Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q1 2017 Earnings Presentation
36 slides from Sensata Technologies's earnings presentation, Apr 25, 2017
Slide 1: Sensata First Quarter 2017 Earnings Presentation
SENSATA FIRST QUARTER 2017 EARNINGS PRESENTATION APRIL 25, 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements In addition to historical facts, this earnings presentation, 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
Slide 3: Q1 2017 GAAP Results
Q1 2017 GAAP Results Q1 2017 Q1 2016 Δ Revenue $807.3M $796.5M 1.3% Gross Profit $274.5M $268.2M 2.4% (% of revenue) 34.0% 33.7% R&D $31.8M $31.4M 1.5% (% of revenue) 3.9% 3.9% SG&A $70.3M $71.9M (2.3%) (% of revenue) 8.7% 9.0% Profit from Operations $121.1M $113.6M 6.7% (% of revenue) 15.0% 14.3% N
Slide 4: Strong Start to the Year
Strong Start to the Year TOP-LINE GROWTH, MARGIN EXPANSION, & DOUBLE-DIGIT ORGANIC GROWTH IN ADJUSTED EPS Organic revenue growth of 3.5% – balanced growth from both segments with continued strength in China Strong margin expansion (organic) – adjusted EBIT margin expands by 90 basis points y/y;
Slide 5: Strong Year-Over-Year Margin Improvement
Strong Year-Over-Year Margin Improvement ADJUSTED EBIT MARGINS* ADJUSTED NET INCOME MARGINS* +90 BASIS POINTS ORGANICALLY1 +130 BASIS POINTS ORGANICALLY2 21.1% 15.0% 20.6% 14.2% Q1 16 Q1 17 Q1 16 Q1 17 *Includes integration-related charges of $8.9M of in Q1-17 1 Excluding FX, Adj EBIT Margin was 21.
Slide 6: M&A Cost Synergies Will Continue to Benefit Earnings Growth
M&A Cost Synergies Will Continue to Benefit Earnings Growth in 2017 and Beyond Areas of Savings TOTAL POTENTIAL COST SAVINGS OF CST & SCHRADER • Consolidate footprint for manufacturing and related support functions 40% of potential • Best Cost Sourcing: leveraging synergies captured larger scale to
Slide 7: Performance Sensing Update
Performance Sensing Update AUTO HVOR • Global Auto Markets expected to be in-line with • North America commercial truck market has initial guidance for FY-17 bottomed and is slowly recovering • Continued strength in China in Q1-17, weaker 2H-17 • Demand and outlook from off-road customers • Expect N
Slide 8: Expanding Content Growth Opportunities in Sensing Solutions
Expanding Content Growth Opportunities in Sensing Solutions HVAC Aerospace APPLICATION APPLICATION Variable Refrigerant Flow Technology (VRF) Demand for more powerful engines with smaller saves energy by moving refrigerant around a footprint building rather than heated or cooled air SENSOR IMPLICATI
Slide 9: Continued Focus on Growth & Execution
Continued Focus on Growth & Execution • Strong start to 2017 • Delivering strong combination of organic revenue growth, margin expansion, and double- digit adjusted EPS growth (organic basis) • Markets remain stable and are expected to be in-line with our initial guidance for FY-17 - Industrial and
Slide 10: Q1 2017 Financial Summary
Q1 2017 Financial Summary ADJUSTED NET INCOME GROWS 13% ORGANICALLY Q1 2017 Q1 2016 Δ • Revenue growth of 1.3% composed of: Revenue $807.3M $796.5M 1.3% • Organic revenue growth: 3.5% Adjusted EBIT $170.7M $164.1M 4.0% • Foreign exchange lowers % revenue 21.1% 20.6% revenue by (2.2%) Adjusted Net In
Slide 11: Q1 2017: Performance Sensing
Q1 2017: Performance Sensing REVENUE PROFIT FROM OPERATIONS (PFO) 25.7% PFO INDEX EXCLUDING FX $597.2M $600.1M $151.7M $145.8M 25.3%* 24.4%* Q1 2016 Q1 2017 Q1 2016 Q1 2017 Q1-17 REVENUE GROWTH REPORTED ORGANIC • Automotive organic growth driven by strong performance from China Automotive 0.2% 3.1%
Slide 12: Q1 2017: Sensing Solutions
Q1 2017: Sensing Solutions REVENUE PROFIT FROM OPERATIONS (PFO) 32.3% PFO INDEX EXCLUDING FX $207.1M $199.4M $67.4M $63.2M 32.6%* 31.7%* Q1 2016 Q1 2017 Q1 2016 Q1 2017 • Third straight quarter of solid organic revenue Q1-17 REVENUE GROWTH REPORTED ORGANIC growth driven by recovery in HVAC, Applianc
Slide 13: Q1 2017 Non-GAAP Results
Q1 2017 Non-GAAP Results Changes recalculated based on unrounded numbers Q1 2017 Q1 2016 Δ Revenue $807.3M $796.5M 1.3% Adj. Gross Profit $279.7M $271.5M 3.0% (% of revenue) 34.7% 34.1% R&D $31.8M $31.4M 1.5% (% of revenue) 3.9% 3.9% Adj. SG&A $69.0M $70.3M (1.9%) (% of revenue) 8.5% 8.8% Adj. Other
Slide 14: Delivering on Promise to Strengthen Balance Sheet
Delivering on Promise to Strengthen Balance Sheet NET DEBT ($M) NET LEVERAGE RATIO ~$435M OF NET DEBT REDUCTION SINCE Q4-15 LEVERAGE RATIO OF ~3.0X BY END OF 2017* 4.6x 4.5x 3400 4.3x $3,317 4.0x 3.8x 3200 3.6x 3000 $2,882 2800 2600 2400 2200 2000 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q4 15 Q1 16 Q2 1
Slide 15: 2017 Financial Guidance
2017 Financial Guidance FY 2016 FY 2017 GUIDANCE REPORTED ORGANIC COMMENTS • No change to organic guidance for revenue, Revenue $3,202M $3,165M – $3,265M (1%) – 2% 1% – 3% Adj. EBIT, Adj. Net Income & Adj. EPS Adj. EBIT $695.3M $734M – $756M 6% – 9% 6% – 10% • FX expected to lower revenue by ~$52M,
Slide 16: Q2-17 Financial Guidance
Q2-17 Financial Guidance Q2-16 Q2-17 GUIDANCE REPORTED ORGANIC COMMENTS • Integration expense of ~$8-$9M in Q2-17 Revenue $827.5M $820M – $844M (1%) – 2% 2% – 4% • FX assumption: EUR/USD: 1.12 Adj. EBIT $175.3M $182M – $188M 4% – 7% 4% – 8% CNY/USD: 6.89 • Fill rate of 86% Adj. Net Income $124.3M $1
Slide 17: Sensata is Committed to Shareholder Value Creation
Sensata is Committed to Shareholder Value Creation Deliver double-digit organic EPS growth Sustain high-profitability and increase margins of acquired businesses Leading and expanding positions in markets with attractive long-term growth Strong cash generation and value-creating capital deployme
Slide 18: Appendix
APPENDIX SENSATA FIRST QUARTER 2017 EARNINGS SUMMARY
Slide 19: Opportunity for Sustained, Long-Term Margin Expansion
Opportunity for Sustained, Long-Term Margin Expansion ADJUSTED NET INCOME MARGIN PERFORMANCE LEVERS • Improved profitability of acquired 20–23% businesses • Volume growth, operating 15.5% leverage, and net productivity gains • Roll-off of integration expenses FY 16 Long-Term Target Q1 2017 EARNINGS
Slide 20: Q1 2017 Cash Flow Statement
Q1 2017 Cash Flow Statement Q1 2017 Q1 2016 Δ Net Income $71.7M $60.6M 18.4% Depreciation & Amortization $69.1M $76.4M (9.7%) Changes in Working Capital ($32.4M) ($10.2M) (216.7%) Other $11.3M $9.4M 20.8% Operating Cash Flow $119.7M $136.2M (12.1%) Capital Expenditures ($33.1M) ($34.2M) 3.4% Free Ca
Slide 21: Balance Sheet
Balance Sheet MAR 31, 2017 DEC 31, 2016 Total Assets $6,330.6M $6,241.0M Working Capital $878.1M $758.2M Intangibles, Net & Other $4,857.3M $4,899.5M Long-Term Assets MAR 31, 2017 DEC 31, 2016 Cash & Equivalents $431.7M $351.4M Current Debt $7.4M $14.6M Net Cash $424.3M $336.8M Q1 2017 EARNINGS SUMM
Slide 22: Reconciliation of Organic Revenue Growth
Reconciliation of Organic Revenue Growth Q1 2017 vs Q1 2016 SENSATA Reported revenue % change 1.3% Less: Foreign exchange rate differences (2.2%) Organic revenue growth 3.5% PERFORMANCE SENSING Reported revenue % change 0.5% Less: Foreign exchange rate differences (2.6%) Organic revenue growth 3.1%
Slide 23: Reconciliation of Net Income to Adjusted Net Income
Reconciliation of Net Income to Adjusted Net Income Q1 2017 Q1 2016 [ $ in Thousands ] (except per share amounts) $ EPS Margin $ EPS Margin Net income $71,736 $0.42 8.9% $60,612 $0.35 7.6% Non-GAAP adjustments: Restructuring and special charges 7,691 0.04 1.0% 3,639 0.02 0.5% Financing and other tra
Slide 24: Reconciliation of Net Income to Organic ANI Growth
Reconciliation of Net Income to Organic ANI Growth Q1 2017 2016 Net income $71,736 $60,612 Non-GAAP adjustments: Restructuring and special charges 7,691 3,639 Financing and other transaction costs - 781 Deferred gain on other hedges (5,340) (13,273) Depreciation and amortization expense related to t
Slide 25: Reconciliation of Net Income Per Diluted Share to Adjusted EPS Growth
Reconciliation of Net Income Per Diluted Share to Adjusted EPS Growth (Organic) Q1 2017 2016 Net income per diluted share $0.42 $0.35 Non-GAAP adjustments: Restructuring and special charges 0.04 0.02 Financing and other transaction costs - - Deferred gain on other hedges (0.03) (0.08) Depreciation a
Slide 26: Reconciliation of Net Income Margins to Organic ANI Margins
Reconciliation of Net Income Margins to Organic ANI Margins Amounts have been calculated based on unrounded numbers. Accordingly, certain amounts many not sum due to the effect of rounding Q1 2017 2016 Change Net income as a % of Net revenue 8.9% 7.6% 1.3% Non-GAAP adjustments: Restructuring and spe
Slide 27: Reconciliation of Net Income to Adjusted EBIT
Reconciliation of Net Income to Adjusted EBIT QUARTERLY [ $ in Thousands ] LTM Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 Net income $273,558 $71,736 $66,527 $69,785 $65,510 $60,612 Interest expense, net 163,827 40,277 40,617 41,176 41,757 42,268 Provision for income taxes 57,148 14,332 10,714 11,121 20,981 16,1
Slide 28: Reconciliation of Net Income to Organic Adjusted EBIT Growth
Reconciliation of Net Income to Organic Adjusted EBIT Growth Amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding Q1 [ $ in Thousands ] 2017 2016 Net income $71,736 $60,612 Interest expense, net 40,277 42,268 Provision for in
Slide 29: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA QUARTERLY [ $ in Thousands ] LTM Q1 17 Q4 16 Q3 16 Q2 16 Q1 16 Net income $273,558 $71,736 $66,527 $69,785 $65,510 $60,612 Interest expense, net 163,827 40,277 40,617 41,176 41,757 42,268 Provision for income taxes 57,148 14,332 10,714 11,121 20,981 16
Slide 30: Reconciliation of Debt to Net Debt and Net Leverage Ratio
Reconciliation of Debt to Net Debt and Net Leverage Ratio [ $ in Thousands ] 3/31/2017 Current portion of long-term debt, capital lease and other financing obligations $7,363 Capital lease and other financing obligations, less current portion 31,260 Long-term debt, net of discount and deferred finan
Slide 31: Reconciliation of Provision for Income Taxes to Adjusted Taxes
Reconciliation of Provision for Income Taxes to Adjusted Taxes Q1 [ $ in Thousands ] 2017 2016 Provision for income taxes $14,332 $16,195 Non-GAAP adjustments: Less: Deferred income tax and other tax expense/(benefit) 3,542 5,757 Adjusted taxes $10,790 $10,438 Adjusted EBIT $170,690 $164,088 Adjuste
Slide 32: Reconciliation of Operating Cash Flow to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Q1 [ $ in Thousands ] 2017 2016 Net cash provided by operating activities $119,701 $136,202 Less: Additions to property, plant and equipment and capitalized software (33,059) (34,235) Free cash flow $86,642 $101,967 % Chan
Slide 33: Reconciliation of PFO as percentage of Net Revenue
Reconciliation of PFO as percentage of Net Revenue to PFO as percentage of Net Revenue ex FX Q1 [ $ in Thousands ] 2017 2016 PERFORMANCE SENSING Net Revenue $600,143 $597,175 Profit from Operations (“PFO”) 151,736 145,787 PFO as % Net Revenue 25.3% 24.4% Less year-over-year change due to: Foreign ex
Slide 34: Sensata Peer Group
Sensata Peer Group ST Peer Group Sector 1. Ametek Inc Industrial 2. Amphenol Corp Tech 3. Delphi Auto 4. Fortive Industrial Tech 5. FLIR Systems Tech 6. Gentex Auto 7. Littelfuse Industrial 8. Rockwell Industrial 9. Roper Industrial 10. TE Connectivity Industrial Tech 11. Wabco Industrial Q1 2017 EA
Slide 35: 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 36: 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. Net debt – represents total debt, capital lease and other financing obligations less cash and cash equivalents. Net