Sensata(ST) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2022, the company reported revenue of $1,015 million, an increase of 8.6% year-over-year, despite a 360 basis point headwind from foreign currency [8][31] - Adjusted operating margins improved by 70 basis points sequentially to 20.1% [8][39] - For the full year 2022, revenue reached a record$ 4,029 million, up 5.5% from the previous year, with a market outgrowth of 820 basis points [31] Business Segment Performance - Performance Sensing segment revenues were $757.7 million, a 10.6% increase compared to the same quarter last year, driven by strong automotive content growth and pricing [17] - Sensing Solutions segment revenues were$ 257 million, a 3% increase year-over-year, with industrial revenue decreasing due to weaker markets, while aerospace revenue increased significantly [18] Market Data and Key Metrics Changes - The company experienced a $27 million revenue headwind from foreign exchange in Q1 2023, with expectations of a 1.1% headwind for the full year [23][24] - The automotive and industrial electrification areas generated approximately$ 460 million in revenue, up 77% from 2021, while Insights posted $175 million, up 133% [35] Company Strategy and Industry Competition - The company is focusing on organic growth and improving adjusted operating margins, with a target net debt-to-EBITDA range of 1.5x to 2.5x over the next two to three years [44][49] - Significant investments have been made in electrification and insights, with over 70% of new business wins in electrification growth factors [32][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving above-target market outgrowth in 2023 despite macroeconomic uncertainties [67] - The company is discontinuing full-year guidance due to market volatility but will provide quarterly guidance [24][45] Other Important Information - The company returned$ 50 million to shareholders through share repurchases in Q4 2022 and announced a quarterly dividend of $0.11 per share [22] - The company achieved a reduction in greenhouse gas emissions intensity by over 10% in 2022, reaching its 2026 target four years early [10] Q&A Session Summary Question: How does the company view opportunities in light of EV makers' price cuts? - Management noted that there has been significant quoting activity and success in winning opportunities, indicating a strong focus on electrification [55] Question: What is the impact of new leverage rates on M&A strategy? - The company plans to focus on organic growth and improving margins rather than pursuing new M&A opportunities at this time [57][86] Question: What is the visibility on achieving the 21% margin target? - Management indicated that achieving the 21% margin will depend on volume growth and market conditions, with a focus on improving margins over time [81] Question: What is the outlook for the HVAC market within Sensing Solutions? - The company acknowledged ongoing challenges in the HVAC market but sees long-term opportunities related to changes in refrigerant needs [107] Question: How does the company plan to manage supply chain challenges? - Management reported improvements in supply chain conditions but noted that challenges remain, particularly in the industrial sector [129]