responding to We are continuing our R,D&E weaker end markets with customers and Megatrend Restructuring activity to align our cost base investments to deliver long- with anticipated demand levels term growth H1-20 new business wins of $225M; of which
Slide 19: Appendix A
APPENDIX A OTHER FINANCIAL INFORMATION
Slide 20: H1-2020 GAAP Results
H1-2020 GAAP Results $ and shares outstanding in millions, except EPS H1-2020 H1-2019 B/(W) Revenue $1,350.8 $1,754.2 (23.0%) Gross Profit $371.9 $598.2 (37.8%) (% of revenue) 27.5% 34.1% R&D $64.7 $71.8 9.9% (% of revenue) 4.8% 4.1% SG&A $142.0 $142.6 0.4% (% of revenue) 10.5% 8.1% Amortization of
Slide 21: H1-2020 Non-GAAP Results
H1-2020 Non-GAAP Results $ in millions, except EPS H1-2020 H1-2019 B/(W) Revenue $1,350.8 $1,754.2 (23.0%) Adj. Gross Profit $409.3 $607.5 (32.6%) (% of revenue) 30.3% 34.6% R&D $64.7 $71.8 9.9% (% of revenue) 4.8% 4.1% Adj. SG&A $129.5 $138.6 6.6% (% of revenue) 9.6% 7.9% Adj. Operating Income $211
Slide 22: Q2-2020 Cash Flow Statement
Q2-2020 Cash Flow Statement $ in millions Q2-2020 Q2-2019 B/(W) Net (Loss)/Income ($42.5) $73.4 (157.9%) Depreciation & Amortization $63.4 $64.0 (1.0%) Changes in Working Capital $31.1 ($24.9) 224.5% Other $19.8 $27.0 (26.4%) Operating Cash Flow $71.7 $139.5 (48.6%) Capital Expenditures ($27.2) ($39
Slide 23: H1-2020 Cash Flow Statement
H1-2020 Cash Flow Statement $ in millions H1-2020 H1-2019 B/(W) Net (Loss)/Income ($34.1) $158.5 (121.5%) Depreciation & Amortization $131.1 $127.4 3.0% Changes in Working Capital $9.6 ($79.8) 112.0% Other $63.7 $46.1 38.3% Operating Cash Flow $170.3 $252.2 (32.5%) Capital Expenditures ($56.7) ($81.
Slide 24: Balance Sheet
Balance Sheet $ in millions JUN 30, 2020 JUN 30, 2019 Total Assets $7,084.9 $6,852.1 Working Capital $1,352.6 $1,340.4 Intangibles, Net & Other $4,805.7 $4,882.5 Long-Term Assets $ in millions JUN 30, 2020 JUN 30, 2019 Cash & Equivalents $1,242.9 $721.1 Current Debt $407.0 $13.6 Net Cash $835.9 $707
Slide 25: Impact of Megatrend spend moving to Corporate & Other
Impact of Megatrend spend moving to Corporate & Other $ in millions 2020 2019 1Q 1Q 2Q 3Q 4Q FY As Previously Reported Performance Sensing Operating Income $ 129.1 $ 150.5 $ 168.1 $ 165.1 $ 165.1 $ 648.7 % margin 22.7% 23.5% 26.1% 26.3% 26.1% 25.5% Sensing Solutions Operating Income $ 55.9 $ 75.0 $
Slide 26: Appendix B
APPENDIX B GAAP TO NON-GAAP RECONCILIATIONS
Slide 27: Non-GAAP Measures
Non-GAAP Measures We supplement the reporting of our financial information determined in accordance with U.S. generally accepted accounting principles (“GAAP”) with certain non-GAAP financial measures. We use these non-GAAP financial measures internally to make operating and strategic decisions, inc
Slide 28: Non-GAAP Measures – continued
Non-GAAP Measures – continued Free Cash Flow – represents net cash provided by/(used in) operating activities less additions to property, plant and equipment and capitalized software. We believe free cash flow is useful to management and investors as a measure of cash generated by business operation
Slide 29: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM YTD 2020 2Q 2020 1Q 2020 4Q 2019 3Q 2019 2Q 2019 Net income/(loss) $ 90,103 $ (34,110) $ (42,541) $ 8,431 $ 53,538 $ 70,675 $ 73,436 Interest expense, net 159,904 80,211 40,808 39,403 40,137 39,556 39,608 Provision for/(benefit from) income tax
Slide 30: Other GAAP to Non-GAAP Reconciliations – Q2 2020
Other GAAP to non-GAAP Reconciliations – Q2 2020 $ in thousands 2Q 2020 Restructuring Cost of Operating Interest Income Net Total Sensata Gross profit SG&A Amortization and other Other, net Income taxes revenue (loss)/income expense, net before taxes (loss)/income charges, net Reported (GAAP) $ (412
Slide 31: Other GAAP to Non-GAAP Reconciliations – H1-2020
Other GAAP to non-GAAP Reconciliations – H1-2020 $ in thousands H1 2020 Restructuring Cost of Amortization Operating Interest Income before Net Total Sensata Gross profit SG&A and other Other, net Income taxes revenue of intangibles income expense, net taxes (loss)/income charges, net Reported (GAAP
Slide 32: Organic Revenue Growth
Organic Revenue Growth 2Q 2020 0 Constant Currency % Reported % Change Less: Acquisition & Organic Growth/(Decline) Less: FX Impact Change (GAAP) Divestitures, net (non-GAAP) (non-GAAP) Performance Sensing (40.2%) (0.9%) (39.3%) 0.0% (39.3%) Sensing Solutions (20.0%) (0.7%) (19.3%) 0.0% (19.3%) Sens
Slide 33: Free Cash Flow
Free Cash Flow $ in thousands 2Q H1 Total Sensata 2020 2019 Change 2020 2019 Change Net cash provided by operating activities $71,728 $139,473 (48.6%) $170,272 $252,166 (32.5%) Additions to property, plant and equipment and capitalized software (27,150) (39,859) 31.9% (56,697) (81,549) 30.5% Free ca
Slide 34: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands As of Total Sensata 30-Jun-20 31-Mar-20 31-Dec-19 Current portion of long-term debt, finance lease and other financing obligations $ 407,042 $ 7,095 $ 6,918 Finance lease and other financing obligations, less current portion 28,243 28,280 28,810 Long-te
Slide 35: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands 2Q H1 Total Sensata 2020 2019 2020 2019 Provision for/(benefit from) income taxes $ 1,441 $ 30,841 $ (75) $ 52,308 Non-GAAP adjustments: Deferred income tax and other tax expense 4,400 16,846 (531) 24,799 Current tax effect of non-GAAP adjustments