Sensata Technologies Reports Third Quarter 2021 Financial Results

SWINDON, England--()--Sensata Technologies (NYSE: ST), a global industrial technology company and leading provider of sensor-rich solutions that create insights for customers, today announced financial results for its third quarter ended September 30, 2021.

Operating results for the third quarter of 2021 compared to the third quarter of 2020 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 $951.0 million, an increase of $162.7 million, or 20.6%, compared to $788.3 million in the third quarter of 2020.
  • Revenue increased 16.6% from the third quarter of 2020 on an organic basis, which excludes a 1.7% increase from foreign currency exchange rates and a 2.3% increase from acquisitions versus the prior-year period.

Operating income:

  • Operating income was $161.3 million, or 17.0% of revenue, an increase of $34.5 million, or 27.2%, compared to operating income of $126.8 million, or 16.1% of revenue, in the third quarter of 2020.
  • Adjusted operating income was $201.0 million, or 21.1% of revenue, an increase of $46.2 million, or 29.8%, compared to adjusted operating income of $154.8 million, or 19.6% of revenue, in the third quarter of 2020.

Earnings per share:

  • Earnings per share was $0.53, an increase of $0.04, or 8.2%, compared to earnings per share of $0.49 in the third quarter of 2020.
  • Adjusted earnings per share was $0.87, an increase of $0.21, or 31.8%, compared to adjusted earnings per share of $0.66 in the third quarter of 2020.
  • Changes in foreign currency exchange rates decreased Sensata's adjusted earnings per share by $0.01 in the third quarter of 2021 compared to the prior-year period.

"Sensata’s third quarter revenues reflect a continuation of strong growth associated with recovery across our heavy vehicle, industrial, and aerospace markets. Sensata’s automotive revenue also grew over the same period last year due to significant outgrowth and channel replenishment despite production declines due to constraints stemming from semiconductor and other component shortages,” said Jeff Cote, CEO and President of Sensata. “Sensata’s resilient and focused organization has enabled us to quickly and effectively adapt to continually evolving market conditions and broad supply chain disruptions to deliver these strong financial results. In addition, we are continuing to make good progress on our long-term growth strategy as evidenced by the pending acquisitions of Spear Power Systems in Clean Energy Solutions and SmartWitness in Sensata Insights."

Operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 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 a record $2,886.2 million, an increase of $747.1 million, or 34.9%, compared to $2,139.1 million in the nine months ended September 30, 2020.
  • Revenue increased 29.9% from the nine months ended September 30, 2020 on an organic basis, which excludes a 3.0% increase from foreign currency exchange rates and a 2.0% increase from acquisitions versus the prior-year period.

Operating income:

  • Operating income was $483.5 million, or 16.8% of revenue, an increase of $300.0 million, or 163.4%, compared to operating income of $183.6 million, or 8.6% of revenue, in the nine months ended September 30, 2020.
  • Adjusted operating income was $608.4 million, or 21.1% of revenue, an increase of $242.0 million, or 66.0%, compared to adjusted operating income of $366.5 million, or 17.1% of revenue, in the nine months ended September 30, 2020.

Earnings per share:

  • Earnings per share was $1.58, an increase of $1.31 compared to earnings per share of $0.27 in the nine months ended September 30, 2020.
  • Adjusted earnings per share was $2.68, an increase of $1.32, or 97.1%, compared to adjusted earnings per share of $1.36 in the nine months ended September 30, 2020.
  • Changes in foreign currency exchange rates did not have a meaningful impact on Sensata's adjusted earnings per share in the nine months ended September 30, 2021 compared to the prior-year period.

Sensata generated $125.3 million of operating cash flow in the third quarter of 2021 compared to $123.1 million in the prior-year period. The Company's free cash flow totaled $88.5 million in the third quarter of 2021 compared to $99.8 million in the prior-year period.

Sensata generated $393.2 million of operating cash flow in the nine months ended September 30, 2021 compared to $293.3 million in the prior-year period. The Company's free cash flow totaled $292.8 million in the nine months ended September 30, 2021 compared to $213.4 million in the prior-year period.

Segment Performance

 

 

For the three months ended

September 30,

 

For the nine months ended

September 30,

$ in 000s

 

2021

 

2020

 

2021

 

2020

Performance Sensing

 

 

 

 

 

 

 

 

Revenue

 

$

706,466

 

 

$

580,936

 

 

$

2,162,830

 

 

$

1,534,832

 

Operating income

 

$

193,742

 

 

$

151,626

 

 

$

591,650

 

 

$

347,428

 

% of Performance Sensing revenue

 

27.4

%

 

26.1

%

 

27.4

%

 

22.6

%

 

 

 

 

 

 

 

 

 

Sensing Solutions

 

 

 

 

 

 

 

 

Revenue

 

$

244,555

 

 

$

207,377

 

 

$

723,379

 

 

$

604,255

 

Operating income

 

$

75,262

 

 

$

58,229

 

 

$

218,705

 

 

$

170,545

 

% of Sensing Solutions revenue

 

30.8

%

 

28.1

%

 

30.2

%

 

28.2

%

Guidance

"Sensata delivered strong financial performance in the third quarter, posting 20.6% revenue growth and 29.8% adjusted operating income growth from the prior-year period," said Paul Vasington, EVP and CFO of Sensata. “For the fourth quarter of 2021, we expect revenue of $895 to $925 million and adjusted EPS of $0.76 to $0.82. Although there is still uncertainty in several of the markets that we serve due to supply chain challenges, we are confident in our ability to navigate these disruptions and we intend to resume our balanced capital allocation approach that includes both M&A and share repurchases."

Q4 2021 Guidance

 

 

 

$ in millions, except EPS

Q4-21 Guidance

Q4-20

Y/Y Change

Revenue

$895 - $925

$906.5

(1)% - 2%

organic growth

 

 

(3)% - 0%

Adjusted Operating Income

$180 - $190

$195.6

(8)% - (3)%

Adjusted Net Income

$121 - $131

$134.7

(10)% - (3)%

Adjusted EPS

$0.76 - $0.82

$0.85

(11)% - (4)%

Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will increase revenue by approximately $2.6 million at the midpoint and adjusted EPS by approximately $0.02 at the midpoint for the fourth quarter of 2021.

Conference Call and Webcast

Sensata will conduct a conference call today at 8:00 a.m. Eastern Time to discuss its third quarter 2021 financial results and its outlook for the fourth quarter of 2021. The dial-in numbers for the call are 1-844-784-1726 or 1-412-380-7411. Callers should reference the "Sensata Q3 2021 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 2, 2021. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 10160754.

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 more than 19,000 employees and operations in 13 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 and measured on either a reported, constant currency, or an organic basis, the latter of which excludes the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s) and the effect of foreign currency exchange rate differences between the comparative 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 described 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 described 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, (3) deferred gain or loss on derivative instruments, and (4) step-up inventory amortization.

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.

Safe Harbor Statement

This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995, which relate to future events and are subject to risks and uncertainties. The forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, may contain words or phrases such as: “believe,” “continue,” “expect,” “look ahead,” “predict,” or “will,” and other words and phrases of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity or other financial matters, together with any statements related in any way to the COVID-19 pandemic including its impact on the Company. Although the Company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, no assurance can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results, or other expectations expressed in this earnings release, including, without limitation, the following: future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have a significant adverse impact on our operations including, depending on the specific location, full or partial shutdowns of our facilities as mandated by government decree, government actions limiting our ability to adjust certain costs, significant travel restrictions, “work-from-home” orders, limited availability of our workforce, supplier constraints, supply chain interruptions, logistics challenges and limitations, and reduced demand from certain customers; uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers and suppliers; uncertainties and volatility in the global capital markets; political, economic, military and other risks in countries outside of the United States; the impact of general economic conditions, geopolitical conditions and U.S. trade policies, legislation, trade disputes, treaties and tariffs, including those affecting China, on the Company’s business operations; risks associated with the improper conduct by any of our employees, customers, suppliers, distributors or any other business partners which could impair our business reputation and financial results and could result in our non-compliance with anti-corruption laws and regulations of the U.S. government and various foreign jurisdictions; changes in exchange rates of the various currencies in which the Company conducts business; the Company’s ability to obtain a consistent supply of materials, at stable pricing levels; changes in defense expenditures in the military market, including the impact of reductions or changes in the defense budgets of U.S. and foreign governments; the Company’s ability to compete successfully on the basis of technology innovation, product quality and performance, price, customer service and delivery time; the Company’s ability to continue to conceive, design, manufacture and market new products and upon continuing market acceptance of its existing and future product lines; difficulties and unanticipated expenses in connection with purchasing and integrating newly acquired businesses, including the potential for the impairment of goodwill and other intangible assets; events beyond the Company’s control that could lead to an inability to meet its financial covenants under its credit arrangements; the Company’s ability to access the capital markets on favorable terms, including as a result of significant deterioration of general economic or capital market conditions, or as a result of a downgrade in the Company’s credit rating; changes in interest rates; governmental export and import controls that certain of our products may be subject to, including export licensing, customs regulations, economic sanctions or other laws; cybersecurity threats or incidents that could arise on our information technology systems that could disrupt business operations and adversely impact our reputation and operating results and potentially lead to litigation and/or governmental investigations; changes in fiscal and tax policies, audits and examinations by taxing authorities, laws, regulations and guidance in the United States and foreign jurisdictions; any difficulties in protecting the Company’s intellectual property rights; and litigation, customer claims, product recalls, governmental investigations, criminal liability or environmental matters. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

A further description of these uncertainties and other risks can be found in the Company's 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and the Company’s other reports filed with the SEC. Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov.

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,

 

 

2021

 

2020

 

2021

 

2020

Net revenue

 

$

951,021

 

 

$

788,313

 

 

$

2,886,209

 

 

$

2,139,087

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of revenue

 

628,922

 

 

530,255

 

 

1,922,556

 

 

1,509,104

 

Research and development

 

40,060

 

 

33,423

 

 

118,929

 

 

98,115

 

Selling, general and administrative

 

85,784

 

 

75,747

 

 

249,728

 

 

217,698

 

Amortization of intangible assets

 

34,571

 

 

32,562

 

 

101,492

 

 

98,397

 

Restructuring and other charges, net

 

345

 

 

(10,519

)

 

9,956

 

 

32,197

 

Total operating costs and expenses

 

789,682

 

 

661,468

 

 

2,402,661

 

 

1,955,511

 

Operating income

 

161,339

 

 

126,845

 

 

483,548

 

 

183,576

 

Interest expense, net

 

(45,137

)

 

(44,129

)

 

(134,393

)

 

(124,340

)

Other, net

 

(9,403

)

 

9,194

 

 

(47,788

)

 

(1,511

)

Income before taxes

 

106,799

 

 

91,910

 

 

301,367

 

 

57,725

 

Provision for income taxes

 

21,840

 

 

15,181

 

 

49,759

 

 

15,106

 

Net income

 

$

84,959

 

 

$

76,729

 

 

$

251,608

 

 

$

42,619

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.54

 

 

$

0.49

 

 

$

1.59

 

 

$

0.27

 

Diluted

 

$

0.53

 

 

$

0.49

 

 

$

1.58

 

 

$

0.27

 

 

 

 

 

 

 

 

 

 

Weighted-average ordinary shares outstanding:

 

 

 

 

 

 

Basic

 

158,394

 

 

157,220

 

 

158,122

 

 

157,335

 

Diluted

159,479

 

157,979

 

159,351

 

157,990

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

September 30,

2021

 

December 31,

2020

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,958,144

 

 

$

1,861,980

 

Accounts receivable, net of allowances

 

662,751

 

 

576,647

 

Inventories

 

551,628

 

 

451,005

 

Prepaid expenses and other current assets

 

130,141

 

 

90,340

 

Total current assets

 

3,302,664

 

 

2,979,972

 

Property, plant and equipment, net

 

805,202

 

 

803,825

 

Goodwill

 

3,301,947

 

 

3,111,349

 

Other intangible assets, net

 

859,367

 

 

691,549

 

Deferred income tax assets

 

78,597

 

 

84,785

 

Other assets

 

156,981

 

 

172,722

 

Total assets

 

$

8,504,758

 

 

$

7,844,202

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt, finance lease and other financing obligations

 

$

6,632

 

 

$

757,205

 

Accounts payable

 

427,271

 

 

393,907

 

Income taxes payable

 

32,830

 

 

19,215

 

Accrued expenses and other current liabilities

 

363,087

 

 

324,830

 

Total current liabilities

 

829,820

 

 

1,495,157

 

Deferred income tax liabilities

 

306,703

 

 

259,857

 

Pension and other post-retirement benefit obligations

 

43,621

 

 

48,002

 

Finance lease and other financing obligations, less current portion

 

27,000

 

 

27,931

 

Long-term debt, net

 

4,214,388

 

 

3,213,747

 

Other long-term liabilities

 

73,603

 

 

94,022

 

Total liabilities

 

5,495,135

 

 

5,138,716

 

Total shareholders' equity

 

3,009,623

 

 

2,705,486

 

Total liabilities and shareholders' equity

 

$

8,504,758

$

7,844,202

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

For the nine months ended

September 30,

 

 

2021

 

2020

Cash flows from operating activities:

 

 

 

 

Net income

 

$

251,608

 

 

$

42,619

 

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

 

 

 

 

Depreciation

 

94,361

 

 

94,216

 

Amortization of debt issuance costs

 

5,142

 

 

5,026

 

Share-based compensation

 

18,871

 

 

14,212

 

Loss on debt financing

 

30,066

 

 

 

Amortization of intangible assets

 

101,492

 

 

98,397

 

Deferred income taxes

 

(2,070

)

 

(11,600

)

Unrealized loss on derivative instruments and other

 

17,359

 

 

5,876

 

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

 

(123,603

)

 

44,592

 

Net cash provided by operating activities

 

393,226

 

 

293,338

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Acquisitions, net of cash received

 

(414,959

)

 

(64,452

)

Additions to property, plant and equipment and capitalized software

 

(100,410

)

 

(79,939

)

Investment in debt and equity securities

 

(4,655

)

 

(24,794

)

Other

 

3,919

 

 

10,717

 

Net cash used in investing activities

 

(516,105

)

 

(158,468

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of stock options and issuance of ordinary shares

 

20,016

 

 

2,237

 

Payment of employee restricted stock tax withholdings

 

(8,987

)

 

(2,335

)

Proceeds from borrowings on debt

 

1,001,875

 

 

1,150,000

 

Payments on debt

 

(760,768

)

 

(406,568

)

Payments to repurchase ordinary shares

 

 

 

(35,175

)

Payments of debt financing costs

 

(33,093

)

 

(6,957

)

Net cash provided by financing activities

 

219,043

 

 

701,202

 

Net change in cash and cash equivalents

 

96,164

 

 

836,072

 

Cash and cash equivalents, beginning of period

 

1,861,980

 

 

774,119

 

Cash and cash equivalents, end of period

 

$

1,958,144

 

 

$

1,610,191

 

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,

 

 

2021

 

2020

 

2021

 

2020

Performance Sensing

 

74.3

%

 

73.7

%

 

74.9

%

 

71.8

%

Sensing Solutions

 

25.7

%

 

26.3

%

 

25.1

%

 

28.2

%

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,

 

 

2021

 

2020

 

2021

 

2020

Americas

 

39.0

%

 

41.4

%

 

37.8

%

 

40.1

%

Europe

 

24.7

%

 

26.8

%

 

26.8

%

 

26.6

%

Asia/Rest of World

 

36.3

%

 

31.8

%

 

35.4

%

 

33.3

%

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,

 

 

2021

 

2020

 

2021

 

2020

Automotive*

 

52.3

%

 

58.9

%

 

54.6

%

 

56.3

%

Heavy vehicle and off-road

 

23.0

%

 

15.8

%

 

21.5

%

 

16.6

%

Industrial

 

11.2

%

 

11.1

%

 

10.5

%

 

11.5

%

Appliance and heating, ventilation and air-conditioning

 

6.6

%

 

6.0

%

 

6.4

%

 

6.4

%

Aerospace

 

3.6

%

 

4.0

%

 

3.5

%

 

4.7

%

All other

 

3.3

%

 

4.2

%

 

3.5

%

 

4.5

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

*

Includes amounts reflected in the Sensing Solutions segment as follows: $9.5 million and $7.8 million of revenue in the three months ended September 30, 2021 and 2020, respectively, and $33.0 million and $23.3 million of revenue in the nine months ended September 30, 2021 and 2020, respectively.

Market Outgrowth (Unaudited)

 

 

For the three months ended

September 30, 2021

 

For the nine months ended

September 30, 2021

 

 

 

Reported

Growth

 

Organic

Growth

 

End

Market

Growth

 

Reported

Growth

 

Organic

Growth

 

End

Market

Growth

 

Automotive

 

7.0

%

 

5.2

%

 

(21.6

%)

*

30.7

%

 

27.3

%

 

9.1

%

*

Heavy vehicle and off-road

 

75.1

%

 

58.9

%

 

31.4

%

 

74.8

%

 

59.5

%

 

35.3

%

 

*

Excludes Toyota, adjusted for Sensata's geographic mix.

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, 2021

 

Operating

Income

 

Operating

Margin

Income

Taxes

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

161,339

 

 

17.0

%

$

21,840

 

 

$

84,959

 

 

$

0.53

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Restructuring related and other

5,426

 

 

0.6

%

(47

)

 

5,379

 

 

0.03

 

Financing and other transaction costs

(972

)

 

(0.1

%)

3,546

 

 

1,723

 

 

0.01

 

Step-up depreciation and amortization

32,656

 

 

3.4

%

 

 

32,656

 

 

0.20

 

Deferred loss on derivative instruments

2,567

 

 

0.3

%

1,100

 

 

10,162

 

 

0.06

 

Amortization of debt issuance costs

 

 

%

 

 

1,716

 

 

0.01

 

Deferred taxes and other tax related

 

 

%

1,971

 

 

1,971

 

 

0.01

 

Total adjustments

39,677

 

 

4.2

%

6,570

 

 

53,607

 

 

0.34

 

Adjusted (non-GAAP)

$

201,016

 

 

21.1

%

$

15,270

 

 

$

138,566

 

 

$

0.87

 

($ in thousands, except per share amounts)

For the three months ended September 30, 2020

 

Operating

Income

 

Operating

Margin

 

Income

Taxes

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

126,845

 

 

16.1

%

 

$

15,181

 

 

$

76,729

 

 

$

0.49

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other (1)

(5,555

)

 

(0.7

%)

 

10,042

 

 

4,992

 

 

0.03

 

Financing and other transaction costs

1,842

 

 

0.2

%

 

 

 

1,842

 

 

0.01

 

Step-up depreciation and amortization

31,467

 

 

4.0

%

 

 

 

31,467

 

 

0.20

 

Deferred loss/(gain) on derivative instruments

212

 

 

0.0

%

 

 

 

(5,926

)

 

(0.04

)

Amortization of debt issuance costs

 

 

%

 

 

 

1,763

 

 

0.01

 

Deferred taxes and other tax related

 

 

%

 

(7,272

)

 

(7,272

)

 

(0.05

)

Total adjustments

27,966

 

 

3.5

%

 

2,770

 

 

26,866

 

 

0.17

 

Adjusted (non-GAAP)

$

154,811

 

 

19.6

%

 

$

12,411

 

 

$

103,595

 

 

$

0.66

(1)

Includes an $11.7 million gain recognized upon release of excess accrual following the September 2020 settlement of patent infringement litigation with Wasica. Refer to our 2020 Annual Report on Form 10-K for additional information.

($ in thousands, except per share amounts)

For the nine months ended September 30, 2021

 

Operating

Income

 

Operating

Margin

 

Income

Taxes

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

483,548

 

 

16.8

%

 

$

49,759

 

 

$

251,608

 

 

$

1.58

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

15,689

 

 

0.5

%

 

(333

)

 

19,596

 

 

0.12

 

Financing and other transaction costs (1)

6,143

 

 

0.2

%

 

 

 

35,795

 

 

0.22

 

Step-up depreciation and amortization

96,036

 

 

3.3

%

 

 

 

96,036

 

 

0.60

 

Deferred loss on derivative instruments

7,002

 

 

0.2

%

 

 

 

13,464

 

 

0.08

 

Amortization of debt issuance costs

 

 

%

 

 

 

5,142

 

 

0.03

 

Deferred taxes and other tax related (2)

 

 

%

 

5,893

 

 

5,893

 

 

0.04

 

Total adjustments

124,870

 

 

4.3

%

 

5,560

 

 

175,926

 

 

1.10

 

Adjusted (non-GAAP)

$

608,418

 

 

21.1

%

 

$

44,199

 

 

$

427,534

 

 

$

2.68

 

(1)

Includes a $30.1 million loss recognized in the first quarter of 2021 related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125%. The loss primarily includes the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs. The loss is presented in other, net in our condensed consolidated statement of operations.

(2)

Includes $10.9 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.

($ in thousands, except per share amounts)

For the nine months ended September 30, 2020

 

Operating

Income

 

Operating

Margin

 

Income

Taxes

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

183,576

 

 

8.6

%

 

$

15,106

 

 

$

42,619

 

 

$

0.27

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other (1)

79,041

 

 

3.7

%

 

(8,337

)

 

76,778

 

 

0.49

 

Financing and other transaction costs

7,195

 

 

0.3

%

 

 

 

7,195

 

 

0.05

 

Step-up depreciation and amortization

95,635

 

 

4.5

%

 

 

 

95,635

 

 

0.61

 

Deferred loss/(gain) on derivative instruments

1,021

 

 

0.0

%

 

 

 

(4,969

)

 

(0.03

)

Amortization of debt issuance costs

 

 

%

 

 

 

5,026

 

 

0.03

 

Deferred taxes and other tax related

 

 

%

 

(7,803

)

 

(7,803

)

 

(0.05

)

Total adjustments

182,892

 

 

8.6

%

 

(16,140

)

 

171,862

 

 

1.09

 

Adjusted (non-GAAP)

$

366,468

 

 

17.1

%

 

$

31,246

 

 

$

214,481

 

 

$

1.36

 

(1)

Includes a $29.6 million loss recorded through cost of revenue related to the patent infringement case brought by Wasica and $26.5 million of charges recognized related to the Q2 2020 Global Restructure Program. We settled the litigation brought by Wasica in the third quarter 2020. Refer to our 2020 Annual Report on Form 10-K for additional information.

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,

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue (1)

$

4,012

 

 

 

$

746

 

 

 

$

9,465

 

 

 

$

38,071

 

Selling, general and administrative

3,023

 

 

 

6,806

 

 

 

10,664

 

 

 

19,228

 

Amortization of intangible assets

32,297

 

 

 

30,933

 

 

 

94,785

 

 

 

93,396

 

Restructuring and other charges, net (2)

345

 

 

 

(10,519

)

 

 

9,956

 

 

 

32,197

 

Operating income adjustments

39,677

 

 

 

27,966

 

 

 

124,870

 

 

 

182,892

 

Interest expense, net

1,716

 

 

 

1,763

 

 

 

5,142

 

 

 

5,026

 

Other, net (3)

5,644

 

 

 

(5,633

)

 

 

40,354

 

 

 

84

 

Provision for income taxes (4)

6,570

 

 

 

2,770

 

 

 

5,560

 

 

 

(16,140

)

Net income adjustments

$

53,607

 

 

 

$

26,866

 

 

 

$

175,926

 

 

 

$

171,862

 

(1)

The nine months ended September 30, 2020 includes a $29.2 million loss related to a judgment against us in a patent infringement case with Wasica Finance GmbH. We settled this litigation in the third quarter 2020. Refer to our 2020 Annual Report on Form 10-K for additional information.

(2)

The three months ended September 30, 2020 includes a gain of $11.7 million recorded upon the reversal of excess accrual related to the Wasica litigation. The nine months ended September 30, 2020 also includes an accrual of $12.1 million in the second quarter of 2020 related to additional damages awarded by the court to Wasica and $24.1 million of charges recognized in the second quarter 2020 related to the Q2 2020 Global Restructuring Program. Refer to our 2020 Annual Report on Form 10-K for additional information regarding this litigation and the restructuring program.

(3)

The nine months ended September 30, 2021 includes a $30.1 million loss recognized in the first quarter of 2021 related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125%. The loss primarily includes the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs.

(4)

The nine months ended September 30, 2021 includes $10.9 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

 

($ in thousands)

Three months ended

September 30,

 

% Change

 

Nine months ended

September 30,

 

% Change

 

2021

 

2020

 

 

 

2021

 

2020

 

 

Net cash provided by operating activities

$

125,295

 

 

$

123,066

 

 

1.8

%

 

$

393,226

 

 

$

293,338

 

 

34.1

%

Additions to property, plant and equipment and capitalized software

(36,838

)

 

(23,242

)

 

(58.5

%)

 

(100,410

)

 

(79,939

)

 

(25.6

%)

Free cash flow

$

88,457

 

 

$

99,824

 

 

(11.4

%)

 

$

292,816

 

 

$

213,399

 

 

37.2

%

Adjusted EBITDA

 

 

 

 

 

Three months ended

September 30,

 

Nine months ended

September 30,

(in thousands)

 

LTM

 

2021

 

2020

 

2021

 

2020

Net income

 

$

373,275

 

 

$

84,959

 

 

$

76,729

 

 

$

251,608

 

 

$

42,619

 

Interest expense, net

 

181,810

 

 

45,137

 

 

44,129

 

 

134,393

 

 

124,340

 

Provision for income taxes

 

36,008

 

 

21,840

 

 

15,181

 

 

49,759

 

 

15,106

 

Depreciation expense

 

125,825

 

 

31,528

 

 

28,928

 

 

94,361

 

 

94,216

 

Amortization of intangible assets

 

132,644

 

 

34,571

 

 

32,562

 

 

101,492

 

 

98,397

 

EBITDA

 

849,562

 

 

218,035

 

 

197,529

 

 

631,613

 

 

374,678

 

Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

31,619

 

 

4,340

 

 

(5,050

)

 

18,717

 

 

80,215

 

Financing and other transaction costs

 

34,963

 

 

(1,823

)

 

1,842

 

 

35,795

 

 

7,195

 

Deferred loss/(gain) on derivative instruments

 

11,472

 

 

9,062

 

 

(5,926

)

 

13,464

 

 

(4,969

)

Adjusted EBITDA

 

$

927,616

 

 

$

229,614

 

 

$

188,395

 

 

$

699,589

 

 

$

457,119

 

Net debt and leverage ratio

 

 

As of:

($ in thousands)

 

September 30,

2021

 

December 31,

2020

Current portion of long-term debt, finance lease and other financing obligations (1)

 

$

6,632

 

 

$

757,205

 

Finance lease and other financing obligations, less current portion

 

27,000

 

 

27,931

 

Long-term debt, net

 

4,214,388

 

 

3,213,747

 

Total debt, finance lease, and other financing obligations

 

4,248,020

 

 

3,998,883

 

Less: Discount, net of premium

 

(5,652

)

 

(9,605

)

Less: Deferred financing costs

 

(27,953

)

 

(28,114

)

Total Gross indebtedness

 

4,281,625

 

 

4,036,602

 

Less: Cash and cash equivalents

 

1,958,144

 

 

1,861,980

 

Net Debt

 

$

2,323,481

 

 

$

2,174,622

 

 

 

 

 

 

Adjusted EBITDA (LTM)

 

$

927,616

 

 

$

685,146

 

Net leverage ratio

 

2.5

 

 

3.2

 

(1)

On February 3, 2021, we announced that we intended to redeem in full the $750.0 million aggregate principal amount outstanding on our 6.25% Senior Notes due 2026. Because we had not issued our 2020 Annual Report on Form 10-K, we determined that these notes should be classified as current on our consolidated balance sheet as of December 31, 2020.

Guidance

 

 

For the three months ending December 31, 2021

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

140.5

 

 

$

148.5

 

 

$

72.8

 

 

$

80.3

 

 

$

0.46

 

 

$

0.50

 

Restructuring related and other

5.5

 

 

6.0

 

 

5.5

 

 

6.0

 

 

0.03

 

 

0.04

 

Financing and other transaction costs

2.5

 

 

3.0

 

 

2.5

 

 

3.0

 

 

0.02

 

 

0.02

 

Step-up depreciation and amortization

31.5

 

 

32.5

 

 

31.5

 

 

32.5

 

 

0.20

 

 

0.20

 

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

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

 

 

 

1.7

 

 

1.7

 

 

0.01

 

 

0.01

 

Deferred taxes and other tax related

 

 

 

 

7.0

 

 

7.5

 

 

0.04

 

 

0.05

 

Non-GAAP

$

180.0

 

 

$

190.0

 

 

$

121.0

 

 

$

131.0

 

 

$

0.76

 

 

$

0.82

 

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

160

 

 

160

 

(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.

 

Contacts

Investors:
Jacob Sayer
(508) 236-1666
jsayer@sensata.com

Media:
Alexia Taxiarchos
(508) 236-1761
ataxiarchos@sensata.com

Social Media Profiles

Contacts

Investors:
Jacob Sayer
(508) 236-1666
jsayer@sensata.com

Media:
Alexia Taxiarchos
(508) 236-1761
ataxiarchos@sensata.com