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ST Sensata Technologies Holding

Participants
Jacob Sayer Vice President, Finance
Jeff Cote Chief Executive Officer & President
Paul Vasington Chief Financial Officer
Mark Delaney Goldman Sachs
Joseph Spak RBC Capital Markets
Nik Todorov Longbow Research
Amit Daryanani Evercore
Bharat Daryani JPMorgan
Luke Junk Baird
David Kelley Jefferies
Brian Johnson Barclays
Wamsi Mohan Bank of America
Jim Suva Citi Investment Research
Michael Filatov Berenberg Capital
Craig Hettenbach Morgan Stanley
Deepa Raghavan Wells Fargo Securities
Matt Sheerin Stifel
Shawn Harrison Loop Capital
Call transcript
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Operator

Good morning everyone, and welcome to the Sensata Technologies Q3 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please also note, today's event is being recorded. like the I'd to call time, Mr. this to conference turn over At of Sayer, Finance. Jacob VP go please Sir, ahead.

Jacob Sayer

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

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

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

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

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

growth actual business filings slide call, conference operating will may the we from management provides of an described the today's the for months this our SEC. measures the today's to will income in limited events Most show update third to He presentation, and company nine non-GAAP of that our included XXXX. information uses include, materials. differ or XX which measures in of our recent XXXX. evaluate forward-looking subsequent segment financial projections Jeff are quarter then Factors discussed during financial highlights business GAAP that not begin and of and are non-GAAP such we we on differences During as outgrowth to, and On during its Reconciliations the sheet the XXXX, financial to encourage company's on our of review XX-K, will our financial We in are quarter statements and earnings your financials key addition areas. our of the such X, financial company Paul regarding those release market provide the and key third balance future GAAP might quarter our detailed presentation quarter, of measures. results financial to in the presentation. other GAAP quarter will Electrification describe statements remarks. results to the will Sensata's discuss our as The make XX-Q first will & well the that but our subsequent with with our call Megatrends We'll you for relate then risks of by questions cause involve slides materially of Smart primary the unit, performance certain in business. XX statements. for details the The Forms uncertainties. fourth after then in progress guidance and and take XXXX. provide select Connected of our organic progress prepared and third cover including in

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

Jeff Cote

performance X. quarter. thoughts governments around world our Thank markets you end some like to as third in everyone. welcome The our Jacob, and summary lockdowns start the from quarantines was during outlined and on on rebound slide the with I'd instituted by dramatic

results. to entire that team customers hard our ramped the achieving a capitalize support even manufacturing of rapidly markets strong revenue the up were to and they quarter I'd financial supply and $XXX.X production updated Our is X. quarter. of XX% our we higher model improving chain guidance work provided million we than September testament to resiliency in on grew as sequentially the and that and our like during the It able on in the recognize these to flexibility agility

deliver to continue outgrowth. We market strong a

that automotive points the of first We delivered by was nine now points in XXX heavy months year half of the inventory vehicle in months customers business of in basis XXXX, build business. our the we of the consumed nine off-road our -- basis For the and believe outgrowth our first third XXX in quarter. automotive

will basis we our our for to business that of XXX to XXXX sustain higher vehicle levels XXX automotive and points XXX heavy basis outgrowth continue for and the be for new points long-term wins. of to off-road market by our confident range consistent XXX in We our supported goals with

million we the During than year-to-date. strong very generated to flow in the year the million new We business enhance ahead steps tracking demonstrates quarter our pace in several more closed position caused clearly the of close the over wins $XXX free us year-to-date, products. of third is pandemic Sensata new and to of in our nature by we the $XX quarter and mission-critical of today believe pandemic financial taken This million $XXX business have bringing last we Sensata's and or to is financial $XXX million a despite cash ability position. and flexibility. disruptions

our demand restructuring structure aligning million our next and controls program of expected to year. cost generate are levels We to to million cost through $XX $XX savings

During rate lowering of raised we at stability. through capital the maturity our of customer and line cost interest our structure, cost we the capital our quarter, low note historically interest $XXX lowering improving and X.XX%, our revolving and credit unsecured of markets of in a giving issued million overall debt repaid extending XX-year financial

and this vehicles in install Finally, more our commercial growth to recently reached heavy of detail the our suite Smart move with subscription commercialization. within Smart first & discuss we a in momentarily, to Connected in to will effort trials continue hardware on services megatrend invest initiatives from and their I a meaningful agreement Connected. basis, operate and achieved as data to fleet to milestone We & manager enabling

also Smart $XXX million we meaningful On electrified automotive & our slide I five Year-to-date Additionally, in just continues provide -- we our equipment, electrification update in have an to to and our achieved electrification grid want megatrend other of closed Connected the progress in infrastructure. megatrend in smart but areas business wins. on in not initiative. advance, milestone

our we in top & XX past space American our shared our with full Smart for of subscription support Recently the demonstrating signed selling with agreement. several of model, full hardware commercial over per technology managers before, to opted how fleet and basis been maintenance vehicle the for services ongoing a the year. for and move to ability a analytics on stack data agreement The data have of North life testing insight. paying fleet As subscription we've fleet Connected proof has from providing we monthly concepts manager, offering a first manager leading the the hardware,

stage basis While this the will remainder value management by moving Connected addressable leading OEMs are Smart proof-of-concept small, we initial planning we've are demonstrate and we our & other forward value of program, are $XX to this XXXX. that $X very the to million out new also initial this and exciting for continue the markets join new Several wins in solutions. to believe solution. initiative our across opened this billion business expanding announced that In bring toward the a for new before & pleased award trials Connected expect that reached understand commercialization their is with of panning solution. Smart fleet. equipment we Sensata others we in of space, commercialization several confident are we fleet date And the we to On

ahead through solutions. us expanding heavy in third-party commercial in investing beyond opportunities of differentiated are Smart prognostics, into with the moving Connected, long-term we vehicle light-duty collaboration, vehicles know-how our & adding to technological our Additionally,

for Moving markets we we across to electrification, provide In slide serve. critical solutions applications end are all six. expanding the we

wins far wins for new year to in for and wins, so million. these from we pace important this This our progress Sensata. to total quarter, significant in These despite third the closed our business another Sensata $XX faster business million much business bringing ongoing year-to-date generate material years. the electrification against target of revenue revenue expected to opportunity megatrend wins During the year, are transform $XXX coming to than demonstrate last the pandemic growth long-term electrification is

we applications third-party capabilities and expanding and charging are example, smart infrastructure For our collaboration. through grid

across industry markets, content accelerate, billion a some portion exceeds estimated and As and for larger increase of and To-date, increased offering the in to combustion strongest worldwide. addressable the a vehicle in Sensata to -- overall we as that with our vehicle OEMs average of internal vehicle. vehicles, compared charge $XX electrification average automotive electrified $XX market trends wins combustion shorter combustion content All the in heading. Sensata significant electric evidence closed solutions become electrification end new battery represents growth of longer-range representing opportunity vehicles. most is globe. $XX all has on opportunities the business vehicles average around this approximately for innovative the as an XXXX. where fleet the is generates electric segment vehicles indicates for engine on these In the the that company, time electric the materially the now in $X.X by markets Sensata for have largest battery core internal the our

from large of While growth the the benefit electrification widening of our all should will electrified megatrends, space automotive beneficiary end a be markets. projected

demonstrated position in addressable and offerings should us against organically, position quickly utilize to to third-party through with progress our these grow pleased significant intend large financial numerous acquisitions meaningfully Sensata's opportunities initiatives strong acquisitions our that collaboration We areas. the to serial acquisition. see areas are within megatrend to unique to cash fast-growing flow bring markets efforts for markets. and and continue our these through through expand applications We expand our and bolt-on megatrend These

important increase over end Connected We as advantages competitive call and investments diversification, these like transform Smart world. to believe provide & that Paul. our growth our continue our in I'd to the and long-term turn electrification to will now rate further trends market

Paul Vasington

and updated in quarter. on revenue financial we information we for September. the from financial markets, to decrease to to that our higher and Adjusted $XXX.X our quarter American especially programs. performance, in Jeff. and second X, savings improve revenues, of was revenue XX.X% currency XX.X% was to continued revenue our COVID-XX XX.X% a operating to market order a year quarter, guidance of impact reflecting North compared that guidance compared a exceed by revenue which strengthening, available was earnings on quarter, the within shown third compensation we date, XX.X% end the our and shipments saw for us our compared largely $X.XX operations, time. net Throughout include at $XXX.X September quarter the to Adjusted due based you, income provided automotive reduction income the decrease third quarter the million, revenue the revenue to aligned a substantial of X.X% the of decrease primarily X.X% a Changes due decrease lower mix XXXX. rebound Thank from by foreign to in the in and sequentially as quarter in pandemic. productivity markets. of quarter, for incentive the X.X% XXXX, manufacturing slide lower of reported higher cost of third quarter prior a enabled European $XXX.X Organic of book partially third Adjusted third Key On increased the XXXX. million, EPS decreased highlights third X million, increased offset

performance I market of third basis slide approximately Now of we organic on market XX.X% XXXX discuss market revenue of points against year-on-year representing the an end outlined for in the of quarter as our reported overall by will decline company. an X. end decline Overall, XXX X.X% outgrowth

Our which industrial equipment, medical remain growth ventilator business weak. end some Strong and mitigated decreased X.X% in as global the industrial manufacturers markets includes market decline. sensors organically of factory automation

our decreased Our and production negatively traffic, impacted reduced aerospace aftermarket XX.X% OEM business. aerospace which lower organically business from has air

market primarily market the defense partially product significant launches, decline. in offset the aerospace New

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

China business accelerated to Our emissions NS better-than-expected post VI on-road regulations. of from adoption growth truck continued

Year-to-date, our levels grew delivered production as experienced have heavy XXX we quarter, business in off-road basis business. we in of Europe these in substantial While third the and on-road outgrowth geographies the both year-over-year. in declined Americas the vehicle China points declines

automotive decrease organic business X.X%. Our of an posted revenue

range the to revenue. X.X% the continued by Year-to-date, was us. that to challenges business down impact Against we ramped production had all basis automotive that XXX demand XXX emissions, and backdrop, basis which led system. basis serve as X.X% This had outgrowth through as automotive points. inventory automotive a production Our on to have the our was quarter, negative work with chain, outgrowth and our customers drove during presented target from product rapidly compared their to points applications down points electrification launches creating quarter supply new delivered and of safety-related XXX long-term of XXX market expected

of I'd XXXX. the performance business in with Now Performance XX. our quarter the two of on to start comment on slide third like segments I'll Sensing

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

the Performance a quarter Sensing second OEM revenue million, reductions operating organic foreign continuing. On same margin revenue the quarter, quarter with our margin contributed XX.X%. ramped and restructuring prior generated increase off-road of the to of higher the Performance not headwind Performance on production reduction by and sequential automotive the through XX% Sequentially for of of headwinds a actions. from year Sensing cost business our up rebound. Excluding and Sequentially, income a business in as vehicle profit an second grew The to margin heavy from shutdowns. the $XXX.X operating savings XX%, the mix positive sensing XX% and compared quarter revenue from quarter incremental to offset somewhat demonstrating replace XX% despite segment increase unfavorable cost the an was of the market loss of Sensing by caused impact income reported primarily in strength other productivity decreased X.X%, temporary customers quarter, a currency production as was basis, of and X.X%. second operating dramatic revenue, but due performance to revenues, lower also decrease XX.X% in manufacturing decrease last reported

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

million, increase impact reduction on income reductions a Solutions the the revenue quarter, Solutions OEM business reported organic foreign from Solutions' quarter. XX.X% positive impact X% included and the somewhat headwinds was mix contributed of Sensing second of increase productivity margin quarter, the and last in not revenue, Corporate mix which year, Sensing currency grew operating in and Excluding ramped operating in the XX.X%. Sequentially the were million continuing Sequentially, in sequential a our decreased $XX.X of revenue temporary segment incremental On revenues same manufacturing income margins the X% revenue reported from operating second X.X%, quarter in of industrial to generated unfavorable reflects up X.X%. of of was savings due cost quarter higher $XX in Sensing basis, also an third by restructuring our business decrease not through costs The and XXXX. primarily with operating segment. XX% Solutions production the cost from actions. customers Sensing unfavorable to decrease lower second within the revenue XX%. segment offset that quarter of an other aerospace as and income of

other operating $XX customers aligned added approximately from operating from and transaction to an operating market Megatrend are order other productivity should which to in develop group margin year. was related gross compared XX.X%, Items corporate while costs initiatives. costs. and early to our XX profit income is quarter challenges. growth revenues peer shows Adjusted decrease same and cost reflects the profile, include top and on the Incentive bond operating and prior non-GAAP operating and recover our related somewhat increasing that deliver and conditions. XX.X% an a our higher year the our to The operating investments are lower are non-GAAP compensation segments in differentiated higher markets Adjusted income the an quarter, global aligned to investments basis the how our operating XX last diversification. our to higher, invest to design growth. to reduction long-term increase near quarter operating last charges to largely our the and reflect offset and markets reflects compared operating structure quarter The to continuing non-GAAP our margin point $XX.X low slides sustainable and action substantial on other. profile, solutions demand still income third during results. back impact million expect decrease currently Adjusted to Slide represents further and shaping adjusted in end this corporate million align long-term $X.X also prior declined Megatrends expense costs especially the XX.X% a taxes jurisdictional the lower $XX.X from income to quarter the this for were to to in Historic and adjusted our operating compensation have during Sensata's we Megatrend from and Excluding the year. and experienced We the corporate reclassification XXX margins added adjusted end considering operating quarter. $X second issuance operating into other of of the pandemic as results, profit our million, the cost third generate affected of third Megatrend-related down of that spend the and XXXX the attractive COVID-XX costs able XX year to costs be this improving rising costs back restructuring-related pandemic higher savings by has continue points were net profit increase financial income in million expenses, of the income in We quarter year financing lower and pandemic of due of to mix. took same million to performance interest due year quarter, due Megatrend incentive year. decreased

of sheet down slide XXXX, repurchases share benefit XX, as partially or adjusted Sensata as the that pandemic financial was offset balance improved the and in adjusted On management has to income highlight strong third compared we $X.XX, $X.XX, in liquidity. of intervening Finally, the EPS a XX.X% the in quarter by during resulted was of net periods. decrease

levels savings $XX We to brings our rate million representing expect of a these from conversion $XX conversion $XXX we align in quarter, expected achieved actions. flow, about in to actions during During cash lower a adjusted these a series the $XX achieve to the of XXX% in net $XXX third $XX generated cost to from quarter, our the achieve Last nearly and million million structurally by to announced $X we cash quarter quarter. structure year-to-date, reduce of million, and rate. savings semi-variable costs demand This income. the to generation XX% million programs expected XX% free representing million in third million targeted savings free fourth

debt the markets, to quarter, offering. of third took interest XX-year of the historically cost credit and our drawn X.X net of market financial end improving low maturity at revolving rates Sensata's September, end given of strengthening million During conditions debt-to-EBITDA repaid through Expand times. lowering our operating April. we the range unsecured and Sensata's $XXX had line we our slightly times target of we a capital, X.X advantage was notes raise to profile in of X.X times above

capital expenditure $XXX controls. million million, guidance is full year prior $XXX lower XXXX $XX for capital the on million the based now to of than continued benefits guidance Our

past have and nine actions economics position the months, conditions. improving financial significant Over strengthen we with taken business to our

are partnerships acquisitions that as segments within quarter. partnerships on us megatrend PRECO existing our and markets. Electronics fast-growing strengthen third-party capabilities We focusing collaborations initiatives. and example, market acquisitions to large business as expanding acquisition By through position the building growing addressable position both should well of our our These and bring we small on meaningfully and announced offerings bolt-on that and last intersect way and our unique well

XXXX, for object XXXX agreement an third notes digital heavy repurchase signed detection early of at conditions quarter, hold. In offerings. radar expand program our on due that stock X.XX% vehicle we'll to the depending and heavy under partnership financial a we evaluate on remains redemption market, February safety our During time our vehicles for

guidance on providing quarter as shown fourth for XXXX slide XX. are We financial the of

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

X% result a million order between decrease to revenue conditions million. will from of that and sequentially by we $XXX strength between we of X% a for As increase stability quarter revenue midpoint revenue year-over-year the and $XXX third currency increase year-on-year X% representing and XXXX, expect flat economic of revenues generate improving the quarter. reported patterns and foreign At and better and the customer reported $X.X million approximately fourth guidance, between expect

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

as fourth Our experience, current quarter. Based indicator our a of coming the is XX% of reliable for fill in on quarter. more quarter revenue midpoint the guidance revenue rate we third our the approximately see fill

indicators We to future economic also form view continue third-party and leading forecasts our monitor help of to market demand.

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

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

into a performance nine to at Sensata and financial ability XXX expect $X.XX and $X.XX to -- $X.XX, XXX Driving fourth guidance which We report heavy In XXX the our impact points this continued to environment to in quarter XXX business, strong is for XXXX our for foreign business. the includes continue positive currency months we points guidance between today. as challenging performance market the summary, vehicle the demonstrated for we're EPS midpoint. of outgrowth basis to despite automotive expect including has financial adjusted targets by the our secular basis delivered to first this providing continue achieve

comments. Jeff? the call to for closing me Jeff let back Now turn

Jeff Cote

of slide wrap supply base enabling well the I'll has Sensata on upswing end messages few our to improving before many Paul. a key Q&A. the chain, end capitalize Demonstrating in flexibility up and on Thanks, go the to XX rapid us the markets. markets. responded of with resiliency our our to very manufacturing we of

respond to a for positions to quickly shifting demand source well trusted customers. our us ability very Our as

business growth out performance strong our attractive this to and new full delivering market based this maintain to end expect outgrowth. We our We are to into wins. the confident remain continue XXXX ability future year for deliver in market end upon

resilient cash We Sensata's flow, continue free strong model. which demonstrates to deliver financial

growing other initiative adoption business this excellent the commercial opportunities by Connected markets, for are so to growth continue and our Smart fleet for progress the large of that as and Megatrends electrification fleet and & making year. end evidenced Sensata wins all invest first and are million in We we by in new $XXX initiatives rapidly our opening across up far

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

technology finally, emerge with Megatrend commercialization. we the partnerships margin this our to return we industry-leading period We And rates we shareholders, capabilities by and parties as the are for pursuing pandemic, collaborations to deliver expect from our growth accelerate may expand in in recessionary third in not technological short caused peak to and investments our opportunities while and margins increasing do term, our our people. while

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

Jacob Sayer

Thank you, Jeff.

large the on the question to Given please circle to questions. please we time, listeners call, the yourself number If of a we'll further the back group and have assemble roster. follow-up. Jamie, limit Q&A each for one

Operator

the now session. comes question Goldman today Sachs. Our from we Please gentlemen, and will Delaney Instructions] question-and-answer question. Mark begin ahead [Operator from with Ladies first go your

Mark Delaney

think outlook in hoping, of XQ and is fill that's about more trends morning. XX% can Street I very company a guidance recent some speak for much on to the And bit revenue that rate question. improvement. year. The order taking been witnessing. XX% very has I'm above last Good well the implied Yes. The trends for the it compared is that good the Thanks a XQ

the what order some to COVID? has experienced it order be for Or in to the book something So that that year hoping seen its that simply of going account rates compared uncertainty ago? fourth for to a understand, are suggesting there to conservatism slowing is quarter factors as such is Sensata is in

Jeff Cote

Yeah, for Mark, question. is the thanks This Jeff.

recover. quarter positive standpoint business from Obviously, about to turned a we that's for little was tends X% fourth the there so a about it's quarter-over-quarter seasonally that And the recovery is last to again last from And still X% into year. HVOR. obviously, auto off lower on Industrial quarter know a lagging, fourth as the quarter. revenue an down XX% trend us versus sequential XX-month sequential notably aero in been to year. fourth continues HVOR leads be a

news XX%. going typically Absolutely remain fill see the than lockdowns. it that's on. rate conscious do We We what's noted the You higher all regarding is. about

quite all rates On to gives from the until our given optimistic exited job about have seen a we remaining But of and job cautious. in side, entered that the all volatility continue But strong. how about last the to an the supply the done couple demand open. things we customers in quarter very tremendous things of have view terms given where of concerns feel go. some stimulate customers. chains be when continue the keeping will as those We've and figuring amazing done that though time, positive But end I'm also order to we started us sure a could quarter which watching go, strong, a quarters with out news we would are just Mark. off little October we're their also our making things that being cautious of where

Mark Delaney

being quarter made you're sense. for for these to an other but And or comments lot commentary Jeff, I lot a exciting some margins incremental influencing any Thanks quarter? of talked a fourth of there the investments about hoping any factors question, kind investing of my makes things And Megatrends better And That really and some understand into not a in in second bit you you're to implement thinking in about next fully year that. program? what the consider not the more cost as you're starting but about this topic. aware that of there more EBIT peak but maybe rates. you of margins anything just margins. leading industry fourth margin we mean, is was Maybe impacting be should about little can dive I especially quite this industry-leading, implement to as be may Thanks. margins peak reduction you that

Paul Vasington

its So, Paul. Mark, and Mark,

COVID Just the we've to the investment increased a the see got Megatrends. of And our to comp about going numbers have supply PRECO We spend happening in the continue bit acquisition. we're still some thinking then integration sort movement that's related to incentive chain. disruption in sequentially, And improve. as higher little of

volume the against would be the we're of that headwinds kind stronger those sequentially. growth So seeing

Jacob Sayer

Thanks, Mark.

Operator

Spak Joseph with RBC from go Capital comes next from Our Markets. question. question ahead your Please

Joseph Spak

much. very Thanks

to wanted now to meeting you market the saving you demand. end markets. at does in restructuring expected to you about announced it is appear is lower that least end the million. some But faster and $XX than demand Just talked some about, When align talk that, demand recovering that,

are some valid? of look Or that you still go forward? numbers So away does those as

Paul Vasington

year. I those on are So as of It's year. of is is execute done can take generate we And to related But restructuring numbers that to to savings continue And to but savings. implementing next Jeff, all continue well they're into not service those The said, the programs, we're restructuring lot actions, people-related this it. Paul. the over plan a implement course valid to programs.

Some Megatrend ultimately higher our but our a may develop XXXX savings in of that that's as we to offset plan. initiatives, be with determined, investment get

Joseph Spak

positive that the here profile then and CPV, And the margin just the And some was business Can business the I assume scale today. the business? what just aside higher about doesn't the CPV higher electrification ICE Okay. of wondering, Because commentary. have the you remind big electrification, on us, today? I the obviously from developments with how it awards then is of

they can are And where the in today? where future? So go they

Jeff Cote

Yeah.

that which to Megatrend be the seeing very area, the trend terms a that's looking a trend at serves, high-voltage a from wouldn't necessarily market. almost the this far this current as Electrification rapidly also our think when in But M&A our continues So represents today. organic about to X%, thus portion at this legacy self-setting but circuit -- to capabilities, to half the this electrification will trend. think $X.X this to theme. breaker only broader to signs needed opportunity And small for I and about year got look in continuing broad our of well. the the in when continued support in business of growing. about that invest include Obviously allow control it's around really Big grid components target the think in But company, regulation electrification develop the our it's to has we've And focus we're very infrastructure, direction. business, almost this continue a it's electrification. that that NBO's as area. Everybody new of move -- not positive I And in SAM. and way business you total half only on the customers. of were we NBO's of we're billion We're

Joseph Spak

Thanks, Jeff.

Operator

next Our ahead Nik comes your from go Longbow from Todorov question. with Please Research. question

Nik Todorov

margin? how Paul much third And takes Thank and Q. mentioned guys. can talk fourth a on, about great bit morning fourth the Good you that Thanks. million in Hi. sensing. costs and results, you. into in I both little in was $XX COVID And puts $XX about, expect the bit you think quarter? of the maybe gross talk can the unfavorable million you mix into little congrats the quarter a and mentioned Maybe you -- wondering about, or I performance unpack if

Paul Vasington

we've the Yeah. that's The profitable. mix is got more business Aerospace being and -- auto HVOR business Industrial performance that latter and sensing the

in normal And which As continues we nature still seasonal look year-over-year. for is our be down, almost Jeff business our see in XX% mentioned, pretty significant is decline business. to this and XX%, to QX as aerospace can industrial you QX,

And driving have. parts is very also business of are those extent. the business really of two automotive unfavorable our units It's our when segment to that that lower-margin the business you down four is revenue recovering some quickly. business think So mix our we

that dynamic probability so cycle. recovery of of, are where the across the just in a it's terms And they mix. businesses, far that's of portfolio So driving

Jeff Cote

question. COVID the was cost second

Paul Vasington

Yeah.

to $X So disrupted. just been place. -- inefficiencies, the COVID to its It's And protecting somewhere, inefficiencies, related it's have quarter. supply chains million the our all the a been logistics labor costs elevated $XX million depending running They've cost. or just on, in

average, quarter. million every on million $XX they're $X running in So to

the were more than bit end some somewhere range. lower higher Some that, in quarters a -- that of

Nik Todorov

I Okay. you. got it. Thank

Operator

next with your question. Our from Daryanani comes ahead from question Evercore. Please Amit go

Amit Daryanani

just December maybe prove seems at over about, one had as is the guide September, the lean in Hi. talk there ecosystem auto conservative And question inventory off to production? in production taking just this X% quarter this Thanks on be you assumption down think I'm what as X%, to the I point. December. the still assumptions, are fairly for you be curious, auto could my think you because do guide, guys. first guess I Could geographical auto for the implied is in

Jeff Cote

Yeah.

Europe production it well. down as based note So about significant change, quarter big and million X%, got year. me will then fourth versus year. let a that's than where right? of year-on-year, pretty think X% about quarter And down during is down it on, sequentially fourth it down in as the automotive performance last about But in was quarter and X% touch from improvement quarter. in so of the last X%, lower So growth year we're were calling I they X% China a rate, now versus still upon think right where we is be -- terms North of overall X%, fourth I Korea are an fourth that, fourth snapback you an in XX% Japan quarter Sensata's last another X.X down mix. units China America Europe. mode is

Paul Vasington

pretty estimates when we of IHS mix production market And than that what the for I little would IHS just the add on more on that QX adjust you'll in would tailwind. pure a see estimates that to you the on our top much IHS is negativity compared numbers you we're the exclude bit see business

Amit Daryanani

I from a really really you And guess had guys over as think That's helpful. a of I here operationally. follow-up, bottoms recovery COVID I impressive mean, have the

down what for helpful gets What market and demand go you to that? be guess, to to for the perspective come triggers trying buyback you to I the pay wait debt that? and think program Or you to your reinitiate to to buyback trying you I'd the back better? understand? So would happen? get love are wait triggers what do to on end back get to Are

Paul Vasington

you we into on opportunities think, M&A organically inorganically. to how megatrend excited continue the tried and we're to the out for or our the capital forward. businesses side grow either Really lay going and I issues thinking about about deployment

is you the X.XX% priority So NPV highly where the think that's of the if priority of -- transaction. driven that's probably right now. a The is call

getting the company. economics the be around good we that that So would value conditions remain will like But in for if economic interested determined certainly that. like be assuming doing

I part important capital deployment of an think strategy. our share are repurchases still

right them three the third the that a as probably see a that from of bit work You leg now, other still the from third have deemphasizing we two. important in but options

Jeff Cote

Thanks, Amit.

Amit Daryanani

Thank you.

Operator

Our your next question comes from ahead Samik Chatterjee question. from go JPMorgan. with Please

Bharat Daryani

for taking for This thanks is on Hi, my Yeah. Samik. Bharat question.

solutions So to just decline to from Sensing expect one at guidance. market the XX% look XX%. I XQ me. your question end you If

help within to hitting us in each if within Thank like aerospace like about industrial other So continues seeing between in thinking what are sub-segments you you improvement much could and mean just strong there think be signs of you industrial? segment? defense expecting And How about you. I are the any you're aerospace? aerospace

Jeff Cote

Sure. Yeah, sure.

industrial the the on fourth still the XX% a it's prior usually X% is from pretty And down fourth revenue year. business. a for versus industrial lower year on then aerospace side is bit little So quarter quarter basis. the That's dramatically prior about down seasonally still side on

there. of terms in seeing markets we're end the what that's So

add anything want to Paul do to So you that?

Paul Vasington

No I that covers think it.

Jeff Cote

Thank you.

Operator

comes with Junk Please question Luke your Baird. question. from Our next ahead go from

Luke Junk

Thanks taking Good guys. morning the for question.

Smart just and between first heavy off-road just the if better the standpoint in as just agreement down you more Connected could $XX management wondering Maybe Smart Thanks. And then the comment your how wanted commercial in total terms a And also that revenue color million well. Connected aspects understand from for of on could cite breaks little vehicle sort you offering. of one-time fleet you & of on more & provide business if model just a wins front-end to sales First, year-to-date. recurring the piece? and

Jeff Cote

to. glad be I'd Yeah.

additional you a roll So across closing to of over continue others start expect they with we're the how but in of sure having terms bang manager would a this experience a it I'm vehicles engaged one they with this with that to with. time. pilot, first they expand fleet And And this do what They that out then pilots in know big only commercial in it's we that out. of the that's roll as terms and process business. not we've fleets don't

that it's the start. right. That's small a And base to in indication provides lot of small of with as have managers fleet the with vehicles value tens us a clear it's it a mentioned thousands engaging but roll of these and solution revenue So the fleets out. I aftermarket to a start are

that $X view about a So talked the is real market. of billion market the magnitude based addressable of upon across that we've fan-out conservative of

will and on different business managers choose different this. fleet so structures And models contract

full fleet manager a particular wanted subscription this So basis.

together and basis seven-year us environment, Others that to on the services. frame. in pay install equipment or buy buy work So equipment. or choose time over subscription we they six it equipment upfront pay for then We just build a the then to and data will a

the will model will desire opportunity, very it be So bringing the about manager. different and tailor the I'm every slightly of to fleet and individual about the very interest excited excited with this and short we forward customers particular continue to other with to and more out a of providing this in period updates customer. commercialization to looking very fan as time it

Jacob Sayer

the to million So than It the the that's aftermarket. MDOs. important had rather is market note $XX in OEM in Luke as mentioned Luke well in

fleet be trailer with manufacturers and will those the the So truck manager. rather than

hardware So from traditional more sale Sensata.

Jeff Cote

point Jacob. Right, great

foundation talked the to associated foundation pressure about we've are pressure environment is but truck this with introduces data note into enabling here notion hub which vehicle there area So tire lots feed past a in tire which of Smart the a information requirements & the to sensor and our network or the is of and collecting additional cloud. unique for Connected an insight initiative around it's and in important of on-road the

offering. a the in that's thing and with part doing of aftermarket suite the same that's being implemented in So OEM's broader we're

Luke Junk

Okay. then Thank all as just helpful. super of that. Thanks That's a you. for maybe And follow-up of maybe a hypothetical. more

your business that fuel Can about of would look administration. rise potentially? terms Sensata there's Obama And does if like he in the might win how standards that talk change efficient you impact what driver? the just ultimately the clean economy in of even economy U.S. stricter of and sharply in U.S. move Biden standards fuel prior election level the next the a to under week, course coming signaled contemplated above the So has administration. fairly

Jeff Cote

I Yes. very a it's And that policy regulation are being be we not is. positive of the offer to And overnight. It's value regulatory-driven what that in can over policy favorable as a for it game. quite and positive more environmental tilt terms view our as toward change time would a would a company proposition long-term that company. -- But is something environmentally and us is trends friendly what more

are in fan-out. And help if though there's it certainly we so policies it from the But the standpoint -- has an significant opportunities exactly more administration hard the feel toward to run. long with us to conservative will current that environmental how as know even could shift a

Jacob Sayer

Luke. Thanks,

Operator

Jefferies. Our go comes Kelley with question. Please question from ahead your from David next

David Kelley

for with one my Thanks taking guys. prepared you challenges ramp. question. support believe customer morning, referenced Good starting to I remarks I first guess demand outsized in automotive. the

onetime costs as we Just in quarter to expected? were such any the curious, all the meet industry if more there overtime snapback than aggressive

Paul Vasington

as ordering tightly very business managing for demand with No. that possible. No, our David. all our customers we end It's the the weren't -- of lean we in to run product. and our rapid And just serve improvement able demand were market cost as the

had get ability we'll create and impact revenue the but a an able the were on we've quarter. terms got long little the time was that demand to some we Long-cycle to generate of a caught some caught in up a of business so all bit out of items. takes in did get lead-time that amount generate And of It there. bump to up, it our little

Jeff Cote

improved I'd Yes. third that dramatically in the is quarter, thing the only that And the the add you trend that through quarter. know, to

we given strong, as And as probably when provided was could that sense in July September. not you we strong -- that but guide so July the

to during in differently going approach demand is the quarter of there. that fourth bit that the We're little strong. the quite growth the so given quarter a And was demand

we deliver. strong this high to and starting efforts the that back out again, in real a done quarter of managing everything team's don't that second on to testament through result a December to capabilities. to the steep the have the that make we're creates and to needs decline as a snapback to team's sure So has that costs be managing want a challenges then go very But demand a and that October that managing you

David Kelley

Great. auto Okay. about variability in production expect returns with maybe normalize? That's range beginning And normal? is some slowly as to or You ongoing target follow-up go outgrowth think helpful. X% to X% X% to a forward that to we as demand line aggressively in Should back -- or super discussion. continue we X% Thanks. should perhaps to

Jeff Cote

were being had third challenges in able testing would products quarter terms be do to a quarter. people called They had launch for COVID-related little of that and they in We third out lower fourth auto some to as in needed second preparing the quarter launch. in forth right customers and terms the launch bit for what preparing given of delays so and the for

third for that called out. points XXX we true in quarter became automotive the outgrowth business. of the So basis That

Fortunately, businesses our other it. offset

So to always a points the know is of company variability business are as that going look for we And these for we wins outgrowth the serve, would by But are end see fact that by we They level most quarter, that of we at basis plan point business. given of to to able long-cycle business There's some again, outgrowth. our I launches. like. what that XXX are. we what a were markets new

long-term in that not being long-term but able high for a in given confidence necessarily range have we in So degree of to sure. quarter any maintain

Jacob Sayer

David. you, Thank

Operator

Please Brian ahead next with comes Barclays. from from Our question. Johnson your go question

Brian Johnson

my there Yes. EPS the fourth income EBIT in EPS real Thank a upside I'm anything question. and housekeeping versus operating than is the The consensus. and lighter little by question quick quarter? Just implied housekeeping you. the changing getting between Very math question then

Paul Vasington

terms interest for little expense that a drive balance in bond coupon you new of the sheet because the arising Brian, are than of It's I is is currency have higher revolver. lines think three And mix. all a the things hedging bit taxes of deal, it. which Obviously, exposures. rising

Brian Johnson

Okay. Thanks.

that right those in electrification the products potential? outlined, the are it is on more shelves Second question now? vehicles actual Or you those have offset on your

Jeff Cote

In sorry, I'm what? for potential of terms the... the

Brian Johnson

For PPP offset.

Jeff Cote

I you. got

content of $XX referring you're So the to?

Brian Johnson

actually something filled customers have Is on? Right. that that

Jeff Cote

Yes.

Brian Johnson

your shelf a have wanted that just to? if they get there could back store you to Or in they

Jeff Cote

No, no, no.

a for they designed are products vehicles when in we it's them. for and XX in or to for have content buy product -- not battery vehicles of if electric greater these it. So choose And that just have

in content it's sold business per that So designed it's vehicle. that generates

Brian Johnson

the more go meaningful if equipment. these And in share you in difference you sensors spots? combustion were see concentrated engine what Do less think your about any of opportunities Okay. market to the concentrated versus that

Jeff Cote

of side Yes. are vehicles. they're that because little a our more lumpy. the tend I a and mean be platforms the -- on larger be wins panned by a tend what customers the bigger larger number little And creating to across is electrification that out to Well

electrified there are the tend more Therefore, to little lumpy. we're the in in that seeing. from terms the will well So a be product But vehicle as little serving today that lumpy bit a to opportunities believe pursuing wins benefit will continue trend to space that of -- that us are bit more we're either opportunity. the or many allow categories this we overall

Brian Johnson

not different part LTM that on that a to like wireless Yes. year? just skateboard did a the for by that platform? same do opportunity highlighted in Spring company the question just competitor they a of the the you a highlight final acquired still the choose what GM It battery selling? though solution. have you're publicly different follow-up platform mean that's announced Does was sensing. with they that GM quite as an there. -- Is Or And

Jeff Cote

management, certainly, components opportunity battery not battery other that's to serve we're it's GM within but platform. us we management, an doing that For have for

Paul Vasington

Brian. Thanks,

Operator

Mohan your question. question ahead next Please of from go comes from Wamsi America. with Our Bank

Wamsi Mohan

Can heading Thank underway have XXXX, quick into that you incremental how you margins next have we I follow-up. you. about into material a given Yes. year? especially initiatives cost talk have that some about you should And maybe think going

Paul Vasington

Paul. its Wamsi,

these our we in from I at volume that yet not margins Obviously, incremental will Megatrends So initiatives but drive going volume, to invest as nice pace continue to the the growing going to does be XXXX, this will that we're help. obviously would continuing do levels. in for to say the talked continue in repositioning if and at Jeff with we it incremental volume invest actions guidance our people. We're giving stay expect about if that are we growth the

have a We performance paper model.

greater year. So with within P&L incentives, greater the next profitability, compensation

think So revenues next do I margins these levels. if will year, at continue expand

Wamsi Mohan

So than rate be the rate though on Paul, those -- higher margin itself clarify conversion conversion should incremental historical just to itself, incremental? the drop-through the

Paul Vasington

For a period of time, that's right.

By For got period say higher back point, of we're incremental business. way look normal. investment a way, cross time the what than to we've see maybe would going the some put margins I At the lot it's seen have down. like to on we'll into to a

up. way capacity able will an start eating of dropped that semi-variable same into right working the But lot weren't where we're and to back in just costs kind now, we So margins phenomenon out the on we our a the have environment because get fixed incremental.

rate. a model of variable more So

Wamsi Mohan

Right.

And say then versus material? restructuring the and It's mean maybe of but substantially there do I roughly. segues versus spends follow-up, margin you for and XXXX a lower where or you And on parse what at think decremental about basis. into about sort the revenues? can think pre-COVID into the else we're guide other megatrend side, revenue is look lower a about in COVID start all on gave up. the Or As the that moving anything were pieces there? you just is ending this, revenues again if that on you COVID the that you of year you on that million EPS that at Thank $X.XX Would $XXX you. more of

Paul Vasington

high on our targets. good a think At a done job delivering outgrowth I level, we've

outgrowth that executed and in things been the our strong. has I were control So think so the we

all market-related I think this mostly not all most of or that this related related suggest to would COVID-XX. is is -- and it's of I

cost. of our the we've we of our at and really terms able cost to talked the In times a in year, weren't semi-variable get fixed half that, about few structure, first

QX move were line in million variable savings, moving structure repeat a we furlough. aligned took generated We costs. with benefit. was It didn't temporary so more our our $XX in that in temporary with our in seeing second the -- half. It cost actions volumes So, around

cost permanent for they lower levels because lower we're and doing demand some actions Now, will period the time. are be of

of we are profitability. sustainable opportunities of major pursue the We're are opportunity drivers those those adding more we Megatrends investing to we grow because for a to and long-term -- think see lot I in growth. want

I -- starting well. a a So, cycling strong a most for that and showing depressed is to market of because through now we're mean results as part, very think we're much the it. recover lever I just that's end But

Wamsi Mohan

so Thanks much.

Operator

comes question your with next Citi Our Jim from Suva Please Investment go ahead Research. question. from

Jim Suva

Thank both side you. any you a Can you into automotive visibility a side? as a Delphi aggregator on be you maker or sell it'd little inventory? middle the talk about other, on well just channel whether Or harness the or middle HVAC on have bit sometimes

Jeff Cote

Yes.

get our of in we judge we doesn't unwound lot in inventory inventory. talked We We to. quarter. is is believe the the inventory if based And that more evidence in unwind a $XX side there's chain that half the a about unwound any We we lot transparent. of and supply and upon more quicker the aerospace with be the HVOR it also is We aerospace believe, tight. thought. had was that of We built year. HVOR, fairly about so channel Jim, than any amount calls auto but the third had believe the So supposed transparent originally first fact candid, that balance in discussions auto, And a significant to that of Friday builds. to that on a us. the buyers, automotive that To don't something ship year, expected in don't huge auto we that has we it in million over there's see candidly

the industrial a it's little On side, harder.

one that's ton out sell-through a indications of that, the that we some we The is there. get area not do build You where distributors. inventory point there's

any a in consumers buy has this of able experienced get all fulfilled. demand we going to a other the been is near home significant think, I We're of being major not products, would pent-up to whether I proxy at terms use that backlog belief unwind there's not in or goods. our calling that we're term. terms in viewing the system. for And terms in as will not least that to appliances try anything inventory else in There or of

Jim Suva

Okay.

back Or a is little back than lean to does to where to And get get you'd unwinding like it bit you too so equilibrium? unwinding, you be?

Jeff Cote

anything isn't There to unwind.

would the that with And so, about chain. now inventory the I see say equilibrium in demand, sure cutting that to customers probably That inventory. little back say trying more an demand end they on be build that supply think a the market a terms I mode where bit would of I we're continuum. inventory are you in can rather in make would than increased on serve of to might we

Jim Suva

Great. Thanks so much for the details and clarifications.

Jeff Cote

Thanks, Jim.

Operator

Berenberg with from go Please next Filatov Our Michael question. question comes Capital. your from ahead

Michael Filatov

trending more on generally sort broadly have the and wondering, there's performed sort performed revenue of right performance do sort contactors was how rest high-voltage business us over And business? for or in the contact was speaking, your then of of also, how speaking higher the the on you sort question. high-voltage relative if business? I you many and And see how of that that just on my BEVs guys has -- for know guys. GIGAVAC I Hi you vehicles. update now for and Thanks on contactors that taking EVs could I of that wondering, electric time average to

Jeff Cote

Yes.

couple in of a points So, there.

And we're have. that the that grow on we're down continued growth would that's market say I significantly a has So, seeing upon based quite calling offering out it directly, content GIGAVAC driven in although, they nicely. the GIGAVAC for not to the business

we so, but faster had knew this that's when has we're core can differentiated we standpoint. margins that. GIGAVAC business, growth have very bought grow what business. grower, was fulfilled from M&A going at growers overall to the we rates rates that very a also Sensata than fast that businesses targeting be And accretive -- be The what to a an much and

two a the have that's contactors, There there in contractors place In architecture that system others of contactors of of have vehicles platform six in number terms place. number a question. today are to out four

over magnitude and more equipment for the push the cost the asset what fewer the architecture protection of that expect time does. direction applying contactors understanding or more vehicle associated the pushing going charging that in will in that, and the down would It the will this also Given direction associated other to battery with protects numbers. contactors, the person the valuable therefore most and charge. is protects application that it I -- the But other in

OEMs negative an performs this or look competitive, anything as to cost that always be unusual case that acquisition. particular investment it function. be important being we on view to a our but more don't So, toward incredibly will take would out

Jacob Sayer

Thank you, Michael.

Operator

next Our question Please with Cowen. from Joseph from ahead comes your go Giordano question.

Unidentified Analyst

questions. if filling Hey, This Is more of a to of Thanks you're first good facilities. investment production you like in provide see terms are view morning. Joe. anything seeing capacity? my what Or in different wanted underlying this various auto you is just Robert seeing the existing could regions? taking I across for in for

Jeff Cote

how that could is Joe you're customers, be what little just if more our sorry, out specific building question. you of asking capacity. I'm or a terms our on -- we're the In

Unidentified Analyst

Sorry.

at investments of your terms their like being underlying directed? customers facilities where their In

Jeff Cote

major meaningful talked on Yes. assembling China no in both designing, I our terms manufacturing, change customers now market. either part, vehicles. Mexico We the in global to in of of our serve high-speed they're where change don't have about in just see automotive any lines how automated this. We And terms doing we're GIGAVAC. and

expressed seen terms terms development. but just some navigated trade -- in challenges that supply in I And so we've so any of we forth in result it the haven't through and major of chain have of change

Jacob Sayer

Robert. you, Thank

Operator

question. next from Our question your Stanley. with comes ahead Hettenbach from Morgan Please go Craig

Craig Hettenbach

size, just of Yes. frame be looks growth industrial that but lot of what Thank portfolio kind recovery a looking type market? I you have do the see the longer more opportunities term, the to at get growth to you. what of mid Jeff, autos market expectations just in kind beyond Can here. you given in of an know you across industrial? kind the maybe industrial in significant the attention

Jeff Cote

Obviously, question. to we the is opportunity end market, Great some fragmented. appreciate industrial other highly Yes. about the an enormous of serve. talk that I markets

We serving there. we're different end number markets products have of and a that

the amount that -- less, also market third recovered actually during the the that's but You it has it's the know year. gone the least down

concentration that different So terms -- in very that of lot market areas different a helpful. has of been

It medical was helped the strong industrial a our small X%, upon a So really device, business, third portion had It's quarter overall for demand of was it. area that really only driven business. for us. a about for down but based very target quarter

we start within business, that talk we'll applications that things to squarely industrial when So fall smart all certainly grid industrial in like infrastructure IoT-type more business. continue to about would explore the

And sticky legacy business. a business very So lots of to opportunity. biggest our note business, It's it's controls of component the a profitable important that slower very also growing that business. is the a -- business, but

at And are areas in be core opposed target faster-growing helps. Hope that the the will you that so in we that GDP-like when growers. on businesses to our look have there total, business that areas as

Jacob Sayer

Craig. Thanks,

Operator

comes question Deepa with Securities. Raghavan from Fargo go your next question. Please from ahead Our Wells

Deepa Raghavan

you you And spends about all. accelerating Hi, that are you our obviously talk in assume Megatrend do good industrial? well? investment any -- morning investment also can investments but Jeff, of terms HVOR talk our versus investments autos the Megatrends in about portfolio? versus autos increasing, can I about -- think How industrial as

Jeff Cote

Yes.

I So apologize.

think I to I nature just the let it the but make me repeat sure. question, got of

that the it's investment question? the where across Is nature Megatrend being markets? end is of So focused -- the

Deepa Raghavan

Yes. I and as portion industrial portion in accelerating is auto the well? that mean

Jeff Cote

Yes.

Okay.

Yes. Okay.

are Megatrend, that purposeful all being impact So our serve. end will investments these our Megatrends of that we're we And markets very we because the that company-wide initiatives. believe

critically strong we a auto. electrification have very in it's important that Now in position

continues that we But platforms targeting serve mistake, broader make engine from can So we're positioned well are no trend combustion market. the electrified as capabilities that. that for to the

serve aerospace And a we industrial, so, auto ongoing so obvious organic development market little the reasons. look clearly that will HVOR less we as the the have at that for

yes activity of & as number And to it end a certainly, to little see all But both is Smart & in focused be transport concentration we Connected you'll And out, on Connected the pretty More of it I our be think organic chains. Megatrends. all and segments. across but end applies would logistics of a those Smart markets. the focus further that around broadly our and look market as at M&A-related that electrification will serves well. the markets pursue these

Deepa Raghavan

Or thoughts XXXX? on the have and generally, here heading a you inventory efficient would on little you in benefits influence inventory Got should or any elsewhere, into that talk do the year? costs continue exiting production U.S. suppliers situation entering HVOR the by yourself? XXXX do thereby how bit replenished in focus the potential about were able early of OEMs to but also think like it. if momentum end And also XXXX, you One I about, to think think into XXXX since can you also

Jeff Cote

Yeah.

So, XXXX. But we from all obviously, that we're landed XXXX growth into to if XXXX. specific suggest not would of where going third-party the continue guidance will the forecasts, provide look on you it at

forecasting, even if So, the If levels, specifically, fairly at they candidly, call nowhere end close from year-over-year. XXXX, markets guide, dramatically XXXX, auto all XX% the our back fourth at down and were near to you markets right? XXXX. The pick peak look down, peak in of quarter automotive it were we're market we

near automotive nowhere peak market. we're So

whether nice of So, point recovery there our Deepa. a here the thus from this little double see in other I to recover fairly would is watching a be that that, Thanks, stronger of the from. is there than, on view Certainly, is or rate anticipated. could signals years, to recovery. been depending feeling XXXX good We're year year over for but or be dip taking some couple not be that would the granted. growth of terms at not potential has impact, least, next or have will the far Everybody

Operator

Sheerin Matt from next Please your Stifel. question comes go Our ahead question. from with

Matt Sheerin

you. Thank Yes.

me for quick of couple a here. Just ones

five markets around regarding that more deals or commentary of Just the cash are a about themes. on acquisitions M&A, years areas to a focusing being bit that you particularly, the on that things also fit all we your But more talked you've you about use, Jeff, into tuck-in the four little strategy, emerging growth and talk priority for expect continuing versus technology ago? could larger did

Jeff Cote

to Yeah. asked I sort you that am clarify. glad of

we've time. during quite the for kept this M&A So, pipeline full

cautious for M&A of area of we've obvious transaction type near-term PRECO. one been we M&A. Although terms sized other byte bolt-on than the in more on reasons did The in be will capital the small focus that deployment with

Smart zone purchase in nothing $X or of type and areas be The of & range. sort target price around million will billion price areas. the target our Connected So, that $X purchase electrification

broadly, play something, we're and also going that high-growth they're grid so equipment, Sensata's focus. not electrified segments, to be highly & Smart at solutions. knowledge the rate, believe that we not going or high-growth We're markets will we that margin, competency and businesses not growth infrastructure. that regarding electrified So, differentiated going right? also And buy where smart transport the that equipment can differentiated we mission-critical have very accretive but only to or have just around the and Sensata's bringing specific is Connected have margins, where auto, to to We targeting a not logistics, we're or we're be So, ability where businesses right? solutions extract perhaps margin, cost. but is value focused on, to right play, rates end have but So,

So, bang to that's strategy. stuff our bolt-ons transformational Not target area. our type more further big

Jeff Cote

Matt. you, Thank

Operator

Loop Please Capital. Harrison next go from with from question Shawn comes Our ahead question. your

Shawn Harrison

taking remember Good one my my inability star question. And hit me to a… guess for morning to I everybody. got thanks

Jeff Cote

of e-mails, …lot asking… inbound

Shawn Harrison

about more define even on the in just could guidance in seeing into we the fourth cited level then exact to Paul kind start of a step-up amount, we there just comp set if and some to to you But I quarter about e-mails, lot OpEx is more incentive XXXX? of sequentially, investments factors. step-up know OpEx inbound and think Exactly, specifically asking quantify the further as the you're way dollar other the a us

Paul Vasington

-- from improved QX it's around with sequentially been have And QX, have I about I'd incremental up $XX we're would would volume. million. million up the so say if without said investment, $XX.X we

that's you the probably it's $X I million, incremental $X mentioned on call. So earlier, the when million, consider items

Shawn Harrison

okay. helpful, Very

Paul Vasington

question. same a That's

Shawn Harrison

the And you content follow-up, years out Jeff. Maybe its $XX color side if now. of Okay. just electrification the to of could on a as then speak brief three

$XX I years time can add go come to potentially What up that your think from charging on up, to maybe vehicle, you now would items range we all content and three out? the to into -- expect other down. average to take say

Jeff Cote

Yeah.

that that our that it's it's go. pointed you do of question item types requires So customers toward, have. think capabilities I I will these the the a of quickly, migrate we believe And direction How to that out. strongly, harder applications. the everything that

that fact of we'll upon continue question activity a the organic content we'll we stopping And in. number. initiatives will where move we'll of $XX drive not that those to sold north Given And of continue that target that that M&A-related number also Obviously other underway we believe, have based there. on that today to without we're have vehicles we're north.

target the don't there's that call us vehicle a us if on large pursue, want a very portals is. positive its make to company. direction of a that But so, for in space continue out drive opportunity, terms target will to what to content there, in per can for specific ample as you our And

Operator

the like Jacob any conference gentlemen, And question-and-answer and turn ladies we've session. call closing over back would I today's of to that, to, the Sayer end with remarks. reached for

Jacob Sayer

like thank earnings We Xth. I'd the Jamie. Investor be this upcoming Industrial for Industrial look Sensata the XXth in us joining you, and will December Conference Melius participating Conference on on to everyone Thank R.W. Investor Baird, November morning. Sensata. to of call in seeing end our morning Jamie those one you interest at events, fourth and or the forward you early in Thank February. on quarter now joining may this you call. for your us for

Operator

that for Ladies end thank attending. do today's we and conference. will We gentlemen, with you

You may lines. now disconnect your