Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q3 2016 Earnings Presentation
38 slides from Sensata Technologies's earnings presentation, Oct 25, 2016
Slide 1: Sensata Third Quarter 2016 Earnings Presentation
OCTOBER 25, 2016 SENSATA THIRD QUARTER 2016 EARNINGS PRESENTATION
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 2016 GAAP Results
Q3 2016 GAAP Results Q3 2016 Q3 2015 Δ Revenue $789.8M $727.4M 8.6% Gross Profit $280.9M $250.7M 12.0% (% of revenue) 35.6% 34.5% R&D $31.6M $30.8M 2.5% (% of revenue) 4.0% 4.2% SG&A $75.0M $66.2M 13.3% (% of revenue) 9.5% 9.1% Profit from Operations $122.8M $106.9M 14.9% (% of revenue) 15.5% 14.7%
Slide 4: Solid Profitability Despite Challenging Markets
Solid Profitability Despite Challenging Markets STRONG SEQUENTIAL MARGIN EXPANSION AND EPS GROWTH IN Q3 2016 Strong sequential margin expansion and EPS growth – adjusted net income margin increases by 100 basis points sequentially; adjusted EPS grows by 11.1% organically year-over-year Deleveragin
Slide 5: Delivering on our Commitment to Improve Margins
Delivering on our Commitment to Improve Margins Adjusted Net Income Margin Drivers of Margin Expansion 16.0% • M&A cost and revenue synergies 15.0% • Net productivity improvements 14.2% • Plant footprint rationalization • Raw material sourcing strategy • Lean manufacturing initiatives • Back office
Slide 6: Significant Runway for Sustainable, Long-Term Margin Expansion
Significant Runway for Sustainable, Long-Term Margin Expansion Reported ANI Margin Core ANI Margin* 19.7% 20.0% 20–23% 18.8% 19.4% 17.0% 15.9% 15.4% FY 2013 FY 2014 FY 2015 FY 2016E Long-Term Target ACQUISITIONS NOT Q3: DeltaTech DeltaTech DeltaTech REFLECTED IN CORE: Q4: Schrader Schrader Schrader
Slide 7: Continue to Invest in Long-Term Growth Opportunities
Continue to Invest in Long-Term Growth Opportunities • Securing new wins to address the need for energy efficiency and a clean environment • Increasing sensor content in electrification • Extending TPMS leadership into China – important mandate passed in Q3-16 • Expanded portfolio and closing new or
Slide 8: Q4-16 End Market And Business Trends
Q4-16 End Market And Business Trends Market Highlights • Stronger Sensata growth in China Automotive • Low expectations for NA Auto market – high year-end inventories • European TPMS aftermarket soft • ST performance better than expected YTD HVOR • North America Class 8 production still declining •
Slide 9: Delivering on Earnings and Margin Guidance for full year 2016
Delivering on Earnings and Margin Guidance for full year 2016 On track to deliver our full year 2016 earnings guidance Strong organic EPS growth Good progress on margin expansion and integration of acquisitions Strengthening our balance sheet and paying down our debt Q3 2016 EARNINGS SUMMARY
Slide 10: Q3 2016 Financial Summary
Q3 2016 Financial Summary ADJUSTED NET INCOME GREW 11% ORGANICALLY Q3 2016 Q3 2015 Growth Acquisitions, net of exited businesses, add 8.6% revenue Net Revenue $789.8M $727.4M 8.6% growth Net Income $69.8M $53.2M 31.3% • Organic revenue growth: 1.7% Adjusted Net Income $126.3M $123.3M 2.4% ANI Margin
Slide 11: Q3 2016 Review: Performance Sensing
Q3 2016 Review: Performance Sensing NET REVENUE PROFIT FROM OPERATIONS (PFO) 27.6% PFO EXCLUDING FX AND CST $155.2M $584.7M $150.8M $576.5M 26.6%* 26.2%* Q3 2015 Q3 2016 Q3 2015 Q3 2016 Q3-16 Growth y/y Reported Organic • Solid organic revenue growth in Auto (ex-TPMS) business outpaces market growth
Slide 12: Q3 2016 Review: Sensing Solutions
Q3 2016 Review: Sensing Solutions NET REVENUE PROFIT FROM OPERATIONS (PFO) 33.8% PFO EXCLUDING FX AND CST $205.1M $67.3M $150.9M $49.7M 32.8%* 33.0%* Q3 2015 Q3 2016 Q3 2015 Q3 2016 • Sensing Solutions resumes organic revenue Q3-16 Growth y/y Reported Organic growth after (4.8%) organic decline in H
Slide 13: Delivering on Promise to De-Lever
Delivering on Promise to De-Lever DEBT ($M) NET LEVERAGE RATIO ~$300M OF DEBT REDUCTION SINCE Q4-15 LEVERAGE RATIO OF ~3.0X BY END OF 2017* 4.6x Total Gross Indebtedness Net Debt 4.5x 4.3x $3,659 4.0x $3,619 ~3.8x $3,491 $3,363 $3,317 $3,272 ~3.0x $3,182 $3,063 Q4-15 Q1-16 Q2-16 Q3-16 Q4-15 Q1-16 Q2
Slide 14: Q4 2016 Financial Guidance
Q4 2016 Financial Guidance Q4 2015 Q4 2016 Guide Reported Organic* Net Revenue $726.5M $765 – $805M 5% – 11% 2% - 6%* 1% - 5%** Adj. Net Income $113.3M $123 – $133M 8% – 17% 19% – 23%* 9%-14%** Adj. EPS $0.66 $0.71 – $0.77 8% – 17% 18% – 23%* 10% -15%** Diluted Shares Outstanding 171.5M 171.6M * Inc
Slide 15: 2016 Financial Guidance
2016 Financial Guidance ON TRACK FOR FULL YEAR FY 2015 FY 2016 Guide Reported Organic* Net Revenue $2,975M $3,179 – $3,219M 7% – 8% 1% – 2%* 1% – 2%** Adj. Net Income $472.0M $487 – $497M 3% – 5% 11% – 12%* 9% – 10%** Adj. EPS $2.75 $2.84 – $2.90 3% – 5% 11% – 12%* 9% – 10%** Diluted Shares Outstand
Slide 16: Sensata is Committed to Shareholder Value Creation
Sensata is Committed to Shareholder Value Creation Sensata Wins In Sensing, serving secular growth markets with leading margins Acquisitions diversify end–market exposure and provide earnings expansion Attractive long-term revenue and earnings CAGRs Strong cash generation and disciplined capital
Slide 17: Appendix
APPENDIX SENSATA THIRD QUARTER 2016 EARNINGS SUMMARY Q3 2016 EARNINGS SUMMARY 17
Slide 18: Sensata Financial Metrics Dashboard
Sensata Financial Metrics Dashboard TSR from IPO* 2015 TSR 2015 ROIC 107% (12)% 13.0% (S&P: 111%) 2016 YTD: (19)%* LTM Q3 2016: 11.9% Cash Returned Acquired Revenue 2012–2016 (DeltaTech, Schrader, CST) $500M 7.5% OF SHARES REPURCHASED $1.05B *as of October 21, 2016 Q3 2016 EARNINGS SUMMARY 18
Slide 19: Q3 2016 Non-GAAP Results
Q3 2016 Non-GAAP Results Q3 2016 Q3 2015 Δ Revenue $789.8M $727.4M 8.6% Adj. Gross Profit $286.8M $259.4M 10.6% (% of revenue) 36.3% 35.7% R&D $31.6M $30.8M 2.5% (% of revenue) 4.0% 4.2% Adj. SG&A $73.9M $60.8M 21.5% (% of revenue) 9.4% 8.4% Adj. EBIT $176.3M $160.2M 10.1% (% of revenue) 22.3% 22.0%
Slide 20: YTD 2016 GAAP Results
YTD 2016 GAAP Results YTD 2016 YTD 2015 Δ Revenue $2,413.9M $2,248.5M 7.4% Gross Profit $839.1M $747.3M 12.3% (% of revenue) 34.8% 33.2% R&D $95.2M $92.8M 2.6% (% of revenue) 3.9% 4.1% SG&A $224.6M $203.6M 10.3% (% of revenue) 9.3% 9.1% Profit from Operations $364.5M $302.4M 20.5% (% of revenue) 15.
Slide 21: YTD 2016 Non-GAAP Results
YTD 2016 Non-GAAP Results YTD 2016 YTD 2015 Δ Revenue $2,413.9M $2,248.5M 7.4% Adj. Gross Profit $852.0M $779.3M 9.3% (% of revenue) 35.3% 34.7% R&D $95.2M $92.8M 2.6% (% of revenue) 3.9% 4.1% Adj. SG&A $220.8M $192.3M 14.8% (% of revenue) 9.1% 8.6% Adj. EBIT $515.7M $476.0M 8.3% (% of revenue) 21.4
Slide 22: Q3 2016 Cash Flow Statement
Q3 2016 Cash Flow Statement Q3 2016 Q3 2015 Δ Net Income $69.8M $53.2M 31.3% Depreciation & Amortization $76.9M $67.5M 13.8% Changes in Working Capital ($6.3M) $11.6M (154.4%) Other $9.4M $19.2M (51.1%) Operating Cash Flow $149.7M $151.5M (1.2%) Capital Expenditures ($30.1M) ($43.4M) 30.7% Free Cash
Slide 23: YTD 2016 Cash Flow Statement
YTD 2016 Cash Flow Statement YTD 2016 YTD 2015 Δ Net Income $195.9M $129.4M 51.4% Depreciation & Amortization $229.2M $207.2M 10.6% Changes in Working Capital ($66.2M) ($37.0M) (79.0%) Other $37.5M $64.1M (41.5%) Operating Cash Flow $396.4M $363.7M 9.0% Capital Expenditures ($94.6M) ($130.2M) 27.4%
Slide 24: Balance Sheet
Balance Sheet Sep 30, 2016 Sep 30, 2015 1 Dec 31, 2015 Total Assets $6,251.0M $5,109.6M $6,298.9M Working Capital $674.4M $554.3M $412.7M Intangibles, Net & Other $4,954.7M $3,916.2M $5,021.0M Long-Term Assets Sep 30, 2016 Sep 30, 2015 1 Dec 31, 2015 Cash, Cash Equivalents & $299.9M $258.2M $342.3M
Slide 25: Reconciliation of Organic Revenue Growth
Reconciliation of Organic Revenue Growth Q3 2016 YTD 2016 SENSATA Net revenue growth 8.6% 7.4% Less: Effects of foreign currency movements (1.7%) (1.6%) Less: Acquisitions, net of exited businesses 1 8.6% 8.7% Organic revenue growth 1.7% 0.3% PERFORMANCE SENSING Net revenue growth 1.4% 1.3% Less: Ef
Slide 26: Reconciliation of Net Income to Adjusted Net Income – Q3
Reconciliation of Net Income to Adjusted Net Income – Q3 Amounts have been calculated based on unrounded numbers. Accordingly, sum of items may not foot due to rounding Q3 2016 Q3 2015 [ Amounts in thousands ] (except per share amounts) $ EPS Margin $ EPS Margin Net income $ 69,785 $ 0.41 8.8% $ 53,
Slide 27: Reconciliation of Net Income to Adjusted Net Income – YTD
Reconciliation of Net Income to Adjusted Net Income – YTD Amounts have been calculated based on unrounded numbers. Accordingly, sum of items may not foot due to rounding YTD 2016 YTD 2015 [ Amounts in thousands ] (except per share amounts) $ EPS Margin $ EPS Margin Net income $ 195,907 $ 1.14 8.1% $
Slide 28: Reconciliation of Net Income % of Revenue to Organic ANI Margin
Reconciliation of Net Income as a Percentage of Net Revenue to Organic ANI Margin and Core ANI Margin Q3 2016 Q3 2015 Change Net income as % of net revenue 8.8% 7.3% 1.5% Non-GAAP adjustments: Restructuring and special charges 0.5% 1.2% (0.6%) Financing and other transaction costs 0.1% 0.5% (0.4%) D
Slide 29: Reconciliation of Operating Cash Flow to Free Cash Flow
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Q3 YTD [ $ thousands ] 2016 2015 2016 2015 Net cash provided by operating activities $ 149,720 $ 151,514 $ 396,351 $ 363,713 Less: Additions to property, plant and equipment and capitalized software 30,118 43,442 94,584 13
Slide 30: Reconciliation of Net Income to Adjusted EBIT
Reconciliation of Net Income to Adjusted EBIT QUARTERLY [ $ thousands ] LTM YTD Q3 16 Q2 16 Q1 16 Q4 15 Q3 15 Net income $ 414,196 $ 195,907 $ 69,785 $ 65,510 $ 60,612 $ 218,289 $ 53,152 Interest expense, net 166,798 125,201 41,176 41,757 42,268 41,597 29,706 Provision for/(benefit from) income taxe
Slide 31: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA QUARTERLY [ $ thousands ] LTM YTD Q3 16 Q2 16 Q1 16 Q4 15 Q3 15 Net income $ 414,196 $ 195,907 $ 69,785 $ 65,510 $ 60,612 $ 218,289 $ 53,152 Interest expense, net 166,798 125,201 41,176 41,757 42,268 41,597 29,706 Provision for/(benefit from) income ta
Slide 32: Reconciliation of RD&E Expenses as Percentage of Net Revenue
Reconciliation of Research, Development and Engineering (RD&E) Expenses as a Percentage of Net Revenue [ $ thousands ] Q3 2016 Research and development expense $ 31,601 Non-GAAP adjustments: Add: Engineering expenses 35,406 Total Research, development and engineering expenses $ 67,007 % Net revenue
Slide 33: Reconciliation of Provision for Income Taxes to Adjusted Taxes
Reconciliation of Provision for Income Taxes to Adjusted Taxes Q3 YTD [ $ thousands ] 2016 2015 2016 2015 Provision for income taxes $ 11,121 $ 13,215 $ 48,297 $ 32,342 Non-GAAP adjustments: Less: Deferred income tax and other tax expense/(benefit) 451 4,485 16,150 6,339 Adjusted taxes $ 10,670 $ 8,
Slide 34: Reconciliation of Net Debt
Reconciliation of Net Debt [ $ thousands ] 9/30/2016 Current portion of long-term debt, capital lease and other financing obligations $ 14,475 Capital lease and other financing obligations, less current portion 33,255 Long-term debt, net of discount and deferred financing costs, less current portion
Slide 35: Return on Invested Capital (ROIC)
Return on Invested Capital (ROIC) QUARTERLY [ $ thousands ] Average 9/30/16 6/30/16 3/31/16 12/31/15 9/30/15 Shareholders' equity $ 1,694,692 $ 1,854,237 $ 1,787,959 $ 1,716,289 $ 1,668,576 $ 1,446,397 Long-term debt, gross of discount (or premium) and deferred financing costs, less current 3,170,31
Slide 36: Reconciliation from Net Income Per Share to Organic Earnings Growth
Reconciliation from Net Income Per Diluted Share to Organic Earnings Growth Q3 2016 Q3 2015 Net income per diluted share $ 0.41 $ 0.31 Non-GAAP adjustments: Restructuring and special charges 0.02 0.05 Financing and other transaction costs 0.00 0.02 Deferred (gain)/loss on other hedges (0.02) 0.03 De
Slide 37: 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 38: Non-GAAP Measures – continued
Non-GAAP Measures – continued Adjusted EBIT – represents Net income excluding Interest expense, net, Provision for/(benefit from) income taxes and certain non-GAAP adjustments including (1) restructuring and special charges, (2) financing and other transaction costs, (3) deferred losses/(gains) on o