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Sensata Technologies Reports First Quarter 2021 Financial Results

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Record first quarter revenues demonstrate strong recovery

Sensata Technologies (NYSE:ST), a global industrial technology company and leading provider of sensor-rich solutions that create insights for customers, today announced financial results for its first quarter ended March 31, 2021.

Operating results for the first quarter of 2021 compared to the first quarter of 2020 are summarized below. These results include non-GAAP financial measures, each of which is defined and reconciled to the most directly comparable GAAP measure later in this press release.

Revenue:

  • Revenue was a record $942.5 million, an increase of $168.3 million, or 21.7%, compared to $774.3 million in the first quarter of 2020.
  • Revenue increased 18.8% from the first quarter of 2020 on an organic basis, which excludes a 2.9% increase from foreign currency exchange rates versus the prior-year period.

Operating income:

  • Operating income was $157.5 million (16.7% of revenue), an increase of $98.9 million, or 168.7%, compared to operating income of $58.6 million (7.6% of revenue) in the first quarter of 2020.
  • Adjusted operating income was $198.1 million (21.0% of revenue), an increase of $61.4 million, or 44.9%, compared to adjusted operating income of $136.7 million (17.7% of revenue) in the first quarter of 2020.

Earnings per share:

  • Earnings per share was $0.34, an increase of $0.29, or 580.0%, compared to earnings per share of $0.05 in the first quarter of 2020.
  • Adjusted earnings per share was $0.86, an increase of $0.33, or 62.3%, compared to adjusted earnings per share of $0.53 in the first quarter of 2020.
  • Changes in foreign currency exchange rates had minimal impact on Sensata's adjusted earnings per share in the first quarter of 2021 compared to the prior-year period.

"Sensata's record first quarter revenues reflect a continuation of strong growth associated with recovery across our automotive, heavy vehicle and industrial markets. Beyond more robust end markets, Sensata's growth significantly outpaced the automotive market by 910 basis points and the heavy vehicle market by 1,070 basis points during the quarter," said Jeff Cote, CEO and President of Sensata. "Despite widespread supply chain challenges, we are pleased with how effectively we are adapting to evolving conditions, clearly positioning Sensata to benefit from the overall business recovery."

Mr. Cote added, "We are continuing to execute well on our long-term growth strategy as evidenced by the recent acquisition of Xirgo Technologies in Smart & Connected and our new joint venture with Churod Electronics in Electrification, adding key medium-voltage electrical protection technologies to Sensata's extensive capabilities."

Sensata generated $104.5 million of operating cash flow in the first quarter of 2021, compared to $98.5 million in the prior-year period. The Company's free cash flow totaled $77.3 million in the first quarter of 2021 compared to $69.0 million in the prior-year period.

Segment Performance

 

 

For the three months ended

March 31,

$ in 000s

 

2021

 

2020

Performance Sensing

 

 

 

 

Revenue

 

$

714,512

 

 

$

568,689

 

Operating income*

 

$

195,844

 

 

$

135,046

 

% of Performance Sensing revenue

 

27.4

%

 

23.7

%

 

 

 

 

 

Sensing Solutions

 

 

 

 

Revenue

 

$

228,016

 

 

$

205,580

 

Operating income*

 

$

66,894

 

 

$

56,529

 

% of Sensing Solutions revenue

 

29.3

%

 

27.5

%

*

Includes adjustments for reclassification of Megatrend growth spend to corporate and other.

Guidance

"Sensata delivered strong financial performance in the first quarter, posting 19% organic revenue growth and 45% adjusted operating income growth from the prior-year period," said Paul Vasington, EVP and CFO of Sensata. "Accordingly, we are revising our full year financial guidance upward to reflect the recent acquisition of Xirgo Technologies, current market conditions, and Sensata's recent debt transactions. For full year 2021, we now expect revenue of $3,685 to $3,825 million and adjusted EPS of $3.20 to $3.50. For the second quarter of 2021, we expect revenue of $960 to $990 million and adjusted EPS of $0.84 to $0.90."

Full Year 2021 Guidance

$ in millions, except EPS

FY-21 Guidance

 

FY-20

 

Y/Y Change

Revenue

$3,685 - $3,825

 

$3,045.6

 

21% - 26%

organic growth

 

 

 

 

16% - 21%

Adjusted Operating Income

$755 - $805

 

$562.1

 

34% - 43%

Adjusted Net Income

$509 - $557

 

$349.2

 

46% - 60%

Adjusted EPS

$3.20 - $3.50

 

$2.21

 

45% - 58%

Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will increase revenues by approximately $58 million at the midpoint and adjusted earnings per share by approximately $0.03 at the midpoint for the full year 2021.

Q2 2021 Guidance

$ in millions, except EPS

Q2-21 Guidance

 

Q2-20

 

Y/Y Change

Revenue

$960 - $990

 

$576.5

 

67% - 72%

organic growth

 

 

 

 

58% - 63%

Adjusted Operating Income

$195 - $205

 

$75.0

 

160% - 173%

Adjusted Net Income

$134 - $144

 

$27.7

 

385% - 420%

Adjusted EPS

$0.84 - $0.90

 

$0.18

 

367% - 400%

Versus the prior-year period, Sensata expects that changes in foreign currency exchange rates will increase revenues by approximately $23 million at the midpoint and adjusted earnings per share by approximately $0.01 at the midpoint for the second quarter of 2021.

Conference Call and Webcast

Sensata will conduct a conference call today at 8:00 AM eastern time to discuss its first quarter 2021 financial results and its outlook for the second quarter and full year 2021. The dial-in numbers for the call are 1-844-784-1726 or +1-412-380-7411. Callers should reference the "Sensata Q1 2021 Financial Results Conference Call." A live webcast and a replay of the conference call will also be available on the investor relations page of Sensata's website at http://investors.sensata.com. Additionally, a replay of the call will be available until May 4, 2021. To access the replay, dial 1-877-344-7529 or 1-412-317-0088 and enter confirmation code: 10154379.

About Sensata Technologies

Sensata Technologies is a leading industrial technology company that develops sensors, sensor-based solutions, including controllers and software, and other mission-critical products to create valuable business insights for customers and end users. For more than 100 years, Sensata has provided a wide range of customized, sensor-rich solutions that address complex engineering requirements to help customers solve difficult challenges in the automotive, heavy vehicle & off-road, industrial, and aerospace industries. With more than 19,000 employees and operations in 13 countries, Sensata's solutions help to make products safer, cleaner and more efficient, more electrified, and more connected. For more information, please visit Sensata's website at www.sensata.com.

Non-GAAP Financial Measures

We supplement the reporting of our financial information determined in accordance with U.S. generally accepted accounting principles ("GAAP") with certain non-GAAP financial measures. We use these non-GAAP financial measures internally to make operating and strategic decisions, including the preparation of our annual operating plan, evaluation of our overall business performance, and as a factor in determining compensation for certain employees. We believe presenting non-GAAP financial measures is useful for period-over-period comparisons of underlying business trends and our ongoing business performance. We also believe presenting these non-GAAP measures provides additional transparency into how management evaluates the business.

Non-GAAP financial measures should be considered as supplemental in nature and are not meant to be considered in isolation or as a substitute for the related financial information prepared in accordance with U.S. GAAP. In addition, our non-GAAP financial measures may not be the same as, or comparable to, similar non-GAAP measures presented by other companies.

The non-GAAP financial measures referenced by Sensata in this release include: adjusted net income, adjusted earnings per share ("EPS"), adjusted operating income, adjusted operating margin, free cash flow, organic revenue growth, market outgrowth, adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA"), net debt, and net leverage ratio. We also refer to changes in certain non-GAAP measures, usually reported either as a percentage or number of basis points, between two periods and measured on either a reported, constant currency, or an organic basis, the latter of which excludes the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s) and the effect of foreign currency exchange rate differences between the comparative periods. Such changes are also considered non-GAAP measures.

Adjusted net income is defined as net income, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted EPS is calculated by dividing adjusted net income by the number of diluted weighted-average ordinary shares outstanding in the period. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Adjusted operating income is defined as operating income, determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described in the accompanying reconciliation tables. Adjusted operating margin is calculated by dividing adjusted operating income by net revenue. We believe that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Free cash flow is defined as net cash provided by operating activities, determined in accordance with U.S. GAAP, less additions to property, plant and equipment and capitalized software. We believe that this measure is useful to investors and management as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to fund acquisitions, repurchase ordinary shares, or for the accelerated repayment of debt obligations.

Organic revenue growth is defined as the reported percentage change in net revenue calculated in accordance with U.S. GAAP, excluding the period-over-period impact of foreign exchange rate differences as well as the net impact of acquisitions and divestitures for the 12-month period following the respective transaction date(s). We believe that this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Adjusted EBITDA is defined as net income calculated in accordance with U.S. GAAP, excluding interest expense, net, provision for/(benefit from) income taxes, depreciation expense, amortization of intangible assets, and the following non-GAAP adjustments, if applicable: (1) restructuring related and other, (2) financing and transaction related, (3) deferred gain or loss on commodities and other derivative instruments, and (4) step-up inventory amortization.

Net debt is defined as total debt, finance lease, and other financing obligations less cash and cash equivalents. We believe net debt is a useful measure to management and investors in understanding trends in our overall financial condition.

Net leverage ratio is defined as net debt divided by last twelve months (LTM) adjusted EBITDA. We believe that the net leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.

Safe Harbor Statement

This earnings release contains "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995, which relate to future events and are subject to risks and uncertainties. The forward-looking statements, which address the Company's expected business and financial performance and financial condition, among other matters, may contain words or phrases such as: "believe," "continue," "expect," "look ahead," "predict," or "will," and other words and phrases of similar meaning. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about expected earnings, revenues, growth, liquidity or other financial matters, together with any statements related in any way to the COVID-19 pandemic including its impact on the Company. Although the Company believes the expectations reflected in its forward-looking statements are based upon reasonable assumptions, no assurance 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 release, including, without limitation, the following: future risks and existing uncertainties associated with the COVID-19 pandemic, which continues to have a significant adverse impact on our operations including, depending on the specific location, full or partial shutdowns of our facilities as mandated by government decree, government actions limiting our ability to adjust certain costs, significant travel restrictions, "work-from-home" orders, limited availability of our workforce, supplier constraints, supply chain interruptions, logistics challenges and limitations, and reduced demand from certain customers; uncertainties associated with a protracted economic slowdown that could negatively affect the financial condition of our customers and suppliers; uncertainties and volatility in the global capital markets; political, economic, military and other risks in countries outside of the United States; the impact of general economic conditions, geopolitical conditions and U.S. trade policies, legislation, trade disputes, treaties and tariffs, including those affecting China, on the Company's business operations; risks associated with the improper conduct by any of our employees, customers, suppliers, distributors or any other business partners which could impair our business reputation and financial results and could result in our non-compliance with anti-corruption laws and regulations of the U.S. government and various foreign jurisdictions; changes in exchange rates of the various currencies in which the Company conducts business; the Company's ability to obtain a consistent supply of materials, at stable pricing levels; changes in defense expenditures in the military market, including the impact of reductions or changes in the defense budgets of U.S. and foreign governments; the Company's ability to compete successfully on the basis of technology innovation, product quality and performance, price, customer service and delivery time; the Company's ability to continue to conceive, design, manufacture and market new products and upon continuing market acceptance of its existing and future product lines; difficulties and unanticipated expenses in connection with purchasing and integrating newly acquired businesses, including the potential for the impairment of goodwill and other intangible assets; events beyond the Company's control that could lead to an inability to meet its financial covenants under its credit arrangements; the Company's ability to access the capital markets on favorable terms, including as a result of significant deterioration of general economic or capital market conditions, or as a result of a downgrade in the Company's credit rating; changes in interest rates; governmental export and import controls that certain of our products may be subject to, including export licensing, customs regulations, economic sanctions or other laws; cybersecurity threats or incidents that could arise on our information technology systems that could disrupt business operations and adversely impact our reputation and operating results and potentially lead to litigation and/or governmental investigations; changes in fiscal and tax policies, audits and examinations by taxing authorities, laws, regulations and guidance in the United States and foreign jurisdictions; any difficulties in protecting the Company's intellectual property rights; and litigation, customer claims, product recalls, governmental investigations, criminal liability or environmental matters. In addition, the extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.

A further description of these uncertainties and other risks can be found in the Company's 2020 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and the Company's other reports filed with the SEC. Copies of our filings are available from our Investor Relations department or from the SEC website, www.sec.gov.

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

 

For the three months ended

March 31,

 

 

2021

 

2020

Net revenue

 

$

942,528

 

 

$

774,269

 

Operating costs and expenses:

 

 

 

 

Cost of revenue

 

635,349

 

 

566,406

 

Research and development

 

35,956

 

 

34,453

 

Selling, general and administrative

 

77,123

 

 

77,221

 

Amortization of intangible assets

 

32,064

 

 

33,092

 

Restructuring and other charges, net

 

4,582

 

 

4,498

 

Total operating costs and expenses

 

785,074

 

 

715,670

 

Operating income

 

157,454

 

 

58,599

 

Interest expense, net

 

(44,043)

 

 

(39,403)

 

Other, net

 

(39,397)

 

 

(12,281)

 

Income before taxes

 

74,014

 

 

6,915

 

Provision for/(benefit from) income taxes

 

20,281

 

 

(1,516)

 

Net income

 

$

53,733

 

 

$

8,431

 

 

 

 

 

 

Net income per share:

 

 

 

 

Basic

 

$

0.34

 

 

$

0.05

 

Diluted

 

$

0.34

 

 

$

0.05

 

 

 

 

 

 

Weighted-average ordinary shares outstanding:

 

 

Basic

 

157,764

 

 

157,599

 

Diluted

 

159,230

 

 

158,385

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

 

March 31,

2021

 

December 31,

2020

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,893,926

 

 

$

1,861,980

 

Accounts receivable, net of allowances

 

641,161

 

 

576,647

 

Inventories

 

468,446

 

 

451,005

 

Prepaid expenses and other current assets

 

102,592

 

 

90,340

 

Total current assets

 

3,106,125

 

 

2,979,972

 

Property, plant and equipment, net

 

796,419

 

 

803,825

 

Goodwill

 

3,124,939

 

 

3,111,349

 

Other intangible assets, net

 

676,072

 

 

691,549

 

Deferred income tax assets

 

80,023

 

 

84,785

 

Other assets

 

161,614

 

 

172,722

 

Total assets

 

$

7,945,192

 

 

$

7,844,202

 

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

 

Current liabilities:

 

 

 

 

Current portion of long-term debt, finance lease and other financing obligations

 

$

9,678

 

 

$

757,205

 

Accounts payable

 

431,084

 

 

393,907

 

Income taxes payable

 

21,498

 

 

19,215

 

Accrued expenses and other current liabilities

 

311,261

 

 

324,830

 

Total current liabilities

 

773,521

 

 

1,495,157

 

Deferred income tax liabilities

 

262,673

 

 

259,857

 

Pension and other post-retirement benefit obligations

 

43,074

 

 

48,002

 

Finance lease and other financing obligations, less current portion

 

27,605

 

 

27,931

 

Long-term debt, net

 

3,961,397

 

 

3,213,747

 

Other long-term liabilities

 

86,279

 

 

94,022

 

Total liabilities

 

5,154,549

 

 

5,138,716

 

Total shareholders' equity

 

2,790,643

 

 

2,705,486

 

Total liabilities and shareholders' equity

 

$

7,945,192

 

 

$

7,844,202

 

SENSATA TECHNOLOGIES HOLDING PLC

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

For the three months ended

March 31,

 

 

2021

 

2020

Cash flows from operating activities:

 

 

 

 

Net income

 

$

53,733

 

 

$

8,431

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation

 

31,197

 

 

34,679

 

Amortization of debt issuance costs

 

1,711

 

 

1,631

 

Share-based compensation

 

5,099

 

 

6,084

 

Loss on debt financing

 

30,066

 

 

 

Amortization of intangible assets

 

32,064

 

 

33,092

 

Deferred income taxes

 

130

 

 

(4,100)

 

Loss on litigation judgment

 

 

 

29,200

 

Unrealized loss on derivative instruments and other

 

8,797

 

 

11,040

 

Changes in operating assets and liabilities, net of effects of acquisitions

 

(58,286)

 

 

(21,513)

 

Net cash provided by operating activities

 

104,511

 

 

98,544

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Acquisitions, net of cash received

 

(20,406)

 

 

 

Additions to property, plant and equipment and capitalized software

 

(27,172)

 

 

(29,547)

 

Investments in debt and equity securities

 

(1,799)

 

 

(5,217)

 

Other

 

340

 

 

1,928

 

Net cash used in investing activities

 

(49,037)

 

 

(32,836)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of stock options and issuance of ordinary shares

 

10,556

 

 

709

 

Payments of employee restricted stock tax withholdings

 

(221)

 

 

(15)

 

Proceeds from borrowings on debt

 

750,000

 

 

 

Payments on debt

 

(752,753)

 

 

(2,375)

 

Payments to repurchase ordinary shares

 

 

 

(35,175)

 

Payments of debt financing costs

 

(31,110)

 

 

 

Net cash used in financing activities

 

(23,528)

 

 

(36,856)

 

Net change in cash and cash equivalents

 

31,946

 

 

28,852

 

Cash and cash equivalents, beginning of period

 

1,861,980

 

 

774,119

 

Cash and cash equivalents, end of period

 

$

1,893,926

 

 

$

802,971

 

Revenue by Business, Geography, and End Market (Unaudited)

(percent of total revenue)

 

For the three months

ended March 31,

 

 

2021

2020

Performance Sensing

 

75.8

%

 

73.4

%

Sensing Solutions

 

24.2

%

 

26.6

%

Total

 

100.0

%

 

100.0

%

(percent of total revenue)

 

For the three months

ended March 31,

 

 

2021

2020

Americas

 

36.5

%

 

43.9

%

Europe

 

28.3

%

 

29.4

%

Asia/Rest of World

 

35.2

%

 

26.7

%

Total

 

100.0

%

 

100.0

%

(percent of total revenue)

 

For the three months

ended March 31,

 

 

2021

2020

Automotive*

 

58.2

%

 

57.6

%

Heavy vehicle and off-road

 

18.9

%

 

16.9

%

Industrial

 

9.6

%

 

10.4

%

Appliance and heating, ventilation and air-conditioning

 

6.4

%

 

5.9

%

Aerospace

 

3.5

%

 

5.4

%

All other

 

3.4

%

 

3.8

%

Total

 

100.0

%

 

100.0

%

*

Includes amounts reflected in the Sensing Solutions segment as follows: $11.5 million and $8.2 million of revenue in the three months ended March 31, 2021 and 2020, respectively.

Market Outgrowth (Unaudited)

 

 

For the three months ended

March 31, 2021

 

 

 

Reported

Growth

 

Organic

Growth

 

End

Market

Growth

 

Automotive

 

22.6

%

 

19.3

%

 

10.2

%

*

Heavy vehicle and off-road

 

35.7

%

 

32.8

%

 

22.1

%

 

*

Excludes Toyota, adjusted for Sensata's geographic mix.

GAAP to Non-GAAP Reconciliations

The following unaudited tables provide a reconciliation of the difference between each of the non-GAAP financial measures referenced herein and the most directly comparable U.S. GAAP financial measure. Amounts presented in these tables may not appear to recalculate due to the effect of rounding.

Operating income and margin, income tax, net income, and EPS

($ in thousands, except per share amounts)

For the three months ended March 31, 2021

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

157,454

 

 

16.7

%

 

$

20,281

 

 

$

53,733

 

 

$

0.34

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other

4,525

 

 

0.5

%

 

(201)

 

 

7,291

 

 

0.05

 

Financing and other transaction costs (1)

4,571

 

 

0.5

%

 

(3,103)

 

 

32,805

 

 

0.21

 

Step-up depreciation and amortization

29,696

 

 

3.2

%

 

 

 

29,696

 

 

0.19

 

Deferred loss on derivative instruments

1,840

 

 

0.2

%

 

(748)

 

 

2,245

 

 

0.01

 

Amortization of debt issuance costs

 

 

%

 

 

 

1,711

 

 

0.01

 

Deferred taxes and other tax related (2)

 

 

%

 

10,122

 

 

10,122

 

 

0.06

 

Total adjustments

40,632

 

 

4.3

%

 

6,070

 

 

83,870

 

 

0.53

 

Adjusted (non-GAAP)

$

198,086

 

 

21.0

%

 

$

14,211

 

 

$

137,603

 

 

0.86

 

(1)

Includes a $30.1 million loss recognized related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125%. The loss includes the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs. The loss is presented in other, net in our condensed consolidated statement of operations.

(2)

Includes $10.1 million of current tax expense related to the repatriation of profit from certain Asian subsidiaries to their parent company in the Netherlands. The decision to repatriate these profits was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.

($ in thousands, except per share amounts)

For the three months ended March 31, 2020

 

Operating

Income

 

Operating

Margin

 

Income

Tax

 

Net

Income

 

Diluted

EPS

Reported (GAAP)

$

58,599

 

 

7.6

%

 

$

(1,516)

 

 

$

8,431

 

 

$

0.05

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

Restructuring related and other (1)

43,757

 

 

5.7

%

 

(9,269)

 

 

38,188

 

 

0.24

 

Financing and other transaction costs

1,734

 

 

0.2

%

 

 

 

1,734

 

 

0.01

 

Step-up depreciation and amortization

32,271

 

 

4.2

%

 

 

 

32,271

 

 

0.20

 

Deferred loss on derivative instruments

309

 

 

0.0

%

 

 

 

5,884

 

 

0.04

 

Amortization of debt issuance costs

 

 

%

 

 

 

1,631

 

 

0.01

 

Deferred taxes and other tax related

 

 

%

 

(4,931)

 

 

(4,931)

 

 

(0.03)

 

Total adjustments

78,071

 

 

10.1

%

 

(14,200)

 

 

74,777

 

 

0.47

 

Adjusted (non-GAAP)

$

136,670

 

 

17.7

%

 

$

12,684

 

 

$

83,208

 

 

$

0.53

 

(1)

Includes a $29.2 million loss recorded through cost of revenue in the first quarter of 2020 related to a judgment against us in an intellectual property litigation with Wasica Finance GmbH. We settled this litigation in the third quarter 2020; refer to our 2020 Annual Report on Form 10-K for additional information.

Non-GAAP adjustments by location in statements of operations

(in thousands)

For the three months

ended March 31,

 

 

2021

 

 

2020

 

 

 

 

 

 

 

Cost of revenue (1)

$

2,415

 

 

 

$

35,994

 

 

Selling, general and administrative

4,388

 

 

 

6,182

 

 

Amortization of intangible assets

29,247

 

 

 

31,397

 

 

Restructuring and other charges, net

4,582

 

 

 

4,498

 

 

Operating income adjustments

40,632

 

 

 

78,071

 

 

Interest expense, net

1,711

 

 

 

1,631

 

 

Other, net (2)

35,457

 

 

 

9,275

 

 

Provision for/(benefit from) income taxes (3)

6,070

 

 

 

(14,200)

 

 

Net income adjustments

$

83,870

 

 

 

$

74,777

 

 

(1)

The first quarter of 2020 includes a $29.2 million loss recorded through cost of revenue related to a judgment against us in an intellectual property litigation with Wasica Finance GmbH. We settled this litigation in the third quarter 2020; refer to our 2020 Annual Report on Form 10-K for additional information.

(2)

The first quarter of 2021 includes a $30.1 million loss recognized related to the early redemption of our 6.25% Senior Notes due 2026 at 103.125%. The loss includes the payment of $23.4 million for the early redemption premium, with the remaining loss representing write-off of debt discounts and deferred financing costs. The loss is presented in other, net in our condensed consolidated statement of operations.

(3)

The first quarter of 2021 includes $10.1 million of current tax expense related to the repatriation of profit from certain Asian subsidiaries to their parent company in the Netherlands. The decision to repatriate these profits was the result of our goal to reduce our balance sheet exposure and corresponding earnings volatility related to changes in foreign currency exchange rates as well as to fund our deployment of capital.

Free cash flow

($ in thousands)

Three Months Ended

March 31,

 

% Change

 

2021

 

2020

 

 

Net cash provided by operating activities

$

104,511

 

 

$

98,544

 

 

6.1

%

Additions to property, plant and equipment and capitalized software

(27,172)

 

 

(29,547)

 

 

8.0

%

Free cash flow

$

77,339

 

 

$

68,997

 

 

12.1

%

Adjusted EBITDA

(In thousands)

 

LTM

 

Q1 21

 

Q4 20

 

Q3 20

 

Q2 20

 

Q1 20

Net income/(loss)

 

$

209,588

 

 

$

53,733

 

 

$

121,667

 

 

$

76,729

 

 

$

(42,541)

 

 

$

8,431

 

Interest expense, net

 

176,397

 

 

44,043

 

 

47,417

 

 

44,129

 

 

40,808

 

 

39,403

 

Provision for/(benefit from) income taxes

 

23,152

 

 

20,281

 

 

(13,751)

 

 

15,181

 

 

1,441

 

 

(1,516)

 

Depreciation expense

 

122,198

 

 

31,197

 

 

31,464

 

 

28,928

 

 

30,609

 

 

34,679

 

Amortization of intangible assets

 

128,521

 

 

32,064

 

 

31,152

 

 

32,562

 

 

32,743

 

 

33,092

 

EBITDA

 

659,856

 

 

181,318

 

 

217,949

 

 

197,529

 

 

63,060

 

 

114,089

 

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring related and other

 

57,926

 

 

7,366

 

 

12,902

 

 

(5,050)

 

 

42,708

 

 

42,557

 

Financing and other transaction costs

 

40,537

 

 

35,908

 

 

(832)

 

 

1,842

 

 

3,619

 

 

1,734

 

Deferred (gain)/loss on derivative instruments

 

(9,852)

 

 

2,993

 

 

(1,992)

 

 

(5,926)

 

 

(4,927)

 

 

5,884

 

Adjusted EBITDA

 

$

748,467

 

 

$

227,585

 

 

$

228,027

 

 

$

188,395

 

 

$

104,460

 

 

$

164,264

 

Net debt and leverage ratio

 

 

As of:

($ in thousands)

 

3/31/21

 

12/31/20

 

12/31/19

Current portion of long-term debt, finance lease and other financing obligations (1)

 

$

9,678

 

 

$

757,205

 

 

$

6,918

 

Finance lease and other financing obligations, less current portion

 

27,605

 

 

27,931

 

 

28,810

 

Long-term debt, net

 

3,961,397

 

 

3,213,747

 

 

3,219,885

 

Total debt, finance lease, and other financing obligations

 

3,998,680

 

 

3,998,883

 

 

3,255,613

 

Less: Discount

 

(8,416)

 

 

(9,605)

 

 

(11,758)

 

Less: Deferred financing costs

 

(30,495)

 

 

(28,114)

 

 

(24,452)

 

Total Gross indebtedness

 

4,037,591

 

 

4,036,602

 

 

3,291,823

 

Less: Cash and cash equivalents

 

1,893,926

 

 

1,861,980

 

 

774,119

 

Net Debt

 

$

2,143,665

 

 

$

2,174,622

 

 

$

2,517,704

 

 

 

 

 

 

 

 

Adjusted EBITDA (LTM)

 

$

748,467

 

 

$

685,146

 

 

$

900,137

 

Net leverage ratio

 

2.9

 

3.2

 

2.8

(1)

On February 3, 2021, we announced that we intended to redeem in full the $750.0 million aggregate principal amount outstanding on our 6.25% Senior Notes due 2026. Because we had not issued our 2020 Annual Report on Form 10-K, we determined that these notes should be classified as current on our consolidated balance sheet as of December 31, 2020.

Guidance

 

For the three months ending June 30, 2021

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

160.3

 

 

$

168.8

 

 

$

92.2

 

 

$

99.7

 

 

$

0.59

 

 

$

0.62

 

Restructuring related and other

5.5

 

 

6.0

 

 

5.3

 

 

5.8

 

 

0.03

 

 

0.04

 

Financing and other transaction costs(a)

0.2

 

 

0.2

 

 

0.2

 

 

0.2

 

 

 

 

 

Step-up depreciation and amortization(a)

29.0

 

 

30.0

 

 

29.0

 

 

30.0

 

 

0.18

 

 

0.19

 

Deferred (gain)/loss on derivative instruments(b)

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt issuance costs

 

 

 

 

1.8

 

 

1.8

 

 

0.01

 

 

0.01

 

Deferred taxes and other tax related

 

 

 

 

5.5

 

 

6.5

 

 

0.03

 

 

0.04

 

Non-GAAP

$

195.0

 

 

$

205.0

 

 

$

134.0

 

 

$

144.0

 

 

$

0.84

 

 

$

0.90

 

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

159

 

 

159

 

 

For the full year ending December 31, 2021

($ in millions, except per share amounts)

Operating Income

 

Net Income

 

EPS

 

Low

 

High

 

Low

 

High

 

Low

 

High

GAAP

$

617.5

 

 

$

661.5

 

 

$

303.0

 

 

$

341.0

 

 

$

1.90

 

 

$

2.14

 

Restructuring related and other

16.0

 

 

18.0

 

 

18.5

 

 

20.5

 

 

0.12

 

 

0.13

 

Financing and other transaction costs(a)

5.2

 

 

5.2

 

 

33.5

 

 

33.5

 

 

0.21

 

 

0.21

 

Step-up depreciation and amortization(a)

114.5

 

 

118.5

 

 

114.5

 

 

118.5

 

 

0.72

 

 

0.75

 

Deferred (gain)/loss on derivative instruments(b)

1.8

 

 

1.8

 

 

2.2

 

 

2.2

 

 

0.01

 

 

0.01

 

Amortization of debt issuance costs

 

 

 

 

7.3

 

 

7.3

 

 

0.05

 

 

0.05

 

Deferred taxes and other tax related

 

 

 

 

30.0

 

 

34.0

 

 

0.19

 

 

0.21

 

Non-GAAP

$

755.0

 

 

$

805.0

 

 

$

509.0

 

 

$

557.0

 

 

$

3.20

 

 

$

3.50

 

Weighted-average diluted shares outstanding (in millions)

 

 

 

 

 

159

 

 

159

 

(a)

Amounts do not contemplate the effects of future acquisitions or financing transactions that occur beyond our most recent fiscal period end, including the acquisition of Xirgo Technologies and the additional issuance of 4.0% Senior Notes that occurred after the period end. Due to recent closing of the acquisition of Xirgo, the initial accounting is incomplete and we are not able to reasonably estimate the potential step-up depreciation and amortization implications thereof.

(b)

We are unable to predict movements in commodity prices and, therefore, the impact of mark-to-market adjustments on our commodity forward contracts to our projected 2021 operating results. In prior periods such adjustments have been significant in relation to our reported GAAP results.

 

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