Sensata(US:ST)2023-11-07 13:08Revenue Performance - Net revenue for Q3 2023 was $1,001.3 million, a decrease of 1.7% from $1,018.3 million in Q3 2022, with organic revenue decline of 0.7%[94] - For the nine months ended September 30, 2023, net revenue increased by 1.6% to $3,061.6 million, with organic growth of 2.4% after adjusting for foreign currency effects and acquisitions[95] - Performance Sensing net revenue for Q3 2023 increased by 2.0% compared to the prior period, with organic growth of 3.1% after adjusting for foreign currency effects[109] - Sensing Solutions net revenue for Q3 2023 decreased by 11.3%, reflecting weakness in various markets, with an organic decline of 10.9%[113] Operating Income and Expenses - Operating income for Q3 2023 decreased by 54.0% to $116.3 million, representing 11.6% of net revenue, compared to $252.9 million (24.8% of net revenue) in Q3 2022[97] - For the three months ended September 30, 2023, cost of revenue as a percentage of net revenue increased due to unfavorable foreign currency exchange rates and inflation impacts, partially offset by cost savings from repositioning actions taken in fiscal year 2022[117] - For the nine months ended September 30, 2023, cost of revenue as a percentage of net revenue increased primarily due to a $10.5 million inventory write-down from exiting the Spear Marine Business[118] - Research and development (R&D) expense decreased for the three months ended September 30, 2023, primarily due to cost savings from repositioning actions taken in fiscal year 2022[120] - Selling, general and administrative (SG&A) expense decreased for the three months ended September 30, 2023, due to cost savings and lower compensation expenses[122] - Restructuring and other charges resulted in a net charge of $26.0 million for the three months ended September 30, 2023, compared to a net gain of $(107.4) million in the prior period[128] - Operating income decreased for the three months ended September 30, 2023, primarily due to the non-recurrence of a gain on the sale of the Qinex Business[131] Cash Flow and Financial Position - Operating cash flows generated in the nine months ended September 30, 2023 were $351.6 million, with cash and cash equivalents totaling $889.7 million[98] - Free cash flow for the nine months ended September 30, 2023, was $215.4 million, compared to $125.3 million in the same period of 2022[161] - The company reported a net cash provided by operating activities of $351.6 million for the nine months ended September 30, 2023[161] - Cash and cash equivalents totaled $889.7 million as of September 30, 2023, a decrease from $1,225.5 million at the end of 2022[166] - The company had $746.1 million available under the Revolving Credit Facility as of September 30, 2023[178] - The net leverage ratio improved to 3.1 as of September 30, 2023, compared to 3.4 at the end of 2022[165] - Total gross indebtedness as of September 30, 2023, was $3.825 billion, down from $4.273 billion as of December 31, 2022[175] Future Outlook and Plans - The company expects a revenue headwind of approximately $35 million to $40 million in Q4 2023 due to the UAW strike[96] - The Q3 2023 Plan includes a reduction of 451 positions, with expected restructuring charges between $20.5 million and $25.5 million, and an accrued charge of $21.4 million in Q3 2023[102] - Annualized savings from the Q3 2023 Plan are projected to be approximately $40 million to $50 million, with personnel-related cost savings of $4 million to $6 million expected in Q4 2023[103] - Capital expenditures for fiscal year 2023 are anticipated to be between $170.0 million and $180.0 million[173] - The company plans to fund capital expenditures with cash on hand, indicating a focus on maintaining liquidity[173] Shareholder Returns - In the nine months ended September 30, 2023, the company paid aggregate cash dividends of $53.4 million, an increase from $34.3 million in the same period of 2022[185] - The quarterly dividend was increased to $0.12 per share in the second quarter of 2023, up from $0.11 per share in the second quarter of 2022[185] - The company repurchased 1.5 million ordinary shares in the nine months ended September 30, 2023, compared to 5.2 million shares in the same period of 2022[184] - As of September 30, 2023, approximately $164.2 million remained available for share repurchase under the new $500.0 million program authorized on September 26, 2023[184] Tax and Interest - The provision for income taxes decreased by $28.6 million for the three months ended September 30, 2023, predominantly due to lower profit before tax[141] - Interest expense, net decreased by $7.9 million for the three months ended September 30, 2023, primarily due to lower interest expense on the Term Loan and increased interest income[133] Adjusted Metrics - Adjusted operating income and adjusted EPS are used by the company for internal planning and evaluation of overall business performance[142] - For the three months ended September 30, 2023, the reported operating income was $116.3 million with an operating margin of 11.6%[158] - Adjusted operating income for the same period was $191.6 million, reflecting an adjusted operating margin of 19.1%[158] - The adjusted net income for Q3 2023 was $138.3 million, resulting in an adjusted diluted EPS of $0.91[158] - For the nine months ended September 30, 2023, the reported operating income was $383.1 million with a margin of 12.5%[159] - The adjusted operating income for the same nine-month period was $590.3 million, with an adjusted operating margin of 19.3%[159] - Adjusted EBITDA for the last twelve months (LTM) was $932.9 million, compared to $903.9 million for the same period last year, reflecting a growth of approximately 3.5%[165] Accounting and Risk - No significant changes to market risk have occurred since December 31, 2022[188] - There are no recently issued accounting standards that have had or are expected to have a material impact on the company's financial position or results of operations[186] - The company continues to utilize critical accounting policies that require significant judgments and estimates, as discussed in the 2022 Annual Report[187]