Sensata Technologies Holding NV (NYSE:ST) Q2 2020 Earnings Conference Call - Final Transcript
Jul 28, 2020 • 08:00 am ET
We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mark Delaney with Goldman Sachs. Please go ahead.
Thanks. To start, I was hoping to better understand the reason Sensata as being more conservative than IHS for North American and European auto production in the third quarter. Is this conservatism on the part of Sensata in case there's COVID-related factory shutdowns that are anticipated or in case retail demand were softened? Or is this more about what your customers are telling you their production build rates are going to be?
Yes. Thanks for the question, Mark. So let me just frame it. We are lower than IHS in terms of expectations in North America and Europe and were slightly higher in China. The net difference is about 1.7 million vehicles across that range, which is substantial in terms of the impact that, that would have on Sensata's revenue. There are really four key factors that weighed into our decision around this. The first is clearly regarding caution associated with potential resurgence and lockdowns and impact on demand that, that would result in. There are also some differences between us and what we believe IHS is forecasting regarding the shutdown schedule with our customers, which we're tracking on a customer-by-customer basis. And then the other factors are relating to just generally understanding our customer order patterns. We're coming off a period of time where the volatility and customer order patterns have been substantial. And until we get a better feel for the orders and how they will materialize into revenue, we're taking some caution on that. You'll note that, historically, the order patterns going into the quarter is our best indicator of performance in the quarter. But certainly, we're coming off a period where that isn't as much the case. And then the last factor, which is a smaller one, is just the general automotive supply chain and the risk that we wouldn't or our customer wouldn't have a disruption in demand or orders, but there might be some other implication in the broader supply chain, and so we're cautioning for all of the factors which we've outlined. Obviously, if things turn out better, we're prepared to be able to deliver, but it's based upon all of that input.
That's really helpful, Jeff. Thank you. And for my follow-up question, the Company mentioned in the prepared remarks about the good wins in electrification and even being an acceleration compared to what the Company was realizing in new wins than a year ago despite the pandemic. What do you think is leading to that acceleration in bookings? And maybe you can level set investors about where Sensata's content per car stands now for an EV compared to internal combustion engine vehicles? Thank you.
Sure. So that and the old quote was across the Company. So it's not just automotive, and there's a substantial portion of that, that is outside of the automotive market. My view is