Sensata Technologies

Good afternoon and welcome to the Sensata Technologies fourth quarter and full year 2024 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 touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded, and I would like now to turn the conference over to Mr. James Entwistle, Senior Director of Investor Relations. Please go ahead.

Thank you, Wyatt, and good afternoon, everyone. I'm James Entwistle, Senior Director of Investor Relations for Sensata, and I would like to welcome you to Sensata's fourth quarter and full year 2024 earnings conference call. Joining me on today's call are Stefan von Schuchman, Sensata's Chief Executive Officer, 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 be making forward-looking statements regarding future events or the financial performance of the company that can involve 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 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 in the appendices of our presentation materials. Brian will begin today by covering our detailed results for the fourth quarter and fall year 2024. Stefan will comment on his perspectives from his first 30 days and key priorities moving forward. Stefan will then turn the call back over to Brian to discuss our financial guidance for the first quarter of 2025 and our high-level 2025 outlook. We will then take your questions. Now I would like to turn the call over to Sensata's Chief Financial Officer, Brian Roberts.

Thank you, James. Good afternoon, everyone. First, let me welcome Stefan to the team. and thank Martha Sullivan for her leadership over the last several months as she stepped back into the CEO role on an interim basis. For clarity, unless noted, all amounts are denominated in U.S. dollars. Let me start on slide six. We finished 2024 with a strong fourth quarter as revenue of $908 million exceeded the top end of our $870 to $900 million guidance range. Adjusted operating margins increased sequentially for a fourth consecutive quarter, and we improved full year free cash flow conversion by 27 percentage points to 76% of adjusted net income as compared to 49% in 2023. With our improved free cash flow generation totaling 393 million for the year, we reduced net leverage to under three times as of December 31st, 2024 for the first time in three years. Our renewed focus on our core portfolio of highly differentiated sensing and electrical protection products is driving value and improving operational efficiency. Over the last two quarters, we exited through a combination of divestitures and last-time buys approximately $370 million of annual revenue, including both the insights business and the low-margin, low-growth product pruning efforts we described last year. In connection with these portfolio optimization measures, we implemented restructuring activities to streamline process, reduce overhead expense, and consolidate facilities. These actions to strengthen our operational foundation will prove critical as we enter 2025. As I noted, revenue was $908 million for the fourth quarter of 2024 as compared to $992 million in the fourth quarter of 2023. a decrease of about 8%. We exceeded our guide as our top line benefited from higher than expected auto production in both North America and China. For the full year, revenue was 3.93 billion, representing approximately a 3% decrease from revenue of 4.05 billion in 2023. Adjusting for the sale of Insights on September 30th and other products exited in the second half of the year, Revenue would have decreased approximately 1% from 2023. Adjusted operating income for the quarter was $175 million, representing a margin of 19.3%, an increase of 80 basis points from 18.5% in the fourth quarter of 2023. For the full year, adjusted operating income was $749 million or 19%. Adjusted earnings per share in the fourth quarter of 2024 was at the high end of our guidance range at 76 cents as compared to adjusted earnings per share of 81 cents in the prior year period. For the full year, we reported adjusted earnings per share of $3.44 as compared to $3.61 in 2023. Now let's turn to slide seven to discuss our segments. Performance sensing, which includes our auto and heavy vehicle off-road units, reported revenue of 2.74 billion in 2024, roughly flat year over year. This represents approximately 350 basis points of outgrowth against automotive and heavy vehicle end markets, which both contracted over the same time period. Our strong incumbency and recent share gains on ICE platforms enabled us to drive outgrowth despite the slowdown seen in EV adoption in both North America and Europe. Performance sensing adjusted operating margin for full year 2024 was 24.6%, representing an 80 basis point decrease year over year due primarily to regional revenue mix and the impact of foreign currency. For 2024, sensing solutions, which is comprised primarily of our industrial and aerospace businesses, reported revenue of $1.06 billion, which was a decrease of 8% year over year. While we have not yet seen a turn in industrial in-market demand, we are encouraged that the business appears to have stabilized as fourth quarter revenues were down just a couple percentage points as compared to the fourth quarter of 2023. Sensing solutions operating margins for 2024 were 29.5%, representing a 30 basis point increase from 2023. Adjusted operating expenses of $264 million included within our corporate and other segment were roughly flat year over year. This includes approximately $62 million of expense related to programs previously referred to as megatrend spend. Beginning in the first quarter of 2025, we will reallocate these expenses to the business units with a great majority to be included within our performance sensing segment. With that, let me turn the call over to Stefan for his initial thoughts on the business.