Sensata Technologies

VP of Finance. Please go ahead.

Thank you, Operator, and good afternoon, everyone. I'm Andrew Lynch, Vice President of Finance for Sensata, and I would like to welcome you to Sensata's second quarter 2024 earnings conference call. Joining me on today's call are Martha Sullivan, Sensata's Interim President and CEO, and Brian Roberts, 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 will post a replay on our 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 involves certain risks and uncertainties. The company's actual results may differ materially from the projections described in such statements. Factors that might cause such differences include, but are not limited to, those discussed in our Forms 10-Q and 10-K, as well as other filings with the SEP. 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. Martha will begin today with comments on our overall business. Brian will cover our detailed financials for the second quarter of 2024 and our financial guidance for the third quarter of 2024. Martha will then return for some closing remarks. We will then take your questions. Now, I would like to turn the call over to Sensata's interim president and CEO, Martha Sullivan.

Thank you, Andrew. Good afternoon, everyone. It is a privilege to have the opportunity to speak with you today. Since rejoining Sensata as interim president and CEO 90 days ago, I have been focused in three key areas. First, enhancing our overall performance to expand margins and improve our execution. Second, identifying underperforming products and projects within our portfolio that no longer drive value. And third, finding the next CEO for Sensata. Let me take a couple of minutes to discuss each of these in greater detail. Our long term strategy has not changed. We are a best in class provider of sensor rich and electrical protection solutions to our customers. Our sensing products are essential for customers to meet increasing mandates for safer, cleaner, and more efficient applications. Our electrification solutions support the ongoing conversion across the end markets we serve, including automobiles, heavy trucks, and industrial infrastructures such as the power grid needed to support a more electrified world. While our sensing technologies are significant within our electrification portfolio, at the center of our strategy are high voltage contactors, which are critical electrical protection devices used to switch currents. Earlier this year, we augmented our contactor product family with the buyout of the remaining shares of our joint venture in China. And we are well positioned to grow and gain share with a broad set of offerings, including next generation contactors that provide higher levels of efficiency, greater safety, and multipole configurability. It is clear that the world will continue to be more electrified. And while I closely track our advancements as a board member, My return to the CEO seat has given me a broader and deeper appreciation for the significant progress we have made on several key fronts. There are near and long-term opportunities and key strategic growth factors for Sensata, including many electrification and sensor opportunities that will drive success for years to come. Market transformations are rarely linear in nature, and we are experiencing that today in electric vehicles. which we define to include both battery, electric vehicles, and plug-in hybrids. While EV production is forecasted by S&P Global and their June 2024 report to grow nearly 18% to 17.9 million units in 2024, this level of production has dropped by 10% as compared to forecasts from just five months earlier in January. Despite this drop in projected EV volume, Sensata remains well positioned to react to short-term shifts in consumer preference. Our core suite of vital sensing products remains of critical importance to our customers, allowing us to outgrow the market despite changes in volume mix between combustion engines and EVs. For the second quarter of 2024, Our automotive business outgrew the market by more than 700 basis points as we grew 6% year over year compared to an S&P global defined market, which contracted by approximately 1%. As we know, market outgrowth can vary from quarter to quarter due to mix and launch schedules, but we are pleased with the second consecutive quarter of strong outgrowth in our auto business. While we are hedged against changes in powertrain mix, we are not immune to impacts from reductions in overall automotive production, and we are taking the necessary steps to prepare for an automotive slowdown in the back half of 2024. S&P July's report indicated a drop of over 800,000 units as compared to their report of just four weeks prior and a drop of 1.6 million units from their April estimate. In the third quarter, China is now expected to be down nearly 8% year over year, Europe lower by almost 6%, and North America down by 2.5%. We believe there is a possibility that total production may show further reductions as OEMs adjust inventory levels. Let me take a moment to discuss the rest of our business portfolio, which represents nearly half of our revenue. Our heavy vehicle and off-road business reported relatively flat year-over-year top-line results for the second quarter against a market drop which was down by approximately seven percentage points. This outgrowth was the result of strong China production levels of on-road truck and new tire pressure monitoring regulation in Europe, offset by continued production weakness primarily in North America. Both agriculture and construction were weak in the quarter, consistent with expectations. While the stocking and slow housing construction markets continue to impact our industrial business, which has significant exposure to housing through HVAC and appliance, we are encouraged with the continued growth of our new A2L leaf detection sensor. This product has been well received in the market, and we have quickly become the leader in this exciting growth segment. Finally, aerospace continues to deliver solid results and is on pace to deliver mid-single-digit revenue growth in 2024. I am encouraged by our execution today as we return to a more normalized operating environment and I remain confident in our ability to improve our margins in the second half of 2024 despite the macro headwinds that exist. Increasing my confidence in our ability to improve margins is the work we have begun to identify and take action on underperforming products. Early in my tenure, we began a review of various component families across our business to effectively prune the tree of products which may be mature in cycle, slow growing, and at substandard margins. This exercise identified approximately $200 million of annual revenue falling into this low growth, low margin category with the majority of these products in our performance sensing segment. Actions to eliminate these products started in June with the goal of more than half eliminated in Q3 and the remainder by the end of the year. Finally, regarding our CEO search, our board search committee and I are committed to finding the right next leader of Samsata. We are continuing to source and meet with highly qualified candidates who are attracted to our differentiated business, and I am encouraged by our progress today. Searches such as these do take time, but I expect that we will have identified the new CEO for Samsata in the coming quarters. With that, Let me turn the call over to Brian.