ST - Earnings call 4 2023 | Sensata Technologies Holding plc

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Operator

Good day, and welcome to the Sensata Technologies Fourth Quarter 2023 Earnings Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Note, this event is being recorded. I would now like to turn the conference over to Mr. Jacob Sayer, VP Finance. Please go ahead.

Jacob Sayer

good and Drew, you, morning, everyone. Thank to Full Year like welcome you and Quarter Fourth Sensata's XXXX to I'd Earnings Call. Conference

and on me CEO Financial today's are Brian President; Officer. Jeffrey Chief Roberts, Joining Sensata's Cote, call and Sensata's

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

As we statement harbor begin, safe I'd to Sensata's Slide run on X. like

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

expectations today Jeff your XXXX. year he few begin markets updates Fourth after in release cover during our our remarks. First XXXX, overall about guidance will Quarter for of and then earnings provide will on a our prepared are capital highlights the business our and the our and detailed our financials Brian and GAAP take thoughts for We'll included for including XXXX. of will presentation financial Quarter the questions financials, end financial discuss deployment, the XXXX, full then performance Our materials. reconciliations non-GAAP of and I'll appendices on results with our

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

Jeffrey Cote

updated a you, we XXXX unprecedented while our our everyone. and performance. would to Fourth electrification months XX opportunity against ago, bottom X Jacob, backdrop. on an allocation line on financial discussed net M&A, themes themes future welcome, drive deemphasizing in that an Quarter capital a Thank reducing strategy were challenging key our On key leverage focus Those Earnings Call top and performance gross and and focused improvement market shape

against Let success. a progress to these provide our on take me drivers some minute of thoughts our X

of rise. on year-over-year XX% As million X, our component Electrification that future continues you XXXX. key grew conviction see to approximately revenue is in total revenue can or our Slide XX% of about a electrification $XXX to

The XXXX electrification wins. less to electrification driver X of years billion than increasingly new of our was an that after our XXXX, the business is comparison, of we time in of programs typically more business cycle and These revenue growth. include launch me confidence X% important great total electrification in wins For give and than $X.X XXXX. Between lines secured development award. X

scale overall this in also company. that enable is but adoption light generator fluctuate revenue a it is with to heavy positioned capture to value from needed infrastructure experience. deliver customers meaningful in our continues our increase industrial Sensata well efficient the While and fluctuations and significant not It increased in the automotive, to we and market, provides of in vehicles efficiency said, safe to our and technology, vehicles period, share to will electrification. That may trend business electrification may especially electrification of only the only period Sensata offsets and meaningful attractive

and use gross M&A and success, X.X we by down past X.Xx, we the leverage away our we of organic years X.Xx are to that where capabilities capital and of down the XXXX from interest careful the key investments to reducing loan last net paid rate term of our evaluation net set in-house, seeing around over leverage. of was XXXX as and year and progress we $XXX already full I'm from theme X.X leading-edge dropped based December. half allocation. good shifted The our in of best now our electrification. With we retiring higher made towards million respectively. In capital first pleased a made strategic bonds XXXX, eliminating second is most We approximately growth debt on couple of determined invest key this in and that

core our the we future strategy. of With focusing investments capital best focus and for shareholders team, sheet clear in in going deleveraging share paid electrification $XX We stock also company the forward million our component of open back We on also there market is our of committed allocation a have efforts repurchases. Prioritizing dividends. opportunistically profitability. investments while our $XX in and remain to our bought insights, overall million the area is balance the narrowed undertaking our for

are for focus business Insights as strategic continue investment to our We hone alternatives exploring we strategic priorities. the and

me with the and end brought theme and effectively will complex of solve to we to the Throughout transformation. change customers, including while several period, that numbers, chain you unprecedented impact Finally, take around discuss The financial pandemic, engineering them extraordinary we years the material market third the Brian serve, last disruptions, performance challenges. the let through supply more our end broadly. helping increasingly this operational their partnered inflation markets

adjusted not revenue there This have immune challenges, business worked the pressures. And of navigate short-term market disappointing. operating our has to these was impact while these to margins. in been we a to business, been has lower-than-expected our and However, form

especially negatively gas our America China, less EVs in have have where by share in and UAW was local ramp-ups OEMs per taken to we mix, as and our in from compared multinationals. In diesel from business vehicle Europe, softening share automotive the region lower on or where vehicles content market North impacted Specifically, EV revenue given strike.

on in destocking markets, in growth. our inventory declines and heavy market pressure experienced vehicle to also industrial end the off-road have We adding

job but inflationary increased increased pricing, recovering an offset through costs team efforts excellent in Our not did these fully expenses. did

industrial In the decline offset in headwinds, changed, these help has margins. Despite adjusted These addition, our market along have control has effect in operating a in business. rates factors, higher-margin taken of decline and to led we end these exchange our actions to challenges. business with mix resulting within a macro

In As -- XXXX we recent year-on-year. turn our X, end believe our to down the to cumulative IHS outperform basically basis to be we markets flat we forecast those points XX year, XXXX indicate but down on most is vehicle be Slide this expect will production expected markets. that automotive, to slightly

in market in reductions. In offroad China heavy strength contractual is price returning vehicle America as Europe, for vehicle us. segment offset pre-pandemic in by market third-party declines single-digit markets, well on-road dynamics, including forecast indicate Additional evidence that and suggests be as off-road the and automotive that end market resulting market heavy North weaknesses in will to in low

which to sales business, General Industrial HVAC, appliance global and industrial Our market, destocking impacting see includes and overall inventory slow expectations. continues construction a

continue these begin first half second in expect to XXXX. and trends subside the We year the of to the half in of

tire to expect new the continues aerospace backdrop, ramps and launch expected growth of converter leak certain outlook business, light take our vehicle HVAC of aerospace in sensors consideration of and platforms, in our growth business continued detection year-over-year. of continued launch pressure the and overall approximately of inverter business be growth revenue and to to is XXXX. This our market strong anticipated percentage we and see new heavy into based slightly upon X% on smaller up X% vehicles, flat sensors of this is albeit HXL Dynapower Finally, units. year-over-year to down launches a

margin, operating erosion. pricing, caused in structural adjusted changes and exchange business around rates revenue mix, our Regarding short-term our have margin

firmly Fourth 'XX, each from then of XX to and to We XXXX XXXX, slightly or of grow quarter margins despite Quarter greater increase of operating reaching by Quarter the XX% XXXX expect basis near-term XX points committed and margins headwinds. these First sequentially in quarter. We adjusted in per confident in about continue to sequentially remain the

me units that compared recent overall quartile to margins matters As It's our exposure, even of our operating business. impact as product our Sensata our on lines. noteworthy deliver peers. address mix shown and let X, automotive adjusted to challenges top on with and business continues Mix the margin to margins across Slide

later demonstrate, similar XXXX X points our percentage With end, industrial market operating basis compared in an increased points by destocking margins business charts end end a by shift industrial to trend automotive 'XX. with in our grow to XX while exception amount. This higher-margin begin in decreased destocking that concentration some by that the this XXXX. the of XXXX, will will As again, business reduced and our reversing product markets mix expectation

to XXXX. On in our and in content to platforms EV North also of currently In move from X, impact EVs our America, are basis saw from In and shift regions. local across China, to exposures among or players. business. euro margins peso, ahead auto, terms color share meaningfully XX points by into Further share [ given XX% key long within X ICE mix more multinational provide of given the exposures In ] EVs. want we added pound I the to are market rates ICE OEMs trends of vehicles shifts our to and we our average higher impacted currency addition, to X automotive balancing Slide

in vehicles, EV our of higher penetration produced multinationals. While trend. ICE increase year. half offset we platforms. We of content total lower generation local new today, across XX% product of pace China, on locally or categories, many from current business is EVs today are to lines In including than our average OEMs development on EVs the are on engines new on the should automobiles with wins work help country-specific In anticipated which local due only ICE should average gap this this XXXX content and prior in close in behind the 'XX compared with market we Chinese behind many at of to contactors product believe and brands Europe, but accelerated comprised market, We XXXX, the Europe. an slightly has the approximately

the Brian. Now call to over let turn me

Brian Roberts

morning, income of include adjusted per of revenue onetime Quarter, Slide the the period. UAW timing revenue the from reflecting both million settling October Fourth earnings in of Fourth decreased X.X% year of X% share prior Quarter the to year-end was was On adjusted per and highlights negatively $X.XX a operating of inventory you, procedures. Adjusted year a shown favorable by of In currency Thank everyone. higher of in the the Good $XXX prior impacted our adjustments as for mix from Key million related margin guidance, operating Fourth strike XXXX, Quarter Revenue basis, Adjusted by Fourth midpoint decreased the XXXX. decrease the constant was Jeff. November. million, than Quarter XX.X%. on share $X $X.XX quarter. from or earnings $XXX.X of X,

and on X% revenue decrease unit took from business and million, Slide from On Adjusted prior offset XX.X% goodwill billion X% the company from Insight the Quarter, X, per of annual slight year. shown a noncash primarily Fourth earnings $XXX constant highlights financial operating of prior or for a return and improvements. Adjusted to expectations the XXXX. costs $XXX operational due XXXX was by This to reduction, revised adjusted record million grew basis. million debt impairment from our on approximately in XXXX, XX% shareholders. X% per basis, related as $X.XX constant increase full in by XX.X% of mix unit. Key for share $XXX During rate $X.XX a currency the XXXX to to of approximately partially charge on earnings the an exchange, of of our year, year was grew inflationary a capital share currency or income include driven business focus

business Slide starting comment results X to our of Sensing the Quarter XX. XXXX, on Now Performance the like on segments of Fourth I'd in with

same Sensing currency. Performance Both Our content growth productivity, year. of foreign revenues approximately and off-road increased vehicle mix, and automotive and not of partially offset On pricing operating margins million, the compared largely rate margin quarter XX.X%. to currency slightly a primarily of heavy [ exchange. due an operating $XXX Performance was offset launches, of basis, year-over-year, with margins reported increase revenue market pricing X% to last line business by by ] operating decreased and operating mix product due million, was to Sensing constant Set Performance fully Sensing income negative XX.X%. $XXX.X

to on Quarter compared quarter the revenues shown reported decrease million XX% XX, a Sensing in as $XXX.X last As Solutions of of same year. Fourth the Slide

to offset margins partially Sensing destocking of aerospace was decline in driver by income Industrials Solutions decline, the Continued The was in in growth our due operating revenue revenue. industrial the of million year-over-year XX.X%. primarily $XX.X lower the margins with continued is business. operating

related XX, income of the were Fourth revised to and XXXX corporate and business. Quarter charge in Slide The on projections impairment financial noncash and approximately other $XXX to million to the of Insights outlooks. result segment our moderated growth operating business As operating of impairment shown million in expectations accounting including included goodwill the for earlier flow expenses was compared the not cash $XXX.X

While the in we believe for business. we review Insight's its are alternatives in confident market and on this our in investments have future narrowed resulting electrification strategic initiatives focus of opportunity,

costs. impairment the due other non-GAAP Excluding year prior other results, X% expense to and from increased excluded compared charge the higher Corporate by charges employee and quarter to

XX. Moving Slide to

To million year. focus free to Our full well $XXX inventory renewed represents and our at we working points free results XX to We with control million in million. as our be on flow in are expected on the adjusted maintaining X.X% this approximately invested streams That net excellent in over rate $XXX our as conversion capital capital in XX% cash demonstrating spending. Capital capital to focused by income. Quarter basis flat have expenditures strategy year approximately allocation the $XX XXXX receivables conversion return cattle with of is over during improve our work increase XXXX, reducing and as XXXX. Fourth generated increased CapEx

$XX Our fourth December, by further metric improve this Xx the We of stock and for of end and X.Xx ratio and bought quarter the of expect million net the Xx by the in XXXX. full was million we below to the to $XX XXXX end year. of back end below leverage at

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

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

of the guidance billion. we revenue million $X.XX At $XXX XX.X% the first per For the share expect of earnings would quarter margin and expect we adjusted midpoint XXXX, $X.XX. adjusted approximately of to revenue range, of operating of

be in per range likely the we revenue, to results XX as anticipate X%. continued industrial and revenue Revenue markets to from margins Quarter to on operating rate points of earnings X% will in share. We flat our slowing, negatively impact year to Second exchange of year-over-year headwind destocking is of First slightly our full and to First expected million an the growth the the Quarters While to impact adjusted expect down basis margin pressure. it see with adjusted to $X.XX $X

our the The operating sustain confident margins, based ramping second deliver rebound targets margin XX% range X% year with revenues of half should with to X% adjusted performance. increases of expected remain and to of gains. quartile group, year-over-year and increasing launches to volume in we the new peer continues We and XXXX that products driving growth. Within upon productivity our top expect in Sensata

be in significant the leverage XXXX, gaining with However, structural differences margin business the XXXX adjusted in will since operating difficult.

product mix material Specifically, impacts foreign have compared between inflation experienced negative noted, high our and units. as to we to rates, and families exchange currency from XXXX, Jeff margins business

will facilities offset return to in price-down our our chains to trend. environment and productivity supply a we improve As OEM with customers, manufacturing seek we to this

XX benefits year this cost inventory to yields the with X, productivity negotiate higher would increases XXXX. automation improve we suppliers and pressure Quarter effective through on we hand expect to sequential margin navigate efficiency. First see ramp adjusted cost certain throughout of add cost However, Further, basis statutory to operating From and material quarter will as slowly margins. Quarter through XX each levels, January First points our reductions

for like I'd to closing Jeff the call turn Now back to comments.

Jeffrey Cote

Brian. Thanks,

outlined few a XX. with up Slide messages wrap as on key me Let

as directed transformation electrification. strategic on through focus you, this extraordinary our First, with for keenly your I work thank investors, now we our support want to

was earlier, of X% revenue, than I XX% in now which As XXXX less our total is business. mentioned electrification

longer-term than past We have years, won electrification X the more and $X.X in our that billion over opportunities fuel will growth.

may adoption for I'm occur ahead. days volatility that improve, confident brighter and hedge safe a rates. that business We markets EV our efficient natural Second, provides will and with of our know

margins sequential are see improvement but to prepared continue recover to peers compared than operating longer margin our to expect quarterly we to take adjusted year. initially perform Our this expected, we and will well and

Third, growth good our in is as per share increase showing the adjusted in XXXX. already strategy revenue capital results earnings allocation outpaced

we future what prioritize fourth, pandemic from know to of our earnings further per March and capital. target year, share inflation targets improve disruption with we did made continue XX% XXXX baseline and XXXX invested repurchases level. delevering being years. will seen worldwide the to named I Scope note emissions in highest market-based last have little CEO returns on XX We our emissions, while we've for In supply opportunistic goal addressing when progress X share immediate And the and I to XXXX, dramatic reduction early. Consequently, greenhouse gas X XXXX reduction raised held, chain closing, our was I'll massive that a in meeting

a see return than the ahead. about I environment. normal opportunities am now we However, more to ever more excited a

poised are engineering to best, most challenging challenges. and solve customers helping their to what We operational do them we our deliver

management and teammates execution. We have a progress. driving forward to across a focused team look than XX,XXX globe updating you strategy committed on Sensata the I more our

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

Jacob Sayer

Jeff. you, Thank

Q&A. we'll to Now would first introduce please move the on question. you Drew,

Operator

comes question Mohan Bank America. first of from Instructions] The [Operator Wamsi with

Wamsi Mohan

filling Looks XX.X guidance today. prior to every guidance margin like bps fiscal quarter. based op XX%. to for It's XX Wamsi to in your XX% the implied compares 'XX for Ruplu on [ is of That ] improvement XX to XX.X

you you XX restructuring, year-on-year Can XX, every the grow we from margin in confidence that said year-on-year you then can those help mix, a bps impact bps FX can remaining giving quarter? think size pricing, quarter-on-quarter, impacts headwind. us so is I what parse just into really bps So XX is XX our and

Jeffrey Cote

Yes.

impacting benefit the the that the that mix year, to of of We in outlined. coming we're did mitigate that around X the really It's some but the markets of impact did profile. really really experiencing. that speak last serving. is we offset is headwinds mix the restructuring spoke business the not and a from associated the Third which we about of years we're that But the X margin So with it's we've the are Quarter the items helping obviously, end

to an automotive, business a So relative automotive business. as higher-margin example, industrial, which is versus our

we the And -- goes us. industrial basis outlined that Quarter, as basis XX and product point Fourth XXXX also XX business across that or down, impacts impact as in that was a negatively, So point regions and was a families. to

The other is more impact in than year. exchange. to foreign the full around First going That's the Quarter

to I think in exchange, we're we of exchange basis we be we obviously, for terms a year, of full of year, the don't that as XX the depending the thinking of the the or year, modest control it's going flat goes. But believe for that's last full where rate on year. entered amount points maybe rate impact to

which that's starting volume that's there's So is to leverage to profile. impacting our terms obviously, is And well news. the mitigate, very margin ability in aspect business of then good gain the as which in the some of

Wamsi Mohan

to productivity have the half the year, conditions higher of to obviously, for work And here, of the want dive I kind as real room levels of cycle. X a of of a of this mean, of of things quick. X I I've add But need my as became doing just quarter in first that planning we I that through improvement as lot the do clear we we through especially budget around been go the our normalize. spent the things on deep is, inventory. part lot time first that

quarter as that XX half margins gives so first especially see throughout little which to lot in, and confidence productivity able year, the impact us we year, points X be the things And of going bit, should the forward. XX gains that basis of kick the will a per in improving that's improvement then a the to of to sequentially

Operator

Delaney The from with Sachs. next Goldman question comes Mark

Mark Delaney

for in in plans pace ramps OEM and automotive XXXX of the Is you bookings also considering target around of now XXXX. recent EV reported Given today their the billion had achievable? what the $X.X company slower the auto revenue for electrification years strong

Jeffrey Cote

XXXX. expectation know a of of Yes. penetration little about booked we can the It of fact the is as time, we that upon and EV have the end about based move XX% around talked of that bit. over We've that

So strong a million. we see to that of sight real line $X.X

sight in We other revenue based also growth million expectations upon fairly have business of the to in other of those electrification $XXX a good the market areas. line

off penetration hedge overall the in the listen, is with last that extent electrification, movement that be That we positive But of profile market of billion, it in overall there's penetration it the depend toward XX% $XXX business continue. to fact puts the development year. And company. That electrification growth impact either markets. EV but To of the real. the XX% about is down, the the rate we've would so So direction business. will migration and and takes grew the it going margin might if in $X be in our the trend talked million slows rates on to terms those may It's now business. toward of natural have or the business,

positioned we we'll feel and of won and evolves. watch So what in the capabilities what are, market how our we've closely terms well

Operator

comes with question next Matt Stifel. Sheerin The from

Matthew Sheerin

this given the to a X peers of guess question and visibility correction X% ask guidance that confidence to I suppliers guidance have growth. the the of year, lot just year your could are around and that not for take is, I wanted giving inventory due you also X% any your to visibility concerns of for longer. just actually kind that what and lack the

could by So sector process growth us in just your by sector walk thought year? rates you for the through

Jeffrey Cote

Yes, be I'd to. glad

forecast, you right? impact believe the growth in impact on share various terms to IHS going weighted we in for We automotive upon we platforms the how and we is business. different and in believe focus adjustments where content better -- us to that more OEMs. we our being of In with on we're to forth then the our IHS in the company it's are and forecast have much conscious business So have based XXXX, past, follow so

that the IHS full down, auto understand forecast. Right it, We IHS to following the we with customers upon believe the latest -- to we're is is what call forecast launches So going now, have that our happen based points. were this from into were in you automotive view we terms their where and full but that year into 'XX launches carryover delayed good 'XX, the business those to of giving guiding the First of feel Quarter. basis product fourth year a We're for market from some about year engaged that XX we're specifically is.

would a points call a market that -- the basis the X% we a HR [ up are around forecasting points XXX somewhere So down. automotive of business up In third it, our couple market call market, in ] XXX down, we couple believe parties in X%. basis the that's

comments, but my in weakness and of Europe had in that's in on China a I mentioned result on-road As North also truck America in strength prepared road construction.

to year, Aerospace, the to growth first XXXX. shining a market be that of really market up the be single-digit that little continue heavy would high down that then for in view little the to first dynamics, into more vehicle destocking, going with market continued we baked a the Industrial, be half recover that some expect expectation market. And do single would the will to in the bit digits to we back in get to our the for full have sledding expect terms of be year we star half So but bit. is tough but

Operator

question Glynn comes with Christopher Oppenheimer. next The from

Christopher Glynn

you're a to, but about of flow. missed role think, and free long-term guidance XX% know cash soft to 'XX conversion wanted I in 'XX a kind to question XX% new you to to year, then light outlook. here, was XX% at I compares I XX% after the ask Brian, and the your

on thoughts working that cash where flow should are some flows better are conversion. drive of lean free capital the and where to ability So the disciplines operating gates curious your and maybe

Brian Roberts

no, of years the of mean word, at right. chain to to if kind timing, last big and our it in us over focus. make or Yes, demands inventory, sure we've customers' to meet adjusted over up half right? able piece We've Obviously, basically a the can looked as -- slightly of or ultimately, cash it sure half converting make couple the try we and had you main income I quantity question. you're supply that's of in free great And of was X to different account we been needed flow. I net where sum important years, for it's to enough last could will, enough there company. was to really for it, lot redundancy that prioritization in the the a be a couple

working company in 'XX, to higher balances. there, through those said, better. reasons more hard the start of time, normalized and in can for overall to normalization. Certainly, And that we bit the down environment, talked impact will Now that one the it's job good receivable but do first as a kind we're inventory little cost work inventory the a adjusted taking of operating just That a we going it's management, take we've does of why half about look of margins year, as well of -- as we look the we us. where you'll on as for And to point we let that's that we improvement for term, longer to at we it to inventory. back key really mean come get no, this 'XX. be end piece to of your I'll got a So beginning 'XX then is try the result didn't going I the of the think 'XX sheet, balance of for manage the of we and again, should, at right? and kind end we naturally year, which flow payables, why

Operator

The with Chatterjee next from Samik question JPMorgan. comes

Samik Chatterjee

seems X of and a to and you. laid more some terms can insights, continues relative well. I Day of relation for fluid out bit in to I transformation, of in happening, sentiments relation the state sort that execution including the X you've we'll challenge had to here the to in that of in more you're around strategy Investor bigger that when but it just as think more electrification, your today's of the not that over mean, you to response be you in strategy time thoughts the I restructuring I think out did get of strategy adjacencies strategic an tracking be guess but those be to stable I is sort September, changing that of fluid. Any terms the sort of because that the It's in are you're to it, on a and in hear change to sort of Jeff, I investor continue earnings adjacencies macro terms think front. developments now report, of of

Jeffrey Cote

great And going several it's to bit I be we Day to years XX we in end what when I've was in net going end connectivity, around there's make you if realized known electrification the confidently serve. we with And very, at be serve. to early lines in experience very had March that the as electrification, relevant the areas of in there that very had wide, change to we and IoT and the been to we will that. will, state narrowing X think And than we to that XX. will, water, insights in I those be on to And look are long next markets term. I there that I'm is us this years question. -- were has change to make incubate cast to identified all changes resulted our the been say going that the last now needing to growth that wanted more sure really and that agree we in Yes, future, at certain we amounts to investments Investor sure markets in significant invest we what we of around we a over the little a we ago, we and talked that where highly the was fact stayed took you needed or XXXX, about autonomy, if that about enough that.

direction the we're the look has fortunate really were of of or in those But opportunities our terms the very you million we're business that achieving Now of of in of XXXX, meaningful strategy. that opportunities market. at the $XXX the was we pursued electrification the X dictated development XX% X when success fact

the that the We to serve have They capabilities help customers is the need for our our and company. future there.

to be experiencing. business new business that in Now manage can you and to revenue that the seeing And to area of restructuring It's need significant electrification. businesses we focus core see our painful around wins through in growth strategy will very are it relevant, need It's we're but the continue the to opportunity, the we that but to choosing go and where until but out for the toward about. electrification what the go where question. with committed We'll to Thanks find is toward all our need picking strategy be area. we that to is invest. continue very insights the -- investments business, very want we strategy

Operator

comes Fox next Steven with question Advisors. The from Fox

Steven Fox

expectations just you for on dial if your in Jeff, wondering was I could for XXXX. electrification

those kind expecting? influence expansion pool and Your thinking what its market products you're of this And on of is overall versus margins growth margin? also on that the how within year advancing

Jeffrey Cote

Yes.

the that So development. let product part start me is around with last which the question, of

build of accumulation monitoring, electrical continue contact expertise. And and we aspects from growth component opportunities But are partner -- all that technology. that that, at isolation organically the into other with venture the there's it's around through And we're of that Sara subsystems ] average that that [ portfolio an core meaningful of contactors strong to and China other with distribution getting in our We of units battery the it's pulled have current high-voltage very have is necessary joint protection transformation. to It's level propelling core we the but well. is order go on those much standpoint very that it's our customers of in components go in price are broader. the to sensing, as the a sensing by where or selling way, form customers an it's for to this our

So there's are capabilities product and around necessary the of the markets technology different different world. types in that

growing of be the out of time. the wins business demonstrated several built been that that portfolio during that's in last we've new nice and the And a really we've period So the over market. magnitude to serve to form experienced again, that able of years, it's

vehicles. In around rates experienced penetration XX%. North XX%, of market, XX% somewhere XX% meaningful curve development electric China, China over the the XXXX, I electric that's in terms invested America, Europe in And in are around of with they reason we of years, of the Today, higher ahead why go that think have penetration X around models back vehicles. in overall they've the because and in Those penetration and options. XXX rates of there of penetration there's are there different we've many if so

that ebb but and a on happening. ship this. has regulation little different happen. acceptance This may and things sailed is bit So flow it, of Consumer the the with penetration

the And light vehicle, so that's only we've in it. double happening it's and infrastructure vehicle that's for electrication heavy support of necessary but to not really the why era in down

choices down that our good efficient, terms new follow spend to feel decide about that to watch then we in a where engine allocate want as it, money we're to more make things well. continue we'll and that they and So going if some on combustion serve in of we but market suit dollars. And they our investment slow customers customers that's of extraordinarily them closely do

Operator

comes with next Luke Baird. question from The Junk

Luke Junk

what mix you in and auto know things parse out and well. be growth I that EV wondering outlook have question if geographic you relative the that ramp? piece also what non-auto based of changing launches the you've your half is AAC expectation the I'm revenue could half your in as new the year just ramping to that relative on or The auto related of and product ramp are back second and any extent rebound to moderating to growth some whatnot the specifically contributing just injected assumptions on to in haircut conservatism for for curious

Jeffrey Cote

sure. Yes,

a big is So that's Yes, numbers, First XX.X on auto Quarter given of business. expected we're let at the portion 'XX right? me looking of touch be IHS million, units. million So the XX piece, about to

expected dip. Fourth Quarter. almost to the automotive up bit million XX%. be for up little $XX a by a the market, And there's then Third that's is to Fourth the It's Quarter quarter natural in Quarter, Second units in the

top So down on material at the the that are the down of all new capacity, then drive percentage or percentage associated net layer that X details we're launches X.X that with we're of production. building in of happening that's raw looking point overall that data on. would we we're And terms bringing point

we customers, of sure that a we're happening. So there's engaging year some terms closely with customers understand in really been of dialogue the lot to learned and more extensive last delays with occurred what's to much make that

we're experience to content to X% outgrowth growth accustomed But markets, that the spectacular it's growth, that X% launch growth upon itself upon we'll in schedules. so based normally reality the does not business. And the And honest, to market right? so market drive based that end be is isn't the the and

Unknown Executive

the look And coming regulation second we year add the I'll that question, TPMS by half your That's in have up product in the driven to just launches within Europe. for do of HVOR.

So bit a that leak feel about to expect continuing and X up like that detection makes we one. in HVAC little looks what us are ramp we where better demand see to The see there. given

seeing. it's we're it -- we've executing process, this mentioned in his mean, that we his and So sure we're I through what important as certainly against Jeff in well we've remarks, gone make that

tried of a continue goes just so to to fair we'll to watch conservatism think if third-party level the today. we've it that say build good in feel it's we into but and it required, pretty And obviously, data forecasting, as I about

Operator

as Wolfe Research. comes from The Shreyas with question Patil next

Shreyas Patil

talk a think of about little And reductions. how productivity actions contractual that price looking I to take that bit wondered impact you're the to the this relative to if could more year. you about

around You starting believe I they're mentioned come those annually. typically are X% to to back. X%

to the looking X you offset this about how trying price will year? through productivity just So -- be to think those reductions

Unknown Executive

great No, Sure. question. Thank you.

would expenditures customer of levels. the improve we also but continuously and I needs have driven couple to So our is investing been years capital lines in efficiencies over around and to say I be able facilities last for mean, the gain first audition

costs. half certainly that's year that's to the an find in to time a in area to around and here environment. be with think We're kind going find material to that an so those us And down OEM higher a more an us inventory. gains through help capitalized of productivity. Again, second to kicking that certainly of means going bit our in normalizing we it's price able what already, the environment to cost is work of Again, suppliers take working little

half more normalizing of as as of a purchase. headwind noted us a the that's benefit than little we we're bit again, the margin in back the the we bit Jeff for us. certainly a And But rates helper year. year, talk sequential we there beginning that's improvement also, as So more about exchange think think of gives little the a the continuing

Jeffrey Cote

would mention Yes. pricing the I is The thing only side. other on

a seeing from We're So return But going we talked price trend a about neutral significant in not XXXX. normal expecting down is direction to more environment. the were in X.X% more on pricing. to where price we a up

to X%, be environment the price are So of that cost prepared completely, curve offset we down try to X.X% we overall bending line have bend and where the to curve terms normal in to productivity would COGS ahead for but to we the see transition get it. the cost of back don't that

Operator

comes from Amit Daryanani The next question Evercore. with

Amit Daryanani

you just do hoping Jeff, can what as the guess I think two have there and is like margin contribution to operating today? first run that I X talk what XX% need that path well. looks a And there? you the about I'm one, get to would like? rate those reduction a cost And you revenue of buckets or combination of the just look

Jeffrey Cote

Yes.

right -- There can't revenue So expected about helps there's we not growth, that. But that on count no X% now. volume is X%, us tremendously. question with

talked the all more measures point the loan of currencies. try the things do to starting to to terms pricing little Brian dollar turn about going get those offset some in strength we're the are of other of impact at to productivity and versus So bit to productivity that a U.S.

that what's helpful to do -- a or we overall but that. full there benefit us So of terms big profitability do a experience. things is really the year, to for the of extraordinarily have are impact associated the the going going be to to we're mix, headwind the with on fact we business in But of that that the going combination those Longer-term well. of allow aspects it's that going not

get very so road us to maps road product product We the families we've lower have business we mix business. We've our that electrification net comparable the better gross but company calls to margin. more margin will have multiyear a or that the profitability that extensively are pretty talked that regarding built large of in where is at maps fact the level, it's at on margin level, dozen the prior margin

to a start as of so investment And drop-through overall we'll better reaches profile. equilibrium, terms see profile margin that in

Operator

from with Joe comes Giordano Cowen. question next The

Joseph Giordano

I up to the here. following just keep want margin on

But could still this I having competitors curious think and some right? of Is were in volumes issues absence as facility? pricing, well. business of with cycle I think think kind I that. if favorable X pre-COVID do mix supply pretty And there below -- margin I'm this margins pre for back -- the over when and of -- restructuring a we're from they levels? historical I chain mean, a a a here. maybe I kind the And almost think at I XX% struggled are at Sensing all of So Performance was getting up far kind there more to standpoint to everyone push others needed is point, like kind from just to more look is closer or aggressive footprint where effort disruption. maybe of you

Jeffrey Cote

Yes.

future. demonstrated making also you we X not was will on, more that can I new to a place business of on team Quarter -- long-cycle as wins. that a was in that's portion need in restructuring, that $X.X about business deliver bashful think in imagine, last of the new just And we provide make to want The billion growth the wins very Third years we large So like sure very wins we electrification. business, delicate the billion have really we're that doing deliver new balance have forward. of the It the over going clearly because business regarding to we decisions tough a but $X.X

in that. future, trying measures decisions We're And so around what areas a that balance. is with needle associated on to we restructuring difficult it strategy We're short long insights. taking the the regarding appropriate business is delicate term and the the are that are thread focusing believe

we else So look what it. decisions. doing we're can right we We'll pace to accelerate to at to the that be continue that's our at look to change. making commitment continue of believe

what we're footprint And now. From fairly with what on I consolidated. we've standpoint, so billion you mean, are and opportunities sharing we a acted right believe we're X-plus the business. for

-- get a comparable of we're and and We the growth there, that's XX, for our right? already to margins a world, to get the business, have of bit more recognize margin, which back don't short peers to take with to much a level not we of around investment need sites we and But to it organizations. to little have it's in XX time we term. and keep So on higher some XX, It's going the us business drives long-term is of we're what the XX our the backing working larger off 'XX. long balance just

Jacob Sayer

see that in as in safe we're We mind gross the today the And similar for your does efficient margin electrification. that improve will at side. electrification side with if And margin the versus and But EBIT margins, and in point to Yes. scale, helps. of gain you scale. not will, yet grow more that on keep to levels Performance us continue Sensing again, the electrification

to over As today, start the reason going times, we're tomorrow. a years especially the of these that Jeff and 'XX couple new see to noted the of which ultimately and we're in, growth wins, is investing really business hopefully kick cycles, in why part 'XX several of last lot

X drivers So those of big are it where is.

I And agree with Jeff. so again,

have the I to always important need do and to aspect, growth new wins smart structure, prudent we fuel and an cost the to but be going is ultimately business be it. think around we in

against them. execute So now to we have

Operator

from Snyder The UBS. comes next with question Chris

Christopher Snyder

time, more ] the since at years up worthy opportunity wanted already a accretive substantial or neutral And been dollars. follow Zirgawas investment maybe at company to I electrification bought margins. X even I the I it's Insights maybe at [ And Zygo of at bigger Smart investment on witness only is X million. business. was [ $XXX ]. probably thought But the that And the and least understand to

you So I something over happen? Are they competitive last X, guess my X Did than in thought? question is has years? changed new something more businesses the

Jeffrey Cote

Yes, it's a question. great

look and investing Samsara], model you they're the called Insights them. in if very they're business, growth not experiencing that But or comp company rate our is So public know business. to heavily that you most their notable in the at it's a may [ different, may

number require getting real. in with a different to model opportunity does share stream business there market then out two, tough number one, for investing very where other gaining it have business revenue are at to we investment it's model when, equipment is the in associated And terms But that have areas a in. Sensata's can't us in be more software. The operate meaningful run that of a we we So can and loss.

put the the full And optimize where that allow to in going business. we so And make the on that write-off we have work We listen, changing the to don't I a think investments it, we to our tough this we're it don't like decisions that I perspective but to business on potential. made, its holds. based like that think we've to water future achieve lines and upon

Operator

follow-up Oppenheimer. a have Glynn And Christopher we with from

Christopher Glynn

XXXX what Wondering outlook new if on organic was that. could clarify XX% business part of is for I on the Dynapower huge was what the backdrop you electrification revenue. think to wanted Just for don't wins? comment a and the your

Jeffrey Cote

Yes.

trying So 'XX. is the time summer of in think back here in to

from XXXX XX% in but portion half So sizable the the it's still that Power electrification growth plus we experiencing was Chris. had Dina inorganic, that we're of was that business,

Christopher Glynn

'XX? anything on 'XX,

Jeffrey Cote

meaningful. was XXXX as a target that ] what $XXX XXXX. continue up of we in we MBOs peak The XXXX And rent to in would well. will and in ended terms think be [ for We around at expect sourcing opportunities. year is

in area level of of is X So the a disproportionate or ago electrification. off heightened X years

Operator

This would for closing remarks. the over like turn concludes any Jacob our question-and-answer to session. back to I Sayer conference

Jacob Sayer

you participating in and Conference Investor the Tech Sensata Conference forward those earnings everyone joining Sensata. on X. us now First for for Investor in this or Morgan end which Thank the call. thank to at Thank you, our in this for and of look Quarter March XX to joining New call, in events late Tech San your be you in interest morning. morning Francisco on on seeing us Stanley York XXXX. AllianceBernstein We be may Drew, Drew. will one April will February you I'd like the

Operator

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

You may now disconnect.

Sensata Technologies Holding (ST) 6 Feb 242023 Q4 Earnings call transcript