ST Sensata Technologies Holding

Joshua Young Vice President, Investor Relations
Martha Sullivan President and Chief Executive Officer
Paul Vasington Executive Vice President and Chief Financial Officer
Samik Chatterjee JP Morgan
Wamsi Mohan Bank of America Merrill Lynch
Amit Daryanani RBC Capital
Shawn Harrison Longbow Research
Christopher Glynn Oppenheimer
Craig Hettenbach Morgan Stanley
Joe Giordano Cowen
Brian Johnson Barclays
William Stein SunTrust
Mark Delaney Goldman Sachs
Jim Suva Citi
Deepa Raghavan Wells Fargo Securities
Call transcript
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Good day and welcome to the Sensata Technologies Q3 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Investor President, Vice Young, Relations. Joshua Please go ahead.

Joshua Young

very like to you earnings call. much, third Carrie, I’d everybody. conference morning, good welcome XXXX and quarter Thank you Sensata’s to

and call Officer. Financial Sullivan, Joining Sensata’s are on Paul Vasington, today’s Sensata’s me President CEO; and Chief Martha

a the PDF referencing of Sensata’s can downloaded presentation addition this will to earlier Investor we conference from release presentation earnings In on Relations issued today’s we today, be slide The website. call. be

shortly post after also We a today’s today’s webcast conclusion replay call. the will of of

begin, I’d on we like Before Safe to Harbor slide reference statement Sensata’s number X.

of materially related measures that to our statements. of call, and to future our risks of During this during presentation. our the Forms subsequent our statements GAAP and financial as from company information in will to might today’s are X, quarter encourage SEC We forward-looking in On the will uncertainties. webcast that slide filings. financial but included today’s XXXX. measures. of include earnings Reconciliations well we in the regarding show projections will you financial cause The course or call our performance are non-GAAP discuss third be XX-Q the in results the GAAP our of conference limited differences differ financial we subsequent Most in Company’s involve non-GAAP we addition for release presentation. statements GAAP to make described to, discussed review actual number other Sensata’s and not such Factors XX-K, as that events may those results such the

then XXXX. XX quarter evaluate with our provide are primary of financials and fourth the Martha begin the details quarter measures and business will company management third for cover call Slide the provides full segment which year of to XXXX its the overall Paul today’s for performance of business. guidance will summary. uses the an XX, Additionally and on

your after take questions then our remarks. We will prepared

like CEO, turn to call President the to I’d over Sensata’s and Now, Martha Sullivan.

Martha Sullivan

may top as XXXX, reported and automotive China, of growth. basis revenue compared Solutions growth announcement Many synergies to growth of our quarter on throughout business a lower M&A M&A of expansion of growth overall will strong seen the our was of all cost that highlight of this this double-digit HVOR third Sensata This business revenue cost. and once to be solid into again cost in a model to intention synergies a including reported million flexibility have our our industrial our earnings the was for Sensing margin of guidance. The revenues in be our announced EBIT we the continue in quarter. in The benefits of Should the that Strength expansion we posted $XXX Performance to organic power revenue drivers provide performance, that, and performance XX, are quarter you, toward of revenue due with and result key end XXXX. of high posting another businesses integration repurchases expanded and earnings quarter earnings reducing on XXXX. I and as the and growth Thank with quarter past. another line businesses delivering have We drive particularly high September momentum M&A drive our the XX% will re-domicile greater joining you our year. third continue trend of costs believe our our should HVOR of share to combined XXXX. generated maintaining X.X% of Both in I reported attractive in X.X% year-over-year fourth continued leverage. for am XXXX. results by continue pleased the Slide Sensing exceeding industrial This capital net key our QX UK. you the integration China XX next points of our third in adjusted has growth of returning in move deployment the redomicile capital lower of segments growth, the number to margin we improvements adjusted profitability morning. has third position. approved, thank while us deployed as earnings businesses. to delivered and well initiatives, quarter We X. organic This margins company More recently, and and tax our representing focused X.X% in acquired quarter while growth. We begin in the strong the attractive of on organic results Joshua, strong Sensata Sensata

to we approach deployment and range. balanced forward Going to a expect an shareholder leverage capital have that appropriate net maximizes value

help will balanced more approach. support to Our move the this UK to

of content organic and double content exhaust Within X as revenue in in strong at efficiency starting outpaced particularly auto the XXXX. end QX slide. off-road HVOR once customers are a top trend and our design and the of quarter grew shows businesses our of improved of fastest result third gas growth wins. with again HVOR, strength particular our the market, posting growth, and both vehicles for market businesses nearly new need on-road quarter another sensor was by of Finally new in revenue end digits, construction end as growth. with in environment. growing our stronger the in markets electrified XX% agriculture a for in adding the yet growth That strong organic cleaner cars increasingly safety business Slide treatment are was systems braking

of into We are growth design healthy wins a future. a backlog HVOR, rates which against executing visibility attractive in into the provides sustaining

expect for full remainder grow HVOR year the in project for production X% the we will we of As market the year, underlying the XXXX.

with markets content will production, outpace our reflects portfolio. in As growth expanded strong the these making a we we that expect revenue are Sensata’s result, which organic gains

of turn of In revenues. end base want by X.X% HVAC performance The uptick in and drive represent the Sensing and revenue over of demand industrial other past which third quarters and our content healthy our are overall remain of few of served the segment quarter businesses, to our generated many total Next solid in an demand approximately to applications. business. customer solid. Solutions drivers Sensata’s customers growth from organic seen which global economic industrial, XXXX, growth Most diversified the this their are and we segment indicators, markets, our I have the and of XX%

is growth within the production growth we families that reinvigorating CST result important CST, in months. as they’re result, these a creating that the we and execute overall a Solutions are note increasing investments As their have to acquired product the opportunities of overall made from Sensata. we the for over portfolio. has we It into expanded the higher Sensing business And on this opportunities. is business within drive past growth content growth helping XX as to

of within a such is highlight growth water sensing quarter. industrial organic this and pumps Another our the applications. applications heat double-digit is of of revenue business business that and sensors HVAC in part use expanding variety delivered our industrial third Industrial as sensing in the

mid-single its remain third delivered business quarter organic markets in strong. digit as aerospace our revenue Finally, growth the

quarter, declined the with posting in decrease our which automotive expectations. Our slightly line QX, in an revenue was organic of business third X.X% in

February, the of would beginning prior continued a the are that global to the at we reminder, of second Consistent XXXX the weaker in in have market playing our year, overall year. as provided we half back for a production we will guidance dynamics expected. flat out global auto auto forecasted and expect be As total with

Our the auto often with expected chain of solid of market China to American piece diesel though balance This is Europe despite business is auto revenue the our that American built Sensata even revenue content mix due have North capture better American out business more XXXX, line our strong in gains strategy. business posted performance gets despite quarter correlated business. in significantly It organic organic auto the growth revenues. lower despite reductions. in only year-over-year headwinds growth worth XX% comparisons. of the while our the facing in it inventory North in with declined third and weaker to we organic and pointing is production North continues posting supply growth quarter difficult Sensata our generated

exceed our new business We target expect for in to wins XXXX.

such such and capitalize a We China and vehicles are winning gas large as engine electrification, well positioned on sensor vehicles, secular areas from racing business exhaust, off-road connected as to trends also in efficiency and needs electronic for continuing the systems Sensata as world. electrified for safety, in sensing content customers systems cleaner industrial ongoing benefit HVOR add for tire more control pressure market. is to

margins on quarter reflected XXXX. margin lower improvement continue deliver the driven acquired higher and margin year-over-year by We profitability points EBIT increased and integration This net to expenses. is adjusted of X. compared adjusted both was XX in quarter. our third improvement by the businesses to from third income basis improvement We strong The our Slide

full executing EBIT performance for we is On will to margin drive XXX that the key XXXX. Sensata X, reasons Our integration how are I of the a Slide UK. our well we adjusted to profitability. points the of company list expect year our redomicile is initiatives to proposing higher the approximately basis reflection margins expand I some by why

recognize flexible options and UK the of importance more our deploy effective that the capital the in shareholder be for shareholders. First, allocation. will we effectively with creating to being value to capital provide in will We UK believe and capital Sensata more allocation enable

the environment. Second, shareholder UK and friendly the governance

Schrader with by this in significantly expanded the the we domiciled First third, administrative we presence – and gain in UK. UK. expanded acquisition being the After presence, our efficiencies can

in the with are to treaty order benefits. qualify XX% eliminate requirement needing U.S. residents that of our will we establish shareholders tax to of certain Finally,

that that meeting Our take early the in redomicile XXXX. as still the redomicile first the approved, shareholder nearly well will needs the of in effective place shareholders as of anticipate if quarter January, We and High the the become end of approval proposed UK. Court will

up is of X, substantial of have a and Through our which revenue over has first X.X% Slide three what performance delivered me a the three guidance is in quarters all basis, executing improvement delivering organic year-to-date On and Sensata growth, to XXXX. wrap the quarters. few generated with closing strong a thoughts. we midpoint Turning exceeded in we let XXXX,

to due auto resulting markets in our content of growing better than performance. growth outside businesses our end topline is Additionally this and faster are

expansion to full of a EPS growth double-digit XX% the This year-to-date adjusted and helping margins On margin We and assumes points approximately have expanded points XX our attractive by XXXX guidance year full – is basis basis, deliver for basis, to EPS our year-to-date EPS expect drive of have adjusted are we EBIT delivered expansion. double-digit margin basis sustaining organic EBIT a expansion. growth. year-over-year our margin growth EBIT On XXX we year.

delivered have our ratio. net We our leverage improve our sheet strengthen to and on commitment balance

Finally, performing promise. we are to

We guidance continue delivering are of turn to ability redomiciling shareholders the and to enhancing our future the the shareholder on out in for create to we by we flexibility UK value increasing and the our are set third quarter our capital guidance deployment fourth initiatives. to Paul results in provide Paul? the and now I over full to for review XXXX. to financial the year like quarter detail to and call more

Paul Vasington

for third X.X% Key organically X.X% quarter. outpacing tailwinds tailwind revenue the on Adjusted Of Thank of was Organic $XXX XX quarter. a of XXXX. margin grew to EBIT the growth the rates. XXXX. foreign third the income to the points grew by adjusted X.X% million X.X% quarter impact the third X.X% Slide XX.X% prior an increase increase as of rates $X.XX excludes highlights reflects the of exchange foreign of adjusted revenue compared you, inorganic income quarter EBIT quarter, in quarter, in organic the exchange rates of growth basis X, was slight of from increased changes was the include by in increase foreign a revenue this on growth, growth. points our million EBIT of Adjusted margins X.X%. $X.XX revenue quarter. revenue. third XXXX. Adjusted grew by shown basis the increase A in which far net and or this quarter, quarter XX were exchange in $XXX.X On from of basis, $X.XX EPS in compared Adjusted Of net Martha.

growing exchange the volumes grew to of due and impact EPS Excluding synergies. foreign higher adjusted primarily organically, X.X% acquisition rates,

will I’d Now I Sensing to segments. Slide start business two comment on Performance with like XX. our on

third the of compared business quarter of an from Our Performance Sensing third revenues to the X.X% quarter reported changes for increase the XXXX, million tailwind XXXX, foreign of rates. of $XXX.X in which of exchange X.X% includes

HVOR our performance strong China. business which in organically business, driven this results and strong performance earlier, exceptionally our As mentioned Martha by was rose in of nearly a automotive XX%

over just helped grew was Our of business weak XX.X% European automotive million, American North $XXX.X offset X% market. revenue. a quarter, Performance profit auto the which or Sensing during organically

Sensing of leverage, from and effects was new the the points percentage foreign a partly This improvement benefit accelerating the the from Excluding XX.X%, exchange up revenue growing spend of XX profit offset prior lower to of quarter. rates, support operating operations. year acquisition reflects manufacturing synergies, business investment year and wins Performance basis by optimize as integration to ago

our This growth, well portfolio end and shown industrial the up its in profit prior well $XX.X growth reported was X.X% same as China. last based broad on strong positive served third continued million, $XXX.X Solutions markets strong Slide was Sensing as of Sensing XX, from sensing of X.X%, year. performance year. Sensing across As particularly year. reflecting business an Sensing reported the from in content revenue X.X% last revenues Solutions the above quarter momentum unit. XXXX, Year-to-date Solutions from Sensing organic of organic within our Solutions X.X% of million Solutions increase in growth growth the posted revenue was XXXX, quarter

$XX.X margins to primarily year-over-year increase income higher operating as manufacturing Excluding of spend due included percentage XXX leverage, costs to the benefit compensation of due XX, transaction Slide expenses operations. to to acquisition incurred shows by our a XXXX, quarter $X Gross foreign and revenue, integration primarily XXXX non-GAAP to offset point approximately of related XX.X%, and not lower operating Corporate profit the manufacturing the synergies, partly was segment proposed a the incurred million the expenses declined efficiency costs quarter Solutions of Sensing in other due third redomicile exchange investments profit, up Sensata’s growing UK. optimize operations. to the to slightly third and to in were basis million results. rates, year-over-year improve

support rates exchange Additionally, margin unfavorable quarter. The adjusted and spend integration headwinds. to increased in movements new our wins. helped expand reflects higher business when of accelerating this expense lower compared EBIT design prior slight foreign spending R&D caused both control SG&A efforts to a to margin quarter Tight and development the

Our full higher by the rate XX for of quarter year and with in of primarily driven we tax points is jurisdictional the expecting in the third the increase, mix profits. basis line are

by and X.X%. has our the that XX position Sensata adjusted million, QX by XX since driven start for On Slide $XXX declined declined points, of rather approximately a by net approximately adjusted quarter and the XXXX, I deliver XXXX. line, to EPS net XXXX of shows bottom end the On of financial as leverage our our net our of our to increased at net times X.X the guidance of show income balances times by margins on to will start likely on debt. continues improved our basis X.X reduce our commitment Slide than strengthen balance from has the XXXX, the by debt of ratio of XXXX. And significant of fourth be Further most net XX, end times three increasing leverage cash we track reduction improvement leverage in are to XXXX. by sheet.

guidance, our We midpoint growth. a X% expect million million by a or revenue quarter between XXXX. revenues foreign exchange in At the fourth $XXX range increase that $XX X% we of and revenues of will $XXX to of X.X% rates representing to the million approximately report expect

revenue to quarter effect fourth to XXXX. the of in we X% growth report foreign expect X% of differences, of exchange organic Excluding rate the

of rate quarter fourth guidance is of the for revenue midpoint approximately Our XXXX. the XX% current fill

$XXX organic will adjusted million, report represent to EBIT growth which XX%. X% $XXX between of We million to and expect

On net to increase $X.XX, the by adjusted we report organic exchange and in and represent expect bottom line, $XXX growth would adjusted and $X.XX. EPS XX%. between adjusted X% of $X.XX expected to million to EPS are income to foreign $XXX $X.XX approximately million Changes rates which between

turn XX. on the for full me guidance year our let XXXX Now, shown Slide to

growth. strong raising results we for are quarters revenue our our of the guidance three Given for first XXXX,

of to which full be forecasting are $X.XXX for would in XXXX, a X% revenues revenue to growth. billion We to the represent now year billion X% range reported $X.XXX

rates We guided which revenues is of to million to foreign unchanged $X.XX last $XX exchange $X.XX The exchange year-over-year. last approximately – year-over-year, reduce expect foreign rates earnings continue remains by on headwind $XX our effect we quarter. we expect a adjusted EPS as to

X% rates, growth foreign up in exchange to Excluding revenue the XXXX, of X%. expect X% organic from of of previous impact now our guidance to X% we

represent to full and XXXX, between expect $X.XX would organic adjusted the in year EPS XX% $X.XX growth generate We which to of XX%. for

We million driver cash higher $XXX we to cash previous businesses more in for our XXXX, million $XXX The lower million. flow the primary locations. $XXX we’ll guidance transition of is million approximately of new, that generate $XXX flow efficient from to as expect of free manufacturing to free to down acquired related inventory

in the with from We on to profitability conclude XX. Sensata’s expect focused improvements growth. Slide is XXXX. I earnings share see Sensata remarks on will cash flow benefit these per summary we delivering double-digit will drive transitions my that organic investment

our while profitability, of margins to We the acquire. expect businesses sustain we industry-leading increasing high

and leading business. a is attractive opportunities. high finally, cash positions markets growth And have generation expanding Sensata with long-term in We

deploying capital We this focused appropriately long-term value cash our generation strong are sustaining on to flow and for shareholders. create

Joshua. turn to like over call I’d to the Now

Joshua Young

roster. you. Thank assemble Q&A the please Carrie,


ahead. of first Morgan. We will question Chatterjee begin JP Please question-and-answer the come Instructions] now will go from session. Samik The [Operator

Samik Chatterjee

Hi, good morning.

growth that in growth really you and should in expecting of The HVOR sustainability about Solutions sort really both of are How quarter. first question I had this going of And color end this the I had forward? about for in was What industry in growth content in rates XQ, markets Sensing quarter. estimate you example? was HVOR the also strong in versus sort what you the in can growth add of the was what those if terms growth your two think in

Martha Sullivan

at growth about look on this quarter HVOR an way that that, the X%, say expect market, about content beyond and ongoing you If strong particularly to We off-road would I our actually XX%. was the moved would we and basis Vehicle business. we market believe moved in Heavy have strong.

But year, about continues and that It’s that, think content usually out, over growth, think achievable. new and single-digit way it’s we controls content this our into you terribly past to designed the models be go cabs. growth that high associated new linear. with plays and If we’ve seen not

On growth from in our the Sensing as area HVOR. Solutions market. represents sensing what industrial business. about solutions of the our revenue, has similarly That makes a perspective content Solutions our balance strongest up moving with and growing that’s Sensing been The business, within overall X.X% Sensata’s of is industrial of

We’re would expect China, share continue sustain to as example, performance for well. and gaining to in that

important So are understand puts to takes. those the moving. are It end of some be how will and markets

I that to overall we of year be the think we’ll want part at will our outlook this make And for look that’s growth. backlog call a into our as end XXXX. organic that and

Samik Chatterjee

my that few – to this market suppliers growing better And only reporting a to sensing it. revenue leads that have point? more question the to in technology business, Got Sensata’s for gaining is Great. that it I at that got share the can which of understand. is there at second pace? of are Is just that sort it is wanted X.X% double-digit this access it, sensing growth. me because terms industrial mentioned you of but Or overall is industrial

Martha Sullivan

a it’s So combination.

diversified we on put use applications. more end-markets it’s look drive. solutions, pull-through to are primarily seeing now they growing, in into analytics are customers make information content of And an business. want layer, We’re nice our that but as It’s seeing some that to of efficient set very that

Samik Chatterjee

questions. taking for Thanks you. thank Great, our


The ahead. go will Mohan from Bank Merrill of next of America question come Wamsi Lynch. Please

Wamsi Mohan

and can concerned the thank associated given your agreements to One, we’ll are share like of start it a here more to more about with decision favorable repurchases for does And when Yes, items more talent in you. mean XXXX, that a uncertainty Martha, meaningful on how have second, you the follow-up to the you UK, comment potentially and and capital see re-domicile couple here? a Brexit cross-border things there? uptick given setup in that? Paul. say I And balanced deployment, you

Martha Sullivan

first requires the the High the think I is thing by this shareholder Court note that approval approval to So and in UK.

get through to overall need really that we so process. And

ensure you we of that a one that The project this the lot at many, was looked And those analysis of risks and of associated. many many, thing at looked share with is required many, would of months other I many, to is all Brexit. we a work

and is goods with jurisdictions look you to at view of when see and on associated and the don’t the UK. takes the domiciled of point it’s risks puts Our you that, primarily services, trading being and related in tax

the say M&A major pipeline, had that’s UK. us way things that we like that we cash interesting to that are returns is a shareholders in think perspective the I that really we we it’s our the from and balanced question. position and through balance provide have returns, a to optionality can and go allocate our can look would that about compare sounds way that We intend have – those take important you we and It that’s forward. we against to think the we way So about at come the in the returns in think capital,

Wamsi Mohan

Thank how And you what than quarter? And for change inventory it build demand? think Then out Yes, better despite you. weaker free yes, conversion the Martha. you inventory do my question level? remarks, been EBIT the cash you somewhat like in your in has drove is called what earlier that Was flow – higher year-on-year, these cycle XXXX? been performance, and cash Thanks, improvements that has if margin. much prepared in Okay. higher could thought Paul last adjusted

Paul Vasington

things nature. is to are are we that a as we going Inventory prudent higher. restructuring due But a we’re inventory underlying new we new well this customers that of ensure that of year, severance exceptionally that in from which the of receiving – very fund, significant those sites to terms we have so to shutting charge down, sites cash, Wamsi, spend amount have our of serve manufacturing that we we’re So those are in year, payments lines. level and the took production have that to it’s transition the think prior

we get issue. So of It’s timing the revenue. the that We’ll a do. we to very benefit cash think next thing smart into it’s year flow as inventory a convert


The next question Daryanani Please RBC go comes of Amit from Capital. ahead.

Amit Daryanani

about the Thanks Good Martha, seeing guess, difficult just morning, maybe rather the those think, you Sensing to as Solutions a you lot. production, compares, China across, been two guys. in start buckets. guys in has of you with nice a markets, you’re and off China talk I I Performance strength for source of is I entering the Sensing sustainability for China guys strength both in XXXX Could auto think, especially

Martha Sullivan


years, there say, China of has and here I recognize end about now businesses. been, stronger the market as as that’s of our little So between the would The – overall is revenues, our business industrial-based than in half our not past XX% auto second a expected year. fairly split and we strong

go auto that China, So year particularly this and design in at extend on much forward. look at as to able the side, success is, we’ve makes be content in great from occurring that When up, to growth. the we do of is look we expect that we we what growth coming content wins, performance that overall had

Amit Daryanani

I you calendar going for integration that that or think I you us ahead restructuring could Paul, just should of much are how charges much guys Fair then, still model guess? about enough. remind How as And forward, XXXX? in we guess, we

Paul Vasington

to XX There’s next over probably to another $X the million million fund months. $XX

flow. and funded see year’s cash already in $XX million, can we’ve that’s You this

time. So over it starts to go down

Amit Daryanani

Got it.

and a lot quarter congrats Okay, the on thanks guys.

Paul Vasington

Thank you.


next of Harrison comes The Research. Longbow from ahead. Shawn question Please go

Shawn Harrison

Hi, good morning.

on if bit I briefly. Just a America may North touch

North guess, any know may I into expect, you the fourth the year? both positively do I weaken there any replenishment impacted, Or quarter to don’t negatively, guess, and further is inventory have of into whatever the the the Within guidance, if or I guidance? America expected, end hurricanes

Martha Sullivan

backlog, At when at quarter, point, informs we’re we’re primary looking and this overall the really calling the that thing that’s guide. our our

in to production that’s and that production you that’s that came pertains use some There’s out. information can rates, quarter. how are inventory parse and out not give and that But some the guide so to overall probably the that And takes. related look at quite there forward-looking we frankly,

Shawn Harrison


that, nothing to related within so hurricanes either? And

Martha Sullivan

couldn’t I say.

is overall based of the that rates what we’re look that or that really comments at So us. that is so much is and based. the providing understand have And much hurricane-based I’m the customer how demand our OEMs’ – pull of to how demand on to you’d on is

Shawn Harrison

standing and provide Okay. And a of a a sales over that should hedges for just days, off think benefit, potentially, follow-up maybe to EPS the over number next of we XX bit little year now, right and that may. a months. Paul, should past have I bit you a roll the kind about, as the tailwind? if Euros well of knowing six rallied past How

Paul Vasington

are bottom X% say, I So to line, in terms that a of $X.XX $X.XX line, line. quarter. move top it’s important next against more for different benefit other. still a each the wait probably program in lot hedging moving top on tailwind for the [indiscernible] next the probably till which year, we think a in currencies is year or have around, the year. fourth We do out of see so our to would obviously, range We in we finish the

we formal it for to definitely favorable $X.XX XXXX, looking guidance view able better next So in we’ll but for when range a to is be $X.XX provide the give year.


go [Operator of Oppenheimer. ahead. Instructions] The next question from Christopher Please Glynn comes

Christopher Glynn

question any the electronics uptake Wondering for I the a identifying? controls of and legacy GDP. morning. like have and protection. of growth you. products the new long-term Thank Sensing of you’re content outlook, breadth to you’re dynamics broad new on Solutions Good around working Any just some seeing if

Martha Sullivan

gain in ability China of been business legacy remarkable Again, share. achieve its – we into niche-y. able And in as to that growth. to quite you and to have applications. is it’s design-in business know, the on But find focus That also new lot of are that applications side a Chris, those

about and portion half a mentioned, Sensing Solutions, auto. of in I China our is that is that. growth you’re of referring content the the piece definitely business of to, our outside As And of

probably able we’ll it’s GDP as we but we business, that growth components slightly sustain growthful our ahead. look above of So to less think be other than

Christopher Glynn

Okay. the on for And margins question Performance Sensing. a just

a think this in instance. the versus I little third quarter quarter, the not second progress upward so that usually bit in

Just that. any curious there’s if thought around

Paul Vasington

increased and the the Sensing is seeing. that segment, sequentially. we’re accelerating look spend most P&L, costs the And Performance support of R&D see R&D pipeline you’ll NBO to of in was at When we that most that


Craig The Hettenbach from Please next question Morgan Stanley. of ahead. go comes

Craig Hettenbach

Yes, a of you your follow-up X of if I you in to contribution efforts? CST, other time any In investments, would are when when give words, kind see months reinvestment last comments business. on context you the terms in that line? Martha, thank Can XX increasing would that – you. in revenue question had those from around months

Martha Sullivan

we’re revenue increase make is think, I now. seeing the Craig, we’re point trying to Yes. here

growth of Solutions, bit of sooner a than at Sensing and a went the look would the expected. the portfolio CST overall that’s you coming recognizing most it’s if the definitely Solutions we in and growth have So that driver business, into of Sensing little

we seeing did already investment growth. the the of the reinvigorate So benefits to

Craig Hettenbach

approach your terms of of terms Got balance leverage follow-up, come M&A sheet it. flexibility. has comments in to down as the allocation capital Any And your versus thoughts then my buybacks? in as around

Martha Sullivan

that, allocation. that high think, been able of think way about deliver with part again, returns to very will accretive we’ve the an and very important M&A, continue capital our be to I we

cash returned have We also the of shareholders form past to in buybacks. the in

want able to compare options each that forward, what selecting against we we make returns shareholders. when other the that going are and best be sure we those deliver think two about to for So continuously our will

a As result, expect in I allocation. capital would more see balance to our


The Giordano of next Joe go Cowen. question ahead. from comes Please

Joe Giordano

before? platforms like you and been for on dive wins on are you here. in just those? bit on thanks systems people guys, Or Are never Hi more little questions predominantly maybe taking a mentioned gas displacing filtration new want to systems that I certain the these my brake have systems.

Martha Sullivan

the is they get share Almost grow way grow. on we applications them always, into as to with and gain early

these end exactly the that allows outpace examples of are to So both just doing market, great and us of that.

Joe Giordano

involved about of there? on side, about. this systems? know manufacturers brake talk is sensors on like the as larger on of know I thinking some the into there’s EVs, you more – that’s guys in kind are you like pads. putting you Are get Or the I that, been more the actual there stuff Are something

Martha Sullivan

to so sort to autonomous will like Look, we’re to that vehicles. probably of higher they’re technologies vehicles bringing and extend diagnostics we’re more become Yes. need about front. vehicles, very vehicles that OEMs levels efficient on of much always highly other electric plug-in and an kind and into things application, there. the talk on full systems leave subsystems that emerging to electric of very what the it more in doing have have we help of engaged new application that range the get to to And quite discuss that sensitive many that to into I we’re new engaged But applications as also

in work that lot a area. So of underway

Joe Giordano

Paul. just last, for maybe And

anything terms you here on I up heating your soon. have anything in of there tax not and – pay cash so of do expectation change think tax at don’t the move the the with guys federal you’ve to UK potentially doing your currently that does reform, outlook anytime out you Does heard of or U.S. in all? the government

Paul Vasington

that’s the is move that The UK jurisdictions All The the today. cash are doesn’t operations company. taxes. our moving to in affect no. parent entity remain the No, the UK they

an have right, base. significant period a of taxable on doesn’t for And in payer won’t it be the you’re a income So time. we tax U.S. effect our


Brian comes Johnson Please question of Barclays. from next ahead. go The

Brian Johnson

should morning. incremental to between maybe result, from we Could an having HVOR? and through light the about or came automotive whether a we you talk good it us about Yes, think talk expansion margin on HVOR? incrementals HVOR the margin differences basis fair With within margin the segment? and assume And how flat, CPV is strong can margin vehicle the

Martha Sullivan

of acquisition our CST So the Schrader primarily, is acquired businesses. that and fact from across on acquired differences margin portfolio. coming two the profitability no on focuses the we business. And the of huge the that those profitability are expansion Most our improving

getting we acquired when we’ve spend are margin. Sensata’s put on integration that we the our delivering chain, optimization and the supply are with in that these – So businesses bring place we’ve plans of had them we to the to

Brian Johnson

mentioned higher the that next all, year? about of of year second you next And Okay. into year? think is should – the we it for the can that expected and R&D to you wins, And is to design continue how close through

Paul Vasington

be year. of to continue will the remainder the for it higher Certainly,

Brian Johnson

Okay, thank you.


of go question Stein Please from next The SunTrust. comes William ahead.

William Stein

Or R&D in taking made isn’t guidance. for to I times, love gross the the for little is you despite results a think, questions. relate That particular, couple overall. that to Thanks perhaps we entirely, the was that Paul? quarter Does explain Great. to outperforming. out is a there great relative else? to be clearly one my Revenue EPS it. comment appeared model, we’d concern lighter and bit margins something our hear had, you’ve

Paul Vasington

that operations to mentioned to Sensing optimize Performance future. we drive the will in did in and that our Sensing I money manufacturing both quarter, this continue efficiencies So Solutions, spend some and

the I FX hedging. fund our we bit relates increase, R&D flow accelerating quarter what quarter, would as spend higher would pipeline also big launch the in to to relative this third cash to little the have NBO is For it this in the future. of to the those that was say, a a you quarter headwind products to expect support fourth

a So it basis point was basis about XX headwind. points, XX

William Stein

margin. To gross

Paul Vasington

margin. gross To

other and can the expense. You below income offset down see in

gross margin was think headwind. I a

William Stein

exceed times that a that helpful. the you’re and for comment perhaps and you. supporting also that that would And now expectation least to you’re Thank guiding That’s XXXX. helpful. Maybe XXXX, clearly doing your you’ve a while any for margin I about growth expect of year couple I Paul, it next one think, be in growth the R&D sign you’re is in seeing But if the you’re now, that. really not trajectory talked can. at around other, that still you

Paul Vasington

revenue design work is that’s on today a of there the three longer years So the big that maybe but per that won’t in we over term. do bit, little eight next impact years so we’re and se, today XXXX typically have most to doing what a results

it’s of acceleration given think right at investment the I the the time, pipeline. So the right NBO

Martha Sullivan


and XXXX. XXXX. be a cadence, point also seeing strong said into had organic the you’re to we that Frankly, expected it year XXXX in improved that growth, we cadence stronger play on stronger out than in So an than of time when coming at we’re we called had

about organic cadence feeling continued good strong we’re So growth. revenue of a

William Stein

you. Thank


will Mark Please Goldman question come of next from Sachs. Delaney The go ahead.

Mark Delaney

morning thanks Good and Yes. questions. taking much for the very

First question the I that wanted vehicles. seeing on is to Sensata trends follow-up in electric

range in summer a said that on the vehicle Sensata mid-$XX pure something think Could content something per us over just is those I an mid-$XX on has range a been that look But you stand also, organic on traditional that engine. combustion car in the average is the electric efforts the company where address versus you And inorganically? basis? would working Sensata that to update close with gap. that and to on

Martha Sullivan

are seeing Those vehicles. full all of regenerate terms hybrid, electric in electrified In term, on both progress systems rates relevant the manner to braking that great content example. nice adding making vehicles. plug-in electric for of near energy, and we’re we’re So on take

in vehicle, and that’s as content of that One their of our some come X opportunity range and significantly we’re moving quite are happens. content is gen a that into a versions the up full on sophisticated of vehicles gen the the manufacturers electric as things more electric seeing seeing we’re available X

that. engaged So in quite

the We’re average not no and the that in at all vehicle, number a overall so built it’s is such a you range try pure point now meaning, an use where is to there based Sensata, the on on electric the average electric vehicle pure if plug-in, meaningful. for where model world that

be gas engine made content of well So being world whether product on on a or vehicle that a or in gen typical above see it’s X X, OEM is, where who the type depending gen we it and a below, not can the the is vehicle. lot

Mark Delaney

follow-up trend. And a also Martha. helpful, just That’s question longer-term

was was I I earlier think, in XX% it year the company’s think about expectation XX% for go diesel would its the Is penetration penetration diesel change it in in to, that said in by expectation Sensata forecast that any the for Europe there earlier XXXX. was rates? XXXX rates calendar from

Martha Sullivan

X% so one that was Europe. We’re in engine on a the example, Europe, Europe, really engines decline our reminder, production quarter, of as a for keep this diesel watching saw what past outside of we diesel closely. some In those eye exported production headwind of in is us. overall And that for being in we

mindful go look to can changing, that continue you share so is And we’re and forward. of it being you very as with we’ll we change and perspective what as ahead, that

coming an puts think, diesel like everybody takes Interestingly, we’re in a Some things and market, European bit seeing rates, to the the stronger vehicle that’s rate on take headwind. and of Europe offset that, the of demand as the I light content knows, in commercial is sell down. for emerging


comes Suva ahead. next Please Jim go The Citi. from of question

Jim Suva

hedging about got can confirm a guys Martha, in Specifically, Can distributors Thanks the for top levels, like very below to then if you line question and for more Is also, I about, one term, the Or changed, anything like And them off? is $X.XX a about think Paul. keep $X.XX for or earnings In it be you channel? whether then your the just have of one Paul, Martha and in benefit your Above inventory HVOR much. average? for sounds programs? at year. I Thank and has on roll explain is, use for putting benefit long the channel. inventory on question and question the talk I bit hedging, average? it those average? thoughts hedge X% segment, line it correctly, any your methodology it Paul right? given year with next And [indiscernible] little heard industrial Just as you. you we your they next so hedging. if a just three-year can you

Martha Sullivan

Jim. Sure,

maybe in So slightly inventory those Vehicle end as would relates business. portions and off-road overall it’s, in say, in I of it markets, our Heavy to lower line,

inventory So that ton is a there, of to a we do. it get we don’t channel but visibility check dealer

that with industrial line mind, the through keep runs And business, the in a in does So that part in lot of areas lower of not other business. have of slightly distribution. our revenue Sensata

overall So firms we’ll our overall than with channel result demand more a aligned strategy. other of be as

Paul Vasington

an foreign more to it foreign higher did rates. to incremental exchange, $X.XX I favorable is rates $X.XX X% to exchange as it then early EPS next year of view, and And but Jim, foreign favorable to exchange relates due say revenue due

XX-month Our XX-month to hedges in and is to layer over hedge, period, program time. hedging a we rolling basis, a over on those

try movements that, in to over doing so reduction time volatility we create rates. to we – And exchange due in earnings

Jim Suva

Thanks the appreciated. so for greatly much That’s Great. details.

Paul Vasington

welcome. You’re

Jim Suva



Securities. will go question Wells of Fargo Please Kwas from The next Rich ahead. come

Deepa Raghavan

morning. for Deepa Kwas. Rich Raghavan is Good This

too. strong, obviously, the you Your mentioned growth, In as past, a about it, asked pretty HVOR are was thought questions organic I richer mix. it

past? was XXXX curious, expect rates, should to your Or within that we that richer what anything richer thought assuming reduced you mix Just HVOR has offsets a in changed conversion Or would we it’s the have about a something should as products? be mix? thinking

Martha Sullivan

out assume Yes, a we always mix. of folks times XX, – it’s nine I think richer

part our how across way manage Our look overall operations, margins the it’s we are the drive business. the of business. we strong you And a overall at when really

is So this a from prior. not change

strong our Heavy profitability, and automotive in Vehicle and our both business. business have off-road We

Deepa Raghavan


I possibly Curious, if out can production there’s production. helpful. revenue that qualify you diesel call that decline to accelerate. it. you can, did your saw – that you be if actually the you’ve lower diesel – X% able clipped or evidence would how if will You if growth? much diesel seen Europe diesel that headwinds And But know quantify any you don’t in if automotive be wondering Europe in –

at forward, outlooks production needs catch point out sales being time. us some You pointed that going seeing up lower, accelerate? give to you your did in are You but

seen that if curious So accelerates. you’ve just

Martha Sullivan


Just basis, a about annualized of data $X in an Sensata. million X% revenue about couple is On for points. decline

basis, revenue in an helpful. that’s if million annualized $X on diesel, in decline X% So

seen look another data five mix diesel. is think I if XX% years, we’ve point in that a let’s you say, on about reduction overall back,

a downward. it’s cadence been So

but look expectation beyond what if not acceleration we XXXX, that, been. on has Some our in

$X for the is, to so decline thing we million forward about smaller move in And equals X% today as two reasons. with think revenue, other a that gets

and to moving engine we’re when of up. vehicle. Europe happens, been XXXX difference quite in in hybrid cadence is vehicles same will small. coming improvement And And that’s content point where getting that to Some XXXX, in at our further gas engine into it on the XXXX. And those are diesel the improve a is a time, a actually even

the So to time we’re engine where getting a versus think gap vehicle diesel a period we where between in the deceleration to we’re engine is becoming diesel, gas going of on most hybridized a the point negligible. our see versus content a


turn Relations, And for conference that’s President remarks. Vice back all I the to to any Young, like time would allotted for over the today’s Joshua now of Investor call. closing

Joshua Young

continued I’d City in our Sensata, you Investor/Analyst December like of York New to and we forward many to morning. thank look this your Day everybody for in hosting appreciate on upcoming at We interest joining XX. us

you’d If website. posted on and our Relations good Thank attend and day. details registration event, about event Investor like are the you, this to


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

You may day. lines. disconnect now your a great Have