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.”

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.

Segment Performance

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

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

Non-GAAP adjustments by location in statements of operations

Free cash flow

Adjusted corporate and other expenses

Adjusted EBITDA

Net debt and leverage

Guidance