Sensata Technologies Holding plc (ST) Q4 2019 Earnings Report, Transcript and Summary

Good morning, and welcome to the Sensata Technologies Fourth Quarter and Full-year 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.I would now like to turn the conference over to Joshua Young, Vice President of Investor Relations. Please go ahead.

Thank you, Andrew, and good morning everybody. I'd like to welcome you to Sensata's fourth quarter and full-year 2019 earnings conference call. Joining me on today's call are Martha Sullivan, Sensata's CEO; Jeff Cote, Sensata's CEO-elect, and current President and Chief Operating Officer; and Paul Vasington, Sensata's Chief Financial Officer.In addition to the earnings 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 Web site. We will post a replay of today's webcast shortly after the conclusion of today's call.Before we begin, I'd like to reference Sensata's Safe Harbor statement on slide number two. During the course of 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 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 subsequent SEC filings.On slide number three, we show Sensata's GAAP results for the full-year 2019. We encourage you to review our GAAP financial statements in addition to today's presentation. Most of the subsequent information that we will discuss during today's call will be related to non-GAAP financial measures. Reconciliations of our GAAP to non-GAAP financial measures are included in our earnings release and in our webcast presentation. The company provides details of its segment operating income on slides 11 and 12, which are the primary measures management uses to evaluate the business.Martha will begin today's call with brief comments on Sensata's growth and transformation over the past seven years. After which, Jeff will review our overall business summary, and provide more detail on our outlook for 2020, including a discussion of key progress and megatrends. Paul will then cover our financials for the fourth quarter and full-year 2019, and provide guidance for the first quarter and full-year 2020. We will then take your questions after our prepared remarks.Now, I'd like to turn the call over to Sensata's CEO, Martha Sullivan.

Thank you, Joshua, and thanks to everyone on the call for joining us this morning. By now, I am sure that many of you read our press release on January 23, detailing our planned management succession process at Sensata. On March 1, I will officially pass the baton of CEO over to Jeff Cote as part of a well-planned transition process, and I am delighted to do so. While I will be retiring as CEO, I will remain as a strategic advisor and board member as the company executes the strategy we have laid out for our investors over the past several years.As you know, Jeff and I have worked closely together since his arrival at Sensata 13 years ago. Over the past seven years, he has had significant company-wide operational responsibilities, including leading our global operations team and all of our business segments with full P&L responsibility. Jeff and I along with rest of the leadership team at Sensata have collaborated closely in developing and executing the strategy to position Sensata for the next wave of future growth. Key to this effort is leveraging our industry leadership to take advantage of the megatrends that transform our industry and deliver growth to Sensata. This effort, which we first unveiled at our Investor Day in December 2017, provides excellent preparation for Jeff as he moves into the CEO position.So, we as we close our 2019, and I conclude my tenure as CEO, I wanted to share some perspective on Sensata's progress and achievement, and convey my excitement for Sensata's future. I am confident that Jeff and the rest of the leadership team will build on our past accomplishments to create strong return and shareholder value. One of the differentiating features of Sensata is that we have build longstanding relationships with customers around the world, who rely on us to develop mission-critical sensor-rich solutions that address both their current and evolving need.Our relationships combined with our innovation capabilities and strength and engineering enable us to outgrow our end market. We have also built and are constantly optimizing a highly efficient global manufacturing and supply chain network. These pillars of our strategy have reduced differentiated sensing solutions for our customers and industry-leading margin, and will remain important element of our strategy as we go forward.Over the past seven years, we have implemented an effective capital deployment strategy that has created value for our shareholders while providing the company greater flexibility and optionality. We completed 11 acquisitions, which are generating strong return, have added new capabilities, and have led to greater diversification of our end market exposure. Our expanded position and focus on executing growth opportunities in industrial, HVOR, and aerospace industry have reduced our exposure to the automotive market from over 70% to approximately 59% today, and will continue to decline -- this will continue to decline.Our Sensing Solutions business has greater scale and a broader portfolio to capitalize on attractive opportunities in this large and fragmented market. Our M&A strategy has added important new capabilities in wireless sensing, software, and subsystem integration and high voltage electrical architecture. These capabilities along with our best-in-class sensing portfolio have provided the foundation for our electrification and Smart & Connected initiative. In addition, since our [indiscernible] to the U.K. in 2018, we have repurchased approximately $750 million of Sensata stock, while further strengthening our balance sheet, enabling us to make returns based tradeoff between investing in our business, completing M&A, and buying back our own shares. In light of this progress, you can see why we are so confident in Sensata's future. Jeff and the rest of the leadership team have been integral to our effort to expand in high growth auto and accelerate growth in HVOR, industrial, and aerospace industries.Our capital deployment decisions, combined with disciplined operational management have enabled us to deliver solid financial performance, while our end markets have been weak. During my tenure as CEO, we have grown our revenue from $1.9 billion to $3.5 billion, while meaningfully outgrowing our end markets and nearly doubling our employee base. Additionally, our focus on cost efficiency and our ability to capture M&A cost synergies helped us to generate a seven year EPS CAGR of approximately 9%.While I'm proud of our team and their achievements, I am even more excited about the opportunities that lay ahead for the company. Jeff is the perfect leader to deliver strong value creation for our shareholders, our customers, and our employees. Our progress thus far is a strong testament to the high caliber leadership and team, who comprise Sensata today, and I'm deeply grateful for their commitment and support over the years. I have tremendous confidence in the entire team, and could not be more excited about the future. I look forward to continuing to provide support as an advisor and a board member, especially around innovation as we move forward.I also want to thank our long-term shareholders for your support of me and Sensata. Many of you have owned our shares for more than five years. I appreciate the constructive feedback you have provided me over the years, your conviction in our vision and strategy, and your trust in us to be responsible stewards of your capital.I'd like to now turn the call over to Jeff to speak in more depth about our recent performance and our key priorities for 2020. Jeff?

Thank you, Martha. It is an honor to be named as the next CEO of Sensata, and I'm thrilled to lead such a talented group of individuals during this very exciting time for our company. Martha and I have worked closely to develop our strategy, which will continue to focus on mission-critical, hard-to-do applications, further diversifying our business, investing in high growth megatrends, and capitalizing on opportunities where we develop sensor-rich solutions that create value for our customers. I look forward to continuing our legacy of growth, profitability, and success.Now let me turn my attention to our performance in the fourth quarter of 2019. On slide four, I list some of the key highlights of the fourth quarter. We reported revenues of $846.7 million, which represented an organic revenue decline of 0.8%, but exceeded the high-end of our guidance range. We delivered adjusted earnings per share of $0.89, which was also at the high-end of our guidance range. We faced a very difficult end market environment in the fourth quarter, particularly in our heavy vehicle off-road end market, which declined 14% in the quarter. Despite these market headwinds, we continue to significantly outgrow our end markets posting market outgrowth of 490 basis points in automotive and 1,190 basis points in heavy vehicle off-road. One of the key drivers of our overall secular growth was China, which generated 20% organic revenue growth in the fourth quarter. This performance was primarily driven by strong market outgrowth as our customers prepared to comply with China 6 regulations.We generated adjusted operating margins of 22.7% in the fourth quarter, which was in line with our guidance, and includes incremental growth investments made in our megatrend initiatives. We generated $148 million in free cash flow in the quarter, which exceeded our adjusted net income, and represents a conversion rate of 104%. Finally, we continue to make important long-term investments in megatrends for future growth, and are excited about the progress we're making in our Smart & Connected and electrification initiatives, which I will describe in more detail later in this presentation.Slide five shows organic revenue growth or performance by end market in the fourth quarter. I will begin with our aerospace, industrial and other end markets. For the fourth quarter of 2019, we posted 0.7% organic growth in this business. Our aerospace business had a particularly strong fourth quarter, posting double-digit organic revenue growth as a result of a strong end market, continued content growth and solid aftermarket performance. Our industrial business in China continues to decline, but improved significantly on a sequential basis. While channel inventory reductions are pressuring results, our fourth quarter performance benefited from modestly better market dynamics. Our automotive business posted an organic revenue decline of 1.1% in the quarter. This was 490 basis points better than the global end market decline of 6% in the fourth quarter and was in line with the expectations we shared with you in October.During the fourth quarter, we generated double-digit organic revenue growth in our China automotive business as a result of strong content gains, and end market growth of 3%. Our North American automotive business saw its fourth quarter performance adversely affected by the GM strike, which resulted in meaningful end market decline, even though content growth remains strong in this region. In Europe, we continue to be affected by a volatile end market primarily as a result of a general market decline due to softer exports to China and specific weakness in the U.K. and Turkey. Our heavy vehicle off-road business posted an organic revenue decline of 1.9% which represented 1190 basis points of outgrowth versus a 13.8% end market decline during the fourth quarter.The largest end market decline in the quarter was from the construction end market which was down 25% followed by double-digit end market declines for both North America and European on-road truck. The bright spot for this business remains our China on-road truck business, which continues to post healthy growth as a result of strong content performance, especially as OEMs prepare for the implementation of China 6 regulations.On slide six, we show outgrowth versus end market over the past two years. At our Investor Day in 2017, we made a commitment to significantly outgrow our end markets. Specifically, we stated our outgrowth in our automotive business would be in the range of 400 to 600 basis points. And our heavy vehicle off-road business would be in the range of 600 to 800 basis points.After two years of execution, I'm pleased to report that we are operating right in the middle of the targets we set. Our automotive business has generated average outgrowth of 495 basis points, while our heavy vehicle off-road business operated at an average of 735 basis points outgrowth over that two-year period. This performance speaks to the visibility that we have into our content performance, even during periods of end market volatility. Unfortunately, our strong outgrowth has been offset by unanticipated declines in our end markets. For example, in automotive, we have seen end market decline of 3.2% on average since 2017, compared to our expectations that the market would be flat, in heavy vehicle off-road our end markets grew 0.8% per year since 2017 in contrast to our expectations that that market would grow 3% per year.In 2019, we closed nearly $400 million in new business wins, which is lower than our expectations as customers pushed out decisions on a number of new platforms. We would expect an acceleration of new business wins in 2020 as we capture some of these delayed opportunities and we have a strong pipeline to support that outcome. The key message that I want you to take away from this slide is that we have confidence and our ability to sustain a consistent level of our growth into 2020 and beyond.Moving to slide seven, I want to share some updates about progress we're making in our megatrend initiatives, as well as our plans to accelerate our investment in these areas in 2020. I described on our last quarter's call, our activities related to Smart & Connected. We are currently testing proof-of-concepts with some of the world's leading fleet managers. Our solution is working in real-world environments, and is currently capturing data on trucks and trailers in our customer's beliefs. Our tire pressure sensing application has demonstrated a clear and compelling value proposition. We are helping fleet managers identify, which trucks and trailers in their fleet are not ready to be driven well before they hit the road. This is helping them eliminate downtime, reduce operating costs, and create safer driving conditions in their fleets. We expect to be able to announce additional business wins with both fleet managers and OEMs later this year. Due to our progress and excitement about this initiative, we plan to increase our investment in smart and connected in 2020 to support our efforts.On the electrification front, we continue to have confidence that a large portion of our solutions that served the market for combustion engines will continue to be required in an electrified environment. Further, we continue to add capabilities to allow us to capitalize on this electrification trend. For instance, a little more than a year ago, we acquired GIGAVAC to expand our electrification offering into high voltage contactors. And we're quickly establishing ourselves as the standard for premium electrified vehicles, particularly with the most challenging applications with high current levels.Additionally, Sensata has a leadership position in the DC fast charging infrastructure segment, which is growing greater than 30% a year. Also, we were the first company in the industry to develop a Smart Sensor that addresses safety issues associated with risk of thermal runaway in batteries, and we have had several wins related to this solution in 2019. We continue to extend our market share leadership and various thermal management and motor precision applications in both hybrid and full electric battery vehicles. And we have an active new business pipeline in electrification applications. And we are increasing our R&D investment to pursue this growth.A significant portion of our new business wins will eventually serve electrification trends in all of our end markets that we serve. So for both smart and connected, and electrification, we are very excited about our efforts thus far and continue to believe that our progress in these important initiatives will help some Sensata differentiate itself with customers and lead to long-term advantages for our company and our shareholders.On slide eight, we summarize some key messages, which we have discussed. We are delivering on our promise for our growth to market despite and market volatility. We are accelerating our investments for growth given the opportunities we say, we are generating solid free cash flow, and we will continue to strengthen our portfolio through disciplined value add M&A.I would now like to turn the call over to Paul to review our fourth quarter and full-year 2019 results in more detail and also to provide guidance for the first quarter and full-year 2020. Paul.

Thank you, Jeff. Key highlights for the fourth quarter as shown on slide 10 include revenue of $846.7 million in the quarter, a decrease of point 0.1% from the fourth quarter of 2018. Changes in foreign currency decrease revenues by 0.3%. The acquisition of GIGAVAC increased revenues by 1%. The net result was 0.8% organic revenue decline a quarter.Adjusted operating income was $192.5 million in a quarter, a decrease of 8.4% compared to the fourth quarter of 2018 driven primarily by the decline in organic revenues, productivity headwinds, partially due to increasing new product launches, better design, and development effort to support new business win and megatrend growth initiatives and higher incentive compensation. These factors were somewhat offset by saving a repositioning action taken this year. Adjusted net income was $141.7 million, a quarter, a decrease of 10.1% compared to the prior year quarter. Adjusted EPS was $0.89 in the fourth quarter, a decrease of 6.3% compared to the prior quarter.Now I'd like to comment on the performance of our 2 business segments in the fourth quarter of 2019. I will start with Performance Sensing on slide 11. Performance Sensing reported revenues of $632.9 million for the fourth quarter, a decrease of 1% occurred to the same quarter last year, reflecting a negative impact from foreign currency of 0.3% in a positive impact on the acquisition of GIGAVAC of 0.6%. Excluding these factors Performance Sensing organic revenue decline 1.3% compared to the prior quarter. Our automotive business reported an organic revenue decline of 1.1% in the fourth quarter of 2019, but outpaced the end market by 490 basis points.Organic revenue growth in China was offset by organic revenue decline in North America and Europe. The GM strike reduced our fourth quarter revenues in North America by approximately $10 million, which was less than expected. Excluding the GM strike, our North American auto business delivered organic revenue growth in the quarter driven by high single-digit content growth. Our HVOR business reported in organic revenue decline about -- of 1.9% in the fourth quarter, far outpacing a 14% in market decline by 1,190 basis points, primarily due to strong content growth in our China on-road truck business.Performance Sensing operating income was $165.1 million, a decrease of 7% as compared to the prior year quarter and operating income as a percent of revenue was 26.1% in the fourth quarter, a decline of 170 basis points. The decline in segment operating income was due primarily to the declining organic revenue. Productivity headwinds partly due to increasing new product launches, and greater design and development effort to support new business wins in megatrend growth initiatives, somewhat offset by savings from restructuring actions.As shown on slide 12, Sensing Solutions reported revenues of $213.8 million in the fourth quarter, an increase of 2.3% as compared to the prior quarter. Organic revenue increased 0.7%, which excludes a negative impact on foreign currency of 0.4% and a positive impact on the acquisition of GIGAVAC of 2%. This increase was a result of double-digit organic growth in our aerospace business, driven by shorter content in a healthy end market partially offset by industrial market declines, albeit less significant than previously anticipated.Sensing Solutions operating income was $68.2 million in the fourth quarter, a decrease of 0.8% from the prior quarter. The slight decline and operating income was due primarily to productivity in foreign currency headwind, somewhat offset by savings from repositioning actions and the acquisition of GIGAVAC.Corporate and other costs not included in segment operating income were $52.3 million in the fourth quarter. Excluding charges added back to our non-GAAP results, corporate and other costs were $39.1 million in the fourth quarter of 2019, up approximately $5 million from the fourth quarter of 2018, primarily due to higher variable compensation and administrative costs.Slide 13 shows Sensata's fourth quarter 2019 non-GAAP results. Adjusted gross profit declined 4.5% year-over-year to $298 million and gross margins declined 160 basis points to 35.2%. The decline in gross profit and margin were primarily due to declining organic revenue, productivity headwinds partially related to increasing new product launches, higher variable compensation, and unstable foreign currency, somewhat offset by acquisition of GIGAVAC and savings from repositioning actions.R&D costs were 8.3% due primarily to increasing design and development effort. Support new business wins and investment in megatrend. SG&A cost increased 1% to the acquisition of GIGAVAC. Excluding the impact of GIGAVAC, SG&A cost were flat with the prior quarter as we align our cost structure to the lower revenues we are experiencing. As a result, adjusted operating income was down 8.4%, compared to the prior year quarter. Our tax rate shown on the slide as a percent of adjusted profit before tax was roughly flat, compared to the prior year. Finally adjusted EPS was down $0.06 or 6.3% as compared to the fourth quarter of 2018 as a decline in operating income was partially offset by the benefit of shared repurchases.Slide 14 shows Sensata's full-year 2019 non-GAAP results. Adjusted gross profit declined 5.4% year-over-year to $1.2 billion, and gross margins declined 130 basis points to 35%. The decline in gross profit in margin were primarily due to the decline in organic revenues, productivity headwinds parts related to increasingly product launches, the net impact from acquisitions and divestitures partially offset by stable foreign currency and lower variable compensation costs.R&D costs were $148.4 million or up 0.8% year-over-year as increases in design development efforts to support new business win and megatrend growth initiatives were mostly offset by the favorable impact of foreign currency. SG&A costs were $267.4 million or 8.6% lower year-over-year, due primarily to lower variable compensation and selling costs favorable foreign currency and cost savings from repositioning actions. As a result, adjusted operating income was down 5.6%, compared to the prior year. Our tax rate shown on the slide as a percent of adjusted profit before tax was up 40 basis points year-over-year to 8.6% in line with our guidance.Finally, adjusted EPS was down $0.09 or 2.5%, as compared to 2018 as a decline in operating income was mostly offset by the benefit of share repurchases. Free cash flow was $458.3 million during the year or 79.6% of adjusted net income, and exceeded a free cash flow guidance provided last October, net leverage at the end of the year at 2.8 times within our target range of 2.5 to 3.5 times.On slide 15, I show our financial guides for the first quarter of 2020, which includes our best estimate of the business impact related to the recent coronavirus outbreak, which is quickly changing and highly uncertain. Furthermore, it's very difficult to predict when the government imposed quarantines will end when travel restrictions will be lifted, when our plans will be fully operational and ultimate impact on end market demand.That said we estimate for both the first quarter and full-year '20 a $40 million revenue and a $20 million operating profit negative impact. The $20 million operating profit drop reflects the normal impact, unexpected loss revenue as well underutilized and stranded costs related to the sudden event. We continue to monitor the situation closely and we are doing everything possible to protect our employees and serve our customers. For the first quarter of 2020, we expect reported revenues between $793 million and $817 million representing a reported revenue client between 6% and 9%. At the midpoint of our guidance, we expect our foreign currency will decrease revenues year-over-year by approximately $5 million. Excluding the impact of foreign currency, we expected for inorganic revenue decline of 6% to 8% in the first quarter.Our current flow rate is approximately 93% of the revenue guidance midpoint for the first quarter, and reflects lower than normal production of our manufacturing sites in China, and reduced customer demand. We expect to report adjusted operating income between $149 million and $155 million 140. On the bottom line, we expect reported adjusted net income between $98 million and $104 million, which would represent a decline of 25% to 30%. We expect to report adjusted EPS between 62 and $0.66, which includes a $0.01 negative impact from foreign currency at guidance midpoint. Throughout 2019, we implemented significant restructuring actions to better align our costs to lower volumes we are experiencing.More recently, we announced the closing of our Carrickfergus plant in Northern Ireland to further optimize our manufacturing network and footprint. This action will result in approximately $7 million annualized savings. We expect this manufacturing plant to be fully shut down in early 2021, and expect to incur approximately $15 million in restructuring costs in 2020 to complete this closure. Looking forward, Northern Ireland will remain an important expanding R&D center for Sensata.Now, let me turn to our guidance for full-year 2020 shown on slide 16. For full-year 2020 we expect revenue between $3.4 billion and $3.5 billion, representing a range between a 1% decline in 1% growth. We expect foreign currency to decrease revenues by approximately $15 million. Excluding foreign currency or organic revenue gains represents a range between a 1% decline and 2% growth. We expect adjusting average income between $753 million and $781 million, which would represent a range between 1% and 4% decline.On the bottom line, we expect adjusted net income between $539 million and $555 million, and adjusted earnings per share between $3.42 and $3.58 for the full-year 2020, which represents the decline of 4% to growth of 1%. We expect foreign currency will have a $0.04 negative impact on EPS in 2020. Our EPS performance in 2020 reflects continued strong revenue growth out growth to our major end markets, which continued to decline, and in the case of China, significant market uncertainty as noted earlier in our prepared comments. Currently, we expect the effects of the coronavirus will reduce our EPS by $0.11, overall with all that occurring in the first quarter.With that said, we expect ongoing net productivity gains and savings for repositioning actions to fund our efforts to further strengthen our core business as well as expand our initiatives intersect promising new megatrend growth opportunities, most of them will be in the areas of electrification and smart connected. We expect that our adjusted tax rate will increase by approximately 100 basis points over 2019, and being a range of 9.8% for adjusted profit before tax. We expect to generate free cash flow of approximately $430 million to $470 million. This free cash flow guidance assumes annual capital expenditures of approximate $165 million to $275 million for the full-year 2020.At our Investor Day in 2017, we shared with investors a three year financial plan. Since then, we have achieved a number of critical objectives, such as accelerating content growth over that period and creating greater flexibility in deploying capital. However, with our current 2020 guidance, we expect the fall short of our revenue earning in cash flow targets. First, our end markets have weakened significantly below the market growth assumptions embedded in our three year projections. This end market weakness will result in nearly $425 million less revenue over the three-year period than originally expected. Second, we divested a profitable, but very slow growing non-strategic business in valves, and purchased a small, but very fast growing business in GIGAVAC, which is critical to our electrification growth platform. These two factors combined with lower than expected productivity gains, mostly due to lower volume are the main contributors to our expected shortfall to work for your targets.On slide 17, our expectations regarding most of our major end markets in 2020, which all continue to perform. We expect another difficult end market environment in 2020. But overall, we expect less of a headwind from our end markets in 2020 due to modest improvement in the global auto and industrial markets, somewhat offset by a weaker HVOR end market.Now I'd like to turn the call back over to Joshua.

Thank you. Andrew, please assemble the Q&A roster.

[Operator Instructions] The first question comes from Sameet Chatterjee of JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking my question. Before I start, congratulations to both Martha and Jeff. I just wanted to start off with the content gains in 2020 related to 2019, you're guiding to similar levels of content gains or even modestly higher, if you can help me with the drivers of the content gains you are thinking about in 2020? It looks like China 6 Regulation will be one on the heavy vehicle side, and then how to think about the change in mix of the content gain towards the megatrends that you are investing towards?

Yes. Great question, so, we tend to look at the content gains over a very long period of time, much like we look at our NBO opportunities, given the long cycle nature of our business. As we mentioned in our prepared comments, we would expect similar content gains in 2020 and beyond that we have experienced over the last couple of years, and so, that's an average in automotive about 490-500 basis points, and on HVOR in that 600 to 800 range, so, midpoint about 700. In terms of the opportunities that we are seeing very much similar to the trend that we have been seeing in the past in terms of all of our customers aiming to achieve regulatory requirements around the world, and also, we are seeing impact of megatrend-related activity, and so, about a third of our NBO activity in 2019 was related to megatrend-related opportunities that will eventually turn into content growth, and so, over the long period of time of three, five, seven years, we will see content shift more toward megatrends in the business helping our customers achieve their objectives.

Got it, that's helpful. And if I can just clarify one more thing, which is you now guide to China automotive production being down 6% in 2020. That's related to some third-party forecast that are more flat, so I'm assuming a big part of that impact is the 1Q impact, given the events there. So, if you can just help me think about how much of that -- how are you thinking about he 1Q China automotive production, and if you can remind me what the average content per vehicle is for Sensata in China right now?

Sure. So, yes, a very large portion of the decline of 6% is related to the impact in the first quarter, although there is a slight decline expectation in our forecast for China, but the big component of that is related to the virus; very fluid situation, we will come back to that I think in terms of providing a little bit more color on it. So, that's the trend that we see there.

The next question comes from Amit Daryanani of Evercore. Please go ahead.

Thanks for taking my questions. [Indiscernible] best luck Martha, it's been a pleasure working with you, and congrats Jeff on the new role. Yes, I guess, maybe to start off, the two growth initiatives that you guys have been talking about, Smart & Connected and electrification, is there way to think about how much of the investments are [making] [ph] from a dollar terms in 2020 for those initiatives, and when do you think revenues will start to accrue, or show up on your P&L from these investments?

Yes. So when you compare '19 to '20, there is about a $20 million incremental investment in Smart & Connected. Some of that is reallocation within other investment, but net $10 million to $15 million incremental R&D spend associated with growth opportunities that's baked into 2020, but there is some reallocation as well. So, we have been shifting over time our investments -- our long-term investments associated with growth to megatrend, and year-over-year, there is about a $20 million incremental spend on that. So, in terms of when we will start to see impact, we see some impact already. So we have some revenue in our 2020, the megatrend-related areas, but I think it's also important to note that a large portion of the revenue that we are experiencing today will apply in the future as well. So, it's not a shift completely from one platform to another. There are elements of our product categories that will continue to have a role going forward even as those megatrends get implemented more broadly in the end markets that we serve.

Got it. If I could just a follow-up on China, with the health concerns, I heard the numbers you guys have, which is $40 million in revenue, $20 million in operating income impact in Q1, I am hoping can you just talk a little bit more on what impact it's having on your supply chain at this point, and do you see that being an issue in terms of your ability to ship products globally to meet demand trends beyond just China?

Yes. I appreciate the comment. Let me provide a little bit more context associated with the virus and what we are seeing. So, I think everyone knows that we have two manufacturing plants based in China, we also have a business and Engineering Center based in China. So we're getting firsthand information regarding what's going on in the ground, and we're doing everything we possibly can to make sure that we protect our people, and we serve our customers, and we're having constant dialog with both to make sure that we're doing what we need to as well as with the local governments to make sure that we're complying with the mandates that they put in place. Based upon those, that's how we came up with the estimate. We're also speaking with our supply chain to make sure that our suppliers more deep in the supply chain are ready to respond as this recurs, and we're examining the inventory levels that our suppliers have, we have -- our customers have to make sure that we can have [continuity] [ph] of supply.Having said all that, it is a very fluid situation, and we're watching day to day how demand unfolds, and also the impact that it has overall on our supply chain, but it's an active dialog. Our best estimate at this point is the $40 million of revenue and $20 million of profit, largely the profit drop through is more significant than you would expect, because the way that the government implemented the quarantines is to extend holidays. So, there was an obligation during some portion of that time to continue to pay our employees, which is also the right thing to do for them, given that the situation they're in, and so, that's the more color that we have, and we'll continue to monitor the situation very closely.

The next question comes from David Kelley of Jefferies. Please go ahead.

Hey, good morning, and I'd also like to convey my congrats to Martha and Jeff as well. Just following-up on that coronavirus commentary, I guess, could you provide some color on how we should think about the actual individual end market impacts, is it mostly automotive, and where else do you see the flow-through as well?

Yes, so we have a broader business, obviously in China outside of automotive, and it's pretty, pretty widespread in terms of the impact across all of those end markets that we serve. So, when you think about the $40 million impact in Q1, that represents about 4.5% of our decline in revenue that we've guided to, a decline in overall market and it's pretty consistent across each of the end markets, automotive, industrial, HVOR, because candidly all of the customers that we serve in that region are impacted in the same way. The interesting question will be on the rebound side of this, we're not expecting that there will be a recovery of this $40 million loss, but we'll watch closely because I think on the recovery side, you might see a different outcome across those end markets going forward, which we will update when we have more data on.

One other comment, just, if you look at our exposures in China, about two-thirds of 70% of our business is auto or truck-related, and the impact here is roughly aligned to our exposure in China in those end markets.

Okay, great. Thank you, and a follow-up, I guess how are you thinking about the timing of your customers returning to production, and how that flows through the $40 million, you know, we've heard from others and certainly seen headlines around some sort of mid-February timeframe, is that in line with your thinking, or you're trying to take a more cautious approach, and again, recognizing this is a very fluid situation and hard to pinpoint at this point?

Yes. So, the government is lifting quarantines in a different way across different provinces. I can speak to the specifics that we see. It's hard to really understand how that would impact others in the supply chain because it's very facts and circumstances-specific. In both of our manufacturing plants, we've been given a clear sign to restart production. Now, the challenge with that is when our workers come in from outside of the province, they in some instances need to go through a quarantine period, and there are also instances where if there are indications of the virus in that area, not in our plant, but in that area, then we might be asked to put a halt, and so, for instance, on Monday, when we restarted our Wao Ying, China location, there was an instance of a virus outside of the plant in the area that the government asked us to postpone the rest of the day. So, our plan is to get back to close to full production by the end of the 17th. So that gives us a little bit of leeway, and will again continue to monitor the situation very closely here.

The next question comes from Wamsi Mohan of Bank of America Merrill Lynch. Please go ahead.

Yes, thank you. Congrats to Martha and Jeff as well. Can you maybe address the fact that if you take out the $40 million impact from coronavirus, you're still guiding 1Q somewhat sub-seasonal at roughly flat versus up. So, can you talk about some of the factors that are driving that and how should we think about the seasonality if let's say you get back to full production, as you said, Jeff, after on the 17th or so, how should we think about the sequential projections from there forward as you go through the course of the year obviously you're starting rate across 1Q level?

Hey, Wamsi, it's Paul. A couple of comments, I mean the first would be that, as you know, Q1 is always our lowest margin quarter. It's what a lot of new pricing kicks in at the end of the year, and our productivity initiatives accelerate over the course of the year. So this is a normal, somewhat normal trend that we see every year, but still even if exclude $40 million, we're still down. So we're still struggling a little bit in terms of productivity with the lower volume and operating leverage. We have some timing around expenses related to compensation. So, all in all, I think it's a solid quarter. It's consistent with what you see in the past, to grow over the course of year our productivity will continue to improve. So I think it's similar to what our trends and patterns have been historically.

Thanks, Paul. And can you maybe also address what your expectation in 2020 for free cash flow is I might have missed that but can you just talk about how you're thinking about the flow through and how much restructuring, cash restructuring impact we should expect in 2020?

We're happy to share that, share a range of $430 million to $470 million with midpoint of $450 million, which is somewhat is in line with what we delivered this year, we got $458 million lower given level of profit levels with a higher CapEx in 2020 versus 2019, so it's largely in line. Restructuring payments will be slightly less than we saw in 2019. So, that does help a bit, and we had some one-time expenditures this year that don't repeat next year. So it's consistent in line, I think with the level of operating profits that we're generating.

[Operator Instructions] The next question comes from Dan Galves of Wolfe Research. Please go ahead.

Hey, good morning. Thanks for taking my question. In terms of the EV opportunity, our sense is that the current batch of EVs launching now aren't very optimized partially due to not having fully optimized automotive grade parts from the supply chain. Is that your impression as well? Do you have content on kind of some of the EVs that are launching late last year this year and kind of what is the sourcing environment currently in terms of pipeline of new business?

So, yes, yes, we do have content on the vehicles that are being launched today. And yes, I would agree with you that as customers use new evolving technology, the R&D and product roadmaps that they experience vary sometimes based upon the challenges that they face as they really ironed out what their vehicle architecture will look like, and I think what you mentioned in terms of the supply chain than largely pulling on suppliers that were more typically in the industrial supply chain is accurate. The good example I would give you is that the GIGAVAC acquisition that we had primarily served that market and we're then bringing it to automotive levels, the product quality and the manufacturing standards. So I think your observations are absolutely accurate and I would say we're consistent with what we're experiencing.

Okay, got it. Thanks. And just one housekeeping that the negative FX impact of $0.04 is that related to the top line impact that's happening this year or is that more of a non-recur of some of the hedging that benefited 2019?

It has to do with some of the hedges that are coming off. Our hedging program is consistent we had about 18 to 24 months, we had about 80% hedged on the major currencies, which could be the same, the Euro, the Peso and the Pound. And so it's a reflection of what we've hedged and where spot rates were at the end of December, and the exposure that we have.

The next question comes from Joe Spak of RBC Capital Markets. Please go ahead.

Thank you. Good morning. I wanted to talk a little bit about some of the comments on HVOR. I think, again, you mentioned the potential that some programs could be pushed out a little bit. I think you mentioned that last quarter as well. Even though it looks like organic growth, our out growth this quarter, can be became a little bit better than expected, but how does that sort of, I guess, dovetail with the 700 basis points about performance that you're guiding to, in that segment from a cadence perspective and also with the virus does that not at all impact the potential outperformance. I guess does the virus really impact some of the potential outperformance and sort of further push out some of the programs?

Yes. So, on the HVOR business, we've talked during 2019 about the fact that some of our customers pushed out launches partly due to market circumstances, also partly due to readiness more broadly on the architecture and systems that they're implementing. And but we also see at the end of the day, although we saw some lumpiness in terms of content by quarter within HVOR, we landed quite nicely and over the last two years, we landed quite nicely. And so, although market circumstances, customer readiness, other supplier readiness to launch platforms could have quarter-to-quarter impacts on overall content growth. We continue to have very high confidence in the long-term content growth. In terms of the virus impact, it's a broader impact. It's a demand and when there's lower demand, there's lower content clearly, but we don't expect that that would have a lasting impact in terms of how customers think about new product launches.

Okay. And then, just I appreciate your comments and sort of the migration impact within China. I think that's been a little bit under reported. I guess, as you're starting to maybe it's still too early for this, but as you're starting to see some employees come back. Are you noticing any hesitancy of workers to come back and like could there be a potential for a little bit of ramp up or startup disruption as you might have to also do some new hiring?

No, on the employee desire to come back to work part and we are doing other activities associated with providing a mass and where they gather to eat to make sure that we're taking the necessary precautions to make them feel comfortable with the working environment. Obviously, testing temperatures, we have doctors on staff at our plants to make sure that we're monitoring that situation, a variety of other logistics things associated with wiping down these flat surfaces and so forth. So we're doing everything to make sure that our employees as they come back, feel comfortable with the working environment that they're coming back to.

The next question comes from Shawn Harrison of Longbow Research. Please go ahead.

Hi, good morning. Just following up on the China virus topic, I know most kind of the automotive supply chain is localized to a region, but are you seeing any potential risk either into Europe or other regions of another supplier, maybe not being able to get product to either the integrator or the auto OEM themselves, and that potentially impacting demand for you and in the first quarter of the first-half of the year?

So the $40 million that we've quoted is China region specific as we examine the potential impact to our customers in Europe and North America, we do not see any impact on that right now. I would also mention that over the last several years, we've -- we as a company have worked to make sure that we have regionalized manufacturing to minimize that impact, but you're absolutely right, that it is a very complex supply chain, and there are sub suppliers and others deeper in the supply chain, that could have an impact that we're monitoring. In terms of our view, we don't feel as though there's any incremental impact. The question that you're bringing up is a good one, which is, well other suppliers in the supply chain impact that more broadly, and we're not seeing that right now. But again we'll continue to monitor it very closely.

Okay. And then, as brief follow-up, Jeff, you mentioned I think program wins were down 100 and some million over the average, relative to the average the past two years. What gives you confidence in terms of maybe the push out that you saw in 2019 that it accelerates in 2020? And that, it maybe doesn't get pushed again a little bit?

Yes, so two things. The first would be if you look at the average new business when over the last five years, it's $440 million. So although in individual years, we might see higher amounts of opportunities and wins due to just the timing of when customers choose to launch new items, but given it's a long cycle business that long-term average, I think is the more meaningful number in terms of what we should watch, and also the pipeline. So when we look at the pipeline of opportunities that we have now versus what we had in the beginning of 2019, it's a bigger pipeline, and nothing replaces the personal contact with customers to make sure we understand where they are in their decision-making process, and all of those things give us comfort in the fact that we will see a higher NBO award in 2020 that we did in 2019.

The next question comes from Brian Johnson of Barclays. Please go ahead.

Thank you. Just want to talk a bit about the margin guide for 2020. If you kind of strip out the virus impact, looks like slightly growing top line but flattish margins. Can you kind of give us some color on the puts and takes A is that directionally right and B the puts and takes around the margin?

Sure, if you back out the $40 million, we're in a 1%-1.5% organic growth and earnings were operating profit grow at a similar level. So what's happening there, we continue to benefit from the repositioning actions that we took. But as Jeff mentioned, we have a significant increase in investment around megatrend. Those two were somewhat offsetting. And then, we look at compensation costs, investing in the core business for sustainable long-term growth. Those things are being funded by continued productivity gains, net productivity gains in the P&L. So net and net you back out the virus impact, it's about flat earnings. It's earnings growth in line with revenue growth on an organic basis. Currency is a little bit of a headwind like we noted about $0.04.

Okay. So, not really any margin expansion with those puts and takes?

No, when you back out -- just about flattish to slightly down and operating margin.

I've got bunch of strategic questions. We'll get those in Florida like look forward to seeing you Jeff, we will miss you Martha but congrats. Just want quick and I hate to just keep feeding the virus but, with about sort of five, mid fives $5.4 million in production expected in China this quarter, can you give us a sense of just so we can track at every week or so, the production assumption embedded in your virus cut?

Yes. So we believe there's about 450,000 to 500,000 units per week of production. So, given the fact that we're down three, call it three weeks. You can -- that math is, translate to 1.5 million units, it would be a roundly estimate.

Okay. Just rather then there is the incremental impact on HVOR industrial business, but after that.

Okay.

The next question comes from Christopher Glynn of Oppenheimer. Please go ahead.

Thank you. Good morning, and congrats to Martha and Jeff on the transitions. I had a question about the vehicle Area Network topics on HVOR, you've been, right down the middle on your content growth targets the last couple of years. Is this something that, you'd see improving on that or it's more sustaining at a year or two out?

Yes, the goal would be to have it improve. And the interesting part that I think you and others have caught on is that it's, we're serving a different market segment, right? So it's an aftermarket, which might have shorter periods or will have shorter periods in terms of the end NBO pipeline. So it would be incremental, our megatrend investments, broadly, when you think of some of these things that are, if you will be on the center component, we will naturally have larger ASPs and create more content growth for us as a company and as you know, they're very large addressable markets in terms of the opportunity that we're pursuing.

Thanks for that. And my follow-up is on your new business wins is in particular with China content like vehicle being great and EVs taking off, is this still primarily a single source business any particular variations as pertained to EV or China for instance?

Yes, no major changes in terms of how our customers are thinking about their sourcing strategies. The fact that we focus on those mission critical hard to do applications requires a lot of engineering effort on the part of our customers and so the dynamics associated with that and the need for us to make sure that we can deliver for them when they need it is critically important to them in terms of selecting their suppliers.

The next question comes from Deepa Raghavan of Wells Fargo. Please go ahead.

Good morning all. Let me also echo my congratulations to both Martha and Jeff. A couple questions from me. First one, how are you thinking about the full-year organic decline that you guided splits between Performance Sensing and Sensing Solutions, given that you exited Sensing Solutions on a positive organic growth in Q4?

So, for the full-year, if you look at our guide is essentially flat on revenue. We would expect our Performance Sensing business to be down largely driven by the HVOR market, we're expecting the automotive business to be slightly better than it was last year, and the performance Sensing business will be up. So really that impact aside from the virus obviously, the impact of the virus is the HVOR business in terms of year-over-year decline versus some improvement.

Yes. So, Sensing Solutions -- let me give, Sensing Solutions -- and stronger aerospace business that continues to show really strong content growth into '20.

Got it, and that's why the organic growth in Sensing Solutions is positive, but Performance Sensing is impacted by the virus gently…

That's right.

Yes, got it. My follow-up is on the virus, so sorry about that, I know that you're getting a lot of questions, but why do you think the lost revenues from the virus may not be [recouped] [ph], is that your worst case scenario? Just curious why you think this is lost demand, and on the flip side, how we are situated from a production capacity or utilization perspective, if demand were to come back. I mean, what are some of the governing factors there?

Yes. So I wouldn't say it's our worst case scenario. The worst case scenario is that there's continued disruption here, right. So I think it's right down the middle of the road in terms of the impact. It's a great question that around whether or not it will snap back, and it really does in my view depend on a couple of things. Consumer sentiment, which may be driven by government in terms of other incentives we've experienced in the past certainly the government in China can implement very quickly incentives to create incremental demand, and so that's an option that may exist that could change this outcome, and the other is around the capacity that you're bringing up a great one. And so which capacity with us and also deeper in the supply chain and with our customers in terms of them being able to catch up. We like to think that we can always find a way to make sure that we can deliver for incremental demand, but there are areas of capacity within our business where we are running pretty much at close to full capacity within 5% or so. And so, there could be minimal impact, but our goal would be if demand materializes to make sure that we can deliver on it.

The next question comes from Joe Giordano of Cowen. Please go ahead.

Hey, guys, thanks for taking my question. Just starting on Sensing Solutions, some other players in China industrial have talked about like a pull forward demand into the fourth quarter given the timing of New Year and kind of stocking ahead of that. So did you see -- I know you said that Sensing Solutions did better than you thought on industrials as wondering if that has anything to do with it there?

It does have some of the impact when you peel back the - what we believe to be the market impact in the industrial business. In the fourth quarter it was down about 5%. We are expecting that to improve into 2020. But yes, it's the combination of market decline and also inventory takeout it's a very fragmented complicated supply chain on the industrial side, and we saw a fair amount of inventory takeout in the supply chain. That is the channel inventory takeout, which ultimately impacted our demand for our products. So that separate from raw demand from customers. So we saw more of an impact in 2019, then pure demand reduction because of that channel inventory take out.

Yes, I guess I was referring to - some we're talking about like a positive impact just in fourth quarter from China, specifically, a head of New Year, so I'm like, so there was a little bit of a surge in demand from kind of stocking ahead of that outside of the general destocking that happened all throughout 2019?

Yes, I mean, I think that would be normal market cycle for us. I don't think that we saw anything that was different than what we would normally see in terms of our quarterly trend in the businesses.

Okay, that's what is going on. Okay, perfect. And then Paul, just on the tax rate guidance for next year. I guess the ramp a little bit quicker than most probably anticipated. How do you kind of see that progression over the next couple years? I know we generally talked about like, 50 bits a year now, and this is 118. So how quickly should we see that kind of increase over the next few? And do you have kind of like an endgame number that we should think about?

So go back to 2017 Investor Day, we did talk around - about 50 basis points a year for few years, we've done better than that. So that's around the mix of where the profits are generated in the tax rates and those different jurisdictions. So we are a little bit ahead of where we thought we're going to be. We've had some tax benefits that naturally expired in 2019 that won't benefit '20. So that's driving some of the increase, but over the three year period we are about where we thought we would be. We did better than the first two and now we're giving a little bit that back in 2020.

The next question comes from Steven Fox of Cross Research. Please go ahead.

Thanks. Good morning. Just on the HVOR markets obviously, out of those end markets are in cyclical decline, I was wondering if you can sort of give us a sense of where you think construction versus Ag versus commercial vehicles are at this point in that cycle. And secondly, when you look at your growth over marketing was in those markets, it was substantially above the two year average. I was wondering what you would attribute that to given that the cyclical pressures that I just mentioned. Thank you.

Yes, so we started seeing a decline. We start with we had forecasted a decline in the latter part of 2019 in those markets. We saw that come a little bit earlier starting really in the tail end of the second quarter of 2019. We started to see the decline in some of those end markets. And it really accelerated as we got to the end of the year, and so we quoted some of the stats on market in the fourth quarter of 2019 on road truck down 14% in North America, Europe down almost 14, as well Ag down 10, and so cross that overall market down 14%. So going forward, we're expecting it to be some similar trends, but overall about 9% are in the market, so less than fourth quarter, but more than full-year 2020. In terms of the timing on that, I think that our view is that it's a year to 18 months cycles. So we'll see more come to balance at the end of 2020, but we're not forecasting that there's any big uptick in terms of that market during this year.

The next question comes from Mark Delaney of Goldman Sachs. Please go ahead.

Yes, good morning, and thanks for taking the question. Martha, thanks for all your help and time over the years and just best of luck in your new role. The questions about the comment Jeff you made on your prepared remarks about one of your goals as CEO of diversification by end markets? Are you referring mostly to organic growth end markets like aerospace which I noted pretty well for the company in 2019? Are you alluding to potential M&A, potentially CST size or maybe even something larger in order to achieve that objective?

Both, so it's nice to have an aerospace business that's growing at the rate that it is, well, some of our end markets are down or seeing decline, but it will also be on the M&A front to identify potential targets that would help to continue to diversify the business over the long-term.

Got it. And my follow-up questions around SG&A in the first quarter, but it's always been a very good job, especially second half 19 of managing SG&A expense, but no typically in the first quarter, there are some stuff up and just trying to get a better sense for where to be thinking about SG&A dollars in the first quarter? Thank you.

First quarter 2020, we would expect it to move up a little bit from where we exited the fourth quarter, probably that's just normal timing of employee costs, and then there's also just the timing around investment costs.

The next question comes from William Stein of SunTrust. Please go ahead.

Great. Thanks for taking my question. I wanted to ask a question and a follow-up about the electrification megatrend. Over the last few quarters, I'm hoping you can help us understand how your end OEM customer's plans might have changed regarding the anticipated mix of internal combustion versus hybrid versus electric vehicle?

Yes. So, I don't think we're seeing any major shift. Every one of our customers has a pretty robust product development strategy associated with electrified platforms, but I don't think we've seen any major shift. I think what we've observed as we've been engaging with customers on this new product category for us is a couple of things. I alluded to the fact that as customers implement new emerging technologies, the product development lifecycle doesn't always follow the same path as what it historically has with more mature technologies, and the second is, they tend to be a little more lumpy, as would be expected given that platforms will be more concentrated in electrified environment, the opportunities tend to be a little bit more lumpy in terms of the size of the opportunities that we're pursuing.

That's helpful. And then, another thing you mentioned in the prepared remarks was a significant overlap between the two categories, broadly speaking, internal combustion and EV within your portfolio. That was a surprise to me. I thought that most of the products that are using internal combustion relate to that power type. Can you maybe elaborate as to what the overlap is? What types of sensors were -- any details on that would be helpful? Thank you.

Yes, absolutely. So, breaking electronic stability control type applications, we still apply it in electrified platform for redundancy associated with the vehicle, cabin management type, thermal management type applications, tire pressure monitoring. So, there are a number of applications outside of the engine and transmission that we serve today that would be applicable, and are being designed into those vehicles going forward, you know, half or better of the total portfolio ports right over to an electrified platform.

The next question comes from Jim Suva of Citi. Please go ahead.

Thank you very much. I just have one question, and that is regarding, you'd mentioned your plants, you expect to be back into production February 17th, and you mentioned the sales shortage or the challenges associated with that for the plant closures. We talked a lot about automotive so far. Is it fair to assume that you're also making a similar adjustment to the heavy vehicle, the construction side and all that, and do you expect that to come back kind of to the same magnitude, or how should we think about that? So, a lot of the commentary so far was kind of on automotive.

Yes. So, two-thirds of the business in China is automotive, but we would generally expect a similar impact, proportionate impact to the other end markets that we serve, not just HVOR, but also the industrial markets as well. We don't have an aerospace presence in China, and so, it would be those three end markets that would be impacted proportionately, given the shutdowns that have occurred.

The next question comes from Craig Hettenbach of Morgan Stanley. Please go ahead.

Yes, thank you. I just had a question on the strong outgrowth in China on the automotive side, just you know, your visibility into that sustaining, and then is there anything on the competitive front in terms of how you're positioned in that region versus some of the things you're seeing kind of in Europe and North America?

Yes, great visibility into the sustaining content growth in the China market and more broadly in the other automotive markets and other end markets that we serve, the long-term nature of the business and the NBO wins and engagement with customers provides that level of visibility into the future.

Got it. And then, just a quick follow-up on GIGAVAC, can you kind of helped frame just that the growth that you're seeing in that business maybe versus the overall growth of the company and then just the commentary about kind of some industrial applications with the EV just kind of where you are in that process?

Yes, so we're seeing strong double-digit growth in the GIGAVAC business despite the market headwinds that we're facing. So the investment case that we had laid out that we underwrote is playing out as we would expect, as we look beyond this year and into the next five years in terms of platform development. I mentioned in my prepared comments, some of the other areas where we're exploring beyond the acquisition of GIGAVAC that we're looking at battery pressure sensors to enable this battery monitoring, motor position, there are a number of different other organic applications that we're working on, that will allow us to be able to continue to serve the electrification market as that unfolds. So feel really good about those initiatives, both -- the ones that we've acquired, and we'll continue on investing in the ones that we're working on organically.

That is all the time we have allotted for today's call. I'd like to turn the call back over to Joshua Young for closing remarks.

I'd like to thank everybody for joining us this morning. Sensata will be attending the following conferences in the first quarter: The Goldman Sachs Technology Conference, The Barclays Industrial Conference, The Citi Industrial Conference, and the Wolfe Research Investor Conference. We also invite you to visit us at our headquarters in Attleboro, Massachusetts. Thank you for joining us this morning and for your interest in Sensata. Andrew, you may now end the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.