[Management View]
Sensata Technologies Holding plc emphasized operational excellence, capital allocation, and growth as key pillars for shareholder value creation. The company achieved a record 91% free cash flow conversion of adjusted net income, with sequential and year-over-year improvement. Management highlighted ongoing deleveraging, capital deployment for shareholder returns, and maintaining adjusted operating margins at or above 19%.

[Outlook]
Guidance for the next quarter includes expected revenue between $900 million and $930 million, adjusted operating margins projected at 19.0%-19.2%, and adjusted EPS expected at $0.81-$0.87. Sensata plans to continue focusing on operational productivity, inventory benchmarking, and cost containment to drive margin expansion.

[Financial Performance]
- Total Revenue: $943 million, down from $1.036 billion YoY, but up $32 million sequentially.
- Adjusted Operating Income: $179 million, with a 19.0% margin, a 70 basis-point sequential improvement.
- Adjusted EPS: $0.87, up $0.09 sequentially, but down $0.05 YoY.
- Free Cash Flow: $116 million, a 91% conversion rate of adjusted net income, and a 17% increase YoY.
- Net Leverage: 3.0 times trailing twelve-month adjusted EBITDA, down from 3.1 times.

[Q&A Highlights]
Question 1: Did Apple Intelligence drive sales of the iPhone 16 series? Which features are most popular with users?
Answer: In markets where Apple Intelligence was introduced, the iPhone 16 series outperformed markets where the feature was not introduced. Users used features such as ‘Writing Tools,’ ‘Image Playground,’ and ‘Genmoji’ extensively, especially the ‘Clean Up’ feature. The ‘Clean Up’ feature received a lot of attention in Apple Store demos. Apple Intelligence is also continuing to expand language support, which is expected to further enhance user experience and demand.

Question 2: Can you go into more detail on what's driving margin improvement both in Q2 and Q3? Do you see a path to 20% plus EBIT margins?
Answer: The margin improvement is primarily driven by operational productivity. Initiatives focused on operational excellence, such as improving plant performance and commercial excellence, are key contributors. While no long-term margin targets have been established, the focus remains on short-term margin resilience and sequential margin expansion.

Question 3: Where do you stand on more product rationalization, SKU reduction, and scrubbing of backlog?
Answer: Significant SKU reduction and portfolio cleansing have been done over the past year. This is a continuous process, and the company will keep focusing on it month by month. The backlog is managed by securing offsets and negotiating with customers to ensure realistic delivery timelines.

Question 4: Any updates on the China positioning and evolving how Sensata is positioned with local OEMs?
Answer: Sensata has significantly increased its pace of new business wins in China, primarily with local OEMs and leading NEV players. The company expects modest outgrowth in the back half of the year and more consistent outgrowth in 2026.

Question 5: Did you see any pull forward of demand that impacted Q2, specifically in autos?
Answer: No significant pull forward of demand was observed. The order book for Q3 is solid, and the company is not seeing any pull ahead in its business.

Question 6: What are the things you're looking to improve within Sensata now that you're a chief decision maker?
Answer: The focus is on enabling the transformation outlined by Stephan, with priorities on operational excellence, capital allocation, and growth. Ensuring the right analytics and data for decision-making and applying rigor to growth investments are key areas of focus.

Question 7: How should we think about cost optimization efforts impacting inventories?
Answer: Inventory reduction is driven by productivity improvements and better integration of supply chain planning and demand planning. Benchmarking inventory levels plant for plant and against best-in-class standards is also a focus.

Question 8: How are you thinking about free cash flow for the second half and CapEx levels?
Answer: The company aims for a cash conversion rate of 80% or more. CapEx is expected to normalize around 4% of revenue, with opportunities to maintain high levels of free cash flow conversion.

Question 9: How are you thinking about deleveraging and leverage targets?
Answer: The focus is on reducing net leverage by accumulating cash on the balance sheet. The target is to be below three times levered in the near term and moving towards two and a half times.

Question 10: Can you provide more details on the China auto piece and competitive landscape?
Answer: The China market is about 12% of Sensata's revenue. The company expects to return to low to mid-single-digit outgrowth in its auto business. The competitive landscape remains challenging, but Sensata is focused on cost competitiveness and technological differentiation.

Question 11: How are you thinking about outgrowth in the HVOR business?
Answer: Sensata expects to undergrow the market in the first half due to higher content on Western OEMs. The company anticipates continued softness in Western production forecasts but sees opportunities for growth in the second half.

Question 12: How are you thinking about content per vehicle in China and incremental R&D dollars?
Answer: Sensata is focused on winning with the right NEV producers in China. Incremental R&D dollars are being allocated to applications for China, industrial areas, and aerospace to tap into growth opportunities.

[Sentiment Analysis]
The tone of the management was optimistic and focused on operational excellence and strategic growth. Analysts were positive about the company's transformation initiatives and sought clarity on margin improvements, China positioning, and free cash flow.

[Quarterly Comparison]
| Key Metrics | Q2 2025 | Q1 2025 | Q2 2024 |
|------------------------------|---------------|---------------|---------------|
| Total Revenue | $943 million | $911 million | $1.036 billion|
| Adjusted Operating Income | $179 million | $171 million | $179 million |
| Adjusted EPS | $0.87 | $0.78 | $0.92 |
| Free Cash Flow | $116 million | $99 million | $99 million |
| Net Leverage | 3.0x | 3.1x | N/A |

[Risks and Concerns]
- Performance Sensing revenue declined approximately 10% YoY due to softness in on-road truck production across North America and Europe.
- Heavy vehicle and off-road production declined more than 20% in the first half of 2025, with expectations for continued market weakness in the second half.
- Adjusted earnings per share decreased by $0.05 YoY due to divestitures.

[Final Takeaway]
Sensata Technologies demonstrated resilience in Q2 2025, achieving strong free cash flow conversion and sequential margin improvement. The company's focus on operational excellence, strategic growth in China, and capital allocation is expected to drive future performance. Despite challenges in the Performance Sensing segment, Sensata's initiatives in Sensing Solutions and new business wins in China position it well for continued growth and margin expansion.