Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Investor Day (February 2015)
71 slides from Sensata Technologies's investor day presentation, Feb 24, 2015
Slide 1: Sensata Technologies Investor Event February 2015
1 February 2015 Investor Event SENSATA TECHNOLOGIES INVESTOR EVENT FEBRUARY 2015
Slide 2: Introduction
INTRODUCTION FEBRUARY 2015 2 February 2015 Investor Event JACOB SAYER, VP TREASURY & INVESTOR RELATIONS
Slide 3: Today's Agenda
Today’s Agenda 12:40 Overview Martha Sullivan President & CEO 1:10 Growth in Sensing Steve Beringhause Senior Vice President 1:40 Opportunities in Industrial Sensing Martin Carter Senior Vice President 3 February 2015 Investor Event 2:00 Break 2:15 Operations Jeff Cote Executive Vice President & COO
Slide 4: Forward-Looking Statements
This presentation contains certain forward–looking statements that involve risks or uncertainties. For example, statements regarding financial guidance and product development goals are forward–looking. The Company’s future results may differ materially from the projections described in today’s disc
Slide 5: Overview
OVERVIEW FEBRUARY 2015 5 February 2015 Investor Event MARTHA SULLIVAN, PRESIDENT & CEO
Slide 6: Sensata Investment Highlights
Sensata Investment Highlights checkbld Innovative products designed for mission–critical, hard–to–do applications checkbld Custom solutions in high–value systems are sole-sourced leading to sticky, recurring revenue checkbld Collaborative, long–term relationships with diversified OEM customers Leadi
Slide 7: Sensata Delivers High Shareholder Returns
$45.00 $55.00 Sensata Delivers High Shareholder Returns TSR from IPO CAGR (S&P: 13%) 24% 2014 TSR 35% 2014 ROIC 15.0% 7 February 2015 Investor Event $15.00 $25.00 $35.00 ST Volume ST S&P 500 Acquired Revenue 2014 RUN RATE $1 ACCRETION AFTER INTEGRATION$800M Cash Returned 2012–2014 7.5% OF SHARES REP
Slide 8: We are Expanding Our Large Addressable Markets
Automotive Machinery We are Expanding Our Large Addressable Markets GLOBAL MARKETS TOTAL MARKET: $95B OUR END MARKETS AND TECHNOLOGIES IN US $ MILLIONS $1,300 $2,000 $3,200 Motor / Power Protection Speed Sensing Temperature Sensing Position Sensing 8 February 2015 Investor Event Construction Process
Slide 9: Societal Imperatives Drive Markets
Premature deaths Societal Imperatives Drive Markets Regulatory requirements and economic forces drive sensor adoption CLEAN ENVIRONMENT Reduce emissions in air and water EFFICIENCY 9 February 2015 Investor Event from vehicle exhaust1 1 International Council on Clean Transportation More efficiently u
Slide 10: Acquisitions Expand Our Technology and Markets
Acquisitions Expand Our Technology and Markets Growth driven by the same market forces CLEAN ENVIRONMENTEFFICIENCY SAFETY MARKET EXPANSION TECHNOLOGY ALIGNMENT TPMS HVOR Low Pressure MSP 10 February 2015 Investor Event AOB Mobile Power HVOR Exhaust Automotive Inverters MSP High Temp MSP
Slide 11: Technology Evolution Enables Ongoing Improvement
Technology Evolution Enables Ongoing Improvement Proliferation of closed–loop control systems require smart sensing Value–creating automotive trends now migrating to industrial end markets AUTOMOTIVE / HVOR Basic Braking On / Off Pumps Fixed Drives, Valve Train Anti–lock Braking > Electronic Stabili
Slide 12: Renaming Our Global Business Units
Renaming Our Global Business Units (GBU) to Align With Their Strategic Intent Sensors PerformanceSensing Primary Sensor Development High Volume Low Mix Strong Ongoing Content Growth 12 February 2015 Investor Event Sensing SolutionsControls Leveraging Existing Sensor Technology and Electrical Protect
Slide 13: Sensata Grows Organically at High Single-digits
Sensata Grows Organically at High Single–digits Content growth drives consistent above market revenue growth Organic Growth 10.3% Content growth can be variable due to economic backdrop, timing of product launches, timing of regulation 13 February 2015 Investor Event SENSATA PRODUCES ATTRACTIVE ORGA
Slide 14: Sensata Grows Revenue Double-digits All-in
Sensata Grows Revenue Double-digits All–in With acquisitions revenue and earnings grow at double–digit CAGRs $1,540 $3,065 Revenue $Millions $1.77 $2.92 ANI / Share 14 February 2015 Investor Event 1 2015E represents mid–point of guidance given February 2015 2 Assumes 2011 diluted share count to calc
Slide 15: Leading Margins Generate Significant Cash Flow
Long Cycle Revenue Leading Margins Attractive Tax Position Low Capital Intensity Significant Cash Generation Leading Margins Generate Significant Cash Flow ...That can be used to invest in the business and fund M&A 5, 7, 10 YEAR 2014 2014 15 February 2015 Investor Event 2012 $343 2013 $313 2014 $238
Slide 16: Sensata Invests in Acquired Products and Technologies
Sensata Invests in Acquired Products and Technologies Creating value in acquisitions through product expansion Repositioning portfolios for growth NEW HIGH TEMPERATURE SENSORS 1 CREATING A PLATFORM FOR GROWTH IN MAGNETIC SENSING checkbld More robust designs 16 February 2015 Investor Event AOB $135M
Slide 17: Sensata Globalizes Acquired Companies
Sensata Globalizes Acquired Companies Creating value in acquisitions through market expansion Globalization TPMS EXPANSION 2 17 February 2015 Investor Event Future manufacturing line in Changzhou to support growth of business, especially in China Acquisition Expanding from Germany to three continent
Slide 18: Sensata Captures Synergies From Acquisitions
Sensata Captures Synergies From Acquisitions Creating value in acquisitions through cost synergies Back–end savings and synergies LEVERAGE COMMONALITIES 3 AOB 18 February 2015 Investor Event Common ERP system, back–office processes, and sales infrastructure Moving manufacturing to best cost location
Slide 19: Performance Sensing
PERFORMANCE SENSING FEBRUARY 2015 19 February 2015 Investor Event STEVE BERINGHAUSE, SVP
Slide 20: Overview: Performance Sensing
Overview: Performance Sensing • Global leader in the largest end market for sensing • Mission critical, hard–to–do sensing applications • Early engineering engagement enables leading positions across high performing sensing parameters 20 February 2015 Investor Event
Slide 21: Performance Sensing Large Addressable Markets
$3,200M Position Sensing • Unrelenting regulatory trends require system solutions that reduce tail pipe emissions, improve fuel economy and safety • All system solutions require sensor inputs about vehicle environment We are expanding our Large Addressable Markets Performance Sensing end markets and
Slide 22: Sensata Provides Sensors to Mission Critical Auto Systems
Exhaust checkbld Exhaust Temperature Cabin Comfort checkbld Air Conditioning Pressure checkbld Air Classification / Quality checkbld Humidity checkbld Solar / Twilight Sensor o Air Conditioning Temperature o Rain Engine checkbld Gasoline Direct Injection Pressure checkbld Common Rail Diesel Pressure
Slide 23: Development of a Sensor
Development of a Sensor 23 February 2015 Investor Event checkbldAcross Customers checkbldAcross Geographies checkbldAcross Applications
Slide 24: What Does Sensata Mean for Gasoline Engines?
What Does Sensata Mean for Gasoline Engines? 24 February 2015 Investor Event SOURCE: Dr. Sung Hwan Cho, President, Hyundai America Technical Center, Superior Township, MI, USA; 35th International Vienna Engine symposium 2014
Slide 25: What Does Sensata Mean for Diesel Engines?
What Does Sensata Mean for Diesel Engines? 25 February 2015 Investor Event SOURCE: Dr. Sung Hwan Cho, President, Hyundai America Technical Center, Superior Township, MI, USA; 35th International Vienna Engine symposium 2014
Slide 26: What Does Schrader Mean to Sensata?
What Does Schrader Mean to Sensata? Enhances Position in Safety Systems checkbldVehicle Stability Control P checkbldWheel Speed Expands Capabilities checkbldMEMS manufacturing, scale checkbldASIC and sense element design 26 February 2015 Investor Event checkbldPedal Position checkbldBrake Booster Va
Slide 27: Turbo Speed Sensor Opportunity
• Downsized engine increases fuel economy; adding turbo maintains engine performance • Sensor allows the system to drive the turbo closer to its design limits compared with indirect control Turbo Speed Sensor Opportunity Direct speed measurement 27 February 2015 Investor Event • Small engine and tur
Slide 28: Opportunity for Gasoline Particulate Filter Differential Pressure Sensor
First customer launch with DPF for diesel passenger car First gasoline particle filters planned European politics 100% diesel installation 2000–200 EU3 2000–2006 EU 4 2005–2010 US 07 2007–2009 EU 5 2009–2015 EU6b 2014–2018 EU6c 2017–2022? Opportunity for Gasoline Particulate Filter Differential Pres
Slide 29: HVOR Opportunities
HVOR Opportunities CO2 reduction is next driver for sensor growth 29 February 2015 Investor Event SOURCE: Cummings Inc. 9th Diesel Emissions Conference & AdBlue Forum Europe 2013 • Waste heat recovery converts exhaust gas / waste to mechanical energy • The system requires two pressure sensors for sy
Slide 30: China: System Penetration Increase Drives Growth
China: System Penetration Increase Drives Growth System 2015 Installed System IN CHINA 2019 Installed System IN CHINA 2015 Mature Market Sensor Controlled A/C Systems 55% 60% 95% Electronic Stability Control 30% 45% 100% 30 February 2015 Investor Event Tire Pressure Monitoring 10% 40 - 100% 100% Com
Slide 31: Competitive Strategies to Win
Competitive Strategies to Win Competitor Typical Strategy Weakness Sensata Strategy Large multinational • System suppliers (Bosch / Denso) • Technology drivers with standard high–volume process • Sensors represent small portion of overall business • Less flexibility with design, process checkbldHigh
Slide 32: Summary
Summary • As vehicles get safer, cleaner, and more efficient they require more sensors • Manufacturers are risk–averse and depend on partners they can trust, like Sensata • Our engineers engage early and provide mission critical high performing solutions built into complex systems 32 February 2015 I
Slide 33: Sensing Solutions
FEBRUARY 2015 SENSING SOLUTIONS 33 February 2015 Investor Event MARTIN CARTER, SVP
Slide 34: Sensing Solutions Overview
Sensing Solutions Overview • Global leader in mature and emerging markets • Critical “must work” products driven by safety and energy mandates • Successful high mix / low volume and multi–market global business model • Well positioned with leading OEMs and innovators 34 February 2015 Investor Event
Slide 35: Successfully Executing on Three Platforms
3 Successfully Executing on Three Platforms 2 SALES checkbldLeading technology with scale checkbld Incumbency with leading OEMs and innovators checkbld INDUSTRIAL ELECTRONIC SENSING 35 February 2015 Investor Event 2015 INDUSTRIAL ELECTRO–MECHANICAL EMERGING MARKETS INDUSTRIAL ELECTRONIC SENSING 1 2
Slide 36: Successfully Executing on Three Platforms
Successfully Executing on Three Platforms 2 3SALES checkbldGlobal leader 10x its nearest competitor checkbld In mission critical applications checkbldLow percentage of INDUSTRIAL ELECTRO–MECHANICAL 36 February 2015 Investor Event 2015 YEAR INDUSTRIAL ELECTRO–MECHANICAL EMERGING MARKETS INDUSTRIAL EL
Slide 37: 4X Expansion of Addressable Markets
4X Expansion of Addressable Markets Significant runway in Industrial Applications Automotive Machinery GLOBAL MARKETS TOTAL MARKET: $95B OUR END MARKETS AND TECHNOLOGIES IN US $ MILLIONS Temperature Sensing Motor / Power Protection FUTURE GROWTH Leveraging existing sensor 37 February 2015 Investor E
Slide 38: Auto Technologies Support Industrial Needs
Auto Technologies Support Industrial Needs Proliferation of closed–loop control systems require smart sensing Value–creating automotive trends now migrating to industrial end markets AUTOMOTIVE / HVORAUTOMOTIVE / HVOR 38 February 2015 Investor Event CONTINUOUS SYSTEM IMPROVEMENTS drive the adoption
Slide 39: Macro Needs Enable Content Growth in Industrial Markets
Macro Needs Enable Content Growth in Industrial Markets Food Safety > Cold Chain Deployment Monitoring, Redundancy > Pumps, Gas Tanks Safety Energy > 39 February 2015 Investor Event Green Energy Sources > Solar & Wind Natural Refrigerants > Ammonia, CO2, and HC Clean Environment Variable Load Motor
Slide 40: Cold Chain Deployment a Critical Priority
5:1 RATIO OF COLD STORAGE CAPACITY PER PERSON, DEVELOPED VS. DEVEOPING COUNTRIES 200M1 Safety Environment Cold Chain Deployment a Critical Priority Refrigerated transport and storage preserves food from field to fork 3 EXAMPLE METRIC TONS OF FOOD COULD BE PRESERVED2 40 February 2015 Investor Event A
Slide 41: The Largest New Source of Energy Is Efficiency
45% OF THE GLOBAL ELECTRICITY IS CONSUMED BY ELECTRIC MOTOR– DRIVEN SYSTEMS 50% OPTIMIZATION DRIVES UP TO IN ENERGY SAVINGS 2 1 Efficiency Environment The Largest New Source of Energy Is Efficiency Early stage adoption of variable load systems EXAMPLE 41 February 2015 Investor Event ADOPTION ACCELER
Slide 42: Competitive Advantages
Competitive Advantages Typical Strategy • Industrial system suppliers • Various sensing parameters offering • Global support • High service level • Regional support • Custom design solutions • Niche market expertise Competitor Diverse Global Industrial Regional 42 February 2015 Investor Event Sensat
Slide 43: A Unique Business Model
A Unique Business Model MIX INDUSTRIAL VOLUME PERFORMANCE SENSING Technology with Scale Technology, Scale & Supply Chain Technology with Scale Channels & Customers checkbldAutomotive Volume checkbld Innovation checkbldCost WIN checkbldLeaders checkbldLong–lasting checkbldBroad Industrial Channels 43
Slide 44: Sensing Solutions in Summary
Sensing Solutions in Summary • Safety, Efficiency, and Environmental concerns are driving significant discontinuities in industrial markets • A well established, global, and leading electrical protection business • A unique business model drives new sensing growth: technology with scale, incumbency
Slide 45: Short Break
Short Break 45 February 2015 Investor Event
Slide 46: Sensata Technologies Investor Event February 2015
45 February 2015 Investor Event SENSATA TECHNOLOGIES INVESTOR EVENT FEBRUARY 2015
Slide 47: Global Operations
GLOBAL OPERATIONS FEBRUARY 2015 46 February 2015 Investor Event JEFF COTE, COO
Slide 48: Significant Scale and Flexibility
1,300,000,000+ devices shipped each year, all highly engineered and application specific 17,100 employees located in 15 countries Significant Scale and Flexibility 47 February 2015 Investor Event 17,000+ unique products 9 brand names we own, manufacture, and sell under: Sensata®, Airpax®, Klixon®, D
Slide 49: Competitive Advantage Through Operational Excellence
Competitive Advantage Through Operational Excellence checkbld Best cost sourcing commodity approach drives significant cost productivitySourcing checkbld Evolving shared service centers provide consistency and selling, checkbld Best delivered cost with culture of continuous improvementCost 48 Februa
Slide 50: Consolidated Manufacturing Footprint Serving the World
Consolidated Manufacturing Footprint Serving the World Major manufacturing sites Bulgaria: Botevgrad, Plovdiv China: Baoying, Changzhou Malaysia: Subang Jaya Poland: Bydgoszcz 49 February 2015 Investor Event NEWLY ACQUIRED CORE SENSATA MFG SITE NEW, UNDER CONSTRUCTION Mexico: Aguascalientes, Mexical
Slide 51: Facilities Capacity Available for Growth
620,000 417,000 916,000 AMERICAS EUROPE ASIA Facilities Capacity Available for Growth In thousands of square feet 50 February 2015 Investor Event 89,000 328,000 17,000 603,000 285,000 631,000 AVAILABLE SQ FT UTILIZED SQ FT
Slide 52: Sourcing Strategy to Drive Core Productivity and Acquisition Synergies
25% 30% 35% COMMODITY APPROACH Sourcing Strategy to Drive Core Productivity and Acquisition Synergies LOW COST / HIGH COST SOURCING COST REDUCTION % OF SPEND 55.4% 52.8% 46.8% 6.2% 5.8% 6.2% 51 February 2015 Investor Event 0% 5% 10% 15% 20% FY12 FY13 FY14 FY13 FY14 AP15 44.6% 47.2% 53.2% 2013 % OF S
Slide 53: Mature Manufacturing With Significant Labor Advantage
Mature Manufacturing With Significant Labor Advantage COUNTRY PRODUCTIONSTART DIRECT LABOR RATE INDEX USA = 100 HEADCOUNT DIRECT LABOR MANUFACTURING ENGINEERING PURCHASING SHARED SERVICE CENTER USA 1916 100 473 N. Ireland 1996 93 751 Poland 2011 33 308 52 February 2015 Investor Event 89% OF HEADCOUN
Slide 54: Continuous Improvement Through Design Driven Cost Reduction
Continuous Improvement Through Design Driven Cost Reduction 0.47 WEIGHT REDESIGNORIGINAL Inline design improvements checkbldDownsize sense element checkbld Eliminate components TARGET: 22% COST SAVINGS (EXCLUSIVE OF INVESTMENTS) INDEX 1.0 WEIGHT INDEX 53 February 2015 Investor Event $0.78 2017 COST
Slide 55: Continuous Improvement Through Best Delivered Cost
Continuous Improvement Through Best Delivered Cost APPROACHBACKGROUND Existing capacity footprint entirely within Asia Capacity expansion into Bulgaria in 2015, leveraging existing supply chain to serve Measures of success checkbldOn–time delivery to customer with zero defect rate launch checkbldRed
Slide 56: Continuous Improvement By Increasing Throughput
Continuous Improvement By Increasing Throughput Value stream map Go see, ask why Identify waste1 2 3 55 February 2015 Investor Event Similar changeover reduction time Similar output improvement Product A 54% 10.7% Product B 58% 9.8% Product C 63% 10.3% Before After Change Human movement (m) 146 36 7
Slide 57: Shared Service Opportunity
Shared Service Opportunity Build a center: maximize scale, financial benefits, improve process 80 HEADCOUNT Transactional Break / fixMATURITY M ATURITY O F SHARED SERVICES CENTER O F SHARED SERVICES CENTER 2012 2014 85 HEADCOUNT Contractual 56 February 2015 Investor Event LIFECYCLE OF SHARED SERVICE
Slide 58: Low Capital Intensity Driving Strong Cash Flow
checkbld Modular manufacturing cells—with long design cycles—reducing at risk capitalModular checkbld Throughput optimization—debottleneckingThroughput checkbld Flexibility across products and customersFlexible Low Capital Intensity Driving Strong Cash Flow 57 February 2015 Investor Event 2004 2005
Slide 59: 58 February 2015 Investor Event
58 February 2015 Investor Event
Slide 60: Finance
FINANCE FEBRUARY 2015 59 February 2015 Investor Event PAUL VASINGTON, CFO
Slide 61: Sensata On-track to $3.8B in Revenue by 2017
Schrader DeltaTech Controls Wabash Technologies Organic Growth $570M Sensata On-track to $3.8B in Revenue by 2017 2017 Double Revenue $3.8B High Single Digit $125M 60 February 2015 Investor Event 2012 Revenue $1.9B $80M TREMENDOUS PROGRESS IN 2014 checkbld Deployed $1.3B of capital for acquisitions
Slide 62: Acquiring Sensing Growth Platforms
RUN–RATE BUSINESS RUN–RATE BUSINESS Acquiring Sensing Growth Platforms Demonstrating our ability to repeatedly identify and close value–creating transactions aligned with our strategy to Win In Sensing 61 February 2015 Investor Event $570M, growing rapidly ACQUIRED October 2014 EARNINGS $(0.05) dilu
Slide 63: 2014 Financial Results
2014 Financial Results checkbld7% organic revenue growth checkbldExcluding the impact of acquired businesses ANI expanded ~9% HIGHLIGHTSFY14 FY13 %V Net Revenue $2,410 $1,981 22% Adj. Net Income $410 $385 7% 62 February 2015 Investor Event • Index % expands 40 bps to 19.8% checkbldANI Per Share excl
Slide 64: 2015 Financial Outlook
2015 Financial Outlook checkbld6% organic revenue growth • Content accelerates • Market ~flat • ASP decline (1.5%–2.0%) FY151 FY14 %V Net Revenue $3,065 $2,410 27% Adj. Net Income $501 $410 22% HIGHLIGHTS 63 February 2015 Investor Event checkbld23% growth from acquired businesses checkbldFX (2%) rev
Slide 65: M&A Delivering Value; Hedge Net Earnings Volatility
M&A Delivering Value Hedge Net Earnings Volatility 80%–90% hedged Hedge systematically 2015 ANI Per Share 23% growth in 2015 coming from both core and acquired businesses. FX impact on earnings moderated by systematic hedging program. $2.38 $2.92 $0.25 – $0.41 $0.21 – $0.28 $(0.03) – $(0.04) 64 Febr
Slide 66: Effective Systematic Hedging Program Designed to Reduce Earnings Volatility
Euro Pound Net Exposure1 $250M–$300M Effective Systematic Hedging Program Designed to Reduce Earnings Volatility • Euro and Renminbi largest net revenues Peso and Pound largest net expenses Foreign Exchange Non–US dollar denominated net transaction flows $0.03–$0.04 HEADWIND IN 2015 65 February 2015
Slide 67: Sensata's Financial Framework
Sensata’s Financial Framework % Net Revenue 2014 Target Range Highlights Gross Margin 35.0% 36%–38% checkbld Productivity, Integration synergies R&D 3.4% 3%–4% checkbld Invest for NBOscheckbld Tech leadership position RDE 6.8% 6%–7% 66 February 2015 Investor Event checkbld Included in COR SGA 9.1% 7
Slide 68: Financial Liquidity
$238 $425 $313 75% 2.6x 4.4x ~3.0x Financial Liquidity Strong cash flow generation fuels robust capital allocation Execute M&A and reduce debt to return to target net leverage ratio of 2x–3x FREE CASH FLOW NET LEVERAGE RATIO (“NLR”) 67 February 2015 Investor Event 2013 2014 2015E 74% 57% 2013 2014 2
Slide 69: Sensata Investment Highlights
Sensata Investment Highlights checkbld Innovative products designed for mission–critical, hard–to–do applications checkbld Custom solutions in high–value systems are sole-sourced leading to sticky, recurring revenue checkbld Collaborative, long–term relationships with diversified OEM customers Leadi
Slide 70: Q & A
Q & A 69 February 2015 Investor Event
Slide 71: Non-GAAP Financial Measures
This presentation includes references to Adjusted net income, Adjusted EBITDA, Net debt, Net leverage ratio, free cash flow and unleveraged free cash flow amounts. Adjusted net income is a non–GAAP financial measure. The Company defines Adjusted net income as follows: Net income before certain restr
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