ST Sensata Technologies Holding

Joshua Young Vice President, Investor Relations
Martha Sullivan Chief Executive Officer
Jeff Cote President & Chief Operating Officer
Paul Vasington Chief Financial Officer
Jed Dorsheimer Canaccord Genuity
Wamsi Mohan Bank of America
Deepa Raghavan Wells Fargo Securities
Dan Galves Wolfe Research
Amit Daryanani Evercore
Bharat Daryani JPMorgan
Robert Jamieson Cowen
William Stein SunTrust
Craig Hettenbach Morgan Stanley
Jim Suva Citi
Call transcript
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Good day and welcome to the Sensata Technologies Q3 2019 Earnings 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 like to turn the conference over to Mr. Investor President, Vice Young, Relations. Joshua Please go ahead.

Joshua Young

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

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

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

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

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

course statements. we involve materially regarding performance statements this actual our and Forms subsequent the and During as described the might are SEC the the of of Company's that filings. but include, well conference in cause differ risks will make XX-Q in financial may limited differences or events call, uncertainties. forward-looking from to, discussed that other not such Factors XX-K, as Company The future those results such projections

of related are that to non-GAAP to webcast during earnings our GAAP information to today's X, will quarter encourage presentation. in We today's On measures. release Reconciliations we slide financial our XXXX. will measures call our included non-GAAP of discuss the show be you third GAAP the results our financial of subsequent Most financial in we addition for presentation. statements GAAP and to review number Sensata's in

update XXXX initiative, quarter year our Jeff overall will to XXXX are in begin investments and the financials segment cover will of primary provide provides business. Company fourth well for Paul guidance. our will and summary, on the an of guidance for then as XX uses business call XX, as then its details income evaluate with the today's quarter on the The slides Smart & full and measures our management details operating Connected third provide which and more Martha

your remarks. questions after our then prepared will take We

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

Martha Sullivan

you, call everyone thanks morning. on Joshua, this us and the Thank to for joining

our solid the manage market effectively HVOR facing currency. movements and to our generated meaningful operations as continue free quarter and in well third foreign as particularly unfavorable EPS and in industrial decline, We in businesses cash flow end despite margins

On key list third some of I slide of the X, highlights the quarter.

third guidance the adjusted movement which We -- of reported quarter, an of revenue was we EPS which guidance. midpoint, For relative decline adjusted our for accounting of revenues delivered represented after unfavorable to X.X%. of foreign $XXX.X our $X.XX, we ahead organic of million, currency

markets and posting We outgrowth XXX points of in in basis outgrow continued our end auto points to XXX basis HVOR.

While customers HVOR outgrowth of their from in end our of as to much this slowed XXXX, related demand. lower to response market to launch level is inventories they QX production delays work to relative reduce from

the XX.X% We generating adjusted in the of despite operating guidance, generated points our of was lower which the business. third approximately million reflects have expected revenue. quarter XX than than in discipline we operating This basis margins higher $X

lower with on costs in to expense revenue. focused initiatives are productivity align driving quickly and order We our

the the XXXX. better for was quarter EPS weakening the a due third for than the reflected midpoint $X.XX, of adjusted $X.XX expected we renminbi. Our of our approximately from the of of Chinese of than primarily to to guidance which EPS $X.XX $X.XX After currency $X.XX, provided foreign effect, $X.XX tailwind tailwind adjusting our was of lower this

as commercial & OEMs in truck our future We call well Smart and about as investments continue value to Connected in fleet our for how will make Jeff bring important we trailer believe investments significant solution and initiative later talk this long-term managers. will the growth. for

conversion the quarter. rate free which than XX% net working significantly higher was cash million of of efficiency. quarters result posted income represented grew our better $XXX adjusted have totaling as capital our flow we in in recent Finally, a year-over-year, a XX% This

in I end above organic basis Slide revenue by third points was the shows an basis quarter. third organic decline quarter. quarter. performance X.X% of This will XXX in begin which revenue the end decline points X of in XX market market posted with an the auto,

improvement solid For automotive third a our of XXXX, XXXX. year declined growth was XXX XX% the which significant during we the driven auto points. full to end outgrow the from quarter China compared improvement in quarter. end We in last quarter, a this approximately our to basis decline was market the by China expect its business Most business sequential by quarter revenue generated market, X% which second organic of auto the

to continue sustain China. in robust We double-digit growth content

revenue Europe, in will in and North headwind the growth volatile market by a the primarily as be end GM affected result a organic headwind quarter, be our business auto of by to American represented the quarter. business a adversely was fourth In we a in estimate QX but GM that general continue revenue overall the for auto strike. a revenue for generated strike auto We the X% affected X% Our decline. market business

portions We organic HVOR of declines was for X.X%, HVOR experienced the our considerable a an on revenue Next which end the above decline business. the points XXX decline of and during posted third both end market X.X% off-road basis business quarter. market

of customers announced inventories their demand. ag falling multi-quarter efforts and because to reduce construction Large

reductions customers We post continues healthy our business weaker strong are and similar end while on-road as demand America seeing trend growth Europe, a performance. in from of a North to China on-road market our of result and content inventory

overall launches end months pushing XX to work they out These as continue off-road our our HVOR months to to down inventories. much by production. equipment delays level have their as lowered A X as number are outgrowth relative product planned of of customers market

end to Sensing our which Finally, and segment. I turn aerospace, served markets are our other Solutions industrial by

all geographic of slowing and contraction customers this production. regions in lowering a PMI organic business is X.X% demand posted our third are as decline signaling weakened. the quarter demand continued For industrial inventory XXXX, Weak revenue global we and in

Our is China weak in trade of result particularly global as and a tariff industrial actions. performance

slowdown Our trucks. be declines posting to is market. Sensing which aerospace the HVAC to of growth expanding continue The our business to part in in production a on strongest in continues Solutions content performance an top end end refrigerated market see of due

single-digit to organic in poised full generate business are We aerospace our high growth for the year.

Turning assumption. to of previous X. of our some the fourth market the show for to specifics slide compared I quarter XXXX outlook our of end

year. the We fourth incrementally our and their customers expect continue we our through the weaker markets inventories to to in end of to quarter the end expect lower become

of American auto is our GM will North performance. reduce outlook One which of lower the of the revenue primary this drivers the negative strike, effect

the American America the We strike. significantly be North fourth end will of due auto. the to the auto XXXX XX% expect market than weaker down low effects is in the decline of XX% to quarter single-digit North we expected This GM in previously primarily

end We markets HVOR for European the industrial are auto the market lowering for quarter. fourth also and expectations end

result, exchange. our lower by we a which As changes driven less fourth revenue $XX guidance is are outgrowth unfavorable the at forecasting weaker demand previously million midpoint of million of in is than foreign approximately quarter the This expected. in and largely market we $XXX what

slide with a show the to call on X. to few key want over turning that messages I Before close Jeff, I

reporting end end our of you strong margins, types of we reflected revenue. solid a market more solid quarter cash including and EPS with customer margin the despite meaningful declines. third levels lower-than-expected in to long operating saw periods market demand quickly during generating We history environments and our of results earnings have aligned And of as discipline flows produce many cost

a In five-year the strengthen past times of the X%. five which end but of years, We've end be our low EPS we over to sheet adjusted of leverage past at CAGR environments, market lot done historic should balance our the net for work is a managed years experienced reassuring periods deliver our of difficult investors. still and range few our of ratio X.X to

free a and flow of generates business gives markets. the better cash industrial auto a which Our us model much than most flow cash peers serving of profile our lot

I'd less even past have as million than in our has and we to more we major stronger susceptible months. deployed sheet occurred towards claims point the over out repurchases So are balance that share demand. XX M&A also $XXX

evaluate capital Smart and to to capital sustain investment what order initiatives continually returns-driven enables repurchases a M&A, other focus investments to work This healthy in leverage in us have to accelerate share to We We approach and continue our a put alongside to growth. and to is future Electrification balanced deployment. our as drive & opportunities ratio. such Connected

net to other and speaks pressures, our of market deliver operating external of low results of operating our historically pace ratio This our continually future growth strength our to face shareholders shareholder our returning the and invest strategy effectiveness to weakening value. and to organization. in leverage performance of our cash improve to end to higher sustained end the the from outgrow In markets

like Jeff to talk our the more Smart & I'd now Connected initiative. to Jeff? to over turn call about

Jeff Cote

you, for Connected with as & We truck to this establish the Thank brings detail I'm initiative the customer Tier that pleasure our is potential our partners. OEMs one new further has relationships talk believe we today. Smart the you It in and to this going our about Martha. to making value join are solution in a investments segment a initiative system is to and growth Sensata, as strategic of most investments our X while well and strengthening trailer customers.

deployed of trailer the on of everything systems Sensata and broad drivetrain comfort on-road We're I clear suspension trucks and that X, overview On from a trailers providing and Slide cabin industry applications. sensors are show today. portfolio sensors for leader an to

chip customers success. strong We of brand we track with have have record a a blue and

has outgrowing XX% XXX by XXXX, points. averaged Since business end organic while nearly HVOR basis markets our growth, its

areas around leadership where tire specifically a monitoring. is position pressure sensing, in the of One have wireless we

vehicles include significantly to beyond are customers our solution. be capturing and the As using TPMS capabilities leveraging vehicle tire requires expand area our new OEM trailers will on our and to legislation on their pressure network trucks data just OEMs trailers, they

bring chain. We the tremendous of this type that quickly value of solution also value part cyclical logistics a to growing could managers, fleet less overall directly and recognized

market solution. in our is around fleet Europe truck are and Today, market could $X OEMs America believe there potential North our for XX total trailers million billion, the alone be and we available trailer times While is sold larger. into with for nearly managers solution that today retrofit the commercial six and trucks almost

a have can as using that weight, While they desire currently be and and sensors to ends, solutions, in telematics areas many brakes, managers other high-performing applications. software only algorithms data valuable fleet delivered wheel embedded capture through such are

leadership new us proposition fleet evolve a both for technology value into important and and TPMS managers. more OEMs partner market an our our is insight to Consequently, strategic data broaden and creating in opportunity for

data consists provided gateway truck-to-trailer and a the Sensata A by seamlessly. developed vehicle show sensors high-performing those is data device I XX, the the Slide wireless and On to exchanged that and collect between ensure Sensata third-parties. of wireless truck network to high-bandwidth area trailer and process link which by the

the opportunity generally is categorized Sensata uniquely The for understand the deliver as mechanical is well to applications monitoring. this load and are this two one, as because positioned cases. and the generate safety; we data use market and environmental condition sensors that the areas; and productivity-enabling that on in developing vehicle portfolio we two,

for of the show I of we slide. a and side of prioritized on for right-hand on on truck a trailer the the examples applications slide the sensor sensor applications left-hand side are the focused

trailer ultimately brought is sensors that to and network fuses shop one-stop are efficiency from provide all Sensata a which scalable vehicle various These valuable customers. information platform data together data information. insights for for improves sensor to area in vehicle leads applications that This the a

solution to This choose applications. software only portfolio can scale features advanced makes it to can with along to embedded the customizable customer-specific deploy that elect entire a one needs. deploy Customers highly the of or

value Each has a of use the cases compelling proposition.

reduce save For and example, help managers and fleet sensors dock scale increase utilization. our driver yard weight time fees,

few roadside Our a checks rapid the have applications These a benefits. of decrease fleet and and compelling costs managers. brake sensors maintenance for name payback to

of leading their solution number our the of network to already We North truck area the proof decision deploy by and have new wins a on trucks value had America. including in the vehicle OEM a points all of demonstrating

many with We multi-million in tests. fleet a secured top in our leading manufacturer trailer field U.S. In live Europe. dollar evaluate our have third agreement on solution with their quarter, to the deploy solution engagements managers we a trailers to initiated

partners integrate have significant pull with solution. seeking And from our to finally, we

sensor using Hendrickson, For and manufacturer power U.S. area recently with network. in axle example, leading a partnership to suspension wheel-end vehicle formed the we their a our

as customers While years fast from shorter close see as close we it will generate business can once we our revenue a the XX much possibly be win. typical opportunities time with time new to take fleet to new three to revenue months OEM with XX line four to expect we the customers, months

slide vehicle sensor network that telematics will I is for area On a show how feed the Sensata valuable ecosystem data. XX, hungry

there complexity and is off the to capture lot for cloud we ecosystem While to this to have required telematics of a is slide simplified analytics. trailer in the that bring data the truck it

We expect service telematics to on-road hardware be an both and important software offer providers fleet for partner that solutions. management cloud

onboard with facilitate into vehicle valuable data OEMs is and We devices are fleet in to and cloud will of strong, requirements off integrate meet solution the the managers. to pull we their insights our managers. To ensure fleet offering our the investing to for order

has to as we initiative tremendous in accelerate accelerate to next growth and our the double logistics as spending investment ago, to new expect this months. This the in on speaks expect broader This unlock began to well two that investment long-term we potential In years our ecosystem. the the XXXX our XX initiative. opportunities

I XX, continue This slide over and systems a TPMS insight how evolved to an the has years integrated sensor vehicle included area depict partner evolution from and aspiration past development has data evolve network moving OEM to to wireless our onboard as On such and into Sensata fleet customers. solution. design for two our to

to customers our leveraging to opportunity we in differentiated systems and very and coming and our our IoT quarters. stack. the the knowledge on sensor We embedded broaden move are wireless can position exciting More analytics come designs, in to industry in bring that value this up the expertise and

call to and year review detail Paul in over more to full the third for the like guidance to Paul? our provide to results turn now quarter fourth I'd and quarter XXXX.

Paul Vasington

include: third Changes million in the foreign quarter, of Jeff. XX quarter Key XXXX. revenue you, Thank the highlights quarter third organic GIGAVAC X.X%. for from revenues shown quarter. as the decline decrease by $XXX.X of valves X.X% slide a The of on by and in increased The was X.X% the revenue revenues divestiture of net in decreased result the effect year-over-year. currency our net acquisition a X.X%

Adjusted and operating of the favorable and partially the third productivity divestitures decrease quarter, of compared a revenue net product due to XXXX income lower new the effect to by was somewhat $XXX.X currency. to in million acquisition X.X% of due primarily headwinds launches quarter offset

income was to to the quarter, million net Adjusted quarter. X.X% Adjusted $X.XX in was compared quarter, the third third the a decrease decrease of XXXX. a $XXX.X year EPS the in compared of X.X% quarter prior

two Now comment business the on third quarter like XXXX. to of in segments our I'd of performance the

I Sensing will start XX. slide with Performance on

quarter, Our Performance impact both by the Sensing decrease same the and reduced compared of X.X% divestitures and which business year revenue reported revenues negative effect reflecting last of foreign $XXX.X of million of acquisitions for the quarter currency net the a third to X.X%. X.X% from

prior reported Excluding an relative organic revenue of year. Sensing these decline the to Performance X.X% factors,

organic by revenue decline Organic revenue the was decline Automotive North the Our points. organic an but reported of outpaced basis business quarter, an America in XXX offset in and Europe. China market revenue X.X% third by growth end in

third basis the drove combined business due outpacing market organic of by content market quarter. declines, lower revenue decline HVOR points. end of the End an revenues the the Our most X.X% during growth decline in XXX quarter, in launch to HVOR delays reported the with

decline last of of Sensing operating as compared points percentage XXX third year. year. million, same $XXX.X was profit Performance a prior in quarter, from X.X% decrease Performance the XX.X% income the the was a a as revenue of to basis quarter Sensing

launches by margin foreign divestitures. The new net decline impact the in was somewhat and headwinds, revenues. of effect positive of driven scaling to in due acquisitions by effect decline and segment of partially currency. This offset was Productivity the the the operating organic income and primarily product

an impact decline reported quarter, organic we the XX, revenues Solutions year. of quarter third Sensing currency X.X%, of from factoring positive slide to a in as reported of X.X%. contribution As million an decrease $XXX.X acquisition of a negative X.X% the shown and GIGAVAC foreign in basis, same revenue compared on last On from of the X.X% of organic a

by organic business in healthy result by geographic offset inventory was Industrial This major as end lower and market. driven growth regions. as partially revenue reductions of result decline our Aerospace market growth business, content demand our a in a was a The and of end

million operating from are to due same quarter lower last the the by the the related of $XX GIGAVAC. we primarily in of quarter, of was offset decline The acquisition, Solutions' favorable where a segment margin in X.X% income Sensing third investing income impact was of acquisition heavily in partially decline decrease dilutive organic revenue, impact the GIGAVAC The of year. operating Electrification. primarily in the to was the

in segment flat income roughly costs, other year. million $XX.X previous third in were included operating and Corporate quarter, the the with not

back costs added non-GAAP XXXX. our the were $XX.X of charges other to third and results, in quarter Excluding corporate million

Slide to decline to to gross X.X% year-over-year XX foreign productivity currency due XX in offset third shows margins Sensata's Adjusted primarily profit XX.X%. headwinds margin non-GAAP launches, were gross the organic results. gross profit decline and in new tailwinds. related partially declined $XXX lower gross million, XXXX declined revenues and -- margin by and scaling quarter points to basis The product

SG&A $X.X as million costs, favorable spending. costs well year-over-year, selling lower lower as compensation due were to and discretionary variable

the was As year prior quarter. a compared down operating result, X.X%, income adjusted to

Our XX before profit year-over-year. percent tax, of down as tax adjusted on basis slide, was shown this a points rate

be of X%. We approximately expect previous X.X% tax our our full year consistent to with to rate X%, guidance

or to of offset X.X% decline adjusted EPS compared in the was benefit income the Finally, the by operating of was as quarter mostly third $X.XX% as down XXXX, repurchases. share

net to debt X.X from I balance reduced progress we ratio strengthening X.X leverage the of by in the our times our end and Since times. years. $XXX few have million, our made have XX, Slide we the sheet past over On XXXX, lowered show

a loan. term by our million financing these outcomes new we bond $XXX refinancing enhanced positive our and We from the During capital XX-year quarter, achieved several issuing actions. structure

a XX-year our high have First, bondholders and our This took low markets, yield a favorable and business as bond on we market, the performance. advantage rate in that attractiveness coupon the confidence of financing. X.XXX% of secured operating historically as our long-term well reflects

this increased debt the Also total percentage further of rate we our rate extended we of addition, from XX% reduce fixed duration financing, In of our debt debt with to volatility. interest our portfolio. to the XX% bond

Finally, amount loan our of XXXX. maturity extended total term we the reduced the and to

maturities we result, XXXX. have before a As no debt

of guidance, guidance representing our of we XXXX, financial year-over-year $X reported million, $XXX quarter the our effect approximately show million decline that XXXX. X%. and between the we quarter of revenues between $X At I million. fourth XX, a midpoint expect by million Slide decrease will increase expect report for revenues and currency net will X% acquisitions and $XXX the fourth divestitures foreign On to revenues revenue Overall, approximately of net in by the and

to the of report currency acquisitions we divestitures, Excluding organic and X% impact of net an of expect in to the the fourth quarter. revenue effect X% foreign and decline

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

report $XXX adjusted and between million income operating We million. $XXX expect to

for a million, represent $XXX the expect decline of which million our of guidance. income would On the $XXX net and bottom-line, we adjusted between XX% midpoint at

expenses. EPS We earnings higher mainly lower This primarily $X.XX revenues, $X.XX. and expect of down investment growth employee the new is quarter end sequentially XXXX, timing weaker the of report markets, in from and from compensation third due programs, to adjusted between performance to

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

outlook lower Our year call. that we earlier with market shared on end XXXX, the updated anticipates you the guidance now for full

X% $X.XXX X%. decline As XXXX, and $X.XXX expect full the between for to revenue a billion, year between representing result, a we billion

million. And $XX divestitures We to net and approximately acquisitions by by decrease effect expect reduced revenues revenues approximately of foreign currency million. $X the

the year. organic X% for revenue full of guide decline represents to X% Our a

represent decline $XXX We $XXX would of operating million a expect and income million, adjusted approximately X%. between which

bottom-line, we and X% XXXX, income the of the $X.XX expect $XXX earnings On between and a year X%. decline which and million net $X.XX to full adjusted per adjusted between $XXX million, represents share for

million free flow the for million. $XXX generate to cash This full We XXXX. of guidance $XXX approximately flow expect cash free capital million expenditure to annual to $XXX year million of assumes $XXX approximately

call the back to, Now over I'd like to Joshua. turn

Joshua Young

assemble Thank roster. please you the very Francesca, Q&A much.


We will Dorsheimer question question-and-answer now The ahead. from with [Operator Instructions] begin Please Jed go session. first Canaccord the is Genuity.

Jed Dorsheimer

you one I migrate question. I Hi. new the up initiative taking Thanks for dig Martha I'd first this guess to and/or will. guess to of for stack is like kind into my Jeff. if

software current question the the my engineers? engineering is, is and of would that, engineering categorize so of of you as resources? those what resources, what personnel what And is And headcount percent

Jeff Cote

Great, design. we've our skills some good able around wireless business associated question, been the there use to with are core so expertise sensor that from specifically

have of if number will you redeployed reused So those resources. we a or

customer engineering, Headcount today, that of sales people wise, we're of important base marketing critical very talking given in resources some we're majority vast about being but them the the XX with terms engaging and with. new

Jed Dorsheimer

more two generate as may one could, we road, to in, the airplane for it, Francisco. basically or going gigabyte a Boston follow-up, from ADAS, whatever in a the be look questions vehicle level -- whether day will over then or that proxy think, the and a will if a a an aerospace if and Got But car autonomous terabyte. vehicles San heavy at generated generate you're more I it's a I targeting, or for the being off data

that generated data And storing with the in then mentioned and strategy? is moving that a maybe massive this Martha. data IoT terms solution kind had your What in for amount of as cloud. in of the of you of dealing So terms we --

that. wondering, on by I'm breaking always given that in vehicle a nice of update market per end auto. that major changed was done the content dollar what's representing strategy kind slowdown? could down of wondering region, China Thanks. if a part I you the kind you've the growth engine was with of of as job for And

Martha Sullivan

about space look a that what offering When into The in really of it's now you you've solutions-based is at what's those vehicles talked that like on in a data. happening hit of getting those. automotive, we're really needs, as I'll Yeah. the and a algorithmic customer and on, focused Sensata both really data more really -- the aero on for foray this those areas actually intensity interesting trailers. insights including that is base

you So of to able vehicle look insight telematics from really accept and challenge be data. coming to is, to is is the not today to fleet even that are platforms of the keep when the what and some The well that really at level scaled those managers happy. cloud infrastructure providers needs be it the there

Also content say a little on have. bit per that to has comment a initiatives relative the the of progression vehicle we I'd been quite good.

As base moving the content a that to rapidly you really content so content, there. there. great well along so past three Jed progress we're years to know in shape continues on good auto, over we small make grower in in way continue our fastest of us EV doubling the China so be are for

the have auto of feeling just North of strong. that face now. growth accelerate, Some at right well our clean GM progress that continuing make We're General content quite so of in ties the to is seen But market be the there. of Motors one strong we to parts happens America we've to the in where those as initiatives our content strike that we're

Jed Dorsheimer

Great. Thank you.


is America. go Please Mohan ahead. The Wamsi of Bank next with question from

Wamsi Mohan

adjusted QX down has operating morning. down and X% Yes, down In revenue guide XX%. margin you thank but X% income reported and you. is X% down revenues Good roughly adjusted operating your

mentioned You of little a about bit Paul might that comp. have timing

what as I can could you address, you that follow-up. you do worse of view creating But a how have controllable that these you actions incremental I if take just And on? margins? much is And wanted ask to

Paul Vasington

business, time? X% it significant. but all abrupt, drop it's is question The we the is automotive That over drop. was of very what a biggest with significant period that controllable, it's GM It's of the so saw

is drop volume starting to we're most the which is driving the our and costs. degradation margin so And of align

cost We demand have profile. been lower the aligning to our

working quickly to we it QX margins back we're instantaneously and have our into very as up happen we get in our exit But doesn't and confidence that XXXX. so ability

Martha Sullivan

accelerating area We're investments sequentially an where Wamsi some that's phenomena a comment and other time And move one as we're profiling spending as there. we well.

And GM phenomena a it's growth the of initiatives. compressed is our it's we're So shot. taking and ugly, but off eyes not important really one

some having move So that's impact well. as as sequentially we

Wamsi Mohan

And GM, the exit XQ you color is that So models about? would like there, Thanks for modeling seasonality about the into we some just should rate Martha. that for as street XQ say onetime how assume like the spoke for Okay. base here we to a I if XXXX? XQ? has updates think could, good negatives particularly Seems

Martha Sullivan

Yes. The same would - I'm...

Paul Vasington

is to same Yes. -- you The is seasonality the QX as typically lowest going profile. margin our be

would than I saw in I better expect similar the be of out just drop for you volume about the we XXXX. what profile the just So seasonality or made say given XXXXs the to to to be Other abrupt that, expect XXXX this would QX, we would comments quarter.

Martha Sullivan


on the So sort of as no, to answer a fourth in your baseline performance reset question Sensata. directly; we margin would the quarter view

seeing of down. That's our profile basis So profit normal XX we move sequentially. as not operating on sequential movements we're points

early we So we as days we and certainly fourth -- would expect we to go quarter get enter the -- as through as the XXXX. of into

Wamsi Mohan

Thank you. Okay.


with question next from go Wells Please Deepa ahead. Securities. is Fargo The Raghavan

Deepa Raghavan

Paul. Martha, morning good Hey,

-- etcetera that pointed margin that on Tagging question doesn't and questions, strong margin Martha. tagging out into is Cote. but like GM XXXX. you include broader on outlooks a Just more Jeff in This broader it,

scenario you taken the about contribution or of margin considering? are this actions that have than might talk given initial for outlooks you Can coming peers about worse auto about leverage you some in for how talk be should feared. in cost Can thinking downcast Sensata we for on XXXX

Martha Sullivan

already a would expect really that making to on we Paul taken and I'm focus actions. number Yes. market. going We've down do sure maintain in decrementally let elaborate our a to But high-differentiated we of a more. bit even margins in

into extreme, that's something get impact. have we if can an it Now

market quarter. we've down third you an lot movement can how awful the But we're seen doing and in of see

good say the done you GM of cost think Paul can strike So that And took the in more. job a putting earlier aside, and we've protecting really done margins some our I we that we've year. through actions

Paul Vasington


lot of a in was restructuring -- more in as the restructuring QX. last done So we in we've we QX there mentioned call,

We continue in the come on volumes to focusing and come cost natural to our structure available cost allowing a the discipline really as and structure. the to cost down down and demand fixed managing lower align cost to reduction, our work of managing P&L our

Deepa Raghavan


once -- these -- costs -- GM is I GM back do like mean So come

Paul Vasington


Deepa Raghavan

right mean, I now.


So don't. they

Okay. -- The structural

Paul Vasington

to Yeah. pick fixed costs go that to we're volume. those away, need to terms going permanently. majority back. aren’t expected of clearly come volumes fixed The But I mean support fixed to to when going are in costs of up, cost, those

Deepa Raghavan

follow-up... my And it. Got

Paul Vasington

mentioned, talk we are will offsetting be that to these growth continuing impact. invest not programs, an as in But so Martha to and new

Deepa Raghavan

clear. Thank you My much. That's it. follow-up... so Got


The next Please David go question with ahead. Kelley from is Jefferies.

Unidentified Analyst

This for question. my David. on is Gavin for taking Thanks

Looking or noted have at you Can quick a in is to about just of drivers expected improve auto the Is X, there? talk that follow-up. outgrowth product-specific? then QX. region-specific some that slide you I And

Martha Sullivan

There pretty a end to of volatility despite have good And market. Yeah. the content visibility number in are we keep just the in mind drivers. on growth

do underway. we that So, are launches have

despite GM content on coming actually vehicles things strike. like the new So,

content China performer for be continues strong to us. a very

X%. despite in in growth you a saw QX, So about organic of China we down actually market delivered

to So, will double-digit basis delivering content about strong continues points. overall of performance be and XXX that what drive growth an

Unidentified Analyst

content growth please? you. Thank And then, into -- outgrowth too that more that China, can you go Thank there Great. content you. detail just in

Martha Sullivan

driving that There growth. a are number Yeah. of things

our a fulfill customers -- the are a requirement VI of standards. around we National helping that requirement ones So, one is big fulfilling

cars as That's think X Euro of in sensors and can emission more analogous also driving being to standards. on-road trucks. these simple passenger You

So, some content there. great

to just and share mandate that's And in the then, We're see nice of seeing now China of kind continuing tire additional in China. we're modernization around a content. pressure sensing gains out and the play us fleet given

us. adding are like systems mature are which sensors So grow content and climate in things oil control use to in growth pressure of are China. continuing highly for The sensors, installed markets, pretty

of some puts the So, and takes.

Unidentified Analyst

you. Thank Great.


from Wolfe go question next Galves from Research. The Please ahead. is Dan

Dan Galves

Yeah. Thanks a the question. taking for lot

in strategies COX or about meet content on anything you expect maybe new opportunities be Europe. to vehicles hybrid hybrid Can there's if wondering wins of bit little activity particularly OEM report to to Just broadly vehicles? on business a on we big your talk a more And electrification? as targets, part bidding

Jeff Cote


talked on like hybrid question because available We've powertrains it it. the provide both address that fact has about me solution, content on can hybrid and really we into first. it, the let So always we a

help With we very propel we products on well see customers that from the validated confirmed strong and regard M&A a believe been the market, acquisition we with to really the continue engagement GIGAVAC to standpoint. pipeline platforms, an been really that opportunity. to innovation of of progress that broader that The electrified that's terms investment of the their in as from case us bring investment on underwrote and to as our the has

continue we're But and -- both good the initiatives, feel front we terms that on that to and positioning organically last in electrification through quarter that number product design about developing customers of on different area. talked our -- very in acquisition feel the of about serving

Martha Sullivan

It's a competitive pretty market now. right

talk -- about to it's intense platforms a always enjoying of and of get we're because just announcements, bit winning is sensitive any engagements. marketplace little the business, those into in competition where new to we're So there in sort customer terms we're

Dan Galves

Okay, Paul, headwinds from in And launches. some if quarter mentioned great. could you you -- productivity the

You also talked and you fixed out kind investment in XXXX, R&D continued cost of talked into reductions. about about

forward, to variable basis kind of kind be we year-over-year next things you out movements If on a of cost those of year based put lower you on together, the three of taking expect production? kind as look effect just do general costs

Paul Vasington

that going of lot we're and and margin still scaling What of level, this new largely decline for So up products impacting our a behind in higher products which so the at of mature next products as were us. planning new we the scaling these high year is more is a look just at process the year is XXXX costly. through

as profile will improve. So, products to new margin become those more mature, start the

that. So I'd as next it the relates to year, expect better be margins to

for to the look cost seeing. mentioned Jeff that It's out issue about to we'll us. important we're connected. to as reduction, very more to drive With increasing and to investments align continue continue try fixed We're our the cost going a demand

as So XXXX. expect I everything into relative to XXXX to but demand through be cost call profile, too margin early to to the and we to lower go would improve,

Jeff Cote

our that see will profile And the demand it customers. we from follow

in understand that. our to and better XXXX -- overall the the is of the that now to sure being we'll structure translates that's to a work do So and profile outlook lifting heavy right terms done to where aligned demand is the that make what cost

Dan Galves

Thanks a lot. That’s really helpful.


[Operator Instructions] Next with question Please is Daryanani Evercore. Amit from go ahead.

Amit Daryanani

Thanks a as have questions I lot. two Good morning guys. well.

inventory how HVOR forecast typically do From quarters Martha issue How and and you HVOR that persist? corrections these your lower softness experience, typically on as last market? many well. reductions long talked in the one, the First does customer about

perspective, or next from over content on a then remaining stable do content you side the few quarters? a see HVOR And accelerating the

Martha Sullivan

when looked went end and we an we Yeah. correction. overall innings things XXXX We at saw market those Its market look of where back early like across correction segment.

so to very that other same the never quarters, Given every about has six from momentum. intensity some it ranges time and four of throughout start intensely the cycle, been build

of that can on I lot So look not provide like. visibility can sure what a that --

stabilizes growth The seeing in market older these equipment that think equipment now of the consume as the content. actually you're gets delays thing underway content less customers and new has into the to we correction that's are that trying is coming as impacting

expect have would content inventories down, those the would come programs and rate. we as to So same we the see see restored to growth at take equipment we that improve expect overall time

Amit Daryanani

the Hopefully XX% QX just was as Paul. high that's high well. it XX% free Paul, really I right. remains QX. Got it. if flow think high suggests math cash And could helpful. again conversion in impressive up with fairly I in in -- follow the That's My

Paul Vasington

That's right.

Amit Daryanani

is term is helping in nature should longer this numbers think guys? half. about Or flow something model high we conversion back structural one-time this that's for in something free this free start as I'm the flow that we wondering to cash cash in you

Paul Vasington

year the What had past reducing similar very had of was in on where QX. seeing kind around dues similar conversion last the is strong flow -- second execution very collections stronger saw first good dues half. you we're half than it cash If the receivables. Past

driving work is inventory efficiency inventory and to and work we've continue better half the relatively for our the of working seeing our while that. terms our of inventory to so capital levels improve process a suppliers, We conditions -- our the down, streamline of is conversion. typically a seasonality terms second in results you're But is initiative the had the same stronger improvement where

Amit Daryanani

Thank much guys. you very

Paul Vasington

Thanks Amit.


Next Please Chatterjee question with JPMorgan. go Samik ahead. is

Bharat Daryani

This Bharat Samik. is for on

first trends end sense And question market. a seeing in to So us relates aerospace end give what are can the of my you you're market?

growth organic there. been reporting strong have You very numbers

is sustainable general as XXXX? we how favorable into or particularly of Sensata? a the end content more So move trend Is it in function more market growth for

Thanks. follow-up, update also And an just much be of quarter? as us in you restructuring can undertaken the remains to give a how quick fourth

Jeff Cote

one So, the why question. second of can hit the aerospace part don't Paul hit I then the and

markets a the So aerospace luxury time that is the one of of these has long very end around booked business. lead

so of aerospace you of suspect industry the And XX-year I out are eight are orders to there. many tracking that the in backlog that

would that with very, associated that. we have long into visibility for that stream some provides very So the revenue

into growth that around visibility or well. new have we're similar also space content We as pipeline that we high to products that have launching

the overall been has would miles but visibility business We aircraft to combination number really to and orders, us health long be so continued some there to be cause metrics that anything be the of and forth gauge a of anybody pretty look. cycle grounded associated forth. of of and And a we despite the the that gives regarding cancellation also alarmed watch resilient which industry. backlog the track that with of So challenges some we're quite of good seeing things like the not -- and so very passenger

Martha Sullivan

rate. to the growth content time, have we At into same that been able new bring

well end content. So market seeing you're a strong combination as as of the

Paul Vasington

restructuring. mentioned you So

site did our action. we more I weak we're sites. So restructuring we third to the activity continue We And market continue a and in end current transformation seeing. consolidated initiatives existing that quarter, in to Germany this expect reposition given the within have demand

Bharat Daryani

so Thanks much.

Paul Vasington

you. Thank


Please Giordano question The is next Joseph with Cowen. from go ahead.

Robert Jamieson

Robert just morning. is for This good a Joe. had Hi, quick in question. I

head next after at that. into we current markets expectations? I versus end have year are do most follow-up risk XXXX, a quick think which As you And your

Martha Sullivan


of earlier, we're mentioned landscape as try Paul doing for XXXX. a work lot understand think I to to the

want careful you at to best. be these tell we that very So, preliminary are to thoughts

at think, we I seeing quite already of risk forward, contraction. are going bit we think we're about, a that where what's when looking

are so, China beginning contraction And it's it, like still we're PMI things but to recognize a stabilizing that unfortunately rate.

we've declines we've we American of that correction the in Auto. see first of accelerated but seen, lot half at one of a the end most seen North So probably not don't market The have recovery likely. least year like is not risk

So expectation, above that I down, slightly market been the but a operating, GM strike notwithstanding, expectation. has that's above think

So closely. that's another area quite we're watching

HVOR When XXXX. remain look segment markets, at probably in of into territory we as we the end correction definitely and balance move is our our there will

don't counting So definitely XXXX. portion of on for improved expect good a not a outlook surprise, an but

affect preliminary thoughts. on the do their are those ones encourage those but would that end themselves, Sensata. We are markets those work to everybody So very

Robert Jamieson

Okay, bottoming of within perfect. sequential market? sequential end And industrial then any or you the be, my seen signs follow would bottoming just have up

Martha Sullivan

inventory in of that occurs, where while an for chain. know lot that not we us, has and market, just particular the end it that has, given You awful what is take in sort of supply conclusion see out We we our see yet it stabilized. operate

watching but one of fourth be the one that's that's So, affecting phenomena closely, the reguide we'll quarter. in that our

Robert Jamieson

very That's much. Thank helpful. great, very you


Stein ahead. is question with next The from SunTrust. Please go William

William Stein

Great. Thanks I to on question. would Smart for Connected. my follow taking like in & the up investment

of for and there company? be there's organic into deepen we us area acquisition most that think and is investment, focus area M&A in anticipate aware M&A from Schrader an the may Should initial are market the now to foray this this would and the opportunities this it I of broaden as that portfolio. seem

Jeff Cote

this knew of pointed opportunities. terms of come an that through you & as we when certainly in opportunities sensing. that, the for healthy time are Well, element and did of Connected activity of of would pipeline out, among foundation there originally pipeline; the use we and be Electrification Schrader, M&A have acquired Smart more a wireless We do major at

it. at will to look So we continue

was It's this that capability bring business. have tough solution. do also us note the to capability strong in to into segment. converted this important applications core to Area can it's Network just the it's And to it's that, also we not think position to brought the I Vehicle be with a HVOR ability serve wireless of terms that our into new wireless

So organic it's really inorganic into of to today. a and where those is to market combination it bring this

William Stein

And… Great.

Martha Sullivan

that the thing I we aligned they think that, strategy. much to can acquisitions, when our is really count are on one do very you

the GIGAVAC electrification in that acquisition. You've seen with

If you look at sensor Schrader our of the very acquisition strategy. to tied much

the do the acquisitions folks do we understanding our not be by to that surprised you appreciate and you are the make. that, we to will that work extent So strategy

William Stein

to the bit to business more sort integrated -- out you've One stand-alone. more of could products if Okay, that bit as one can, opposed acquisitions developed I stand-alone let's more acquisition other color these you much provided maybe it's minute I deeper of letting little to been that completely appreciate a a as of ago. and a But if a little a business GIGAVAC, with color. recently or there little the much typically as coming more have say you go relative two well traction of way

the Any you. So and an there also on partnerships and helpful. with Lithium update Balance. Quanergy those would then be update Thank

Martha Sullivan


topics important we'll inside tag really They're So team bit. a this Sensata.

co-mingled expertise to happening is technical what's engineering at important, but put have around technical that teams. with we Just frame really we highly already that expertise, the the GIGAVAC, a business acquired

team So the the Sensata sits. into California electrification we've staffed that contactor from legacy team where sits,

about launched in in expanding and the and position market. We've already Mexico manufacturing Sensata China all for core example, that's our automotive inside in sites

to had well. GIGAVAC customers just our globally have industrial happened for auto progressing as engage would not design-ins and We've some ability stand-alone well. that are given and quite things with wins So, some

progress So there. I think nice

opportunity to about lot X, Quanergy. there. autonomous see out pushing overall say really the a Level Level driving Not We X

about a we of pace probably And the as you want versus think area been the an to so say turned down our Jeff, investments, we've And we past. in anything? bit where that's where

Jeff Cote


Balance, spoke we but last how they regarding this battery the to form we've a together side, what only Lithium other that fair terms strategy. fit the been and in Balance call Electrification wireless not so Lithium on and is forth the topic Sensata's undertaking amount On of management organic activities

be partnership depending really that the we're we about the talking than varies or done outcome progress on one-size-fits-all. integration, and acquisition which feel the rather to a for to good on that And about the terms that there, having but More the Wireless with Balance in the of it's been really good had progress in us and customers our our progress to we've and Battery continued Lithium provided engagement terms of the optimize Management. help is

there. good progress So,

William Stein

Thanks updates for those


Morgan is go from Stanley. The Please with Hettenbach Craig ahead. question next

Craig Hettenbach

Yes. Thank you.

you within we Just think a you're question of as is kind expected longer-term? just drive or kind the Jeff of kind some invest on growth what of margins particular thinking to kind of to in margin just initiatives, longer-term laid footprint of should of of operating resources reallocating kind out there of -- any

Jeff Cote

great a That's Yeah. question.

the the to-date, about months about So It's we've sizable Smart years invested where investment. And to we've range & biggest $XX that been in. investments you've two in doing initiative a for just we've done We've reallocated are to long-term We've been XX per already. been said. the opportunities that exactly talked investing Connected it's million been that year for fact what Sensata. the in by

the you double down around to be range to inorganic might we in, continue in point need example at I there when as some time was on investment is if here, what that's come to getting talked speak invest talking gave sort will, that to the amounts we but it the other Connected she think we huge there. help thinking to be as the out. proof may the call is, able people about have Martha and Smart that we kind double that to the incrementally, a points of of mentioned there about about money & of transform, as We're question well want frame we'll we'll of and to do the activity be where

Craig Hettenbach

recent the how cycles in and appreciate are markets, that terms on And you a for -- it. of customers inventory to of just just of color heavy terms question signals the in industrial, to But out. deterioration kind and then in or but same any realign Martha. play I Got you're in they the these they adjustments as of progress vehicle said, the seeing follow-up from where are macro end the none demand? and of other lower terms inventory kind of

Martha Sullivan

on we tight extent would with what say us they described. Yeah. eye that orders do a with what what's I've what to then happening more of productions. their and not keeping say. phenomena usually, they the generally much I And There's beyond a versus can it's already really

what in component our expect takeout call-offs to and can end So their level see our both reflect also often will own inventory terms in inventory. on we of

So things the we those are look that at.

Craig Hettenbach

you. Thank Okay.


with Suva Jim go Citi. from is question last Please The ahead.

Jim Suva

was much. Jeff about inventory or very takes an in correction mentioned it believe right. to either six quarters four Thanks if that HVOR heard I Martha I

put is I HVOR XXXX for think the comment. does exiting So likely that much much much, exiting but auto I And assuming was the And us better growth? basically demand then for doesn't get on to know XXXX equilibrium that worse, the the have a auto side, take? was the curious strike we And should working you. inventory. GM Thank I side, that? think that you but the there long was inventory mentioned through about lot how on about

Martha Sullivan

to cycle. around I market the we does do question Yes, Martha. long generally Jim, it to responding HVOR Hi, take how it’s a was --

how those less phenomena quarter do what they than on described. I sort to those So That was outliers four side six was to just long to take of either out. end corrections the relative past markets that about there's play end of in markets takeout inventory and studying And that.

do available that's everybody it's on. So information to probably for homework their

addition we're that order auto to correction inventory piece correction yes in rates. on and the so, top of On seeing

inventory side, inventory visible. is low on On control inventory is they overall strike vehicle quite less actually is vehicle quite is speaking, will Generally build in low component And and supply auto in chain. to GM North more that right trying the much inventory given there's in the back. the industry vehicle the be America level GM the now

keep are terms that's that in that's get -- thinking our on guide of expecting more as well. some of in the in That's eye -- have we to we're as of places So inventory the into our Europe fourth the we corrections quarter. some

Jim Suva

Great. for clarification. the Thanks so much appreciated. greatly It’s


allotted the turn remarks. like call. Joshua have time for today's call Young to This to concludes we back for now closing over I'd the

Joshua Young

thank Technology headquarters to Sensata well us like I'd in everybody Industrial in attending Industrial the Conference morning. New next Massachusetts. XX these on for Chicago Attleboro, week Baird & Summit Robert November or this as be to We Cowen the our will invite us conferences visit as at in joining you York.

Thank for interest this joining for Sensata. morning your at and us you

end now call. the may You


has you call Thank now concluded. for today's attending Conference presentation.

now may You disconnect.