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Sensata Technologies Reports Second Quarter 2022 Financial Results

Achieves Record Quarterly Revenue

Awarded Largest Single Design Win in Company's History

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 second quarter ended June 30, 2022.

"Sensata delivered record revenue in the second quarter, with results in line with guidance despite significant market, supply chain, and foreign currency headwinds. Sensata’s organic revenue growth outpaced underlying markets by 650 basis points and we delivered growth from acquisitions of 280 basis points, offsetting end market declines compared to the prior-year quarter,” said Jeff Cote, CEO and President of Sensata. “In addition, during the quarter the Company was awarded its largest ever design win for a new electric vehicle battery disconnect system for a major North American OEM, further demonstrating Sensata’s ability to capitalize on our electrification strategy to grow through new product design and new market opportunities.”

Operating results for the second quarter of 2022 compared to the second 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 a record $1,020.5 million, an increase of $27.9 million, or 2.8%, compared to $992.7 million in the second quarter of 2021.
  • Revenue increased 2.2% on an organic basis, which excludes a decrease of (2.2%) from foreign currency exchange rates and an increase of 2.8% from acquisitions, each versus the prior-year period.

Operating income:

  • Operating income was $138.9 million, or 13.6% of revenue, a decrease of $(25.8) million, or (15.7%), compared to operating income of $164.8 million, or 16.6% of revenue, in the second quarter of 2021.
  • Adjusted operating income was $193.8 million, or 19.0% of revenue, a decrease of $(15.5) million, or (7.4%), compared to adjusted operating income of $209.3 million, or 21.1% of revenue, in the second quarter of 2021.

Earnings per share:

  • Earnings per share was $0.22, a decrease of $(0.49), or (69.0%), compared to earnings per share of $0.71 in the second quarter of 2021.
  • Adjusted earnings per share was $0.83, a decrease of $(0.12), or (12.6%), compared to adjusted earnings per share of $0.95 in the second quarter of 2021.
  • Changes in foreign currency exchange rates decreased Sensata's adjusted earnings per share by $(0.05) in the second quarter of 2022 compared to the prior-year period.

Sensata generated $94.5 million of operating cash flow in the second quarter of 2022 compared to $163.4 million in the prior-year period. The Company's free cash flow totaled $56.2 million in the second quarter of 2022 compared to $127.0 million in the prior-year period.

During the second quarter of 2022, Sensata repurchased nearly 1.7 million ordinary shares for total consideration of $77.0 million as part of its existing share repurchase program. The Company also returned approximately $17.2 million to shareholders through its first quarterly dividend paid on May 25, 2022.

Operating results for the six months ended June 30, 2022 compared to the six months ended June 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 $1,996.3 million, an increase of $61.1 million, or 3.2%, compared to $1,935.2 million in the six months ended June 30, 2021.
  • Revenue increased 1.1% on an organic basis, which excludes a decrease of (1.3%) from foreign currency exchange rates and an increase of 3.4% from acquisitions, each versus the prior-year period.

Operating income:

  • Operating income was $264.9 million, or 13.3% of revenue, a decrease of $(57.3) million, or (17.8%), compared to operating income of $322.2 million, or 16.7% of revenue, in the six months ended June 30, 2021.
  • Adjusted operating income was $376.3 million, or 18.8% of revenue, a decrease of $(31.1) million, or (7.6%), compared to adjusted operating income of $407.4 million, or 21.1% of revenue, in the six months ended June 30, 2021.

Earnings per share:

  • Earnings per share was $0.36, a decrease of $(0.69), or (65.7%), compared to earnings per share of $1.05 in the six months ended June 30, 2021.
  • Adjusted earnings per share was $1.60, a decrease of $(0.21), or (11.6%), compared to adjusted earnings per share of $1.81 in the six months ended June 30, 2021.
  • Changes in foreign currency exchange rates decreased Sensata's adjusted earnings per share by $(0.02) in the six months ended June 30, 2022 compared to the prior-year period.

Sensata generated $141.9 million of operating cash flow in the six months ended June 30, 2022, compared to $267.9 million in the prior-year period. The Company's free cash flow totaled $67.8 million in the six months ended June 30, 2022 compared to $204.4 million in the prior-year period.

During the six months ended June 30, 2022, Sensata repurchased approximately 2.8 million ordinary shares for total consideration of $144.3 million as part of its existing share repurchase program.

“We are continuing to monitor supply chain challenges and the macroeconomic backdrop. Sensata is working closely with our customers to understand their current needs and we are leveraging the deep experience of our management team to respond accordingly in these uncertain times. As a result of the investments we are making, we are continuing to post record levels of new business wins and we are confident that we are well positioned for the future," Cote added.

Segment Performance
 

 

 

For the three months ended

June 30,

 

For the six months ended

June 30,

$ in 000s

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Performance Sensing

 

 

 

 

 

 

 

 

Revenue

 

$

746,882

 

 

$

741,852

 

 

$

1,464,579

 

 

$

1,456,364

 

Operating income

 

$

185,519

 

 

$

202,064

 

 

$

366,157

 

 

$

397,908

 

% of Performance Sensing revenue

 

 

24.8

%

 

 

27.2

%

 

 

25.0

%

 

 

27.3

%

 

 

 

 

 

 

 

 

 

Sensing Solutions

 

 

 

 

 

 

 

 

Revenue

 

$

273,666

 

 

$

250,808

 

 

$

531,739

 

 

$

478,824

 

Operating income

 

$

79,488

 

 

$

76,549

 

 

$

152,003

 

 

$

143,443

 

% of Sensing Solutions revenue

 

 

29.0

%

 

 

30.5

%

 

 

28.6

%

 

 

30.0

%

Quarterly Dividend

Sensata recently announced a quarterly dividend of $0.11 per share, payable on August 24, 2022 to shareholders of record as of August 10, 2022.

Guidance

"Sensata delivered solid financial performance in a challenging second quarter, posting 2.8% revenue growth and 19.0% adjusted operating income margin," said Paul Vasington, EVP and CFO of Sensata. “For the third quarter of 2022, we expect revenue of $980 to $1,020 million and adjusted EPS of $0.81 to $0.89. For fiscal year 2022, we are adjusting our annual financial guidance calling for revenue of $3,970 to $4,050 million and adjusted EPS of $3.30 to $3.42. This updated guidance includes the previously announced acquisition of Dynapower and divestiture of Qinex."

Fiscal Year 2022 Guidance

 

 

 

$ in millions, except EPS

FY-22 Guidance

FY-21

Y/Y Change

Revenue

$3,970- $4,050

$3,820.8

4% - 6%

organic growth

 

 

3% - 5%

Adjusted Operating Income

$758 - $782

$806.0

(6%) - (3%)

Adjusted Net Income

$514 - $534

$566.8

(9%) - (6%)

Adjusted EPS

$3.30 - $3.42

$3.56

(7%) - (4%)

Versus the prior year, Sensata expects that changes in foreign currency exchange rates will decrease revenue by approximately $(76) million at the midpoint and decrease adjusted EPS by approximately $(0.11) at the midpoint for fiscal year 2022.

Q3 2022 Guidance

 

 

 

$ in millions, except EPS

Q3-22 Guidance

Q3-21

Y/Y Change

Revenue

$980 - $1,020

$951.0

3% - 7%

organic growth

 

 

2% - 6%

Adjusted Operating Income

$187 - $199

$201.0

(7%) - (1%)

Adjusted Net Income

$126 - $138

$138.6

(9%) - 0%

Adjusted EPS

$0.81 - $0.89

$0.87

(7%) - 2%

Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will decrease revenue by approximately $(23) million at the midpoint and decrease adjusted EPS by approximately $(0.02) at the midpoint in the third quarter of 2022.

Conference Call and Webcast

Sensata will conduct a conference call today at 8:00 a.m. Eastern Time to discuss its second quarter of 2022 financial results and its outlook for the third quarter and full year 2022. The dial-in numbers for the call are 1-844-784-1726 or 1-412-380-7411. Callers should reference the "Sensata Q2 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 August 2, 2022. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 4911125.

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 June 30,

 

For the six months ended

June 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net revenue

 

$

1,020,548

 

 

$

992,660

 

 

$

1,996,318

 

 

$

1,935,188

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of revenue

 

 

686,603

 

 

 

658,285

 

 

 

1,343,683

 

 

 

1,293,634

 

Research and development

 

 

47,971

 

 

 

42,913

 

 

 

93,951

 

 

 

78,869

 

Selling, general and administrative

 

 

97,329

 

 

 

86,821

 

 

 

193,009

 

 

 

163,944

 

Amortization of intangible assets

 

 

36,805

 

 

 

34,857

 

 

 

74,172

 

 

 

66,921

 

Restructuring and other charges, net

 

 

12,897

 

 

 

5,029

 

 

 

26,630

 

 

 

9,611

 

Total operating costs and expenses

 

 

881,605

 

 

 

827,905

 

 

 

1,731,445

 

 

 

1,612,979

 

Operating income

 

 

138,943

 

 

 

164,755

 

 

 

264,873

 

 

 

322,209

 

Interest expense, net

 

 

(44,842

)

 

 

(45,213

)

 

 

(90,287

)

 

 

(89,256

)

Other, net

 

 

(39,240

)

 

 

1,012

 

 

 

(89,696

)

 

 

(38,385

)

Income before taxes

 

 

54,861

 

 

 

120,554

 

 

 

84,890

 

 

 

194,568

 

Provision for income taxes

 

 

20,020

 

 

 

7,638

 

 

 

27,608

 

 

 

27,919

 

Net Income

 

 

34,841

 

 

 

112,916

 

 

 

57,282

 

 

 

166,649

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

$

0.71

 

 

$

0.36

 

 

$

1.05

 

Diluted

 

$

0.22

 

 

$

0.71

 

 

$

0.36

 

 

$

1.05

 

 

 

 

 

 

 

 

 

 

Weighted-average ordinary shares outstanding:

 

 

 

 

 

 

Basic

 

 

156,477

 

 

 

158,208

 

 

 

156,950

 

 

 

157,986

 

Diluted

 

 

156,994

 

 

 

159,344

 

 

 

157,812

 

 

 

159,287

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

 

June 30,

2022

 

December 31,

2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,558,578

 

$

1,708,955

Accounts receivable, net of allowances

 

 

743,048

 

 

653,438

Inventories

 

 

656,736

 

 

588,231

Prepaid expenses and other current assets

 

 

161,367

 

 

126,370

Total current assets

 

 

3,119,729

 

 

3,076,994

Property, plant and equipment, net

 

 

825,862

 

 

820,933

Goodwill

 

 

3,534,438

 

 

3,502,063

Other intangible assets, net

 

 

904,929

 

 

946,731

Deferred income tax assets

 

 

101,899

 

 

105,028

Other assets

 

 

119,820

 

 

162,017

Total assets

 

$

8,606,677

 

$

8,613,766

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

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

 

$

6,566

 

$

6,833

Accounts payable

 

 

537,261

 

 

459,093

Income taxes payable

 

 

15,309

 

 

26,517

Accrued expenses and other current liabilities

 

 

327,993

 

 

343,816

Total current liabilities

 

 

887,129

 

 

836,259

Deferred income tax liabilities

 

 

341,383

 

 

339,273

Pension and other post-retirement benefit obligations

 

 

37,863

 

 

38,758

Finance lease and other financing obligations, less current portion

 

 

25,623

 

 

26,564

Long-term debt, net

 

 

4,213,512

 

 

4,214,946

Other long-term liabilities

 

 

77,583

 

 

63,232

Total liabilities

 

 

5,583,093

 

 

5,519,032

Total shareholders' equity

 

 

3,023,584

 

 

3,094,734

Total liabilities and shareholders' equity

 

$

8,606,677

 

$

8,613,766

 
 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

For the six months ended

June 30,

 

 

 

2022

 

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

Net income

 

$

57,282

 

 

$

166,649

 

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

 

 

 

 

Depreciation

 

 

62,882

 

 

 

62,833

 

Amortization of debt issuance costs

 

 

3,433

 

 

 

3,426

 

Share-based compensation

 

 

15,739

 

 

 

11,475

 

Loss on debt financing

 

 

 

 

 

30,066

 

Amortization of intangible assets

 

 

74,172

 

 

 

66,921

 

Deferred income taxes

 

 

(5,211

)

 

 

(7,070

)

Acquisition-related compensation payments

 

 

(15,000

)

 

 

 

Mark-to-market loss on equity investments, net

 

 

71,100

 

 

 

 

Unrealized loss on derivative instruments and other

 

 

20,669

 

 

 

12,700

 

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

 

 

(143,178

)

 

 

(79,069

)

Net cash provided by operating activities

 

 

141,888

 

 

 

267,931

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Acquisitions, net of cash received

 

 

(48,989

)

 

 

(421,951

)

Additions to property, plant and equipment and capitalized software

 

 

(74,069

)

 

 

(63,572

)

Investment in debt and equity securities

 

 

(6,878

)

 

 

(6,444

)

Other

 

 

152

 

 

 

2,862

 

Net cash used in investing activities

 

 

(129,784

)

 

 

(489,105

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of stock options and issuance of ordinary shares

 

 

14,577

 

 

 

17,957

 

Payment of employee restricted stock tax withholdings

 

 

(7,577

)

 

 

(7,948

)

Proceeds from borrowings on debt

 

 

 

 

 

1,001,875

 

Payments on debt

 

 

(5,664

)

 

 

(757,889

)

Dividends paid

 

 

(17,225

)

 

 

 

Payments to repurchase ordinary shares

 

 

(144,279

)

 

 

 

Payments of debt financing costs

 

 

(2,313

)

 

 

(33,032

)

Net cash (used in)/provided by financing activities

 

 

(162,481

)

 

 

220,963

 

Net change in cash and cash equivalents

 

 

(150,377

)

 

 

(211

)

Cash and cash equivalents, beginning of year

 

 

1,708,955

 

 

 

1,861,980

 

Cash and cash equivalents, end of period

 

$

1,558,578

 

 

$

1,861,769

 

 
 
 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,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Performance Sensing

 

73.2

%

 

74.7

%

 

73.4

%

 

75.3

%

Sensing Solutions

 

26.8

%

 

25.3

%

 

26.6

%

 

24.7

%

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,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Americas

 

42.1

%

 

38.0

%

 

41.0

%

 

37.2

%

Europe

 

26.0

%

 

27.2

%

 

26.1

%

 

27.8

%

Asia/Rest of World

 

31.9

%

 

34.8

%

 

32.9

%

 

35.0

%

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,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Automotive (1)

 

50.6

%

 

53.4

%

 

51.5

%

 

55.7

%

Heavy vehicle and off-road

 

23.6

%

 

22.5

%

 

22.8

%

 

20.7

%

Industrial

 

12.0

%

 

10.6

%

 

11.9

%

 

10.1

%

Appliance and HVAC

 

5.7

%

 

6.4

%

 

5.8

%

 

6.4

%

Aerospace

 

3.8

%

 

3.3

%

 

3.6

%

 

3.4

%

All other

 

4.3

%

 

3.8

%

 

4.4

%

 

3.7

%

Total

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

(1) Includes amounts reflected in the Sensing Solutions segment as follows: $9.9 million and $12.1 million of revenue in the three months ended June 30, 2022 and 2021, respectively, and $19.2 million and $23.6 million of revenue in the six months ended June 30, 2022 and 2021, respectively.

Market Outgrowth (Unaudited)

 

 

For the three months ended June

30, 2022

 

For the six months ended June

30, 2022

 

 

Reported

Growth

 

Organic

Growth

 

End

Market

Decline(1)

 

Reported

Growth

 

Organic

Growth

 

End

Market

Decline(1)

Sensata

 

2.8

%

 

2.2

%

 

(0.9

%)

 

3.2

%

 

1.1

%

 

(3.3

%)

(1) End Market excludes (3.4%) and (2.8%) inventory build in the three months and six months ended June 30, 2021, 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 June 30, 2022

 

Operating

Income

 

Operating

Margin

 

Income

Taxes

 

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. 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 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 three months ended June 30, 2021

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

164,755

 

16.6

%

 

$

7,638

 

 

$

112,916

 

 

$

0.71

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

5,738

 

0.6

%

 

 

(85

)

 

 

6,926

 

 

 

0.04

 

Financing and other transaction costs

 

2,544

 

0.3

%

 

 

(443

)

 

 

1,267

 

 

 

0.01

 

Step-up depreciation and amortization

 

33,684

 

3.4

%

 

 

 

 

 

33,684

 

 

 

0.21

 

Deferred loss on derivative instruments

 

2,595

 

0.3

%

 

 

(352

)

 

 

1,057

 

 

 

0.01

 

Amortization of debt issuance costs

 

 

%

 

 

 

 

 

1,715

 

 

 

0.01

 

Deferred taxes and other tax related

 

 

%

 

 

(6,200

)

 

 

(6,200

)

 

 

(0.04

)

Total adjustments

 

44,561

 

4.5

%

 

 

(7,080

)

 

 

38,449

 

 

 

0.24

 

Adjusted (non-GAAP)

$

209,316

 

21.1

%

 

$

14,718

 

 

$

151,365

 

 

$

0.95

 

 
 

($ 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 a mark-to-market loss on our investment in Quanergy Systems, Inc of $71.7 million, recorded in other, net. Also includes $31.1 million of expense related to compensation arrangements entered into concurrent with the closing of an acquisition, partially offset by $9.4 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. 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 six months ended June 30, 2021

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$ 322,209

 

16.7

%

 

$ 27,919

 

 

$ 166,649

 

$ 1.05

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

10,263

 

0.5

%

 

(286

)

 

14,217

 

0.09

Financing and other transaction costs (1)

7,115

 

0.4

%

 

(3,546

)

 

34,072

 

0.21

Step-up depreciation and amortization

63,380

 

3.3

%

 

 

 

63,380

 

0.40

Deferred loss on derivative instruments

4,435

 

0.2

%

 

(1,100

)

 

3,302

 

0.02

Amortization of debt issuance costs

 

%

 

 

 

3,426

 

0.02

Deferred taxes and other tax related (2)

 

%

 

3,922

 

 

3,922

 

0.02

Total adjustments

85,193

 

4.4

%

 

(1,010

)

 

122,319

 

0.77

Adjusted (non-GAAP)

$ 407,402

 

21.1

%

 

$ 28,929

 

 

$ 288,968

 

$ 1.81

 
 

(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 June 30,

 

For the six months

ended June 30,

 

 

2022

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Cost of revenue

$

1,215

 

$

3,038

 

 

$

3,375

 

 

$

5,453

 

Selling, general and administrative

 

5,699

 

 

3,253

 

 

 

10,730

 

 

 

7,641

 

Amortization of intangible assets

 

35,019

 

 

33,241

 

 

 

70,666

 

 

 

62,488

 

Restructuring and other charges, net (1)

 

12,897

 

 

5,029

 

 

 

26,630

 

 

 

9,611

 

Operating income adjustments

 

54,830

 

 

44,561

 

 

 

111,401

 

 

 

85,193

 

Interest expense, net

 

1,717

 

 

1,715

 

 

 

3,433

 

 

 

3,426

 

Other, net (2)

 

32,989

 

 

(747

)

 

 

82,844

 

 

 

34,710

 

Provision for income taxes (3)

 

5,170

 

 

(7,080

)

 

 

(1,998

)

 

 

(1,010

)

Net income adjustments

$

94,706

 

$

38,449

 

 

$

195,680

 

 

$

122,319

 

(1) The three and six months ended June 30, 2022 include $12.8M and $31.1M, respectively, of expense related to compensation arrangements entered into concurrent with the closing of an acquisition. The six months ended June 30, 2022 also includes $9.4M of gains, which relate to changes in the fair value of acquisition-related contingent consideration amounts.

(2) 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. Refer to our Quarterly Report on Form 10-Q for additional information. The six months ended June 30, 2021 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 reflects 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.

(3) Each period presented 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 each of the three and six months ended June 30, 2022, and $10.1 million and $10.9 million, in the three and six months ended June 30, 2021, respectively.

Free cash flow

($ in thousands)

Three months ended June 30,

 

Six months ended June 30,

 

 

2022

 

 

 

2021

 

 

% △

 

 

2022

 

 

 

2021

 

 

% △

Net cash provided by operating activities

$

94,533

 

 

$

163,420

 

 

(42.2

%)

 

$

141,888

 

 

$

267,931

 

 

(47.0

%)

Additions to property, plant and equipment and capitalized software

 

(38,358

)

 

 

(36,400

)

 

(5.4

%)

 

 

(74,069

)

 

 

(63,572

)

 

(16.5

%)

Free cash flow

$

56,175

 

 

$

127,020

 

 

(55.8

%)

 

$

67,819

 

 

$

204,359

 

 

(66.8

%)

 
 

Adjusted EBITDA

 

 

 

 

For the three months ended June 30,

 

For the six months ended June 30,

(in thousands)

 

LTM

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Net income

 

$

254,213

 

$

34,841

 

$

112,916

 

$

57,282

 

$

166,649

Interest expense, net

 

 

180,322

 

 

44,842

 

 

45,213

 

 

90,287

 

 

89,256

Provision for income taxes

 

 

50,026

 

 

20,020

 

 

7,638

 

 

27,608

 

 

27,919

Depreciation expense

 

 

125,008

 

 

31,351

 

 

31,636

 

 

62,882

 

 

62,833

Amortization of intangible assets

 

 

141,380

 

 

36,805

 

 

34,857

 

 

74,172

 

 

66,921

EBITDA

 

 

750,949

 

 

167,859

 

 

232,260

 

 

312,231

 

 

413,578

Non-GAAP Adjustments

 

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

 

17,746

 

 

4,330

 

 

7,011

 

 

8,479

 

 

14,377

Financing and other transaction costs

 

 

107,255

 

 

28,727

 

 

1,710

 

 

103,831

 

 

37,618

Deferred loss on derivative instruments

 

 

17,564

 

 

19,444

 

 

1,409

 

 

10,672

 

 

4,402

Adjusted EBITDA

 

$

893,514

 

$

220,360

 

$

242,390

 

$

435,213

 

$

469,975

 
 

Net debt and leverage

 

 

As of

($ in thousands)

 

June 30,

2022

 

December 31,

2021

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

 

$

6,566

 

 

$

6,833

 

Finance lease and other financing obligations, less current portion

 

 

25,623

 

 

 

26,564

 

Long-term debt, net

 

 

4,213,512

 

 

 

4,214,946

 

Total debt, finance lease, and other financing obligations

 

 

4,245,701

 

 

 

4,248,343

 

Less: discount, net of premium

 

 

(4,317

)

 

 

(5,207

)

Less: deferred financing costs

 

 

(26,691

)

 

 

(26,682

)

Total gross indebtedness

 

 

4,276,709

 

 

 

4,280,232

 

Less: Cash and cash equivalents

 

 

1,558,578

 

 

 

1,708,955

 

Net debt

 

$

2,718,131

 

 

$

2,571,277

 

 

 

 

 

 

Adjusted EBITDA (LTM)

 

$

893,514

 

 

$

928,276

 

Net leverage ratio

 

 

3.0

 

 

 

2.8

 

 
 

Guidance

 

Three months ending September 30, 2022

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

141.5

 

$

151.0

 

$

63.8

 

$

72.3

 

$

0.41

 

$

0.46

Restructuring related and other

 

4.0

 

 

4.5

 

 

3.5

 

 

4.0

 

 

0.02

 

 

0.03

Financing and other transaction costs(1)

 

7.5

 

 

8.5

 

 

7.0

 

 

8.0

 

 

0.05

 

 

0.05

Step-up depreciation and amortization(1)

 

34.0

 

 

35.0

 

 

34.0

 

 

35.0

 

 

0.22

 

 

0.23

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

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

 

 

 

 

1.7

 

 

1.7

 

 

0.01

 

 

0.01

Deferred taxes and other tax related

 

 

 

 

 

16.0

 

 

17.0

 

 

0.10

 

 

0.11

Non-GAAP

$

187.0

 

$

199.0

 

$

126.0

 

$

138.0

 

$

0.81

 

$

0.89

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

 

155.2

 

 

155.2

 
 

 

Full year ending December 31, 2022

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

559.2

 

$

578.2

 

$

198.5

 

$

211.5

 

$

1.29

 

$

1.37

Restructuring related and other

 

13.0

 

 

14.0

 

 

12.0

 

 

13.0

 

 

0.08

 

 

0.08

Financing and other transaction costs(1)

 

46.0

 

 

48.0

 

 

117.0

 

 

119.0

 

 

0.75

 

 

0.76

Step-up depreciation and amortization(1)

 

138.0

 

 

140.0

 

 

138.0

 

 

140.0

 

 

0.88

 

 

0.90

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

 

1.8

 

 

1.8

 

 

8.5

 

 

8.5

 

 

0.05

 

 

0.05

Amortization of debt issuance costs

 

 

 

 

 

7.0

 

 

7.0

 

 

0.04

 

 

0.04

Deferred taxes and other tax related

 

 

 

 

 

33.0

 

 

35.0

 

 

0.21

 

 

0.22

Non-GAAP

$

758.0

 

$

782.0

 

$

514.0

 

$

534.0

 

$

3.30

 

$

3.42

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

 

156.0

 

 

156.0

(1) Amounts do not contemplate the effects of future acquisitions, divestitures, or financing transactions that occur beyond our most recent fiscal period end, including the acquisition of Dynapower and the sale of Qinex each of which occurred subsequent to June 30, 2022.

(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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