Sensata Technologies

Good day, and welcome to this Insight of Technology's fourth quarter 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I'd now like to turn the conference over to Mr. Jacob Thayer, Vice President of Finance. Please go ahead.

Thank you, Jason, and good morning, everyone. I'd like to welcome you to Sensata's fourth quarter 2022 earnings conference call. Joining me on today's call are Jeff Cote, Sensata's CEO and President, and Paul Basington, Sensata's Chief Financial Officer. In addition to the financial results press release we issued earlier today, we will be referencing a slide presentation during today's conference call. The PDF of this presentation can be downloaded from Sensata's investor relations website. This conference call is being recorded and we'll post a replay webcast on the investor relations website shortly after the conclusion of today's call. As we begin, I would like to reference Sensata's safe harbor statement on slide two. During this conference call, we will make forward-looking statements regarding future events or the financial performance of the company that involve risks and uncertainty. in such statements. Factors that might cause such differences include but are not limited to those discussed in our forms 10Q and 10K, as well as other subsequent filings with the SEC. We encourage you to review our GAAP financial statements in addition to today's presentation. Most of the information that we will discuss during today's call will relate to non-GAAP financial measures. Our GAAP to non-GAAP financials, including reconciliations, are included in our earnings release, and in the appendices of our presentation materials. The company provides details of its segment operating income on slides 9 and 10 of the presentation, which are the primary measures management uses to evaluate the performance of the company. Jeff will begin today with highlights of our business results during the fourth quarter and full year 2022. He will then provide updates on our new business wins and key growth initiatives. Paul will cover our detailed financials for the fourth quarter. and he will also provide financial guidance for the first quarter of 2023. We'll then take your questions after our prepared remarks. Now, I'd like to turn the call over to Sensata's CEO and President, Jeff Kotek.

Thank you, Jacob, and welcome, everyone. I'd like to start with some summary thoughts on our performance during the fourth quarter and full year, as outlined on slide three. During the fourth quarter, we produced $1 million, $15 million in revenue. up 8.6% from the prior year period, despite a 360 basis point headwind from foreign currency. Adjusted operating margins moved higher by 70 basis points sequentially to 20.1% as we continue to focus on improving our margins to our target level of 21%. For the full year 2022, we produced a record $4,029,000,000 in revenue, which is up 5.5% from the prior year. Our underlying markets were pressured last year by continued supply chain disruptions, and we experienced a 240 basis point headwind associated with foreign currency. Nevertheless, for the full year, we produced 820 basis points of market outgrowth, continuing our above-target performance for the third consecutive year. We appreciate the dedication and expertise of our Sensata team members who contributed to these results. Quoting activity for new business awards was extremely active during the year. As a result, we achieved a second consecutive year of record wins. In 2021, we achieved record new business wins of more than 640 million. And in 2022, they exceeded 1 billion. Even more notable is that approximately 70% of these wins are in our electrification growth factor, which will drive Sensata's future revenue outgrowth and are directly due to the incremental investments we have made over the past several years. During 2022, we also made substantial progress toward our environmental, social, and governance goals. We reduced our greenhouse gas emissions intensity by more than 10% last year, reaching our 2026 target four years earlier than anticipated. In addition, Newsweek named Sensata as one of America's most responsible companies for 2023. 23 overall, ninth in the technology hardware sector, and first in Massachusetts. All of us anticipate more change in the end markets Sensata serves over the next 10 years than we have seen in the past 50. As our customers transform their businesses and product portfolios to adjust to decarbonization trends, many equipment categories are electrifying, and significant investment is being made in global infrastructure to support this trend. It is a strategic imperative for Sensata to enable this transformation for our customers, and we are very pleased with our accomplishments thus far as we execute on this strategy. As shown on slide four, over the past several years, we have made significant investments, including both acquisitions and internal development efforts. to develop the products, technologies, and capabilities our customers need as they transform their businesses. The commercial success resulting from these investments is clear. Last year's awards included the single largest business win in the company's history and represented a substantial shift in our business toward electrification-related areas. Sensata largely serves long cycle end markets, which underscores the benefit of pivoting to where the market is going, and we appreciate our investors' patience through this investment cycle to secure our bright future. The success that we have achieved to date from our organic and inorganic investments in the growth vectors demonstrates that we have built a strong foundation for future growth. Now we are focused on leveraging the benefits of these investments. This includes completing the integration of the businesses we've acquired to maximize growth and focusing organic P&L investments in areas where we are having the greatest success. Consequently, as we look to 2023 and beyond, we are focusing on organic growth, improving adjusted operating margins, and increasing conversion of earnings to cash flow. While we will continue to return capital to shareholders through our dividend and opportunistic share repurchases, improving free cash flow will naturally allow leverage to decline and returns on invested capital to improve over time. Paul will speak to the specific capital allocation targets later. During 2022, we posted approximately $460 million in revenue in automotive and industrial electrification areas, up 77% from 2021. Insights posted $175 million in revenue last year, up 133% from 2021. During our electrification teach-in last February, we forecasted that Sensata would produce more than $2 billion in electrification revenue and that Sensata content in battery electric light vehicles would grow to double current content in a comparable internal combustion light vehicle by 2026. We are well on our way to bringing this vision to life. While we still need to deliver on the product designs underlying business wins in hand, These awards, coupled with our existing business and expected market growth over the coming three years, is now sufficient to deliver on our electrification revenue target. The demonstrated commercial success from our investments establishes Sensata very well to assist our customers in their transformational journeys and to realize our own exciting potential. Now I'd like to turn the call over to Paul.