ST - Earnings call transcript Q1 2022 | Sensata Technologies Holding plc

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Operator

Good day, everyone, and welcome to Sensata's First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. At this time, I'd like to turn the conference call over to Mr. of President Vice Sayer, Finance. Jacob ahead. Sir, please go

Jacob Sayer

I'd Thank you welcome call. everyone. XXXX you, and good Jamie, like to conference to earnings morning, Sensata's quarter first

me Heavy Vineet Nargolwala, Sensata's Executive Vice Jeff Vasington, Joining Sensing Chief Sensata's call Solutions of President; and Sensata's and and Off-road. Paul Cote, Officer; Financial President today's on Vehicle CEO are

call. of a call addition webcast website shortly this Relations website. call. today, we earlier conclusion to we releases issued conference downloaded be today's the the In can recorded, a Investor This after today's be presentation financial we slide referencing from press The Relations replay during results post our will PDF is and other Investor and presentation will on Sensata's being conference of

reference As Harbor like Safe X. begin, statement Slide I'd to Sensata's on we

from review discussed forward-looking GAAP addition Company's our Most call, those limited this or and financial these measures. performance discussed during conference to, During involve the that XX-K are might relate non-GAAP results filings to will with statements to XX-Q the will as financial the subsequent actual financial in SEC. and differences uncertainties. such may that projections to the cause include, not you encourage we risks regarding events today's but other that materially described Company in will be as in the We of well Forms presentation. statements. information The Factors subsequent future statements make of our today's call differ

and business to performance primary provide during Jeff the results then measures provides Slides XX operating the the today's presentation release and our are the revenue details XXXX. our with in today Company will insights earnings management of and well are he'll in and strategic about after our financials, prepared and business. the reconciliations including including of highlights the announced Paul key for quarter. take year share first on guidance financials also will quarter evaluate details recently progress GAAP full of The recent We'll electrification our segment which cover as as detailed XX growth He the quarter uses appendices growth will Dynapower. update income of remarks. outgrowth unit, an its non-GAAP in included begin of and first Our on areas by materials. of our questions for presentation, then business the provide and our your and market second financial segment acquisition

Cote. like to Now, the Jeff to over President, turn I'd CEO call and Sensata's

Jeff Cote

strong to thoughts and with everyone. like Thank X. first Slide summary you, Jacob, on some the start quarter, I'd outlined welcome, our performance as during on

production markets to across due nearly of quarter supply compared X% last shortages. all declined end to chain our year and the disruptions during While

model, served well. business acquisitions outgrowth, market us which and Our includes

delivering financial solid the produced shareholders from again for we above result, ranges. in a million As the year, we prior our target range of growth in outgrowth once results February. $XXX revenue provided or above We market strong demonstrated guidance quarter X.X% of the

insights. half is revenue to driven than electrification areas, outgrowth. megatrend them expect outgrowth wins factors, and in wins business we basis including XXX Sensata's new of awards in we been basis growth outgrowth will million quarter. extremely has we revenue during our in the includes into discuss recovery. last Sensata's are of business quarter, during these $XXX detail. rapidly exceed strong delivered As more our growing a increasingly positions new by points active activity of points the track first current secured company, This future XXX business new megatrend currently record Quoting pricing the for outgrowth Paul on year. to More translate and revenue and in are we

for believe is expand our in the this investing Acquisitions margin to to is completed these I'll are expected in trade-off impact index right moment. quarter, fast-growing acquired in investment, by exposure growth to points in and first we these with more Dynapower points XXX which full about this and share in latest the more organic basis year inorganic in these areas is targeted areas, line We areas. over regarding the increased the contributed our our XXX past revenue acquisition, our revenue year company-wide growth. details a and basis

and from innovation, confident these commercial us our achieving supply actions. our we promise customers actions focused chain potentially of During and that the our impact flexible hard but are business, navigate recognize inflationary our impact the and as with of are resilient, demand. we aim benefited currently in agile, external like successfully pricing more deliver limited continue The impacted in I'd strong differentiated from deliver minimal entire that will closely be Also COVID-related we year in longer-term our and become costs full operating these results. financial to strong will Ukraine on team to today. results, the customers' offset war on a to and organization China these needs. of landscape and agility impact having but we costs first The quarter, to first and quarter the our allow is work impacts and lockdowns continues have and direct input led to other on in near are situations to these timing position watching us Sensata these profits. the could strong on factors the continued support ever-changing

be electrification primary sustainable within EBITDA billion the of debt allocation long-term strategy insights our We this our of of for ratio We capital our have for generate sheet. is $X.X than as and significant to balance in activity each drives areas the our range flow megatrend cash free target cash net more And our on continues Company. focus growth and Acquisitions X.Xx. to year.

share addition starting repurchase per program. deployed $X.XX next addition share for quarterly And In acquisitions, dividend announced capital today, the we month. have of to our our of we

on allocation program. that capital to will confident are cash to continue execute balanced flow our We business this sufficient generate

to XXXX. continuing is X. make in our electrification, winning to new Sensata in excellent progress business Moving success building upon Slide in

new strength power management centers continued These we makers management, business vehicles thermal received quarter, key thermal multiple As of usage. this representing due primarily in revenue. their to annual for an low support Sensata's in in electric pump awards million $X example

Additionally, depth to industry represents awarded solution across $XXX annual we our provide in leading This million new and in million efficiency tire were a in opportunity management a than was will with electrification and management sensor pressure because business business tire temperature win tire of $XX drive health, Revenue unique it revenue. manufacturer. is from the today and from This business XXXX. new efforts electrification tire higher a combines which in tread picture more complete single a safety. more

increase revenue in XX% and quarter our in order We continue expect to results XXXX, pipeline support this first greater this and forecast. than

generate team. we acquire As of revenue close energy to by announce million customary conversion with over Dynapower. well leader a a defense to fast-growing in well-earned aftermarket is and Pending to margins forward profitable applications. excess control Dynapower of agreed the focus hand. industrial comprehensive power rectifiers as And solutions. a shown as in high several half and converters be They a on strategy, years the This stickiness solutions Vermont, of higher storage be expect and X. experts Like to will second Sensata the and services. voltage sales the the knowledge, as pleased Dynapower to They in product It Slide DC we $X.XX extension margins. Sensata, we of Slide and supplier to per Burlington, is on expected cash EPS is grow XX% only power engineered XXXX XXX-plus this the and DC in year. result, has employees are their to longevity is They renewable Dynapower business. over a approvals, is high funded in on is more highly X, across in focuses and to Dynapower that responsiveness. annual using differentiated deep have technical than to in electrification July. XXXX. the XX% and in $XXX suite revenue are year and $XXX conversion, year. are on rectifier Dynapower acquisition to headquartered million inversion Sensata's inverters, control mission-critical, natural to and Dynapower create customer enjoy regulatory quality for customer and EBITDA look in as reputation we expected are that power transaction accretive shown a next offer transaction Sensata's expected and welcoming power energy,

for as billion well addressable battery and and over such We hydrogen this $X.X charging beyond required green the and as high-voltage per over generation fast-growing an $X.X are areas and including the year rapid large ecosystem, is electric the industrial where renewable energy are vehicles. by production use Dynapower energy XX% fast addressable handle expected a broader segments, billion for electrification opportunity Solutions needs power These are to large-scale XXXX. with vehicle applications, DC market to and storage electric generation, defense grow storage and of renewable usage. to energy year as market focused

$X our electrification strategy business during to electrification build XXXX. a by discussed is billion teach-in, As Sensata's

acquired Sensata's Sensata capabilities our electrification summary, with growth Spear allow of leading synergies opportunities Furthermore, battery of the billion. over drive $XXX [Ulta] partners On efficiency, Dynapower's revenue, and share Solution sensors, Power presence become to utilize fuses, Sensata's of in is the an data give objective such part and achieving us cost continuing across update date Insights. market, a Dynapower and Slide Energy their our shareholder growth Sensata our component operations. inverters fast-growing global and key to we revenue will deliver electrification $X.X to of our expected on systems megatrend. Dynapower unlock businesses current current in provider expertise confidence savings wins as value. help is as Insights target capabilities revenue X, conversion industries, high-power contactors, to customers to front and half high-voltage targeted actionable already and business Dynapower's the progress electrification accelerates to and a us in continuing leading delivers and pursue Our Sensata's progress us. operational to large long-term Sensata in with higher Storage of In safer This portfolio. combined manufacturing components the in journey in million new organic and provide the management

Insights and initiative new expect revenue evidence mentioned, and of in year of over we to growth as awarded solutions, our on XXXX generated to putting year. a this we we Insights the XXXX. double of million The compared us business $XX track first our this nature quarter, last $XX million worth during value in wins the to business were As double

from solution developed support and example first Ossia, enables wireless the is jointly quarter that during An charging bookings XX won an new Insights safe innovative storage award devices performance distribution and of product novel centers. shipping a our trucking technology Our in yards of to-date use high-value for with products telematics power for top this development XXXX a and heavy-duty goal. as in properties solution such magazine. This

on the with are amount during Their providers customers sizable IoT pioneer and solutions. and these service is and better making intuitive I'm with delivering that to In markets assets We megatrend their to summary, MXM acquisition operational are platform progress really cloud see for We pursue intelligence analyze increasingly capabilities and we analytics quarter. Elastic technology of make also rich utilizes artificial can and Elastic data digest cost-effective the machine excellent to customers. connected telematics an MXM scalable growth we pleased initiatives. broadened of flexible encouraged a IoT from decisions. learning our that enable in end

capabilities, relationships see utilize supply opportunities through before, As in to the areas. position, efforts and and we partnerships enlarge acquisitions chain through these customer addressable to numerous engineering strong markets our and organic I've said bolt-on meaningfully financial both

Paul. Now, to over the I'd to turn like call

Paul Vasington

of quarter, Thank million, revenue first as income net on million, investments of X.X% an primarily include XXXX, inflationary X, the the areas. $XXX.X of lower was XXXX. first pricing quarter of in decrease you, to related volumes, quarter compared supply Jeff. and chain first Key Slide material highlights shown higher due growth costs and $XXX.X for X.X% megatrend of from increase our of the operating a Adjusted to

business XX. two starting Now, first I'd of of quarter on Performance in Sensing XXXX, like comment to Slide the our on the performance with segments

basis $XXX.X last increase outgrowth was reported points quarter same Our our Performance of XXX compared million, revenue business of acquisitions. to driven X.X% well an by as the year. from primarily market This revenues as of Sensing

with Segment somewhat XX.X%. income Sensing first the op back, supply foreign currency. approximately by of was million, operating year income we in higher of Performance organic appears Looking favorable margins customers and from acquisitions it $XXX.X $XX volumes built material million inventory are quarter inflationary the calculation. income last offset declined costs, operating related outgrowth excluding and that pricing, due lower to chain and from

other in of last year. by Sensing on strong the an of shown XX, industrial in of offset increase income applications Slide declines increase Adjusted $XX.X Solutions to the million, growth. of costs compared to our was by XX.X%. the support the somewhat quarter year to As XXXX, million non-GAAP expenses from quarter as pricing, income were Solutions due same the income an from and development quarter Slide other XX.X% operating and offset growth business first of inflationary $XXX.X reported and This including of higher year, primarily with revenues outgrowth, our was acquisitions, support and electrification costs driven initiatives. material-related included increase $XX.X operating from of were somewhat was launch increase million, operating X.X% the results, corporate not quarter, million market. new by prior primarily aerospace higher and spend of million operating The an research development first the charges quarter megatrend segment excluded same last margins in segment Sensing in corporate business XXXX. and to for higher volumes $X.X $XX.X supply operating reflecting XX, chain and expenses selling On in higher

vectors differentiated and We and between of and XXXX and in $XX insights. megatrend $XX the to solutions electrification in design for fast-growing megatrend-related continue to million transformational expect develop million spend

We that year we that new increase revenue megatrend-related wins areas. and long-term is are is transformational supported experiencing right these trade-off by this rapid in business confident in this spend the record the and growth are

over Slide $XX quarter by $XXX Moving in achieving ensure affected Free million reflecting the and generated in paid to our flow compensation million accounts cash the the of months. XX cash key continuity business to to supply of in the free We the cash increase the It was in flow customers also growth bonuses impact growth incentive volume and revenue last linearity in first for in anticipation free acquisition-related inventory quarter our the quarter. both coming milestones of in and decision flow to XX. in the was increase Annual impacted quarters. an by in quarter. our and receivable were during

XX% cash and target hand businesses cash was of range $XXX we require conversion Sensata's XXXX, electrification debt-to-EBITDA our XX% and full capital Sensata's adjusted million. of growth Sensata's March flow be use net would in for ratio of at position vectors our we the our within For acquisition been within net year to range. X.Xx. will ratio debt-to-EBITDA expect expect income, of free Dynapower, approximately forma expenditures the end the to insights. be on to to that X.Xx of primary have key extend is and Pro to the $XXX net million of

balance repurchased sheet also million the Sensata's capital in and return and dividend expected expected the XX to we quarterly earlier look quarter to our be initiation we flows, today, of shareholders. strength of first we and cash share shares to Given is of on Consequently, record of the of on XX. future paid shareholders to announced $X.XX May XX free May a per

on financial providing guidance are XXXX, for of XX. as quarter shown the Slide second We

acquisitions the market war recent market do page. reflect comparison. lowered the inventory outgrowth inventory unwind We shown second China. both end production supply completed expect they conservative chain year-on-year The the Ukraine in and from increasing We growth as was the in would of quarter impacts COVID-related remind upon and customers in on revenue FX. based IHS for automotive are of lockdowns million side more automotive but even expectations and components than period of XXXX, our the in the their during not of complicating right quarter, year estimates the Our that $XX the estimates on revenue by full to guidance investors approximately outlook recently the somewhat as remain and that quarter built

quarter. the revenue which the the the expected XX%, Our for current midpoint, margin rate is to second includes of midpoint guidance operating adjusted be income XX% approximately is fill At impact chain acquisitions, inflationary growth investments supply vectors. growth including megatrend-related and material partially related offset lower rapidly of our for in these pricing by and as costs, scale volumes, areas higher we

quarters adjusted we As expect year. productivity of the quarter, operating each the of mentioned last balance the revenue addition we to lead improvements in year, improving in throughout sequential to growth this to margins

We are guidance not the reiterating financial shown our as Slide on Dynapower full year include does which XX. for XXXX,

be in growth of higher customers estimates reoccur the million XX% unwind offset of be growth discuss areas. expected do by or We We pricing a automotive prices expect impact the the higher our in acquisitions to outgrowth XXXX. will pressures and balance the midpoint, during FX. expect volumes, expected between includes lower higher and of during benefit Revenue outgrowth, to $XXX which moment, market I completed roughly XX.X%, of the margin in that the year. income At includes not inventory stronger inflationary is offsetting operating markets, and built megatrend investments adjusted by XXXX and to X%

provide have automotive to we growth partially on from as Given and growth currency We and this production currently approximately increased adjusted the foreign compared by both exchange our our decreased for Europe North impact Slide offset with in OEM prior estimates year, production for our China currency America. expectations, rates expect in revenue X% of XXXX. our XXXX the declines expectations On EPS. recent updated our XX, updated we estimates for changes,

production estimates to vehicle contract automotive this weighted and Our The production market parts is on shortages curtail X% outlook heavy than at of electronics more as by off-road machinery. other this conservative expected somewhat year a point basis. IHS now current regionally remains

As outgrowth Slide basis price in organic basis Jeff shown XXX as increases highlighted the points Sensata's target offset points first This our range. material for XX, of inflation. earlier, is of cost the includes revenue above XXX quarter on well that quarter, largely first

range. our for higher of period so some any continue expect revenue in underlying that reflect that some outgrowth the we above businesses aggregate, contribute forward, target we faster our Each to than and will will lower in Looking total, that value be grows our XXXX that to markets. of

acquiring access In addition us that businesses over revenues by give needs. fast-growing our we the organic address market, to differentiated that customers' revenue increased applications growth also to

is require revenue target add basis XXX that first range. additional target inorganic long-term XXX streams new to quarter the of M&A within growth to of We each points Our an acquired in XXX basis the revenue growth points to year. Sensata

let back Jeff Now, the over turn closing to comments. me call for

Jeff Cote

Paul. Thanks,

me key reliable resilient Sensata's on we organizational strong, Let or solutions and deliver model as some is highly outlined Page by customers. required as messages wrap business up our and with Slide XX. mission-critical, engineered

cyclical, aim per these are points While outgrow to by we year. our XXX markets customers' to basis XXX markets

confident We and levels opportunities. new are our market our new of to end attractive awards and ability in our business record pipeline of outgrowth expanding sustain based large this on

to that across invest growing our opening are for initiatives megatrend-driven growth in our continue markets. end We Sensata large opportunities and of all rapidly

through excellent ventures. and progress both and/or joint making new wins and inorganically through are strong insights, bolt-on We organically business in acquisitions electrification

basis inorganic revenue We are points to targeting XXX growth annually. adding of XXX

continue innovate engineering solving of will hard-to-do on We our to their challenges. behalf customers,

customers. array solutions provide a differentiated of broad continue will We to also to

customers' increasing continue mission-critical our our finally, to operations, contributing industry-leading to these just growth more excited opportunities margins our deliver cleaner, to about world. investments to better also we create Solving long-standing and shareholders, through people. own but while meaningfully a in believe And safer world. Sensata our enable I'm Sensata's challenges for a our help Not and we products, mission for also connected are

look sustainability to during on the progress of in for first the our report targets are achieving to sustainability sharing the all sustainability the and be long-term through our report our to We published of quarter. laid bolstering stakeholders. We an way last updated year, out success second Company its forward

back call Jacob. Now, turn the to I'd like to

Jacob Sayer

Thank you, to We'll Jeff. Q&A. now move

large roster. Jamie, the listeners the of assemble Q&A number Given please

Operator

ahead comes Wamsi of today Instructions] from from first Our Bank with Mohan your Please go question question. [Operator America.

Wamsi Mohan

Congrats on the deal.

trajectory at weaker, HVOR auto year but look we your maintain and from guidance bit a prior when your So, end assumptions. weaker markets full both your XQ on you despite it's here, the

help it that's So your us increased to can what growth, in Or offsets that you content inventory giving Is growth it pricing? And what content the are? Is build? it understand, is versus has extent the something you it maybe assumptions? is higher it else? prior

Jeff Cote

thoughts. high-level some share me let Wamsi, Yes.

So obviously, we than anticipated. QX in better came

positive us, other chain, supply at in in associated chain So continued overall in column. challenges we impact by deeper on not quarter of to challenges demand. exacerbated look caused suppliers that slightly of But demand, and supply by the caused terms really do the as necessarily that's was second the supply lower our them chain some have causing customers' with but

internally. Second going specific a quarter be in than we but we had what to quarter February, lower didn't forecasted is it's I coming know little little guidance bit a in back lower. originally provide second

acceleration of As content outgrowth combination that's in that's megatrends or drive higher, you outgrowth for we've pricing. as always expected more to to of accelerate as going of the that well naturally us noted, a events terms is

the X.X% help first the the then as positive. up will quarter acquired We're overall latter little us And in first bit impact the quarter, the more the obviously, a year. or M&A part well. in recovered to was the So bit It most go in of pricing of about expecting cost, was a growth muted. but pricing aspect little that first,

sense acquired So We the terms some negative a there our Hopefully, but side that that the strategy of of and and little quite lower, in we're businesses market. on we bit you then contribute offset to well of that. positive on inorganic a side things. several outgrowth are growth, performed seeing overall of gives those is items other and think

Operator

question. comes Sachs. go ahead with from from Goldman Mark Delaney your next question Our Please

Mark Delaney

you're But into spoke chain through the you And you able raw them? quarter. Could Can much was a be how expecting first the in increases I willingness to pricing bit pass-through supply better cost. being for did materials some costs hoping how cost and to logistics specific from accept cost around in year? you incremental pricing those is understand now and be price confidence about fully price guidance full your versus what higher baked to also to customers' more talk much those dynamics. of

Paul Vasington

Paul. Mark, it's

So we're the side pricing the on getting every to traction continuing is quarter. improve

Jeff QX, As a bit bit in headwind said, little it become QX, QX. a tailwind in we it was still in a a of but to headwind expect

continues grow So as out. the pricing to material costs start to flatten

improvement it's job said, in more cost commercial I second financially. on very a like pass to So, continue us to great And make we're competitive of half first a with and to half. doing terms able lot off a teams being of really that to with work the customers of

Operator

from Matt Please question. with question comes next from ahead Stifel. Sheerin go Our your

Matt Sheerin

you're big get to looking the that a to an year Is to looks the that specifically start at guidance, automotive. in of sorry, production at full improves? gives rest as that wanted to supply the step fairly just like, year QX in we're -- you back QX up? and your What finally into that backing I on that step-up will guide going see transportation It improve confidence Jeff, side. expectation customers QX

Jeff Cote

it Yes, you're reading right.

X%. was the quarter Company-wide at was in look you market down If -- first

down of be we or market again, X% second quarter X%. of call last it quarter, year, to off expect Second

decline. So, a half a there's the first standpoint, from net market

half It's the our in first a specific the off the will increase of the It of will up. year. second of pick revenue insight-driven year. coming recover automotive Also to around that of couple expecting some is half in of are We areas.

think market down. the The and opportunity business So, seeing come last we're versus pockets where year. but -- we as I right, are the down has pockets has slightly overall that down, market of come there European has offset will come absolutely an that. some some HVOR well, has But of see you're expectation dynamic increase China

Operator

comes next go question from your Samik from JPMorgan. with Our question. Please ahead Chatterjee

Samik Chatterjee

seeing given but in run And bit can wins what's you have your that compared XXXX already ex-rate. wins? still XXXX. of because the dig to the that for quoting time would the eclipse that What remarks clearly, would on have into rate have wanted investors track you you in last year I year. in in some in early you And you're the activity macro, share guess, your it's seeing of Jeff, being prepared are moderated, I terms to some to ratably the visibility terms relation of a to assumed maybe that this mentioned

So is it really OEMs? on more by side? being color some is industrial it auto the there. you share Or can If driven

Jeff Cote

Yes.

key I serving we're businesses. the long-cycle primarily here is, think remember,

terms NBOs slowdown been we quoting So in we've a mentioned not NBOs over of in We quotes very the has the there in $X been our that billion opportunity of robust. that It's we'll and have that XXXX alone. had. teach-in be during in electrification

quite is high the activity now. quoting So, right

run it trajectory, not sitting extraordinarily and first April. year to we're ahead was of of rate on quarter, through would XXX you an first of months our basis. of four last it expecting was trend end an annualized I towards extraordinarily an well And we're tell here is strong the strong of what terms year the but that continue, In the

half of all confidence that electrification, have auto a electrification not them And insights. Again, And lot end serve. so, in of we of we're more the broadly remember, in with are the but markets we coming just is that. areas electrification focused that than again, associated and

us, continued that confidence through in opportunity longer success in giving terms customers, offering our we're term. tremendous that again, selling so to some our set grow, of to growth And having out and continues

Operator

question. comes Our from next with Please William question ahead Stein from Truist go Securities. your

William Stein

and of I'm detail markets overall specifically. to serve results. your about more you effects Shanghai, as and you acquisition the you hoping then the on speak Congrats in can little good influencing these COVID business bit and see the war in a how the Ukraine

-- prepared deeper in I having could this think maybe for having a your like us? impact, you neither material good of isn't these is remarks, one I sounded a it but wonder if

Jeff Cote

customers, on doesn't in based that or terms our not you components I'm be that So they for causing orders have because order disruption they question asked there's to what some broadly book, it's vehicles others that, more And movement other I'd glad it in based right? mean impact make to. supply them they're chain, upon of that the procure Yes, having swap allow equipment. when to it's to impacts the need not out glad the able an

in volatility that. of but managing a done And the has good team job so, very there through in is the market, terms

closely of not we We're now, talk is order the we're have terms the Additionally, volatility result in on here region seeing it's quarter, book, second in in effect which impact there's this supply European with our right overall end we're impact through managing about minimal and today. chain filled the of conflict the knock-on demand dramatically forth. like region, the so against So when right? the it impact But to XX% guide direct longer-term with impacted associated but market, as our directly the sit an Sensata. when that, revenue now look that's the impact associated or impact, doesn't right markets, for of in we everyone at you not that

Paul Vasington

second production the a that one in itself the guess add is China assuming market the thing quarter. decline is I in I mean in I would

and there that embedded actually, QX we're that So, for guidance the our and a conservative little more market. seeing embracing into we're and bit in

the it having reverses impact QX, an is that but in half. we in second So expect

more than So timing demand. it's absolute

Operator

Baird. from go your comes ahead Please with Luke question Junk next question. from Our

Luke Junk

out is to clean X was little bit Is Dynapower's the exposure on the sales. just in better parse presentation, energy you to a hoping XX% for if that their Slide of the at showed exposure or materials exposures possible it about at Jeff mining And a what extent, you including as little similar relative are this of some that clean you've more morning? things? bit securely legacy there to such unpack all, applications

Vineet Nargolwala

Yes, is Luke. take your This question. I'll Vineet.

is grids. So Dynapower energy, some our And electrolysis as with well the supporting to expand markets closely extraction, exciting this energy field the brings solar working so green is to the into us which as as opportunities really as running hydrogen end well from renewable micro gamut process the space. clean

the with pleased gamut, and runs So, portfolio end really brings Sensata. and to market the it the that exposure really we're Dynapower

Operator

go Spak comes ahead from Capital with Please question your from next RBC Joe Our question. Markets.

Joe Spak

clarifications. non-repeats the million first headwind, quick million inventory $XX million said mentioned I was some it the you prior, -- think quarter. you $XX $XXX just but that Maybe The in now also

relates is is including I Slide an to the so, remainder want that year? million electrification classification? of just that in $XX And Are tire on powertrain? you just And if win for million what the Or your part electric system, such clarify that. is that business the management like then $XXX a delta? increase of So that the to X, EV

Jeff Cote

you Sure, inventory to then get cover. the and question I'll want

Joe Giordano

Yes.

And looking year-over-year. high at production. versus we're our that re-casted a more production on share being we the into back So, to market shipping growth pressure where market the we use year I based gauge was sensor is went were found what analytical tool we into kind and QX of last that built.

time. model the it, in the to didn't it was we that QX, do and didn't So, capture like have QX we QX but at

So some the inventory it's last really a year's of -- of headwind a was growth build. of because recap

the and just that impact. QX it's growth So, profile, a we've excluded from

Jeff Cote

does $XXX that million delta set the citing represent between $XXX the a And now. had we million $XX million,

Paul Vasington

QX. all it's to isolated But

Jeff Cote

away. and offering over efficiency our combustion an electrified because in That's is an platforms your are apply there's I the of Joe, a in fact, question -- of portion or a accentuated So, we've when even on more as pull there's of on -- have think our environment, right? that talked the environment. our electrified port perception all wind, the to true. in product a not it, system about a in the large lot solutions There products that engine opportunity goes of you categories stronger

pressure about or is what tire management. a tire broader talking we're So,

offering the proposition is pressure So, a we've expanded tire tire the given in include to and management of electric higher value environment. an important how

for offering when So, answer your the vehicles. to selling the part first of electrified our to customer, duration last because absolutely, an of win electric we're an electrification question, it's legacy platform to going that's

XX% terms electric convert an the have In you the that. application, of talked uplift million about of today. other When from application a of your question, ICE to revenue, $XXX we've vehicle part demonstrated we an

the million that providing going given demonstrated EV But forward, and forecast in content customers, see is of doubling. so, sight a XX% experiencing that And manufacturing our for embedded electrified we're wins uplift. we that the for we're line $XXX

to occurs combustion we're engines that selling from the that in significant with as associated shift electrified be there'll outgrowth transition today. So

in Some vehicles produced, electric the is helps but those embedded content. of higher clarify in that it terms forward dramatically is look of Hopefully, things. overall

Paul Vasington

a the million side. not one there is would to just the add on the figure. It's company-wide automotive be think thing I $XXX that

business. Joe, industrial we example, question. including heavy to electrified and vehicle stations, goes charging content for the will into go industrial which our Thanks, revenue, for that So, also

the next have We one.

Operator

comes UBS. Snyder next Our question. ahead your from from go question with Chris Please

Chris Snyder

that margin So back majority the by being or ongoing very cost this despite driven the guidance price. half suggest inflation, continued the is a of strong commentary recovery seems

to back negotiated? So, the are still my are to have we drivers expected there we And guess aware for is And this price price should of? to. flow I the is, discussions any already Or the into question that agreed be half wait through numbers? improvement it also, being size just price these margin then

Paul Vasington

So three the things. comment on I would

So the confident be baked continue customers, that some yes, that's activity, feel half that we of first and to year some still our versus already elevate does as with commercial in the push to achieve of but has excellence pricing achieved work of it second ability in, we outcome. to the in

second half. from sequentially the to increase half do first volumes the is, Second

first additional improvements the second in we the coming savings always see productivity getting some are structure to And that the volume we not as in realize half we improve be third on are cost we quarter-by-quarter, getting So leverage and would our half. that did benefit volume. continued we and continue cost

Operator

from question. comes Please ahead our And question your Nik next Longbow with from Research. go Todorov

Nik Todorov

pricing XXX expect Just like, for the that how assumptions you target. it around XXX do for trending of much obviously, pricing for pricing. is the compared to Is another you your Can question year? sounds year full outgrowth this ago. points this XX days talk above changed basis to the year And to come from

Paul Vasington

pricing outgrowth Material in continue has significant I the days. narrative rise. is costs mean in XX last Yes, the the half. to come of costs portion and other to the a second going continue changed from

pretty And and inflationary been with pressures, we to as reacting very pass half. we're quickly and work see I successful it said, customers first proactively we've So, the in all on. to

to And be to need respond expect we're the been the in something we've here. I going we'll this to input it's successful going do have do long But costs we gain in continue to rising, more and We that in said, to second second half like successful far we way. as doing better as are as to momentum so half. believe the

Jeff Cote

XXX clarify, given first expect points But going we'll including to to high higher And range. is it's pricing end that. continue would look quarter, of of basis we those pricing, when the just above at us the in still actions. for commercial the the need we be outgrowth, implement net to the even that And

Operator

our from comes question next question. your ahead And Evercore. from Daryanani go Amit Please with

Amit Daryanani

you back concern ramping margins just around XX% expansion are is you're input thinking? the get back versus how you're cost guess from margin that think operating assuming half this investors XX%. Is the going worse this that today your the part. having that clarify think about I Because sort aren't confidence big to to any I I want When embedding, you in first the are half to of half.

stable assumption given that. before. Is And including understand guide not I get in would love Are XXXX didn't Dynapower quite this. yet? then, input curious, had just get I'm the you stay or or worse? your I answer Paul, to the you So, costs

Paul Vasington

guide. including So, not Dynapower in the we're

Paul Vasington

our It's to that. practice not do

closure a close. to way a occurs We have on

Jeff Cote

half. what But the the EPS we be we in close we second Yes. you gave would early accretion think if

pretty and been we've costs quickly. So material The on the pricing piece, I have very would consistent. rising been say that --

in are terms we amount tremendous in so a of that, of first to half, we the a overcome offsetting bit effort momentum that. and but behind And have

rises than assumptions around I would And the so, say material faster the pricing costs.

generates I high. So, and have the is it's second first in on start very to half. the the costs level positive as that half we we amazing, incremental said, then the in out didn't conversion catch volumes, volumes, that and profit And up, income material conversion

above grow to in half. volumes were expect second half where the the We in they first

Jeff Cote

would item months, inflationary given seen us. forward I Amit, look, trend a that's ignore we we've the And add the is, we for the when don't do behind last only XX that pressures

forecast it's to that going So, we continue do extent. to some

expecting going to that stops, of stuff bad don't going recovery. I ends time. conclude, those we're for will the know that. inflationary that a have pressures continue happen that that's be where to period answer assumed haven't to getting Now but There's only up, to to lot We're some and the we

Operator

And question. from ahead Johnson Please our Brian go next question comes Barclays. from your with

Brian Johnson

trade important do have one, automotive have with go other a about would but how pricing more Are don't Or price-downs however, and I in your same markets? beg a to pricing you the go the end contractually, have you price X, Tier the contracts stuck flexibility like OEMs you subject to productivity and Since recovery. pricing in ask to more supply a very to and the Yes. annual Xs for of in dynamics? you bit products? really of chain. are you're the your Tier just works into obviously lot suppliers versus secrets, vis-à-vis A auto

Jeff Cote

let because our normally take based regarding so me our this regarding seriously, So, -- have baked clauses. productivity very do we have expectations. want volume have is More adder Very with customers we've clauses are we We do what contracts. I arrangements cavalier into we not frequently, to frequently, long-term with pricing material customers inflationary start upon right? that we be with

we where viable to with be had is results new And sustainable cost company discussion. And success as adapt having customers. the is order to have, need we're their have make have, go the instances to there good for into them, is them living going we're part to out to they're having the in that us and year, trying we first evidenced by hard are and so, product really our pricing every explain to there that know and to in, that for there up must I but the improve will world but of that... customers conversations we and latter Hopefully, that to we're supplier dramatically their the the to quarter but expectation those results conversations are

Brian Johnson

that say Is follow-on. customers a Tier to Or X? generally is OEMs? you just When -- that

Jeff Cote

It could either. be

As discuss well by tier a as oftentimes, to go and largely directed we you know, we're that. OEM. the to But have

sometimes conversation accomplish, three-party of in what we to need be but with. can terms we are who of So terms contracted both it's a in ultimately it

Operator

from question David Please your Kelley comes from next with go And our question. Jefferies. ahead

David Kelley

quarter, how in end you maybe outgrowth full the Just in can think market the strong industrial that for expecting the order decline versus the about opportunity should year? X% we content of visibility you're light industrial and talk today about

Jeff Cote

Yes.

visibility business has have the given strong our the historically, industrial into above order and that where we in as factoring very conditions, fill less therefore, shorter industrial historically our times market But lead well, and So pipeline. into guide. we're seeing we're general well

than we're assume You field the would normally that each seeing our see against whole across rate it's that in the the form fill of businesses, to see. but safe company, we higher of

four not I And as were that we seeing when much is acceleration due area. ago, in had of growth, so we business historically the other we historically, we're three content that our are lands solutions years trends seeing mentioning seeing element clean what -- significant that energy or our which Industrial say is, in of you're seeing segment. toward we're to in industrial. Part And trends

businesses GIGAVAC the into space. land acquisition in we're that well the as that industrial as go applications contactors and that the of think So acquiring that

opportunity historically results market assumption basis, year-over-year we're X% going We're we're out, we're segments right? and in revenue, more in we're that near-term given seen. we see on seeing more basically that it outgrowth seeing an market And in it basis. a So, a down see year-over-year than have you market flat of for on well. long-term in high-growth would strategy the to revenue more in playing The as -- investing is a

Operator

Wolfe question. comes next ahead question our And Patil Shreyas your with Please from from go Research.

Shreyas Patil

Last quarter, and/or the little more inflation kind sounded related wage price like increases. talked to of it nature cost year. incurring its And whether inflation this Tier about you X a you're of it's the structural

if that price to carry of the be of nature back such environment? the going wondering we the And sort price of periodically go the the recoveries recovery? to drive the talked of are of typically, in business? you'll per be are productivity in second one-off I'm customers a understand have that to in And of productivity improvement? that half. the of the do step-up to they wanted next that forward Or recoveries are you for kind you're higher to So just OEM some these about few factors structurally what what a getting, and some years, kind going are for And then, in terms the you I these for -- productivity are see what year

Jeff Cote

Yes.

let So me pricing hit question the question maybe hit on the productivity. and Paul can

we in of of our piece last on and the absorbed as that surcharge we were as incremental that last company, lot discussions half, second a average the an back to lot change. of customers. customers But pretty year, we In you talking half describe the cost this and than rather have on a pivoted a with during fourth I more if about to we when last quarter price part of change. hard started what them go we a that an are selling with basically, a pricing the first of to recall, year, the would experiencing recover about year, So ASP, costs

don't your We that embedded to that these anticipate so, will go more cost. some of a And away. it's costs point where gets

sure we of by And as it's future pricing way we'll costs lot our in point and having. make expect as preparing that. time. away be we're but we would that future go a price for or change it's that a stay, will around customer are higher it an But expectation that need those for add obviously, over of the readdress go wouldn't part-by-part discussion a away at customer, And opposed that. In the logistics more some would go on discussions to we're the quarter, we so, magically to to costs in that my forward, a just but

Paul Vasington

Yes.

comes get throughput better bit, but the side, productivity the factory. from On here often it weeds through to a the

higher-performing So more the in seeing to moving better processes it's structure, efficiency on less that yields output, driving better the mitigate labor continuously manufacturing cost -- our more we're manufacturing to inflation plants, of side. automation the

lot to that pull add we deliver So the of don't within at that when have levers it's get on cost the our we manufacturing incremental we a to as volume. consistently different leverage as well that volume

that customer taking things. as cost of we're increase. a dealing where So there well for different it used inflation bit pricing. main material we challenge Obviously, be that leverage the with bit is as volumes -- approach savings by operating material a are higher quite Those us. is a just gain a now with to And a

Jeff Cote

takes merit is unusual excuse our and is for year, digest this for to quarter because the quarter quarter, increase that throughout company. typically, a lower also a us pricing throughout -- first also then have And happens lot our merit first our phenomenon effect Usually, margin the an in the then quarter and not of our increase me. we global or

Operator

go And question question. your from Cowen. our Giordano with from ahead comes next Please Joe

Joe Giordano

like it I you or whether are not you're elevated you think know terms? not it build customers I want components how unit dollar now? is -- in any like your they levels right to think where of how but for at think? do liquidation, you calling we're of terms Like or do in about inventory now, know like

Paul Vasington

because that of us that let's insight. what Europe is do which remains we know say, do We to be how dealerships, difficult bit. low. But don't the many It's is for to inventory, a get days know know we struggling pretty

has We're situation assuming so basis. stable. still on we're a we're the pressure up. or happen, So, making still where if they think customers not saw and what our changed anything I a real-time we And feeling built in don't supplying we're sure that's to unwind anything new on dramatically,

looking the and on slightly is And things what half. there's we've a felt I seeing what market bit first are again, it getting better. with worst worse the probably which although And it's China we're in QX, and is the second months, we're still to slow. we line Ukraine expecting. better, you So, But is a back over obviously, disruption. a in the are the starting given But slow we now, COVID add better the things half, but just to that pressure six the going lot create of said still last get in in in seen little just improvement for that was continues think

Operator

from comes go Jim from question next Our question. ahead Suva Citi. Please with your

Jim Suva

is expectations Just everything. the and math to, announced the absolutely the results, full not great then or the help think HVOR But not strength beat And mostly again, recently it through on increasing. reason there. full the you But you again, us had I just year, mentioned to not conservative for you're said increasing spectacular you the bridge the side including flowing consultants you're can But year here, not you you're the difference auto QX, a than year? just acquisition. Or then bridge the your side? peak, more out QX the you're industry is again why rest you the of why

Paul Vasington

HVOR, all our started than would is say but pricing macro dealing little that automotive seeing given coming we're with. we're factors the half looks we're of we -- better some the different a better than But when outgrowth a little environment. seeing QX I in and and lighter Yes, in probably the year where second

the So, remains largely it's same. but little bit, mix outcome the has a -- the changed

Jim Suva

it get I now.

Operator

Please ahead next from our Filatov go And your question. Michael with comes Berenberg. question from

Michael Filatov

over aspects, Just quite if maybe And moderate speak it, two maybe a dynamics and could last, been remarkable other quick that are outgrowth know, know, been that some just wondering should are I was driving just on tailwinds years we there's one. I in so. yes, a working mean, but you when outperformance? the call that? or And obviously, regulatory that the bit? TPMS HVOR I I outgrowth that dynamics to has driving don't the expect

Paul Vasington

nice very we the that I China. NS in we're of trucking that the a of keep And the thing for not is one VI at we're up getting bringing end tailwind adoption cycle. So from still think

continue of which starts and equipment. growth operator QX, benefiting So controls, about electronics up, launches content in in other our type a to new we've outgrowth bit just for and whether that's application content sensing, hydraulics offered to quite new is talked and will sensing and it's seeing really here QX pick levers, still pressure other nice

Sorry these. any or jump run in you

Vineet Nargolwala

Yes.

content So on the and impact traditional the we ahead, as see do only higher than platform. thing electrified much further I we coming look electrification diesel on would add we is, in, do we platforms see of

in So, range the we guided expect be outgrowth we've the to to to. that continue

Operator

And to Mr. I'd reached gentlemen, that, over and of session. closing for the Sayer with back the question-and-answer we've ladies remarks. end like turn floor today's to her

Jacob Sayer

and again quarter Thanks, this participating investor later your or sponsored for you this our second Jamie, by were and couple now which Thank Stifel. you forward Jamie. earnings thank us for end us July. everyone I'd be in a Since Sensata. late look morning. conferences to for in on you call, interest We we at be to can of will morning seeing one those in events the call. joining the in quarter, will like Oppenheimer -- joining and then of

Operator

thank with we'll today's conclude the Ladies you do We and gentlemen, presentation. conference call. that, attending for

now your lines. may disconnect You

Sensata Technologies Holding (ST) 26 Apr 222022 Q1 Earnings call transcript