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Sensata Technologies Reports Third Quarter 2022 Financial Results

Year to Date New Business Awards in 2022 Have Already Surpassed Previous Record Full Year Awards Achieved in 2021

Sensata Technologies (NYSE: ST), a global industrial technology company and leading provider of sensor-rich solutions that create insights for customers, today announced financial results for its third quarter ended September 30, 2022.

"Sensata delivered solid third quarter financial results due to strong market outgrowth of 650 basis points, improving markets, and growth from M&A despite increased foreign exchange and inventory headwinds compared to the prior-year quarter,” said Jeff Cote, CEO and President of Sensata. “We continued to invest in growth and improve our execution during the quarter and margins rose sequentially toward our medium-term target level."

He continued: “Importantly, the strong underlying megatrends of electrification and insights continue to propel our new business win momentum. In the first nine months of 2022 we have already surpassed our record full year new business awards achieved last year.”

Operating results for the third quarter of 2022 compared to the third quarter of 2021 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 $1,018.3 million, an increase of $67.2 million, or 7.1%, compared to $951.0 million in the third quarter of 2021.
  • Revenue increased 7.1% on an organic basis, which excludes a decrease of (3.3%) from foreign currency exchange rates and an increase of 3.3% from acquisitions, net of divestitures, each versus the prior-year period.

Operating income:

  • Operating income was $252.9 million, or 24.8% of revenue, an increase of $91.6 million, or 56.8%, compared to operating income of $161.3 million, or 17.0% of revenue, in the third quarter of 2021.
  • Adjusted operating income was $197.3 million, or 19.4% of revenue, a decrease of $(3.7) million, or (1.8%), compared to adjusted operating income of $201.0 million, or 21.1% of revenue, in the third quarter of 2021.

Earnings per share:

  • Earnings per share was $0.91, an increase of $0.38, or 71.7%, compared to earnings per share of $0.53 in the third quarter of 2021.
  • Adjusted earnings per share was $0.85, a decrease of $(0.02), or (2.3%), compared to adjusted earnings per share of $0.87 in the third quarter of 2021.
  • Changes in foreign currency exchange rates decreased Sensata's adjusted earnings per share by $(0.08) in the third quarter of 2022 compared to the prior-year period.

Sensata generated $93.8 million of operating cash flow in the third quarter of 2022 compared to $125.3 million in the prior-year period. The Company's free cash flow totaled $57.5 million in the third quarter of 2022 compared to $88.5 million in the prior-year period.

During the third quarter of 2022, Sensata repurchased approximately 2.3 million ordinary shares for total consideration of $97.6 million as part of its existing share repurchase program. The Company also returned approximately $17.0 million to shareholders through its quarterly dividend paid on August 24, 2022.

Operating results for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 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 $3,014.6 million, an increase of $128.4 million, or 4.4%, compared to $2,886.2 million in the nine months ended September 30, 2021.
  • Revenue increased 3.1% on an organic basis, which excludes a decrease of (2.1%) from foreign currency exchange rates and an increase of 3.4% from acquisitions, net of divestitures, each versus the prior-year period.

Operating income:

  • Operating income was $517.8 million, or 17.2% of revenue, an increase of $34.2 million, or 7.1%, compared to operating income of $483.5 million, or 16.8% of revenue, in the nine months ended September 30, 2021.
  • Adjusted operating income was $573.6 million, or 19.0% of revenue, a decrease of $(34.8) million, or (5.7%), compared to adjusted operating income of $608.4 million, or 21.1% of revenue, in the nine months ended September 30, 2021.

Earnings per share:

  • Earnings per share was $1.26, a decrease of $(0.32), or (20.3%), compared to earnings per share of $1.58 in the nine months ended September 30, 2021.
  • Adjusted earnings per share was $2.45, a decrease of $(0.23), or (8.6%), compared to adjusted earnings per share of $2.68 in the nine months ended September 30, 2021.
  • Changes in foreign currency exchange rates decreased Sensata's adjusted earnings per share by $(0.10) in the nine months ended September 30, 2022 compared to the prior-year period.

Sensata generated $235.7 million of operating cash flow in the nine months ended September 30, 2022, compared to $393.2 million in the prior-year period. The Company's free cash flow totaled $125.3 million in the nine months ended September 30, 2022 compared to $292.8 million in the prior-year period.

During the nine months ended September 30, 2022, Sensata repurchased approximately 5.2 million ordinary shares for total consideration of $241.9 million as part of its existing share repurchase program.

Quarterly Dividend

Sensata recently announced a quarterly dividend of $0.11 per share, payable on November 23, 2022 to shareholders of record as of November 9, 2022.

Segment Performance

 

 

 

For the three months ended

September 30,

 

For the nine months ended

September 30,

$ in 000s

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Performance Sensing

 

 

 

 

 

 

 

 

Revenue

 

$

754,527

 

 

$

706,466

 

 

$

2,219,106

 

 

$

2,162,830

 

Operating income

 

$

188,560

 

 

$

193,742

 

 

$

554,717

 

 

$

591,650

 

% of Performance Sensing revenue

 

 

25.0

%

 

 

27.4

%

 

 

25.0

%

 

 

27.4

%

 

 

 

 

 

 

 

 

 

Sensing Solutions

 

 

 

 

 

 

 

 

Revenue

 

$

263,741

 

 

$

244,555

 

 

$

795,480

 

 

$

723,379

 

Operating income

 

$

73,622

 

 

$

75,262

 

 

$

225,625

 

 

$

218,705

 

% of Sensing Solutions revenue

 

 

27.9

%

 

 

30.8

%

 

 

28.4

%

 

 

30.2

%

Guidance

"Sensata delivered solid financial results during the third quarter, revenue grew 7.1% despite a larger than expected 10.0% headwind from inventory movements and a 3.3% headwind from FX," said Paul Vasington, EVP and CFO of Sensata. “Adjusted operating margins improved sequentially to 19.4% as pricing improved in response to increased inflationary cost pressures and we are taking measures to control costs in the face of uncertain future market conditions. For the fourth quarter of 2022, we expect revenue of $980 to $1,020 million and adjusted EPS of $0.85 to $0.91."

Q4 2022 Guidance

 

 

 

$ in millions, except EPS

Q4-22 Guidance

Q4 21

Y/Y Change

Revenue

$980 - $1,020

$

934.6

5% - 9%

organic growth

 

 

7% - 11%

Adjusted Operating Income

$193 - $205

$

197.6

(2%) - 4%

Adjusted Net Income

$130 - $140

$

139.3

(7%) - 1%

Adjusted EPS

$0.85 - $0.91

$

0.87

(2%) - 5%

Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will decrease revenue by approximately $(41) million at the midpoint and decrease adjusted EPS by approximately $(0.11) at the midpoint in the fourth quarter of 2022.

Conference Call and Webcast

Sensata will conduct a conference call today at 8:00 a.m. Eastern Time to discuss its third quarter of 2022 financial results and its outlook for the fourth quarter of 2022. The dial-in numbers for the call are 1-844-784-1726 or 1-412-380-7411. Callers should reference the "Sensata Q3 2022 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 November 1, 2022. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 1743715.

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 more than 21,000 employees and operations in 13 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 and measured on either a reported, constant currency, or an organic basis, the latter of which excludes the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s) and the effect of foreign currency exchange rate differences between the comparative 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 described 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 described 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, (3) deferred gain or loss on derivative instruments, and (4) step-up inventory amortization.

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.

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 September 30,

 

For the nine months

ended September 30,

 

 

2022

 

2021

 

2022

 

2021

Net revenue

 

$

1,018,268

 

 

$

951,021

 

 

$

3,014,586

 

 

$

2,886,209

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

694,535

 

 

 

628,922

 

 

 

2,038,218

 

 

 

1,922,556

 

Research and development

 

 

47,947

 

 

 

40,060

 

 

 

141,898

 

 

 

118,929

 

Selling, general and administrative

 

 

90,013

 

 

 

85,784

 

 

 

283,022

 

 

 

249,728

 

Amortization of intangible assets

 

 

40,313

 

 

 

34,571

 

 

 

114,485

 

 

 

101,492

 

Restructuring and other charges, net

 

 

(107,441

)

 

 

345

 

 

 

(80,811

)

 

 

9,956

 

Total operating costs and expenses

 

 

765,367

 

 

 

789,682

 

 

 

2,496,812

 

 

 

2,402,661

 

Operating income

 

 

252,901

 

 

 

161,339

 

 

 

517,774

 

 

 

483,548

 

Interest expense, net

 

 

(44,856

)

 

 

(45,137

)

 

 

(135,143

)

 

 

(134,393

)

Other, net

 

 

(21,371

)

 

 

(9,403

)

 

 

(111,067

)

 

 

(47,788

)

Income before taxes

 

 

186,674

 

 

 

106,799

 

 

 

271,564

 

 

 

301,367

 

Provision for income taxes

 

 

46,421

 

 

 

21,840

 

 

 

74,029

 

 

 

49,759

 

Net Income

 

 

140,253

 

 

 

84,959

 

 

 

197,535

 

 

 

251,608

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.91

 

 

$

0.54

 

 

$

1.27

 

 

$

1.59

 

Diluted

 

$

0.91

 

 

$

0.53

 

 

$

1.26

 

 

$

1.58

 

 

 

 

 

 

 

 

 

 

Weighted-average ordinary shares outstanding:

 

 

 

 

 

 

Basic

 

 

154,474

 

 

 

158,394

 

 

 

156,124

 

 

 

158,122

 

Diluted

 

 

154,943

 

 

 

159,479

 

 

 

156,855

 

 

 

159,351

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

September 30,

2022

 

December 31,

2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,103,916

 

$

1,708,955

Accounts receivable, net of allowances

 

 

722,934

 

 

653,438

Inventories

 

 

675,862

 

 

588,231

Prepaid expenses and other current assets

 

 

197,487

 

 

126,370

Total current assets

 

 

2,700,199

 

 

3,076,994

Property, plant and equipment, net

 

 

831,587

 

 

820,933

Goodwill

 

 

3,847,450

 

 

3,502,063

Other intangible assets, net

 

 

1,103,256

 

 

946,731

Deferred income tax assets

 

 

100,014

 

 

105,028

Other assets

 

 

130,110

 

 

162,017

Total assets

 

$

8,712,616

 

$

8,613,766

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

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

 

$

6,536

 

$

6,833

Accounts payable

 

 

501,301

 

 

459,093

Income taxes payable

 

 

42,732

 

 

26,517

Accrued expenses and other current liabilities

 

 

355,405

 

 

343,816

Total current liabilities

 

 

905,974

 

 

836,259

Deferred income tax liabilities

 

 

392,222

 

 

339,273

Pension and other post-retirement benefit obligations

 

 

35,445

 

 

38,758

Finance lease and other financing obligations, less current portion

 

 

25,180

 

 

26,564

Long-term debt, net

 

 

4,208,670

 

 

4,214,946

Other long-term liabilities

 

 

75,807

 

 

63,232

Total liabilities

 

 

5,643,298

 

 

5,519,032

Total shareholders' equity

 

 

3,069,318

 

 

3,094,734

Total liabilities and shareholders' equity

 

$

8,712,616

 

$

8,613,766

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

For the nine months ended

September 30,

 

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

197,535

 

 

$

251,608

 

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

 

 

 

 

Depreciation

 

 

94,562

 

 

 

94,361

 

Amortization of debt issuance costs

 

 

5,256

 

 

 

5,142

 

Gain on sale of business

 

 

(135,112

)

 

 

 

Share-based compensation

 

 

24,180

 

 

 

18,871

 

Loss on debt financing

 

 

5,468

 

 

 

30,066

 

Amortization of intangible assets

 

 

114,485

 

 

 

101,492

 

Deferred income taxes

 

 

3,313

 

 

 

(2,070

)

Acquisition-related compensation payments

 

 

(23,500

)

 

 

(7,000

)

Mark-to-market loss on equity investments, net

 

 

75,135

 

 

 

 

Unrealized loss on derivative instruments and other

 

 

40,702

 

 

 

17,359

 

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

 

 

(166,291

)

 

 

(116,603

)

Net cash provided by operating activities

 

 

235,733

 

 

 

393,226

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Acquisitions, net of cash received

 

 

(632,683

)

 

 

(414,959

)

Additions to property, plant and equipment and capitalized software

 

 

(110,424

)

 

 

(100,410

)

Investment in debt and equity securities

 

 

(7,773

)

 

 

(4,655

)

Proceeds from the sale of business, net of cash sold

 

 

198,841

 

 

 

 

Other

 

 

152

 

 

 

3,919

 

Net cash used in investing activities

 

 

(551,887

)

 

 

(516,105

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of stock options and issuance of ordinary shares

 

 

16,460

 

 

 

20,016

 

Payment of employee restricted stock tax withholdings

 

 

(7,834

)

 

 

(8,987

)

Proceeds from borrowings on debt

 

 

500,000

 

 

 

1,001,875

 

Payments on debt

 

 

(507,968

)

 

 

(760,768

)

Dividends paid

 

 

(34,271

)

 

 

 

Payments to repurchase ordinary shares

 

 

(241,903

)

 

 

 

Payments of debt financing costs

 

 

(13,369

)

 

 

(33,093

)

Net cash (used in)/provided by financing activities

 

 

(288,885

)

 

 

219,043

 

Net change in cash and cash equivalents

 

 

(605,039

)

 

 

96,164

 

Cash and cash equivalents, beginning of year

 

 

1,708,955

 

 

 

1,861,980

 

Cash and cash equivalents, end of period

 

$

1,103,916

 

 

$

1,958,144

 

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

 

(percent of total revenue)

 

For the three months

ended September 30,

 

For the nine months

ended September 30,

 

 

2022

 

2021

 

2022

 

2021

Performance Sensing

 

74.1

%

 

74.3

%

 

73.6

%

 

74.9

%

Sensing Solutions

 

25.9

%

 

25.7

%

 

26.4

%

 

25.1

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(percent of total revenue)

 

For the three months

ended September 30,

 

For the nine months

ended September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Americas

 

43.8

%

 

39.0

%

 

41.9

%

 

37.8

%

Europe

 

25.9

%

 

24.7

%

 

26.1

%

 

26.8

%

Asia/Rest of World

 

30.3

%

 

36.3

%

 

32.0

%

 

35.4

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(percent of total revenue)

 

For the three months

ended September 30,

 

For the nine months

ended September 30,

 

 

2022

 

2021

 

2022

 

2021

Automotive (1)

 

52.4

%

 

52.3

%

 

51.8

%

 

54.6

%

Heavy vehicle and off-road

 

22.5

%

 

23.0

%

 

22.7

%

 

21.5

%

Industrial

 

14.5

%

 

11.2

%

 

12.8

%

 

10.5

%

Appliance and HVAC

 

5.1

%

 

6.6

%

 

5.6

%

 

6.4

%

Aerospace

 

3.7

%

 

3.6

%

 

3.6

%

 

3.5

%

All other

 

1.8

%

 

3.3

%

 

3.5

%

 

3.5

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(1) Includes amounts reflected in the Sensing Solutions segment as follows: $8.6 million and $9.5 million of revenue in the three months ended September 30, 2022 and 2021, respectively, and $27.8 million and $33.0 million of revenue in the nine months ended September 30, 2022 and 2021, respectively.

Market Outgrowth (Unaudited)

 

 

 

For the three months

ended September 30, 2022

 

For the nine months

ended September 30, 2022

 

 

Reported

Growth

 

Organic

Growth

 

End

Market

Growth(1)

 

Reported

Growth

 

Organic

Growth

 

End

Market

Growth(1)

Sensata

 

7.1

%

 

7.1

%

 

10.6

%

 

4.4

%

 

3.1

%

 

1.3

%

(1) End Market Growth excludes (10.0%) and (5.2%) inventory movements between the three and nine months ended September 30, 2021 and September 30, 2022, respectively.

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 September 30, 2022

 

Operating

Income

 

Operating

Margin

 

Income

Taxes

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

252,901

 

 

24.8

%

 

$

46,421

 

 

$

140,253

 

 

$

0.91

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

16,394

 

 

1.6

%

 

 

(427

)

 

 

15,967

 

 

 

0.10

 

Financing and other transaction costs (1)

 

(110,883

)

 

(10.9

%)

 

 

3,761

 

 

 

(97,619

)

 

 

(0.63

)

Step-up depreciation and amortization

 

39,001

 

 

3.8

%

 

 

 

 

 

39,001

 

 

 

0.25

 

Deferred (gain)/loss on derivative instruments

 

(102

)

 

0.0

%

 

 

(1,170

)

 

 

4,501

 

 

 

0.03

 

Amortization of debt issuance costs

 

 

 

%

 

 

 

 

 

1,823

 

 

 

0.01

 

Deferred taxes and other tax related

 

 

 

%

 

 

27,121

 

 

 

27,121

 

 

 

0.18

 

Total adjustments

 

(55,590

)

 

(5.5

%)

 

 

29,285

 

 

 

(9,206

)

 

 

(0.06

)

Adjusted (non-GAAP)

$

197,311

 

 

19.4

%

 

$

17,136

 

 

$

131,047

 

 

$

0.85

 

(1) Includes a gain of $135.1 million on the sale of the Qinex Business in the third quarter of 2022, partially offset by $7.4 million of expense related to compensation arrangements entered into concurrent with the closing of various acquisitions and $13.5 million of transaction-related charges to sell the Qinex Business, each of which were recorded in restructuring and other charges, net. Also includes a $5.5 million loss related to the redemption of the 4.875% Senior Notes in the third quarter of 2022 and $4.0 million of mark-to-market losses on our equity investments, primarily our investment in Quanergy Systems, Inc, each of which is recorded in other, net. Refer to our Quarterly Report on Form 10-Q for additional information.

($ in thousands, except per share amounts)

For the three months ended September 30, 2021

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

161,339

 

 

17.0

%

 

$

21,840

 

 

$

84,959

 

$

0.53

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

5,426

 

 

0.6

%

 

 

(47

)

 

 

5,379

 

 

0.03

Financing and other transaction costs

 

(972

)

 

(0.1

%)

 

 

3,546

 

 

 

1,723

 

 

0.01

Step-up depreciation and amortization

 

32,656

 

 

3.4

%

 

 

 

 

 

32,656

 

 

0.20

Deferred loss on derivative instruments

 

2,567

 

 

0.3

%

 

 

1,100

 

 

 

10,162

 

 

0.06

Amortization of debt issuance costs

 

 

 

%

 

 

 

 

 

1,716

 

 

0.01

Deferred taxes and other tax related

 

 

 

%

 

 

1,971

 

 

 

1,971

 

 

0.01

Total adjustments

 

39,677

 

 

4.2

%

 

 

6,570

 

 

 

53,607

 

 

0.34

Adjusted (non-GAAP)

$

201,016

 

 

21.1

%

 

$

15,270

 

 

$

138,566

 

$

0.87

($ in thousands, except per share amounts)

For the nine months ended September 30, 2022

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

517,774

 

 

17.2

%

 

$

74,029

 

 

$

197,535

 

$

1.26

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

24,431

 

 

0.8

%

 

 

(563

)

 

 

24,310

 

 

0.15

Financing and other transaction costs (1)

 

(80,624

)

 

(2.7

%)

 

 

2,767

 

 

 

5,218

 

 

0.03

Step-up depreciation and amortization

 

110,264

 

 

3.7

%

 

 

 

 

 

110,264

 

 

0.70

Deferred loss on derivative instruments

 

1,740

 

 

0.1

%

 

 

(3,372

)

 

 

12,971

 

 

0.08

Amortization of debt issuance costs

 

 

 

%

 

 

 

 

 

5,256

 

 

0.03

Deferred taxes and other tax related (2)

 

 

 

%

 

 

28,455

 

 

 

28,455

 

 

0.18

Total adjustments

 

55,811

 

 

1.9

%

 

 

27,287

 

 

 

186,474

 

 

1.19

Adjusted (non-GAAP)

$

573,585

 

 

19.0

%

 

$

46,742

 

 

$

384,009

 

$

2.45

(1) Includes gains on the sale of the Qinex Business in the third quarter of 2022 and changes in the fair value of acquisition-related contingent consideration amounts of $135.1 million and $9.4 million, respectively, partially offset by $38.4 million of expense related to compensation arrangements entered into concurrent with the closing of an acquisition and $15.6 million of transaction-related charges to sell the Qinex Business, each of which were recorded in restructuring and other charges, net. Also includes $75.1 million of mark-to-market losses on our equity investments, primarily our investment in Quanergy Systems, Inc., recorded in other, net. Refer to our Quarterly Report on Form 10-Q for additional information.

(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.

($ in thousands, except per share amounts)

For the nine months ended September 30, 2021

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

483,548

 

16.8

%

 

$

49,759

 

 

$

251,608

 

$

1.58

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

15,689

 

0.5

%

 

 

(333

)

 

 

19,596

 

 

0.12

Financing and other transaction costs (1)

 

6,143

 

0.2

%

 

 

 

 

 

35,795

 

 

0.22

Step-up depreciation and amortization

 

96,036

 

3.3

%

 

 

 

 

 

96,036

 

 

0.60

Deferred loss on derivative instruments

 

7,002

 

0.2

%

 

 

 

 

 

13,464

 

 

0.08

Amortization of debt issuance costs

 

 

%

 

 

 

 

 

5,142

 

 

0.03

Deferred taxes and other tax related (2)

 

 

%

 

 

5,893

 

 

 

5,893

 

 

0.04

Total adjustments

 

124,870

 

4.3

%

 

 

5,560

 

 

 

175,926

 

 

1.10

Adjusted (non-GAAP)

$

608,418

 

21.1

%

 

$

44,199

 

 

$

427,534

 

$

2.68

(1) Includes a $30.1 million loss recognized in the first quarter of 2021 related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125%. The loss primarily includes the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs. The loss is presented in other, net in our condensed consolidated statement of operations. Refer to our Quarterly Report on Form 10-Q for additional information.

(2) Includes $10.9 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.

Non-GAAP adjustments by location in statements of operations

 

(in thousands)

For the three months

ended September 30,

 

For the nine months

ended September 30,

 

 

2022

 

 

 

2021

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

Cost of revenue

$

8,687

 

 

$

4,012

 

$

12,062

 

 

$

9,465

Selling, general and administrative

 

4,461

 

 

 

3,023

 

 

15,191

 

 

 

10,664

Amortization of intangible assets

 

38,703

 

 

 

32,297

 

 

109,369

 

 

 

94,785

Restructuring and other charges, net (1)

 

(107,441

)

 

 

345

 

 

(80,811

)

 

 

9,956

Operating income adjustments

 

(55,590

)

 

 

39,677

 

 

55,811

 

 

 

124,870

Interest expense, net

 

1,823

 

 

 

1,716

 

 

5,256

 

 

 

5,142

Other, net (2)

 

15,276

 

 

 

5,644

 

 

98,120

 

 

 

40,354

Provision for income taxes (3)

 

29,285

 

 

 

6,570

 

 

27,287

 

 

 

5,560

Net income adjustments

$

(9,206

)

 

$

53,607

 

$

186,474

 

 

$

175,926

(1) The three and nine months ended September 30, 2022 include a gain of $135.1 million on the sale of the Qinex Business. This gain was partially offset in the three and nine months ended September 30, 2022 by $13.5 million and $15.6 million, respectively, of transaction-related charges to sell the Qinex Business and $7.4 million and $38.4 million, respectively, of expense related to compensation arrangements entered into concurrent with the closing of certain acquisitions. The nine months ended September 30, 2022 also includes $9.4 million of gains related to changes in the fair value of acquisition-related contingent consideration amounts.

(2) The three and nine months ended September 30, 2022 include a mark-to-market loss on our equity investments, primarily in Quanergy Systems, Inc, of $4.0 million and $75.1 million, respectively. Refer to our Quarterly Report on Form 10-Q for additional information. A $5.5 million loss related to the redemption of the 4.875% Senior Notes in the third quarter of 2022 is included in the three and nine months ended September 30, 2022 and a $30.1 million loss recognized in the first quarter of 2021 related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125% is included in the nine months ended September 30, 2021.

(3) Includes 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. This includes $11.4 million in the nine months ended September 30, 2022 and $10.9 million in the nine months ended September 30, 2021.

Free cash flow

($ in thousands)

Three months ended September 30,

 

Nine months ended September 30,

 

 

2022

 

 

 

2021

 

 

% △

 

 

2022

 

 

 

2021

 

 

% △

Net cash provided by operating activities

$

93,845

 

 

$

125,295

 

 

(25.1

%)

 

$

235,733

 

 

$

393,226

 

 

(40.1

%)

Additions to property, plant and equipment and capitalized software

 

(36,355

)

 

 

(36,838

)

 

1.3

%

 

 

(110,424

)

 

 

(100,410

)

 

(10.0

%)

Free cash flow

$

57,490

 

 

$

88,457

 

 

(35.0

%)

 

$

125,309

 

 

$

292,816

 

 

(57.2

%)

Adjusted EBITDA

 

 

 

 

For the three months

ended September 30,

 

For the nine months

ended September 30,

(in thousands)

 

LTM

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

2021

Net income

 

$

309,507

 

$

140,253

 

 

$

84,959

 

 

$

197,535

 

$

251,608

Interest expense, net

 

 

180,041

 

 

44,856

 

 

 

45,137

 

 

 

135,143

 

 

134,393

Provision for income taxes

 

 

74,607

 

 

46,421

 

 

 

21,840

 

 

 

74,029

 

 

49,759

Depreciation expense

 

 

125,160

 

 

31,680

 

 

 

31,528

 

 

 

94,562

 

 

94,361

Amortization of intangible assets

 

 

147,122

 

 

40,313

 

 

 

34,571

 

 

 

114,485

 

 

101,492

EBITDA

 

 

836,437

 

 

303,523

 

 

 

218,035

 

 

 

615,754

 

 

631,613

Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

 

29,800

 

 

16,394

 

 

 

4,340

 

 

 

24,873

 

 

18,717

Financing and other transaction costs

 

 

7,698

 

 

(101,380

)

 

 

(1,823

)

 

 

2,451

 

 

35,795

Deferred loss on derivative instruments

 

 

14,173

 

 

5,671

 

 

 

9,062

 

 

 

16,343

 

 

13,464

Adjusted EBITDA

 

$

888,108

 

$

224,208

 

 

$

229,614

 

 

$

659,421

 

$

699,589

Net debt and leverage

 

 

 

As of

($ in thousands)

 

September 30,

2022

 

December 31,

2021

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

 

$

6,536

 

 

$

6,833

 

Finance lease and other financing obligations, less current portion

 

 

25,180

 

 

 

26,564

 

Long-term debt, net

 

 

4,208,670

 

 

 

4,214,946

 

Total debt, finance lease, and other financing obligations

 

 

4,240,386

 

 

 

4,248,343

 

Less: discount, net of premium

 

 

(3,740

)

 

 

(5,207

)

Less: deferred financing costs

 

 

(30,952

)

 

 

(26,682

)

Total gross indebtedness

 

 

4,275,078

 

 

 

4,280,232

 

Less: Cash and cash equivalents

 

 

1,103,916

 

 

 

1,708,955

 

Net debt

 

$

3,171,162

 

 

$

2,571,277

 

 

 

 

 

 

Adjusted EBITDA (LTM)

 

$

888,108

 

 

$

928,276

 

Net leverage ratio

 

 

3.6

 

 

 

2.8

 

Guidance

 

 

Three months ending December 31, 2022

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

141.0

 

$

151.0

 

$

67.0

 

$

74.0

 

$

0.44

 

$

0.48

Restructuring related and other

 

5.0

 

 

6.0

 

 

5.0

 

 

6.0

 

 

0.03

 

 

0.04

Financing and other transaction costs(1)

 

9.0

 

 

9.0

 

 

9.0

 

 

9.0

 

 

0.06

 

 

0.06

Step-up depreciation and amortization(1)

 

38.0

 

 

39.0

 

 

38.0

 

 

39.0

 

 

0.25

 

 

0.25

Deferred (gain)/loss on derivative instruments(2)

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

 

 

 

 

2.0

 

 

2.0

 

 

0.01

 

 

0.01

Deferred taxes and other tax related

 

 

 

 

 

9.0

 

 

10.0

 

 

0.06

 

 

0.07

Non-GAAP

$

193.0

 

$

205.0

 

$

130.0

 

$

140.0

 

$

0.85

 

$

0.91

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

 

153.6

 

 

153.6

(1) Amounts do not contemplate the effects of future acquisitions, divestitures, or financing transactions that occur beyond our most recent fiscal period end.

(2) 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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