Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q3 2019 Earnings Presentation
37 slides from Sensata Technologies's earnings presentation, Oct 30, 2019
Slide 1: Sensata Third Quarter 2019 Earnings Presentation
SENSATA THIRD QUARTER 2019 EARNINGS PRESENTATION OCTOBER 30, 2019
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: Q3-2019 GAAP Results
Q3-2019 GAAP Results $ and shares outstanding in millions, except EPS Q3-2019 Q3-2018 Δ Revenue $849.7 $873.6 (2.7%) Gross Profit $294.8 $315.2 (6.5%) (% of revenue) 34.7% 36.1% R&D $38.2 $37.8 1.0% (% of revenue) 4.5% 4.3% SG&A $68.2 $73.9 (7.8%) (% of revenue) 8.0% 8.5% Operating Income $146.1 $22
Slide 4: Q3-2019: Solid margin and free cash flow performance
Q3-2019: Solid margin and free cash flow performance despite challenging end-markets ✓ Continued secular outgrowth – organic revenue decline of (2.8%) reflects 140 basis points of outgrowth in Auto and 160 basis points of outgrowth in HVOR; Q3-19 YTD Sensata generated 430 basis points of outgrowth i
Slide 5: Q3-19 Performance by End Market
Q3-19 Performance by End Market PERCENT OF REVENUES Auto – Organic revenue decline: (0.4%) • China content growth remains robust as end market continues to decline, but improves considerably from Q2-19 ~58% • NA auto revenues continue to grow, but performance lowered as a result of General Motors st
Slide 6: We are lowering our growth expectations for several end markets in Q4-19
We are lowering our growth expectations for several end markets in Q4-19 OEM Production: GLOBAL AUTO EUROPE AUTO NA AUTO HVOR INDUSTRIAL (5%) (7%) (1%) (3%) (5%) (12-13%) (8%) (11%) (4%) (14%) Content growth will help to offset end market declines Previous Expectations Current Guidance Q3 2019 EARNI
Slide 7: Key messages
Key messages We have a demonstrated track record of sustaining margins and increasing earnings over the long-term • Continued secular outgrowth • Strong operating discipline and quickly aligning costs with customer demand • 5 year EPS CAGR of ~8% (2014-2019E) We have a strong balance sheet and we ha
Slide 8: Smart & Connected Initiative
SMART & CONNECTED INITIATIVE JEFF COTE, PRESIDENT & CHIEF OPERATING OFFICER
Slide 9: Today, we are the leading provider of sensor components
Today, we are the leading provider of sensor components for on-road truck and trailer OEMs and tier 1 providers Trailers Cabin Brake, ABS, Speed, Comfort TPMS, Suspension Air Conditioning & Refrigerator & Cabin Air Sensors Filter Sensors Engine Exhaust Fuel, Oil, Coolant, Intake, Temperature, Speed,
Slide 10: Leveraging leadership in wireless & embedded systems
We are our leveraging leadership in wireless & embedded systems to create a Vehicle Area Network for many use cases Wireless Gateway 3rd Party Sensors Climate Control Cargo Capacity Brakes Wheel End Wheel End Truck to Trailer Link Weight TPMS TPMS Weight Brakes Sensata’s vehicle area network (VAN) p
Slide 11: A large market opportunity exists to help Fleet Managers
A large market opportunity exists to help Fleet Managers reduce downtime and become more efficient Real-Time Analytics Mechanical Condition & Safety Data Load & Environmental Monitoring Data Valuable Insights for Fleet Managers Telematics Ecosystem $6 BILLION MARKET Truck to Trailer Link Sensata Veh
Slide 12: Evolving into a key data insight partner for customers
We are evolving into a key data insight partner for our commercial truck, trailer and fleet customers ! . DATA INSIGHT Capabilities Leveraged VEHICLE PARTNER SENSOR DESIGN ON-BOARD AREA NETWORK Embedded algorithms to & DEVELOPMENT WIRELESS SYSTEMS Centralized wireless gateway manage vehicle utilizat
Slide 13: Q3-19 Financials & Guidance
Q3-19 FINANCIALS & GUIDANCE PAUL VASINGTON, CHIEF FINANCIAL OFFICER
Slide 14: Q3-2019 Financial Summary
Q3-2019 Financial Summary $ in millions, except EPS Q3-2019 Q3-2018 Δ • Revenue decline of (2.7%) composed of: Revenue $849.7 $873.6 (2.7%) • Organic revenue decline: (2.8%) Adjusted Op Income $199.5 $207.6 (3.9%) • Net effect of acq./divestitures % revenue 23.5% 23.8% increases revenue by 0.4% Adju
Slide 15: Q3-2019: Performance Sensing
Q3-2019: Performance Sensing REVENUE SEGMENT OPERATING INCOME % OPERATING MARGIN $ in millions $649.6 $ in millions $178.4 $628.6 $165.1 27.5%* 26.3%* Q3-2018 Q3-2019 Q3-2018 Q3-2019 Q3-19 REVENUE GROWTH REPORTED ORGANIC • NA and China Auto deliver organic revenue Automotive (2.8%) (0.4%) growth des
Slide 16: Q3-2019: Sensing Solutions
Q3-2019: Sensing Solutions REVENUE SEGMENT OPERATING INCOME $ in millions % OPERATING MARGIN $223.9 $ in millions $221.1 $73.3 $71.0 32.7%* 32.1%* Q3-2018 Q3-2019 Q3-2018 Q3-2019 • Weak end market demand leads to high single- Q3-19 REVENUE GROWTH REPORTED ORGANIC digit organic decline in Industrials
Slide 17: Q3-2019 Non-GAAP Results
Q3-2019 Non-GAAP Results $ in millions, except EPS Q3-2019 Q3-2018 Δ Revenue $849.7 $873.6 (2.7%) Adj. Gross Profit $303.0 $319.3 (5.1%) (% of revenue) 35.7% 36.6% R&D $38.2 $37.8 1.0% (% of revenue) 4.5% 4.3% Adj. SG&A $63.7 $73.0 (12.8%) (% of revenue) 7.5% 8.4% Adj. Operating Income $199.5 $207.6
Slide 18: Issued new bond and refinanced term loan at attractive rates
Issued new bond and refinanced term loan at attractive rates, higher portion of debt fixed and maturity pushed out NET DEBT ($M) NET LEVERAGE 4.6x $3,317 ~$744M ~1.8x $2,573 2.8x Q4-15 Q3-19 Q4-15 Q3-19 Issued new 10-year $450M Senior Unsecured Notes: 4.375%, maturity date 2030 Increased fixed debt
Slide 19: Q4-19 Financial Guidance
Q4-19 Financial Guidance $ in millions, except EPS Q4-18 Q4-19 GUIDANCE Y/Y Change • Acquisitions/Divest, net expected to Revenue $847.9 $818 – $842 (3%) – (1%) increase revenue by organic growth (4%) – (1%) ~$9M • FX expected to decrease revenue by Adj. Op Income $210.1 $186 – $192 (12%) – (8%) ~$6
Slide 20: 2019 Financial Guidance
2019 Financial Guidance $ in millions, except EPS FY-2018 FY-2019 GUIDANCE Y/Y Change • FX expected to decrease revenue by ~$29M Revenue $3,521.6 $3,422 – $3,446 (3%) – (2%) organic growth (2%) – (1%) – Adjusted EPS: positive impact from FX of $0.12 - $0.13 $779 – $785 • Adjusted tax rate: Adj. Op I
Slide 21: Appendix A: Other Financial Information
APPENDIX A OTHER FINANCIAL INFORMATION
Slide 22: YTD 2019 GAAP Results
YTD 2019 GAAP Results $ and shares outstanding in millions, except EPS YTD 2019 YTD 2018 Δ Revenue $2,603.9 $2,673.7 (2.6%) Gross Profit $893.0 $950.4 (6.0%) (% of revenue) 34.3% 35.5% R&D $110.0 $111.8 (1.6%) (% of revenue) 4.2% 4.2% SG&A $210.7 $235.7 (10.6%) (% of revenue) 8.1% 8.8% Operating Inc
Slide 23: YTD 2019 Non-GAAP Results
YTD 2019 Non-GAAP Results $ in millions, except EPS YTD 2019 YTD 2018 Δ Revenue $2,603.9 $2,673.7 (2.6%) Adj. Gross Profit $910.5 $965.8 (5.7%) (% of revenue) 35.0% 36.1% R&D $110.0 $111.8 (1.6%) (% of revenue) 4.2% 4.2% Adj. SG&A $202.3 $228.1 (11.3%) (% of revenue) 7.8% 8.5% Adj. Operating Income
Slide 24: Q3-2019 Cash Flow Statement
Q3-2019 Cash Flow Statement $ in millions Q3-2019 Q3-2018 Δ Net Income $70.7 $149.1 (52.6%) Depreciation & Amortization $65.1 $60.0 8.5% Changes in Working Capital $22.7 $14.8 53.4% Other $22.9 ($57.7) NM Operating Cash Flow $181.4 $166.2 9.1% Capital Expenditures ($41.7) ($45.0) 7.4% Free Cash Flow
Slide 25: YTD 2019 Cash Flow Statement
YTD 2019 Cash Flow Statement $ in millions YTD 2019 YTD 2018 Δ Net Income $229.2 $344.9 (33.6%) Depreciation & Amortization $192.4 $183.1 5.1% Changes in Working Capital ($57.1) ($88.4) 35.4% Other $69.0 ($19.5) NM Operating Cash Flow $433.5 $420.1 3.2% Capital Expenditures ($123.2) ($111.3) (10.7%)
Slide 26: Balance Sheet
Balance Sheet $ in millions SEP 30, 2019 DEC 31, 2018 Total Assets $6,843.6 $6,797.7 Working Capital $1,329.1 $1,277.2 Intangibles, Net & Other $4,894.0 $4,880.5 Long-Term Assets $ in millions SEP 30, 2019 DEC 31, 2018 Cash & Equivalents $721.4 $729.8 Current Debt $7.9 $14.6 Net Cash $713.5 $715.3 Q
Slide 27: 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 28: Appendix B: GAAP to Non-GAAP Reconciliations
APPENDIX B GAAP TO NON-GAAP RECONCILIATIONS
Slide 29: 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 30: 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 31: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM YTD Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Net income $483,275 $229,176 $70,675 $73,436 $85,065 $254,099 $149,118 Interest expense, net 157,288 118,417 39,556 39,608 39,253 38,871 38,058 Provision for/(benefit from) income taxes (54,057) 80,64
Slide 32: Other GAAP to Non-GAAP Reconciliations – Q3-2019
Other GAAP to non-GAAP Reconciliations – Q3-2019 $ in thousands Q3 2019 Restructuring Cost of Operating Interest Income Total Sensata Gross profit SG&A Amortization and other Other, net Income taxes Net income revenue income expense, net before taxes charges, net Reported (GAAP) ($554,910) $294,805
Slide 33: Other GAAP to Non-GAAP Reconciliations – YTD 2019
Other GAAP to non-GAAP Reconciliations – YTD 2019 $ in thousands YTD 2019 Restructuring Cost of Amortization Operating Interest Income before Total Sensata Gross profit SG&A and other Other, net Income taxes Net income revenue of intangibles income expense, net taxes charges, net Reported (GAAP) ($1
Slide 34: Organic Revenue Growth
Organic Revenue Growth Q3 0 Constant Currency % Reported % Change Less: Acquisition & Organic Growth/(Decline) Less: FX Impact Change (GAAP) Divestitures, net (non-GAAP) (non-GAAP) Performance Sensing (3.2%) (0.3%) (2.9%) (1.2%) (1.7%) Sensing Solutions (1.3%) (0.6%) (0.7%) 5.6% (6.3%) Sensata Total
Slide 35: Free Cash Flow
Free Cash Flow $ in thousands Q3 YTD Total Sensata 2019 2018 Change 2019 2018 Change Net cash provided by operating activities $181,361 $166,226 9.1% $433,527 $420,139 3.2% Additions to property, plant and equipment and capitalized software (41,657) (44,974) 7.4% (123,206) (111,275) (10.7%) Free cas
Slide 36: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands As of Total Sensata 30-Sep-19 30-Jun-19 31-Mar-19 31-Dec-18 Current portion of long-term debt, finance lease and other financing obligations $7,863 $13,582 $13,660 $14,561 Finance lease and other financing obligations, less current portion 29,415 30,141
Slide 37: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands Q3 YTD Total Sensata 2019 2018 2019 2018 Provision for income taxes $28,341 $24,562 $80,649 $62,086 Non-GAAP adjustments: Deferred income tax and other tax expense/(benefit) 16,040 9,897 40,839 20,783 Current tax effect of non-GAAP adjustments (700