Sensata Technologies Holding plc
Loading chart...
ITEM 1. BUSINESS
The Company
The reporting company is Sensata Technologies Holding plc, a public limited company incorporated under the laws of England and Wales, and its consolidated subsidiaries, collectively referred to as the "Company," "Sensata," "we," "our," and "us." We are a global industrial technology company that strives to help our customers and partners safely deliver a cleaner, more efficient, electrified, and connected world. For more than 100 years, we have been developing and innovating a wide range of customized solutions that address increasingly complex engineering and operating performance requirements for our customers' mission-critical applications. We present financial information for three reportable segments, Automotive, Industrials, and Aerospace, Defense, and Commercial Equipment.
We develop, manufacture, and sell sensors and sensor-rich solutions, electrical protection components and systems, and other products. Our sensors are used by our customers to translate a physical parameter, such as pressure, temperature, position, or location of an object, into electronic signals that our customers’ products and solutions can act upon. Our electrical protection portfolio (which includes both components and systems) is composed of various switches, fuses, inverters, energy storage systems, high-voltage distribution units, controllers, and software, and includes high-voltage contactors and other products embedded within systems to maximize their efficiency and performance and ensure safety. Other products and services we provide include power conversion systems, which include inverters, converters, and rectifiers for renewable energy generation, green hydrogen production, electric vehicle charging stations, and microgrid applications, as well as industrial and defense applications.
Customers
Our customers in the Automotive reportable segment include leading global automotive original equipment manufacturers ("OEMs") and the companies that supply parts directly to these OEMs, known as Tier 1 suppliers, as well as various aftermarket distributors. Within the Industrials reportable segment, our customers include a wide range of industrial and commercial manufacturers and suppliers across multiple end markets, primarily OEMs in the climate control, appliance, medical, energy and charging infrastructure, and data/telecom industries, as well as systems integrators and motor and compressor distributors. Customers of the Aerospace, Defense, and Commercial Equipment reportable segment include manufacturers, suppliers, and distributors in the aerospace and defense industries and OEMs and their Tier 1 suppliers of agricultural, construction, and on-road truck equipment.
We have had relationships with our top ten customers for an average of 36 years. No customer exceeded 10% of our net revenue in any of the years ended December 31, 2025, 2024, and 2023.
Business Strategy
We believe our long-term success depends on improving operational performance, optimizing capital allocation, and returning to growth.
Improving operational performance
We have achieved our current cost position through development of manufacturing scale and efficiencies, a continual process of migration and transformation to best-cost manufacturing locations, global best-cost sourcing, product design improvements, and ongoing productivity-enhancing initiatives. We also use our decades of manufacturing expertise to drive efficient, high-quality processes. We leverage next-generation automation to lower labor costs and to drive towards zero defects. We are building resilient supply chains with a balanced approach in ensuring the continuity of supply while aggressively focusing on innovative ways to drive material cost down. Through collaboration and partnership across our project teams, sourcing, and our supply base partners, we have identified and are executing on project-based material savings programs to help mitigate inflation. In addition, we continue to drive operational efficiencies with network analysis and optimization, lean initiatives, and accelerating automation deployments to mitigate both labor shortages and wage inflation pressures in our factories.
Optimizing capital allocation
Our capital allocation strategy is primarily focused on supporting the growth of the business through capital expenditures, maintaining our dividend, reducing our debt levels, and repurchasing shares opportunistically.
•We repaid an aggregate principal amount of $354.0 million of the 4.0% senior notes in November 2025 that were
4
validly tendered in connection with a cash tender offer that commenced in October 2025.
•We repaid our $700.0 million aggregate principal amount of 5.0% senior notes due 2025 (the "5.0% Senior Notes") in July 2024 with a combination of cash on hand and the issuance of our $500.0 million aggregate principal amount of 6.625% senior notes due 2032 (the "6.625% Senior Notes").
•We repaid our $400.0 million aggregate principal amount of 5.625% senior notes due 2024 (the "5.625% Senior Notes") in December 2023 with cash on hand.
•In September 2023, our Board of Directors authorized a new $500.0 million ordinary share repurchase program (the “September 2023 Program”), effective on October 1, 2023. In the twelve months ended December 31, 2025, we paid $120.6 million to repurchase shares and $70.4 million in cash dividends.
Returning to growth
While we may continue to consider strategic partnerships and acquisitions to accelerate the growth and transformation of our product portfolio and to obtain access to new technologies, expertise, processes, and solutions, our primary focus is growing the core business, which continues to have meaningful end market demand and generate strong cash flows. Our future success builds upon our deep expertise in customizing the base technologies developed over the years, improving them meaningfully over time, and expanding to other end markets or applications. In some cases, we look to accelerate this by integrating new technologies and capabilities that have been acquired.
Automotive
The Automotive reportable segment accounted for approximately 57.0% of our net revenue in fiscal year 2025. It primarily serves the Automotive OEM and aftermarket industries through the development and manufacturing of sensors, high-voltage solutions (i.e., electrical protection components), and other solutions that are used in mission-critical systems and applications.
Our solutions are present in a wide variety of transportation systems and subsystems, playing a critical role in ensuring the functionality and safety of a vehicle’s operation. Within both internal combustion and electrified propulsion architectures, we provide various sensor solutions (e.g., electric motor position, gasoline direct injection, oil pressure monitoring, exhaust temperature, electric motor position, and fuel delivery) that enable superior functionality, efficiency, and optimized performance while reducing environmental impact. As more transportation platforms leverage a plug-in hybrid or fully electrified powertrain, the ability to protect the vehicle systems/sub-systems from high-voltage power sources becomes critical, a need that our electrical protection portfolio (e.g., high-voltage contactors, fuses, and high-voltage junction boxes) addresses. Our cabin thermal management (e.g., pressure plus temperature sensing) and safety (e.g., braking, electronic stability control, and tire management solutions) sensor/product solutions all play critical roles in enabling safety, improved performance, and increased efficiency and range across ICE, plug-in hybrid, and electrified powertrains.
Applications we serve require close engineering collaboration between us and our OEM partners or their Tier 1 suppliers. Solutions are designed to meet application-specific requirements with customer-specific fit, form, and function. As a result, OEMs and Tier 1 suppliers make significant investments in selecting, integrating, and testing sensors as part of their product development. Once our solutions are designed into an application, we are well positioned as the incumbent supplier due to the high degree of sensor customization and application/vehicle platform certification. This results in high switching costs for automotive manufacturers once a sensor is designed into a particular system or platform. We believe this is one of the reasons that sensors are rarely changed during a platform lifecycle, which in the case of the automotive industry typically lasts five to seven years. OEMs and Tier 1 suppliers seek to partner with suppliers with a proven record of quality, on-time delivery, and performance, as well as the engineering and manufacturing scale/resources to meet their needs over the multi-year lifecycle of these highly engineered vehicles and systems.
Markets
The markets we serve are seeking to provide cleaner, safer, and connected solutions. Transportation industries provide some of the largest markets for sensors, giving participants with a presence in these markets significant scale advantages over those participating only in smaller, more niche industrial and medical markets. As electrified transportation platforms continue to evolve and grow, we expect OEM and Tier 1 suppliers to continue to require sensing partners that can meet their increasing needs for mission-critical sensors and solutions, enabling their global vehicle strategies.
We believe light vehicle production is a proxy for automotive end market growth. We believe that growth in the automotive end market has historically been driven by three principal trends: growth in the number of vehicles produced globally and expansion in the number and type of sensors per vehicle.
5
Number of sensors per vehicle: We believe that the number of sensors used in vehicles of all classes will continue to be driven by increasing requirements in vehicle emissions, efficiency, safety, electrification, and comfort-related control systems that depend on sensors for proper functioning, such as electronic stability control, tire pressure monitoring, advanced driver assistance, advanced combustion and exhaust after-treatment applications. For example, government regulation of emissions, including fuel economy standards such as the National Highway Traffic Safety Administration’s Corporate Average Fuel Economy requirements in the U.S. and emissions requirements require advanced sensors to achieve these performance metrics. Sensors are crucial enablers for a vehicle’s systems and sub-systems to meet the ever-increasing requirements in a vehicle’s operation.
New Technology: Automobiles continue to evolve, with new alternative technologies being developed to make these vehicles more efficient, reliable, financially viable, and safe. We believe this trend will drive growth in our business for the foreseeable future. Moreover, we believe our broad customer base, global diversification, and evolving portfolio provide the foundation that will allow us to grow with these trends across a diverse set of markets.
Product Categories
The following table presents the significant product categories offered by Automotive and the corresponding key products, solutions, applications and systems:
| Key Products/Solutions | Key Applications/Systems | |||||||
| Product category: Sensors | ||||||||
Pressure sensors High-temperature sensors Force sensors Pressure monitoring solutions | Thermal management and air conditioning systems Powertrain Exhaust after-treatment Suspension Braking Tire management solutions Battery packs | |||||||
| Product category: Electrical protection | ||||||||
High-voltage contactors/fuses High-voltage switching and protection devices and solutions High-voltage distribution modules | Electrical protection Electrical powertrain Battery packs Charging systems | |||||||
Competitors
Within each of the principal product categories in Automotive, we compete with three to four suppliers per key application served. These competitors range from local to large players, depending on the market. We believe that the key competitive factors in the markets served by this segment are product performance in mission-critical operating environments, quality, service, reliability, manufacturing footprint, and commercial competitiveness. We believe that our ability to design and produce customized solutions globally, breadth and scale of product offerings, technical expertise and development capability, product service and responsiveness, and a commercially competitive offering position us well to succeed in these markets. We are experts in the applications we serve, enabling us to provide industry-leading solutions to our customers.
Industrials
Industrials, which accounted for approximately 21.3% of our net revenue in fiscal year 2025, primarily serves industrial customers through the development and manufacture of a broad portfolio of application-specific sensor, power management, and electrical protection products used in a diverse range of industrial markets, including the appliance, heating, ventilation and air conditioning ("HVAC"), material handling, charging infrastructure, renewable energy generation, and microgrid applications and markets.
Our products perform many functions, including prevention of damage from excess heat, gas leak detection sensing, electrical current, optimization of system performance, low-power circuit control, renewable energy generation, and power conversion from DC power to AC power. Our electrical protection devices are critical for the safe operation of appliances that are used in every day life. We believe that we are the industry leader in the residential and commercial heating and cooling equipment markets for switches and sensors that manage the refrigerant loop.
6
Markets
Demand for our products is driven by many of the same factors as in the transportation sensor markets: regulation of emissions, greater energy efficiency and safety, and consumer demand for new features. We use Purchasing Managers' Index to gauge short-term trends in the markets we serve. For instance, the growing consumer demand for cleaner heat sources (e.g., heat pumps) that utilize our content is being driven by government initiatives to reduce carbon emissions.
We continue to focus our efforts on expanding our presence globally and serving our global customers in a highly efficient and cost-effective manner. Our customers include established multinationals as well as local producers in certain markets. Asia Pacific remains a priority for us in light of the rapid growth and pace of innovation in that market. We also believe there is a growing opportunity for applications of our products in data centers, specifically around liquid and air cooling solutions, electrical protection, battery energy storage, and uninterruptible power supply, based on data centers' increasing needs for precision sensing, power management, and system reliability across computing environments.
Product Categories
The following table presents the significant product categories offered by Industrials and the corresponding key products, solutions, applications and systems:
Loading financial statements...
Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
| Line item |
|---|
| Period ending |
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations supplements should be read in conjunction with the discussion in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2025 Annual Report. The following discussion should also be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto (the "Financial Statements") included elsewhere in this Report. Amounts and percentages in the following discussions and tables have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
Overview
Net revenue for the three months ended March 31, 2026 was $934.8 million, an increase of 2.6% on a reported basis compared to $911.3 million in the prior period. Excluding an increase of 2.2% attributed to changes in foreign currency exchange rates and a decrease of 3.8% related to the effect of disposals, net revenue increased 4.2% on an organic basis. Organic revenue growth (or decline), discussed throughout this Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (this "MD&A"), is a financial measure not presented in accordance with U.S. GAAP. Refer to Non-GAAP Financial Measures included elsewhere in this MD&A for additional information regarding our use of organic revenue growth (or decline).
Operating income for the three months ended March 31, 2026 was $141.6 million (15.2% of net revenue), an increase of $19.5 million, or 15.9% compared to operating income of $122.2 million (13.4% of net revenue) in the three months ended March 31, 2025. Refer to Results of Operations included elsewhere in this MD&A for additional discussion of our earnings results for the three months ended March 31, 2026 compared to the prior periods.
We generated $122.5 million of operating cash flows in the three months ended March 31, 2026, ending the quarter with $635.1 million in cash and cash equivalents. In the three months ended March 31, 2026, we used cash of approximately $17.9 million for capital expenditures, $17.5 million for payment of dividends, and $25.1 million for share repurchases as part of our share repurchase plan.
Results of Operations
The table below presents our historical results of operations, in millions of dollars and as a percentage of net revenue, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. We have derived the results of operations from the Financial Statements included elsewhere in this Report. Amounts and percentages in the table below have
21
been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| For the three months ended | |||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||||||||||||||||||
| Automotive | $ | 524.8 | 56.1 | % | $ | 528.9 | 58.0 | % | |||||||||||||||||||||||||||||||
| Industrials | 184.2 | 19.7 | 185.7 | 20.4 | |||||||||||||||||||||||||||||||||||
| Aerospace, Defense, and Commercial Equipment | 225.8 | 24.2 | 196.7 | 21.6 | |||||||||||||||||||||||||||||||||||
| Net revenue | 934.8 | 100.0 | 911.3 | 100.0 | |||||||||||||||||||||||||||||||||||
| Operating costs and expenses | 793.2 | 84.8 | 789.1 | 86.6 | |||||||||||||||||||||||||||||||||||
| Operating income | 141.6 | 15.2 | 122.2 | 13.4 | |||||||||||||||||||||||||||||||||||
| Interest expense | (34.1) | (3.6) | (38.0) | (4.2) | |||||||||||||||||||||||||||||||||||
| Interest income | 3.9 | 0.4 | 4.3 | 0.5 | |||||||||||||||||||||||||||||||||||
| Other, net | 4.1 | 0.4 | 2.1 | 0.2 | |||||||||||||||||||||||||||||||||||
| Income before taxes | 115.5 | 12.4 | 90.6 | 9.9 | |||||||||||||||||||||||||||||||||||
| Provision for income taxes | 28.4 | 3.0 | 20.7 | 2.3 | |||||||||||||||||||||||||||||||||||
| Net income | $ | 87.1 | 9.3 | % | $ | 69.9 | 7.7 | % | |||||||||||||||||||||||||||||||
Net Revenue
Net revenue for the three months ended March 31, 2026 increased 2.6% compared to the prior period. Net revenue increased 4.2% on an organic basis, which excludes an increase of 2.2% attributed to changes in foreign currency exchange rates and a decrease of 3.8% due primarily to the effects of the divestiture of the Magnetic Speed and Positioning Business ("MSP Business") in the first quarter of 2025. Refer to Note 16: Disposals of the Financial Statements, included elsewhere in this Report, for additional information on the sale of the MSP Business.
Automotive
Automotive net revenue for the three months ended March 31, 2026 decreased 0.8% compared to the prior period. Excluding an increase of 2.5% attributed to changes in foreign currency exchange and a decrease of 4.0% due to the effects of a divestiture, Automotive net revenue increased 0.7% on an organic basis compared to the prior period, which was primarily due to product mix in the markets we serve.
Industrials
Industrials net revenue for the three months ended March 31, 2026 decreased 0.8% compared to the prior period. Excluding an increase of 1.5% attributed to changes in foreign currency exchange and a decrease of 3.0% due to the effect of divestitures, Industrials net revenue grew 0.7% on an organic basis compared to the prior period, which primarily reflects content growth in our Industrials business segment.
Aerospace, Defense, and Commercial Equipment
Aerospace, Defense, and Commercial Equipment net revenue for the three months ended March 31, 2026 increased 14.8% compared to the prior period. Excluding an increase of 1.8% attributed to changes in foreign currency exchange rates and a decline of 3.7% due to the effects of a divestiture, Aerospace, Defense, and Commercial Equipment net revenue grew 16.7% on
22
an organic basis due to growth in our commercial equipment and aerospace business.
Operating Costs and Expenses
Operating costs and expenses for the three months ended March 31, 2026 and 2025 are presented, in millions of dollars and as a percentage of net revenue, in the following table. Amounts and percentages in the table below have been calculated based on unrounded numbers. Accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| For the three months ended | |||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||||||
| Operating costs and expenses: | |||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | 648.5 | 69.4 | % | $ | 638.7 | 70.1 | % | |||||||||||||||||||||||||||||||
| Research and development | 31.9 | 3.4 | 36.8 | 4.0 | |||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 93.4 | 10.0 | 86.0 | 9.4 | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 15.7 | 1.7 | 20.6 | 2.3 | |||||||||||||||||||||||||||||||||||
| Restructuring and other charges, net | 3.7 | 0.4 | 7.0 | 0.8 | |||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | $ | 793.2 | 84.8 | % | $ | 789.1 | 86.6 | % | |||||||||||||||||||||||||||||||
Cost of revenue
For the three months ended March 31, 2026, cost of revenue as a percentage of net revenue decreased from the prior period, primarily due to the favorable effects of the MSP divestiture in the first quarter of 2025 and organic revenue growth, partially offset by the net impacts of inflation on material and logistics costs and tariffs.
Research and development expense
For the three months ended March 31, 2026, research and development expense did not fluctuate materially from the prior period.
Selling, general and administrative expense
For the three months ended March 31, 2026, selling, general and administrative expense did not fluctuate materially from the prior period.
Amortization of intangible assets
For the three months ended March 31, 2026, amortization of intangible assets decreased from the prior period, primarily due to the effect of amortization of intangible assets in accordance with their expected economic benefit, which generally results in acceleration of amortization expense in the early years of the life of an intangible asset.
Restructuring and other charges, net
In the three months ended March 31, 2026, restructuring and other charges, net decreased from the prior period, primarily due to higher transaction-related charges in 2025 corresponding to the business divestitures that took place in that year, partially offset by higher charges related to the Transformation Plan in the current period.
Refer to Note 5: Restructuring and Other Charges, Net, included elsewhere in this Report, for additional information regarding the components of restructuring and other charges, net.
Operating Income
For the three months ended March 31, 2026, operating income was $141.6 million, compared to operating income of $122.2 million in the prior period. This favorable impact was driven primarily by (1) higher revenue in the current period, (2) a decrease in amortization of intangibles, and (3) cost savings as a result of actions taken as part of our restructuring plans, partially offset by the net impacts of inflation on material and logistics costs.
Interest Expense
For the three months ended March 31, 2026, interest expense did not fluctuate materially from the prior period.
23
Interest Income
For the three months ended March 31, 2026, interest income did not fluctuate materially from the prior period.
Other, Net
Other, net primarily includes gains and losses related to currency remeasurement adjustments, foreign currency and commodity forward contracts not designated as hedging instruments, mark-to-market investments, debt refinancing, and the portion of our net periodic benefit cost excluding service cost.
For the three months ended March 31, 2026, other, net represented a net gain of $4.1 million, a favorable impact on
earnings of $2.0 million compared to a net gain of $2.1 million in the prior period. This favorable impact was primarily due to the absence of losses on forward currency forward contracts in the current year.
Refer to Note 13: Fair Value Measures and Note 6: Other, Net of the Financial Statements, included elsewhere in this Report, for additional details of our hedge accounting contracts and the components of other, net, respectively.
Provision for Income Taxes
The provision for income taxes consists of (1) current tax expense, which relates primarily to our profitable operations in tax jurisdictions with limited or no net operating loss carryforwards and withholding taxes related to management fees, royalties, and the repatriation of foreign earnings; and (2) deferred tax expense (or benefit), which represents adjustments in book-to-tax basis differences primarily related to (a) book versus tax basis in intangible assets, (b) changes in net operating loss carryforwards and tax credits, and (c) changes in withholding taxes on unremitted earnings.
Non-GAAP Financial Measures
This section provides additional information regarding certain non-GAAP financial measures, including organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share ("EPS"), free cash flow, adjusted corporate and other expenses, net debt, gross and net leverage ratio, and adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), which are used by our management, Board of Directors, and investors. 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.
The use of our non-GAAP financial measures has limitations. They should be considered as supplemental in nature and are not intended to be considered in isolation from, or as an alternative to, reported net revenue growth (or decline), operating income, operating margin, net income, diluted EPS, net cash provided by operating activities, corporate and other expenses, or total debt and finance lease obligations, respectively, calculated in accordance with U.S. GAAP. In addition, our measures of organic revenue growth (or decline), adjusted operating income, adjusted operating margin, adjusted net income, adjusted EPS, free cash flow, adjusted corporate and other expenses, gross and net leverage ratio, and adjusted EBITDA may not be the same as, or comparable to, similar non-GAAP financial measures presented by other companies.
Organic revenue growth (or decline) and market outgrowth
Organic revenue growth (or decline) 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 material acquisitions, divestitures, and product life-cycle management actions for the 12-month period following the respective transaction date(s).
We believe that organic revenue growth (or decline) provides investors with helpful information with respect to our operating performance, and we use organic revenue growth (or decline) to evaluate our ongoing operations as well as for internal planning and forecasting purposes. We believe that organic revenue growth (or decline) provides useful information in evaluating the results of our business because it excludes items that we believe are not indicative of ongoing performance or that we believe impact comparability with the prior period.
Market outgrowth is calculated as organic revenue growth less our weighted market growth. Our weighted market growth is calculated using our regional and platform sales mix, as applicable, in the corresponding prior period. Market outgrowth is used to describe the impact of an increasing quantity and value of our products used in customer systems and applications above market growth. We believe this provides a more meaningful comparison of our revenue growth relative to the markets we serve.
24
Adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS
We define adjusted operating income as operating income (or loss), determined in accordance with U.S. GAAP, adjusted to exclude certain non-GAAP adjustments which are described under the heading Non-GAAP Adjustments below. Adjusted operating margin is calculated by dividing adjusted operating income (or loss) by net revenue determined in accordance with U.S. GAAP. We define adjusted net income as follows: net income (or loss) determined in accordance with U.S. GAAP, excluding certain non-GAAP adjustments which are described under the heading Non-GAAP Adjustments below. Adjusted EPS is calculated by dividing adjusted net income by the number of diluted weighted-average ordinary shares outstanding in the period as determined in accordance with U.S. GAAP.
Management uses adjusted operating income, adjusted operating margin, adjusted net income, and adjusted EPS (and the constant currency equivalent of each) as measures of operating performance, for planning purposes (including the preparation of our annual operating budget), to allocate resources to enhance the financial performance of our business, to evaluate the effectiveness of our business strategies, in communications with our Board of Directors and investors concerning our financial performance, and as factors in determining compensation for certain employees. We believe investors and securities analysts also use these non-GAAP financial measures in their evaluation of our performance and the performance of other similar companies. These non-GAAP financial measures are not measures of liquidity.
Free cash flow
Free cash flow is defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software. Free cash flow conversion is defined as Free cash flow divided by Adjusted net income. We believe free cash flow is useful to management and investors as a measure of cash generated by business operations that will be used to repay scheduled debt maturities and can be used to, among other things, fund acquisitions, repurchase ordinary shares, or accelerate the repayment of debt obligations.
Adjusted corporate and other expenses
Adjusted corporate and other expenses is defined as corporate and other expenses calculated in accordance with U.S. GAAP, excluding the portion of non-GAAP adjustments described below that relate to corporate and other expenses. We believe adjusted corporate and other expenses is useful to management and investors in understanding the impact of non-GAAP adjustments on operating expenses not allocated to our segments.
Adjusted EBITDA
Adjusted EBITDA is defined as net income (or loss), determined in accordance with U.S. GAAP, excluding interest expense, interest income, and provision for (or 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 other transaction costs, and (3) other, net. Refer to Non-GAAP Adjustments below for additional discussion of these adjustments.
Gross leverage ratio
Gross leverage ratio represents gross debt (total debt and finance lease obligations less unamortized issue costs) divided by last twelve months ("LTM") adjusted EBITDA. We believe that gross leverage ratio is a useful measure to management and investors in understanding trends in our overall financial condition.
Net leverage ratio
Net leverage ratio represents net debt (gross debt less cash and cash equivalents) divided by 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.
Non-GAAP adjustments
Many of our non-GAAP adjustments relate to a series of strategic initiatives developed by our management aimed at better positioning us for future revenue growth and an improved cost structure. These initiatives have been modified from time to time to reflect changes in overall market conditions and the competitive environment facing our business. These initiatives include, among other items, acquisitions, divestitures, restructurings of certain business, supply chain or corporate activities, and various financing transactions. We describe these adjustments in more detail below, each of which is net of current tax impacts, as applicable.
25
•Restructuring related and other: includes net charges related to certain restructuring and other exit activities, other costs (or income) that we believe are either unique or unusual to the identified reporting period, and the impact of commodity forward contracts that we believe impact comparisons to prior period operating results. Such costs include charges related to optimization of our manufacturing processes to increase productivity. This type of activity occurs periodically; however, each action is unique, discrete, and driven by various facts and circumstances. Such amounts are excluded from internal financial statements and analyses that management uses in connection with financial planning and in its review and assessment of our operating and financial performance, including the performance of our segments.
•Financing and other transaction costs: includes costs incurred, such as legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or equity financing transaction, expenses related to compensation arrangements entered into concurrent with the closing of an acquisition, adjustments related to changes in the fair value of acquisition-related contingent consideration amounts.
•Amortization of intangible assets: represents amortization of intangible assets.
•Other, net: includes non-operating expenses (or non-operating income) recorded within Other, net on our condensed consolidated statements of operations. Refer to Note 6: Other, Net of the Financial Statements, included elsewhere in this Quarterly Report, for additional details of the components of Other, net.
•Deferred taxes and other tax related: includes adjustments for deferred taxes and other timing differences including, but not limited to, book-to-tax basis differences on the fair value of intangible assets and goodwill, the utilization of net operating losses, and adjustments to our valuation allowance in connection with certain transactions and tax law changes. Other tax related items include certain adjustments to unrecognized tax benefits and withholding tax on repatriation of foreign earnings.
•Amortization of debt issuance costs: represents interest expense related to the amortization of deferred financing costs as well as debt discounts, net of premiums.
•Where applicable, the current income tax effect of non-GAAP adjustments.
Our definition of adjusted net income excludes the deferred provision for (or benefit from) income taxes and other tax related items described above. As we treat deferred income taxes as an adjustment to compute adjusted net income, the deferred income tax effect associated with the reconciling items presented below would not change adjusted net income for any period presented.
Non-GAAP reconciliations
The following tables present reconciliations of certain financial measures calculated in accordance with U.S. GAAP to the related non-GAAP financial measures for the three months ended March 31, 2026 and 2025. Refer to the Non-GAAP Adjustments section above for additional information regarding these adjustments. Amounts and percentages in the tables below have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding.
| For the three months ended March 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Operating Income | Operating Margin | Income Taxes | Net Income | Diluted EPS | ||||||||||||||||||||||||||||||||||||||||||
| Reported (GAAP) | $ | 141.6 | 15.2 | % | $ | 28.4 | $ | 87.1 | $ | 0.59 | |||||||||||||||||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||
Restructuring related and other (a) | 16.6 | 1.8 | (1.7) | 14.9 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||
Financing and other transaction costs (b) | 0.1 | — | — | 0.1 | — | ||||||||||||||||||||||||||||||||||||||||||
Amortization of intangible assets | 15.7 | 1.7 | — | 15.7 | 0.11 | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of debt issuance costs | — | — | — | 1.1 | 0.01 | ||||||||||||||||||||||||||||||||||||||||||
| Other, net | — | — | 0.8 | (3.3) | (0.02) | ||||||||||||||||||||||||||||||||||||||||||
Deferred taxes and other tax related | — | — | 9.9 | 9.9 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||
| Total adjustments | 32.4 | 3.5 | 9.0 | 38.4 | 0.26 | ||||||||||||||||||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 174.0 | 18.6 | % | $ | 19.4 | $ | 125.5 | $ | 0.86 | |||||||||||||||||||||||||||||||||||||
26
| For the three months ended March 31, 2025 | |||||||||||||||||||||||||||||||
| (Dollars in millions, except per share amounts) | Operating Income | Operating Margin | Income Taxes | Net Income | Diluted EPS | ||||||||||||||||||||||||||
| Reported (GAAP) | $ | 122.2 | 13.4 | % | $ | 20.7 | $ | 69.9 | $ | 0.47 | |||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||
Restructuring related and other (a) | 18.3 | 2.0 | 1.6 | 19.9 | 0.13 | ||||||||||||||||||||||||||
Financing and other transaction costs (b) | 5.4 | 0.6 | — | 5.4 | 0.04 | ||||||||||||||||||||||||||
Amortization of intangible assets | 20.6 | 2.3 | — | 20.6 | 0.14 | ||||||||||||||||||||||||||
| Amortization of debt issuance costs | — | — | — | 1.2 | 0.01 | ||||||||||||||||||||||||||
Other, net | — | — | (0.5) | (2.6) | (0.02) | ||||||||||||||||||||||||||
| Deferred taxes and other tax related | — | — | 2.2 | 2.2 | 0.02 | ||||||||||||||||||||||||||
| Total adjustments | 44.3 | 4.9 | 3.3 | 46.7 | 0.31 | ||||||||||||||||||||||||||
| Adjusted (non-GAAP) | $ | 166.5 | 18.3 | % | $ | 17.4 | $ | 116.6 | $ | 0.78 | |||||||||||||||||||||
(a) The following table presents the components of our restructuring related and other non-GAAP adjustment to net income for the three months ended March 31, 2026 and 2025 (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding):
| For the three months ended March 31, | |||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||
Business and corporate repositioning (i) | $ | 13.9 | $ | 18.1 | |||||||||||||||
Other | 2.7 | 0.2 | |||||||||||||||||
Income tax effect | (1.7) | 1.6 | |||||||||||||||||
Total non-GAAP restructuring related and other | $ | 14.9 | $ | 19.9 | |||||||||||||||
__________________________
i.Primarily includes charges related to repositioning our business and corporate functions to more effectively respond to the challenges that face the business, including severance, contract termination costs, charges related to asset write-downs, and other various restructuring-related charges.
(b) The following table presents the components of our financing and other transaction costs non-GAAP adjustment to net income for the three months ended March 31, 2026 and 2025 (amounts have been calculated based on unrounded numbers, accordingly, certain amounts may not appear to recalculate due to the effect of rounding):
| For the three months ended March 31, | |||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||
Transaction loss (i) | $ | — | $ | 4.7 | |||||||||||||||
Merger and acquisition compensation arrangements (ii) | (0.4) | 0.7 | |||||||||||||||||
Other | 0.4 | — | |||||||||||||||||
Income tax effect | — | — | |||||||||||||||||
Total financing and other transaction costs | $ | 0.1 | $ | 5.4 | |||||||||||||||
__________________________
i.Primarily includes losses or gains related to the divestiture of a business, costs incurred, including for legal, accounting, and other professional services, that are directly related to an acquisition, divestiture, or other transaction. In the three months ended March 31, 2025, this line includes costs and losses associated with the disposition of the MSP Business. Refer to Note 16: Disposals for further information on this transaction.
ii.Primarily relates to compensation arrangements entered into concurrent with the closing of an acquisition and compensation in connection with the closing of a transaction.
The following table provides a reconciliation of net cash provided by operating activities in accordance with U.S. GAAP to free cash flow.
| For the three months ended March 31, | |||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||
| Net cash provided by operating activities (GAAP) | $ | 122.5 | $ | 119.2 | |||||||||||||
| Additions to property, plant and equipment and capitalized software | (17.9) | (32.6) | |||||||||||||||
| Free cash flow (non-GAAP) | $ | 104.6 | $ | 86.6 | |||||||||||||
27
The following table provides a reconciliation of corporate and other expenses in accordance with U.S. GAAP to adjusted corporate and other expenses.
| For the three months ended March 31, | |||||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||||
| Corporate and other expenses (GAAP) | $ | (75.7) | $ | (69.2) | |||||||||||||||||
| Restructuring related and other | |||||||||||||||||||||
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-06-12 | Caljouw Lynne J | EVP, Chief HR Officer | Sell | -2,723 | $50.35 | -$137,103 |
| 2026-05-20 | Stott David K | EVP, General Counsel | Sell | -6,335 | $47.40 | -$300,248 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-07-28 10-Q expected by 2026-08-05 (in 2 days)
- ~2026-11-02 10-Q expected by 2026-11-10 (in 99 days)
- ~2027-02-28 10-K expected by 2027-03-19 (in 217 days)
- ~2027-04-27 10-Q expected by 2027-05-05 (in 275 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-06-01 8-K Other Events; Financial Statements and Exhibits
- 2026-05-15 8-K Other Events; Financial Statements and Exhibits
- 2026-04-29 DEF 14A Proxy Statement
- 2026-04-28 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-28 10-Q Quarterly Report
- 2026-02-27 10-K Annual Report
- 2026-02-19 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-26 8-K Officer/Director Change
- 2025-12-11 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-11-12 8-K Other Events; Financial Statements and Exhibits
- 2025-11-03 10-Q Quarterly Report
- 2025-10-28 8-K Earnings Release; Material Impairments; Officer/Director Change; Other Events; Financial Statements and Exhibits
- 2025-09-29 8-K Material Agreement Entered
- 2025-07-29 10-Q Quarterly Report
- 2025-07-29 8-K Earnings Release; Financial Statements and Exhibits