Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q1 2020 Earnings Presentation
29 slides from Sensata Technologies's earnings presentation, Apr 29, 2020
Slide 1: Sensata First Quarter 2020 Earnings Presentation
SENSATA FIRST QUARTER 2020 EARNINGS PRESENTATION APRIL 29, 2020
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures Safe Harbor Statement This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995, which relate to future events and are subject to risks and uncertainties. The forward-looking statem
Slide 3: Q1-2020 GAAP Results
Q1-2020 GAAP Results $ and shares outstanding in millions, except EPS Q1-2020 Q1-2019 ∆ Revenue $774.3 $870.5 (11.1%) Gross Profit $207.9 $289.7 (28.2%) (% of revenue) 26.8% 33.3% R&D $34.5 $35.1 1.8% (% of revenue) 4.4% 4.0% SG&A $77.2 $70.5 (9.5%) (% of revenue) 10.0% 8.1% Operating Income $58.6 $
Slide 4: Response to COVID-19
Response to COVID-19 Safeguarding our • Continuing to implement preventative measures including: employees • increased frequency of cleaning and disinfecting of facilities • social distancing, remote working when possible • travel restrictions and limitations on visitor access to our facilities Serv
Slide 5: Q1-2020 Unprecedented health, economic and market conditions
Q1-2020 Unprecedented • Decisive actions to protect employees, mitigate supply chain disruptions, improve financial flexibility and align our costs with declining market demand health, economic and market • COVID-19 pandemic response has severely weakened end-market demand and economic conditions in
Slide 6: Organic growth declines 10.4% as end-market outgrowth offsets portion of decline
Organic growth declines 10.4% as end-market outgrowth offsets portion of 18% end-market decline PERCENT OF REVENUES HVOR – Q1 Organic revenue decline: 10.7% • On-road, construction, and agriculture end markets all declined double-digits in the quarter, 20% overall market decline ~17% • 930 bps outgr
Slide 7: Delivered significant end-market revenue outgrowth in Q1 despite weak market
Delivered significant end-market revenue outgrowth in Q1 despite very weak market environment Q1 OUTGROWTH vs. END-MARKET PRODUCTION % OF SENSATA REVENUE Traditional High-Growth +930 bps Powertrain Auto Industrial +600 bps +430 bps Aerospace Auto Aerospace HVOR HVOR Secular drivers will remain attra
Slide 8: Advancing our Megatrend initiatives for long-term growth
Advancing our Megatrend initiatives for long-term growth SMART & CONNECTED — KEY PROGRESS MADE OEM business growing rapidly, $15M Q1 wins — $1B SAM • Executing on ~$90M total new business wins; sensing / vehicle area network solution for insights on tire, on-board weight and wheel-end monitoring • P
Slide 9: Q1-20 Financials & Q2-20 Outlook
Q1-20 FINANCIALS & Q2-20 OUTLOOK PAUL VASINGTON, CHIEF FINANCIAL OFFICER
Slide 10: Q1-2020 Financial Summary
Q1-2020 Financial Summary $ in millions, except EPS Q1-2020 Q1-2019 ∆ • Revenue decline of (11.1%) composed of: Revenue $774.3 $870.5 (11.1%) • Foreign exchange decreases Adjusted Op Income $136.7 $188.6 revenue by (0.7%) (27.5%) % revenue 17.7% 21.7% • Organic revenue decline: (10.4%) Adjusted Net
Slide 11: Q1-2020: Performance Sensing
Q1-2020: Performance Sensing REVENUE SEGMENT OPERATING INCOME % OPERATING MARGIN $640.0M $568.7M $150.5M $129.1M 23.5%* 22.7%* Q1-2019 Q1-2020 Q1-2019 Q1-2020 Q1-20 REVENUE GROWTH REPORTED ORGANIC • Automotive market outgrowth of 600 bps and Automotive (11.0%) (10.4%) customer inventory build, mostl
Slide 12: Q1-2020: Sensing Solutions
Q1-2020: Sensing Solutions REVENUE SEGMENT OPERATING INCOME % OPERATING MARGIN $230.5M $75.0M $205.6M $55.9M 32.5%* 27.2%* Q1-2019 Q1-2020 Q1-2019 Q1-2020 • Revenue decline was largely due to impact of Q1-20 REVENUE GROWTH REPORTED ORGANIC COVID-19. Industrial was down 12.3% organically Sensing Solu
Slide 13: Q1-2020 Non-GAAP Results
Q1-2020 Non-GAAP Results $ in millions, except EPS Q1-2020 Q1-2019 ∆ Revenue $774.3 $870.5 (11.1%) Adj. Gross Profit $243.9 $294.5 (17.2%) (% of revenue) 31.5% 33.8% R&D $34.5 $35.1 1.8% (% of revenue) 4.4% 4.0% Adj. SG&A $71.0 $69.1 (2.9%) (% of revenue) 9.2% 7.9% Adj. Operating Income $136.7 $188.
Slide 14: Proactively aligning cost structure to end-market demand
Proactively aligning cost structure to end-market demand COST CATEGORIES - 2019 Variable: Material Spend, Direct Labor, Freight, Operating Supplies Semi-Variable: Indirect Labor & Spend, Outside Services, Utilities Fixed: Depreciation, Leases, Licensing Costs, Outside Services EBIT • COVID-19 pandem
Slide 15: Sensata has de-levered substantially over past 4+ years
Sensata has de-levered substantially over past 4+ years NET DEBT ($M) NET LEVERAGE RATIO 4.6x $3,317 ~$830M ~1.7x $2,487 2.9x Q4-15 Q1-20 Q4-15 Q1-20 • Drew down $400M from Revolver on April 1 • Substantial buffer to covenants • $1.2B cash on hand currently • SSNL* covenant <5.0x; currently (0.4x) •
Slide 16: Leading Indicators for Q2-20 Revenue
Leading Indicators for Q2-20 Revenue Each week of NA and EU Auto Industrial tracks with PMI, GDP, production shutdown is housing starts equivalent to ~$25M in revenue Estimating 4–5 weeks of shutdown Aerospace tracks with OEM Automotive tracks with commercial and defense production rates production,
Slide 17: Key Messages – Looking Forward
Key Messages – Looking Forward We continue to monitor We have $1.2 billion of cash on weak and volatile end markets our balance sheet We are responding operationally to dramatic Lowering salaries, reducing project and weakness in our end markets capital expenditures to conserve cash We are deliverin
Slide 18: Appendix A: Other Financial Information
APPENDIX A OTHER FINANCIAL INFORMATION
Slide 19: Q1-2020 Cash Flow Statement
Q1-2020 Cash Flow Statement $ in millions Q1-2020 Q1-2019 ∆ Net Income $8.4 $85.1 (90.1%) Depreciation & Amortization $67.8 $63.4 7.0% Changes in Working Capital ($21.5) ($54.8) 60.8% Other $43.9 $19.1 129.7% Operating Cash Flow $98.5 $112.7 (12.6%) Capital Expenditures ($29.5) ($41.7) 29.1% Free Ca
Slide 20: Balance Sheet
Balance Sheet $ in millions MAR 31, 2020 MAR 31, 2019 Total Assets $6,812.8 $6,793.5 Working Capital $1,348.5 $1,248.8 Intangibles, Net & Other $4,843.3 $4,908.4 Long-Term Assets $ in millions MAR 31, 2020 MAR 31, 2019 Cash & Equivalents $803.0 $649.5 Current Debt $7.1 $13.7 Net Cash $795.9 $635.9 Q
Slide 21: Appendix B: GAAP to Non-GAAP Reconciliations
APPENDIX B GAAP TO NON-GAAP RECONCILIATIONS
Slide 22: 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 23: 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 24: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM 1Q 2020 4Q 2019 3Q 2019 2Q 2019 1Q 2019 Net income $206,080 $8,431 $53,538 $70,675 $73,436 $85,065 Interest expense, net 158,704 39,403 40,137 39,556 39,608 39,253 Provision for/(benefit from) income taxes 84,726 (1,516) 27,060 28,341 30,841 21
Slide 25: Other GAAP to Non-GAAP Reconciliations – Q1 2020
Other GAAP to non-GAAP Reconciliations – Q1 2020 $ in thousands 1Q 2020 Restructuring Operating Interest expense, Income before Total Sensata Cost of revenue Gross profit SG&A Amortization and other Other, net Income taxes Net income income net taxes charges, net Reported (GAAP) $(566,406) $207,863
Slide 26: Organic Revenue Growth
Organic Revenue Growth 1Q 0 Constant Currency % Reported % Change Less: Acquisition & Organic Growth/(Decline) Less: FX Impact Change (GAAP) Divestitures, net (non-GAAP) (non-GAAP) Performance Sensing (11.1%) (0.7%) (10.4%) 0.0% (10.4%) Sensing Solutions (10.8%) (0.4%) (10.4%) 0.0% (10.4%) Sensata T
Slide 27: Free Cash Flow
Free Cash Flow $ in thousands 1Q Total Sensata 2020 2019 Change Net cash provided by operating activities $ 98,544 $ 112,693 (12.6%) Additions to property, plant and equipment and capitalized software (29,547) (41,690) 29.1% Free cash flow $ 68,997 $ 71,003 (2.8%) Q1 2020 EARNINGS SUMMARY 27
Slide 28: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands As of Total Sensata 31-Mar-20 31-Dec-19 Current portion of long-term debt, finance lease and other financing obligations $7,095 $6,918 Finance lease and other financing obligations, less current portion 28,280 28,810 Long-term debt, net 3,220,359 3,219,
Slide 29: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands 1Q Total Sensata 2020 2019 (Benefit from)/provision for income taxes $(1,516) $21,467 Non-GAAP adjustments: Deferred income tax and other tax (benefit)/expense (4,931) 7,953 Current tax effect of non-GAAP adjustments (9,269) (400) Adjusted taxes $1