Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q2 2017 Earnings Presentation
37 slides from Sensata Technologies's earnings presentation, Jul 25, 2017
Slide 1: Sensata Second Quarter 2017 Earnings Presentation
SENSATA SECOND QUARTER 2017 EARNINGS PRESENTATION JULY 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: Q2 2017 GAAP Results
Q2 2017 GAAP Results Q2 2017 Q2 2016 Δ Revenue $839.9M $827.5M 1.5% Gross Profit $298.8M $290.1M 3.0% (% of revenue) 35.6% 35.1% R&D $31.2M $32.3M (3.3%) (% of revenue) 3.7% 3.9% SG&A $81.0M $77.7M 4.3% (% of revenue) 9.6% 9.4% Profit from Operations $139.2M $128.1M 8.7% (% of revenue) 16.6% 15.5% N
Slide 4: Solid Organic Revenue Growth & Margin Expansion in Q2-17
Solid Organic Revenue Growth & Margin Expansion in Q2-17 Organic revenue growth of 3.6% – significant strength in Asia, HVOR and industrial markets; automotive business outgrows softer market Robust margin expansion – adjusted EBIT margin expands by 140 basis points y/y; adjusted net income marg
Slide 5: Asia Continues to Be Strongest Driver of Organic Revenue Growth Due to Strength in China
Asia Continues to Be Strongest Driver of Organic Revenue Growth Due to Strength in China ASIA 12.2% organic revenue growth in Q2-17 • Broad-based strength in China across all businesses due to combination of tightening regulation, growing middle-class, and maturation of mid-size cities • Robust grow
Slide 6: Q2-17 Performance by End Market
Q2-17 Performance by End Market PERCENT OF REVENUES HVOR – Organic revenue growth: 12.5% • Strong performance from both on-road and off-road segments • Strong content growth in Q2-17 and poised to outgrow ~15% markets in FY-17 due to another strong year of content gains • Unit volume production move
Slide 7: Robust Year-Over-Year Margin Improvement
Robust Year-Over-Year Margin Improvement ADJUSTED EBIT MARGINS ADJUSTED NET INCOME MARGINS + 140 BASIS POINTS + 160 BASIS POINTS 16.6% 22.6% 15.0% 21.2% Q2 16 Q2 17 Q2 16 Q2 17 Q2 2017 EARNINGS SUMMARY 7
Slide 8: Continued Focus on Growth, Margin Improvement and Capital Deployment
Continued Focus on Growth, Margin Improvement and Capital Deployment • Strong performance in H1-17 • Strong growth in HVOR and industrial markets • Steady organic growth in auto markets • Continued execution on margin expansion • Raising full year guidance to reflect strong performance in H1-17 • Ac
Slide 9: Q2 2017 Financial Summary
Q2 2017 Financial Summary ADJUSTED NET INCOME GROWS 13% ORGANICALLY Q2 2017 Q2 2016 Δ • Revenue growth of 1.5% composed of: Revenue $839.9M $827.5M 1.5% • Organic revenue growth: 3.6% Adjusted EBIT $189.6M $175.3M 8.2% • Foreign exchange lowers % revenue 22.6% 21.2% revenue by (2.1%) Adjusted Net In
Slide 10: Q2 2017: Performance Sensing
Q2 2017: Performance Sensing REVENUE SEGMENT PROFIT % SEGMENT MARGIN (EXCLUDING FX) $169.1M $615.6M $621.8M $152.5M 27.4%* 24.8% Q2 2016 Q2 2017 Q2 2016 Q2 2017 Q2-17 REVENUE GROWTH REPORTED ORGANIC • Positive auto organic revenue growth in a declining global auto production market Automotive (1.2%)
Slide 11: Q2 2017: Sensing Solutions
Q2 2017: Sensing Solutions REVENUE SEGMENT PROFIT % SEGMENT MARGIN (EXCLUDING FX) $218.0M $70.1M $68.2M $212.0M 32.2% 32.0%* Q2 2016 Q2 2017 Q2 2016 Q2 2017 • Continued momentum in HVAC, Appliance Q2-17 REVENUE GROWTH REPORTED ORGANIC and Industrial markets Sensing Solutions 2.9% 3.9% • Organic reve
Slide 12: Q2 2017 Non-GAAP Results
Q2 2017 Non-GAAP Results Q2 2017 Q2 2016 Δ Revenue $839.9M $827.5M 1.5% Adj. Gross Profit $304.3M $293.7M 3.6% (% of revenue) 36.2% 35.5% R&D $31.2M $32.3M (3.3%) (% of revenue) 3.7% 3.9% Adj. SG&A $79.2M $76.6M 3.4% (% of revenue) 9.4% 9.3% Adj. Other Opex1 $5.8M $2.0M NM Adj. Other Gains/(Losses),
Slide 13: Delivering on Promise to Strengthen Balance Sheet
Delivering on Promise to Strengthen Balance Sheet NET DEBT ($M) NET LEVERAGE RATIO ~$515M 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 3.4x 3000 $2,803 2800 2600 2400 2200 2000 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q4 15
Slide 14: 2017 Financial Guidance
2017 Financial Guidance FY 2016 FY 2017 GUIDANCE REPORTED ORGANIC COMMENTS • Narrowing revenue guidance to high-end Revenue $3,202M $3,214M – $3,290M 0%– 3% 2% – 3% of range • FX expected to lower revenue by ~$32M Adj. EBIT $695.3M $741M – $755M 7% – 9% 7% – 9% – Adjusted EPS impact from FX remains
Slide 15: Q3-17 Financial Guidance
Q3-17 Financial Guidance Q3-16 Q3-17 GUIDANCE REPORTED ORGANIC COMMENTS Revenue $789.8M $781M – $817M (1%) – 3% 0% – 3% • Third quarter is historically a seasonably lower quarter for Sensata Adj. EBIT $176.3M $185M – $191M 5% – 8% 4% – 8% • Expected performance in-line with original guidance assumpt
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 SECOND 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 Q2 2017 EARNINGS
Slide 19: H1 2017 GAAP Results
H1 2017 GAAP Results H1 2017 H1 2016 Δ Revenue $1,647.1M $1,624.1M 1.4% Gross Profit $573.4M $558.3M 2.7% (% of revenue) 34.8% 34.4% R&D $63.0M $63.6M (1.0%) (% of revenue) 3.8% 3.9% SG&A $151.3M $149.6M 1.1% (% of revenue) 9.2% 9.2% Profit from Operations $260.4M $241.7M 7.7% (% of revenue) 15.8% 1
Slide 20: H1 2017 Non-GAAP Results
H1 2017 Non-GAAP Results H1 2017 H1 2016 Δ Revenue $1,647.1M $1,624.1M 1.4% Adj. Gross Profit $584.0M $565.2M 3.3% (% of revenue) 35.5% 34.8% R&D $63.0M $63.6M (1.0%) (% of revenue) 3.8% 3.9% Adj. SG&A $148.2M $146.9M 0.9% (% of revenue) 9.0% 9.0% Adj. Other Opex1 $13.9M $3.4M NM Adj. Other Gains/(L
Slide 21: Q2 2017 Cash Flow Statement
Q2 2017 Cash Flow Statement Q2 2017 Q2 2016 Δ Net Income $79.5M $65.5M 21.3% Depreciation & Amortization $67.0M $75.9M (11.7%) Changes in Working Capital ($50.7M) ($49.7M) (2.1%) Other $18.4M $18.7M (1.4%) Operating Cash Flow $114.1M $110.4M 3.4% Capital Expenditures ($34.1M) ($30.2M) (12.9%) Free C
Slide 22: H1 2017 Cash Flow Statement
H1 2017 Cash Flow Statement H1 2017 H1 2016 Δ Net Income $151.2M $126.1M 19.9% Depreciation & Amortization $136.1M $152.4M (10.7%) Changes in Working Capital ($83.2M) ($59.9M) (38.8%) Other $29.8M $28.1M 6.0% Operating Cash Flow $233.8M $246.6M (5.2%) Capital Expenditures ($67.2M) ($64.5M) (4.2%) Fr
Slide 23: Balance Sheet
Balance Sheet JUN 30, 2017 JUN 30, 2016 DEC 31, 2016 Total Assets $6,417.6M $6,288.9M $6,241.0M Working Capital $987.6M $567.1M $758.2M Intangibles, Net & Other $4,829.4M $4,992.6M $4,899.5M Long-Term Assets JUN 30, 2017 JUN 30, 2016 DEC 31, 2016 Cash & Equivalents $511.5M $309.1M $351.4M Current De
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. Littlefuse Industrial 8. Rockwell Industrial 9. Roper Industrial 10. TE Connectivity Industrial Tech 11. Wabco Industrial Q2 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 – Q2 2017
Adjusted EBIT – Q2 2017 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. Q2 2017 Q2 2016 Change TOTAL SENSATA $000s Margin1 $000s Margin1 $000s Margin1 Net income $79,457 9.5% $65,510 7.9% 21.3% 160 bps Intere
Slide 28: Adjusted EBIT – H1 2017
Adjusted EBIT – H1 2017 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. H1 2017 H1 2016 Change TOTAL SENSATA $000s Margin1 $000s Margin1 $000s Margin1 Net income $151,193 9.2% $126,122 7.8% 19.9% 140 bps Inte
Slide 29: Adjusted EBITDA
Adjusted EBITDA $ in thousands PERIOD TOTAL SENSATA LTM1 H1-17 Q2-17 Q1-17 Q4-16 Q3-16 Q2-16 Net income $287,505 $151,193 $79,457 $71,736 $66,527 $69,785 $65,510 Interest expense, net 162,108 80,315 40,038 40,277 40,617 41,176 41,757 Provision for income taxes 54,778 32,943 18,611 14,332 10,714 11,1
Slide 30: ANI, Adjusted EPS, and ANI Margin
ANI, Adjusted EPS, and ANI Margin Per share and percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. Q2 2017 Q2 2016 Change TOTAL SENSATA $000s EPS1 Margin2 $000s EPS1 Margin2 $000s EPS1 Margin2 Net income $79,457
Slide 31: ANI, Adjusted EPS, and ANI Margin
ANI, Adjusted EPS, and ANI Margin Per share and percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. 1H 2017 1H 2016 Change TOTAL SENSATA $000s EPS1 Margin2 $000s EPS1 Margin2 $000s EPS1 Margin2 Net income $151,19
Slide 32: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands Q2 H1 TOTAL SENSATA 2017 2016 2017 2016 Provision for income taxes $18,611 $20,981 $32,943 $37,176 Non-GAAP adjustments: Less: Deferred income tax and other tax expense/(benefit) 6,271 9,942 9,813 15,699 Adjusted taxes $12,340 $11,039 $23,130 $21,4
Slide 33: Free Cash Flow
Free Cash Flow $ in thousands Q2 H1 TOTAL SENSATA 2017 2016 2017 2016 Net cash provided by operating activities $114,148 $110,429 $233,849 $246,631 Additions to property, plant and equipment and capitalized software (34,133) (30,231) (67,192) (64,466) Free cash flow $80,015 $80,198 $166,657 $182,165
Slide 34: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands BALANCE AS OF TOTAL SENSATA JUN-30-2017 MAR-31-2017 DEC-31-2016 Current portion of long-term debt, capital lease and other financing obligations $10,704 $7,363 $14,643 Capital lease and other financing obligations 30,929 31,260 32,369 Long-term debt 3,2
Slide 35: Organic Revenue Growth
Organic Revenue Growth 2017 VERSUS 2016 TOTAL SENSATA Q2 H1 Reported net revenue % change 1.5% 1.4% Less: year-over-year change due to: Foreign exchange rate differences (2.1%) (2.2%) Organic revenue growth 3.6% 3.6% PERFORMANCE SENSING Q2 H1 Reported net revenue % change 1.0% 0.8% Less year-over-ye
Slide 36: Segment Margin
Segment Margin $ in thousands Q2 PERFORMANCE SENSING 2017 2016 Segment profit $169,100 $152,525 Segment net revenue 621,829 615,570 Segment margin (reported basis) 27.2% 24.8% Less year-over-year change due to: Foreign exchange rate differences (0.2%) 0.0% Segment margin (constant currency basis) 27
Slide 37: Segment Margin
Segment Margin $ in thousands 1H PERFORMANCE SENSING 2017 2016 Segment profit $320,836 $298,312 Segment net revenue 1,221,972 1,212,745 Segment margin (reported basis) 26.3% 24.6% Less year-over-year change due to: Foreign exchange rate differences (0.3%) 0.0% Segment margin (constant currency basis