Sensata(ST) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements This section presents Sensata Technologies Holding PLC's unaudited condensed consolidated financial statements for Q2 and YTD June 30, 2025, encompassing balance sheets, operations, cash flows, and related notes Condensed Consolidated Balance Sheets Total assets increased to $7.27 billion as of June 30, 2025, from $7.14 billion at year-end 2024, driven by higher cash and receivables, while liabilities also rose to $4.39 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $2,240,020 | $2,027,239 | | Goodwill | $3,383,845 | $3,383,800 | | Total assets | $7,270,072 | $7,143,264 | | Total current liabilities | $827,112 | $711,358 | | Long-term debt, net | $3,178,457 | $3,176,098 | | Total liabilities | $4,389,861 | $4,252,821 | | Total shareholders' equity | $2,880,211 | $2,890,443 | Condensed Consolidated Statements of Operations Q2 2025 net revenue decreased to $943.4 million from $1,035.5 million year-over-year, yet operating income increased to $138.1 million, while net income declined to $60.7 million Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $943,384 | $1,035,535 | $1,854,639 | $2,042,244 | | Operating income | $138,062 | $129,947 | $260,258 | $274,739 | | Net income | $60,668 | $71,703 | $130,587 | $147,724 | | Diluted net income per share | $0.41 | $0.47 | $0.88 | $0.98 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities for the six months ended June 30, 2025, increased to $260.1 million, while investing activities used $33.6 million, and financing activities resulted in a $160.8 million outflow Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $260,103 | $249,943 | | Net cash used in investing activities | ($33,606) | ($85,194) | | Net cash (used in)/provided by financing activities | ($160,776) | $365,090 | | Net change in cash and cash equivalents | $68,107 | $524,948 | Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, revenue disaggregation, restructuring plans, debt structure, shareholder equity movements, segment performance, and recent business disposals - The company operates two reportable segments: Performance Sensing (PS) and Sensing Solutions (SS), with segment operating income definition realigned in Q1 2025 to include 'megatrend' costs[23] Net Revenue by End Market for the Six Months Ended June 30 (in thousands) | End Market | 2025 | 2024 | | :--- | :--- | :--- | | Automotive | $1,058,744 | $1,138,579 | | HVOR | $318,548 | $377,845 | | Industrial | $300,385 | $275,890 | | HVAC | $81,884 | $79,311 | | Aerospace | $95,078 | $91,524 | | Other | $0 | $79,095 | | Total | $1,854,639 | $2,042,244 | - The company is executing two main restructuring plans: the '2H 2024 Plan' with expected charges of $15.5-$16.5 million, and the 'Q3 2023 Plan' with expected charges of $26.7-$27.6 million, involving reductions-in-force and site closures[32][33][35] - In the first six months of 2025, the company repurchased 4.2 million ordinary shares for $120.6 million and paid cash dividends of $35.5 million[53][55] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2025 financial results, highlighting an 8.9% Q2 revenue decline, partially offset by Sensing Solutions growth, and an increase in operating income due to cost savings Results of Operations Q2 2025 net revenue declined 8.9% to $943.4 million due to divestitures and Performance Sensing weakness, while operating income rose to $138.1 million from $129.9 million Q2 2025 vs Q2 2024 Revenue Performance (in millions) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $943.4M | $1,035.5M | -8.9% | | Organic Revenue Change | - | - | -1.5% | | Performance Sensing Revenue | $652.2M | $723.9M | -9.9% | | Sensing Solutions Revenue | $291.2M | $268.1M | +8.6% | - The increase in Q2 operating income was primarily driven by a decrease in product line management charges, a $17.9 million decrease in amortization of intangibles, and cost savings from restructuring plans[114] - Amortization of intangible assets decreased significantly in Q2 and YTD 2025, mainly due to the divestiture of the Insights Business, which lowered amortization expense by $9.8 million and $19.7 million, respectively[111] Non-GAAP Financial Measures This section details non-GAAP measures, showing Q2 2025 adjusted operating income at $179.1 million (19.0% margin) and adjusted diluted EPS at $0.87 Reconciliation of GAAP to Non-GAAP Results (Q2 2025 vs Q2 2024, in millions, except per share) | (in millions, except per share) | Q2 2025 (GAAP) | Q2 2025 (Adjusted) | Q2 2024 (GAAP) | Q2 2024 (Adjusted) | | :--- | :--- | :--- | :--- | :--- | | Operating Income | $138.1 | $179.1 | $129.9 | $196.7 | | Operating Margin | 14.6% | 19.0% | 12.5% | 19.0% | | Net Income | $60.7 | $127.3 | $71.7 | $139.3 | | Diluted EPS | $0.41 | $0.87 | $0.47 | $0.92 | - Free cash flow for the first six months of 2025 was $202.1 million, an increase from $162.7 million in the same period of 2024[146] Liquidity and Capital Resources The company maintains strong liquidity with $661.8 million in cash and $745.8 million available under its revolving credit facility, with gross indebtedness at $3.2 billion - As of June 30, 2025, the company had $661.8 million in cash and cash equivalents and $745.8 million available under its Revolving Credit Facility[97][159] Leverage Ratios | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total gross indebtedness | $3,222.1M | $3,223.4M | | Adjusted EBITDA (LTM) | $840.3M | $882.8M | | Gross leverage ratio | 3.8x | 3.7x | | Net debt | $2,560.3M | $2,629.7M | | Net leverage ratio | 3.0x | 3.0x | - Under the September 2023 share repurchase program, $282.4 million remained available as of June 30, 2025[164] Quantitative and Qualitative Disclosures About Market Risk No significant changes to market risk exposures have occurred since the end of fiscal year 2024, with further details available in the 2024 Annual Report on Form 10-K - No significant changes to market risk have occurred since December 31, 2024[167] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to previously identified material weaknesses, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses identified as of December 31, 2024[170] - The material weaknesses relate to an inappropriate internal control environment, unclear objectives for risk assessment, and inadequate control activities, partly due to a lack of appropriate accounting personnel in Mexico[170] - Remediation efforts include hiring additional personnel (including a new Chief Accounting Officer in May 2024), formalizing a risk assessment process, implementing a new global account reconciliation system, and enhancing inventory count procedures[176] PART II OTHER INFORMATION Legal Proceedings The company is involved in various ordinary course legal claims, but their outcomes are not expected to materially adversely affect financial condition or results - The company does not expect the outcome of ordinary course legal proceedings to have a material adverse effect on its results of operations, financial condition, or cash flows[177] Risk Factors No material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K have occurred - No material changes to the risk factors disclosed in the 2024 Annual Report have occurred[178] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 843,026 shares at a weighted average price of $27.94, with $282.4 million remaining for future repurchases Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Weighted Average Price Paid per Share | Shares Purchased Under Program | Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 135,637 | $24.23 | — | $302.5M | | May 2025 | 246 | $21.37 | — | $302.5M | | June 2025 | 707,143 | $28.65 | 701,232 | $282.4M | | Quarter total | 843,026 | $27.94 | 701,232 | $282.4M | Other Information An executive officer entered into a Rule 10b5-1 trading plan on June 9, 2025, for the potential sale of up to 28,688 ordinary shares - An executive officer entered into a Rule 10b5-1 trading plan on June 9, 2025, for the potential sale of up to 28,688 ordinary shares, with the earliest possible sale date being September 8, 2025[181] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL data files - Exhibits filed with the report include CEO, CFO, and CAO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[183]