SENSATA FIRST QUARTER 2016 EARNINGS SUMMARY · Defense & Aero. Other. $3.21B in 2016E Revenue. 20%....

SENSATA FIRST QUARTER 2016 EARNINGS SUMMARY

APRIL 26, 2016

Q1 2016 EARNINGS SUMMARY 2

In addition to historical facts, this earnings release, including any documents incorporated by reference herein, includes

“forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward–

looking statements relate to analyses and other information that are based on forecasts of future results and estimates of

amounts not yet determinable. These forward-looking statements also relate to our future prospects, developments, and

business strategies. These forward-looking statements may be identified by terminology such as “may,” “will,” “could,”

“should,” “expect,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “forecast,” “continue,” “intend,” “plan,” and similar

terms or phrases, or the negative of such terminology, including references to assumptions. However, these terms are

not the exclusive means of identifying such statements. Forward–looking statements contained herein, or in other

statements made by us, are made based on management’s expectations and beliefs concerning future events impacting

us, and are subject to uncertainties and other important factors relating to our operations and business environment, all

of which are difficult to predict, and many of which are beyond our control, that could cause our actual results to differ

materially from those matters expressed or implied by forward–looking statements. These forward–looking statements

relate to analyses and other information that are based on forecasts of future results and estimates of amounts not yet

determinable. Although we believe that our plans, intentions, and expectations reflected in, or suggested by, such

forward–looking statements are reasonable, we can give no assurances that any of the events anticipated by these

forward–looking statements will occur or, if any of them do, what impact they will have on our results of operations and

financial condition.

Forward–looking Statements


Q1 2016 HighlightsON TRACK TO DELIVER IN 2016

Net Revenue of $796.5M, above the midpoint of guidance (increase of 6% y/y) and Adj. EPS of $0.66. On track for full year guide

On track for planned margin expansion

Regulatory journey a driver of content growth

Early design wins with CST

Autonomous driving an exciting area of growthfor Sensata

Net leverage ratio down to 4.5x;Paid down a portion of outstanding Revolver in Q1


$2.15$2.38

$2.75 $2.87

0%

5%

10%

15%

20%

2013 2014 2015 2016E (mid-point ofguide)

Adjusted EPS and ANI MarginAdjusted EPS Reported ANI Margin Core ANI margin (exc. Acq during integration, constant currency)

Sensata Has Significant EPS Growth Potential10% ADJ. EPS CAGR SINCE 2013 - ACQUISITIONS INTEGRATION DELIVERS MARGIN GROWTH

Core margins near target range, including fully integrated acquisitions (e.g. Wabash from 2015)

Acquisitions dilute margins during integration

Significant recent acquisitionsfinanced with low-cost debt

As demonstrated, integration of acquisitions and operational efficiencies enable reported margins to reach targetHoneywell Onboard - 2013 onward

SensorNite - 2013 onwardWabash - 2015 onward

Coreincludes:

Target ANI Margin: 20 - 23%

Chart1

Adjusted EPS and ANI Margin

Adjusted EPS

2013201420152016E (mid-point of guide)2.152.382.752.87Reported ANI Margin2013201420152016E (mid-point of guide)0.194000000000000010.170.1590.1530.174999999999999990.2Core ANI margin (exc. Acq during integration, constant currency)2013201420152016E (mid-point of guide)0.194000000000000010.195000000000000010.194000000000000010.202000000000000010.1530.190.23

Sheet1

Reported ANI MarginCore ANI margin (exc. Acq during integration, constant currency)Adjusted EPS

201319.4%19.4%2.15

201417.0%19.5%2.38

201515.9%19.4%2.75

2016E (mid-point of guide)15.3%15.3%20.2%2.87

17.5%19.0%

20.0%23.0%

18.8%

19.7%

18.7%

200910.9%0.86

201019.9%1.77

201119.4%1.96

201218.7%1.96

Adjusted EPS and ANI Margin

Adjusted EPS

2013201420152016E (mid-point of guide)2.152.382.752.87Reported ANI Margin2013201420152016E (mid-point of guide)0.194000000000000010.170.1590.1530.174999999999999990.2Core ANI margin (exc. Acq during integration, constant currency)2013201420152016E (mid-point of guide)0.194000000000000010.195000000000000010.194000000000000010.202000000000000010.1530.190.23

Target ANI:20 - 23%


Regulatory Journey a Driver ofContent Growth

2015

2025

Euro VI2014–2018

SEER 14 – HVAC2015

HVOR Tier IV2015–2018

China National Stage V2016–2018

CAFÉ2018–2025Beijing VI

2017

Euro VII2019–2020

On–board Diagnostics, US

2018–2019

Real Driving Emissions, EU

TPMS, China2019–2020

TPMS ELECTRIFI–CATION

EXHAUST TREATMENT

ADVANCED TRANSMISSION

ADVANCED BRAKING

CRANKCASE PRESSURE

GDI ADAS

Q1 DESIGN WINS:

High Temperature

Differential PressureCrankcase Pressure


NA Auto

EU Auto

Asia ROW Auto

HVOR

Industrial

App & HVAC

Defense & Aero

Other

$3.21Bin 2016E Revenue

20%

5%

26%

17%10%

6%

4%

2%

3%

4%

3%

CST Expands Sensor Growth Beyond AutoEARLY NEW DESIGN WINS

EARLY WINS

PRESSURE SENSOR WIN with major N. American systems integrator

Industrial chillers and rooftop HVAC

LINEAR VARIABLE DIFFERENTIAL TRANSFORMER (LVDT) WIN with worldwide aerospace control systems maker

Major aircraft autopilot systems

~10%ADDITIONAL NON–AUTO REVENUE

CST ADDS

$


Night Vision Assist

Forward Collision Avoidance

Pedestrian Detection

Traffic LightDetection

Partnership Brings Sensata Substantial Sensor Growth as ADAS is Adopted

* Source: Strategy Analytics, February 2016

• Potential LiDAR market opportunity of ~$1B by 2020*

• Well positioned to win in one of the largest ADAS sensing opportunities

• High performance LiDAR is key to semi and fully autonomous vehicles

• Mission-critical application to enable ADAS

SENSATA BRINGS SIGNIFICANT VALUE:

New product launch experienceManufacturing expertise

Deep customer relationshipsGlobal presence

LOWER COST LEADS TOWIDESPREAD ADOPTION OFAUTONOMOUS VEHICLES


• 8.9% acquired growth including exited businesses; net revenue declined (0.9)% organically, as expected

• Core ANI margin of 18.4% (excluding DeltaTech, Schrader and CST) (19.6% on a constant currency basis)

Foreign exchange detrimental impact to net revenue of (1.9)% and Adj. EPS $(0.04)

Q1 2015 Q1 2016 Reported Growth

Net Revenue $750.7M $796.5M +6.1%

Adj. EBITDA $173.3M $187.7M +8.3%

Adj. Net Income $110.9M $113.2M +2.1%

Adj. EPS $0.65 $0.66 +1.5%

Free Cash Flow $65.2M $102.0M +56.3%

RD&E index 7.7% 7.7% -

Q1 2016 Financial SummaryADJUSTED NET INCOME GROWTH OF 8% ON A CONSTANT CURRENCY BASIS

Q1 2015 Q1 2016Core M&A FX

ANI DriversContent growthProductivity gainsImproved capital structure

M&A Delivers ValueIntegration synergiesCST flat

Hedge Net Earnings Volatility80%–90% hedgedHedge value strongest in Q1

$0.65 $0.66$0.03 $0.02 $(0.04)


Acquisitions less exited businesses added 2%

Foreign exchange (2)% negative impact

• Automotive organic growth driven by increasing content in Europe and China

• HVOR impacted by weakness in North American on-road Class 8 trucks

• Integration of DeltaTech and Schrader improve Performance Sensing PFO, despite currency headwinds

PROFIT FROM OPERATIONS

Q1 2015

$591.3M

Q1 2016

$597.2M

Q1 2015 Q1 2016

$143.9M $145.8M

24.3% 24.4%

Q1 Growth y/y % of ST Net Revenue Reported Organic

Automotive (inc.TPMS) 61% (2)% 1%

HVOR 14% 15% (3)%

Performance Sensing 1% 1%

Q1 2016 Review: Performance Sensing

NET REVENUE

HELD MARGIN DESPITE CURRENCY HEADWINDS


• Continued weakness in certain end-markets

• Margin improvement despite dilution from CST acquired revenue

• China improving sequentially

• Comparisons better in second half 2016CST acquisition provided 33% growth

Foreign exchange (1)% negative impact

Q1 2015

$159.4M

Q1 2016

$199.4M

Q1 2015 Q1 2016

$63.2M$49.2M

31.7%30.9%

Q1 2016 Review: Sensing Solutions

Q1 Growth y/y % of ST Net Revenue Reported Organic

Sensing Solutions 25% 25% (7)%

PROFIT FROM OPERATIONSNET REVENUE

SUSTAINED HIGH MARGIN PERFORMANCE


Q2 2015 Q2 2016 Guide Reported Organic

Net Revenue $770.4M $800 – $840M 4% – 9% (2)% – 1%

Adj. Net Income $124.6M $117 – $127M (6)% – 2% 3% – 8%

Adj. EPS $0.73 $0.68 – $0.74 (7)% – 1% 3% – 7%

Diluted Shares Outstanding 171.7M 171.6M

CST acquisition providing ~10% revenue growth

FX detrimental impact to revenue (2% – 3%) and earnings ($0.05 – $0.06)

Q2 2016 Financial Guidance

Performance Sensing flat to up 1 percent organically

HVOR on–road weaker

Sensing Solutions downward trend improvingChina appears to have bottomedBetter second half comparisons

Excludes FX, CST,Exited business


FY 2015 FY 2016 Guide Reported Organic

Net Revenue $2,975M $3,140 – $3,280M 6% – 10% 0% – 3%

Adj. Net Income $472.0M $470 – $515M 0% – 9% 4% – 11%

Adj. EPS $2.75 $2.74 – $3.00 0% – 9% 4% – 11%

Diluted Shares Outstanding 171.5M 171.7M

2016 Financial GuidanceON TRACK FOR YEAR

Excludes FX, CST,Exited business

• Utilized strong free cash flow to reduce debt by $40M in Q1

• Target net leverage ratio to be below 3x; willing to lever up for accretive acquisitions

• Balance debt repayment with high–returning opportunistic investments

Long History Of DeleveragingPROFITABLE, HIGHLY CASH GENERATIVE BUSINESS ALLOWS FOR SIGNIFICANT DELEVERAGING

7.0x 7.0x6.6x

3.1x

Honeywell Onboard + SensorNite

3.4x

2.7x 2.6x

Schrader4.4x

3.5x

CST4.6x

4.5x

3.7x-3.9x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

Sensata Net Leverage Ratio


Sensata Remains Committed to Shareholder Value Creation

Sensata Wins In Sensing, outperforming markets with leading margins

Acquisitions diversify end–market exposure and provide earnings leverage

Double–digit long–term revenue and earnings CAGRs

Strong cash generation and disciplined capital allocation

APPENDIXSENSATA FIRST QUARTER 2016 EARNINGS SUMMARY


GAAP to Non–GAAP ReconciliationSensata Technologies Holding N.V.Reconciliation of GAAP Net Income to Adjusted EBITDA and Adjusted EBIT($ in 000s)

Quarter EndedMar 31, 2015

Quarter EndedJun 30, 2015

Quarter EndedSep 30, 2015

Quarter EndedDec 31, 2015

Year EndedDec 31, 2015


Net income $ 35,355 $ 40,900 $ 53,152 $ 218,289 $ 347,696 $ 60,612

Provision for/(benefit from) income taxes and other tax related expense 10,518 13,609 13,215 (174,409) (137,067) 16,195

Interest expense, net 34,761 31,562 29,706 41,597 137,626 42,268

Amortization and depreciation expense 67,651 72,041 67,538 77,273 284,503 78,765

Deferred loss/(gain) on other hedges 4,038 2,424 5,576 (174) 11,864 (13,273)

Financing and other transaction costs 19,822 5,974 3,659 5,598 35,053 781

Restructuring and special charges 1,156 17,657 8,502 9,743 37,058 2,363

Adjusted EBITDA $ 173,301 $ 184,167 $ 181,348 $ 177,917 $ 716,733 $ 187,711


Quarter EndedJun 30, 2015

Quarter EndedSep 30, 2015

Quarter EndedDec 31, 2015

Year EndedDec 31, 2015


Net income $ 35,355 $ 40,900 $ 53,152 $ 218,289 $ 347,696 $ 60,612

Provision for/(benefit from) income taxes and other tax related expense 10,518 13,609 13,215 (174,409) (137,067) 16,195

Interest expense, net 34,761 31,562 29,706 41,597 137,626 42,268

Depreciation and amortization expense related to the step-up in fair value of fixed and intangible assets and inventory 47,346 46,308 46,403 53,313 193,370 53,866

Deferred loss/(gain) on other hedges 4,038 2,424 5,576 (174) 11,864 (13,273)

Financing and other transaction costs 19,822 5,974 3,659 5,598 35,053 781

Restructuring and special charges 1,156 22,023 8,502 10,651 42,332 3,639

Adjusted EBIT $ 152,996 $ 162,800 $ 160,213 $ 154,865 $ 630,874 $ 164,088


Acquired Revenue(DeltaTech, Schrader, CST)

$0.40 - $0.45 ACCRETION IN 2016E$1.05B

Cash Returned2012–2015

7.5% OF SHARES REPURCHASED$500M

TSR from IPO

CAGR (S&P: 10%)

14%2015 TSR

(12)%2015 ROIC

13.0%

Sensata Financial Metrics Dashboard

2016 YTD: (16)%


This presentation includes references to Adjusted net income, Adjusted EBITDA, Net debt, Net leverage ratio and free cash flow. Adjusted net income and Adjusted EBITDA are non–GAAP financial measures. The Company defines Adjusted net income as follows: Net income before certain restructuring and special charges, costs associated with financing and other transactions, deferred loss/(gain) on other hedges, depreciation and amortization expense related to the step–up in fair value of fixed and intangible assets and inventory, deferred income tax and other tax expense, amortization of deferred financing costs, and other costs. The Company defines Adjusted EBITDA as follows: Net income before provision for/(benefit from) income taxes and other tax related expense, interest expense (net of interest income), amortization and depreciation expense, deferred (gain)/loss on other hedges, costs associated with financing and other transactions, restructuring and special charges, and other costs. The Company believes Adjusted net income and Adjusted EBITDA provide investors with helpful information with respect to the Company’s operating performance, and management uses Adjusted net income and Adjusted EBITDA to evaluate its ongoing operations and for internal planning and forecasting purposes. Adjusted net income and Adjusted EBITDA are not measures of liquidity.

Net debt represents total indebtedness including capital lease and other financing obligations, less cash and cash equivalents. The net leverage ratio represents Net debt divided by Adjusted EBITDA for the last twelve months. Free cash flow represents operating cash flow less capital expenditures. Please refer to the Company’s financial press releases, Form 8–K filings, and financial reports for a further description of our non–GAAP financial measures, including reconciliations of these measures to Net income. Copies of all the Company’s filings are available from the Investor Relations section of our website, Sensata.com, and from the SEC.

Non–GAAP Measures

http://www.sensata.com/

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SENSATA FIRST QUARTER 2016 EARNINGS SUMMARY · Defense & Aero. Other. $3.21B in 2016E Revenue. 20%....

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