SENSATA THIRD QUARTER 2019 EARNINGS PRESENTATION OCTOBER 30, 2019 - PowerPoint PPT Presentation

SENSATA THIRD QUARTER 2019 EARNINGS PRESENTATION OCTOBER 30, 2019

Forward-Looking Statements and Non-GAAP Measures Forward-Looking Statements This earnings presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Sensata believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results, or other expectations expressed in this earnings presentation, including, without limitation, risks associated with regulatory, legal, governmental, political, economic and military matters; adverse conditions in the automotive industry; competition in our industry, including pressure from customers to reduce prices; supplier interruptions, which could limit access to manufactured components or raw materials; business disruptions due to natural disasters; labor disruptions; difficulties with or failures integrating acquired businesses; market acceptance of new products; fluctuations in foreign exchange rates; and our level of indebtedness. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak to results only as of the date the statements were made; and we undertake no obligation to publicly update or revise any forward-looking statements, whether to reflect any future events or circumstances or otherwise. See "Risk Factors" in the Company's 2018 Annual Report on Form 10-K and other public filings and press releases. Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov. Non-GAAP Financial Measures Where we have used non-GAAP financial measures, reconciliations to the most comparable GAAP measures are provided, along with a disclosure on the usefulness of the non- GAAP measure, at the back of this presentation or in the “Investor Relations” section of the Company’s website, www.investors.sensata.com. 2 Q3 2019 EARNINGS SUMMARY

Q3-2019 GAAP Results Δ Q3-2019 Q3-2018 $ and shares outstanding in millions, except EPS Revenue $849.7 $873.6 (2.7%) Gross Profit $294.8 $315.2 (6.5%) (% of revenue) 34.7% 36.1% R&D $38.2 $37.8 1.0% (% of revenue) 4.5% 4.3% SG&A $68.2 $73.9 (7.8%) (% of revenue) 8.0% 8.5% Operating Income $146.1 $222.3 (34.3%) (% of revenue) 17.2% 25.5% Tax Rate 28.6% 14.1% 1,450 bps Net Income $70.7 $149.1 (52.6%) (% of revenue) 8.3% 17.1% Diluted EPS $0.44 $0.88 (50.0%) Diluted Shares Outstanding 161.3 168.6 (4.3%) 3 Q3 2019 EARNINGS SUMMARY

Q3-2019: Solid margin and free cash flow performance despite challenging end-markets ✓ Continued secular outgrowth – organic revenue decline of (2.8%) reflects 140 basis points of outgrowth in Auto and 160 basis points of outgrowth in HVOR; Q3-19 YTD Sensata generated 430 basis points of outgrowth in Auto and 410 basis points of outgrowth in HVOR ✓ Solid adjusted operating margins despite lower revenues – adjusted operating margins of 23.5%, ahead of Q3-19 guidance ✓ Effectively delivering EPS performance despite lower revenue – EPS ahead of guidance midpoint after adjusting for FX, contribution from FX approximately $0.03 lower than previous guidance ✓ Investing for long-term growth – accelerating investments in Electrification/Smart & Connected to penetrate attractive markets ✓ Strong free cash flow performance of $140M – free cash flow to adjusted net income conversion of 97% reflects improved working capital efficiency 4 Q3 2019 EARNINGS SUMMARY

Q3-19 Performance by End Market PERCENT OF REVENUES Auto – Organic revenue decline: (0.4%) • China content growth remains robust as end market continues to decline, but improves considerably from Q2-19 ~58% • NA auto revenues continue to grow, but performance lowered as a result of General Motors strike • Continue to be affected by a volatile & declining market in Europe • Outgrowth expected to improve in Q4-19E HVOR – Organic revenue decline: (6.2%) • Construction and agriculture markets incrementally weaken as customers further reduce inventory and lower forecasts ~16% • On-road business strong in China, declines in NA and Europe were in-line with expectations • Customer delays of planned product launches lowering overall content growth Aero, Industrial & Other – Organic rev decline: (6.3%) • PMI in all geographic regions signaling contraction and further weakening of demand for our products ~26% • Exports of industrial products out of China particularly weak • HVAC performance negatively affected by lower demand for refrigerated trucks • Aerospace business continues to post solid growth 5 Q3 2019 EARNINGS SUMMARY

We are lowering our growth expectations for several end markets in Q4-19 OEM Production: GLOBAL AUTO EUROPE AUTO NA AUTO HVOR INDUSTRIAL (5%) (7%) (3%) (1%) (5%) (12-13%) (8%) (11%) (4%) (14%) Content growth will help to offset end market declines Previous Expectations Current Guidance 6 Q3 2019 EARNINGS SUMMARY

Key messages We have a demonstrated track record of sustaining margins and increasing earnings over the long-term • Continued secular outgrowth • Strong operating discipline and quickly aligning costs with customer demand • 5 year EPS CAGR of ~8% (2014-2019E) We have a strong balance sheet and we have delivered solid free cash flow performance • Net leverage ratio of 2.8x despite deploying more than $900M toward M&A and share repurchases in past 18 months • Free cash flow to revenue ratio of approximately 12% (Q3-YTD) We continue to execute value-creating capital deployment • Balanced approach between M&A and share buybacks We are accelerating our investments for future growth • Smart & Connected and Electrification Initiatives 7 Q3 2019 EARNINGS SUMMARY

SMART & CONNECTED INITIATIVE JEFF COTE, PRESIDENT & CHIEF OPERATING OFFICER

Today, we are the leading provider of sensor components for on-road truck and trailer OEMs and tier 1 providers Cabin Trailers Comfort Brake, ABS, Speed, TPMS, Suspension Air Conditioning & Refrigerator & Cabin Air Sensors Filter Sensors Engine Exhaust Fuel, Oil, Coolant, Intake, Temperature, Speed, EGR, Fuel Filter, Urea & SCR rail, Filter, Cam & Sensors Crank Sensors Chassis Transmission ABS, Air, Brake, Pressure, Speed, Speed, Height, Retarder, Position, TPMS & Sensors Suspension Sensors 9 Q3 2019 EARNINGS SUMMARY

We are our leveraging leadership in wireless & embedded systems to create a Vehicle Area Network for many use cases Wireless Gateway 3 rd Party Sensors Climate Control Cargo Capacity Brakes Wheel End Wheel End Truck to Trailer Link Weight TPMS TPMS Weight Brakes Sensata’s vehicle area network (VAN) provides a scalable platform that supports several wireless sensing applications across trucks and trailers and also has the capability to interface with other 3 rd party devices 10 Q3 2019 EARNINGS SUMMARY

A large market opportunity exists to help Fleet Managers reduce downtime and become more efficient Real-Time Analytics Mechanical Condition & Safety Data Valuable Insights for Fleet Managers Load & Environmental Monitoring Data Telematics Ecosystem $6 BILLION MARKET Truck to Trailer Link Fleet Managers represent a new, less Sensata Vehicle Area Network (VAN) cyclical customer segment for Sensata 11 Q3 2019 EARNINGS SUMMARY

We are evolving into a key data insight partner for our commercial truck, trailer and fleet customers ! . DATA INSIGHT Leveraged Capabilities VEHICLE PARTNER ON-BOARD AREA NETWORK SENSOR DESIGN Embedded algorithms to WIRELESS SYSTEMS & DEVELOPMENT Centralized wireless gateway manage vehicle utilization, “HUB” with application software Pressure, temperature, RF protocols, in-house ASIC readiness, warnings and speed, position & more design, power optimization & more hosting and truck-to-trailer link other advanced features Today 2020 Roadmap and Beyond 12 Q3 2019 EARNINGS SUMMARY

Q3-19 FINANCIALS & GUIDANCE PAUL VASINGTON, CHIEF FINANCIAL OFFICER

Q3-2019 Financial Summary • Revenue decline of (2.7%) Δ Q3-2019 Q3-2018 $ in millions, except EPS composed of: Revenue $849.7 $873.6 (2.7%) • Organic revenue decline: (2.8%) $199.5 Adjusted Op Income $207.6 (3.9%) • Net effect of acq./divestitures % revenue 23.8% 23.5% increases revenue by 0.4% Adjusted Net Income $144.6 $154.0 (6.1%) • Foreign exchange decreases % revenue 17.0% 17.6% revenue by 0.3% Adjusted EPS $0.90 $0.91 (1.1%) • Adjusted Op Income declines ($0.06) $0.04 $0.04 ($0.03) primarily due to lower organic revenue, productivity headwinds from scaling new $0.91 $0.90 product launches, the net effect of acq/div, partially offset by favorable currency • EPS favorability of $0.04 from FX is approximately $0.03 lower than guidance due primarily to Q3-2018 Operational FX Share Acq/Div, net Q3-2019 weakness in Chinese Renminbi Repurchases 14 Q3 2019 EARNINGS SUMMARY