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ST Sensata Technologies Holding

Participants
Jacob Sayer Vice President, Finance
Jeff Cote President and Chief Executive Officer
Paul Vasington Chief Financial Officer
Mark Delaney Goldman Sachs
Deepa Raghavan Wells Fargo
Bharat Daryani JPMorgan
Matt Sheerin Stifel
Wamsi Mohan Bank of America
Brian Johnson Barclays
Joseph Spak RBC Capital Markets
Craig Hettenbach Morgan Stanley
Tim Yang Citi
Call transcript
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Operator

Good day and welcome to the Sensata Technologies Second Quarter 2020 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Jacob Sayer, Vice President of Finance. ahead. go Please

Jacob Sayer

and welcome Constantinos conference everyone. would I Thank to good Sensata’s to you earnings second like you, morning quarter call. XXXX

CEO Vasington, on Jeff me call and Sensata’s President Joining and Chief Sensata’s today’s Paul Financial Officer. Cote, are

press PDF financial today, be can Sensata’s downloaded of slide this to a we today’s during Investor will that from results, presentation addition issued release Relations In conference referencing presentation the earlier we call. website. A be

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

As we like would I Harbor statement to Safe begin, reference on Sensata’s Slide X.

model review markets operating will during materially the the of that presentation XXXX. information subsequent in and of to Sensata’s call, will to show of will revenue are measures second our first cause and today’s SEC. and measures. including relative some and quarter material in the the He end with are our cover evaluate in measures such GAAP half to the review events risks the of are what an megatrend in encourage today’s for and our Most financial you provides for position, provide include, financials the During the Electronics. this our markets quarter, then the to also for regarding presentation, presentation. position uses are of detailed the non-GAAP but those of non-GAAP second call including in the end Reconciliations year the we of of company XXXX. GAAP from a Factors will second for overall performance other of will Jeff income that statements our company progress financial on description third growth impact PRECO limited the make to uncertainties. release update XX-Q our to financial we earnings strong included relate Sensata’s financial provide future On addition The course XX XXXX. discuss Paul our the of on insight of quarter our begin during balance the and business the of results the of segment acquisition its recent second and liquidity select our that Forms from COVID-XX and GAAP described X, discuss of We with areas, Slides in our provide as during provide will of into changes financial statements subsequent details our differences our conference filings statements. differ we’ll a financial not well such company’s the to, primary XX discussed certain the He then forward-looking guidance we Slide for actual involve the as quarter company. recent or financial may might the business. management XX-K growth expecting which then projections in key results quarter,

We after will questions then prepared take your remarks. our

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

Jeff Cote

actions Sensata you, took a with to on and our our we outlined range employees and Thank designed meet global financial start enable thoughts our welcome early, protect to demand recognized everyone. enhancing COVID-XX performance Slide summary like us to of and flexibility. some customer on Jacob as impact essential X. wide while I’d of the

customers, of so the shareholders world navigate better the COVID-XX operate. action quarter. were from caused to through instituted quick the well end Our spread we during by employees environment. serve the we quarantines and response can that lockdowns worldwide as helped as which actions around The markets and help XX% us these priorities this the communities and will our These this unprecedented emerge stronger position Sensata governments decline on focus that to disruption to serve in almost we in

Our market which organically. net by our the in this portion decline, outgrowth offset revenue contracting strong of resulted a during market XX.X% quarter

XX.X%. through and first second and market have the half, basis Certain basis their delayed and QX of For points points outgrowth first vehicle heavy in respectively. our in in the the customers product which for market launches outgrowth will year, and basis points some net our impact basis the half half business XXX points of revenue XXXX, of the our XXX off-road for We second decreased delivered our business, of XXX automotive quarter XXX QX.

that However, to our we points off-road of XXX vehicle XXXX sustained business continued be basis points XXX heavy for basis to in for to XXX due be will beyond to and and range points automotive, confident XXX points basis new basis for continue in our outgrowth market part wins. the

July. shutdowns. trajectory customer This of improvements From new year. of electrification $XXX first to million the pace for the standpoint, $XXX first XXXX. half business wins, second June. new business the closed May During new quarter, has than half third we saw in sites part million over This during is as faster basis, sequential mission-critical million quarters wins demand this business in the the products, as reopened these our of wins of improvements of quarter, fourth new award and wins. included nature years five past average continued new production to and in Sensata’s over as customers our business believe for on of that in We And wins anticipate us, continued a the even in and have business the month-to-month $XXX midst in demonstrate we up the ramped we COVID-XX-related

have COVID-XX to However, trend. may regarding Despite are surgeons-related this shutdowns challenges, and believe the on we position financial a financial taken recovery steps the we our have that cautious remain necessary impact enhance potential the flexibility. strong we in

lowered expenditures We a more the will Paul and quarter generated million second in We our measures the temporary free implemented for capital address our through cost actions aggressively $XX will million year these and have the operating second reduced number we example, $XXX managed cost cost For in demand. of permanent flow that cash since actions working normalized and capital. quarter structure later. in align our year-to-date. expenses to

seeing book provide enough the we in are order financial for stability our to third the quarter. guidance We and markets serve

as with our I quarter, was Finally, are detail, challenging future Electronics. will will discuss It with capabilities of in more accomplishments. that continue drive growth PRECO we a to but pleased our invest in we our acquisition

to Overall second XX%. first We XX.X% the quarter revenues volume Slide by revenue both reported second million year-on-year second $XXX.X the market XXXX. which quarter Now, as and market lower XXXX overall our than represents XXXX, the an I the would like on quarter X. during end an discuss performance outlined in of of decline of organic almost against of end of quarter decline of was

a slowdown industrial business, primarily Our business of in Outperformance approximately industrial medical ventilator manufacturers. to and in sensors organically, due was market to particular, business shutdowns XX.X%. the growth decreased pandemic-related global driven equipment providing by XX.X% industrial our in

down down Our trough the year, Global grounding is production our end air drove which XX.X% organically. from of levels Reduced aerospace business. and business decreased than is currently the traffic were XX% XX%. of the aftermarket impacted market better April XX% aerospace that beginning in planes decline

decrease business outgrowth. points vehicle XXX basis a posted of heavy outperforming XX.X%, revenue market representing an organic XX% off-road market Our of contraction, end

continued of a adoption business post China on-road emissions NS regulations. as of the to VI truck strong result Our growth

While grew declines substantial second in quarter, declined. our in production the we and China Europe the as in business levels experienced Americas markets both these

Americas outgrowth global automotive a revenue an Our fourth and first the from the launches of automotive the posted points X.X% grow and XX.X% declines. for third second slightly the to expect continues by to plants basis XXX safety-related representing in to outperforming and China outgrowth. led shuttered shutdown-related recovery automotive Europe the as decrease in do that second grew be organic This emissions, end snapping average as measured the market the quarter global XX.X%, were quarter The the expect market back into the six end-market prior from versus We well where second we be pricing. quarters. year, seven weeks production sequentially contraction, business quarter. IHS the more quarter market in better electrification of will of and

portion During growth especially revenue although North in inventory from we believe do Automotive attributed there a America. inventory with shift quarter, and China were of the building, Chinese movements to automotive that supply a chain customers. we was the negligible, first second Europe to quarter

normalized We expect by global end the inventory to our the year. return customers of at to levels

I X, to updates important are making Slide want about Moving initiatives. our key progress megatrend some in share to we

megatrend performance reporting for detail. more the end Despite are electrification, to to we into these we segments, not serve. from of competitive these and this are are in investments investments investments In and market We smart corporate and expanding see markets growth trends slowing megatrends rate cost the diversification, autonomous Paul increase their discuss long-term the transparency of the these greater spending our that all important and our operating critical connected further customers end as solutions and provide we we segments other. of will COVID-XX, advantages To will the moving areas. our our in we applications provide evidence believe across transform electrification, world. provide continue our do in impact

million closed new $XX During $XXX the now quarter, million in we electrification another wins, second business year-to-date.

and these increasing as Green opportunities orders testing several by new XXXX. As our Smart solutions, fleet the expected they to proof-of-concepts billion with representing efforts electrification by end leading broad into of trends for the In $X.X managers year. for we such turn addressable driven deal, present Connected, this an legislation, & accelerate, working by Sensata market continue are European

telematics the As order by this Sensata’s to in working collected valuable part area several transmit we vehicle insights also provide network fleet are that managers. companies to data initiative, will to of cloud with

Connected market by Our fleet expected and an in opens management billion billion OEM addressable initiative Smart XXXX. $X & in $X up Sensata

and areas our new In These our industrial business focus manufacturing, drive will infrastructure. increasing are benefit as we on smart segments unit. IoT, industrial high-growth fast-growing market and such for outgrowth and that opportunities business represent buildings addition,

we is object X, step small, on heavy based developing mission-critical EU Boise, improve market into crucial well advanced but application We from and $XXX an detection to with PRECO in safety. driver sticky, detection Moving blind is to turn radar expands a Road represents early vehicles, for acquisition in positioned July Slide regulations PRECO important benefit functionality. on autonomy efficiency Object by Electronics Other upcoming front, XXXX X, Detection assistance overall solutions a the providing and User our Vulnerable believe spot million that leader applications. content. closed in and Idaho, and Their side addressable assist

including in offering will differentiated we its margins. leveraging business synergies growth our is potential approximately supply see believe chain. a currently And relationships revenue, well, between OEM drive net Sensata PRECO’s substantial million and strong While small PRECO $XX and strong as with substantial. We

now We for growth intend our future. initiatives against progress these expand the megatrend are to the to and with efforts provide our pleased over I Sensata’s differentiation would these like that Paul. and to strong markets, turn call continue

Paul Vasington

furloughs costs align as by our including our in items ability which the to costs second markets. quarter, decrease X, repositioning currency productivity operating to operating restrictions, by lower manufacturing Key salary million, EPS headwinds due and from and decrease safeguard government taken a Jeff. the net impacted These Organic cost contracting million, foreign was $XXX.X XX.X%, decreased quarter shown in $XX.X XX.X% elevated of decrease employees capacity, as highlights facilities quarter. to revenues, impact of as of you, decreased of second XX.X% compared Thank were offset the end income to the temporary on reductions and to the include our was together, the all a in a well $X.XX the of revenue change reductions to actions partially significantly million, quarter second compared $XX a our the of of XXXX. revenue XXXX, was of XXXX. of second the Adjusted to X.X%. largely XX.X% primarily year. savings the for compared prior lower last pandemic quarter, due second year Slide quarter for from COVID-XX XX.X% at income Adjusted revenue decrease to Adjusted quarter, local

to on the performance second quarter of of like comment Performance XX. I’d segments Now Sensing on our two XXXX. the I business will Slide in with start

year. the Our million, decrease Sensing of to business reported quarter of compared revenues Performance last $XXX.X XX.X% same a

the foreign Excluding revenue reported XX.X%. currency X.X%, Sensing organic an impact of decrease of Performance from negative

prior by favorable year market safety reported Revenue Our quarter. was of in sensor the organic electrification to Automotive business XXX end major but in decrease and strong revenue Pricing end led when compared XX.X% an markets, all its by outgrowth points. basis new applications. mission-critical outpaced was emissions, launches

driven operating quarter significantly as elevated offset of the lower taken income somewhat was Our quarter as XXX the XX.X%. accelerated decrease end but segment points, Performance at XX.X% primarily organic growth truck and actions business, China of same is heavy from related VI as as COVID-XX, revenue to vehicle XX% moderate adoption the temporary million, facilities operating off-road Performance truck NS China year. savings business basis $XX.X reported cost due by manufacturing revenues, on-road capacity costs decrease operating content second in lower by of its from an our of compared profit growth we expect market Sensing was regulations. outpaced to of primarily in content year. a Consequently, well reductions revenue percentage the on-road to operating related year. last to emission in a to half The restructuring this last decrease in by income Sensing

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

significantly organically was by due as from impact aerospace business decrease industrial restructuring capacity Sensing elevated Sensing facilities related was decrease Excluding second reductions actions XX.X%. quarter year. revenue Solutions Solutions in decreased $XX.X was industrial quarter, manufacturing offset aftermarket. negative XX.X% the foreign organically income revenue In our XX.X% revenue XX.X% quarter somewhat commercial end in of percentage operating to business as cost COVID-XX, same our in substantially last production operating segment operating lower million, and currency from the contracted The temporary at decreased to XX.X%. year. lower of of operating savings income the revenues, OEM markets revenue and costs weaker profit from primarily in Solutions in and last the decreased taken XX.X%. a from a And reductions X.X%, organic Sensing

better business insight XXXX related investments growth and our The million with the results As for provided million ongoing year. end corporate approximately change and segments our visibility Corporate from To the this megatrends included second in your modeling, provides business from profit approximately fiscal year in in XXXX that into reflect increase XXXX not earlier, and to of on This income other. were we in markets investments into operating other are have of the Jeff segments margins mentioned Slide XX appendix. reconciliations costs and moving we and $XX.X emerging underlying the that to costs. results operating quarterly increased costs and are operating our first in impacting our quarter segment expected to the of shaping help $XX are million reclassification operating the segment XXXX. of $XX and megatrend quarter of XX to these

foreign incentive prior million, and quarter, benefiting currency, higher and charges other lower lower costs improved XX.X%, salary compensation, $X.X our favorable from Excluding currency. actions results, temporary to to support added Sensata’s reductions last as to with altogether of XX.X%. safeguarding corporate profit to $XXX.X end and quarter and and last cost gross from SG&A last shows non-GAAP $XX.X compared of to profit back elevated by significantly same favorable from Productivity furloughs were XXXX gross megatrend from from our to global same revenues, costs XX.X% taken a manufacturing largely basis million reflects and decreased offset somewhat temporary the gross XXX non-GAAP markets. points lower foreign actions decreased facilities XX.X% COVID-XX. quarter align year, year decrease costs year decrease our due from which year second The quarter investments. headwinds R&D results. repositioning our Adjusted our the margins XX million, to contracting cost improved and lower at impacted and restrictions, this in local savings due gross capacity, government ability margin operating to the costs employees quarter both Slide costs

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

profit percent the primarily the XX.X% basis as was to quarter, Tax a up profit Our points mix. compared EBIT points the in as year prior to to prior tax second a quarter, was XXX jurisdictional up percentage of rate XXX basis year X.X%, quarter. due tax before compared of adjusted

in a the consistent EBIT quarter. percentage as second of half tax expect remain with second year of to the We this

a up are Finally, costs of $X.XX semi-variable of $X.XX, that the quarter by adjusted requires of a action their structure specific we majority types adjusted some scaled XXX intervening XX, extent XX%, second In the a costs, share partially management XX.X% drive demand fixed the due to COVID-XX in in XXXX, to in make are periods. our of provide to we drop cost change offset are down of decremental which compared EPS On the and or costs. North relative revenue. incurred the from was followed by rapid decrease variable. margins quarter of with spend benefit to structural to Slide in breakdown quarter, size remainder income first net These second customer the the our to year-on-year The XXXX, was spread and quarter of as the basis point significant revenue in as the and America that net improvement gross second repurchases despite of Europe. of

were second reduced the plants at levels. manufacturing quarter, During running significantly our

XX% and being and chains reduced higher from To to costs our supply the which of direct temporarily disrupted. freight achieve levels $XX mandates thereby despite these cost exceeded help XX% our the our million $XX this million. recovery, expected labor remain potential reduced pay $XX as volume of better However, taken lower related to to actions savings of mitigate higher alignment with safeguard to expectation quarter during contraction. year. remain logistics needed in comply not extended by employees, production our Recognizing government salaries our to implemented and an second impact of of achieving during quarter, the volume a protect of our have costs moderated for approximately to Manufacturing the elevated reduce an to manufacturing million employee costs series some to to structurally we due about $XX economic we costs savings to million, semi-variable furloughs, previous management by the manufacturing next million $XX savings

coming we We closure early half and increasing through second an XXXX, to XXXX includes the structure, will expect $XX levels that as that into have cost the and $XX $X align throughout related approximately with to largely XXX workforce, of changes these include reduction $X the year of $XX operations quarter be rigorously of charges our will the progress will of These this to about action savings our demand better to implemented over and million people-related cost-saving analyzed in anticipate our actions we in savings million quarters. the third remainder worldwide. site-related million in to Restructuring reduce costs. workforce This XXXX. charges expected million million affecting positions generate and

flow we from revolving hand. million second with With flexibility. down provided of cash financial on $XX exited we to free quarter, with drew credit, quarter entered X, quarter, the position. Sensata’s balance related quarter million we $X.XX cash the charges our actions. $XX $XXX second XX line recognized additional We second approximately these of $XXX on million April during sheet. the billion in the Slide the On generated demonstrates liquidity strong in During cash in million

confident income, income last severe the to XXXX compared the debt note to first We the was the to during improvement due. of our of XXX% inventory until quarter, first net outstanding working we a by We $XX.X quarter sequentially when of Free X% same of quarter. flow adjusted our managed dramatic net XXXX, our is in becomes liquidity $XXX and year. maturity a effectively is cash agreements, leverage Consequently, downturn. adjusted capital or not from have reducing the million second a XX% sufficient during quarter unsecured in enable debt our position substantial million are weather covenants October us buffers to

track expenditure capital and we of the the million first XXXX half for for Our million, remains $XXX are year guidance on $XXX full XXXX. to

assess remains IHS program of XX, Lastly, our to show greater show our track future on and stock economic until source products end market demand third-party Slide conditions and we stability. improvement for is solutions. on help On hold number for automotive our future indicators a I information primary production. repurchase that

such automotive In of to our alignment consumer demand communicate expectations, on influence as our addition, gain we market. confidence, monitor which and routinely all view with we key economic customers future strongly end indicators the

heavy levels. vehicle levels LMC business, from our firms off-road we KGP use production production For off-road and third-party for as for such forecasts production on-road and various

for evaluate heavy indicators our markets strongly gauge freight are to the health in economic These We indicators believe which the vehicle include off-road also to demand correlated we serve, of the products. they customers our statements customers crop view industrial the and permits, of load also sales and the large farm to our factors, inventory production, agriculture machinery. our construction ratios, building from market. in help futures Public sectors form

our GDP evaluate with For and we data forecast industrial develop their of demand, a correlation regional given strong to revenue. starts our and housing for industrial forward-looking business, industrial historical view PMI

levels for as data OEM, third-party the and sales, levels and and quarters. conditions aerospace, future which indicators low confidence year. from miles the production order information production defense to engagements. as commercial as represents faction result end as for from of and currently products customer production. The the registrations on performance production our the aerospace demand historic up view expected to snapped vehicle quarter Within Slide levels expectations are is a passenger and second moderate well on production auto know economic first flown XX future second improve customer and expected are forecasters This through for is driving and above are markets, subject good business China, expectations reflects this ramping of well change. OEMs the to Europe, expected fourth vehicle services. back the customer And for American and market from leveraging data to and low in historically balance quarter, provides improve we GDP automotive has North the change second what at quarter levels our aftermarket the the drop end OEM quarter in and and page a and of after third sequentially improving of during today For vehicle in details production year-on-year patterns are our and second in commercial quarter.

IHS The is our more during Europe the markets developing data source by customer are While as in and IHS, end the reflecting conservative during region, a drop for relative decline America expectations shown primary a rates initial vehicle second of COVID-XX quarter light for cycle. production than XXXX. in our product expecting for shutdowns orders lower expectation quarter second globally have to since North the Europe market expectations and vehicle the quarter. downward quarter sharp America the caused on related page, a heavy take North accelerating trend Europe, been in China, in already summer-related shutdowns and first of continued the

production quarters, improved defense fared the the key second sequentially. are vehicle ease other is expected is the expected aerospace off-road levels. the from end of to in to quarter expected year-on-year expected second while indicators of production declines for in sequential Industrial commercial the very the pointing space with of market in second from to low world improve declines markets growth fourth and markets The quarter. in second end in from year remain improve PMI all levels the steady this areas industrial Percentage year-on-year third to the balance better the heavy than quarter, economic However, the year, and quarter. to portion are

in half of as As mentioned decrease Jeff moderate we expect in to for outgrowth half the XXXX. compared first second company earlier, XXXX market the the of a

improve that are and expect In performance end Sensata’s summary, revenue ranges. year we will full for confident outgrowth the to year In withdrew the markets business. April, from and expected we our great through the the second sequentially unpredictability full the to our the quarter, the improvements year. in uncertainty pandemic created COVID-XX as long-term remain However, each negative in due we impact quarter guidance of balance of

call, to practicable. resume guidance we During as as financial our first intention quarter our highlighted soon providing

stability economic As on global and we XX. XXXX, of third patterns a as in order supply better result improving guidance in customer chains, shown providing quarter and conditions financial the of both Slide are

try assumes the government to our spread our we to manufacturing prevent virus. customers Our guidance COVID-XX and and facilities potential of open in despite able the are keep pandemic the to resurgence responses

expect between third quarter $XXX XX%. At of reported revenues the year-over-year XX% currency midpoint representing XXXX, and our report to approximately million. year-over-year decrease that by will $XXX between For we we foreign million, $X.X to million revenues decrease of revenue expect guidance, a the

foreign of organic in to impact the quarter. Excluding expect third XX% currency, of XX% the we to report an revenue decrease

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

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

decline to $XX of million On we the which compared XX% XX% QX million, bottom represent a between to and $XX income would line, expect to net report adjusted XXXX.

as programs from third expenses temporary to QX, margins levels $XX reductions up. our operating financial QX operating semi-variable from the in benefits and to an in the includes the higher quarter as sequentially will begin reduction cost primarily expected cost expect in million We second increase of due quarter This approximately sequentially revenue. expand ramp in

positive adjusted $X.XX between We expect EPS a foreign midpoint. and to which $X.XX, impact at the report includes $X.XX currency guidance from

Jeff’s are visibility improves. I’m will that our comments year are while we times, very of full unprecedented currently I in financial guidance We organization. until proud not echo providing closing, In longer-term operating

significant quarter significant our the in have during despite business We progress strengthening made challenges.

this Sensata the and emerges will now resilient diligently a from stronger time as to ensure turn call I company. more working are Jeff. We back to

Jeff Cote

you, Thank Paul.

wrap few key messages, Q&A, as with Before up turning a I Slide to outlined XX. to over want on

market. end XXXX new the confident confidence outgrowth markets end monitor actions and the resources market attractive our business against forecasts is ability the the and wins. our for this growth and and opportunities, in We align by deliver to necessary our we full are year remain strong of to that continue to against balanced with costs supported all have taken our We customers critical into prioritized future. to ensure And

solid on in cash financial deliver Sensata’s billion and more hand. the flow, quarter free ended we than to continue with $X.X which We cash resilient demonstrates model,

megatrends are up wins so We excellent for & and Connected. to are and And far year customer Sensata. our the making in that in opening business continue invest in we new million progress significant growth new by initiatives evidenced on electrification this Smart $XXX the engagement markets other as

market addition, our important continue portfolio we to believe strengthen acquisitions to such opportunities PRECO Electronics. further overall through the In value-creating provide interesting as may that strategically environment

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

Jacob Sayer

Thank you, Jeff.

morning, direct the For one participants, follow-up. listeners locations each limit so Also, would number of question other the your if to you Q&A please roster. the would Jeff I call, to of to and Constantinos, assemble the free feel a Paul yourself questions one them. or ask in large you and of this separate on to given are

Operator

question from Sachs. will with Delaney Goldman [Operator go first now question-and-answer session. begin Instructions] We Mark Please ahead. line the The is the of

Mark Delaney

to are morning good American start, European more Thank retail production that understand taking North Yes conservative and COVID-related the Sensata about I rates in quarter. are To of was part better factory build reason IHS you this and case the as the what third on hoping or customers question in telling conservatism going case is their were more in for auto softened being you anticipated than your Sensata production is are demand this to shutdowns Is or the there for be?

Jeff Cote

Yes. Thanks Mark. question, for the

frame just me let So it.

our revenue. have which expectations vehicles North in difference Europe impact terms net into four in weighed substantial million X.X factors than across were America that is in range, IHS and China. key that, decision slightly terms The We in this. on that really is about are of around and There Sensata’s of the higher are would lower that

The would result clearly first impact differences factors forecasting regarding understanding we tracking caution on and the patterns. customer-by-customer associated resurgence which are is There regarding IHS that order and also with between other And lockdowns shutdown with some customer our demand our and relating us we is a potential on in. are the schedule believe are customers, just generally to then basis. what

feel on better are we substantial. orders revenue, time until a period off coming caution taking the where how we a customer have for are they been volatility order We that. and some into materialize of patterns will And and the get

of certainly, the risk You that indicator the is period coming as And are general not our factor, performance that then a smaller we one, case. off the is of is and much note order isn’t quarter of the customer the demand broader which will patterns all our the the into which last chain in have supply going where Obviously, implication But the historically, based in would automotive better, that, so quarter. we be just if there a deliver, we best wouldn’t disruption input. that are or outlined. we but out other cautioning have and it’s but for in upon things turn or to chain, factors might to supply are be we orders, all some a the able prepared

Mark Delaney

Sensata’s in the is the to despite new helpful, Jeff. internal vehicles? you bookings? Thank car to mentioned Company that was level where wins you my year the electrification in for Thank follow-up compared per question, combustion about think realizing than stands the What acceleration and you. being set maybe good content And ago compared That’s engine investors now really the remarks in Company about acceleration an wins what you. And an can to pandemic. EV even do a for prepared leading in

Jeff Cote

Sure.

old the across was and that So quote the company.

is automotive knew is customer accelerating continuing, outside why is launch that to automotive, toward more around programs. is and their escalation be new a going there will eventual there is My internal as driven to that market. the We be that, that trend just prepare they electrification portion trends. platforms electrification the not as substantial of that is of every the to it’s is accelerating that view So world was

that is have And We had we what with order seeing. about very substantial the customers, which book talked the the that book, are is not but that as we well. or the opportunity book so – our order

so is that material it’s the basically And set – materializing. it opportunity

high-XXs in of than to the vehicle, vehicle, look is range. electric Europe, per battery we content that low-XXs terms of generally, higher in it a the I terms per at U.S. will In content XX% in in and When vehicle. it’s the speak

conversion trend of revenue Sensata. So therefore, engine per trend positive for content is the vehicle associated internal in electrification combustion from and to a terms with

Jacob Sayer

have the question Constantinos, next can you, Thank Mark. please? we

Operator

Wells Please The next of from question is Fargo. go with Raghavan line Deepa the ahead.

Deepa Raghavan

This morning, good Hi, all. Jeff. question is for

to you to just time that In that based were wins. those does awarded Just internal electrification or the line? tagging to in that three-year the converted push on still wins where same business programs mentioned change Is triangulating trends your five-year a electrification accelerating on that the frame, comment business past, over roughly. that time

Jeff Cote

Yes.

it’s million programs. the dozens across the much pretty $XXX where of So it’s variable. Remember, is same

the we we consider, is wins about normally may are electric associated lots markets, what industrial some when of off-road, with When accustomed it period in be in there of terms development may to than for wins or with go might combustion those of those bit the in you markets into markets, a but a the consistent cycles. automotive are especially shorter to of vehicles that time electrification So shorter heavy engine. development be general tend to the other markets, be to which equivalent factors a vehicle little the line start talk but

Deepa Raghavan

upside Thanks. thoughts. stable back I don’t summer up? we that, how U.S. of being would just key production would of you your through production? bit. It’s more expectations if talk the longer be through is here, is the let’s talk an on perspective. if the and little if little My to focus level you a necessarily on but can normalized you And But Europe schedule but Jeff, bit you By summer how more – question, assume expect I I we just pre-COVID, – am shaping macros can was be much. and a to can when to equilibrium from can a very that that return end, regions, and production say, helpful? – skewed normalized assuming Thank production your to if China follow-up the from a

Jeff Cote

Sure.

So demand comment normalized the can around question I go to first, let summer and to then the me shutdown speak profile globally.

up catch whether you So is to my a expectation that tends little be is summer sure I the OEM at broader be OEM, customer the that more level And to is the tier other make are to is as tell that based is the that, in I I to be make reviewing below the would deliver shutdowns. general mentioned, supply when ready a get we they bit are there you theme observation part, would able that the that chain. What it tracking into in to of upon shutdowns automotive level. canceling level, or most markets, for to vehicle or variable. to heavy When in it you get the customer

are driven Some and they And some are their demand continuing the manufacturing their positions, I it based the shortening altogether. same shutdown suspect that, is largely schedules, see, are it, operations inventory how stable canceling that some upon are. again,

those. availability supply back, And their And – shutdowns of that want created the issues tend of chain are so availability it’s a of as of demand. have wide terms that our terms in that’s the disruptions But level, everyday the seeing and of And us product. all some at point they is stopping range product catch we in snapped in of terms of on that occurred. of demand be in to summer signals to try to we tier up across lives

bit In answer. is little a to give it break very a obviously that bit But question me you geographically to to difficult of terms returning let level, a of more of a little normalized insight. down

things So right. quite rebounded from have a quickly, China standpoint,

growth the second the are growth China quarter in but saw in year-over-year of And in quarter, forecasting third first we versus than quarter, QX Lower nonetheless XX% the in growth. growth as year. prior saw QX the actually well. a we what So

back other in pretty third and that we quarter the yet, significantly it’s the well. but to those into you – would me, markets, better the levels expect China So or excuse quarter, strongly. go to has snapped fourth to third as back continue When it’s trend the into not obviously quarter

me so you data And give let right. some points,

heavy we about QX you is XX%. expecting market not data, be the go to vehicle only This our quarter, So And down then that are quarter-over-quarter the revenue, but when XX%. market to QX, down third was XX% into data. off-road market to

where disruptions you not back down caution back. coming deteriorate. an And at you standpoint. still but the again, the cause and of XX% Things levels When second to with similar improvement the quarter, second year that are year see of last QX of closely. we from last an this pretty we across very those it year significantly where looking are off automotive so are year the from that think serving were same a is XX% quarter watching to end markets, quarter second last versus QX we about but trends So versus time. eye sequentially other are at could profile we improvement given it But demand market

Jacob Sayer

Constantinos, Deepa. can have we Thanks, next the question, please?

Operator

is from question next JPMorgan. Chatterjee Samik Please go with line The the of ahead.

Bharat Daryani

Hi. question. Good my This for Bharat morning. Thanks Samik. on taking is for

so if business big market could how industrial? the pieces with medical that you the I market you you Thanks. expect through if the end stronger improve think other? about help maybe highlighted have that or And year, your to could industrial sub-segments in outlook I you exposure also are the a prepared are could start of of the So, and versus us within within some ask if the remarks end what just just

Jeff Cote

Yes.

So look or important handling to we industrial to these end major portion market an some lighting, market. to is the our home one. appliances, serve in parts that for the overall not the as we with temperature pressure a material it started we associated it, help associated have lighting. Across of segments huge seriously medical big sensors come obviously, is significant industrial of industrial, with customers took And but business, us very

impact variety was revenue with about devices a had. to diversified is industrial associated we segment. the important a with to that million impact the associated are But markets. end medical it there initiative the It’s $XX of note truly So quarter, a related second in that

deliver to get being to good community felt on able of revenue. it terms So good felt It serve in that. the to the

Bharat Daryani

Thanks it. And in Electronics. Got for the made I of the just that. acquisition on ask PRECO could if you quarter

end primarily for You right is now. noted that market HVOR

leveraging such of that well in about terms could that automotive see synergies any Thanks. talk for in you technology as long-term? end as if the So you markets

Jeff Cote

Yes, absolutely.

and the and where cyclists Again, on think is observe that is risk or today, with PRECO you forthcoming bicyclists with serving that road, there pedestrians imagine, off-road pedestrians doesn’t the the on-road the vulnerable heavy is markets. vehicle, large vehicle it’s I as users, So – driver those associated regulation a road largely can significant.

vehicles, And so – with that. that on not radar it work negatives so false or configurations. and to And of a regulation application very with equipment applications positives and unusable there road. difficult development knowledge, are configurations the to wide associated solution It’s articulating work radar because a range need is software the required truck the of would the make in application the that way application-specific there make a requires lot radar a

heavy around vehicle Beyond the opportunities going vehicle so but other the industrial something of light applications that certainly it’s be would the vehicle market, we industrial see there, as off-road in off-road market, in airport we markets. it’s equipment Less heavy terms more and exploring but in well.

Bharat Daryani

so it. Got you Thank much.

Operator

from ahead. of is question the Please Next line with go Sheerin Matt Stifel.

Matt Sheerin

to Thank trends inventory supply Good on your auto, the chain. demand wanted commentary, to near-term in in Jeff Yes. particularly you. just follow-up relative morning.

earlier talk did in America near-term does play and headwind forecast? your some there, Europe. How North into that much about particularly You

Jeff Cote

about a Yes. build. there $XX being Thanks, It’s Matt. number. a the talked not million about big quarter We had first inventory

a by patterns also inventory causing of – they order year. the end stock customer and are But Matt, away seeing Specifically, vehicles available it’s relates during so second little America customers, of a sense the it not with our from what to where just the terms build is difficult making tiny huge impact. terms amount. an of market. China the volatility it’s quarter, have equivalent unwind build bit the is to into it’s to to But amount, we generally to in you, we they the of demand My for it Europe bit a think migrated and that North exact honest that of expect and the them from they we number, China sure be as getting in to level would distinguish the are as

it’s business, but we a that calling So worthy something thought not it’s big number out. to overall the relative of

Matt Sheerin

into just contribution a some the based I for and guide, And gross then know cost-cutting. looks there a margin. it Okay. regarding margins, question is on Thanks. quarter-to-quarter significant really like guidance your backing operating profit SG&A margin very And

I But talked of what margin we to think from And million similar expect savings expectations the about you we look based growth, the contribution are not? other drivers on initiatives. or December $X cost-cutting a that? as in of sequential should

Jeff Cote

please? that take to like you would Paul,

Paul Vasington

Sure.

the in remarks, the of expansion. going So revenue certainly drive is to lot a margin

of and revenues seeing we have as decremental adjust cost down, semi-variable $XX our significant level that significant fixed cuts of we pay a around were to quickly. margins million. in coming did were But and we So because volume to to decline not able furlough savings QX

the see QX, as in margins decremental you go you – a rise, range. improvement revenues incremental XX% in the as in So, similar high into forward

those We going cost those are permanent. through place we are not see $X we saves not putting furloughs that cost QX. But because pay are that actions are the are for temporary we taking from see going in to and to cuts million the come

revenue. significant of savings contribution $X operating structure there. is million coming continuing. temporary So and up on from is volume ramping that what’s $XX million, the cost the headwind driving improvement higher that’s in and the the million the not $XX then really And profit

Matt Sheerin

you. Thank

Operator

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

Wamsi Mohan

in your have Jeff, the subdued mean, color you are I some for can launch for I thank product you expecting sequential expectations more a yes, share was you alluded to little one more push-outs. half some Paul. market given getting outgrowth, hoping on and Hi, second those Jeff volume have one I for that? improvement. you.

takes So a the for the what Paul. are half? that roll here that offs? some program second anticipating have it are is in the case and you large follow-up driving And Or I puts that’s

Jeff Cote

question. thanks Yes, the great. Wamsi, for

or and had strong We year outgrowth. message beyond, for So, confident have that be year that quoted. you just across, the are that we terms will in half we growth first ranges of still we the make within full content to the sure got a very

and vehicle we points For XXX X year-to-date months. at points the XXX first heavy half, in automotive basis were we basis were through at

the continues that’s range confidence to there. above So, be normal was where and

In that in phasing, terms largely VI of time impact second what NS we the deadline of half, it’s regulation, the July. the are seeing, terms was will

there So at that. with then COVID ahead time of period. in impact some there’s was another the pull our And just associated with out customers associated terms

some is a this, very temporary. meaningful that but that difficult X in amounts months year. of time with the There third the happen not was fourth would to there major normally little going this temporary some that So any of we launch following small Obviously, quarter has always cancellations to are and seeing through during order time, with associated of launches cancellation. delays X associated impact in activity in are as associated occurred, disrupted terms it, were out-of-office resulted in this some the amount. of canceling Nothing are to any the They of with customers are have refine quarters. months, magnitude of, pushed delays they movement call and are

in later, coming that see will we of XXXX. first So part

Wamsi Mohan

are $XX And savings? Jeff. or to auto think and $XX aerospace? And you called will more or revenue savings these be proportional net XXXX. by they Thanks, And should you. they gross exposure to we savings of million million in you the are as in Okay. Can clarify in pretty market concentrated across if these Thank out your consistent Paul, quarters?

Paul Vasington

evenly in reduction. across the impacted in reduction are terms cost year to are $XX that million, programs. to A of second this million, we – the it’s spend lot of mostly the productivity be million. $XX the are people. I There and third-party implemented Company improvements will related in that The going would they it say actions $XX It’s have $XX half. No, are being the cost other there business by that the spread mostly million to drive around place workforce

first rate quarter, be should per get we So, we quarter. into when at the that run

of get by should pretty full year, $XX quarter. the end with it million, we $XX So, that million the much rate, the the and being run full first at in

– expecting the quarters. that to coming that we aligns the So over and that’s demand are

Wamsi Mohan

Okay, great. you. Thank

Jeff Cote

Wamsi. Thanks,

Paul Vasington

Wamsi. Thanks,

Operator

line the question with is Brian go from next The Please ahead. of Barclays. Johnson

Brian Johnson

Yes.

Just follow-up want talk the then about opportunity. to ADAS on decrementals bit a

which about that what’s the the your decrementals the temporary XQ higher roll-off on of is for cost we going correct? answer, when end sequentially So year-over-year think think I of a the to the the I to range, reduction is basis, take got decrementals is back

Paul Vasington

way the now that, contribution. out profit is impact it think moving would Well, with cost I our right we our about laid from this that is our line and volume variable variable in

of half see chart, pie can is our that cost You in variable. about

when gain impact. XX% a So $X it��s to a lose about XX% $X, or we

Now at temporary we actions weren’t QX, get cuts. able to the cost and around semi-variable took furloughs pay we so in

$XX the semi-variable we million that’s highlighted Now million, QX, in the at XX%. chart, QX are $XX and going And The getting the those about to costs. costs where range. million $XXX in semi-variable running

that are cost and so we sticky in of we the taking getting of improvement those we weren’t a that are variable of a contribution. getting XX% are now in now make And out what’s XXXX. combination higher, that driving action to going getting we Does are volumes costs about at able we So half costs sense? first that’s semi-variable are

Brian Johnson

new Yes. acquisition vehicles. in around Yes. My second question is the really role your ADAS commercial and of

– solution, Are to aware, are CV ADAS in a with will acting amount and whether radar, We around bit with it gets into left different. which algorithms an is, have is sensors, be there’s, fair ultrasonic a camera, of you that Tier working little as moving or laning. seems course, others this of it’s systems, you detection, of of addition think object that But my who to already you integrators? ADAS Xs question, of the identification, course, space WABCO and been vision-based when

Jeff Cote

Yes.

So we are not – question. great a

than stack not system a it normally off see for sensor a in complicated going or this, would a on high-temperature is are an pressure We the application. you sensor fully but more

OEMs There providing Tier both it. develop, how on depending on they those more embedded associated are and with choice with to system their we with software is overall more architectures. we Xs want And information. working are So

OEMs X differentiation it to Some to more Tier want leverage there. the market development in that. of they choose are the in hold to a the terms what closely of to bringing Others

where part how So, it we OEMs. Tiers – overall But system, ultimate on does depend are they customer on are both are the we and that of approach it. doing with

Brian Johnson

a around have have you Luminar Do discussion And there coming market Is a commercial role of that we seen trucks at you with? in either in follow-on, or LIDAR coming light vehicle? vehicle? into there’s Certainly, you CS to that costs. down would lot relationships either a that play see want the

Jeff Cote

Yes.

is this LIDAR radar have So, a PRECO solution. not a does capability.

know You solid-state market. a That is Quanergy with LIDAR. to partnership bring that at we available have to where stage not the it’s on

working we it’s right in So, now, to referring we this the largely solutions on are are market to radar PRECO with space bring that that to.

Brian Johnson

those? relationship your with advantage of or And exclusive different can better you see or solutions you Okay. take is if Quanergy

Jeff Cote

in But It’s the dimension, radar Yes. growing PRECO which exclusive. again, very and made there that’s opportunities area. associated, that we now, is focus rapidly are investment our right the are have not that that given

this continue detection an but is on acquisition, we of what announcing platform. But capability. PRECO acquisition at with We today to other to build to – look us are enable technologies small associated to object continue important radar to the

Brian Johnson

Okay. Thank you.

Jeff Cote

you. Thank

Operator

of Capital is Markets. RBC Spak go The Please next the ahead. question with from Joseph line

Joseph Spak

very you much. Thank

industry you in China. that the overweight taking the you the the in And versus in the back at that automotive, in automotive bps industry. second quarter look outgrowth XXX Just wanted compare actually your versus about exposure, America back North Europe in versus with you but to when are overall talked and to you and go step impressive the half quarter even the a back

a So, like better that. you actually suggest Sensata on it weighted did even than basis,

and back, in Europe come the of the and strong outgrowth weighting as why and and favor? America sort go So your forward geographic we wouldn’t North work remain continue

Jeff Cote

Yes.

in growth outgrowth, that not several see both across you outgrowth China content around are the vehicle into of markets. do look at what later in hey, is all new ultimately per more equal outgrowth of years tend right, concentration China form standpoint is in is half rest the it from world. new opportunity the We – to content business you which is other and or turns the markets. So there is And of there there is than business

all product is true. OEMs associated launches. with So, But challenges that fact absolutely had have

we that global been all of It’s are – North occurred has America so that And the not that a China. to that and aspect associated with disruption challenge specific with. dealing has is

the reason second for the change into the half. that’s going So,

Joseph Spak

Okay. by IHS is small, talk And said about year of your the you correct, the a we little that then is just bit to want just of end, conservatism to by it clear, know industry there on be inventory, the extra view IHS if I meaning and you But when like in unwinding there? it’s – below is agree. I

Jeff Cote

honestly, sure, of To factor some us if difference to inventory the not relates am it. of a and to I Well, be between IHS these. that unwinding be true, might

that quarter. in $XX you difference the of $XX $XX maybe $XX talking million, have million we it’s third if would the again, million, million So are

be an may that’s there So, factored in as some That’s that not statement. of accurate well.

Joseph Spak

you Thank much. Okay. very

Jeff Cote

you, Joe. Thank

Operator

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

Craig Hettenbach

Yes, A for question you. Jeff. thank

Just you $XX think you can But to changes of at has to that looked the just million on actions, a the basis the this very as cycle savings business, million, obviously, margins? through some thinking been kind cost structural And through kind say $XX how this you improve the least. a unique to more make do just of environment?

Jeff Cote

Craig. the Thanks Yeah. for question,

taking actions start an business. are people the me thing who talking was these was a let So are about this do. to we incredibly difficult first our by saying driving –

of I We necessary. are changes. market want But thank the it. sort this to And of so by their to take contributions impacted unprecedented turn to years. It’s them into respond terms for take people over are minimize we very said and forward. lemons going what the who Having to These I want don’t do need formally to the very, in decisions. we that, tough lemonades action

opportunity tool to as as we that about the think do hire plan the in recover, closer do customers this the that in disruption well. to engineering in where for of we resumes locations, Company But are will manufacture the clearly, our it’s for we as to where that we hire as going be future where and the across for well, the about train hire work will markets skill a as business we and we we terms are to growth will of that people need We different are. lot so do across going, with And market as back, make the future to with our sets Company. take that work where needs to are where sure people, we We a we business.

So that that to get with considered faced times, of there no we very in challenging now in do things that’s very have accelerate terms difficult able the question that that serve. these when we an we are we environment we is that markets

valid. So, your is point

this program. We part as have done that of

Craig Hettenbach

And on automotive sounds more just little the year, just that like is a IHS thinking to on basis, positive are you guys about that the Are Europe for I for then to you context. down just Or full But bit know think year. North America blended? IHS. for it do for that appreciate and a and China as cautious maybe around close XX% how relative production, follow-up a I globally? you blended on think I

Jeff Cote

Yes.

full into we what range year with are develops, quarter, a our from let’s get markets third that But But customers, with we improvement view fourth what looking impact weil we point. order at. of for And the therefore, we view guidance we full get as the is. out are we QX as to the continued conversations book this we do our So, feel forecast sequential mentioned, is the providing is, at as had quarter. the the in not as QX And quarter consistent year fourth through expect the QX. best and have and a into

refining are talking So, view directionally you a what as what them the get better we time we but numbers are seeing. as come accurate, with are to will

Craig Hettenbach

Got Thanks. it.

Jeff Cote

Thanks, Craig.

Operator

from ahead. is Citi. of go Yang with Please Tim line question next The the

Tim Yang

Hey, taking what’s market, in how about question. in you and driving mentioned the can my better pricing pricing, automotive you On it thanks pricing, is? QX better talk for sustainable

Jeff Cote

Yes.

expectation customers we us portion will like them, pricing. there’s an customers of volume a for outgrowth with what major to what volume is market. the that with disruption this, our have provide our is mentioned when the with engage the due volumes So, And associated our and Obviously, Most you look of around that with when like. lower. contracts is contract we better

And of we the in there terms in of some the when in or better recovery could year. where are are end in but Company, across on that the expecting have in we dips always automotive, in business. When seen form just markets, it either business, new impact quarter we pricing be some volume new our what in you have instances better pricing be long-term a so could of take growth new awards the choice, we form significant for or a of given not are that

Tim Yang

the mentioned is little destocking on is in outgrowth question next much that much content half. due inventory mix? My you bit decelerate second that to is of of and how Can the that it. you Thanks. about due customer Got how a the moderation to would talk

Jeff Cote

Yes.

another – we we was as the – well. first inventory So, of talked it’s of the the outgrowth It’s being in the the in about point. first year, a $XX there those. there stocking put it in combination half The that million, is part That the in quarter. good of automotive

program which unwinding deferrals would will, are of forecasting it’s – is the But that of it million going that Tough the temporary the content due into but But how of So, year. element $XX content. $XX we overall the to decline million come of an that certainly, will versus or much judge know impact. be balance that We quantifiable. program exactly that’s if to launch. that unwinds, launch, out that’s

Tim Yang

color. Great. Appreciate Thank you. the

Jeff Cote

you. Thank

Operator

to for over allotted conference Mr. time I remarks. turn for back have this we to like the any gentlemen, Thank closing and call. Jacob Ladies Sayer reached you. the would

Jacob Sayer

will August Jefferies us I participating thank upcoming be Conference the morning. Sensata you, Industrial Citigroup Investor like Thank Constantinos. to would Conference Investor for in Technology everyone on the joining this X, call. Industrial in for the X now and for Constantinos, us Conference you Thank and on the Investor September September end you XX. your may joining interest morning Sensata. on this RBC

Operator

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

You may now disconnect.