Sensata Technologies Holding plc — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparisons are with the three months ended March 31, 2021. Sensata supplies sensing, electrical protection, and related solutions through its Performance Sensing and Sensing Solutions segments. Dollar amounts below are in millions except per-share data.
Financial performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Net revenue | $975.8 | $942.5 |
| Operating income / margin | $125.9 / 12.9% | $157.5 / 16.7% |
| Income before taxes | $30.0 | $74.0 |
| Net income | $22.4 | $53.7 |
| Diluted EPS | $0.14 | $0.34 |
| Adjusted operating income / margin (non-GAAP) | $182.5 / 18.7% | $198.1 / 21.0% |
| Adjusted net income / diluted EPS (non-GAAP) | $123.4 / $0.78 | $137.6 / $0.86 |
| Operating cash flow | $47.4 | $104.5 |
| Free cash flow (non-GAAP) | $11.7 | $77.3 |
Revenue increased 3.5%; excluding currency and acquisitions, organic revenue was flat. Management reported 790 basis points of market outgrowth. Performance Sensing revenue rose 0.4% (down 3.7% organically), while Sensing Solutions rose 13.2% (up 11.6% organically). Cost of revenue was 67.3% of revenue versus 67.4%.
Cash and equivalents were $1,608.5 at quarter-end, versus $1,709.0 at year-end 2021. Gross indebtedness was approximately $4.3 billion; reported net debt was $2,670.2 and net leverage was 2.9x, based on last-twelve-month adjusted EBITDA of $915.5. The $420 million revolving facility had $416.1 million available, net of letters of credit. Total assets were $8,611.4 and shareholders’ equity was $3,072.3.
Material changes and notable items
- Operating income fell $31.5 million, and net income fell $31.3 million year over year. Other, net included a $59.9 million Quanergy investment mark-to-market loss after its shares declined to $1.84 at March 31. The company reported an overall $59.3 million mark-to-market loss on equity investments in other, net.
- Operating costs increased to $849.8 million from $785.1 million. Restructuring and other charges rose to $13.7 million, including $15.0 million of earned Elastic M2M acquisition-related incentive compensation, partly offset by a $6.2 million reduction in Spear contingent consideration.
- Operating cash flow declined, reflecting higher raw-material purchases to manage supply shortages and anticipated volume, the $7.5 million Elastic M2M incentive payment, and timing of supplier payments and customer receipts. Inventory increased to $641.7 million from $588.2 million at year-end.
- Investing cash outflow was $90.9 million, including the Elastic M2M acquisition and a $7.5 million Quanergy PIPE investment. Financing outflow included $67.3 million of share repurchases. The new $500 million repurchase authorization had $449.5 million remaining at quarter-end.
Outlook, risks, and contingencies
- Management expected fiscal 2022 capital expenditures of approximately $165–$175 million, funded from cash on hand. The filing provides no clear numerical quarterly or full-year earnings or revenue guidance.
- Management said global supply-chain disruptions and shortages continued to pressure margins; customer pricing recoveries offset much of the increased supply costs. It cited acquisitions, market outgrowth, and new business wins—particularly in megatrend areas—as growth contributors.
- On April 22, 2022, Sensata agreed to acquire Dynapower for $580 million, subject to adjustments and customary closing conditions, with completion expected in Q3 2022. The company planned to use cash on hand. Dynapower’s 2022 annualized revenue was expected to exceed $100 million, with projected growth above 30% over the next several years.
- The Board declared a $0.11-per-share quarterly dividend on April 26, payable May 25, 2022. The company stated available liquidity was expected to support operations, capital spending, repurchases, and debt service for at least 12 months, while cautioning that future cash generation and borrowing availability were not assured.
- Key risks discussed include supply interruptions, market and industry weakness, acquisition execution, competition, labor costs, product liability and recalls, and regulatory changes. Ordinary-course litigation was not expected to have a material adverse effect; management reported compliance with debt covenants and effective disclosure controls.
Important facts for investors to verify
- Whether the Quanergy valuation loss, and any subsequent share-price changes, materially affect reported earnings or investment value.
- Whether pricing, productivity, and supply-chain conditions improve enough to support operating margins and cash conversion.
- Dynapower transaction closing, cash funding, integration, and realized growth compared with management’s expectations.
- Debt leverage, liquidity after acquisitions and repurchases, and the company’s ability to sustain planned capital spending and dividends.
- Reconciliation and comparability of non-GAAP measures—including adjusted earnings, free cash flow, and adjusted EBITDA—to GAAP results.