Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q4 2016 Earnings Presentation
41 slides from Sensata Technologies's earnings presentation, Feb 2, 2017
Slide 1: Sensata Fourth Quarter and Full Year 2016 Earnings Presentation
SENSATA FOURTH QUARTER AND FULL YEAR 2016 EARNINGS PRESENTATION FEBRUARY 2, 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: FY 2016 GAAP Results
FY 2016 GAAP Results FY 2016 FY 2015 Δ Revenue $3,202.3M $2,975.0M 7.6% Gross Profit $1,118.0M $997.2M 12.1% (% of revenue) 34.9% 33.5% R&D $126.7M $123.7M 2.4% (% of revenue) 4.0% 4.2% SG&A $293.6M $271.4M 8.2% (% of revenue) 9.2% 9.1% Profit from Operations $492.2M $393.6M 25.0% (% of revenue) 15.
Slide 4: Strong Year of Margin Expansion and Earnings Growth
Strong Year of Margin Expansion and Earnings Growth DELIVERED ON FULL YEAR GUIDANCE DESPITE CHALLENGE ON WEAK MARKETS Performance in-line with or above original guidance provided in Feb ’16 – good execution despite market softness and FX headwinds Adjusted EPS of $2.89 above midpoint of guidance
Slide 5: Performance vs. FY 2016 Guidance
Performance vs. FY 2016 Guidance* 26.6%* 26.4%* Organic Revenue Adj. Net Income Growth Adj. EPS Growth Free Cash Flow Growth (Organic) (Organic) GUIDANCE* ACTUAL MET EXPECTATIONS Organic Revenue Growth 0 – 3% 1.6% • Adjusted Net Income (organic growth) 4 – 11% 14.2% 1 • Adjusted EPS (organic growth)
Slide 6: Delivered Sequential Margin Improvement in FY 2016
Delivered Sequential Margin Improvement in FY 2016 ADJUSTED EBIT MARGINS ADJUSTED NET INCOME MARGINS +220 BASIS POINTS SINCE Q1-16 +240 BASIS POINTS SINCE Q1-16 22.3% 22.8% 20.6% 21.2% 16.6% 16.0% 15.0% 14.2% Q1 16 Q2 16 Q3 16 Q4 16 Q1 16 Q2 16 Q3 16 Q4 16 Q4 AND FULL YEAR 2016 EARNINGS SUMMARY 6
Slide 7: Strong Profitability Improvement of Acquired Businesses
Strong Profitability Improvement of Acquired Businesses COMBINED ADJUSTED EBIT MARGIN* OF SCHRADER AND CST COMMENTS +470 BASIS POINTS • Profitability improvement delivered by executing M&A playbook: 21.2% • Leverage global scale • Capture manufacturing and low-cost 16.5% sourcing synergies • Drive e
Slide 8: 2016 Accomplishments
2016 Accomplishments • Integration of Schrader and CST remained on track and contributed to higher operating profit • New business wins across key growth initiatives: • Sensors for emissions and diagnostics • HVOR wins for operator sensing technologies • Strong wins in aerospace • Improved R&D effec
Slide 9: 2017 Priorities
2017 Priorities • Sustain disciplined focus on attractive EPS growth and free cash generation • Continue to expand margins of acquired businesses • Deliver on integration plans for Schrader and CST • Further develop emerging technologies, including LiDAR & wireless sensors • Focus on capturing long-
Slide 10: Q4 2016 Financial Summary
Q4 2016 Financial Summary ADJUSTED EARNINGS PER SHARE GREW 30%* ORGANICALLY Q4 2016 Q4 2015 Δ • Revenue growth of 8.5% comprised of: Revenue $788.4M $726.5M 8.5% • Organic revenue growth: 5.8% Adjusted EBIT $179.6M $154.9M 15.9% • Acquisitions, less exited % revenue 22.8% 21.3% businesses, add 5.6%
Slide 11: Q4 2016 Review: Performance Sensing
Q4 2016 Review: Performance Sensing REVENUE PROFIT FROM OPERATIONS (PFO) 28.4% PFO INDEX EXCLUDING FX AND CST $588.0M $572.1M $162.0M $150.9M 27.5%* 26.4%* Q4 2015 Q4 2016 Q4 2015 Q4 2016 Q4-16 GROWTH Y/Y REPORTED ORGANIC • Automotive organic growth driven by strong performance from China Automotive
Slide 12: Q4 2016 Review: Sensing Solutions
Q4 2016 Review: Sensing Solutions REVENUE PROFIT FROM OPERATIONS (PFO) 33.0% PFO INDEX EXCLUDING FX AND CST $200.4M $154.3M $63.2M $48.7M 31.5%* 31.5%* Q4 2015 Q4 2016 Q4 2015 Q4 2016 • Strong organic revenue growth driven by Q4-16 GROWTH Y/Y REPORTED ORGANIC easier y/y comparison and improved resul
Slide 13: FY 2016 Non-GAAP Results
FY 2016 Non-GAAP Results FY 2016 FY 2015 Δ COMMENTS Revenue $3,202.3M $2,975.0M 7.6% • Organic revenue growth of 1.6% and organic Adj. Gross Profit $1,137.7M $1,038.5M 9.5% EPS growth of 14.2% (% of revenue) 35.5% 34.9% R&D $126.7M $123.7M • Gross profit 2.4% improvement driven by (% of revenue) 4.0
Slide 14: Delivering on Promise to De-Lever
Delivering on Promise to De-Lever DEBT ($M) NET LEVERAGE RATIO ~$335M OF DEBT REDUCTION SINCE Q4-15 LEVERAGE RATIO OF ~3.0X BY END OF 2017* Total Gross Indebtedness Net Debt 4.6x 4.5x $3,800 4.3x $3,600 4.0x 3.8x $3,400 $3,200 ~3.0x $3,000 $2,800 $2,600 $2,400 $2,200 $2,000 Q4 15 Q1 16 Q2 16 Q3 16 Q
Slide 15: 2017 Financial Guidance
2017 Financial Guidance FY 2016 FY 2017 GUIDANCE REPORTED ORGANIC COMMENTS Revenue $3,202M $3,150M – $3,250M (2%) – 1% 1% – 3% • FX expected to lower revenue by ~2% and EPS by ($0.02) to ($0.03) Adj. EBIT $695.3M $734M – $756M 6% – 9% 6% – 10% • Free cash flow expected to be between: $425M- Adj. Net
Slide 16: Profitability Impact from FX and Integration Costs Will Disproportionately Affect Q1 2017
Profitability Impact from FX and Integration Costs Will Disproportionately Affect Q1 2017 FX IMPACT ON ADJUSTED NET INCOME INTEGRATION COSTS $1–2M Q1-17E Remainder of FY-17 Q1-17E Remainder of FY-17 ~($6M) ~($7M) ~($10M) Q4 AND FULL YEAR 2016 EARNINGS SUMMARY 16
Slide 17: Q1-17 Financial Guidance
Q1-17 Financial Guidance Q1-16 Q1-17 GUIDANCE REPORTED ORGANIC COMMENTS • FX expected to lower Revenue $796.5M $781M – $805M (2%) – 1% 1% – 3% revenue by ~$16M – $24M, or 2%-3% Adj. EBIT $164.1M $164M – $170M 0% – 4% 4% – 7% • Integration costs of ~$10M, up ~$6M over Q1-16 Adj. Net Income $113.2M $1
Slide 18: 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 19: Appendix
APPENDIX SENSATA FOURTH QUARTER AND FULL YEAR 2016 EARNINGS SUMMARY
Slide 20: Performance vs. FY 2016 Guidance on Reported Basis
Performance vs. FY 2016 Guidance* on Reported Basis 26.6%* 26.4%* Reported Revenue Adj. Net Income Growth Adj. EPS Growth Free Cash Flow Growth (Reported) (Reported) GUIDANCE* ACTUAL MET EXPECTATIONS Reported Revenue Growth 6 – 10% 7.6% • Adjusted Net Income (reported growth) 0 – 9% 4.8% • Adjusted
Slide 21: 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 • Reduced interest expense FY 16 Long-Ter
Slide 22: Q4 2016 GAAP Results
Q4 2016 GAAP Results Q4 2016 Q4 2015 Δ Revenue $788.4M $726.5M 8.5% Gross Profit $278.9M $249.8M 11.6% (% of revenue) 35.4% 34.4% R&D $31.4M $30.9M 1.8% (% of revenue) 4.0% 4.2% SG&A $69.0M $67.7M 1.8% (% of revenue) 8.7% 9.3% Profit from Operations $127.7M $91.2M 40.0% (% of revenue) 16.2% 12.5% Ne
Slide 23: Q4 2016 Non-GAAP Results
Q4 2016 Non-GAAP Results Q4 2016 Q4 2015 Δ Revenue $788.4M $726.5M 8.5% Adj. Gross Profit $285.7M $259.2M 10.2% (% of revenue) 36.2% 35.7% R&D $31.4M $30.9M 1.8% (% of revenue) 4.0% 4.2% Adj. SG&A $68.7M $60.4M 13.7% (% of revenue) 8.7% 8.3% Adj. EBIT $180.0M $154.9M 15.9% (% of revenue) 22.8% 21.3%
Slide 24: Q4 2016 Cash Flow Statement
Q4 2016 Cash Flow Statement Q4 2016 Q4 2015 Δ Net Income $66.5M $218.3M (69.5%) Depreciation & Amortization $79.2M $75.5M 4.9% Changes in Working Capital ($27.7M) $61.4M (145.1%) Other $7.2M ($185.7M) 103.9% Operating Cash Flow $125.2M $169.4M (26.1%) Capital Expenditures ($35.6M) ($47.0M) 24.1% Fre
Slide 25: FY 2016 Cash Flow Statement
FY 2016 Cash Flow Statement FY 2016 FY 2015 Δ Net Income $262.4M $347.7M (24.5%) Depreciation & Amortization $308.4M $282.7M 9.1% Changes in Working Capital ($93.9M) $24.4M (484.7%) Other $44.6M ($121.7M) 136.7% Operating Cash Flow $521.5M $533.1M (2.2%) Capital Expenditures ($130.2M) ($177.2M) 26.5
Slide 26: Balance Sheet
Balance Sheet DEC 31, 2016 DEC 31, 2015 Total Assets $6,241.0M $6,298.9M Working Capital $758.2M $412.7M Intangibles, Net & Other $4,899.5M $5,021.0M Long-Term Assets DEC 31, 2016 DEC 31, 2015 Cash & Equivalents $351.4M $342.3M Current Debt $14.6M $300.4M Net Cash $336.8M $41.8M Q4 AND FULL YEAR 201
Slide 27: Reconciliation of Organic Revenue Growth
Reconciliation of Organic Revenue Growth Q4 2016 FY 2016 SENSATA Net revenue growth 8.5% 7.6% Less: Effects of foreign currency movements (2.9%) (1.9%) Less: Acquisitions, net of exited businesses 1 5.6% 7.9% Organic revenue growth 5.8% 1.6% PERFORMANCE SENSING Net revenue growth 2.8% 1.7% Less: Eff
Slide 28: Reconciliation of Net Income to Adjusted Net Income – Q4
Reconciliation of Net Income to Adjusted Net Income – Q4 Amounts have been calculated based on unrounded numbers. Accordingly, sum of items may not foot due to rounding Q4 2016 Q4 2015 [ $ in Thousands ] (except per share amounts) $ EPS Margin $ EPS Margin Net income $66,527 $0.39 8.4% $218,289 $1.2
Slide 29: Reconciliation of Net Income to Adjusted Net Income – FY
Reconciliation of Net Income to Adjusted Net Income – FY Amounts have been calculated based on unrounded numbers. Accordingly, sum of items may not foot due to rounding FY 2016 FY 2015 [ $ in thousands ] (except per share amounts) $ EPS Margin $ EPS Margin Net income $262,434 $1.53 8.2% $347,696 $2.
Slide 30: Reconciliation of Net Income to Organic ANI Growth
Reconciliation of Net Income to Organic ANI Growth Amounts have been calculated based on unrounded numbers. Accordingly, sum of items may not foot due to rounding Q4 FY 2016 2015 2016 2015 Net income $66,527 $218,289 $262,434 $347,696 Non-GAAP adjustments: Restructuring and special charges 3,985 10,
Slide 31: Reconciliation of Diluted Net Income Per Share to Organic EPS Growth
Reconciliation of Diluted Net Income Per Share to Organic EPS Growth Amounts have been calculated based on unrounded numbers. Accordingly, sum of items may not foot due to rounding Q4 FY 2016 2015 2016 2015 Diluted net income per share $0.39 $1.27 $1.53 $2.03 Non-GAAP adjustments: Restructuring and
Slide 32: 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, sum of items may not foot due to rounding Q4 FY 2016 2015 Change 2016 2015 Change Net income as a % of Net revenue 8.4% 30.0% (21.6)% 8.2% 11.7% (3.5)% Non-GAAP adjustmen
Slide 33: Reconciliation of Net Income to Adjusted EBIT
Reconciliation of Net Income to Adjusted EBIT QUARTERLY [ $ thousands ] FY 16 Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 Net income $262,434 $66,527 $69,785 $65,510 $60,612 $218,289 Interest expense, net 165,818 40,617 41,176 41,757 42,268 41,597 Provision for/(benefit from) income taxes 59,011 10,714 11,121 20,
Slide 34: 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, sum of items may not foot due to rounding Q4 FY 2016 2015 2016 2015 Net income $66,527 $218,289 $262,434 $347,696 Interest expense, net 40,617 41,597 165,818 137,626 Pro
Slide 35: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA QUARTERLY [ $ thousands ] FY 16 Q4 16 Q3 16 Q2 16 Q1 16 Q4 15 Net income $262,434 $66,527 $69,785 $65,510 $60,612 $218,289 Interest expense, net 165,818 40,617 41,176 41,757 42,268 41,597 Provision for/(benefit from) income taxes 59,011 10,714 11,121 2
Slide 36: Reconciliation of Debt to Net Debt and Net Leverage Ratio
Reconciliation of Debt to Net Debt and Net Leverage Ratio [ $ thousands ] 12/31/2016 Current portion of long-term debt, capital lease and other financing obligations $14,643 Capital lease and other financing obligations, less current portion 32,369 Long-term debt, net of discount and deferred financ
Slide 37: Reconciliation of Income Taxes to Adjusted Taxes
Reconciliation of Provision for/(Benefit From) Income Taxes to Adjusted Taxes Q4 FY [ $ thousands ] 2016 2015 2016 2015 Provision for/(benefit from) income taxes $10,714 ($174,409) $59,011 ($142,067) Non-GAAP adjustments: Less: Deferred income tax and other tax expense/(benefit) 936 (184,889) 17,086
Slide 38: Reconciliation of Operating Cash Flow to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Q4 FY [ $ thousands ] 2016 2015 2016 2015 Net cash provided by operating activities $125,174 $169,418 $521,525 $533,131 Less: Additions to property, plant and equipment and capitalized software (35,633) (46,953) (130,217)
Slide 39: Reconciliation of PFO Percentage of Net Revenue ex FX and CST
Reconciliation of PFO as percentage of Net Revenue to PFO as percentage of Net Revenue ex FX and CST Q4 FY 2016 2015 2016 2015 PERFORMANCE SENSING Net Revenue $587,985 $572,145 $2,385,380 $2,346,226 Profit from Operations (“PFO”) 161,986 615,526 150,862 598,524 PFO as % Net Revenue 27.5% 26.4% 25.8%
Slide 40: 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 Earnings Growth,” “Organic ANI Margin,” “Core ANI Margin,” “Free Cash Flow,” “Adjusted EBIT,” “Adjusted EBITDA,” “Research, Develo
Slide 41: Non-GAAP Measures – continued
Non-GAAP Measures – continued Organic ANI margin – represents ANI margin excluding the effects of (1) foreign currency movements and (2) acquisitions, net of exited businesses that occurred within the previous 12 months. Core ANI margin – represents ANI margin excluding the effects of (1) acquisitio