Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q3 2018 Earnings Presentation
39 slides from Sensata Technologies's earnings presentation, Oct 30, 2018
Slide 1: Sensata Third Quarter 2018 Earnings Presentation
SENSATA THIRD QUARTER 2018 EARNINGS PRESENTATION OCTOBER 30, 2018
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures Forward-Looking Statements This earnings presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Sensata believes that its expectations
Slide 3: Q3-2018 GAAP Results
Q3-2018 GAAP Results Q3-2018 Q3-2017 Δ Revenue $873.6M $819.1M 6.7% Gross Profit $315.2M $291.8M 8.0% (% of revenue) 36.1% 35.6% R&D $37.8M $34.0M 11.2% (% of revenue) 4.3% 4.2% SG&A $73.9M $75.9M (2.6%) (% of revenue) 8.5% 9.3% Profit from Operations $222.3M $140.3M 58.5% (% of revenue) 25.5% 17.1%
Slide 4: Delivering strong secular growth and executing high-return capital deployment initiatives
Delivering strong secular growth and executing high-return capital deployment initiatives Accelerating organic revenue growth as a result of attractive, secular content growth in all markets – Q3-18 organic revenue growth of 7.9% End markets performing in-line with expectations – HVOR remains st
Slide 5: Secular growth drives strong Q3-18 performance
Secular growth drives strong Q3-18 performance PERCENT OF REVENUES HVOR – Organic revenue growth: 19.8% • Outgrew underlying market production by 1020 basis points • Secular growth being driven by the need for cleaner and more ~16% efficient engines and transition to electrified cabins • Secular gro
Slide 6: Electrification is a significant driver of Sensata's growth over the next 3 years and beyond
Electrification is a significant driver of Sensata’s growth over the next 3 years and beyond Next 3 Years CLEAN & ELECTRIFICATION CHINA EFFICIENT Further expansion Sustained vehicle Mandates for cleaner, of electrification modernization more efficient vehicles in China Q3-2018 EARNINGS SUMMARY 6
Slide 7: Sensata is solving some of our customers' most complex electrification challenges
Sensata is solving some of our customers’ most complex Electrification challenges Industry Challenges Examples of Sensata Solutions • Increasing range • Advancing core sensor technology • Decreasing charging times • Scaling up high-voltage contactors • Scaling production expected through GIGAVAC acq
Slide 8: Acquisition of GIGAVAC extends secular growth in Electrification
Acquisition of GIGAVAC extends secular growth in Electrification across Auto, HVOR and Industrial markets • GIGAVAC is a profitable, fast growing provider of high-voltage contactors; acquisition intended to extend Sensata’s core competency in electrical protection • GIGAVAC’s business is highly alig
Slide 9: GIGAVAC doubles our content on battery electric vehicles
GIGAVAC doubles our content on battery electric vehicles and we have significant potential for additional growth Pre-GIGAVAC Post-GIGAVAC BEV of the Future ~$20 per vehicle ~$40 per vehicle ~$175* of incremental content per vehicle • Regenerative Braking • 2–5 High-Voltage • Wireless Battery Managem
Slide 10: Sensata is exposed to the fastest growing segments of the automotive industry
Sensata is exposed to some of the most attractive and fastest growing segments of the automotive industry Sensor-Rich Solutions for Efficient, Traditional Powertrain Connected Subsystems 10% • HVAC • Regenerative Braking • Vehicle Health Monitoring Industrial High-Growth Sensors for Clean Electrifie
Slide 11: Growth in Electrification also extends into HVOR, Industrial and Aerospace markets
Growth in Electrification also extends into the HVOR, Industrial and Aerospace markets HVOR Industrial Aerospace APPLICATIONS APPLICATIONS APPLICATIONS • High-voltage contactors • Electrical protection to serve • Advanced circuit breakers • Embedded motor position high and low voltage/current used i
Slide 12: Sensata Electrification strategy: key takeaways
Sensata Electrification strategy: key takeaways Electrification is a net content tailwind for Sensata and the company is winning business today in its automotive, industrial and heavy vehicle & off-road businesses as secular demand for electrified products grows Sensata is delivering mission-cri
Slide 13: We are executing against the operational targets we established at our Investor Day
We are executing against the operational targets we established at our Investor Day Deliver Double-Digit Execute Balanced, Accelerate Increase Adjusted Organic Returns-Driven Growth Margins EPS Growth Capital Deployment 6.9% 70 bps 14.2% Q3-18 YTD Q3-18 YTD Adj. Q3-18 YTD • Announced GIGAVAC Organic
Slide 14: Q3-2018 Financial Summary
Q3-2018 Financial Summary ADJUSTED NET INCOME GROWS 11% Q3-2018 Q3-2017 Δ • Revenue growth of 6.7% composed of: Revenue $873.6M $819.1M 6.7% • Organic revenue growth: 7.9% Adjusted EBIT $204.9M $189.6M 8.0% • Valves divestiture decreases % revenue 23.5% 23.2% revenue by 1.2% Adjusted Net Income $154
Slide 15: Q3-2018: Performance Sensing
Q3-2018: Performance Sensing REVENUE SEGMENT PROFIT % SEGMENT MARGIN $649.6M $603.9M $178.4M $162.7M 2 26.6% 27.0% 1 Q3-2017 Q3-2018 Q3-2017 Q3-2018 Q3-18 REVENUE GROWTH REPORTED ORGANIC • Secular growth drives strong performance in both HVOR and automotive businesses Automotive 4.7% 6.8% HVOR 19.4%
Slide 16: Q3-2018: Sensing Solutions
Q3-2018: Sensing Solutions REVENUE SEGMENT PROFIT % SEGMENT MARGIN $223.9M $72.4M $73.3M $215.1M 33.6% 31.9%* Q3-2017 Q3-2018 Q3-2017 Q3-2018 • Strong demand from industrial and aerospace Q3-18 REVENUE GROWTH REPORTED ORGANIC customers Sensing Solutions 4.1% 4.0% • China delivers double-digit growth
Slide 17: Q3-2018 Non-GAAP Results
Q3-2018 Non-GAAP Results Q3-2018 Q3-2017 Δ Revenue $873.6M $819.1M 6.7% Adj. Gross Profit $319.0M $296.9M 7.4% (% of revenue) 36.5% 36.3% R&D $37.8M $34.0M 11.2% (% of revenue) 4.3% 4.2% Adj. SG&A $73.0M $71.6M 1.9% (% of revenue) 8.4% 8.7% Adjusted Other Opex1 $0.9M $2.0M (56.4%) Adj. Other Gain/(L
Slide 18: Q4-18 Financial Guidance
Q4-18 Financial Guidance Q4-17 Q4-18 GUIDANCE REPORTED ORGANIC COMMENTS • Valves divestiture expected to decrease Revenue $840.5M $853M - $877M 2% - 4% 6% - 8% revenue by ~3.5% • FX expected to decrease revenue by ~$4M Adj. EBIT $200.6M $215M - $221M 7% - 10% 10% - 12% – Adjusted EPS: positive impac
Slide 19: 2018 Financial Guidance
2018 Financial Guidance FY-2017 FY-2018 GUIDANCE REPORTED ORGANIC ASSUMPTIONS • Organic revenue growth guidance at Revenue $3,307M $3,527M – $3,551M 7% 7% high end of prior range Prior guidance 6% - 8% 5% - 7% • FX expected to increase revenue by Adj. EBIT $750M $827M – $833M 10% – 11% 10% – 11% ~1%
Slide 20: Appendix
APPENDIX SENSATA THIRD QUARTER 2018 EARNINGS SUMMARY
Slide 21: YTD 2018 GAAP Results
YTD 2018 GAAP Results YTD 2018 YTD 2017 Δ Revenue $2,673.7M $2,466.2M 8.4% Gross Profit $950.4M $866.0M 9.7% (% of revenue) 35.5% 35.1% R&D $111.8M $97.0M 15.2% (% of revenue) 4.2% 3.9% SG&A $235.7M $226.8M 3.9% (% of revenue) 8.8% 9.2% Profit from Operations $548.1M $401.9M 36.4% (% of revenue) 20.
Slide 22: YTD 2018 Non-GAAP Results
YTD 2018 Non-GAAP Results YTD 2018 YTD 2017 Δ Revenue $2,673.7M $2,466.2M 8.4% Adj. Gross Profit $962.9M $881.8M 9.2% (% of revenue) 36.0% 35.8% R&D $111.8M $97.0M 15.2% (% of revenue) 4.2% 3.9% Adj. SG&A $228.1M $219.4M 3.9% (% of revenue) 8.5% 8.9% Adj. Other Opex1 $4.0M $15.9M (74.6%) Adj. Other
Slide 23: Q3-2018 Cash Flow Statement
Q3-2018 Cash Flow Statement Q3-2018 Q3-2017 Δ Net Income $149.1M $88.0M 69.4% Depreciation & Amortization $60.0M $67.5M (11.2%) Changes in Working Capital $14.8M ($24.5M) 160.4% Other ($57.7M) $7.4M NM Operating Cash Flow $166.2M $138.4M 20.1% Capital Expenditures ($45.0M) ($36.3M) (23.7%) Free Cash
Slide 24: YTD 2018 Cash Flow Statement
YTD 2018 Cash Flow Statement YTD 2018 YTD 2017 Δ Net Income $344.9M $239.2M 44.2% Depreciation & Amortization $183.1M $203.6M (10.1%) Changes in Working Capital ($88.4M) ($107.7M) 17.9% Other ($19.5M) $37.1M NM Operating Cash Flow $420.1M $372.3M 12.9% Capital Expenditures ($111.3M) ($103.5M) (7.5%)
Slide 25: Balance Sheet
Balance Sheet SEP 30, 2018 DEC 31, 2017 Total Assets $6,664.3M $6,641.5M Working Capital1 $1,372.6M $1,218.8M Intangibles, Net & Other $4,637.1M $4,793.2M Long-Term Assets SEP 30, 2018 DEC 31, 2017 Cash & Equivalents $811.4M $753.1M Current Debt $13.4M $15.7M Net Cash $798.0M $737.4M Q3-2018 EARNING
Slide 26: Sensata Peer Group
Sensata Peer Group ST Peer Group Sector 1. Ametek Inc Industrial 2. Amphenol Corp Tech 3. Aptiv Auto 4. Delphi Technologies Auto 5. Fortive Industrial Tech 6. FLIR Systems Tech 7. Gentex Auto 8. Littelfuse Industrial 9. Rockwell Industrial 10. Roper Industrial 11. TE Connectivity Industrial Tech 12.
Slide 27: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES
Slide 28: 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 29: Non-GAAP Measures - continued
Non-GAAP Measures - continued Adjusted taxes – represents provision for/(benefit from) income taxes, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments recorded to provision for/(benefit from) income taxes in our U.S. GAAP financial statements, such as deferred income ta
Slide 30: Adjusted EBIT – Q3-2018
Adjusted EBIT – Q3-2018 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands Q3 2018 Q3 2017 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $149,118 17.1% $88,035 10.7%
Slide 31: Adjusted EBIT – YTD 2018
Adjusted EBIT – YTD 2018 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands YTD 2018 YTD 2017 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $344,896 12.9% $239,228 9
Slide 32: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM YTD 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Net income $514,025 $344,896 $149,118 $105,288 $90,490 $169,129 $88,035 Interest expense, net 153,991 114,808 38,058 38,321 38,429 39,183 40,263 Provision for/(benefit from) income taxes 8,411 62
Slide 33: ANI, Adjusted EPS, and ANI Margin – Q3-2018
ANI, Adjusted EPS, and ANI Margin – Q3-2018 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 2018 Q3 2017 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount EPS
Slide 34: ANI, Adjusted EPS, and ANI Margin – YTD 2018
ANI, Adjusted EPS, and ANI Margin – YTD 2018 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 2018 YTD 2017 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount
Slide 35: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands Q3 YTD Total Sensata 2018 2017 2018 2017 Provision for income taxes $24,562 $14,816 $62,086 $47,759 Non-GAAP adjustments: Deferred income tax and other tax expense/(benefit) 9,897 2,374 20,783 12,187 Adjusted taxes $14,665 $12,442 $41,303 $35,572 A
Slide 36: Free Cash Flow
Free Cash Flow $ in thousands Q3 YTD Total Sensata 2018 2017 Change 2018 2017 Change Net cash provided by operating activities $166,226 $138,430 20.1% $420,139 $372,279 12.9% Additions to property, plant and equipment and capitalized software (44,974) (36,344) (23.7%) (111,275) (103,536) (7.5%) Free
Slide 37: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands As of Total Sensata 30-Sep-18 30-Jun-18 31-Mar-18 31-Dec-17 Current portion of long-term debt, capital lease and other financing obligations $13,378 $11,044 $8,178 $15,720 Capital lease and other financing obligations 24,548 26,098 27,735 28,739 Long-te
Slide 38: Organic Revenue Growth
Organic Revenue Growth 2018 versus 2017 0 Total Sensata Q3 YTD Reported net revenue (percentage) change 6.7% 8.4% Less year-over-year change due to: Exited business (1.2%) (0.4%) Foreign exchange rate differences 0.0% 1.9% Organic revenue growth 7.9% 6.9% Performance Sensing Q3 YTD Reported net reve
Slide 39: Segment Margin
Segment Margin $ in thousands 3Q YTD Performance Sensing 2018 2017 Change 2018 2017 Change Segment profit $178,391 $162,655 9.7% $535,166 $483,491 10.7% Segment net revenue 649,611 603,932 7.6% 1,988,657 1,825,904 8.9% Segment margin (reported basis) 27.5% 26.9% 60 bps 26.9% 26.5% 40 bps Less year-o
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