ST Sensata Technologies Holding PLC

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 second quarter ended June 30, 2024.

“We are pleased to report a solid second quarter with performance in line with expectations," said Martha Sullivan, Interim President and CEO of Sensata. "Adjusted operating margins increased sequentially by thirty basis points in the second quarter, consistent with our expectations of twenty to thirty basis points of adjusted operating margin expansion per quarter in 2024. We remain committed to deliver top quartile adjusted operating margins amongst our peers.”

Operating Results - Second Quarter

Operating results for the second quarter of 2024 compared to the second quarter of 2023 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 $1,035.5 million, a decrease of $26.6 million, or 2.5%, compared to $1,062.1 million in the second quarter of 2023. Excluding one-time pass-through revenue of $25.9 million in the second quarter of 2023, revenue was effectively unchanged year over year.
• On a constant currency basis, revenue decreased 1.2% or $12.7 million as compared to the second quarter of 2023.

Operating income:

• Operating income was $129.9 million, or 12.5% of revenue, an increase of $11.9 million, or 10.1%, compared to operating income of $118.0 million, or 11.1% of revenue, in the second quarter of 2023.
• Adjusted operating income was $196.7 million, or 19.0% of revenue ($201.7 million or 19.2% of revenue on a constant currency basis), a decrease of $9.1 million, or 4.4%, compared to adjusted operating income of $205.7 million, or 19.4% of revenue, in the second quarter of 2023.

Earnings per share:

• Earnings per share was $0.47, an increase of $0.15, or 46.9%, compared to earnings per share of $0.32 in the second quarter of 2023.
• Adjusted earnings per share was $0.93, a decrease of $0.04, or 4.1% ($0.92 or a decrease of 5.2% on a constant currency basis), compared to adjusted earnings per share of $0.97 in the second quarter of 2023.

Sensata generated $143.5 million of operating cash flow in the second quarter of 2024, compared to $115.8 million in the second quarter of 2023. Sensata's free cash flow totaled $98.4 million in the second quarter of 2024, compared to $68.2 million in the second quarter of 2023.

In June 2024, Sensata completed a $500 million senior notes issuance. In July 2024, the proceeds from the issuance and cash on hand were used to repay approximately $700 million in bonds scheduled to mature in October 2025.

During the second quarter of 2024, Sensata returned approximately $18.1 million to shareholders through its quarterly dividend of $0.12 per share paid on May 22, 2024.

Operating Results - Six Months

Operating results for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 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 $2,042.2 million, a decrease of $18.0 million, or 0.9%, compared to $2,060.3 million in the six months ended June 30, 2023.
• Revenue increased 0.5% on a constant currency basis, which excludes a decrease of 1.4% from foreign currency exchange rates versus the prior year.

Operating income:

• Operating income was $274.7 million, or 13.5% of revenue, an increase of $7.9 million, or 3.0%, compared to operating income of $266.9 million, or 13.0% of revenue, in the six months ended June 30, 2023.
• Adjusted operating income was $385.2 million, or 18.9% of revenue ($399.3 million or 19.3% of revenue on a constant currency basis), a decrease of $13.4 million, or 3.4%, compared to adjusted operating income of $398.6 million, or 19.3% of revenue, in the six months ended June 30, 2023.

Earnings per share:

• Earnings per share was $0.98, an increase of $0.10, or 11.4%, compared to earnings per share of $0.88 in the six months ended June 30, 2023.
• Adjusted earnings per share was $1.82, a decrease of $0.07, or 3.7% ($1.85 or a decrease of 2.1% on a constant currency basis), compared to adjusted earnings per share of $1.89 in the six months ended June 30, 2023.

Sensata generated $249.9 million of operating cash flow in the six months ended June 30, 2024, compared to $212.6 million in the six months ended June 30, 2023. Sensata's free cash flow totaled $162.8 million in the six months ended June 30, 2024 compared to $128.2 million in the six months ended June 30, 2023.

During the first six months of 2024, Sensata returned approximately $36.1 million to shareholders through its quarterly dividend, and repurchased shares valued at approximately $10.1 million.

Guidance

For the third quarter of 2024, Sensata expects revenue of $970 to $1,000 million and adjusted EPS of $0.82 to $0.88.

Martha Sullivan added: "In the second quarter, we launched an initiative to identify underperforming products with low growth and substandard margin profiles. This review resulted in identification of several products totaling approximately $200 million in annual revenue. Actions are underway to exit these products. The guidance range for the third quarter reflects the reduction of approximately $30 million in revenue related to underperforming products.”

Q3-2024 Guidance

 

 

 

$ in millions, except EPS

Q3-24 Guidance

Q3-23

Y/Y Change

Revenue

$970 - $1,000

$1,001.3

(3%) - 0%

organic growth

 

 

(3%) - 0%

Adjusted Operating Income

$184 - $194

$191.6

(4%) - 1%

Adjusted Net Income

$124 - $134

$138.3

(10%) - (3%)

Adjusted EPS

$0.82 - $0.88

$0.91

(10%) - (3%)

Conference Call and Webcast

Sensata will conduct a conference call today at 4:30 p.m. Eastern Time to discuss its second quarter 2024 financial results and its outlook for the third quarter of 2024. The dial-in numbers for the call are 1-844-784-1726 or 1-412-380-7411. Callers should reference the "Sensata Q2 2024 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 August 5, 2024. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 2870913.

About Sensata Technologies

Sensata Technologies is a global industrial technology company striving to create a safer, cleaner, more efficient and electrified world. Through its broad portfolio of mission-critical sensors, electrical protection components and sensor-rich solutions, Sensata helps its customers address increasingly complex engineering and operating performance requirements. With more than 19,000 employees and global operations in 15 countries, Sensata serves customers in the automotive, heavy vehicle & off-road, industrial, and aerospace markets. Learn more at www.sensata.com and follow Sensata on LinkedIn, Facebook, X and Instagram.

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.

Gross leverage ratio is defined as gross debt divided by last twelve months (LTM) adjusted EBITDA. We believe that gross leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.

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 June 30,

 

For the six months ended June 30,

 

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Net revenue

 

$

1,035,535

 

 

$

1,062,112

 

 

$

2,042,244

 

 

$

2,060,287

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

724,414

 

 

 

732,108

 

 

 

1,413,674

 

 

 

1,402,579

 

Research and development

 

 

45,325

 

 

 

44,857

 

 

 

90,639

 

 

 

90,796

 

Selling, general and administrative

 

 

93,273

 

 

 

91,312

 

 

 

181,319

 

 

 

177,462

 

Amortization of intangible assets

 

 

39,085

 

 

 

54,563

 

 

 

77,600

 

 

 

95,337

 

Restructuring and other charges, net

 

 

3,491

 

 

 

21,259

 

 

 

4,273

 

 

 

27,258

 

Total operating costs and expenses

 

 

905,588

 

 

 

944,099

 

 

 

1,767,505

 

 

 

1,793,432

 

Operating income

 

 

129,947

 

 

 

118,013

 

 

 

274,739

 

 

 

266,855

 

Interest expense

 

 

(40,863

)

 

 

(45,759

)

 

 

(79,258

)

 

 

(94,550

)

Interest income

 

 

5,802

 

 

 

7,654

 

 

 

9,540

 

 

 

16,354

 

Other, net

 

 

4,097

 

 

 

(10,924

)

 

 

(7,447

)

 

 

(9,532

)

Income before taxes

 

 

98,983

 

 

 

68,984

 

 

 

197,574

 

 

 

179,127

 

Provision for income taxes

 

 

27,280

 

 

 

19,873

 

 

 

49,850

 

 

 

43,599

 

Net income

 

$

71,703

 

 

$

49,111

 

 

$

147,724

 

 

$

135,528

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.48

 

 

$

0.32

 

 

$

0.98

 

 

$

0.89

 

Diluted

 

$

0.47

 

 

$

0.32

 

 

$

0.98

 

 

$

0.88

 

 

 

 

 

 

 

 

 

 

Weighted-average ordinary shares outstanding:

 

 

 

 

 

 

Basic

 

 

150,845

 

 

 

152,700

 

 

 

150,663

 

 

 

152,609

 

Diluted

 

 

151,129

 

 

 

153,064

 

 

 

151,025

 

 

 

153,194

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

June 30, 2024

 

December 31, 2023

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,033,052

 

$

508,104

Accounts receivable, net of allowances

 

 

809,411

 

 

744,129

Inventories

 

 

708,299

 

 

713,485

Prepaid expenses and other current assets

 

 

148,842

 

 

136,686

Total current assets

 

 

2,699,604

 

 

2,102,404

Property, plant and equipment, net

 

 

884,155

 

 

886,010

Goodwill

 

 

3,542,713

 

 

3,542,770

Other intangible assets, net

 

 

806,977

 

 

883,671

Deferred income tax assets

 

 

128,744

 

 

131,527

Other assets

 

 

127,249

 

 

134,605

Total assets

 

$

8,189,442

 

$

7,680,987

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt and finance lease obligations

 

$

702,701

 

$

2,276

Accounts payable

 

 

475,573

 

 

482,301

Income taxes payable

 

 

22,861

 

 

32,139

Accrued expenses and other current liabilities

 

 

320,324

 

 

307,002

Total current liabilities

 

 

1,521,459

 

 

823,718

Deferred income tax liabilities

 

 

360,437

 

 

359,073

Pension and other post-retirement benefit obligations

 

 

36,217

 

 

38,178

Finance lease obligations, less current portion

 

 

21,964

 

 

22,949

Long-term debt, net

 

 

3,170,804

 

 

3,373,988

Other long-term liabilities

 

 

67,009

 

 

66,805

Total liabilities

 

 

5,177,890

 

 

4,684,711

Total shareholders' equity

 

 

3,011,552

 

 

2,996,276

Total liabilities and shareholders' equity

 

$

8,189,442

 

$

7,680,987

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

For the six months ended June 30,

 

 

 

2024

 

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

147,724

 

 

$

135,528

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation

 

 

67,016

 

 

 

63,560

 

Amortization of debt issuance costs

 

 

3,193

 

 

 

3,421

 

Gain on sale of business

 

 

—

 

 

 

(5,877

)

Share-based compensation

 

 

11,944

 

 

 

17,607

 

Loss on debt financing

 

 

—

 

 

 

857

 

Amortization of intangible assets

 

 

77,600

 

 

 

95,337

 

Deferred income taxes

 

 

6,056

 

 

 

13,449

 

Loss on equity investments, net

 

 

14,306

 

 

 

302

 

Unrealized (gain)/loss on derivative instruments and other

 

 

(9,862

)

 

 

14,674

 

Changes in operating assets and liabilities, net of effects of acquisitions

 

 

(68,034

)

 

 

(117,836

)

Acquisition-related compensation payments

 

 

—

 

 

 

(8,380

)

Net cash provided by operating activities

 

 

249,943

 

 

 

212,642

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Additions to property, plant and equipment and capitalized software

 

 

(87,188

)

 

 

(84,444

)

Investment in debt and equity securities

 

 

1,994

 

 

 

(390

)

Proceeds from the sale of business, net of cash sold

 

 

—

 

 

 

19,000

 

Net cash used in investing activities

 

 

(85,194

)

 

 

(65,834

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of stock options and issuance of ordinary shares

 

 

4,605

 

 

 

5,346

 

Payment of employee restricted stock tax withholdings

 

 

(6,980

)

 

 

(11,470

)

Proceeds from borrowings on debt

 

 

500,000

 

 

 

—

 

Payments on debt

 

 

(566

)

 

 

(448,390

)

Dividends paid

 

 

(36,148

)

 

 

(35,113

)

Payments to repurchase ordinary shares

 

 

(10,052

)

 

 

(25,076

)

Purchase of noncontrolling interest in joint venture

 

 

(79,393

)

 

 

—

 

Payments of debt financing costs

 

 

(6,376

)

 

 

(311

)

Net cash provided by/(used in) financing activities

 

 

365,090

 

 

 

(515,014

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(4,891

)

 

 

—

 

Net change in cash and cash equivalents

 

 

524,948

 

 

 

(368,206

)

Cash and cash equivalents, beginning of year

 

 

508,104

 

 

 

1,225,518

 

Cash and cash equivalents, end of period

 

$

1,033,052

 

 

$

857,312

 

 

Segment Performance

 

 

For the three months ended June 30,

 

For the six months ended June 30,

$ in 000s

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Performance Sensing (1)

 

 

 

 

 

 

 

 

Revenue

 

$

723,921

 

 

$

693,563

 

 

$

1,437,239

 

 

$

1,361,325

 

Operating income

 

$

177,033

 

 

$

180,407

 

 

$

362,165

 

 

$

349,473

 

% of Performance Sensing revenue

 

 

24.5

%

 

 

26.0

%

 

 

25.2

%

 

 

25.7

%

 

 

 

 

 

 

 

 

 

Sensing Solutions

 

 

 

 

 

 

 

 

Revenue

 

$

268,071

 

 

$

331,060

 

 

$

525,910

 

 

$

614,510

 

Operating income

 

$

79,839

 

 

$

94,154

 

 

$

152,318

 

 

$

178,174

 

% of Sensing Solutions revenue

 

 

29.8

%

 

 

28.4

%

 

 

29.0

%

 

 

29.0

%

 

 

 

 

 

 

 

 

 

Other (1)

 

 

 

 

 

 

 

 

Revenue

 

$

43,543

 

 

$

37,489

 

 

$

79,095

 

 

$

84,452

 

Operating income

 

$

9,204

 

 

$

738

 

 

$

15,985

 

 

$

5,708

 

% of Other revenue

 

 

21.1

%

 

 

2.0

%

 

 

20.2

%

 

 

6.8

%

(1)

In the first quarter of 2024, we moved Insights from Performance Sensing, creating another operating segment, which is reported in "Other". We recast Performance Sensing to exclude Insights. Prior period amounts in the above table have been recast to reflect this realignment.

Revenue by Business, Geography, and End Market (Unaudited)

(percent of total revenue)

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

2023

 

2024

 

2023

Performance Sensing (1)

 

69.9

%

 

65.3

%

 

70.4

%

 

66.1

%

Sensing Solutions

 

25.9

%

 

31.2

%

 

25.8

%

 

29.8

%

Other (1)

 

4.2

%

 

3.5

%

 

3.9

%

 

4.1

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

(percent of total revenue)

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

2023

 

2024

 

2023

Americas

 

44.3

%

 

46.2

%

 

43.5

%

 

45.7

%

Europe

 

26.8

%

 

26.7

%

 

27.5

%

 

26.9

%

Asia/Rest of World

 

28.9

%

 

27.1

%

 

29.0

%

 

27.4

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

(percent of total revenue)

 

For the three months ended June 30,

 

For the six months ended June 30,

 

 

2024

 

2023

 

2024

 

2023

Automotive

 

55.6

%

 

50.8

%

 

55.8

%

 

51.7

%

Heavy vehicle and off-road (1)

 

18.2

%

 

17.9

%

 

18.5

%

 

17.7

%

Industrial

 

12.2

%

 

17.4

%

 

12.3

%

 

16.2

%

Appliance and HVAC

 

5.3

%

 

4.8

%

 

5.0

%

 

4.8

%

Aerospace

 

4.4

%

 

4.4

%

 

4.5

%

 

4.4

%

All other (1)

 

4.3

%

 

4.7

%

 

3.9

%

 

5.2

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(1)

Effective January 1, 2024 we moved Insights from the Heavy vehicle off-road operating segment within Performance Sensing, creating another operating segment, which is reported in "Other". Additionally, we moved the Insights business to the "other" end market. Prior period information in the tables above has been recast to reflect this realignment.

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 June 30, 2024

 

Operating Income

Operating Margin

Income Taxes

Net Income

Diluted EPS

Reported (GAAP)

$

129,947

 

 

12.5

%

 

$

27,280

 

 

$

71,703

 

 

$

0.47

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

26,804

 

 

2.6

%

 

 

(809

)

 

 

25,995

 

 

 

0.17

 

Financing and other transaction costs

 

2,462

 

 

0.2

%

 

 

(971

)

 

 

2,510

 

 

 

0.02

 

Step-up depreciation and amortization

 

37,561

 

 

3.6

%

 

 

—

 

 

 

37,561

 

 

 

0.25

 

Deferred gain on derivative instruments

 

(102

)

 

(0.0

%)

 

 

1,406

 

 

 

(3,673

)

 

 

(0.02

)

Amortization of debt issuance costs

 

—

 

 

—

%

 

 

—

 

 

 

1,631

 

 

 

0.01

 

Deferred taxes and other tax related

 

—

 

 

—

%

 

 

4,160

 

 

 

4,160

 

 

 

0.03

 

Total adjustments

 

66,725

 

 

6.4

%

 

 

3,786

 

 

 

68,184

 

 

 

0.45

 

Adjusted (non-GAAP)

$

196,672

 

 

19.0

%

 

$

23,494

 

 

$

139,887

 

 

$

0.93

 

($ in thousands, except per share amounts)

For the three months ended June 30, 2023

 

Operating Income

Operating Margin

Income Tax

Net Income

Diluted EPS

Reported (GAAP)

$

118,013

 

 

11.1

%

 

$

19,873

 

 

$

49,111

 

$

0.32

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other (1)

 

31,078

 

 

2.9

%

 

 

(632

)

 

 

30,446

 

 

0.20

Financing and other transaction costs

 

4,265

 

 

0.4

%

 

 

(98

)

 

 

3,923

 

 

0.03

Step-up depreciation and amortization (2)

 

53,326

 

 

5.0

%

 

 

—

 

 

 

53,326

 

 

0.35

Deferred (gain)/loss on derivative instruments

 

(947

)

 

(0.1

%)

 

 

(1,090

)

 

 

4,232

 

 

0.03

Amortization of debt issuance costs

 

—

 

 

—

%

 

 

—

 

 

 

1,685

 

 

0.01

Deferred taxes and other tax related

 

—

 

 

—

%

 

 

6,433

 

 

 

6,433

 

 

0.04

Total adjustments

 

87,722

 

 

8.3

%

 

 

4,613

 

 

 

100,045

 

 

0.65

Adjusted (non-GAAP)

$

205,735

 

 

19.4

%

 

$

15,260

 

 

$

149,156

 

$

0.97

(1)

Includes $26.6 million of charges related to the exit of the Spear Marine Business in the second quarter of 2023. Refer to our Quarterly Report on Form 10-Q for additional information

(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 six months ended June 30, 2024

 

Operating Income

Operating Margin

Income Tax

Net Income

Diluted EPS

Reported (GAAP)

$

274,739

 

 

13.5

%

 

$

49,850

 

 

$

147,724

 

 

$

0.98

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

29,198

 

 

1.4

%

 

 

(1,384

)

 

 

27,814

 

 

 

0.18

 

Financing and other transaction costs (1)

 

6,813

 

 

0.3

%

 

 

(861

)

 

 

20,258

 

 

 

0.13

 

Step-up depreciation and amortization

 

74,939

 

 

3.7

%

 

 

—

 

 

 

74,939

 

 

 

0.50

 

Deferred (gain)/loss on derivative instruments

 

(477

)

 

0.0

%

 

 

1,688

 

 

 

(4,865

)

 

 

(0.03

)

Amortization of debt issuance costs

 

—

 

 

—

%

 

 

—

 

 

 

3,193

 

 

 

0.02

 

Deferred taxes and other tax related

 

—

 

 

—

%

 

 

5,446

 

 

 

5,446

 

 

 

0.04

 

Total adjustments

 

110,473

 

 

5.4

%

 

 

4,889

 

 

 

126,785

 

 

 

0.84

 

Adjusted (non-GAAP)

$

385,212

 

 

18.9

%

 

$

44,961

 

 

$

274,509

 

 

$

1.82

 

(1)

Includes a $14.8 million mark-to-market loss on an equity investment held under the measurement alternative due to an observable marketplace transaction in the first quarter of 2024. This loss is presented in other, net on the condensed consolidated statement of operations

($ in thousands, except per share amounts)

For the six months ended June 30, 2023

 

Operating Income

Operating Margin

Income Tax

Net Income

Diluted EPS

Reported (GAAP)

$

266,855

 

 

13.0

%

 

$

43,599

 

 

$

135,528

 

$

0.88

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other (1)

 

34,019

 

 

1.7

%

 

 

(1,304

)

 

 

32,715

 

 

0.21

Financing and other transaction costs

 

8,513

 

 

0.4

%

 

 

2,776

 

 

 

11,530

 

 

0.08

Step-up depreciation and amortization (2)

 

92,456

 

 

4.5

%

 

 

—

 

 

 

92,456

 

 

0.60

Deferred (gain)/loss on derivative instruments

 

(3,197

)

 

(0.2

%)

 

 

(237

)

 

 

936

 

 

0.01

Amortization of debt issuance costs

 

—

 

 

—

%

 

 

—

 

 

 

3,419

 

 

0.02

Deferred taxes and other tax related

 

—

 

 

—

%

 

 

13,224

 

 

 

13,224

 

 

0.09

Total adjustments

 

131,791

 

 

6.4

%

 

 

14,459

 

 

 

154,280

 

 

1.01

Adjusted (non-GAAP)

$

398,646

 

 

19.3

%

 

$

29,140

 

 

$

289,808

 

$

1.89

(1)

Includes $26.6 million of charges related to the exit of the Spear Marine Business in the second quarter of 2023. Refer to our Quarterly Report on Form 10-Q for additional information

(2)

Includes $13.5 million of accelerated amortization related to the exit of the Spear Marine Business in the second quarter of 2023.

Non-GAAP adjustments by location in statements of operations

(in thousands)

For the three months ended June 30,

 

 

For the six months ended June 30,

 

 

2024

 

 

 

 

2023

 

 

 

2024

 

 

 

2023

Cost of revenue (1)

$

14,820

 

 

 

$

11,142

 

 

$

15,974

 

 

$

8,364

Selling, general and administrative

 

11,106

 

 

 

 

2,250

 

 

 

15,791

 

 

 

4,022

Amortization of intangible assets (2)

 

37,308

 

 

 

 

53,071

 

 

 

74,435

 

 

 

92,147

Restructuring and other charges, net (3)

 

3,491

 

 

 

 

21,259

 

 

 

4,273

 

 

 

27,258

Operating income adjustments

 

66,725

 

 

 

 

87,722

 

 

 

110,473

 

 

 

131,791

Interest expense, net

 

1,631

 

 

 

 

1,685

 

 

 

3,193

 

 

 

3,419

Other, net (4)

 

(3,958

)

 

 

 

6,025

 

 

 

8,230

 

 

 

4,611

Provision for income taxes

 

3,786

 

 

 

 

4,613

 

 

 

4,889

 

 

 

14,459

Net income adjustments

$

68,184

 

 

 

$

100,045

 

 

$

126,785

 

 

$

154,280

(1)

The three and six months ended June 30, 2023 include 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 three and six months ended June 30, 2023 include accelerated amortization of $13.5 million related to intangible assets assigned to the Spear Marine Business.

(3)

The three and six months ended June 30, 2023 include certain charges related to the exit of the Spear Marine Business and recorded in restructuring and other charges, net, including $1.2 million of severance costs, $1.7 million related to the write-down of property, plant, and equipment, and $11.4 million of other charges, including contract termination costs. The three and six months ended June 30, 2023 include $3.3 million and $10.6 million, respectively, of expense related to compensation arrangements entered into concurrent with the closing of certain acquisitions.

(4)

The six months ended June 30, 2024 includes a $14.8 million mark-to-market loss on an equity investment held under the measurement alternative due to an observable marketplace transactions.

Free cash flow

 

 

For the three months ended June 30,

 

 

For the six months ended June 30,

($ in thousands)

 

 

2024

 

 

 

2023

 

 

% △

 

 

 

2024

 

 

 

2023

 

 

% △

Net cash provided by operating activities

 

$

143,456

 

 

$

115,754

 

 

23.9

%

 

 

$

249,943

 

 

$

212,642

 

 

17.5

%

Additions to property, plant and equipment and capitalized software

 

 

(45,058

)

 

 

(47,562

)

 

5.3

%

 

 

 

(87,188

)

 

 

(84,444

)

 

(3.2

%)

Free cash flow

 

$

98,398

 

 

$

68,192

 

 

44.3

%

 

 

$

162,755

 

 

$

128,198

 

 

27.0

%

Adjusted corporate and other expenses

 

 

For the three months ended June 30,

 

For the six months ended June 30,

(in thousands)

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Corporate and other expenses (GAAP)

 

$

(93,553

)

 

$

(81,464

)

 

$

(173,856

)

 

$

(143,905

)

Restructuring related and other

 

 

24,268

 

 

 

13,110

 

 

 

26,835

 

 

 

11,681

 

Financing and other transaction costs

 

 

1,507

 

 

 

974

 

 

 

4,903

 

 

 

3,593

 

Step-up depreciation and amortization

 

 

253

 

 

 

255

 

 

 

504

 

 

 

309

 

Deferred gain on derivative instruments

 

 

(102

)

 

 

(947

)

 

 

(477

)

 

 

(3,197

)

Total adjustments

 

 

25,926

 

 

 

13,392

 

 

 

31,765

 

 

 

12,386

 

Adjusted corporate and other expenses (non-GAAP)

 

$

(67,627

)

 

$

(68,072

)

 

$

(142,091

)

 

$

(131,519

)

Adjusted EBITDA

 

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

(in thousands)

 

LTM

 

 

2024

 

 

 

2023

 

 

2024

 

 

 

2023

Net income

 

$

8,287

 

 

$

71,703

 

 

$

49,111

 

$

147,724

 

 

$

135,528

Interest expense, net

 

 

142,382

 

 

 

35,061

 

 

 

38,105

 

 

69,718

 

 

 

78,196

Provision for income taxes

 

 

28,002

 

 

 

27,280

 

 

 

19,873

 

 

49,850

 

 

 

43,599

Depreciation expense

 

 

136,561

 

 

 

33,493

 

 

 

32,612

 

 

67,016

 

 

 

63,560

Amortization of intangible assets

 

 

156,123

 

 

 

39,085

 

 

 

54,563

 

 

77,600

 

 

 

95,337

EBITDA

 

 

471,355

 

 

 

206,622

 

 

 

194,264

 

 

411,908

 

 

 

416,220

Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

 

406,673

 

 

 

26,804

 

 

 

31,078

 

 

29,198

 

 

 

34,019

Financing and other transaction costs

 

 

33,857

 

 

 

3,481

 

 

 

4,021

 

 

21,119

 

 

 

8,754

Deferred (gain)/loss on derivative instruments

 

 

(9,732

)

 

 

(5,079

)

 

 

5,322

 

 

(6,553

)

 

 

1,173

Adjusted EBITDA

 

$

902,153

 

 

$

231,828

 

 

$

234,685

 

$

455,672

 

 

$

460,166

Net debt and leverage

 

 

As of

($ in thousands)

 

June 30, 2024

 

December 31, 2023

Current portion of long-term debt and finance lease obligations

 

$

702,701

 

 

$

2,276

 

Finance lease obligations, less current portion

 

 

21,964

 

 

 

22,949

 

Long-term debt, net

 

 

3,170,804

 

 

 

3,373,988

 

Total debt and finance lease obligations

 

 

3,895,469

 

 

 

3,399,213

 

Less: discount, net of premium

 

 

(891

)

 

 

(1,568

)

Less: deferred financing costs

 

 

(28,305

)

 

 

(24,444

)

Total gross indebtedness

 

 

3,924,665

 

 

 

3,425,225

 

 

 

 

 

 

Adjusted EBITDA (LTM)

 

$

902,153

 

 

$

906,647

 

Gross leverage ratio

 

 

4.4

 

 

 

3.8

 

 

 

 

 

 

Total gross indebtedness

 

 

3,924,665

 

 

 

3,425,225

 

Less: cash and cash equivalents

 

 

1,033,052

 

 

 

508,104

 

Net debt

 

$

2,891,613

 

 

$

2,917,121

 

 

 

 

 

 

Adjusted EBITDA (LTM)

 

$

902,153

 

 

$

906,647

 

Net leverage ratio

 

 

3.2

 

 

 

3.2

 

Guidance

 

For the three months ending September 30, 2024

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

115.0

 

$

118.3

 

$

49.7

 

$

52.4

 

$

0.33

 

$

0.34

Restructuring related and other

 

29.0

 

 

34.2

 

 

29.0

 

 

34.2

 

 

0.19

 

 

0.23

Financing and other transaction costs

 

3.0

 

 

4.0

 

 

3.0

 

 

4.0

 

 

0.02

 

 

0.03

Step-up depreciation and amortization

 

37.0

 

 

37.5

 

 

37.0

 

 

37.5

 

 

0.24

 

 

0.25

Deferred (gain)/loss on derivative instruments(1)

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

Amortization of debt issuance costs

 

—

 

 

—

 

 

1.3

 

 

1.4

 

 

0.01

 

 

0.01

Deferred taxes and other tax related

 

—

 

 

—

 

 

4.0

 

 

4.5

 

 

0.03

 

 

0.03

Non-GAAP

$

184.0

 

$

194.0

 

$

124.0

 

$

134.0

 

$

0.82

 

$

0.88

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

 

151.5

 

 

151.5

(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.

 

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