Sensata Technologies Holding Plc · NYSE:ST
Sensata Technologies — Q2 2019 Earnings Presentation
32 slides from Sensata Technologies's earnings presentation, Jul 30, 2019
Slide 1: Sensata Second Quarter 2019 Earnings Presentation
SENSATA SECOND QUARTER 2019 EARNINGS PRESENTATION JULY 30, 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: Q2-2019 GAAP Results
Q2-2019 GAAP Results $ and shares outstanding in millions, except EPS Q2-2019 Q2-2018 Δ Revenue $883.7 $913.9 (3.3%) Gross Profit $308.5 $331.4 (6.9%) (% of revenue) 34.9% 36.3% R&D $36.7 $38.0 (3.4%) (% of revenue) 4.2% 4.2% SG&A $72.0 $80.5 (10.5%) (% of revenue) 8.2% 8.8% Operating Income $147.4
Slide 4: Q2-2019: Strong secular outgrowth and profitability in the face of weakening end markets
Q2-2019: Strong secular outgrowth and profitability in the face of weakening end markets ✓ Organic revenue decline of (1.6%) – auto organic decline of (1.1%); Heavy Vehicle & Off-Road (HVOR) organic growth of 1.0% ✓ Strong Secular growth – strong overall content growth led by auto, which outgrew end
Slide 5: Q2-19 Performance by End Market
Q2-19 Performance by End Market PERCENT OF REVENUES HVOR – Organic revenue growth: 1.0% • Strong growth from China helps to offset end market decline in NA on-road truck business ~16% • Performance in Construction & Agriculture slows as large customers reduce expectations for FY-19 • Sales pipeline
Slide 6: We are lowering our expectations for End Market Growth in FY-19
We are lowering our expectations for End Market Growth in FY-19 GLOBAL AUTO EUROPE AUTO CHINA AUTO HVOR INDUSTRIAL (3-4%) (5%) (4%) (4-5%) (5-6%) (11-12%) (2%) (4%) (1%) (6%) Strong content growth will help to offset end market declines Previous Guidance Current Guidance Q2 2019 EARNINGS SUMMARY 6
Slide 7: Accelerating outgrowth in auto and capitalizing on secular growth opportunities
We are accelerating our outgrowth in auto and capitalizing on attractive secular growth opportunities across entire business OUTGROWTH vs. AUTOMOTIVE % OF SENSATA REVENUE SECULAR GROWTH DRIVERS END MARKET PRODUCTION Traditional • Efficiency & safety requirements High-Growth Powertrain • Electrified
Slide 8: We are actively investing in Electrification opportunities across our entire portfolio
We are actively investing in Electrification opportunities across our entire portfolio Battery Battery Thermal Management – Runaway Lithium Balance Current Warning/ Protection ■■ $32B Addressable High-Voltage Sensing ■■■ market in 2030 Contactors/Fuses ■■■ growing ~18% CAGR (GIGAVAC) ■■■■ E-Motor Po
Slide 9: New partnership further extends Sensata's market opportunities in Electrification
New partnership further extends Sensata’s market opportunities in Electrification ✓ Lithium Balance: well-established customer base, differentiated technology, applications knowledge, and significant expertise in battery management ✓ Extends Sensata’s battery management capabilities into HVOR and in
Slide 10: Key messages
Key messages We are accelerating our content growth • Delivering on the commitment we made at our Investor Day Our end markets continue to weaken • Executing initiatives to further streamline operations and drive higher productivity We are implementing actions to further reduce costs • Restructuring
Slide 11: Q2-2019 Financial Summary
Q2-2019 Financial Summary $ in millions, except EPS Q2-2019 Q2-2018 Δ • Revenue decline of 3.3% composed of: Revenue $883.7 $913.9 (3.3%) • Organic revenue decline: 1.6% Adjusted Op Income $205.1 $219.4 (6.5%) • Net effect of acq./divestitures % revenue 23.2% 24.0% decreases revenue by 0.7% Adjusted
Slide 12: Q2-2019: Performance Sensing
Q2-2019: Performance Sensing REVENUE SEGMENT OPERATING INCOME % OPERATING MARGIN $ in millions $676.2 $644.5 $ in millions $187.4 $168.1 27.7%* 26.1%* Q2-2018 Q2-2019 Q2-2018 Q2-2019 • Continued acceleration of auto content growth: Q2-19 REVENUE GROWTH REPORTED ORGANIC Automotive (6.4%) (1.1%) • Chi
Slide 13: Q2-2019: Sensing Solutions
Q2-2019: Sensing Solutions REVENUE SEGMENT OPERATING INCOME $ in millions $237.6 $239.2 % OPERATING MARGIN $ in millions $79.1 $77.1 33.3%* 32.2%* Q2-2018 Q2-2019 Q2-2018 Q2-2019 • Double-digit growth in Aerospace due to healthy market and strong content growth Q2-19 REVENUE GROWTH REPORTED ORGANIC
Slide 14: Q2-2019 Non-GAAP Results
Q2-2019 Non-GAAP Results $ in millions, except EPS Q2-2019 Q2-2018 Δ Revenue $883.7 $913.9 (3.3%) Adj. Gross Profit $313.0 $336.8 (7.1%) (% of revenue) 35.4% 36.9% R&D $36.7 $38.0 (3.4%) (% of revenue) 4.2% 4.2% Adj. SG&A $69.6 $78.0 (10.8%) (% of revenue) 7.9% 8.5% Adj. Operating Income $205.1 $219
Slide 15: 2019 Financial Guidance
2019 Financial Guidance $ in millions, except EPS FY-2018 FY-2019 GUIDANCE REPORTED ASSUMPTIONS • FX expected to Revenue $3,521.6 $3,461 - $3,523 (2%) - 0% decrease revenue by organic (1%) - 1% ~$15M – Adjusted EPS: positive impact from FX of Adj. Op Income $832.0 $807 – $823 (3%) – (1%) $0.17 - $0.
Slide 16: Q3-19 Financial Guidance
Q3-19 Financial Guidance $ in millions, except EPS Q3-18 Q3-19 GUIDANCE REPORTED COMMENTS • Acquisitions/Divest, Revenue $873.6 $847 - $871 (3%) - 0% net expected to organic (4%) – (1%) increase revenue by ~$5M • FX expected to Adj. Op Income $207.6 $196 – $202 (6%) – (3%) increase revenue by ~$1M –
Slide 17: Appendix A: Other Financial Information
APPENDIX A OTHER FINANCIAL INFORMATION
Slide 18: H1-2019 GAAP Results
H1-2019 GAAP Results $ and shares outstanding in millions, except EPS H1-2019 H1-2018 Δ Revenue $1,754.2 $1,800.2 (2.6%) Gross Profit $598.2 $635.2 (5.8%) (% of revenue) 34.1% 35.3% R&D $71.8 $74.0 (3.0%) (% of revenue) 4.1% 4.1% SG&A $142.6 $161.8 (11.9%) (% of revenue) 8.1% 9.0% Operating Income $
Slide 19: H1-2019 Non-GAAP Results
H1-2019 Non-GAAP Results $ in millions, except EPS H1-2019 H1-2018 Δ Revenue $1,754.2 $1,800.2 (2.6%) Adj. Gross Profit $607.5 $646.5 (6.0%) (% of revenue) 34.6% 35.9% R&D $71.8 $74.0 (3.0%) (% of revenue) 4.1% 4.1% Adj. SG&A $138.6 $155.1 (10.6%) (% of revenue) 7.9% 8.6% Adj. Operating Income $393.
Slide 20: Q2-2019 Cash Flow Statement
Q2-2019 Cash Flow Statement $ in millions Q2-2019 Q2-2018 Δ Net Income $73.4 $105.3 (30.3%) Depreciation & Amortization $64.0 $60.2 6.3% Changes in Working Capital ($24.9) ($54.3) 54.1% Other $27.0 $19.5 38.4% Operating Cash Flow $139.5 $130.7 6.7% Capital Expenditures ($39.9) ($35.4) (12.7%) Free C
Slide 21: H1-2019 Cash Flow Statement
H1-2019 Cash Flow Statement $ in millions H1-2019 H1-2018 Δ Net Income $158.5 $195.8 (19.0%) Depreciation & Amortization $127.4 $123.1 3.5% Changes in Working Capital ($79.8) ($103.2) 22.7% Other $46.1 $38.2 20.6% Operating Cash Flow $252.2 $253.9 (0.7%) Capital Expenditures ($81.5) ($66.3) (23.0%)
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: Appendix B: GAAP to Non-GAAP Reconciliations
APPENDIX B GAAP TO NON-GAAP RECONCILIATIONS
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 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 26: Adjusted EBITDA
Adjusted EBITDA $ in thousands Period Total Sensata LTM1 H1 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Net income $561,718 $158,501 $73,436 $85,065 $254,099 $149,118 $105,288 Interest expense, net 155,790 78,861 39,608 39,253 38,871 38,058 38,321 Provision for/(benefit from) income taxes (57,836)
Slide 27: Other GAAP to Non-GAAP Reconciliations – Q2-2019
Other GAAP to non-GAAP Reconciliations – Q2-2019 $ in thousands Q2 2019 Cost of Restructuring and Operating Interest Income Total Sensata Gross profit SG&A Amortization Other, net Income taxes Net income revenue other charges, net income expense, net before taxes Reported (GAAP) ($575,235) $308,491
Slide 28: Other GAAP to Non-GAAP Reconciliations – H1-2019
Other GAAP to non-GAAP Reconciliations – H1-2019 $ in thousands H1 2019 Cost of Restructuring and Operating Interest Income Total Sensata Gross profit SG&A Amortization Other, net Income taxes Net income revenue other charges, net income expense, net before taxes Reported (GAAP) ($1,156,041) $598,18
Slide 29: Organic Revenue Growth
Organic Revenue Growth Q2 0 Constant Currency % Reported % Change Less: Acquisition & Organic Growth/(Decline) Less: FX Impact Change (GAAP) Divestitures, net (non-GAAP) (non-GAAP) Performance Sensing (4.7%) (1.0%) (3.7%) (3.0%) (0.7%) Sensing Solutions 0.7% (1.0%) 1.7% 5.8% (4.1%) Sensata Total (3.
Slide 30: Free Cash Flow
Free Cash Flow $ in thousands Q2 H1 Total Sensata 2019 2018 Change 2019 2018 Change Net cash provided by operating activities $139,473 $130,658 6.7% $252,166 $253,913 (0.7%) Additions to property, plant and equipment and capitalized software (39,859) (35,363) (12.7%) (81,549) (66,301) (23.0%) Free c
Slide 31: Net Debt and Net Leverage Ratio
Net Debt and Net Leverage Ratio $ in thousands As of Total Sensata 30-Jun-19 31-Mar-19 31-Dec-18 Current portion of long-term debt, finance lease and other financing obligations $13,582 $13,660 $14,561 Finance lease and other financing obligations, less current portion 30,141 30,864 30,618 Long-term
Slide 32: Adjusted Taxes and Adjusted Tax Rate
Adjusted Taxes and Adjusted Tax Rate $ in thousands Q2 H1 Total Sensata 2019 2018 2019 2018 Provision for income taxes $30,841 $23,398 $52,308 $37,524 Non-GAAP adjustments: Deferred income tax and other tax expense/(benefit) 16,846 10,250 24,799 10,886 Current tax effect of non-GAAP adjustments (400