Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q2 2018 Earnings Presentation
36 slides from Sensata Technologies's earnings presentation, Jul 24, 2018
Slide 1: Sensata Second Quarter 2018 Earnings Presentation
SENSATA SECOND QUARTER 2018 EARNINGS PRESENTATION JULY 24, 2018
Slide 2: Forward-Looking Statements
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 are based on reasonable assumptions. No assurance
Slide 3: Q2-2018 GAAP Results
Q2-2018 GAAP Results Q2-2018 Q2-2017 Δ Revenue $913.9M $839.9M 8.8% Gross Profit $331.4M $299.4M 10.7% (% of revenue) 36.3% 35.6% R&D $38.0M $31.2M 21.7% (% of revenue) 4.2% 3.7% SG&A $80.5M $80.8M (0.4%) (% of revenue) 8.8% 9.6% Profit from Operations $178.1M $140.0M 27.2% (% of revenue) 19.5% 16.7
Slide 4: Q2-18 results: accelerating organic revenue growth, margin expansion and EPS growth
Q2-18 results: accelerating organic revenue growth, while delivering attractive margin expansion and EPS growth Growing faster than market as a result of attractive secular growth – overall organic revenue growth of 6.4% Delivering attractive EBIT margin expansion – adjusted EBIT margin expands
Slide 5: Q2-18 Performance by End Market
Q2-18 Performance by End Market PERCENT OF REVENUES HVOR – Organic revenue growth: 14.3% • Strong growth in all HVOR submarkets continues • Performance reflects 660 basis points of outgrowth relative to ~15% end market production • Expect market growth of 7-8% in FY-18E • Closed first win for steer-
Slide 6: Significant progress being made against key growth drivers
Significant progress being made against key growth drivers CLEAN & EFFICIENT ELECTRIFICATION CHINA • Increasing growth of • Increasing sensor • Q2-18 YTD organic sensors on industrial content for thermal revenue growth of products such as heat management 22% pumps systems • Sustained • New wins for
Slide 7: New applications such as regenerative braking are driving growth on electrified vehicles
New applications such as regenerative braking are driving our growth on electrified vehicles • Nearly all hybrids and electric vehicles will require regenerative braking to optimize battery range • Sensor content for regenerative braking is approximately 2x higher than traditional braking • Sensata
Slide 8: Executing against the priorities laid out at our Investor Day
We are executing against the priorities we laid out at our Investor Day Deliver Double- Digit Adjusted Increase Flexibility Accelerate Increase Organic EPS for Value-Creating Growth Margins Growth Capital Deployment 6.4% 110 bps 15.8% Q2-18 YTD Q2-18 YTD Adj. Q2-18 YTD • Completed redomicile to Orga
Slide 9: Q2-2018 Financial Summary
Q2-2018 Financial Summary ADJUSTED NET INCOME GROWS 16% ORGANICALLY Q2-2018 Q2-2017 Δ • Revenue growth of 8.8% composed of: Revenue $913.9M $839.9M 8.8% • Organic revenue growth: 6.4% Adjusted EBIT $210.4M $189.6M 11.0% • Foreign exchange increases % revenue 23.0% 22.6% revenue by 2.4% Adjusted Net
Slide 10: Q2-2018: Performance Sensing
Q2-2018: Performance Sensing REVENUE SEGMENT PROFIT $676.2M % SEGMENT MARGIN (EXCLUDING FX) $187.4M $621.8M $169.1M 27.0%* 27.2% Q2-2017 Q2-2018 Q2-2017 Q2-2018 Q2-18 REVENUE GROWTH REPORTED ORGANIC • Market and content growth remain strong in HVOR Automotive 6.8% 3.9% • China and NA auto deliver st
Slide 11: Q2-2018: Sensing Solutions
Q2-2018: Sensing Solutions REVENUE SEGMENT PROFIT % SEGMENT MARGIN (EXCLUDING FX) $237.6M $79.1M $218.0M $70.1M 32.7%* 32.1% Q2-2017 Q2-2018 Q2-2017 Q2-2018 • Demand from industrial customers in China Q2-18 REVENUE GROWTH REPORTED ORGANIC and NA remains healthy Sensing Solutions 9.0% 7.6% • Aerospac
Slide 12: Q2-2018 Non-GAAP Results
Q2-2018 Non-GAAP Results Q2-2018 Q2-2017 Δ Revenue $913.9M $839.9M 8.8% Adj. Gross Profit $335.7M $304.8M 10.1% (% of revenue) 36.7% 36.3% R&D $38.0M $31.2M 21.7% (% of revenue) 4.2% 3.7% Adj. SG&A $78.0M $79.0M (1.3%) (% of revenue) 8.5% 9.4% Adjusted Other Opex1 $1.4M $5.8M (75.9%) Adj. Other Gain
Slide 13: Strong operating performance offsets negative EPS impact from Chinese Renminbi
Strong operating performance offsets negative EPS impact from Chinese Renminbi compared to previous guidance Q2-2018 YTD-2018 • Cash flow hedges over Revenue $20.4M $47.9M 18-24 months • In-line with expectations Profit from Operations $9.8M $12.2M ---------------------------------------------------
Slide 14: Q3-18 Financial Guidance
Q3-18 Financial Guidance Q3-17 Q3-18 GUIDANCE REPORTED ORGANIC COMMENTS • Strong sequential margin expansion Revenue $819.1M $851M - $875M 4% - 7% 5% - 7% • FX expected to increase revenue by approximately $2M Adj. EBIT $189.6M $201M - $207M 6% - 9% 6% - 7% – Adjusted EPS: positive impact of approxi
Slide 15: 2018 Financial Guidance
2018 Financial Guidance FY-2017 FY-2018 GUIDANCE REPORTED ORGANIC ASSUMPTIONS • Increasing organic growth revenue Revenue $3,307M $3,493M – $3,555M 6%– 8% 5% – 7% guidance Prior guidance 5% - 8% 3% - 5% • FX expected to increase revenue by Adj. EBIT $750M $821M – $837M 9% – 12% 9% – 11% 1-2% – Adjus
Slide 16: Sensata continuously creates value for shareholders
Sensata continuously creates value for shareholders • Accelerating organic revenue growth • Industry leading-margins that continue to expand • Demonstrated track record of double- digit organic EPS growth • Robust free cash flow performance • Balanced, value-creating capital deployment Q2-2018 EARNI
Slide 17: Appendix
APPENDIX SENSATA SECOND QUARTER 2018 EARNINGS SUMMARY
Slide 18: H1 2018 GAAP Results
H1 2018 GAAP Results H1 2018 H1 2017 Δ Revenue $1,800.2M $1,647.1M 9.3% Gross Profit $635.2M $574.2M 10.6% (% of revenue) 35.3% 34.9% R&D $74.0M $63.0M 17.4% (% of revenue) 4.1% 3.8% SG&A $161.8M $150.9M 7.2% (% of revenue) 9.0% 9.2% Profit from Operations $325.7M $261.6M 24.5% (% of revenue) 18.1%
Slide 19: H1 2018 Non-GAAP Results
H1 2018 Non-GAAP Results H1 2018 H1 2017 Δ Revenue $1,800.2M $1,647.1M 9.3% Adj. Gross Profit $643.9M $584.9M 10.1% (% of revenue) 35.8% 35.5% R&D $74.0M $63.0M 17.4% (% of revenue) 4.1% 3.8% Adj. SG&A $155.1M $147.8M 4.9% (% of revenue) 8.6% 9.0% Adj. Other Opex1 $3.2M $13.9M (77.2%) Adj. Other Gai
Slide 20: Q2-2018 Cash Flow Statement
Q2-2018 Cash Flow Statement Q2-2018 Q2-2017 Δ Net Income $105.3M $79.5M 32.5% Depreciation & Amortization $60.2M $67.0M (10.2%) Changes in Working Capital ($54.3M) ($50.7M) (7.0%) Other $19.5M $18.4M 5.8% Operating Cash Flow $130.7M $114.1M 14.5% Capital Expenditures ($35.4M) ($34.1M) (3.6%) Free Ca
Slide 21: H1 2018 Cash Flow Statement
H1 2018 Cash Flow Statement H1 2018 H1 2017 Δ Net Income $195.8M $151.2M 29.5% Depreciation & Amortization $123.1M $136.1M (9.5%) Changes in Working Capital ($103.2M) ($83.2M) (24.1%) Other $38.2M $29.8M 28.4% Operating Cash Flow $253.9M $233.8M 8.6% Capital Expenditures ($66.3M) ($67.2M) 1.3% Free
Slide 22: Balance Sheet
Balance Sheet JUN 30, 2018 DEC 31, 2017 Total Assets $6,806.9M $6,641.5M Working Capital1 $1,513.5M $1,218.8M Intangibles, Net & Other $4,658.0M $4,793.2M Long-Term Assets JUN 30, 2018 DEC 31, 2017 Cash & Equivalents $863.4M $753.1M Current Debt $11.0M $15.7M Net Cash $852.3M $737.4M 1 – June 30, 20
Slide 23: 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 24: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES
Slide 25: 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 26: Non-GAAP Measures - continued
Non-GAAP Measures - continued Adjusted taxes – represents provision for/(benefit from) income taxes, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments recorded to provision for/(benefit from) income taxes in our U.S. GAAP financial statements, such as deferred income ta
Slide 27: Adjusted EBIT – Q2-2018
Adjusted EBIT – Q2-2018 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands Q2 2018 Q2 2017 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $105,288 11.5% $79,457 9.5%
Slide 28: Adjusted EBIT – H1-2018
Adjusted EBIT – H1-2018 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands H1 2018 H1 2017 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $195,778 10.9% $151,193 9.2%
Slide 29: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM H1 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Net income $452,942 $195,778 $105,288 $90,490 $169,129 $88,035 $79,457 Interest expense, net 156,196 76,750 38,321 38,429 39,183 40,263 40,038 Provision for/(benefit from) income taxes (1,335) 37,
Slide 30: ANI, Adjusted EPS, and ANI Margin – Q2-2018
ANI, Adjusted EPS, and ANI Margin – Q2-2018 Per share and percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands Q2 2018 Q2 2017 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount EPS
Slide 31: ANI, Adjusted EPS, and ANI Margin – H1-2018
ANI, Adjusted EPS, and ANI Margin – H1-2018 Per share and percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands H1 2018 H1 2017 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount EPS
Slide 32: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands Q2 H1 Total Sensata 2018 2017 2018 2017 Provision for income taxes $23,398 $18,611 $37,524 $32,943 Non-GAAP adjustments: Deferred income tax and other tax expense/(benefit) 10,250 6,271 10,886 9,813 Adjusted taxes $13,148 $12,340 $26,638 23,130 Adj
Slide 33: Free Cash Flow
Free Cash Flow $ in thousands Q2 H1 Total Sensata 2018 2017 Change 2018 2017 Change Net cash provided by operating activities $130,658 $114,148 14.5% $253,913 $233,849 8.6% Additions to property, plant and equipment and capitalized software (35,363) (34,133) (3.6%) (66,301) (67,192) 1.3% Free cash f
Slide 34: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands As of Total Sensata 30-Jun-18 31-Mar-18 31-Dec-17 Current portion of long-term debt, capital lease and other financing obligations $11,044 $8,178 $15,720 Capital lease and other financing obligations 26,098 27,735 28,739 Long-term debt 3,221,039 3,221,6
Slide 35: Organic Revenue Growth
Organic Revenue Growth 2018 versus 2017 0 Total Sensata Q2 H1 Reported net revenue (percentage) change 8.8% 9.3% Less year-over-year change due to: Foreign exchange rate differences 2.4% 2.9% Organic revenue growth 6.4% 6.4% Performance Sensing Q2 H1 Reported net revenue (percentage) change 8.7% 9.6
Slide 36: Segment Margin
Segment Margin $ in thousands Q2 H1 Performance Sensing 2018 2017 Change 2018 2017 Change Segment profit $187,365 $169,100 10.8% $356,775 $320,836 11.2% Segment net revenue 676,217 621,829 8.7% 1,339,046 1,221,972 9.6% Segment margin (reported basis) 27.7% 27.2% 50 bps 26.6% 26.3% 30 bps Less year-o