Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q3 2017 Earnings Presentation
36 slides from Sensata Technologies's earnings presentation, Oct 24, 2017
Slide 1: Sensata Third Quarter 2017 Earnings Presentation
SENSATA THIRD QUARTER 2017 EARNINGS PRESENTATION OCTOBER 24, 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: Q3 2017 GAAP Results
Q3 2017 GAAP Results Q3 2017 Q3 2016 Δ Revenue $819.1M $789.8M 3.7% Gross Profit $291.6M $280.9M 3.8% (% of revenue) 35.6% 35.6% R&D $34.0M $31.6M 7.6% (% of revenue) 4.2% 4.0% SG&A $76.0M $75.0M 1.2% (% of revenue) 9.3% 9.5% Profit from Operations $140.0M $122.8M 14.0% (% of revenue) 17.1% 15.5% Ne
Slide 4: Solid Organic Revenue Growth & Margin Expansion in Q3-17
Solid Organic Revenue Growth & Margin Expansion in Q3-17 Organic revenue growth of 3.6% –strength in HVOR and industrial businesses; China automotive sustains trend of double-digit growth Sustained EBIT margin expansion – adjusted EBIT margin expands by 90 basis points y/y Double-digit earning
Slide 5: Q3-17 Performance by End Market
Q3-17 Performance by End Market PERCENT OF REVENUES HVOR – Organic revenue growth: 19.5% • Accelerating growth as all market segments remain strong • Executing healthy backlog of closed design wins in on-road, ~15% construction and agriculture markets • Expect FY-17 market growth of 5%: NA Class 8 T
Slide 6: Sustained Year-Over-Year Margin Improvement
Sustained Year-Over-Year Margin Improvement ADJUSTED EBIT MARGINS ADJUSTED NET INCOME MARGINS + 90 BASIS POINTS + 90 BASIS POINTS 16.9% 23.2% 16.0% 22.3% Q3 16 Q3 17 Q3 16 Q3 17 Q3 2017 EARNINGS SUMMARY 6
Slide 7: Moving to the UK Would Increase Our Flexibility to Deploy Capital
Moving to the UK Would Increase Our Flexibility to Deploy Capital • Allows for flexible and effective capital allocation • The UK is a shareholder-friendly corporate governance environment • Sensata has an expanded presence in the UK post recent acquisitions; improves administrative efficiency • Eli
Slide 8: Delivering Solid Execution and Strong Performance
Delivering Solid Execution and Strong Performance Accelerating organic revenue growth • YTD organic revenue growth of 3.6% Sustaining attractive margin expansion • Adjusted EBIT margins expand 90 bps YTD • M&A cost synergies helping to drive margins, integration spend largely completed Double-digit
Slide 9: Q3 2017 Financial Summary
Q3 2017 Financial Summary ADJUSTED NET INCOME GROWS 9% ORGANICALLY Q3 2017 Q3 2016 Δ • Revenue growth of 3.7% composed of: Revenue $819.1M $789.8M 3.7% • Organic revenue growth: 3.6% Adjusted EBIT $189.6M $176.3M 7.5% • Foreign exchange increases % revenue 23.2% 22.3% revenue by 0.1% Adjusted Net In
Slide 10: Q3 2017: Performance Sensing
Q3 2017: Performance Sensing REVENUE SEGMENT PROFIT % SEGMENT MARGIN (EXCLUDING FX) $162.7M $603.9M $584.7 $155.2M 27.1%* 26.6% Q3 2016 Q3 2017 Q3 2016 Q3 2017 Q3-17 REVENUE GROWTH REPORTED ORGANIC • HVOR posts second straight quarter of double-digit organic revenue growth Automotive (0.1%) (0.2%) •
Slide 11: Q3 2017: Sensing Solutions
Q3 2017: Sensing Solutions REVENUE SEGMENT PROFIT % SEGMENT MARGIN (EXCLUDING FX) $72.4M $215.1M $67.3M $205.1M 33.9%* 32.8% Q3 2016 Q3 2017 Q3 2016 Q3 2017 • Continued momentum in HVAC, Appliance Q3-17 REVENUE GROWTH REPORTED ORGANIC and Industrial markets Sensing Solutions 4.9% 5.2% • Organic reve
Slide 12: Q3 2017 Non-GAAP Results
Q3 2017 Non-GAAP Results Q3 2017 Q3 2016 Δ Revenue $819.1M $789.8M 3.7% Adj. Gross Profit $296.7M $286.8M 3.5% (% of revenue) 36.2% 36.3% R&D $34.0M $31.6M 7.6% (% of revenue) 4.2% 4.0% Adj. SG&A $71.7M $73.9M (3.0%) (% of revenue) 8.8% 9.4% Adj. Other Opex1 $2.0M $2.1M (4.6%) Adj. Other Gains/(Loss
Slide 13: Delivering on Promise to Strengthen Balance Sheet
Delivering on Promise to Strengthen Balance Sheet NET DEBT ($M) NET LEVERAGE RATIO ~$616M OF NET DEBT REDUCTION SINCE Q4-15 LEVERAGE RATIO OF ~3.0X BY END OF 2017* 4.6x 4.5x 3400 $3,317 4.3x 4.0x 3.8x 3200 3.6x 3.4x 3.3x 3000 2800 $2,701 2600 2400 2200 2000 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17
Slide 14: Q4-17 Financial Guidance
Q4-17 Financial Guidance Q4-16 Q4-17 GUIDANCE REPORTED ORGANIC COMMENTS • FX expected to increase revenue by Revenue $788.4M $808M - $832M 2% - 6% 2% - 3% ~$12M y/y – Adjusted EPS impact of $0.01 - $0.02 from FX Adj. EBIT $179.6M • Assumes 130 bps $195M - $201M 8% - 12% 7% - 11% increase y/y in adju
Slide 15: 2017 Financial Guidance
2017 Financial Guidance FY 2016 FY 2017 GUIDANCE REPORTED ORGANIC COMMENTS • Increasing organic revenue guidance Revenue $3,202M $3,274M – $3,298M 2%– 3% 3% – 4% • Narrowing range for all other guidance • FX expected to lower Adj. EBIT $695.3M $744M – $751M 7% – 8% 8% – 9% revenue by ~$22M – Adjuste
Slide 16: 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 17: Appendix
APPENDIX SENSATA THIRD QUARTER 2017 EARNINGS SUMMARY
Slide 18: 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 Q3 2017 EARNINGS
Slide 19: YTD 2017 GAAP Results
YTD 2017 GAAP Results YTD 2017 YTD 2016 Δ Revenue $2,466.2M $2,413.9M 2.2% Gross Profit $865.0M $839.1M 3.1% (% of revenue) 35.1% 34.8% R&D $97.0M $95.2M 1.9% (% of revenue) 3.9% 3.9% SG&A $227.3M $224.6M 1.2% (% of revenue) 9.2% 9.3% Profit from Operations $400.4M $364.5M 9.8% (% of revenue) 16.2%
Slide 20: YTD 2017 Non-GAAP Results
YTD 2017 Non-GAAP Results YTD 2017 YTD 2016 Δ Revenue $2,466.2M $2,413.9M 2.2% Adj. Gross Profit $880.8M $852.0M 3.4% (% of revenue) 35.7% 35.3% R&D $97.0M $95.2M 1.9% (% of revenue) 3.9% 3.9% Adj. SG&A $219.9M $220.8M (0.4%) (% of revenue) 8.9% 9.1% Adj. Other Opex1 $15.9M $5.6M 186.2% Adj. Other G
Slide 21: Q3 2017 Cash Flow Statement
Q3 2017 Cash Flow Statement Q3 2017 Q3 2016 Δ Net Income $88.0M $69.8M 26.2% Depreciation & Amortization $67.5M $76.9M (12.1%) Changes in Working Capital ($24.5M) ($6.3M) (287.8%) Other $7.4M $9.4M (21.4%) Operating Cash Flow $138.4M $149.7M (7.5%) Capital Expenditures ($36.3M) ($30.1M) (20.7%) Free
Slide 22: YTD 2017 Cash Flow Statement
YTD 2017 Cash Flow Statement YTD 2017 YTD 2016 Δ Net Income $239.2M $195.9M 22.1% Depreciation & Amortization $203.6M $229.2M (11.2%) Changes in Working Capital ($107.7M) ($66.2M) (62.5%) Other $37.1M $37.5M (0.9%) Operating Cash Flow $372.3M $396.4M (6.1%) Capital Expenditures ($103.5M) ($94.6M) (9
Slide 23: Balance Sheet
Balance Sheet SEP 30, 2017 SEP 30, 2016 DEC 31, 2016 Total Assets $6,537.9M $6,251.0M $6,241.0M Working Capital $1,103.3M $674.4M $758.2M Intangibles, Net & Other $4,806.7M $4,954.7M $4,899.5M Long-Term Assets SEP 30, 2017 SEP 30, 2016 DEC 31, 2016 Cash & Equivalents $613.0M $299.9M $351.4M Current
Slide 24: 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 Q3 2017 EA
Slide 25: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES
Slide 26: 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 27: Adjusted EBIT – Q3 2017
Adjusted EBIT – Q3 2017 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands Q3 2017 Q3 2016 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $88,035 10.7% $69,785 8.8% 2
Slide 28: Adjusted EBIT – YTD
Adjusted EBIT – YTD Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands YTD 2017 YTD 2016 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $239,228 9.7% $195,907 8.1% 22
Slide 29: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM YTD 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016 Net income $305,755 $239,228 $88,035 $79,457 $71,736 $66,527 $69,785 Interest expense, net 161,195 120,578 40,263 40,038 40,277 40,617 41,176 Provision for income taxes 58,473 47,759 14,816 18,61
Slide 30: ANI, Adjusted EPS, and ANI Margin – Q3 2017
ANI, Adjusted EPS, and ANI Margin – Q3 2017 Per share and percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands Q3 2017 Q3 2016 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount EPS
Slide 31: ANI, Adjusted EPS, and ANI Margin - YTD
ANI, Adjusted EPS, and ANI Margin - YTD Per share and percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands YTD 2017 YTD 2016 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount EPS1
Slide 32: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands Q3 YTD Total Sensata 2017 2016 2017 2016 Provision for income taxes $14,816 $11,121 $47,759 $48,297 Non-GAAP adjustments: Deferred income tax and other tax expense/(benefit) 2,374 451 12,187 16,150 Adjusted taxes $12,442 $10,670 $35,572 $32,147 Adj
Slide 33: Free Cash Flow
Free Cash Flow $ in thousands Q3 YTD Total Sensata 2017 2016 Change 2017 2016 Change Net cash provided by operating activities $138,430 $149,720 (7.5%) $372,279 $396,351 (6.1%) Additions to property, plant and equipment and capitalized software (36,344) (30,118) (20.7%) (103,536) (94,584) (9.5%) Fre
Slide 34: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands Balance as of Total Sensata 30-Sep-17 30-Jun-17 31-Mar-17 31-Dec-16 Current portion of long-term debt, capital lease and other financing obligations $13,176 $10,704 $7,363 $14,643 Capital lease and other financing obligations 29,990 30,929 31,260 32,369
Slide 35: Organic Revenue Growth
Organic Revenue Growth 2017 versus 2016 Total Sensata 3Q YTD Reported net revenue (percentage) change 3.7% 2.2% Less year-over-year change due to: Foreign exchange rate differences 0.1% (1.4%) Organic revenue growth 3.6% 3.6% Performance Sensing 3Q YTD Reported net revenue (percentage) change 3.3% 1
Slide 36: Segment Margin
Segment Margin $ in thousands 3Q YTD Performance Sensing 2017 2016 Change 2017 2016 Change Segment profit $162,655 $155,228 4.8% $483,491 $453,540 6.6% Segment net revenue 603,932 584,650 3.3% 1,825,904 1,797,395 1.6% Segment margin (reported basis) 26.9% 26.6% 30 bps 26.5% 25.2% 130 bps Less year-o