Sensata Technologies (NYSE: ST), a global industrial technology
company and leading provider of sensors, sensor-rich solutions and
electrical protection devices used in mission-critical systems that
create valuable business insights for customers, today announced
financial results for its third quarter ended September 30,
2023.
"Sensata's results in the third quarter were in line with our
guidance and reflect our commitment to deliver as we transition
with our customers to widespread Electrification. Sensata remains
on track to achieve its long-term growth goals, including scaling
its Electrification business to $2 billion in revenue by 2026,”
said Jeff Cote, CEO and President of Sensata. "Our ability to
innovate and problem-solve across our rich history, as highlighted
in our investor day last month, supports our commitment to our
focused strategy on improving margins and delivering solutions for
our customers in an increasingly electrified world."
Operating Results - Third Quarter
Operating results for the third quarter of 2023 compared to the
third quarter of 2022 are summarized below. These results include
non-GAAP financial measures, each of which is defined and
reconciled to the most directly comparable GAAP measure later in
this press release.
Revenue:
- Revenue was $1,001.3 million, a decrease of $17.0 million, or
(1.7%), compared to $1,018.3 million in the third quarter of
2022.
- Revenue decreased (0.7%) on an organic basis, which excludes a
decrease of (1.0%) from foreign currency exchange rates versus the
prior year period.
Operating income:
- Operating income was $116.3 million, or 11.6% of revenue, a
decrease of $136.6 million, or (54.0%), compared to operating
income of $252.9 million, or 24.8% of revenue, in the third quarter
of 2022. The third quarter of 2022 included a one-time gain of
$135.1 million related to the sale of the Qinex business.
- Adjusted operating income was $191.6 million, or 19.1% of
revenue (20.3% on a constant currency basis), a decrease of $5.7
million, or (2.9%), compared to adjusted operating income of $197.3
million, or 19.4% of revenue, in the third quarter of 2022.
Earnings per share:
- Earnings per share was $0.41, a decrease of $0.50, or (54.9%),
compared to earnings per share of $0.91 in the third quarter of
2022.
- Adjusted earnings per share was $0.91, an increase of $0.06, or
7.1% ($0.99 or an increase of 16.5% on a constant currency basis),
compared to adjusted earnings per share of $0.85 in the third
quarter of 2022.
Sensata generated $138.9 million of operating cash flow in the
third quarter of 2023, compared to $93.8 million in the prior year
period. Sensata's free cash flow totaled $87.2 million in the third
quarter of 2023 compared to $57.5 million in the prior year
period.
During the third quarter of 2023, Sensata returned approximately
$18.3 million to shareholders through its quarterly dividend of
$0.12 per share paid on August 23, 2023, and repurchased shares
valued at approximately $35.2 million.
Operating Results - Nine Months
Operating results for the nine months ended September 30, 2023
compared to the nine months ended September 30, 2022 are summarized
below. These results include non-GAAP financial measures, each of
which is defined and reconciled to the most directly comparable
GAAP measure later in this press release.
Revenue:
- Revenue was $3,061.6 million, an increase of $47.0 million, or
1.6%, compared to $3,014.6 million in the nine months ended
September 30, 2022.
- Revenue increased 2.4% on an organic basis, which excludes a
decrease of (1.5%) from foreign currency exchange rates and an
increase of 0.7% from acquisitions, net of divestitures, each
versus the prior year.
Operating income:
- Operating income was $383.1 million, or 12.5% of revenue, a
decrease of $134.7 million, or (26.0%), compared to operating
income of $517.8 million, or 17.2% of revenue, in the nine months
ended September 30, 2022. The nine months ended September 30, 2022
included a one-time gain of $135.1 million related to the sale of
the Qinex business.
- Adjusted operating income was $590.3 million, or 19.3% of
revenue (19.9% on a constant currency basis), an increase of $16.7
million, or 2.9%, compared to adjusted operating income of $573.6
million, or 19.0% of revenue, in the nine months ended September
30, 2022.
Earnings per share:
- Earnings per share was $1.30, an increase of $0.04, or 3.2%,
compared to earnings per share of $1.26 in the nine months ended
September 30, 2022.
- Adjusted earnings per share was $2.80, an increase of $0.35, or
14.3% ($2.97 or an increase of 21.2% on a constant currency basis),
compared to adjusted earnings per share of $2.45 in the nine months
ended September 30, 2022.
Sensata generated $351.6 million of operating cash flow in the
nine months ended September 30, 2023, compared to $235.7 million in
the prior year period. Sensata's free cash flow totaled $215.4
million in the nine months ended September 30, 2023 compared to
$125.3 million in the prior year period.
During the first nine months of 2023, Sensata repaid its
variable rate Term Loan, returned approximately $53.4 million to
shareholders through its quarterly dividend, and repurchased shares
valued at approximately $60.3 million.
Segment Performance
For the three months ended
September 30,
For the nine months ended
September 30,
$ in 000s
2023
2022
2023
2022
Performance Sensing (1)
Revenue
$
753,988
$
739,449
$
2,249,700
$
2,173,789
Operating income
$
186,006
$
181,931
$
559,893
$
535,438
% of Performance Sensing revenue
24.7
%
24.6
%
24.9
%
24.6
%
Sensing Solutions (1)
Revenue
$
247,314
$
278,819
$
811,889
$
840,797
Operating income
$
71,345
$
80,251
$
230,813
$
244,904
% of Sensing Solutions revenue
28.8
%
28.8
%
28.4
%
29.1
%
(1)
Effective April 1, 2023, we reorganized
our reportable segments to move material handling products from
Performance Sensing to Sensing Solutions to align with new
management reporting. Prior year amounts have been reclassified
Guidance
"We are adjusting our fourth quarter guidance to reflect updated
third party estimates for automotive production in the quarter due
to the UAW strike. While the strike's impact is likely temporary,
its impact on our results may vary from current expectations," said
Paul Vasington, EVP and CFO of Sensata. "For the fourth quarter of
2023, we now expect revenue of $950 to $1,000 million and adjusted
EPS of $0.79 to $0.89."
Q4-2023 Guidance
$ in millions, except EPS
Q4-23 Guidance
Q4-22
Y/Y Change
Revenue
$950 - $1,000
$1,014.7
(6%) - (1%)
organic growth
(5%) - 0%
Adjusted Operating Income
$176 - $194
$204.3
(14%) - (5%)
Adjusted Net Income
$120 - $136
$146.5
(18%) - (7%)
Adjusted EPS
$0.79 - $0.89
$0.96
(18%) - (7%)
Versus the prior year period, Sensata expects that changes in
foreign currency exchange rates will decrease revenue by
approximately ($11) million at the midpoint and decrease adjusted
EPS by approximately ($0.09) at the midpoint in the fourth quarter
of 2023.
CFO Transition
Separately today, Sensata announced that Paul Vasington, EVP and
CFO, has decided to retire and will be stepping down from these
roles following the publication of the third quarter 10-Q in early
November, and that Brian Roberts has been appointed to begin
serving as EVP and CFO of Sensata as of that date. Mr. Vasington
will remain an advisor to Sensata until April 2024 to ensure a
smooth transition.
Conference Call and Webcast
Sensata will conduct a conference call today at 8:00 a.m.
Eastern Time to discuss its third quarter 2023 financial results
and its outlook for the fourth quarter of 2023. The dial-in numbers
for the call are 1-844-784-1726 or 1-412-380-7411. Callers should
reference the "Sensata Q3 2023 Financial Results Conference Call."
A live webcast of the conference call will also be available on the
investor relations page of Sensata’s website at http://investors.sensata.com. Additionally, a
replay of the call will be available until November 7, 2023. To
access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter
confirmation code: 1055825.
About Sensata Technologies
Sensata Technologies is a leading industrial technology company
that develops sensors, sensor-based solutions, including
controllers and software, and other mission-critical products to
create valuable business insights for customers and end users. For
more than 100 years, Sensata has provided a wide range of
customized, sensor-rich solutions that address complex engineering
requirements to help customers solve difficult challenges in the
automotive, heavy vehicle & off-road, industrial, and aerospace
industries. With approximately 21,000 employees and operations in
16 countries, Sensata’s solutions help to make products safer,
cleaner and more efficient, more electrified, and more connected.
For more information, please visit Sensata’s website at
www.sensata.com.
Non-GAAP Financial 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, including the preparation of our annual
operating plan, evaluation of our overall business performance, and
as a factor in determining compensation for certain employees. We
believe presenting non-GAAP financial measures is useful for
period-over-period comparisons of underlying business trends and
our ongoing business performance. We also believe presenting these
non-GAAP measures provides additional transparency into how
management evaluates the business.
Non-GAAP financial measures should be considered as supplemental
in nature and are not meant to be considered in isolation or as a
substitute for the related financial information prepared in
accordance with U.S. GAAP. In addition, our non-GAAP financial
measures may not be the same as, or comparable to, similar non-GAAP
measures presented by other companies.
The non-GAAP financial measures referenced by Sensata in this
release include: adjusted net income, adjusted earnings per share
(“EPS”), adjusted operating income, adjusted operating margin, free
cash flow, organic revenue growth, market outgrowth, adjusted
earnings before interest, taxes, depreciation and amortization
("EBITDA"), net debt, and net leverage ratio. We also refer to
changes in certain non-GAAP measures, usually reported either as a
percentage or number of basis points, between two periods. Such
changes are also considered non-GAAP measures.
Adjusted net income (or loss) is defined as net income
(or loss), determined in accordance with U.S. GAAP, excluding
certain non-GAAP adjustments which are detailed in the accompanying
reconciliation tables. Adjusted EPS is calculated by
dividing adjusted net income (or loss) by the number of diluted
weighted-average ordinary shares outstanding in the period. We
believe that these measures are useful to investors and management
in understanding our ongoing operations and in analysis of ongoing
operating trends.
Adjusted operating income (or loss) is defined as
operating income (or loss), determined in accordance with U.S.
GAAP, excluding certain non-GAAP adjustments which are detailed in
the accompanying reconciliation tables. Adjusted operating
margin is calculated by dividing adjusted operating income (or
loss) by net revenue. We believe that these measures are useful to
investors and management in understanding our ongoing operations
and in analysis of ongoing operating trends.
Free cash flow is defined as net cash provided by/(used
in) operating activities less additions to property, plant and
equipment and capitalized software. We believe that this measure is
useful to investors and management as a measure of cash generated
by business operations that will be used to repay scheduled debt
maturities and can be used to fund acquisitions, repurchase
ordinary shares, or for the accelerated repayment of debt
obligations.
Organic revenue growth (or decline) is defined as the
reported percentage change in net revenue calculated in accordance
with U.S. GAAP, excluding the period-over-period impact of foreign
exchange rate differences as well as the net impact of material
acquisitions and divestitures for the 12-month period following the
respective transaction date(s). We believe that this measure is
useful to investors and management in understanding our ongoing
operations and in analysis of ongoing operating trends.
Adjusted EBITDA is defined as net income (or loss),
determined in accordance with U.S. GAAP, excluding interest
expense, net, provision for (or benefit from) income taxes,
depreciation expense, amortization of intangible assets, and the
following non-GAAP adjustments, if applicable: (1) restructuring
related and other, (2) financing and other transaction costs, and
(3) deferred gain or loss on derivative instruments. We believe
that this measure is useful to investors and management in
understanding our ongoing operations and in analysis of ongoing
operating trends.
Net debt is defined as total debt, finance lease, and
other financing obligations less cash and cash equivalents. We
believe net debt is a useful measure to management and investors in
understanding trends in our overall financial condition.
Net leverage ratio is defined as net debt divided by last
twelve months (LTM) adjusted EBITDA. We believe the net leverage
ratio is a useful measure to management and investors in
understanding trends in our overall financial condition.
In discussing trends in our performance, we may refer to certain
non-GAAP financial measures or the percentage change of certain
non-GAAP financial measures in one period versus another,
calculated on a constant currency basis. Constant currency
is determined by stating revenues and expenses at prior period
foreign currency exchange rates and excludes the impact of foreign
currency exchange rates on all hedges and, as applicable, net
monetary assets. We believe these measures are useful to investors
and management in understanding our ongoing operations and in
analysis of ongoing operating trends.
Safe Harbor Statement
This earnings release includes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements may be identified by
terminology such as "may," "will," "could," "should," "expect,"
"anticipate," "believe," "estimate," "predict," "project,"
"forecast," "continue," "intend," "plan," "potential,"
"opportunity," "guidance," and similar terms or phrases.
Forward-looking statements involve, among other things,
expectations, projections, and assumptions about future financial
and operating results, objectives, business and market outlook,
megatrends, priorities, growth, shareholder value, capital
expenditures, cash flows, demand for products and services, share
repurchases, and Sensata’s strategic initiatives, including those
relating to acquisitions and dispositions and the impact of such
transactions on our strategic and operational plans and financial
results. These statements are subject to risks, uncertainties, and
other important factors relating to our operations and business
environment, and we can give no assurances that these
forward-looking statements will prove to be correct.
A wide variety of potential risks, uncertainties, and other
factors could materially affect our ability to achieve the results
either expressed or implied by these forward-looking statements,
including, but not limited to, risks related to public health
crises, instability and changes in the global markets, supplier
interruption or non-performance, the acquisition or disposition of
businesses, adverse conditions or competition in the industries
upon which we are dependent, intellectual property, product
liability, warranty, and recall claims, market acceptance of new
product introductions and product innovations, labor disruptions or
increased labor costs, and changes in existing environmental or
safety laws, regulations, and programs.
Investors and others should carefully consider the foregoing
factors and other uncertainties, risks, and potential events
including, but not limited to, those described in Item 1A: Risk
Factors in our most recent Annual Report on Form 10-K and as may be
updated from time to time in Item 1A: Risk Factors in our quarterly
reports on Form 10-Q or other subsequent filings with the United
States Securities and Exchange Commission. All such forward-looking
statements speak only as of the date they are made, and we do not
undertake any obligation to update these statements other than as
required by law.
SENSATA TECHNOLOGIES HOLDING
PLC Condensed Consolidated Statements of Operations (In
thousands, except per share amounts) (Unaudited)
For the three months ended
September 30,
For the nine months ended
September 30,
2023
2022
2023
2022
Net revenue
$
1,001,302
$
1,018,268
$
3,061,589
$
3,014,586
Operating costs and expenses:
Cost of revenue
687,959
694,535
2,090,538
2,038,218
Research and development
45,448
47,947
136,244
141,898
Selling, general and administrative
85,661
90,013
263,123
283,022
Amortization of intangible assets
39,970
40,313
135,307
114,485
Restructuring and other charges, net
26,004
(107,441
)
53,262
(80,811
)
Total operating costs and expenses
885,042
765,367
2,678,474
2,496,812
Operating income
116,260
252,901
383,115
517,774
Interest expense, net
(36,908
)
(44,856
)
(115,104
)
(135,143
)
Other, net
1,317
(21,371
)
(8,215
)
(111,067
)
Income before taxes
80,669
186,674
259,796
271,564
Provision for income taxes
17,868
46,421
61,467
74,029
Net income
$
62,801
$
140,253
$
198,329
$
197,535
Net income per share:
Basic
$
0.41
$
0.91
$
1.30
$
1.27
Diluted
$
0.41
$
0.91
$
1.30
$
1.26
Weighted-average ordinary shares
outstanding:
Basic
152,046
154,474
152,421
156,124
Diluted
152,379
154,943
152,922
156,855
SENSATA TECHNOLOGIES HOLDING
PLC Condensed Consolidated Balance Sheets (In thousands)
(Unaudited)
September 30,
2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
889,703
$
1,225,518
Accounts receivable, net of allowances
766,835
742,382
Inventories
683,646
644,875
Prepaid expenses and other current
assets
152,981
162,268
Total current assets
2,493,165
2,775,043
Property, plant and equipment, net
874,126
840,819
Goodwill
3,864,490
3,911,224
Other intangible assets, net
921,444
999,722
Deferred income tax assets
93,858
100,539
Other assets
141,252
128,873
Total assets
$
8,388,335
$
8,756,220
Liabilities and shareholders'
equity
Current liabilities:
Current portion of long-term debt, finance
lease and other financing obligations
$
1,888
$
256,471
Accounts payable
515,095
531,572
Income taxes payable
28,399
43,987
Accrued expenses and other current
liabilities
327,291
346,942
Total current liabilities
872,673
1,178,972
Deferred income tax liabilities
389,551
364,593
Pension and other post-retirement benefit
obligations
39,131
36,086
Finance lease and other financing
obligations, less current portion
23,456
24,742
Long-term debt, net
3,771,810
3,958,928
Other long-term liabilities
66,533
82,092
Total liabilities
5,163,154
5,645,413
Total shareholders' equity
3,225,181
3,110,807
Total liabilities and shareholders'
equity
$
8,388,335
$
8,756,220
SENSATA TECHNOLOGIES HOLDING
PLC Condensed Consolidated Statements of Cash Flows (In
thousands) (Unaudited)
For the nine months ended
September 30,
2023
2022
Cash flows from operating
activities:
Net income
$
198,329
$
197,535
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
96,877
94,562
Amortization of debt issuance costs
5,110
5,256
Gain on sale of business
(5,877
)
(135,112
)
Share-based compensation
24,454
24,180
Loss on debt financing
857
5,468
Amortization of intangible assets
135,307
114,485
Deferred income taxes
12,323
3,313
Loss on equity investments, net
678
75,135
Unrealized loss on derivative instruments
and other
15,712
40,702
Changes in operating assets and
liabilities, net of effects of acquisitions
(109,573
)
(166,291
)
Acquisition-related compensation
payments
(22,620
)
(23,500
)
Net cash provided by operating
activities
351,577
235,733
Cash flows from investing
activities:
Acquisitions, net of cash received
—
(632,683
)
Additions to property, plant and equipment
and capitalized software
(136,224
)
(110,424
)
Investment in debt and equity
securities
(390
)
(7,773
)
Proceeds from the sale of business, net of
cash sold
19,000
198,841
Other
—
152
Net cash used in investing activities
(117,614
)
(551,887
)
Cash flows from financing
activities:
Proceeds from exercise of stock options
and issuance of ordinary shares
5,346
16,460
Payment of employee restricted stock tax
withholdings
(12,067
)
(7,834
)
Payments on debt
(448,640
)
(507,968
)
Dividends paid
(53,380
)
(34,271
)
Payments to repurchase ordinary shares
(60,290
)
(241,903
)
Payments of debt financing costs
(747
)
(13,369
)
Net cash used in financing activities
(569,778
)
(288,885
)
Net change in cash and cash
equivalents
(335,815
)
(605,039
)
Cash and cash equivalents, beginning of
period
1,225,518
1,708,955
Cash and cash equivalents, end of
period
$
889,703
$
1,103,916
Revenue by Business, Geography, and End Market
(Unaudited)
(percent of total revenue)
For the three months ended
September 30,
For the nine months ended
September 30,
2023
2022
2023
2022
Performance Sensing (1)
75.3 %
72.6 %
73.5 %
72.1 %
Sensing Solutions (1)
24.7 %
27.4 %
26.5 %
27.9 %
Total
100.0 %
100.0 %
100.0 %
100.0 %
(percent of total revenue)
For the three months ended
September 30,
For the nine months ended
September 30,
2023
2022
2023
2022
Americas
45.3 %
43.8 %
45.6 %
41.9 %
Europe
25.6 %
25.9 %
26.5 %
26.1 %
Asia/Rest of World
29.1 %
30.3 %
27.9 %
32.0 %
Total
100.0 %
100.0 %
100.0 %
100.0 %
(percent of total revenue)
For the three months ended
September 30,
For the nine months ended
September 30,
2023
2022
2023
2022
Automotive (2)
55.8 %
52.4 %
53.0 %
51.8 %
Heavy vehicle and off-road (1)
20.5 %
21.0 %
21.4 %
21.3 %
Industrial (1)
13.0 %
16.0 %
15.1 %
14.2 %
Appliance and HVAC
4.8 %
5.1 %
4.8 %
5.6 %
Aerospace
4.9 %
3.7 %
4.6 %
3.6 %
All other
1.0 %
1.8 %
1.1 %
3.5 %
Total
100.0 %
100.0 %
100.0 %
100.0 %
(1)
Effective April 1, 2023, we reorganized
our structure to move material handling products from the
Performance Sensing reportable segment to the Sensing Solutions
reportable segment to align with new management reporting.
Accordingly, material handling revenue, which has historically been
presented in the HVOR end-market, is now presented in the
Industrial end-market. Prior period amounts for revenue by business
and end market have been reclassified above.
(2)
Includes amounts reflected in the Sensing
Solutions segment as follows: $10.4 million and $8.6 million of
revenue in the three months ended September 30, 2023 and 2022,
respectively, and $28.0 million and $27.8 million of revenue in the
nine months ended September 30, 2023 and 2022, respectively.
Market Outgrowth (Unaudited)
For the three months
ended
For the nine months
ended
September 30, 2023
September 30, 2023
Reported Growth
Organic Growth
End Market Growth
Reported Growth
Organic Growth
End Market Growth
Sensata
(1.7%)
(0.7%)
(4.7%)
1.6%
2.4%
0.7%
Market outgrowth, or organic revenue growth less end market
growth, can be lumpy during individual quarters due to timing of
customer production launches, channel inventory, customer or
platform mix, and changes in market share. For the last twelve
months, market outgrowth is estimated to have been 460 bps and 660
bps for the past three years.
GAAP to Non-GAAP Reconciliations
The following unaudited tables provide a reconciliation of the
difference between each of the non-GAAP financial measures
referenced herein and the most directly comparable U.S. GAAP
financial measure. Amounts presented in these tables may not appear
to recalculate due to the effect of rounding.
Operating income and margin, income tax,
net income, and earnings per share
($ in thousands, except per share
amounts)
For the three months ended
September 30, 2023
Operating Income
Operating Margin
Income Taxes
Net Income
Diluted EPS
Reported (GAAP)
$
116,260
11.6
%
$
17,868
$
62,801
$
0.41
Non-GAAP adjustments:
Restructuring related and other (1)
31,549
3.2
%
(1,363
)
30,186
0.20
Financing and other transaction costs
5,662
0.6
%
—
6,038
0.04
Step-up depreciation and amortization
38,825
3.9
%
—
38,825
0.25
Deferred gain on derivative
instruments
(663
)
(0.1
%)
39
(148
)
0.00
Amortization of debt issuance costs
—
—
%
—
1,688
0.01
Deferred taxes and other tax related
—
—
%
(1,122
)
(1,122
)
(0.01
)
Total adjustments
75,373
7.5
%
(2,446
)
75,467
0.50
Adjusted (non-GAAP)
$
191,633
19.1
%
$
20,314
$
138,268
$
0.91
(1)
Includes $28.9 million of charges related
to the Q3 2023 Plan incurred in the third quarter of 2023, $21.4
million of which was recorded in restructuring and other charges,
net. Refer to our Quarterly Report on Form 10-Q for additional
information on the Q3 2023 Plan.
($ in thousands, except per share
amounts)
For the three months ended
September 30, 2022
Operating Income
Operating Margin
Income Tax
Net Income
Diluted EPS
Reported (GAAP)
$
252,901
24.8
%
$
46,421
$
140,253
$
0.91
Non-GAAP adjustments:
Restructuring related and other
16,394
1.6
%
(427
)
15,967
0.10
Financing and other transaction costs
(1)
(110,883
)
(10.9
%)
3,761
(97,619
)
(0.63
)
Step-up depreciation and amortization
39,001
3.8
%
—
39,001
0.25
Deferred (gain)/loss on derivative
instruments
(102
)
0.0
%
(1,170
)
4,501
0.03
Amortization of debt issuance costs
—
—
%
—
1,823
0.01
Deferred taxes and other tax related
—
—
%
27,121
27,121
0.18
Total adjustments
(55,590
)
(5.5
%)
29,285
(9,206
)
(0.06
)
Adjusted (non-GAAP)
$
197,311
19.4
%
$
17,136
$
131,047
$
0.85
(1)
Includes a gain of $135.1 million on the
sale of the Qinex Business in the third quarter of 2022, partially
offset by $7.4 million of expense related to compensation
arrangements entered into concurrent with the closing of various
acquisitions and $13.5 million of transaction-related charges to
sell the Qinex Business, each of which were recorded in
restructuring and other charges, net. Also includes a $5.5 million
loss related to the redemption of the 4.875% Senior Notes in the
third quarter of 2022 and $4.0 million of mark-to-market losses on
our equity investments, primarily our investment in Quanergy
Systems, Inc, each of which is recorded in other, net.
($ in thousands, except per share
amounts)
For the nine months ended
September 30, 2023
Operating Income
Operating Margin
Income Tax
Net Income
Diluted EPS
Reported (GAAP)
$
383,115
12.5
%
$
61,467
$
198,329
$
1.30
Non-GAAP adjustments:
Restructuring related and other (1)
65,568
2.1
%
(2,667
)
62,901
0.41
Financing and other transaction costs
14,175
0.5
%
2,776
17,568
0.11
Step-up depreciation and amortization
(2)
131,281
4.3
%
—
131,281
0.86
Deferred (gain)/loss on derivative
instruments
(3,860
)
(0.1
%)
(198
)
788
0.01
Amortization of debt issuance costs
—
—
%
—
5,107
0.03
Deferred taxes and other tax related
—
—
%
12,102
12,102
0.08
Total adjustments
207,164
6.8
%
12,013
229,747
1.50
Adjusted (non-GAAP)
$
590,279
19.3
%
$
49,454
$
428,076
$
2.80
(1)
Includes $28.9 million of charges related
to the Q3 2023 Plan incurred in the third quarter of 2023, $21.4
million of which was recorded in restructuring and other charges,
net, with the remainder primarily in cost of revenue. Also includes
$25.7 million of charges related to the exit of the Spear Marine
Business in the second quarter of 2023, $15.2 million of which was
recorded in restructuring and other charges, net, with the
remainder primarily in cost of revenue. Refer to our Quarterly
Report on Form 10-Q for additional information on the Q3 2023 Plan
and the exit of the Spear Marine Business.
(2)
Includes $13.5 million of accelerated
amortization related to the exit of the Spear Marine Business in
the second quarter of 2023.
($ in thousands, except per share
amounts)
For the nine months ended
September 30, 2022
Operating Income
Operating Margin
Income Tax
Net Income
Diluted EPS
Reported (GAAP)
$
517,774
17.2
%
$
74,029
$
197,535
$
1.26
Non-GAAP adjustments:
Restructuring related and other
24,431
0.8
%
(563
)
24,310
0.15
Financing and other transaction costs
(1)
(80,624
)
(2.7
%)
2,767
5,218
0.03
Step-up depreciation and amortization
110,264
3.7
%
—
110,264
0.70
Deferred loss on derivative
instruments
1,740
0.1
%
(3,372
)
12,971
0.08
Amortization of debt issuance costs
—
—
%
—
5,256
0.03
Deferred taxes and other tax related
(2)
—
—
%
28,455
28,455
0.18
Total adjustments
55,811
1.9
%
27,287
186,474
1.19
Adjusted (non-GAAP)
$
573,585
19.0
%
$
46,742
$
384,009
$
2.45
(1)
Includes gains on the sale of the Qinex
Business in the third quarter of 2022 and changes in the fair value
of acquisition-related contingent consideration amounts of $135.1
million and $9.4 million, respectively, partially offset by $38.4
million of expense related to compensation arrangements entered
into concurrent with the closing of an acquisition and $15.6
million of transaction-related charges to sell the Qinex Business,
each of which were recorded in restructuring and other charges,
net. Also includes $75.1 million of mark-to-market losses on our
equity investments, primarily our investment in Quanergy Systems,
Inc., recorded in other, net.
(2)
Includes $11.4 million of current tax
expense related to the repatriation of profit from certain Asian
subsidiaries to their parent companies in the Netherlands and the
United States. The decision to repatriate these profits was the
result of our goal to reduce our balance sheet exposure and
corresponding earnings volatility related to changes in foreign
currency exchange rates as well as to fund our deployment of
capital.
Non-GAAP adjustments by location in
statements of operations
(in thousands)
For the three months ended
September 30,
For the nine months ended
September 30,
2023
2022
2023
2022
Cost of revenue (1)
$
7,208
$
8,687
$
15,572
$
12,062
Selling, general and administrative
3,727
4,461
7,749
15,191
Amortization of intangible assets (2)
38,434
38,703
130,581
109,369
Restructuring and other charges, net
(3)
26,004
(107,441
)
53,262
(80,811
)
Operating income adjustments
75,373
(55,590
)
207,164
55,811
Interest expense, net
1,688
1,823
5,107
5,256
Other, net (4)
852
15,276
5,463
98,120
Provision for income taxes (5)
(2,446
)
29,285
12,013
27,287
Net income adjustments
$
75,467
$
(9,206
)
$
229,747
$
186,474
(1)
The three and nine months ended September
30, 2023 include a charge of $7.0 million to write down inventory
in the third quarter of 2023 as a result of business reorganization
decisions made as part of the Q3 2023 Plan. The nine months ended
September 30, 2023 includes a charge of $10.5 million to write down
inventory related to the exit of the Spear Marine Business in the
second quarter of 2023.
(2)
The nine months ended September 30, 2023
includes $13.5 million of accelerated amortization related to the
exit of the Spear Marine Business in the second quarter of
2023.
(3)
The three and nine months ended September
30, 2023 include $21.4 million of charges related to the Q3 2023
Plan incurred in the third quarter of 2023. The nine months ended
September 30, 2023 includes $15.2 million of charges related to the
exit of the Spear Marine Business in the second quarter of 2023.
The three and nine months ended September 30, 2023 and 2022 include
$3.8 million, $7.4 million, $14.4 million, and $38.4 million,
respectively, of expense related to compensation arrangements
entered into concurrent with the closing of certain acquisitions.
The three and nine months ended September 30, 2022 include a gain
of $135.1 million on the sale of the Qinex Business. This gain was
partially offset in the three and nine months ended September 30,
2022 by $13.5 million and $15.6 million, respectively, of
transaction-related charges to sell the Qinex Business. The nine
months ended September 30, 2022 also includes $9.4 million of gains
related to changes in the fair value of acquisition-related
contingent consideration amounts.
(4)
The three and nine months ended September
30, 2022 include a mark-to-market loss on our equity investments,
primarily in Quanergy Systems, Inc, of $4.0 million and $75.1
million, respectively, and a $5.5 million loss related to the
redemption of the 4.875% Senior Notes in the third quarter of
2022.
(5)
The nine months ended September 30, 2022
includes $11.4 million of current tax expense related to the
repatriation of profit from certain Asian subsidiaries to their
parent company in the Netherlands. The decision to repatriate these
profits was the result of our goal to reduce our balance sheet
exposure and corresponding earnings volatility related to changes
in foreign currency exchange rates as well as to fund our
deployment of capital.
Free cash flow
For the three months ended
September 30,
For the nine months ended
September 30,
($ in thousands)
2023
2022
% △
2023
2022
% △
Net cash provided by operating
activities
$
138,935
$
93,845
48.0
%
$
351,577
$
235,733
49.1
%
Additions to property, plant and equipment
and capitalized software
(51,780
)
(36,355
)
(42.4
%)
(136,224
)
(110,424
)
(23.4
%)
Free cash flow
$
87,155
$
57,490
51.6
%
$
215,353
$
125,309
71.9
%
Adjusted corporate and other
expenses
For the three months ended
September 30,
For the nine months ended
September 30,
(in thousands)
2023
2022
2023
2022
Corporate and other expenses (GAAP)
$
(75,117
)
$
(76,409
)
$
(219,022
)
$
(228,894
)
Restructuring related and other
9,234
7,964
20,915
13,125
Financing and other transaction costs
1,973
4,988
5,566
11,493
Step-up depreciation and amortization
391
298
700
895
Deferred (gain)/loss on derivative
instruments
(663
)
(102
)
(3,860
)
1,740
Total adjustments
10,935
13,148
23,321
27,253
Adjusted corporate and other expenses
(non-GAAP)
$
(64,182
)
$
(63,261
)
$
(195,701
)
$
(201,641
)
Adjusted EBITDA
For the three months ended
September 30,
For the nine months ended
September 30,
(in thousands)
LTM
2023
2022
2023
2022
Net income
$
311,479
$
62,801
$
140,253
$
198,329
$
197,535
Interest expense, net
158,780
36,908
44,856
115,104
135,143
Provision for income taxes
73,455
17,868
46,421
61,467
74,029
Depreciation expense
129,499
33,317
31,680
96,877
94,562
Amortization of intangible assets
174,609
39,970
40,313
135,307
114,485
EBITDA
847,822
190,864
303,523
607,084
615,754
Non-GAAP Adjustments
Restructuring related and other
78,708
31,549
16,394
65,568
24,873
Financing and other transaction costs
19,845
6,038
(101,380
)
14,792
2,451
Deferred (gain)/loss on derivative
instruments
(13,480
)
(187
)
5,671
986
16,343
Adjusted EBITDA
$
932,895
$
228,264
$
224,208
$
688,430
$
659,421
Net debt and leverage
As of
($ in thousands)
September 30,
2023
December 31, 2022
Current portion of long-term debt, finance
lease and other financing obligations
$
1,888
$
256,471
Finance lease and other financing
obligations, less current portion
23,456
24,742
Long-term debt, net
3,771,810
3,958,928
Total debt, finance lease, and other
financing obligations
3,797,154
4,240,141
Less: discount, net of premium
(1,994
)
(3,360
)
Less: deferred financing costs
(26,196
)
(29,916
)
Total gross indebtedness
3,825,344
4,273,417
Less: cash and cash equivalents
889,703
1,225,518
Net debt
$
2,935,641
$
3,047,899
Adjusted EBITDA (LTM)
$
932,895
$
903,886
Net leverage ratio
3.1
3.4
Guidance
For the three months ending
December 31, 2023
($ in millions, except per share
amounts)
Operating Income
Net Income
EPS
Low
High
Low
High
Low
High
GAAP
$
132.7
$
146.5
$
70.1
$
80.8
$
0.46
$
0.53
Restructuring related and other
2.3
3.5
2.3
3.5
0.02
0.02
Financing and other transaction costs
1.0
3.0
1.0
3.0
0.01
0.02
Step-up depreciation and amortization
40.0
41.0
40.0
41.0
0.26
0.27
Deferred (gain)/loss on derivative
instruments(1)
—
—
—
—
—
—
Amortization of debt issuance costs
—
—
1.6
1.7
0.01
0.01
Deferred taxes and other tax related
—
—
5.0
6.0
0.03
0.04
Non-GAAP
$
176.0
$
194.0
$
120.0
$
136.0
$
0.79
$
0.89
Weighted-average diluted shares
outstanding (in millions)
152.0
152.0
(1)
We are unable to predict movements in
commodity prices and, therefore, the impact of mark-to-market
adjustments on our commodity forward contracts to our projected
operating results. In prior periods such adjustments have been
significant to our reported GAAP earnings.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031692472/en/
Investors: Jacob Sayer (508) 236-1666 jsayer@sensata.com
Media: Alexia Taxiarchos (508) 236-1761
ataxiarchos@sensata.com
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