Sensata Technologies Reports Third Quarter 2021 Financial Results

Sensata Technologies (NYSE: ST), a global industrial technology company and leading provider of sensor-rich solutions that create insights for customers, today announced financial results for its third quarter ended September 30, 2021.

Operating results for the third quarter of 2021 compared to the third quarter of 2020 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.

Revenue:

• Revenue was $951.0 million, an increase of $162.7 million, or 20.6%, compared to $788.3 million in the third quarter of 2020.
• Revenue increased 16.6% from the third quarter of 2020 on an organic basis, which excludes a 1.7% increase from foreign currency exchange rates and a 2.3% increase from acquisitions versus the prior-year period.

Operating income:

• Operating income was $161.3 million, or 17.0% of revenue, an increase of $34.5 million, or 27.2%, compared to operating income of $126.8 million, or 16.1% of revenue, in the third quarter of 2020.
• Adjusted operating income was $201.0 million, or 21.1% of revenue, an increase of $46.2 million, or 29.8%, compared to adjusted operating income of $154.8 million, or 19.6% of revenue, in the third quarter of 2020.

Earnings per share:

• Earnings per share was $0.53, an increase of $0.04, or 8.2%, compared to earnings per share of $0.49 in the third quarter of 2020.
• Adjusted earnings per share was $0.87, an increase of $0.21, or 31.8%, compared to adjusted earnings per share of $0.66 in the third quarter of 2020.
• Changes in foreign currency exchange rates decreased Sensata's adjusted earnings per share by $0.01 in the third quarter of 2021 compared to the prior-year period.

"Sensata’s third quarter revenues reflect a continuation of strong growth associated with recovery across our heavy vehicle, industrial, and aerospace markets. Sensata’s automotive revenue also grew over the same period last year due to significant outgrowth and channel replenishment despite production declines due to constraints stemming from semiconductor and other component shortages,” said Jeff Cote, CEO and President of Sensata. “Sensata’s resilient and focused organization has enabled us to quickly and effectively adapt to continually evolving market conditions and broad supply chain disruptions to deliver these strong financial results. In addition, we are continuing to make good progress on our long-term growth strategy as evidenced by the pending acquisitions of Spear Power Systems in Clean Energy Solutions and SmartWitness in Sensata Insights."

Operating results for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.

Revenue:

• Revenue was a record $2,886.2 million, an increase of $747.1 million, or 34.9%, compared to $2,139.1 million in the nine months ended September 30, 2020.
• Revenue increased 29.9% from the nine months ended September 30, 2020 on an organic basis, which excludes a 3.0% increase from foreign currency exchange rates and a 2.0% increase from acquisitions versus the prior-year period.

Operating income:

• Operating income was $483.5 million, or 16.8% of revenue, an increase of $300.0 million, or 163.4%, compared to operating income of $183.6 million, or 8.6% of revenue, in the nine months ended September 30, 2020.
• Adjusted operating income was $608.4 million, or 21.1% of revenue, an increase of $242.0 million, or 66.0%, compared to adjusted operating income of $366.5 million, or 17.1% of revenue, in the nine months ended September 30, 2020.

Earnings per share:

• Earnings per share was $1.58, an increase of $1.31 compared to earnings per share of $0.27 in the nine months ended September 30, 2020.
• Adjusted earnings per share was $2.68, an increase of $1.32, or 97.1%, compared to adjusted earnings per share of $1.36 in the nine months ended September 30, 2020.
• Changes in foreign currency exchange rates did not have a meaningful impact on Sensata's adjusted earnings per share in the nine months ended September 30, 2021 compared to the prior-year period.

Sensata generated $125.3 million of operating cash flow in the third quarter of 2021 compared to $123.1 million in the prior-year period. The Company's free cash flow totaled $88.5 million in the third quarter of 2021 compared to $99.8 million in the prior-year period.

Sensata generated $393.2 million of operating cash flow in the nine months ended September 30, 2021 compared to $293.3 million in the prior-year period. The Company's free cash flow totaled $292.8 million in the nine months ended September 30, 2021 compared to $213.4 million in the prior-year period.

Segment Performance

Guidance

"Sensata delivered strong financial performance in the third quarter, posting 20.6% revenue growth and 29.8% adjusted operating income growth from the prior-year period," said Paul Vasington, EVP and CFO of Sensata. “For the fourth quarter of 2021, we expect revenue of $895 to $925 million and adjusted EPS of $0.76 to $0.82. Although there is still uncertainty in several of the markets that we serve due to supply chain challenges, we are confident in our ability to navigate these disruptions and we intend to resume our balanced capital allocation approach that includes both M&A and share repurchases."

Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will increase revenue by approximately $2.6 million at the midpoint and adjusted EPS by approximately $0.02 at the midpoint for the fourth quarter of 2021.

Conference Call and Webcast

Sensata will conduct a conference call today at 8:00 a.m. Eastern Time to discuss its third quarter 2021 financial results and its outlook for the fourth quarter of 2021. The dial-in numbers for the call are 1-844-784-1726 or 1-412-380-7411. Callers should reference the "Sensata Q3 2021 Financial Results Conference Call." A live webcast of the conference call will also be available on the investor relations page of Sensata’s website at http://investors.sensata.com. Additionally, a replay of the call will be available until November 2, 2021. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 10160754.

About Sensata Technologies

Sensata Technologies is a leading industrial technology company that develops sensors, sensor-based solutions, including controllers and software, and other mission-critical products to create valuable business insights for customers and end users. For more than 100 years, Sensata has provided a wide range of customized, sensor-rich solutions that address complex engineering requirements to help customers solve difficult challenges in the automotive, heavy vehicle & off-road, industrial, and aerospace industries. With more than 19,000 employees and operations in 13 countries, Sensata’s solutions help to make products safer, cleaner and more efficient, more electrified, and more connected. For more information, please visit Sensata’s website at www.sensata.com.

Non-GAAP Financial Measures

We supplement the reporting of our financial information determined in accordance with U.S. generally accepted accounting principles (“GAAP”) with certain non-GAAP financial measures. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance, and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures is useful for period-over-period comparisons of underlying business trends and our ongoing business performance. We also believe presenting these non-GAAP measures provides additional transparency into how management evaluates the business.

Non-GAAP financial measures should be considered as supplemental in nature and are not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as, or comparable to, similar non-GAAP measures presented by other companies.

The non-GAAP financial measures referenced by Sensata in this release include: adjusted net income, adjusted earnings per share (“EPS”), adjusted operating income, adjusted operating margin, free cash flow, organic revenue growth, market outgrowth, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), net debt, and net leverage ratio. We also refer to changes in certain non-GAAP measures, usually reported either as a percentage or number of basis points, between two periods and measured on either a reported, constant currency, or an organic basis, the latter of which excludes the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s) and the effect of foreign currency exchange rate differences between the comparative periods. Such changes are also considered non-GAAP measures.

Adjusted net income (or loss) is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted EPS is calculated by dividing adjusted net income (or loss) by the number of diluted weighted-average ordinary shares outstanding in the period. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Adjusted operating income (or loss) is defined as operating income (or loss), determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted operating margin is calculated by dividing adjusted operating income (or loss) by net revenue. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Free cash flow is defined as net cash provided by/(used in) operating activities less additions to property, plant and equipment and capitalized software. We believe that this measure is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to fund acquisitions, repurchase ordinary shares, or for the accelerated repayment of debt obligations.

Organic revenue growth (or decline) is defined as the reported percentage change in net revenue, calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign exchange rate differences as well as the net impact of material acquisitions and divestitures for the 12-month period following the respective transaction date(s). We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Adjusted EBITDA is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and other transaction costs, (3) deferred gain or loss on derivative instruments, and (4) step-up inventory amortization.

Net debt is defined as total debt, finance lease, and other financing obligations less cash and cash equivalents. We believe net debt is a useful measure to management and investors in understanding trends in our overall financial condition.

Net leverage ratio is defined as net debt divided by last twelve months (LTM) adjusted EBITDA. We believe the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.

Safe Harbor Statement

This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995, which relate to future events and are subject to risks and uncertainties. The forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, may contain words or phrases such as: “believe,” “continue,” “expect,” “look ahead,” “predict,” or “will,” and other words and phrases of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity or other financial matters, together with any statements related in any way to the COVID-19 pandemic including its impact on the Company. Although the Company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, no assurance can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results, or other expectations expressed in this earnings release, including, without limitation, the following: future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have a significant adverse impact on our operations including, depending on the specific location, full or partial shutdowns of our facilities as mandated by government decree, government actions limiting our ability to adjust certain costs, significant travel restrictions, “work-from-home” orders, limited availability of our workforce, supplier constraints, supply chain interruptions, logistics challenges and limitations, and reduced demand from certain customers; uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers and suppliers; uncertainties and volatility in the global capital markets; political, economic, military and other risks in countries outside of the United States; the impact of general economic conditions, geopolitical conditions and U.S. trade policies, legislation, trade disputes, treaties and tariffs, including those affecting China, on the Company’s business operations; risks associated with the improper conduct by any of our employees, customers, suppliers, distributors or any other business partners which could impair our business reputation and financial results and could result in our non-compliance with anti-corruption laws and regulations of the U.S. government and various foreign jurisdictions; changes in exchange rates of the various currencies in which the Company conducts business; the Company’s ability to obtain a consistent supply of materials, at stable pricing levels; changes in defense expenditures in the military market, including the impact of reductions or changes in the defense budgets of U.S. and foreign governments; the Company’s ability to compete successfully on the basis of technology innovation, product quality and performance, price, customer service and delivery time; the Company’s ability to continue to conceive, design, manufacture and market new products and upon continuing market acceptance of its existing and future product lines; difficulties and unanticipated expenses in connection with purchasing and integrating newly acquired businesses, including the potential for the impairment of goodwill and other intangible assets; events beyond the Company’s control that could lead to an inability to meet its financial covenants under its credit arrangements; the Company’s ability to access the capital markets on favorable terms, including as a result of significant deterioration of general economic or capital market conditions, or as a result of a downgrade in the Company’s credit rating; changes in interest rates; governmental export and import controls that certain of our products may be subject to, including export licensing, customs regulations, economic sanctions or other laws; cybersecurity threats or incidents that could arise on our information technology systems that could disrupt business operations and adversely impact our reputation and operating results and potentially lead to litigation and/or governmental investigations; changes in fiscal and tax policies, audits and examinations by taxing authorities, laws, regulations and guidance in the United States and foreign jurisdictions; any difficulties in protecting the Company’s intellectual property rights; and litigation, customer claims, product recalls, governmental investigations, criminal liability or environmental matters. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

A further description of these uncertainties and other risks can be found in the Company's 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and the Company’s other reports filed with the SEC. Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov.

Revenue by Business, Geography, and End Market (Unaudited)

Market Outgrowth (Unaudited)

GAAP to Non-GAAP Reconciliations

The following unaudited tables provide a reconciliation of the difference between each of the non-GAAP financial measures referenced herein and the most directly comparable U.S. GAAP financial measure. Amounts presented in these tables may not appear to recalculate due to the effect of rounding.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211026005365/en/