Sensata Technologies

Good day and welcome to the Sensata Technologies first quarter 2023 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 would now like to turn the conference over to Mr. Jacob Sayre, Vice President of Finance. Please go ahead.

Thank you, Jason, and good morning, everyone. I'd like to welcome you to Sensata's first quarter 2023 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. Investor Relations website. We will post a replay of our webcast on our Investor Relations website shortly after the conclusion of today's call. As we begin, I'd like to reference Insata'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 uncertainties. The company's actual results may differ materially from the projections described in such statements. Factors that might Such differences include, but are not limited to, those discussed in our forms 10-Q and 10-K, 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 and non-GAAP financials, including reconciliations, are included in our earnings release, and 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 its business. Jeff will begin today with highlights of our business results during the first quarter. He will then provide a few updates on key growth areas. Paul will cover our detailed financials for the first quarter, Andy will discuss our financial guidance for the second quarter of 2023. We'll then take your questions after our prepared remarks. Now, I'd like to turn the call over to Suncited's CEO and President, Jeff Kosei.

Thank you, Jacob, and welcome, everyone. I'll start today with some summary thoughts on our performance during the first quarter, which is outlined on slide three. We began the year on strong footing. During the first quarter, we produced $998 million in revenue, up 2.3% from the prior year period and above the midpoint of our guidance range, despite a 230 basis point headwind from foreign currency. Adjusted operating income of $193 million was also above the midpoint of our guidance range. Adjusted operating margins moved higher by 60 basis points from the prior year period as we continue to focus on improving our margins to our target level of 21%. Adjusted net income moved higher by 14% to $141 million, and adjusted earnings per share grew 17.9% from the prior year period to $0.92. Market outgrowth for the quarter was disappointing at only 20 basis points. However, outgrowth for the fourth quarter of 2022 was 1,180 basis points. And for the last 12 months, outgrowth remained above our expected range at 630 basis points. As we have said, outgrowth can be lumpy in any quarter, and the first quarter was impacted by region and platform mix. several launch pushouts by our customers, and some production estimate and channel inventory complexities. We continue to have confidence in our long-term range, given past business wins and new product development activities and launch schedules. I'm also pleased to share that we remain on track to achieve our long-term goal of $2 billion in electrification revenue across the company by 2026. with revenue growing strongly in the quarter. We also remain on track to reach our goal of twice the content per vehicle on battery electric vehicles by 2026 as compared to internal combustion engine vehicles. Last quarter, we outlined a shift in our capital deployment strategy based upon our confidence in our capabilities to effectively intersect their growth vectors of electrification and insights. and deliver innovative solutions to our customers. We executed a portion of that strategy during the first quarter. Paul will share more details shortly. As I've said before, we anticipate a great deal of change in the end markets since SADA serves over the next 10 years, reflecting all the ways our customers are transforming their businesses and product portfolios to adjust to decarbonization trends. Electrification is coming to equipment categories beyond vehicles and is leading to significant investment in global infrastructure. As shown on slide four, I'd like to highlight areas of growth for Sensata that will help drive our electrification revenue. In a renewable power generation, solar developers and others are poised to benefit from last year's Inflation Reduction Act. which provides significant long-term funding to this industry. Dynapower's line of inverters and converters help solar power producers condition the energy produced by the sun, either for battery storage or to be transmitted to the grid. We're seeing increasing interest for new solar and other renewable energy installations, and these represent a $2.5 billion addressable market for Dynapower growing more than 15% per year. We are also seeing increased interest in electromechanical braking for electric vehicles. These braking systems remove heavy hydraulics and replace them with more efficient brake-by-wire solutions that require force and pressure sensors, doubling the sensor content as compared to existing solutions. This is a rapidly growing application with market estimates of 250 million of sensor content by 2027. It is an area where we have developed an early lead by collaborating closely with customers in addressing their needs. In addition to the innovation we are driving in the broad areas of electrification, on slide five, I want to highlight yet another new market that we've identified and are pursuing. Recent government regulations meant to reduce greenhouse gases and improve the environment require HVAC manufacturers to switch to new coolants with lower global warming impact known as A2L or A3 refrigerants. Sensata has leveraged its leadership position in HVAC pressure sensing to create a new category of gas detection sensors that are required by these systems to detect refrigerant leaks. We've already won $40 million in annual revenue from two of the largest HVAC manufacturers, and we expect this solution to be adopted on a widespread basis, creating a very fast-growing sensor category with a $500 million addressable market in the next five years. I'd now like to turn the call over to Paul.