Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — FY2018 Earnings Presentation
35 slides from Sensata Technologies's earnings presentation, Feb 6, 2019
Slide 1: Sensata Fourth Quarter and Full Year 2018 Earnings Presentation
SENSATA FOURTH QUARTER AND FULL YEAR 2018 EARNINGS PRESENTATION FEBRUARY 6, 2019
Slide 2: Forward-Looking Statements and Non-GAAP Measures
Forward-Looking Statements and Non-GAAP Measures 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
Slide 3: FY-2018 GAAP Results
FY-2018 GAAP Results $ and shares outstanding in millions, except EPS FY-2018 FY-2017 Δ Revenue $3,521.6 $3,306.7 6.5% Gross Profit $1,254.8 $1,167.8 7.4% (% of revenue) 35.6% 35.3% R&D $147.3 $130.1 13.2% (% of revenue) 4.2% 3.9% SG&A $305.6 $301.9 1.2% (% of revenue) 8.7% 9.1% Profit from Operatio
Slide 4: FY-2018: Solid year of secular growth and operational performance despite year-end market softness
FY-2018: Solid year of secular growth and operational performance despite year-end market softness Organic revenue growth of 6.0% – growth driven by 15.5% organic revenue growth in HVOR and 4.5% organic growth in Auto as a result of strong performance in NA and China Strong Secular growth – HVOR
Slide 5: FY-18 Performance by End Market
FY-18 Performance by End Market PERCENT OF REVENUES HVOR – Organic revenue growth: 15.5% • Every segment of business delivers double-digit organic revenue growth and strong content gains in full year 2018 ~16% • After strong end-market growth in 2018, expect an end market decline of 1%-2% in FY-19 •
Slide 6: Sharper than expected declines in China auto and industrial end-markets lowered Q4-18 revenue growth
Sharper than expected declines in China auto and industrial end-markets lowered Q4-18 revenue growth CHINA PMI LOWEST IN THREE YEARS SENSATA PERFORMANCE Q4-18 53 Overall China organic growth: 52 51 4.3% 50 49 China Auto organic growth: 49.4 48 JAN ’16 DEC ’18 0.6% SHARP DECLINE IN AUTO PRODUCTION Ou
Slide 7: Tracking in-line or above operational targets from Investor Day
After one year, we are tracking in-line or above the operational targets we established at our Investor Day Deliver Double-Digit Execute Balanced, Accelerate Increase Adjusted EPS Returns-Driven Growth Margins Growth Capital Deployment 6.0% 60 bps 14.4% FY-18 Revenue FY-18 Adj. EBIT FY-18 Adj. EPS •
Slide 8: Significant exposure to high-growth auto will help sustain outgrowth
Significant exposure to high-growth auto will help to sustain attractive outgrowth relative to end market production • Intersecting high-growth segments of auto market that will offset effects of weaker end-market • Sensor-rich solutions for efficient, connected subsystems High-Growth • Cleaner, mor
Slide 9: Strength of business model enables sustained profitability and cash flow
Strength of business model enables sustained profitability and cash flow even in the face of weaker end markets FIXED COSTS AS A % OF COGS 100% VARIABLE • Highly variable cost structure limits decremental margins Sensata • Ability to quickly take costs out Auto Supplier Peer Group* • Industry-leadin
Slide 10: Q4-2018 Financial Summary
Q4-2018 Financial Summary ADJUSTED EBIT MARGINS EXPAND BY 80 BASIS POINTS $ in millions, except EPS Q4-2018 Q4-2017 Δ • Revenue growth of 0.9% composed of: Revenue $848 $841 1% • Organic revenue growth: 3.5% Adjusted EBIT $209 $201 4% • Net effect of acq./divestitures % revenue 24.7% 23.9% decreases
Slide 11: Q4-2018: Performance Sensing
Q4-2018: Performance Sensing REVENUE SEGMENT PROFIT $ in millions % SEGMENT MARGIN $ in millions $634.7 $639.0 $180.7 $177.5 2 27.3% 28.7% 1 Q4-2017 Q4-2018 Q4-2017 Q4-2018 Q4-18 REVENUE GROWTH REPORTED ORGANIC • Strong secular growth and healthy end market continued for HVOR Automotive (2.2%) 3.1%
Slide 12: Q4-2018: Sensing Solutions
Q4-2018: Sensing Solutions REVENUE SEGMENT PROFIT $ in millions % SEGMENT MARGIN $ in millions $67.5 $68.8 $208.9 $205.8 32.8% 32.4%* Q4-2017 Q4-2018 Q4-2017 Q4-2018 • Aerospace delivers strong growth on healthy Q4-18 REVENUE GROWTH REPORTED ORGANIC end market and growing content Sensing Solutions 1
Slide 13: Q4-2018 Non-GAAP Results
Q4-2018 Non-GAAP Results $ in millions, except EPS Q4-2018 Q4-2017 Δ Revenue $847.9 $840.5 0.9% Adj. Gross Profit $312.6 $306.3 2.1% (% of revenue) 36.9% 36.4% R&D $35.5 $33.1 7.2% (% of revenue) 4.2% 3.9% Adj. SG&A $64.4 $71.2 (9.6%) (% of revenue) 7.6% 8.5% Adj. Other Opex1 $1.7 $2.6 (34.8%) Adj.
Slide 14: FY-2018 Non-GAAP Results
FY-2018 Non-GAAP Results $ in millions, except EPS FY-2018 FY-2017 Δ COMMENTS Revenue $3,521.6 $3,306.7 6.5% • Strong EBIT growth of 9.5% despite loss of Adj. Gross Profit $1,275.5 $1,188.1 valves business and 7.4% (% of revenue) 36.2% 35.9% negative impact of tariffs R&D $147.3 $130.1 in 2H-18 13.2
Slide 15: 2019 Financial Guidance
2019 Financial Guidance $ in millions, except EPS FY-2018 FY-2019 GUIDANCE REPORTED ORGANIC ASSUMPTIONS • FX expected to decrease revenue by Revenue $3,521.6 $3,580 - $3,680 2% - 5% 2% - 5% ~$16M – Adjusted EPS: positive impact from FX of $0.14 - $0.17 Adj. EBIT $821.4 $858 – $886 4% – 8% 3% – 6% •
Slide 16: Q1-19 Financial Guidance
Q1-19 Financial Guidance $ in millions, except EPS Q1-18 Q1-19 GUIDANCE REPORTED ORGANIC COMMENTS • Valves divestiture and GIGAVAC acquisition Revenue $886.3 $840 - $864 (5%) – (3%) (2%) - 0% (net) expected to decrease revenue by ~$12M • FX expected to Adj. EBIT $197.1 $188 - $194 (5%) – (2%) (2%) -
Slide 17: Appendix
APPENDIX SENSATA FOURTH QUARTER AND FULL YEAR 2018 EARNINGS SUMMARY
Slide 18: Q4-2018 GAAP Results
Q4-2018 GAAP Results $ and shares outstanding in millions, except EPS Q4-2018 Q4-2017 Δ Revenue $847.9 $840.5 0.9% Gross Profit $304.4 $301.8 0.8% (% of revenue) 35.9% 35.9% R&D $35.5 $33.1 7.2% (% of revenue) 4.2% 3.9% SG&A $69.9 $75.1 (6.9%) (% of revenue) 8.2% 8.9% Profit from Operations $162.4 $
Slide 19: Q4-2018 Cash Flow Statement
Q4-2018 Cash Flow Statement $ in millions Q4-2018 Q4-2017 Δ Net Income $254.1 $169.1 50.2% Depreciation & Amortization $62.2 $66.8 (6.8%) Changes in Working Capital $21.4 $12.8 66.9% Other ($137.3) ($63.4) NM Operating Cash Flow $200.4 $185.4 8.1% Capital Expenditures ($48.5) ($41.0) (18.2%) Free Ca
Slide 20: FY-2018 Cash Flow Statement
FY-2018 Cash Flow Statement $ in millions FY-2018 FY-2017 Δ Net Income $599.0 $408.4 46.7% Depreciation & Amortization $245.3 $270.4 (9.3%) Changes in Working Capital ($66.9) ($94.8) 29.4% Other ($156.8) ($26.2) NM Operating Cash Flow $620.6 $557.6 11.3% Capital Expenditures ($159.8) ($144.6) (10.5%
Slide 21: Balance Sheet
Balance Sheet $ in millions DEC 31, 2018 DEC 31, 2017 Total Assets $6,797.7 $6,641.5 Working Capital1 $1,277.2 $1,218.8 Intangibles, Net & Other $4,880.5 $4,793.2 Long-Term Assets $ in millions DEC 31, 2018 DEC 31, 2017 Cash & Equivalents $729.8 $753.1 Current Debt $14.6 $15.7 Net Cash $715.3 $737.4
Slide 22: 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 23: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES
Slide 24: 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 25: 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 26: Adjusted EBIT – Q4-2018
Adjusted EBIT – Q4-2018 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands Q4 2018 Q4 2017 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $254,099 30.0% $169,129 20.1
Slide 27: Adjusted EBIT – FY-18
Adjusted EBIT – FY-18 Percentage amounts have been calculated based on unrounded numbers. Accordingly, certain amounts may not sum due to the effect of rounding. $ in thousands FY 2018 FY 2017 Change Total Sensata Amount Margin1 Amount Margin1 Amount Margin1 Net income $598,995 17.0% $408,357 12.3%
Slide 28: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM FY 2018 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Net income $598,995 $598,995 $254,099 $149,118 $105,288 $90,490 $169,129 Interest expense, net 153,679 153,679 38,871 38,058 38,321 38,429 39,183 Provision for/(benefit from) income taxes (72,620)
Slide 29: ANI, Adjusted EPS, and ANI Margin – Q4-2018
ANI, Adjusted EPS, and ANI Margin – Q4-2018 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 Q4 2018 Q4 2017 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount EPS
Slide 30: ANI, Adjusted EPS, and ANI Margin – FY-18
ANI, Adjusted EPS, and ANI Margin – FY-18 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 FY 2018 FY 2017 Change Total Sensata Amount EPS1 Margin2 Amount EPS1 Margin2 Amount EPS1
Slide 31: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands Q4 FY Total Sensata 2018 2017 2018 2017 Provision for/(benefit from) income taxes ($134,706) ($53,675) ($72,620) ($5,916) Non-GAAP adjustments: Deferred income tax and other tax expense/(benefit) (149,044) (67,343) (128,261) (55,156) Adjusted taxes
Slide 32: Free Cash Flow
Free Cash Flow $ in thousands Q4 FY Total Sensata 2018 2017 Change 2018 2017 Change Net cash provided by operating activities $200,424 $185,367 8.1% $620,563 $557,646 11.3% Additions to property, plant and equipment and capitalized software (48,512) (41,048) (18.2%) (159,787) (144,584) (10.5%) Free
Slide 33: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands As of Total Sensata 31-Dec-18 30-Sep-18 30-Jun-18 31-Mar-18 31-Dec-17 Current portion of long-term debt, capital lease and other financing obligations $14,561 $13,378 $11,044 $8,178 $15,720 Capital lease and other financing obligations 30,618 24,548 26,
Slide 34: Organic Revenue Growth
Organic Revenue Growth 2018 versus 2017 0 Total Sensata Q4 FY Reported net revenue (percentage) change 0.9% 6.5% Less year-over-year change due to: Acquisition and divestiture, net (1.9%) (0.8%) Foreign exchange rate differences (0.7%) 1.3% Organic revenue growth 3.5% 6.0% Performance Sensing Q4 FY
Slide 35: Segment Margin
Segment Margin $ in thousands Q4 FY Performance Sensing 2018 2017 Change 2018 2017 Change Segment profit $177,516 $180,695 (1.8%) $712,682 $664,186 7.3% Segment net revenue 638,994 634,696 0.7% 2,627,651 2,460,600 6.8% Segment margin (reported basis) 27.8% 28.5% (70 bps) 27.1% 27.0% 10 bps Less year