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 fourth quarter and full year ended
December 31, 2023.
"Our capital allocation strategy to reduce net leverage and
return cash to shareholders is showing strong early returns as
adjusted EPS of $3.61 in 2023 increased 6.2% year over year (14.4%
on a constant-currency basis) and gross leverage declined to 3.8x
from 4.7x,” said Jeff Cote, CEO and President of Sensata. "Our
ability to deliver solutions for our customers in an increasingly
electrified world represents an unprecedented opportunity for
Sensata and we are well-positioned for success. In 2023, Sensata's
electrification revenue grew by nearly 50% to approximately $700
million. Over the last three years, we have won over $1.3 billion
in electrification opportunities, much of it in our long-cycle
businesses, giving me great confidence that electrification will
drive Sensata’s growth in the coming years.”
Operating Results - Fourth Quarter
Operating results for the fourth quarter of 2023 compared to the
fourth quarter of 2022 are summarized below. These results include
non-GAAP financial measures, each of which is defined and
reconciled to the most directly comparable GAAP measure later in
this press release.
Revenue:
- Revenue was $992.5 million, a decrease of ($22.2) million, or
(2.2%), compared to $1,014.7 million in the fourth quarter of
2022.
- Revenue decreased (1.3%) on an organic basis, which excludes a
decrease of (0.9%) from foreign currency exchange rates versus the
prior year period.
Operating (loss)/income:
- Operating loss was ($201.4) million, or (20.3%) of revenue, a
decrease of ($353.8) million compared to operating income of $152.4
million, or 15.0% of revenue, in the fourth quarter of 2022.
- Operating loss includes a $321.7 million non-cash goodwill
impairment charge related to the Insights reporting unit.
- Adjusted operating income was $183.7 million, or 18.5% of
revenue (19.1% on a constant currency basis), a decrease of ($20.6)
million, or (10.1%), compared to adjusted operating income of
$204.3 million, or 20.1% of revenue, in the fourth quarter of
2022.
(Loss)/earnings per share:
- Loss per share was ($1.34), a decrease of $(2.08) compared to
earnings per share of $0.74 in the fourth quarter of 2022.
- Adjusted earnings per share was $0.81, a decrease of ($0.15),
or (15.6%) (decrease of (4.2%) on a constant currency basis),
compared to adjusted earnings per share of $0.96 in the fourth
quarter of 2022.
Sensata generated $105.1 million of operating cash flow and
$56.7 million of free cash flow in the fourth quarter of 2023. In
the quarter, Sensata used cash to reduce debt by $400 million,
repurchase shares valued at approximately $28.1 million, and paid
$18.2 million in dividends to shareholders.
Operating Results - Full Year
Operating results for the year ended December 31, 2023 compared
to the year ended December 31, 2022 are summarized below. These
results include non-GAAP financial measures, each of which is
defined and reconciled to the most directly comparable GAAP measure
later in this press release.
Revenue:
- Revenue was a record $4,054.1 million, an increase of $24.8
million, or 0.6%, compared to $4,029.3 million in the year ended
December 31, 2022.
- Revenue increased 1.5% on an organic basis, which excludes a
decrease of (1.4%) from foreign currency exchange rates and an
increase of 0.5% from acquisitions, net of divestitures, each
versus the prior year.
Operating income:
- Operating income was $181.7 million, or 4.5% of revenue, a
decrease of ($488.5) million, or (72.9%), compared to operating
income of $670.1 million, or 16.6% of revenue, in the year ended
December 31, 2022.
- Operating income includes a non-cash goodwill impairment charge
related to our Insights reporting unit, charges related to the Q3
2023 Restructuring Plan, and charges related to the exit of the
Spear Marine Business.
- Adjusted operating income was $774.0 million, or 19.1% of
revenue (19.7% on a constant currency basis), a decrease of ($3.9)
million, or (0.5%), compared to adjusted operating income of $777.9
million, or 19.3% of revenue, in the year ended December 31,
2022.
(Loss)/earnings per share:
- Loss per share was ($0.03), a decrease of ($2.02), or (101.5%),
compared to earnings per share of $1.99 in the year ended December
31, 2022.
- Adjusted earnings per share was $3.61, an increase of $0.21, or
6.2% (increase of 14.4% on a constant currency basis), compared to
adjusted earnings per share of $3.40 in the year ended December 31,
2022.
Sensata generated $456.7 million of operating cash flow and
$272.1 million of free cash flow in the year ended December 31,
2023. During 2023, Sensata reduced debt by $850 million,
repurchased shares valued at approximately $88.4 million, and paid
$71.5 million of dividends to shareholders.
Segment Performance
For the three months ended
December 31,
For the full year ended
December 31,
$ in 000s
2023
2022
2023
2022
Performance Sensing (1)
Revenue
$
753,028
$
746,604
$
3,002,728
$
2,920,393
Operating income
$
184,353
$
192,870
$
744,246
$
728,308
% of Performance Sensing revenue
24.5
%
25.8
%
24.8
%
24.9
%
Sensing Solutions (1)
Revenue
$
239,466
$
268,072
$
1,051,355
$
1,108,869
Operating income
$
68,219
$
78,443
$
299,032
$
323,347
% of Sensing Solutions revenue
28.5
%
29.3
%
28.4
%
29.2
%
(1)
Effective April 1, 2023, we reorganized
our reportable segments to move material handling products from
Performance Sensing to Sensing Solutions to align with new
management reporting. Prior year amounts have been
reclassified.
Guidance
"We anticipate our end markets to be relatively flat year over
year given the current IHS automotive outlook, weakness in Europe
and North America heavy vehicle and off road production, and
continued destocking in industrials," said Brian Roberts, EVP and
CFO of Sensata. "Given that market backdrop, we expect revenue to
be flat to down slightly in the first and second quarters of 2024
before rebounding in the second half of the year as new and ramping
product launches drive growth. We expect adjusted operating margins
to be flat in the first quarter and then increase sequentially by
approximately 20 – 30 basis points per quarter."
Q1 2024 Guidance
$ in millions, except EPS
Q1-24 Guidance
Q1-23
Y/Y Change
Revenue
$970 - $1,010
$998.2
(3%) - 1%
organic growth
(2%) - 2%
Adjusted Operating Income
$178 - $190
$192.9
(8%) - (2%)
Adjusted Net Income
$124 - $134
$140.7
(12%) - (5%)
Adjusted EPS
$0.82 - $0.88
$0.92
(11%) - (4%)
Versus the prior year period, Sensata expects that changes in
foreign currency exchange rates will decrease revenue by
approximately ($7) million at the midpoint and decrease adjusted
EPS by approximately ($0.05) at the midpoint in the first quarter
of 2024.
Conference Call and Webcast
Sensata will conduct a conference call today at 8:00 a.m.
Eastern Time to discuss its fourth quarter and full year 2023
financial results and its outlook for the first 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 Q4 2023
Financial Results Conference Call." A live webcast of the
conference call will also be available on the investor relations
page of Sensata’s website at http://investors.sensata.com. Additionally, a
replay of the call will be available until February 13, 2024. To
access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter
confirmation code: 5379784.
About Sensata Technologies
Sensata Technologies is a leading industrial technology company
that develops sensors, sensor-based solutions, including
controllers and software, and other mission-critical products to
create valuable business insights for customers and end users. For
more than 100 years, Sensata has provided a wide range of
customized, sensor-rich solutions that address complex engineering
requirements to help customers solve difficult challenges in the
automotive, heavy vehicle & off-road, industrial, and aerospace
industries. With approximately 19,400 employees and operations in
16 countries, Sensata’s solutions help to make products safer,
cleaner and more efficient, more electrified, and more connected.
For more information, please visit Sensata’s website at
www.sensata.com.
Non-GAAP Financial Measures
We supplement the reporting of our financial information
determined in accordance with U.S. generally accepted accounting
principles (“GAAP”) with certain non-GAAP financial measures. We
use these non-GAAP financial measures internally to make operating
and strategic decisions, including the preparation of our annual
operating plan, evaluation of our overall business performance, and
as a factor in determining compensation for certain employees. We
believe presenting non-GAAP financial measures is useful for
period-over-period comparisons of underlying business trends and
our ongoing business performance. We also believe presenting these
non-GAAP measures provides additional transparency into how
management evaluates the business.
Non-GAAP financial measures should be considered as supplemental
in nature and are not meant to be considered in isolation or as a
substitute for the related financial information prepared in
accordance with U.S. GAAP. In addition, our non-GAAP financial
measures may not be the same as, or comparable to, similar non-GAAP
measures presented by other companies.
The non-GAAP financial measures referenced by Sensata in this
release include: adjusted net income, adjusted earnings per share
(“EPS”), adjusted operating income, adjusted operating margin, free
cash flow, organic revenue growth, market outgrowth, adjusted
corporate and other expenses, 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.
Adjusted corporate and other expenses is defined as
corporate and other expenses calculated in accordance with U.S.
GAAP, excluding the portion of non-GAAP adjustments described below
that relate to corporate and other expenses. We believe adjusted
corporate and other expenses is useful to management and investors
in understanding the impact of non-GAAP adjustments on operating
expenses not allocated to our segments.
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,
trends, 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
December 31,
For the full year ended
December 31,
2023
2022
2023
2022
Net revenue
$
992,494
$
1,014,676
$
4,054,083
$
4,029,262
Operating costs and expenses:
Cost of revenue
702,287
673,830
2,792,825
2,712,048
Research and development
42,623
47,446
178,867
189,344
Selling, general and administrative
87,532
87,622
350,655
370,644
Amortization of intangible assets
38,553
39,302
173,860
153,787
Goodwill impairment charge
321,700
—
321,700
—
Restructuring and other charges, net
1,238
14,111
54,500
(66,700
)
Total operating costs and expenses
1,193,933
862,311
3,872,407
3,359,123
Operating (loss)/income
(201,439
)
152,365
181,676
670,139
Interest expense, net
(35,756
)
(43,676
)
(150,860
)
(178,819
)
Other, net
(4,759
)
16,449
(12,974
)
(94,618
)
(Loss)/income before taxes
(241,954
)
125,138
17,842
396,702
(Benefit from)/provision for income
taxes
(39,716
)
11,988
21,751
86,017
Net (loss)/income
(202,238
)
113,150
(3,909
)
310,685
Net (loss)/income per share:
Basic
$
(1.34
)
$
0.74
$
(0.03
)
$
2.00
Diluted
$
(1.34
)
$
0.74
$
(0.03
)
$
1.99
Weighted-average ordinary shares
outstanding:
Basic
151,090
152,639
152,089
155,253
Diluted
151,090
153,140
152,089
155,927
SENSATA TECHNOLOGIES HOLDING
PLC
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
December 31,
2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
508,104
$
1,225,518
Accounts receivable, net of allowances
744,129
742,382
Inventories
713,485
644,875
Prepaid expenses and other current
assets
136,686
162,268
Total current assets
2,102,404
2,775,043
Property, plant and equipment, net
886,010
840,819
Goodwill
3,542,770
3,911,224
Other intangible assets, net
883,671
999,722
Deferred income tax assets
131,527
100,539
Other assets
134,605
128,873
Total assets
$
7,680,987
$
8,756,220
Liabilities and shareholders'
equity
Current liabilities:
Current portion of long-term debt and
finance lease obligations
$
2,276
$
256,471
Accounts payable
482,301
531,572
Income taxes payable
32,139
43,987
Accrued expenses and other current
liabilities
307,002
346,942
Total current liabilities
823,718
1,178,972
Deferred income tax liabilities
359,073
364,593
Pension and other post-retirement benefit
obligations
38,178
36,086
Finance lease obligations, less current
portion
22,949
24,742
Long-term debt, net
3,373,988
3,958,928
Other long-term liabilities
66,805
82,092
Total liabilities
4,684,711
5,645,413
Total shareholders' equity
2,996,276
3,110,807
Total liabilities and shareholders'
equity
$
7,680,987
$
8,756,220
SENSATA TECHNOLOGIES HOLDING
PLC
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
For the year ended December
31,
2023
2022
Cash flows from operating
activities:
Net (loss)/income
$
(3,909
)
$
310,685
Adjustments to reconcile net (loss)/income
to net cash provided by operating activities:
Depreciation
133,105
127,184
Amortization of debt issuance costs
6,772
6,969
Goodwill impairment charge
321,700
—
Gain on sale of business
(5,877
)
(135,112
)
Share-based compensation
29,994
31,791
Loss on debt financing
1,413
5,468
Amortization of intangible assets
173,860
153,787
Deferred income taxes
(54,159
)
(781
)
Loss on equity investments, net
711
75,569
Unrealized loss on derivative instruments
and other
35,986
34,309
Changes in operating assets and
liabilities, net of effects of acquisitions
(160,301
)
(125,776
)
Acquisition-related compensation
payments
(22,620
)
(23,500
)
Net cash provided by operating
activities
456,675
460,593
Cash flows from investing
activities:
Acquisitions, net of cash received
—
(631,516
)
Additions to property, plant and equipment
and capitalized software
(184,609
)
(150,064
)
Investment in debt and equity
securities
(390
)
(7,983
)
Proceeds from the sale of business, net of
cash sold
19,000
198,841
Other
994
152
Net cash used in investing activities
(165,005
)
(590,570
)
Cash flows from financing
activities:
Proceeds from exercise of stock options
and issuance of ordinary shares
5,346
22,803
Payment of employee restricted stock tax
withholdings
(12,280
)
(8,525
)
Proceeds from borrowings on debt
—
500,000
Payments on debt
(848,897
)
(510,701
)
Dividends paid
(71,543
)
(51,072
)
Payments to repurchase ordinary shares
(88,398
)
(292,274
)
Payments of debt financing costs
(787
)
(13,691
)
Net cash used in financing activities
(1,016,559
)
(353,460
)
Effect of exchange rate changes on cash
and equivalents
7,475
—
Net change in cash and cash
equivalents
(717,414
)
(483,437
)
Cash and cash equivalents, beginning of
year
1,225,518
1,708,955
Cash and cash equivalents, end of
year
$
508,104
$
1,225,518
Revenue by Business, Geography, and End Market
(Unaudited)
(percent of total revenue)
For the three months
ended December 31,
For the full year ended
December 31,
2023
2022
2023
2022
Performance Sensing (1)
75.9
%
73.6
%
74.1
%
72.5
%
Sensing Solutions (1)
24.1
%
26.4
%
25.9
%
27.5
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
(percent of total revenue)
For the three months
ended December 31,
For the full year ended
December 31,
2023
2022
2023
2022
Americas
43.3
%
43.5
%
45.0
%
42.3
%
Europe
21.3
%
25.6
%
26.3
%
25.9
%
Asia/Rest of World
35.4
%
30.9
%
28.7
%
31.8
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
(percent of total revenue)
For the three months
ended December 31,
For the full year ended
December 31,
2023
2022
2023
2022
Automotive (2)
55.8
%
53.8
%
53.7
%
52.3
%
Heavy vehicle and off-road (1)
21.1
%
20.6
%
21.3
%
21.1
%
Industrial (1)
13.5
%
14.8
%
14.7
%
14.4
%
Appliance and HVAC
4.0
%
4.9
%
4.6
%
5.4
%
Aerospace
4.9
%
4.3
%
4.7
%
3.8
%
All other
0.7
%
1.6
%
1.0
%
3.0
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
(1)
Effective April 1, 2023, we reorganized
our structure to move material handling products from the
Performance Sensing reportable segment to the Sensing Solutions
reportable segment to align with new management reporting.
Accordingly, material handling revenue, which has historically been
presented in the HVOR end-market, is now presented in the
Industrial end-market. Prior period amounts for revenue by business
and end market have been reclassified above.
(2)
Includes amounts reflected in the Sensing
Solutions segment as follows: $9.8 million and $7.9 million of
revenue in the three months ended December 31, 2023 and 2022,
respectively, and $37.9 million and $35.8 million of revenue in the
years ended December 31, 2023 and 2022, respectively.
GAAP to Non-GAAP Reconciliations
The following unaudited tables provide a reconciliation of the
difference between each of the non-GAAP financial measures
referenced herein and the most directly comparable U.S. GAAP
financial measure. Amounts presented in these tables may not appear
to recalculate due to the effect of rounding.
Operating income and margin, income tax,
net income, and earnings per share
($ in thousands, except per share
amounts)
For the three months ended
December 31, 2023
Operating
(loss)/Income
Operating Margin
Income Taxes
Net (Loss)/ Income
Diluted EPS
Reported (GAAP)
$
(201,439
)
(20.3
%)
$
(39,716
)
$
(202,238
)
$
(1.34
)
Non-GAAP adjustments:
Restructuring related and other (1)
345,926
34.9
%
(992
)
344,934
2.28
Financing and other transaction costs
2,111
0.2
%
(49
)
6,651
0.04
Step-up depreciation and amortization
37,301
3.8
%
—
37,301
0.25
Deferred gain on derivative
instruments
(218
)
0.0
%
471
(2,521
)
(0.02
)
Amortization of debt issuance costs
—
—
%
—
1,664
0.01
Deferred taxes and other tax related
—
—
%
(62,493
)
(62,493
)
(0.41
)
Total adjustments
385,120
38.8
%
(63,063
)
325,536
2.15
Adjusted (non-GAAP)
$
183,681
18.5
%
$
23,347
$
123,298
$
0.81
(1)
Includes $321.7 million of charges to
impair goodwill in our Insights reporting unit, presented on the
consolidated statement of operations in goodwill impairment charge.
Also includes $11.4 million of charges arising as an indirect
result of actions taken in the Q3 2023 Plan, of which approximately
$2.1 million was recorded in restructuring and other charges, net,
with the remainder primarily in cost of revenue.
($ in thousands, except per share
amounts)
For the three months ended
December 31, 2022
Operating Income
Operating Margin
Income Tax
Net Income
Diluted EPS
Reported (GAAP)
$
152,365
15.0
%
$
11,988
$
113,150
$
0.74
Non-GAAP adjustments:
Restructuring related and other
12,041
1.2
%
(2,935
)
10,205
0.07
Financing and other transaction costs
5,074
0.5
%
—
5,508
0.04
Step-up depreciation and amortization
38,027
3.7
%
—
38,027
0.25
Deferred gain on derivative
instruments
(3,213
)
(0.3
%)
2,985
(11,481
)
(0.07
)
Amortization of debt issuance costs
—
—
%
—
1,713
0.01
Deferred taxes and other tax related
—
—
%
(10,627
)
(10,627
)
(0.07
)
Total adjustments
51,929
5.1
%
(10,577
)
33,345
0.22
Adjusted (non-GAAP)
$
204,294
20.1
%
$
22,565
$
146,495
$
0.96
($ in thousands, except per share
amounts)
For the full year ended
December 31, 2023
Operating Income
Operating Margin
Income Tax
Net (Loss)/Income
Diluted EPS
Reported (GAAP)
$
181,676
4.5
%
$
21,751
$
(3,909
)
$
(0.03
)
Non-GAAP adjustments:
Restructuring related and other (1)
411,494
10.2
%
(3,659
)
407,835
2.67
Financing and other transaction costs
(2)
16,286
0.4
%
2,727
24,219
0.16
Step-up depreciation and amortization
(3)
168,582
4.2
%
—
168,582
1.11
Deferred gain on derivative
instruments
(4,078
)
(0.1
%)
273
(1,733
)
(0.01
)
Amortization of debt issuance costs
—
—
%
—
6,771
0.04
Deferred taxes and other tax related
—
—
%
(50,391
)
(50,391
)
(0.33
)
Total adjustments
592,284
14.6
%
(51,050
)
555,283
3.64
Adjusted (non-GAAP)
$
773,960
19.1
%
$
72,801
$
551,374
$
3.61
(1)
Primarily includes (1) $321.7 million of
charges to impair goodwill of our Insights reporting unit in the
fourth quarter of 2023, (2) $28.8 million of charges related to the
exit of the Spear Marine Business, $14.4 million of which was
recorded in restructuring and other charges, net, with the
remainder primarily in cost of revenue, (3) $23.5 million of
charges incurred as part of the Q3 2023 Plan, recorded in
restructuring and other charges, net, and (4) $18.8 million of
charges arising as an indirect result of actions taken in the Q3
2023 Plan, of which approximately $2.1 million was recorded in
restructuring and other charges, net, with the remainder primarily
in cost of revenue. Refer to our Annual Report on Form 10-K for
additional information on the goodwill impairment charge, the Q3
2023 Plan, and the exit of the Spear Marine Business.
(2)
Primarily includes $15.3 million of
expense related to acquisition-related compensation arrangements
(recorded in restructuring and other charges, net) and $5.4 million
of debt financing loss related to our repayment of the 5.625%
Senior Notes in December 2023 and our term loan in the first half
of 2023 (recorded in other, net), partially offset by a $5.9
million gain on the sale of a business (recorded in restructuring
and other charges, net).
(3)
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 full year ended
December 31, 2022
Operating Income
Operating Margin
Income Tax
Net Income
Diluted EPS
Reported (GAAP)
$
670,139
16.6
%
$
86,017
$
310,685
$
1.99
Non-GAAP adjustments:
Restructuring related and other
36,472
0.9
%
(3,498
)
34,515
0.22
Financing and other transaction costs
(1)
(75,550
)
(1.9
%)
2,767
10,726
0.07
Step-up depreciation and amortization
148,291
3.7
%
—
148,291
0.95
Deferred (gain)/loss on derivative
instruments
(1,473
)
0.0
%
(387
)
1,490
0.01
Amortization of debt issuance costs
—
—
%
—
6,969
0.04
Deferred taxes and other tax related
(2)
—
—
%
17,828
17,828
0.11
Total adjustments
107,740
2.7
%
16,710
219,819
1.41
Adjusted (non-GAAP)
$
777,879
19.3
%
$
69,307
$
530,504
$
3.40
(1)
Includes gain on the sale of the Qinex
Business in the third quarter of 2022 and changes in the fair value
of acquisition-related contingent consideration amounts of $135.1
million and $9.4 million, respectively, partially offset by $48.9
million of expense related to compensation arrangements entered
into concurrent with the closing of an acquisition, each of which
were recorded in restructuring and other charges, net. Also
includes $75.6 million of mark-to-market losses on our equity
investments, primarily our investment in Quanergy Systems, Inc.,
which are presented in other, net in our consolidated statement of
operations.
(2)
Includes $14.7 million of current tax
expense related to the repatriation of profit from certain Asian
subsidiaries to their parent companies in the Netherlands and the
United States. The decision to repatriate these profits was the
result of our goal to reduce our balance sheet exposure and
corresponding earnings volatility related to changes in foreign
currency exchange rates as well as to fund our deployment of
capital.
Non-GAAP adjustments by location in
statements of operations
(in thousands)
For the three months ended
December 31,
For the full year ended
December 31,
2023
2022
2023
2022
Cost of revenue (1)
$
22,194
$
(1,189
)
$
37,766
$
10,873
Selling, general and administrative
2,890
1,266
10,639
16,457
Amortization of intangible assets (2)
37,098
37,741
167,679
147,110
Goodwill impairment charge (3)
321,700
—
321,700
—
Restructuring and other charges, net
(4)
1,238
14,111
54,500
(66,700
)
Operating income adjustments
385,120
51,929
592,284
107,740
Interest expense, net
1,664
1,713
6,771
6,969
Other, net (5)
1,815
(9,720
)
7,278
88,400
(Benefit from)/provision for income taxes
(6)
(63,063
)
(10,577
)
(51,050
)
16,710
Net income adjustments
$
325,536
$
33,345
$
555,283
$
219,819
(1)
The three and twelve months ended December
31, 2023 includes $9.4 million and $16.5 million, respectively, of
charges arising as an indirect result of actions taken in the Q3
2023 Plan. The twelve months ended December 31, 2023 also includes
a charge of $13.0 million to write down inventory related to the
Spear Marine Business, which was exited in the second quarter of
2023.
(2)
The twelve months ended December 31, 2023
includes $13.5 million of accelerated amortization related to the
exit of the Spear Marine Business in the second quarter of
2023.
(3)
In the fourth quarter of 2023, we impaired
goodwill in our Insights reporting unit. Refer to our Annual Report
on Form 10-K for additional information.
(4)
The twelve months ended December 31, 2023
includes (1) $22.8 million of charges related to the Q3 2023 Plan
incurred in the second half of 2023, (2) $15.3 million of expense
related to compensation arrangements entered into concurrent with
the closing of certain acquisitions, and (3) $14.4 million of
charges related to the exit of the Spear Marine Business in the
second quarter of 2023. The twelve months ended December 31, 2022
includes gains of $135.1 million, related to the sale of the Qinex
Business, and $9.4 million, related to changes in the fair values
of acquisition-related contingent consideration amounts, partially
offset by $48.9 million of expense related to compensation
arrangements entered into concurrent with the closing of certain
acquisitions, including $10.4 million recognized during the fourth
quarter of 2022. Refer to our Annual Report on Form 10-K for
additional information.
(5)
The year ended December 31, 2022 includes
mark-to-market losses on our equity investments, primarily in
Quanergy Systems, Inc, of $75.6 million, and a $5.5 million loss
related to the redemption of the 4.875% Senior Notes in the third
quarter of 2022.
(6)
The year ended December 31, 2022 includes
current tax expense of $14.7 million related to the repatriation of
profit from certain Asian subsidiaries to their parent company in
the Netherlands. The decision to repatriate these profits was the
result of our goal to reduce our balance sheet exposure and
corresponding earnings volatility related to changes in foreign
currency exchange rates as well as to fund our deployment of
capital.
Free cash flow
($ in thousands)
Three months ended December
31,
Full year ended December
31,
2023
2022
% Change
2023
2022
% Change
Net cash provided by operating
activities
$
105,098
$
224,860
(53.3
%)
$
456,675
$
460,593
(0.9
%)
Additions to property, plant and equipment
and capitalized software
(48,385
)
(39,640
)
(22.1
%)
(184,609
)
(150,064
)
(23.0
%)
Free cash flow
$
56,713
$
185,220
(69.4
%)
$
272,066
$
310,529
(12.4
%)
Adjusted corporate and other
expenses
Three months ended December
31,
Full year ended December
31,
(in thousands)
2023
2022
2023
2022
Corporate and other expenses (GAAP)
$
(414,220
)
$
(65,535
)
$
(633,242
)
$
(294,429
)
Restructuring related and other (1)
345,594
(1,229
)
366,509
11,896
Financing and other transaction costs
1,205
4,233
6,771
15,726
Step-up depreciation and amortization
203
286
903
1,181
Deferred gain on derivative
instruments
(218
)
(3,213
)
(4,078
)
(1,473
)
Total Adjustments
346,784
77
370,105
27,330
Adjusted corporate and other expenses
$
(67,436
)
$
(65,458
)
$
(263,137
)
$
(267,099
)
(1)
Includes $321.7 million of charges to
impair goodwill in our Insights reporting unit, presented on the
consolidated statement of operations in goodwill impairment
charge.
Adjusted EBITDA
Three months ended December
31,
Full year ended December
31,
(in thousands)
2023
2022
2023
2022
Net (loss)/income
$
(202,238
)
$
113,150
$
(3,909
)
$
310,685
Interest expense, net
35,756
43,676
150,860
178,819
(Benefit from)/provision for income
taxes
(39,716
)
11,988
21,751
86,017
Depreciation expense
36,228
32,622
133,105
127,184
Amortization of intangible assets
38,553
39,302
173,860
153,787
EBITDA
(131,417
)
240,738
475,667
856,492
Non-GAAP Adjustments
Restructuring related and other
345,926
13,140
411,494
38,013
Financing and other transaction costs
6,700
5,053
21,492
7,504
Deferred (gain)/loss on derivative
instruments
(2,992
)
(14,466
)
(2,006
)
1,877
Adjusted EBITDA
$
218,217
$
244,465
$
906,647
$
903,886
Debt and leverage (gross and
net)
As of
($ in thousands)
December 31, 2023
December 31, 2022
Current portion of long-term debt and
finance lease obligations
$
2,276
$
256,471
Finance lease obligations, less current
portion
22,949
24,742
Long-term debt, net
3,373,988
3,958,928
Total debt and finance lease
obligations
3,399,213
4,240,141
Less: Discount, net of premium
(1,568
)
(3,360
)
Less: Deferred financing costs
(24,444
)
(29,916
)
Total gross indebtedness
$
3,425,225
$
4,273,417
Adjusted EBITDA (LTM)
$
906,647
$
903,886
Gross leverage ratio
3.8
4.7
As of
($ in thousands)
December 31, 2023
December 31, 2022
Total gross indebtedness
$
3,425,225
$
4,273,417
Less: Cash and cash equivalents
508,104
1,225,518
Net Debt
$
2,917,121
$
3,047,899
Adjusted EBITDA (LTM)
$
906,647
$
903,886
Net leverage ratio
3.2
3.4
Guidance
For the three months ending
March 31, 2024
($ in millions, except per share
amounts)
Operating Income
Net Income
EPS
Low
High
Low
High
Low
High
GAAP
$
132.9
$
140.9
$
73.4
$
78.2
$
0.48
$
0.52
Restructuring related and other
1.6
3.1
1.6
3.1
0.01
0.02
Financing and other transaction costs
1.0
3.0
1.0
3.0
0.01
0.02
Step-up depreciation and amortization
42.5
43.0
42.5
43.0
0.28
0.28
Deferred (gain)/loss on derivative
instruments(1)
—
—
—
—
—
—
Amortization of debt issuance costs
—
—
1.5
1.7
0.01
0.01
Deferred taxes and other tax related
—
—
4.0
5.0
0.03
0.03
Non-GAAP
$
178.0
$
190.0
$
124.0
$
134.0
$
0.82
$
0.88
Weighted-average diluted shares
outstanding (in millions)
151.7
151.7
(1)
We are unable to predict movements in
commodity prices and, therefore, the impact of mark-to-market
adjustments on our commodity forward contracts to our projected
operating results. In prior periods such adjustments have been
significant to our reported GAAP earnings.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240206221749/en/
Investors: Jacob Sayer (508) 236-1666 jsayer@sensata.com
Media: Alexia Taxiarchos (508) 236-1761
ataxiarchos@sensata.com
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