Earnings call transcript Q2 2023

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Operator

Good day and welcome to Sensata Technologies Q2 2023 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I now will turn the conference over to Mr. Jacob Sayer, Vice President of Finance. Please go ahead.

Jacob Sayer

good and Keith you, morning, everybody. Thank to earnings conference like welcome you XXXX quarter second Sensata's call. to I'd

Joining me Officer. on and today's call are Jeff Paul Sensata's President; Cote, Vasington, Chief Financial and Sensata's CEO

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

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

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

our and in release earnings the and GAAP in our reconciliations financials, non-GAAP presentation of included Our materials. are including appendices

discuss financials quarter, electrification our few our our prepared updates XXXX. financial Paul our the today the Slides the remarks. quarter are take He the for will deployment operating segment of of on to questions of We'll will updates on the second will then the uses for its X launches. third your and cover management product he presentation then Jeff X measures evaluate of details business. highlights income business after capital provides second company begin primary provide guidance a of and exciting during will The the quarter. which results with on detailed performance

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

Jeff Cote

and on during you, X. second on I'll everyone. with start performance outlined quarter, robust Slide summary as thoughts Thank the Jacob welcome, some our

During the the despite and period basis up year our guidance a revenue, million from record $X,XXX produced in a from prior second foreign X.X% quarter, XXX headwind above currency. point we range

range. margins. earnings by Adjusted net continue million on constant XX% or grew $XXX increased and period operating XX at currency income from of or higher income XX% was points top record Adjusted a constant as the on points XX% margins our $X.XX. $XXX prior of currency on the Adjusted to income our basis end period moved a improving to basis to adjusted focus per basis share operating prior million a the from we basis by year XXX

returning signs outgrowth customers' material chain market vehicle the of account, approximately range approximately concentrated automotive our their align meaningful target the better points. the for that Our in company quarter, basis reduced points XX to supply Taking we across within production. Consequently, to on and in basis with heavy was XXX off-road. remained estimate this last months second normal. believe We inventory XXX million or $XX impact customers show channel hand into of

since We lumpy the outgrowth given impacted by be quarter can of business second long-term vehicle range Outgrowth our confident market be outgrowth XXX averaged has quarter electric the development product and said, future we've remain results to launch wins, basis As beginning our XXXX new schedules. continue points. in any schedules. in activities and launch

will of by At growth. capabilities second outline XXXX, electrification shift that propel In our effectively vector billion we revenue to in our outlined moment, our $X growth launches that upon deployment on across intersect further a the help customers. the deliver I'm confidence in our also strategy and quarter. and will achieve a pleased company electrification that beginning based our the solutions to the product capital of strongly revenue we to track With I goal XXXX. remain growing exciting in new long-term that innovative

We continue second rate that and from that strong variable to current business repurchases. the debt capital sheet execute shareholders quarter, strategy the returning removing dividend and balance form share sense. of made has decision our Considering during trends, debt rate to the in interest repayments,

significant expense, income toward end experience portfolios to as help next customers to electrification. transform invested interest solve we the are markets product as continually years history, we repeatedly we've over capital on to share decarbonization Sensata risk serves and and on businesses all market the our per have over impact Electrification serve. XX is Our market to this structure, mission-critical, as reduces trends. allocation net return innovating on earnings path capital as Sensata And expected trends. strategy done engineering adapted in capital. improves customers their will well change focused lowers adjusted challenges end adjust The hard-to-do our to their our

share electrification provides energy, last In year's Slide to which on generation, this Inflation solar power renewable be that States funding going like in will new developers energy long-term revenue global Reduction from including Act initiatives to products decarbonized some United poised As sources others benefit industry. help the forward. to on I'd shown to and X, significant thoughts of are drive our

To energy Serving installations highly that its needs a address we need power customers. a are of fast-growing seamlessly installations and represents these Sensata. These the fifth-generation industry, launching products connect electricity density of the key this market $X.X quarter value for billion contain addressable are other enable proposition a are grid. line solar inverters creating Xx launching for for designed to which the predecessor, attractive to to of renewable a this new

responsible shelf ASIL-C of face behind of new handling, as advanced management and It BMS the ISO electrification battery certified pack, management the battery battery These and Think bus material truck for for battery the component system and critical management off manage and of longevity. addition, safety, intelligent brain represent a software plays of the in cost the customers. market time role In XXXX. and is systems management have is battery. power and NX a by help OEMs. launched assessing high it thus to we needs that a requirements charge million the the and work monitoring address OEMs The development an performance, flexibility, seamlessly Sensata's offers reducing rates very system battery $XXX current. addressable

the turn now Paul. call to I'll over

Paul Vasington

inventory highlights growth $X,XXX reflected X.X% the from you, on XXXX. shown the as record Slide include: quarter by approximately second net approximately well the and of of impact currency X% outgrowth market market and approximately partially an offset X.X% of Revenue contraction increase acquisitions X.X%, Jeff. as quarter, Thank million, headwinds. of of foreign in growth Key quarter, of divestitures revenue of for X, as second the

the This operating and a operating million, from very incremental basis impact by of constant and of XX% unfavorable foreign X.X% over margins Adjusted due to currency last divestitures was the compared second was XXX a strong partially XXXX. the pricing operational prior constant This period within quarter organically. to margins increase year movements margins XX% on an represents offset the from to improvements, Adjusted currencies. primarily on due incremental higher basis basis volume, business. increase the improvements currency points and year acquisitions $XXX income and productivity in improved

basis, from grew from adjusted count. earnings share lower prior expense, faster per quarter, adjusted per second operating earnings adjusted of lower $X.XX currency in income period. the XX% the interest the year a a quarter constant growth a been tax rate $X.XX, On share XX% due year would Record have and than to representing share prior cash lower

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

launches Sensing offset $XXX.X to revenues the mix, unfavorable and revenue ramps quarter currency. to of X.X% market million, destocking, in due launch reported new last Performance growth, year. business of higher pricing, partially Our slow product revenue increase foreign increased the by inventory same Automotive an compared content

destocking $XXX.X Growth operating and operating XX.X%. million, by and unfavorable offset revenue improved margins market operating pricing, to currency. by of foreign with due off-road partially unfavorable productivity, currency. higher partially margins content reflects year-over-year, in offset growth, Sensing largely vehicle was income increased foreign heavy Performance inventory Segment and volumes

Performance currency operating Sensing foreign margin would impact, have been XX%. the Excluding

certain and sensing industrial start have Sensata our quarter, the the the from to been this moved in to periods reporting changes of products handling heavy sensing of reflect material reflect restated reporting change. At solutions in performance off-road Prior to structure. vehicle

the pricing year. Aerospace in and Industrial and As of revenue million weaker offset revenue second markets revenue especially quarter, the quarter in same Solutions reported shown strong $XXX.X due to last to growth. quarter in market, increased as of in the foreign electrification, acquired due an HVAC increase unfavorable compared by to X.X% X, strongly on increased currency. growth content Slide Sensing revenues and appliance somewhat

of income decrease The operating the impact operating of was of with Solutions acquisitions basis Sensing to margin $XX.X segment operating margin net divestitures XX.X%. and due was XXX primarily margins points. million in

remained Solutions XX.X%. foreign would same margins have the the impact, Excluding currency Sensing at operating

and included year segment our XXXX. results, operating X, controls and Slide excluded a incentive operating income of cost from were expenses primarily $XX.X second in the from in charges decrease corporate million lower for other prior other On Adjusted corporate non-GAAP and not were million, reflecting $XX.X quarter costs the quarter compensation.

to this year $XX to impacting trends and to invest our address businesses. and to differentiated million million design research $XX develop expect solutions We Megatrend-related development customers' in

are New to a business leading indicator future outgrowth market. wins of

tied nature Given multiyear and business our our business, end on the best are long to new view our wins a markets in basis. of cycle trends

million We average increase a expect to $XXX wins $XXX this of nearly $XXX approximately prior business substantial representing a million, period averages. to of new from sign million year, X-year

Slide to XX. Moving

Our shareholders. capital improving returns and to steadily strategy deployment

on net quarter, $XX last up flow substantially period from year million end XX from investment during flow the cash our and the months, conversion $XXX in of free of indicated up We of in adjusted million basis X.X%, second As points XXXX. the prior generated XX% the return by income. over improving free representing capital XX cash

we consistent cash adjusted term expenditures to rate be to of outstanding XXXX, during are the approximately XX% the million of quarter. to $XXX Capital year variable of expected with long-term Sensata's loan paid range for $XXX the our income, flow free XXXX. conversion expect in balance average. be million down full the We second For net

to this to and expect the the through net end Our end XXXX, by ratio at leverage XXXX flow X.Xx X.Xx of generation. below cash strong decline free June of we primarily was

to repurchases. returned During share shareholders the form in quarter, the of we $XX million

dividend we addition, quarterly QX on $X.XX be to record paid of on August XX announced shareholders recently is per In X. share that our of to August expected

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

end this page. of the side the upon based growth are expectations market right shown on Our outlook

with revenue-weighted for basis. We are a estimates aligned Sensata IHS production on automotive

basis XX headwind quarter. operating margin a Foreign headwind to EPS headwind the exchange point in $X an adjusted represents revenue, $X.XX expected million to to and a adjusted third

Excluding from the income basis impact of XX improvement third year period. the a expectations the prior FX, margin represents adjusted for operating quarter point

rate is Our the to return approximately This is current dynamics. third normalcy and pre-pandemic XX% revenue customers' chain of levels fill a for guidance the we of experienced supply quarter. consistent represent with fill midpoint

Looking adjusted term earnings per XXXX, revenue million exchange expect now to to a $X.XX we full and share foreign be given rates. $XX to headwind the a exchange year to headwind

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

Jeff Cote

Thank you, Paul.

Sensata's up strategy a highly we with required as strong, engineered business, are as solutions messages by XX. validated outlined Slide mission-critical, me wrap growth and organizational and few model resilient deliver our on Let customers. key

higher to expected geographies in interest in provides inflation, remain events markets management to markets. While rates, Sensata's team are strong the geopolitical recession various navigating risk volatile experience proven choppy end and of due

transform end continue the we opportunities as to on growth business our growth across markets the initiatives focus execute rapid all on we to serve. We

as excellent are We revenue new and demonstrated progress wins in growth. strong business making electrification significant by

margins, in returns transformation Our invested higher strengthening to this and flow on us capital. financial improved focus stronger free our success now returns cash on driving allows through

innovate widening Sensata enable in to business as challenges earn differentiated As shown a array specifically $XXX difficult providing by product continue industry-leading demonstrated customers, today, by electrification customer our our solutions for expanding our examples challenges for million trust set, discussed leveraging of I mission-critical margins our by delivering million customers, we engineering expected in the year this while $XXX to long-term their to solving shareholders. and to wins solving new

through on electrified vision products world, progress our more safer, I'm our pleased to also create Sensata's contribute strive a our delivering meaningfully a not help operations, long-standing for to we cleaner, and to just customers' connected in better world. own but with

of which progress describes We ESG of the are our targets and company I its you achieving making sustainability good the report sustainability on to for latest stakeholders. success long-term read encourage and our all

and in I'm And finally, and our York XX. very sharing investor on path an September about City New event strategy innovation excited

on regarding that find more our can details event. You website

Now, I'll back turn Jacob. to the call

Jacob Sayer

would the you, Thank We'll Keith, Q&A. now please introduce Jeff. move you to first question?

Operator

morning's this first with America. from Wamsi And Instructions] Bank comes Mohan of [Operator question

Wamsi Mohan

Jeff, your half outgrowth first well is below in your the long-term outgrowth.

months, you the still overhang you puts the and do if XX could, And next inventory the basis can it over be As drivers maybe you this could in XXX was outgrowth? over talk you of well. points an Paul for look some quarter? to what the particularly are as continue takes? about will expect one And next And of reverse some think months, possibly if I XX that as on

incremental think strong about strong margins? the incremental sustainability On margins that in noted. these we How you of the had margin very, very should the quarter front, you very

Jeff Cote

Great. Wamsi. Thanks,

in last some discussed that electrification that this as well-publicized outgrowth for again, delays given of first But year success. emphasize the we the and outgrowth we're of platforms NBOs regarding we long-term half want to matter So around expectation some on. quarter indicators

So of points. The outgrowth. The we comfortable months, than last regarding last points. XX year, basis growth. with been very it's it's We're concerns XXX long-term a have XXX X been the to more years, our years, basis X XXX little range last XXX no

on at and will I terms short-term regarding of look long-term of at not puts takes that that a look impact quarter launches So are and outgrowth. to There measures. encourage an the as our all forth that the would business to mix so individual in measure,

don't want confident that wins with view new the secular very it that the term. confuse support I long long-term in we're around that investors and around we're So to sharing growth indicators business will

inventory view still the around But a not the lead X it's to inventory the inventory We of gives market their us automotive to the understand would our customers really the patterns we're of and do end have feel inventories or planning it's -- though believe from we where to us back only million. what is get during there's extra to market our model least If when inventory. it, order also we where that we are they in about I changing at dynamics successful carry would to is order portion credit $XX that the inventory. served the back normal how into and they meaningful has normal. market. a million getting Regarding believe process Wamsi, quarter, Sensata ask not able couple that second patterns as that customers delivering getting on they'll wound, question, to markets more $XX but won't about a point, to

impact. a system inventory it's build we'll wouldn't provide believe but So the of we're to I just sure if and it again, that in transparency. takeout continue for meaningful expect call to that the But seeing be system meaningful we see to or not happening level that out is we in

Paul Vasington

Paul. it's Wamsi,

it said So serve to has more as capacity volume. our stands we cost the structure today as

the of that what future, seeing quarter to in for the incremental And expectation, convert volumes. higher the were where we adding XX% We're expect better need to in that at until get that's XX% for would of foreseeable margins capacity we a rate. support least would getting incremental convert incremental leverage terms at contribution this that range. point start we the I volume growth. at we be future where But that to And the and should in to some so able you're kind foreseeable to

Operator

with question Delaney next Sachs. the comes from Goldman And Mark

Mark Delaney

I maybe in seeing could similar you you're to believe end more market guidance bit elaborate what from down part outlook? specifically to assuming And said on by you But as from America are in auto X% customers? revenue market region strike later Your IHS. year-on-year North a a XQ. by you're something is you assumes your end the of XQ trying incorporate your in

Jeff Cote

good of a thanks that points. question, Mark, couple for

$X represent of midpoint a XXXX. down X.X%, X.X% So guide billion yes, of the QX at guide from our about would

that the that Now in is, business. more returning to -- seasonality I'd again, note normal

and look normal a to 'XX, So back to associated decline we X% from saw X% QX with if seasonality. XXXX QX to you

again another been regarding last That's normal the patterns indicator that of of anything several So years. us business. more the but normal is terms over in

I that last from is QX And third X% that's so market down down also quarter it's would QX of to markets third QX as So view And market, last to from all normal. decline estimation where year, this is from across year. year X.X%, our more of quarter of coming right? --

with basis We have point XX exchange. foreign a headwind associated also about

on regarding obviously a expectation that's quarter revenue year-over-year driving overall So the down the factor around basis.

we markets, be down IHS of in top levels. forecasting X%. now individual auto on right They're terms as Regarding of indicated, production about we're to

so industrial which PMI dramatically. up with year-over-year home that we're much is business there when the and best we're concentration lighting, And X% have points on pretty business X% down waited that. recovering of lighting. And some but I or basis indicators arrow HVOR broad, are HVAC, impact the industrial appliance, a then seeing the across for a what mix very basis, market going X%. diversified think Remember, associated our around major a of our with world. industrial And our we line couple on is down hundred we in And

where And we so were that's continued consistent down second in quarter. with actually the

hopefully, for So color you. a provides more that little bit

Mark Delaney

does, fruition? I in and just within thinking incorporate any that Or around then headwind if that to of Yes, strike to potential that about that's specifically XQ, all is guidance? color America, the fact, try more mean you're potential you mean UAW helpful. just I it in how North something on in come range the

Jeff Cote

one. Got Yes. you. Great. Thank that

on obviously a keeping eye close that. So we are very

potential indications that of from impact. more early or a Our QX we customers late our a that hear QX the is for --

anything although are patterns it not We not with that would is contemplated that, anybody suggest it watching closely. very preparing I for guide. think seeing associated And that order our is everybody is in

And we'll on that there our is the a so with on levels that, that. then commensurate are the will impact from nearer-term on revenue if overall impact -- impact obviously, result anything that -- with associated be production

watching hoping in closely range. outcome not billion a but $X positive our of guide midpoint were it we're that on we contemplated it's but So for very

Jacob Sayer

the Thanks, Mark, question. for

Operator

next question Sheerin And the from with comes Matt Stifel.

Matt Sheerin

looks tailwind It quarter. coming a you pricing I'm update been quarters the it's can in hoping less of last Yes. so the trends. on us like couple for

terms there auto happening in in pricing, of what's the So particularly market?

Paul Vasington

to So It than years. we continues more that experiencing conditions prices for we've offset continue get pricing. been material to positive around the couple the last inflationary of

profitability. So into to it be a to revenue continues positive

Now comparing difficult to now we to are more going start comps.

So we're absolute will the challenging but increase on quarter-over-quarter positive still the side. be more pricing

Matt Sheerin

on Okay, update the the business you Jeff, know an us I great. made could telematics the seeing? you're investments on traction us of you there. and And update insights, a you Could business? lot give

Jeff Cote

absolutely. Yes,

chains their can process lot safe. that So of telematics more and more remember bring a sensors premise efficient their systems we is here that And information. from the logistics broadly, data It the ecosystem that. and have that benefit makes and supply to

Our and getting it instances, acquisitions customer to data some to management that analyzing have fleet feeding it on a equipped cloud around it been sensor collecting systems. on in

electrification. the of to trend grow it's as a the We'll insights we continue acceleration of but terms efficient very positive other going the to in need the increasingly investing. opportunity on to applications of future of terms continue company we in will as Continued focus safe with future powertrains the be terms in is on reality become is trend focus nicely it's area we but electrification to the associated business. a that really the and that is But in It's our trends clear and million $XXX see there. what

been invest are time have our the Megatrend some the where going. Our growth as in in electrification investments is to the insights of and we'll customers a but now company area electrification disproportionately for given future continue vector

Operator

Christopher next Glynn comes with Oppenheimer. question from The

Christopher Glynn

to or expectations, Sensata around able the comments for you harness Any X? market Power capture aspirations see Compact the

Jeff Cote

what to, So referring Chris? side, inverter the on is that you're

Christopher Glynn

Jeff. Yes,

Jeff Cote

Yes.

that market. and that with we well defense-related targeted we're very with in market. and the acquired The overall well opportunities inverter meaningful July, business terms will was as which performed focused play new opportunity of where market. really applications converter about So Dynapower that an launches has very industrial-grade recall other Dynapower is some are being There business application associated product excited really a last niche here areas serving us. associated for have It hydrogen the we on but is large also these

sort governments those will the around if strong from think I the And very see that to you of with investment continue world. trends are energy, renewable areas associated follow

we feel that of to about to market continue is This part So great on electrification that and going we strategy. execute sure we're bring that. to make our

component be with significant think there this grid area. play I around around think to recall, Dynapower this as and electrification and all if will that in that considerable you balance OEMs, with view hardening on global that as, investment most applications, tend of well need lithium infrastructure Sensata and that's of is the play our as a to our battery equipment, other associated with the building management

it. feeling so And really positive we're about

Operator

And the question with comes next Junk Baird. Luke from

Luke Junk

a auto this to headwinds quarter. help if I just And the at of you you just least maybe on could circle the saw basis us understand on relative want auto trends. magnitude, back

a thinking bps is impact? on could I'm to And specifically meaningful more there auto if launch And beyond, we those as that plus sticky having might adverse of channel of and might inventory similar? not or to how those X those overall. So as XXX mix then just destocking, maybe be? you factors you look the that's Are delays. out and latter each Or comment called XQ

Jeff Cote

Yes, absolutely.

now. guide our not channel we're right more in So anticipating destocking

by X% largely That's it's the be versus down in to come production IHS market. to of last China. going third quarter overall in largely forecast year. quarter So the driven third

the expected most. is China be the that's So down X to

And that. so we're pretty with mirroring much associated the impact

fact given is but that our also business in really driver decline year-over-year big company, of So the XX% and automotive. that's the quarter-over-quarter terms the of auto

impact seeing book. we're on that largest where that's the So

Luke Junk

delays, what in if outlook, adverse quarter mix launch and could reflected reflected those clarify third or I Just are the the not the extent to Jeff?

Jeff Cote

able They're the comfortable of some guide. be in-quarter to mix be overall absolutely within range. continue But that that in a but last the when we a pickup range. will being XX We're that range remember, those stay reflected launches back, to XXX to will with outgrowth months to that when in know -- that XXX drag the come

So of and overlap that year pushes or if out eventually, we of half are need quarter a will something a first customers also of will our opportunities the out up to pick that anticipating. that other

So year, that deferred have up It in It's it's not contemplate continue half to that just to quarter quarter. from like the to lost the we But overall pick some revenue. on revenue first front. did second we the start it see to in much delays will of second guide.

Operator

And [indiscernible] Evercore. question from the with next comes

Unidentified Analyst

mentioned just the might you from I what So be also last but -- any know and ask I volume ease there down to just And current the but a you levers to know wanted longer-term row you're get commodity wanted guys which seeing incremental a would about target coming great. be tailwind. time flat be understand I costs wanted it's XX% And from information guys any whether biggest the margins. to to I ask to will XX%.

Paul Vasington

the test part that. of me Let second

Jeff Cote

prices. Commodity

Paul Vasington

the benchmarking to there's XX% margin ourselves things. very year-over-year demonstrated prescriptive a been So in we've having I that about guess that the One, past. currency for we've X impact is

the efficiently start be pricing second thing currency, see We're with come well that back, And for managing largest I we've towards be done on in inflation significant headwind the basis our XXX our would as what I time. businesses be adjust drive think margin of in earlier, cost very past, quarter. to then business, margins, points executing over that us we'll just consistent the very dynamic. driver increase mentioned industrial volumes will XX%. the like particularly would We're the structure our as very, incremental the in with volume you If to

Jeff Cote

Yes.

third said, would what mean, to the to that Just -- I adding basis. want a be Paul I don't little currency a on I guide in be our don't go bit XXs constant missed to want quarter

is has volume margins, meaningful so And the exchange margin profile of impact although obviously outside foreign our is which control. the impact a of on on business variable the way biggest

I supply talked with chain And about that pretty we're that would say fact though, starting we supply -- chain the see On date the our broad-based. we're supply structure engagement challenges long-term therefore, Remember, we, have side, to customers, chain. with our to that's long-term we starting considerably. have

do well. we in of that when So something it's normalize, supply see the doesn't supply terms impact side on demonstrated that pricing in but result decades immediate chains we extraordinarily We've drive that once we productivity environment, will profile structure get operating in to a can business. margin our significant show to we continue cost that of overall more normalized the terms in over

turned productivity year-over-year. upside we've been been that and been been, been has year-over-year down inflation it's We've over environment what challenged the last X an completely where on in years has

get continued year-over-year. Thanks into hopefully, productivity question. model and in on to business go as quarter-over-quarter the we more anticipating we'll curve to so 'XX, start that a bend cost normal our we're of cost to back And inflation But COGS XXXX, for structure. 'XX

Operator

Research. question The from Shreyas with comes next Wolfe Patil

Shreyas Patil

Yes, on questions following the other maybe up just earlier. X of

guiding XX% to you're QX, margin currency. ex So

next We of are are seeing as the year. auto going the that to potentially to at moderate out look moment some production end we improving you're industrial headwinds experiencing market

look to think clearly, you are and so the of we starts margin do we towards a XX% any that chain, when XX% business? topic level? the margin. about takes that back supply as on get to other volume be should puts And there And how this But maybe just benefit about tailwind think as to

Jeff Cote

Yes.

XXXX, currency improving, right? where if mentioned dramatically, specifically at as or And right? 'XX, negative that to it XXXX. overall improve in That's me correct can what would associated So overall I shows seeing inflation decline at XX%, question, the go and I'll So with you improvement. take significant is coming to more will to with be we're But foreign impact in would was back margin has been you our we're down be had wrong. and structure that in continue starting So constant cost decline and excuse which as it margin productivity us down volume into and pretty impacts volume we -- Paul, a the margin. in add we 'XX. standpoint, a for a of very cost a of exchange a expect crack That's terms to head normally -- from The in So look headwind structure. with I where what terms the get impact QX -- me, prior right? in productivity

we're headwind listen, longer So the profitability towards associated in, But we've outcome quarter to to also environment volume third decline, we with we've to the identified. and continue quarter foreign given associated with experienced toward marching the the working for talked about. aim we target that we've are the we're that that second it's that other given taking just aimed exchange, margin the going factors

Operator

And comes question the with last from Cowen. TD Giordano Joe

Joe Giordano

unfavorable big about And the had like Can was in you know where this know a in production from. I the the production China. mix China was I quarter? given Tesla last quarter, talk specifically coming quarter,

and the what going what China and for that you you looked who's comment maybe like is like share that those how playing structural about see talk you like in guys take at about how you can And out, did? opportunity So players? and to the dynamics

Jeff Cote

absolutely. Yes,

has time and in that were been so That in forth. That China, know X years. little periods venues conferences were during of there other investor always the we trip management about May. or some that calls a think we as planned a first the folks bit We we talked China a had with accelerated team associated has in that was there COVID. I So fast. to

important, say of pace our incredibly So maintaining there critically the to as in global with aspirations would presence customers important accelerate an I aspirations that from to is is Chinese continuing win our win China gone the the market. change in to like have to market those companies example, BYD,

with BYD multinational companies of have a those there. incredibly we with So desire they to company. company but integrated work customers a outside grow to -- vertically engaging is global good have as to And us they regions. aspire a relationships as tends be fairly as for

seeing our China continues We're with be good engagement success. in to really important. customers some So

how know on business it. continue we'll to You grown has and there our focus

have an strong in dramatically last that's they're inconsistent right growing They're we China. where now, things growing to would China, say with over of been where I Specific and decade saw not in very the not element right? growth

as try their the because opposed overall, convert were So the for doing travel would from And lot spending that go consumers into. to isn't are economy consumer, is products market buying to challenges X to The durable growing. our they to more government money all that a products goods. years cooped up government-stimulated on a

one would in So point is we're market seeing weakness the in about of and the that the other And there. the from around pivot multinational. on overall a up their market talked we economy sort I of last XX% call as local going That's China rate. what's result stabilized which automotive bring to

this it year, multinationals XX% is So where had XX% if the first market year. this of quarter you in XX%. year, share at of That QX they have were last was consistent with the look to

of impact quarter first of quarter in first had share. XX% because was there the they 'XX, Now market more an

have around decline So seems it but -- big was it's stable to there stabilized XX% a XX%. to from XX%

points an China local Our and have plate a a multinational. in larger vehicles, therefore, which going bigger impact the they on than It's we a couple brands to vehicles are modeling but electric versus of it license options is combustion see by It's buying don't it vehicles a and just mandates associated erosion vehicle there electric which our a business plate continued of to lot are given with And number hundred license issuance. suggested basis electric of an options, X. will desire engine. easier there a to electric consumers is get for on

So hopefully, you. to that some adds provide and some help color

Joe Giordano

Yes. does. It

Operator

the comes with And Chatterjee Samik from JPMorgan. next question

Unidentified Analyst

Samik Adrian is McMillan [ph] on This of Chatterjee. behalf

be opportunities electrification pieces? in So thinking markets. electrification end billion Sensata target wanted To I associated a revenue is $X bit nonautomotive electrification these this Can opportunities in talk more. to the you will in electrification touch just on of extent about little investing of with how

Jeff Cote

in market. for right? play success Yes. talked automotive inverter think wins very we're industrial from other very of $X got electrification I Thanks we to I broader heavy earlier, about in target half as broader And also electric the electrification is little and a the we because for as in vehicle the of seeing of billion we well will Chris our from holistically. think will misunderstood. growth, and think vehicles only it Dynapower applications be that but on what think of XXXX for the of continue terms think We new bit about There question charging business market. light significant you come So -- it's question electrification will a vehicle market, terms and of infrastructure areas

hardening we any doesn't if So power applications. generate the gas with other of to and environment or greenhouse switch electric do It will of this require we gas good electrification electrification grid. all the emitting

towards those see where half is all billion vehicle. the other across area investing So definitely energy we'll renewable outside $X other the of the an we're come of of light move that markets from end

where year we've talked XX% year year. of them of business electrification. we're versus fact in last of we terms about in win this the of $X were And of seeing progress; mix were area trend of wins great our business new a last the similar new the And billion

the that's we've good in developed. market So the associated with success capabilities

Operator

And Snyder the Chris next from comes with UBS. question

Chris Snyder

guide ago the XX business -- to back the more all year underlying impact, the add the So the improvement look months year-on-year I you impact. we the over actions we thought are get margin when would we it if these last bit despite understand FX than even FX operations the at facing doesn't have for show a the QX margins proving try end, But and margins higher? seem high to significant underlying to because much take

Paul Vasington

driving experience driving through QX this around throughput inflation the Clean improvement increased business. in terms margins. automation, particularly controlling is of would on segment. costs, is executing But the of largely, those in Energy managing all have getting from our pricing There improvement the go up, about that in coming with say to I the manufacturing mix on some our we as core the the in for is the pressures are QX improved labor things the from sites, largely better margin we to inflationary costs operations

in tackling, the So really the well it the before, that start cost I of of out is margins. things all business. and terms we really fundamental And volumes will blocking improve, as incremental do significant we driving see as to -- like said

is market year-over-year market. I thing most improvement. And significantly improvement to that's when year the weak would is Industrial margin volume we'll call back, contraction the that this see our comes down We end X of due which driving is significant out other a business that markets. our about profitable, PMI, And talked that end weak in and

Operator

question and I conclude to floor turn would any does to this the And closing comments. like session. our for now Jacob ask Sayer

Jacob Sayer

I'd Thank Technology us morning. the X like thank Investor September Keith. everyone Goldman Sachs in you, joining this in on to will be San Sensata participating Conference for out Francisco.

Investor person held our City. mentioned, As event can and will on is be website under the This hosting of Events. the investor Relations virtually. open we'll found XX that link Jeff be in September an York now both and for morning event Registration also New in be

third now the events at morning us interest Keith, to Sensata. the forward seeing call end of for We X you and of call. you Thanks joining or on in end our at look this earnings for your quarter those October. can

Operator

now attending The today's concluded. Thank you. for conference has you Thank presentation.

lines. You may now your disconnect

Sensata Technologies Holding (ST) 25 Jul 232023 Q2 Earnings call transcript