Sensata Technologies Reports Second Quarter 2023 Financial Results

Record Quarterly Revenue of $1,062 Million

Sensata Technologies (NYSE: ST), a global industrial technology company and leading provider of sensors, sensor-rich solutions and electrical protection devices used in mission-critical systems that create valuable business insights for customers, today announced financial results for its second quarter ended June 30, 2023.

"Sensata delivered robust results in the second quarter with record revenues for the quarter. The sustained performance we are generating demonstrates that Sensata remains on track to achieve its long-term growth goals, including scaling its Electrification business to $2 billion in revenue by 2026,” said Jeff Cote, CEO and President of Sensata. "During the second quarter, the Company repaid its outstanding Term Loan, removing variable rate debt from our balance sheet at a time of rising rates, with the effect of lowering interest expense and amplifying earnings per share growth.”

Investor Event on Sensata's Innovation

Sensata plans to host an investor event in New York City on September 27, 2023 from 9am to noon EST to highlight Sensata's rich history of innovation on behalf of customers and how that innovation drives its transition to providing solutions for an Electrified World. The event will be in-person and virtual; registration details are now available on Sensata's Investor Relations website.

Operating Results

Operating results for the second quarter of 2023 compared to the second quarter of 2022 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.

Revenue:

  • Revenue was a record $1,062.1 million, an increase of $41.6 million, or 4.1%, compared to $1,020.5 million in the second quarter of 2022.
  • Revenue increased 3.4% on an organic basis, which excludes a decrease of (1.4%) from foreign currency exchange rates and an increase of 2.1% from acquisitions, net of divestitures, each versus the prior year period.

Operating income:

  • Operating income was $118.0 million, or 11.1% of revenue, a decrease of $20.9 million, or (15.1%), compared to operating income of $138.9 million, or 13.6% of revenue, in the second quarter of 2022.
  • Adjusted operating income was $205.7 million, or 19.4% of revenue (20.1% on a constant currency basis), an increase of $12.0 million, or 6.2%, compared to adjusted operating income of $193.8 million, or 19.0% of revenue, in the second quarter of 2022.

Earnings per share:

  • Earnings per share was $0.32, an increase of $0.10, or 45.5%, compared to earnings per share of $0.22 in the second quarter of 2022.
  • Adjusted earnings per share was a record $0.97, an increase of $0.14, or 16.9% ($1.02 or an increase of 22.9% on a constant currency basis), compared to adjusted earnings per share of $0.83 in the second quarter of 2022.

Sensata generated $115.8 million of operating cash flow in the second quarter of 2023, compared to $94.5 million in the prior year period. Sensata's free cash flow totaled $68.2 million in the second quarter of 2023 compared to $56.2 million in the prior year period.

During the second quarter of 2023, Sensata repaid its variable rate Term Loan, returned approximately $18.3 million to shareholders through its quarterly dividend of $0.12 per share paid on May 24, 2023, and repurchased approximately $25.1 million of its shares.

Operating results for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.

Revenue:

  • Revenue was $2,060.3 million, an increase of $64.0 million, or 3.2%, compared to $1,996.3 million in the six months ended June 30, 2022.
  • Revenue increased 4.0% on an organic basis, which excludes a decrease of (1.9%) from foreign currency exchange rates and an increase of 1.1% from acquisitions, net of divestitures, each versus the prior year.

Operating income:

  • Operating income was $266.9 million, or 13.0% of revenue, an increase of $2.0 million, or 0.7%, compared to operating income of $264.9 million, or 13.3% of revenue, in the six months ended June 30, 2022.
  • Adjusted operating income was $398.6 million, or 19.3% of revenue (19.8% on a constant currency basis), an increase of $22.4 million, or 5.9%, compared to adjusted operating income of $376.3 million, or 18.8% of revenue, in the six months ended June 30, 2022.

Earnings per share:

  • Earnings per share was $0.88, an increase of $0.52, or 144%, compared to earnings per share of $0.36 in the six months ended June 30, 2022.
  • Adjusted earnings per share was $1.89, an increase of $0.29, or 18.1% ($1.98 or an increase of 23.8% on a constant currency basis), compared to adjusted earnings per share of $1.60 in the six months ended June 30, 2022.

Sensata generated $212.6 million of operating cash flow in the six months ended June 30, 2023, compared to $141.9 million in the prior year period. Sensata's free cash flow totaled $128.2 million in the six months ended June 30, 2023 compared to $67.8 million in the prior year period.

During the first six months of 2023, Sensata repaid its variable rate Term Loan, returned approximately $35.1 million to shareholders through its quarterly dividend, and repurchased approximately $25.1 million of its shares.

Segment Performance

 

 

For the three months ended June 30,

 

For the six months ended June 30,

$ in 000s

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Performance Sensing (1)

 

 

 

 

 

 

 

 

Revenue

 

$

757,444

 

$

731,645

 

$

1,495,712

 

$

1,434,340

Operating income

 

$

191,147

 

$

179,293

 

$

373,887

 

$

353,507

% of Performance Sensing revenue

 

 

25.2 %

 

 

24.5 %

 

 

25.0 %

 

 

24.6 %

 

 

 

 

 

 

 

 

 

Sensing Solutions (1)

 

 

 

 

 

 

 

 

Revenue

 

$

304,668

 

$

288,903

 

$

564,575

 

$

561,978

Operating income

 

$

84,152

 

$

85,714

 

$

159,468

 

$

164,653

% of Sensing Solutions revenue

 

 

27.6 %

 

 

29.7 %

 

 

28.2 %

 

 

29.3 %

(1) Effective April 1, 2023, we reorganized our reportable segments to move material handling products from Performance Sensing to Sensing Solutions to align with new management reporting. Prior year amounts have been reclassified.

Insights Reporting Segment

During its first quarter earnings conference call, Sensata discussed the creation of a new Insights reporting segment to align with new management reporting. During the second quarter, reporting lines reverted back to prior practices. Consequently, Sensata is continuing to report results in two business segments, and Insights' financial results will continue to be reported as part of the Performance Sensing Segment.

Guidance

"In the second quarter, Sensata once again grew earnings faster than revenue, delivering 4.1% revenue growth, as well as 6.2% adjusted operating income growth (11.5% on a constant currency basis), and record adjusted earnings per share of $0.97 that grew 16.9% (22.9% on a constant currency basis) compared to the prior year period," said Paul Vasington, EVP and CFO of Sensata. "For the third quarter of 2023, we expect revenue of $980 to $1,020 million and adjusted EPS of $0.84 to $0.94."

Q3-2023 Guidance

 

 

 

$ in millions, except EPS

Q3-23 Guidance

Q3-22

Y/Y Change

Revenue

$980 - $1,020

$1,018.3

(4%) - 0%

organic growth

 

 

(3%) - 1%

Adjusted Operating Income

$183 - $199

$197.3

(7%) - 1%

Adjusted Net Income

$129 - $143

$131.0

(2%) - 9%

Adjusted EPS

$0.84 - $0.94

$0.85

(1%) - 11%

Versus the prior year period, Sensata expects that changes in foreign currency exchange rates will decrease revenue by approximately ($6) million at the midpoint and decrease adjusted EPS by approximately ($0.03) at the midpoint in the third quarter of 2023.

Conference Call and Webcast

Sensata will conduct a conference call today at 8:00 a.m. Eastern Time to discuss its second quarter 2023 financial results and its outlook for the third quarter of 2023. The dial-in numbers for the call are 1-844-784-1726 or 1-412-380-7411. Callers should reference the "Sensata Q2 2023 Financial Results Conference Call." A live webcast of the conference call will also be available on the investor relations page of Sensata’s website at http://investors.sensata.com. Additionally, a replay of the call will be available until August 2, 2023. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 7268997.

About Sensata Technologies

Sensata Technologies is a leading industrial technology company that develops sensors, sensor-based solutions, including controllers and software, and other mission-critical products to create valuable business insights for customers and end users. For more than 100 years, Sensata has provided a wide range of customized, sensor-rich solutions that address complex engineering requirements to help customers solve difficult challenges in the automotive, heavy vehicle & off-road, industrial, and aerospace industries. With approximately 21,000 employees and operations in 16 countries, Sensata’s solutions help to make products safer, cleaner and more efficient, more electrified, and more connected. For more information, please visit Sensata’s website at www.sensata.com.

Non-GAAP Financial Measures

We supplement the reporting of our financial information determined in accordance with U.S. generally accepted accounting principles (“GAAP”) with certain non-GAAP financial measures. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance, and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures is useful for period-over-period comparisons of underlying business trends and our ongoing business performance. We also believe presenting these non-GAAP measures provides additional transparency into how management evaluates the business.

Non-GAAP financial measures should be considered as supplemental in nature and are not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as, or comparable to, similar non-GAAP measures presented by other companies.

The non-GAAP financial measures referenced by Sensata in this release include: adjusted net income, adjusted earnings per share (“EPS”), adjusted operating income, adjusted operating margin, free cash flow, organic revenue growth, market outgrowth, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), net debt, and net leverage ratio. We also refer to changes in certain non-GAAP measures, usually reported either as a percentage or number of basis points, between two periods. Such changes are also considered non-GAAP measures.

Adjusted net income (or loss) is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are detailed in the accompanying reconciliation tables. Adjusted EPS is calculated by dividing adjusted net income (or loss) by the number of diluted weighted-average ordinary shares outstanding in the period. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Adjusted operating income (or loss) is defined as operating income (or loss), determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are detailed in the accompanying reconciliation tables. Adjusted operating margin is calculated by dividing adjusted operating income (or loss) by net revenue. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Free cash flow is defined as net cash provided by/(used in) operating activities less additions to property, plant and equipment and capitalized software. We believe that this measure is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to fund acquisitions, repurchase ordinary shares, or for the accelerated repayment of debt obligations.

Organic revenue growth (or decline) is defined as the reported percentage change in net revenue calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign exchange rate differences as well as the net impact of material acquisitions and divestitures for the 12-month period following the respective transaction date(s). We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Adjusted EBITDA is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding interest expense, net, provision for (or benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and other transaction costs, and (3) deferred gain or loss on derivative instruments. We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Net debt is defined as total debt, finance lease, and other financing obligations less cash and cash equivalents. We believe net debt is a useful measure to management and investors in understanding trends in our overall financial condition.

Net leverage ratio is defined as net debt divided by last twelve months (LTM) adjusted EBITDA. We believe the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.

In discussing trends in our performance, we may refer to certain non-GAAP financial measures or the percentage change of certain non-GAAP financial measures in one period versus another, calculated on a constant currency basis. Constant currency is determined by stating revenues and expenses at prior period foreign currency exchange rates and excludes the impact of foreign currency exchange rates on all hedges and, as applicable, net monetary assets. We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Safe Harbor Statement

This earnings release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by terminology such as "may," "will," "could," "should," "expect," "anticipate," "believe," "estimate," "predict," "project," "forecast," "continue," "intend," "plan," "potential," "opportunity," "guidance," and similar terms or phrases. Forward-looking statements involve, among other things, expectations, projections, and assumptions about future financial and operating results, objectives, business and market outlook, megatrends, priorities, growth, shareholder value, capital expenditures, cash flows, demand for products and services, share repurchases, and Sensata’s strategic initiatives, including those relating to acquisitions and dispositions and the impact of such transactions on our strategic and operational plans and financial results. These statements are subject to risks, uncertainties, and other important factors relating to our operations and business environment, and we can give no assurances that these forward-looking statements will prove to be correct.

A wide variety of potential risks, uncertainties, and other factors could materially affect our ability to achieve the results either expressed or implied by these forward-looking statements, including, but not limited to, risks related to public health crises, instability and changes in the global markets, supplier interruption or non-performance, the acquisition or disposition of businesses, adverse conditions or competition in the industries upon which we are dependent, intellectual property, product liability, warranty, and recall claims, market acceptance of new product introductions and product innovations, labor disruptions or increased labor costs, and changes in existing environmental or safety laws, regulations, and programs.

Investors and others should carefully consider the foregoing factors and other uncertainties, risks, and potential events including, but not limited to, those described in Item 1A: Risk Factors in our most recent Annual Report on Form 10-K and as may be updated from time to time in Item 1A: Risk Factors in our quarterly reports on Form 10-Q or other subsequent filings with the United States Securities and Exchange Commission. All such forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update these statements other than as required by law.

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

For the three months ended

June 30,

 

For the six months ended

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Net revenue

 

$

1,062,112

 

$

1,020,548

 

$

2,060,287

 

$

1,996,318

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

732,108

 

 

686,603

 

 

1,402,579

 

 

1,343,683

Research and development

 

 

44,857

 

 

47,971

 

 

90,796

 

 

93,951

Selling, general and administrative

 

 

91,312

 

 

97,329

 

 

177,462

 

 

193,009

Amortization of intangible assets

 

 

54,563

 

 

36,805

 

 

95,337

 

 

74,172

Restructuring and other charges, net

 

 

21,259

 

 

12,897

 

 

27,258

 

 

26,630

Total operating costs and expenses

 

 

944,099

 

 

881,605

 

 

1,793,432

 

 

1,731,445

Operating income

 

 

118,013

 

 

138,943

 

 

266,855

 

 

264,873

Interest expense, net

 

 

(38,105)

 

 

(44,842)

 

 

(78,196)

 

 

(90,287)

Other, net

 

 

(10,924)

 

 

(39,240)

 

 

(9,532)

 

 

(89,696)

Income before taxes

 

 

68,984

 

 

54,861

 

 

179,127

 

 

84,890

Provision for income taxes

 

 

19,873

 

 

20,020

 

 

43,599

 

 

27,608

Net income

 

$

49,111

 

$

34,841

 

$

135,528

 

$

57,282

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.32

 

$

0.22

 

$

0.89

 

$

0.36

Diluted

 

$

0.32

 

$

0.22

 

$

0.88

 

$

0.36

 

 

 

 

 

 

 

 

 

Weighted-average ordinary shares outstanding:

 

 

 

 

 

 

Basic

 

 

152,700

 

 

156,477

 

 

152,609

 

 

156,950

Diluted

 

 

153,064

 

 

156,994

 

 

153,194

 

157,812

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

 

June 30,

2023

 

December 31,

2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

857,312

 

$

1,225,518

Accounts receivable, net of allowances

 

 

772,427

 

 

742,382

Inventories

 

 

660,082

 

 

644,875

Prepaid expenses and other current assets

 

 

186,807

 

 

162,268

Total current assets

 

 

2,476,628

 

 

2,775,043

Property, plant and equipment, net

 

 

858,760

 

 

840,819

Goodwill

 

 

3,861,872

 

 

3,911,224

Other intangible assets, net

 

 

961,180

 

 

999,722

Deferred income tax assets

 

 

93,782

 

 

100,539

Other assets

 

 

140,378

 

 

128,873

Total assets

 

$

8,392,600

 

$

8,756,220

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt, finance lease and other financing obligations

 

$

1,809

 

$

256,471

Accounts payable

 

 

523,968

 

 

531,572

Income taxes payable

 

 

31,920

 

 

43,987

Accrued expenses and other current liabilities

 

 

323,201

 

 

346,942

Total current liabilities

 

 

880,898

 

 

1,178,972

Deferred income tax liabilities

 

 

390,743

 

 

364,593

Pension and other post-retirement benefit obligations

 

 

38,960

 

 

36,086

Finance lease and other financing obligations, less current portion

 

 

23,771

 

 

24,742

Long-term debt, net

 

 

3,770,507

 

 

3,958,928

Other long-term liabilities

 

 

77,949

 

 

82,092

Total liabilities

 

 

5,182,828

 

 

5,645,413

Total shareholders' equity

 

 

3,209,772

 

 

3,110,807

Total liabilities and shareholders' equity

 

$

8,392,600

 

$

8,756,220

 

 

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

For the six months ended June 30,

 

 

 

2023

 

 

2022

Cash flows from operating activities:

 

 

 

 

Net income

 

$

135,528

 

$

57,282

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation

 

 

63,560

 

 

62,882

Amortization of debt issuance costs

 

 

3,421

 

 

3,433

Gain on sale of business

 

 

(5,877)

 

 

Share-based compensation

 

 

17,607

 

 

15,739

Loss on debt financing

 

 

857

 

 

Amortization of intangible assets

 

 

95,337

 

 

74,172

Deferred income taxes

 

 

13,449

 

 

(5,211)

Mark-to-market loss on equity investments, net

 

 

302

 

 

71,100

Unrealized loss on derivative instruments and other

 

 

14,674

 

 

20,669

Changes in operating assets and liabilities, net of effects of acquisitions

 

 

(117,836)

 

 

(143,178)

Acquisition-related compensation payments

 

 

(8,380)

 

 

(15,000)

Net cash provided by operating activities

 

 

212,642

 

 

141,888

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Acquisitions, net of cash received

 

 

 

 

(48,989)

Additions to property, plant and equipment and capitalized software

 

 

(84,444)

 

 

(74,069)

Investment in debt and equity securities

 

 

(390)

 

 

(6,878)

Proceeds from the sale of business, net of cash sold

 

 

19,000

 

 

Other

 

 

 

 

152

Net cash used in investing activities

 

 

(65,834)

 

 

(129,784)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of stock options and issuance of ordinary shares

 

 

5,346

 

 

14,577

Payment of employee restricted stock tax withholdings

 

 

(11,470)

 

 

(7,577)

Payments on debt

 

 

(448,390)

 

 

(5,664)

Dividends paid

 

 

(35,113)

 

 

(17,225)

Payments to repurchase ordinary shares

 

 

(25,076)

 

 

(144,279)

Payments of debt financing costs

 

 

(311)

 

 

(2,313)

Net cash used in financing activities

 

 

(515,014)

 

 

(162,481)

Net change in cash and cash equivalents

 

 

(368,206)

 

 

(150,377)

Cash and cash equivalents, beginning of period

 

 

1,225,518

 

 

1,708,955

Cash and cash equivalents, end of period

 

$

857,312

 

$

1,558,578

 

Revenue by Business, Geography, and End Market (Unaudited)

(percent of total revenue)

 

For the three months

ended June 30,

 

For the six months

ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Performance Sensing (1)

 

71.3 %

 

71.7 %

 

72.6 %

 

71.8 %

Sensing Solutions (1)

 

28.7 %

 

28.3 %

 

27.4 %

 

28.2 %

Total

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

(percent of total revenue)

 

For the three months

ended June 30,

 

For the six months

ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Americas

 

46.2 %

 

42.1 %

 

45.7 %

 

41.0 %

Europe

 

26.7 %

 

26.0 %

 

26.9 %

 

26.1 %

Asia/Rest of World

 

27.1 %

 

31.9 %

 

27.4 %

 

32.9 %

Total

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

(percent of total revenue)

 

For the three months

ended June 30,

 

For the six months

ended June 30,

 

 

2023

 

2022

 

2023

 

2022

Automotive (2)

 

50.8 %

 

50.6 %

 

51.7 %

 

51.5 %

Heavy vehicle and off-road (1)

 

21.4 %

 

22.1 %

 

21.8 %

 

21.3 %

Industrial (1)

 

17.4 %

 

13.5 %

 

16.2 %

 

13.4 %

Appliance and HVAC

 

4.8 %

 

5.7 %

 

4.8 %

 

5.8 %

Aerospace

 

4.4 %

 

3.8 %

 

4.4 %

 

3.6 %

All other

 

1.2 %

 

4.3 %

 

1.1 %

 

4.4 %

Total

 

100.0 %

 

100.0 %

 

100.0 %

 

100.0 %

 

(1) Effective April 1, 2023, we reorganized our structure to move material handling products from the Performance Sensing reportable segment to the Sensing Solutions reportable segment to align with new management reporting. Accordingly, material handling revenue, which has historically been presented in the HVOR end-market, is now presented in the Industrial end-market. Prior period amounts for revenue by business and end market have been reclassified above.

(2) Includes amounts reflected in the Sensing Solutions segment as follows: $9.6 million and $9.9 million of revenue in the three months ended June 30, 2023 and 2022, respectively, and $17.7 million and $19.2 million of revenue in the six months ended June 30, 2023 and 2022, respectively.

Market Outgrowth (Unaudited)

 

 

For the three months ended June 30, 2023

 

For the six months ended June 30, 2023

 

 

Reported

Growth

 

Organic

Growth

 

End Market

Growth

 

Reported

Growth

 

Organic

Growth

 

End Market

Growth

Sensata

 

4.1%

 

3.4%

 

2.5%

 

3.2%

 

4.0%

 

3.4%

Market outgrowth, or organic revenue growth less end market growth, can be lumpy during individual quarters due to timing of customer production launches, channel inventory, customer or platform mix, and changes in market share. For the last twelve months, market outgrowth is estimated to have been 535 bps and 735 bps since the beginning of 2020.

GAAP to Non-GAAP Reconciliations

The following unaudited tables provide a reconciliation of the difference between each of the non-GAAP financial measures referenced herein and the most directly comparable U.S. GAAP financial measure. Amounts presented in these tables may not appear to recalculate due to the effect of rounding.

Operating income and margin, income tax, net income, and earnings per share

 

($ in thousands, except per share amounts)

For the three months ended June 30, 2023

 

Operating

Income

 

Operating

Margin

 

Income

Taxes

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

118,013

 

11.1%

 

$

19,873

 

$

49,111

 

$

0.32

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other (1)

 

31,078

 

2.9%

 

 

(632)

 

 

30,446

 

 

0.20

Financing and other transaction costs

 

4,265

 

0.4%

 

 

(98)

 

 

3,923

 

 

0.03

Step-up depreciation and amortization (2)

 

53,326

 

5.0%

 

 

 

 

53,326

 

 

0.35

Deferred (gain)/loss on derivative instruments

 

(947)

 

(0.1%)

 

 

(1,090)

 

 

4,232

 

 

0.03

Amortization of debt issuance costs

 

 

—%

 

 

 

 

1,685

 

 

0.01

Deferred taxes and other tax related

 

 

—%

 

 

6,433

 

 

6,433

 

 

0.04

Total adjustments

 

87,722

 

8.3%

 

 

4,613

 

 

100,045

 

 

0.65

Adjusted (non-GAAP)

$

205,735

 

19.4%

 

$

15,260

 

$

149,156

 

$

0.97

 

(1) Includes $26.6 million of charges related to the exit of the Spear Marine Business in the second quarter of 2023. Refer to our Quarterly Report on Form 10-Q for additional information.

(2) Includes $13.5 million of accelerated amortization related to the exit of the Spear Marine Business in the second quarter of 2023.

($ in thousands, except per share amounts)

For the three months ended June 30, 2022

 

Operating Income

 

Operating Margin

 

Income Tax

 

Net Income

 

Diluted EPS

Reported (GAAP)

$

138,943

 

13.6%

 

$

20,020

 

$

34,841

 

$

0.22

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

3,888

 

0.4%

 

 

(36)

 

 

4,294

 

 

0.03

Financing and other transaction costs (1)

 

14,434

 

1.4%

 

 

(450)

 

 

28,277

 

 

0.18

Step-up depreciation and amortization

 

35,318

 

3.5%

 

 

 

 

35,318

 

 

0.22

Deferred loss on derivative instruments

 

1,190

 

0.1%

 

 

(4,013)

 

 

15,431

 

 

0.10

Amortization of debt issuance costs

 

 

—%

 

 

 

 

1,717

 

 

0.01

Deferred taxes and other tax related (2)

 

 

—%

 

 

9,669

 

 

9,669

 

 

0.06

Total adjustments

 

54,830

 

5.4%

 

 

5,170

 

 

94,706

 

 

0.60

Adjusted (non-GAAP)

$

193,773

 

19.0%

 

$

14,850

 

$

129,547

 

$

0.83

 

(1) Includes a mark-to-market loss on our investment in Quanergy Systems, Inc of $11.8 million, recorded in other, net. Also includes $12.8 million of expense related to compensation arrangements entered into concurrent with the closing of an acquisition, partially offset by $3.3 million of gains, which relate to changes in the fair value of acquisition-related contingent consideration amounts, each recorded in restructuring and other charges, net.

(2) Includes $11.4 million of current tax expense related to the repatriation of profit from certain Asian subsidiaries to their parent company in the Netherlands. The decision to repatriate these profits was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.

($ in thousands, except per share amounts)

For the six months ended June 30, 2023

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

266,855

 

13.0%

 

$

43,599

 

$

135,528

 

$

0.88

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other (1)

 

34,019

 

1.7%

 

 

(1,304)

 

 

32,715

 

 

0.21

Financing and other transaction costs

 

8,513

 

0.4%

 

 

2,776

 

 

11,530

 

 

0.08

Step-up depreciation and amortization (2)

 

92,456

 

4.5%

 

 

 

 

92,456

 

 

0.60

Deferred (gain)/loss on derivative instruments

 

(3,197)

 

(0.2%)

 

 

(237)

 

 

936

 

 

0.01

Amortization of debt issuance costs

 

 

—%

 

 

 

 

3,419

 

 

0.02

Deferred taxes and other tax related

 

 

—%

 

 

13,224

 

 

13,224

 

 

0.09

Total adjustments

 

131,791

 

6.4%

 

 

14,459

 

 

154,280

 

 

1.01

Adjusted (non-GAAP)

$

398,646

 

19.3%

 

$

29,140

 

$

289,808

 

$

1.89

 

(1) Includes $26.6 million of charges related to the exit of the Spear Marine Business in the second quarter of 2023. Refer to our Quarterly Report on Form 10-Q for additional information.

(2) Includes $13.5 million of accelerated amortization related to the exit of the Spear Marine Business in the second quarter of 2023.

($ in thousands, except per share amounts)

For the six months ended June 30, 2022

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

264,873

 

13.3%

 

$

27,608

 

$

57,282

 

$

0.36

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

8,037

 

0.4%

 

 

(136)

 

 

8,343

 

 

0.05

Financing and other transaction costs (1)

 

30,259

 

1.5%

 

 

(994)

 

 

102,837

 

 

0.65

Step-up depreciation and amortization

 

71,263

 

3.6%

 

 

 

 

71,263

 

 

0.45

Deferred loss on derivative instruments

 

1,842

 

0.1%

 

 

(2,202)

 

 

8,470

 

 

0.05

Amortization of debt issuance costs

 

 

—%

 

 

 

 

3,433

 

 

0.02

Deferred taxes and other tax related (2)

 

 

—%

 

 

1,334

 

 

1,334

 

 

0.01

Total adjustments

 

111,401

 

5.6%

 

 

(1,998)

 

 

195,680

 

 

1.24

Adjusted (non-GAAP)

$

376,274

 

18.8%

 

$

29,606

 

$

252,962

 

$

1.60

 

(1) Includes $71.7 million of mark-to-market losses on our investment in Quanergy Systems, Inc, presented in other, net of our condensed consolidated statements of operations. Also includes $31.1 million of expense related to compensation arrangements entered into concurrent with the closing of certain acquisitions, partially offset by gains of $9.4 million related to changes in the fair value of acquisition-related contingent consideration, each presented in restructuring and other charges, net of our condensed consolidated statements of operations.

(2) Includes $11.4 million of current tax expense related to the repatriation of profit from certain Asian subsidiaries to their parent companies in the Netherlands and the United States. The decision to repatriate these profits was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.

Non-GAAP adjustments by location in statements of operations

(in thousands)

For the three months

ended June 30,

 

 

For the six months

ended June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

Cost of revenue (1)

$

11,142

 

 

$

1,215

 

 

$

8,364

 

 

$

3,375

Selling, general and administrative

 

2,250

 

 

 

5,699

 

 

 

4,022

 

 

 

10,730

Amortization of intangible assets (2)

 

53,071

 

 

 

35,019

 

 

 

92,147

 

 

 

70,666

Restructuring and other charges, net (3)

 

21,259

 

 

 

12,897

 

 

 

27,258

 

 

 

26,630

Operating income adjustments

 

87,722

 

 

 

54,830

 

 

 

131,791

 

 

 

111,401

Interest expense, net

 

1,685

 

 

 

1,717

 

 

 

3,419

 

 

 

3,433

Other, net (4)

 

6,025

 

 

 

32,989

 

 

 

4,611

 

 

 

82,844

Provision for income taxes (5)

 

4,613

 

 

 

5,170

 

 

 

14,459

 

 

 

(1,998)

Net income adjustments

$

100,045

 

 

$

94,706

 

 

$

154,280

 

 

$

195,680

 

(1) The three and six months ended June 30, 2023 include a charge of $10.5 million to write down inventory related to the exit of the Spear Marine Business in the second quarter of 2023.

(2) The three and six months ended June 30, 2023 include accelerated amortization of $13.5 million related to intangible assets assigned to the Spear Marine Business.

(3) The three and six months ended June 30, 2023 include certain charges related to the exit of the Spear Marine Business and recorded in restructuring and other charges, net, including $1.2 million of severance costs, $1.7 million related to the write-down of property, plant, and equipment, $2.3 million related to the write-down of accounts receivables, and $9.1 million of other charges, including contract termination costs. The three and six months ended June 30, 2023 and 2022 include $3.3 million, $10.6 million, $12.8 million and $31.1 million, respectively, of expense related to compensation arrangements entered into concurrent with the closing of certain acquisitions. The six months ended June 30, 2022 also includes $9.4 million of gains related to changes in the fair value of acquisition-related contingent consideration amounts.

(4) The three and six months ended June 30, 2022 include a mark-to-market loss on our investment in Quanergy Systems, Inc of $11.8 million and $71.7 million, respectively.

(5) The three and six months ended June 30, 2022 include $11.4 million of current tax expense related to the repatriation of profit from certain Asian subsidiaries to their parent company in the Netherlands. The decision to repatriate these profits was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.

Free cash flow

 

 

For the three months ended

June 30,

 

For the six months ended

June 30,

($ in thousands)

 

 

2023

 

 

2022

 

% △

 

 

2023

 

 

2022

 

% △

Net cash provided by operating activities

 

$

115,754

 

$

94,533

 

22.4%

 

$

212,642

 

$

141,888

 

49.9%

Additions to property, plant and equipment and capitalized software

 

 

(47,562)

 

 

(38,358)

 

(24.0%)

 

 

(84,444)

 

 

(74,069)

 

(14.0%)

Free cash flow

 

$

68,192

 

$

56,175

 

21.4%

 

$

128,198

 

$

67,819

 

89.0%

 

Adjusted corporate and other expenses

 

 

For the three months ended June 30,

 

For the six months ended June 30,

(in thousands)

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Corporate and other expenses (GAAP)

 

$

(81,464)

 

$

(76,362)

 

$

(143,905)

 

$

(152,485)

Restructuring related and other

 

 

13,110

 

 

2,647

 

 

11,681

 

 

5,161

Financing and other transaction costs

 

 

974

 

 

2,778

 

 

3,593

 

 

6,505

Step-up depreciation and amortization

 

 

255

 

 

299

 

 

309

 

 

597

Deferred (gain)/loss on derivative instruments

 

 

(947)

 

 

1,190

 

 

(3,197)

 

 

1,842

Total adjustments

 

 

13,392

 

 

6,914

 

 

12,386

 

 

14,105

Adjusted corporate and other expenses (non-GAAP)

 

$

(68,072)

 

$

(69,448)

 

$

(131,519)

 

$

(138,380)

 

Adjusted EBITDA

 

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

(in thousands)

 

LTM

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Net income

 

$

388,931

 

$

49,111

 

$

34,841

 

$

135,528

 

$

57,282

Interest expense, net

 

 

166,728

 

 

38,105

 

 

44,842

 

 

78,196

 

 

90,287

Provision for income taxes

 

 

102,008

 

 

19,873

 

 

20,020

 

 

43,599

 

 

27,608

Depreciation expense

 

 

127,862

 

 

32,612

 

 

31,351

 

 

63,560

 

 

62,882

Amortization of intangible assets

 

 

174,952

 

 

54,563

 

 

36,805

 

 

95,337

 

 

74,172

EBITDA

 

 

960,481

 

 

194,264

 

 

167,859

 

 

416,220

 

 

312,231

Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

 

63,553

 

 

31,078

 

 

4,330

 

 

34,019

 

 

8,479

Financing and other transaction costs

 

 

(87,573)

 

 

4,021

 

 

28,727

 

 

8,754

 

 

103,831

Deferred (gain)/loss on derivative instruments

 

 

(7,622)

 

 

5,322

 

 

19,444

 

 

1,173

 

 

10,672

Adjusted EBITDA

 

$

928,839

 

$

234,685

 

$

220,360

 

$

460,166

 

$

435,213

 

Net debt and leverage

 

 

As of

($ in thousands)

 

June 30,

2023

 

December 31,

2022

Current portion of long-term debt, finance lease and other financing obligations

 

$

1,809

 

$

256,471

Finance lease and other financing obligations, less current portion

 

 

23,771

 

 

24,742

Long-term debt, net

 

 

3,770,507

 

 

3,958,928

Total debt, finance lease, and other financing obligations

 

 

3,796,087

 

 

4,240,141

Less: discount, net of premium

 

 

(2,355)

 

 

(3,360)

Less: deferred financing costs

 

 

(27,138)

 

 

(29,916)

Total gross indebtedness

 

 

3,825,580

 

 

4,273,417

Less: cash and cash equivalents

 

 

857,312

 

 

1,225,518

Net debt

 

$

2,968,268

 

$

3,047,899

 

 

 

 

 

Adjusted EBITDA (LTM)

 

$

928,839

 

$

903,886

Net leverage ratio

 

 

3.2

 

 

3.4

 

Guidance

 

For the three months ending September 30, 2023

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

140.1

 

$

153.0

 

$

74.1

 

$

83.9

 

$

0.47

 

$

0.56

Restructuring related and other

 

2.4

 

 

3.5

 

 

2.4

 

 

3.5

 

 

0.02

 

 

0.02

Financing and other transaction costs

 

2.5

 

 

3.5

 

 

2.5

 

 

3.5

 

 

0.02

 

 

0.02

Step-up depreciation and amortization

 

38.0

 

 

39.0

 

 

38.0

 

 

39.0

 

 

0.25

 

 

0.25

Deferred (gain)/loss on derivative instruments(1)

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

 

 

 

 

1.5

 

 

1.5

 

 

0.01

 

 

0.01

Deferred taxes and other tax related

 

 

 

 

 

10.5

 

 

11.6

 

 

0.07

 

 

0.08

Non-GAAP

$

183.0

 

$

199.0

 

$

129.0

 

$

143.0

 

$

0.84

 

$

0.94

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

 

153.4

 

 

153.4

 

(1) We are unable to predict movements in commodity prices and, therefore, the impact of mark-to-market adjustments on our commodity forward contracts to our projected operating results. In prior periods such adjustments have been significant to our reported GAAP earnings.

 

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