Sensata Technologies Holding plc Q1 FY2025 earnings call

Operational Performance: - Implemented standardized production system similar to Toyota's to ensure consistent low-cost component production. - Continued focus on inventory management with new initiative for integrated supply chain planning. - Reorganized procurement to allocate resources to supply development, enhancing operating resiliency. ### Capital Allocation: - Improved free cash flow conversion to 74% in Q1, used $100 million to repurchase 3.5 million shares. - Committed to returning cash to shareholders via repurchases, reducing net leverage, and maintaining dividend. ### Returning to Growth: - Product innovation in areas like leak detection sensing in HVAC and ICE/electrification technologies. - Won significant business in Japan with Mazda and in China with local EV OEMs and tiers serving the global market. - Aerospace business showing stable growth with strong backlog.

Sensing Solutions: Delivered $261 million in revenue in Q1 2025, up 3% year-over-year (adjusted for divested products). Operating margin was 29.2% in the quarter, compared to 28% in Q1 2024. Performance Sensing: Reported revenue of $650 million in Q1 2025, a decrease of about 9% year-over-year (adjusted for divested products). Adjusted operating margin was 22% in Q1, compared to 23.7% in Q1 2024.

Second Quarter: - Expect revenue of $910 million to $940 million, including ~$20 million in tariff passed through revenue. - Adjusted operating income expected in range of $169 million to $177 million. - Adjusted operating margin index range of 18.6% to 18.8% including tariffs; 19% to 19.2% excluding tariffs. ### Second Half: - Anticipates automotive production cuts to impact revenue by ~$20 million to $30 million per quarter in Q3 and Q4. - Confident in expanding pre-tariff adjusted operating income margins by ~20 basis points per quarter in the second half.

• Tariff impacts from Mexico (80% of North American production from Mexico, 20% not USMCA qualified), China-US escalation (1-2% of total revenue subject to tariffs), and reciprocal tariffs. - Macroeconomic volatility affecting automotive production schedules. - Ransomware incident in early April temporarily impacted operations, but resolved with no material financial impact.

Q: Wamsi Mohan asked about the $20 million to $30 million per quarter revenue impact in the second half and if Sensing Solutions growth was due to tariff pull forward.

A: Brian Roberts said it's 100% straight production cuts in North America, and Stephan von Schuckmann noted Sensing Solutions growth was from gas sensing leak detection product range.

Q: Mark Delaney inquired about the size of wins in Asia.

A: Stephan von Schuckmann stated wins in China and Japan are small to medium-sized but growing step by step.

Q: Joe Giordano asked about margin visibility despite auto headwinds.

A: Brian Roberts said it's from operational productivity, leveraging restructuring charges and efficiency initiatives.

Q: Joe Spak asked about tariff compensation progress.

A: Stephan von Schuckmann said 95% of gross tariff exposure in auto and HVR business is mitigated, and Brian Roberts noted $1 million of exposure still to cover.

Q: Christopher Glynn asked about aerospace revenue pivot.

A: Brian Roberts said aerospace has strong backlog and steady growth, with no pivot expected.