Sensata Technologies Holding plc (ST) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Sensata Technologies Second Quarter 2026 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. James Entwistle, Senior Director of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. I'm James Entwistle, Senior Director of Investor Relations for Sensata, and I would like to welcome you to Sensata's Second Quarter 2026 Earnings Conference Call. Joining me on today's call are Stephan Von Schuckmann, Sensata's Chief Executive Officer; and Andrew Lynch, Sensata's Chief Financial Officer. In addition to the financial results press release we issued earlier today, we will reference a slide presentation during today's conference call. A PDF of this presentation can be downloaded from Sensata's Investor Relations website. This conference call is being recorded, and we will post a replay on our Investor Relations website shortly after today's call concludes. As we begin, I would like to reference Sensata's safe harbor statement on Slide 2. During this conference call, we will make forward-looking statements regarding future events or the financial performance of the company that involve certain risks and uncertainties. The company's actual results may differ materially from the projections described in those 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 filings with the SEC. We encourage you to review our GAAP financial statements in addition to today's presentation. Much of the information that we will discuss during today's call will relate to non-GAAP financial measures. Our GAAP and non-GAAP financials, including reconciliations, are included in our earnings release, in the appendices of our presentation materials and in our SEC filings. Stephan will begin today's call with comments on the overall business. Andrew will then cover our detailed results for the second quarter of 2026 and our financial outlook for the third quarter. Stephan will then return for closing remarks. After that, we will take your questions. Now I would like to turn the call over to Sensata's Chief Executive Officer, Stephan Von Schuckmann.

Thank you, James, and good afternoon, everyone. Let's begin on Slide 3, and I'll share a few highlights from the quarter. We are pleased to report exceptionally strong Q2 results with each of our key metrics exceeding expectations and demonstrating accelerating financial performance, both sequentially and year-over-year. Revenue grew 5% or 4.4% organically with organic growth in all 3 segments. Q2 is the fourth consecutive quarter of organic growth. Adjusted operating margin expanded 50 basis points year-over-year to 19.5% and adjusted earnings per share came in at $0.98, a year-over-year increase of over 12%. Free cash flow continues to strengthen as our structural improvements in working capital take hold in our business. The second quarter, we delivered free cash flow of $186 million and our year-to-date conversion is 108%. This strong cash flow enabled us to continue deleveraging the company with net leverage now at 2.4x trailing 12 months adjusted EBITDA, and we retired $406 million of debt in the quarter. Our second quarter results demonstrate that we continue to make efficiency gains in our business. As we become more efficient, we are systematically strengthening our balance sheet and our disciplined growth framework is working and growth is inflecting upwards. Let's turn to Slide 4 and take a closer look at these trends and what they mean as we look ahead. Since we laid out our key pillars and our associated performance metrics, we have demonstrated not only an ability to deliver on our commitments, but to compound gains and accelerate progress. Adjusted operating margins have consistently expanded and the magnitude of these margin gains is increasing. On a trailing 12-month basis, free cash flow conversion has accelerated every quarter since we made this a priority. Similarly, in the second quarter last year, we committed that we would deleverage the company with urgency with a target of getting below 2.5x net leverage in 2026, and we delivered that 2 quarters ahead of schedule. Additionally, we indicated that we would strengthen our balance sheet by reducing gross debt, which improves our earnings resilience through market cycles. We have now executed 2 debt retirement transactions and reduced gross indebtedness by more than $760 million. We also laid out a disciplined framework for how we would return Sensata to growth over time. This framework meant being patient and deliberate in the opportunities we pursue to ensure that we are delivering high-quality, sustainable growth that will compound value for our shareholders over time. We are pleased to report that a trend has emerged. In each of the last 4 quarters, year-over-year growth accelerated. And for the last 2 quarters, we have been in mid-single-digit territory. Importantly, earnings are growing faster than revenue, and we now have 3 consecutive quarters of double-digit year-over-year adjusted EPS growth. Simply put, there is a clear momentum in our business across every metric that we identified, and our progress on growth has the organization increasingly energized. Each site I visit, I see examples of our team proactively identifying emerging or unmet needs for sensing and electrical protection, engaging with customers and rapidly bringing products to market. There are countless examples of this across our business and in each of our segments. So with that, let's turn to Slide 5, and we can take a closer look at how our reorganized business is enabling growth, starting with automotive. In our automotive business, 3 key factors enable us to deliver market outgrowth. First, our diversified portfolio provides balanced exposure across ICE, EV and powertrain-agnostic applications, enabling growth across regions regardless of varying EV adoption trends. Second, product innovation allows us to adapt to evolving EV architectures, which create demand for customized solutions where we have developed differentiated products and won significant business with global OEMs. And third, localization. Our in-region, for-region strategy aligns with customer demand for local content, supporting conquest wins. In the second quarter, these factors enabled us to deliver market outgrowth of 2% and further reinforce our ability to grow across regions with different powertrain adoption trends. In fact, we outgrew both ICE and EV production in both North America and Europe. In North America, our EV revenues were approximately flat in a market where EV production decreased by more than 30% year-over-year. We expect electrification revenue to continue outperforming EV production in North America, supported by the new FaultBreak contactor, which launched in the second quarter and will ramp in future quarters. Outgrowth in North America was not limited to the EV category. We also outgrew ICE production with ICE revenue growth of approximately 14% against the market that increased 2% year-over-year. In aggregate, this represented double-digit net outgrowth in North America. In Europe, recent electrification wins have narrowed the content gap between ICE vehicles and EVs, and we outgrew EV production by 20%, delivering 30% growth in EV revenues against the market, which grew 10%. New business wins on ICE platforms enabled 5% ICE outgrowth in Europe and mid-single-digit net outgrowth for the region. In China, while the domestic market has softened, we continue to win local business that supports future growth. This quarter, more than 90% of our NBOs were again with local OEMs, helping offset mix headwinds from the share shift towards local Chinese OEMs. We're also gaining traction with Tier 1 battery manufacturers by integrating into their system designs, giving us broader access to multiple OEMs. Over time, we expect this to create a flywheel effect as our business ramps and OEMs converge around fewer battery supplier-defined architectures. Performance across the rest of Asia was exceptionally strong with broad growth supporting by increasing content with Japanese OEMs and a rapidly expanding presence in India. In fact, we saw over 40% revenue growth in India in the second quarter and over 50% revenue growth year-to-date. Earlier this quarter, I traveled to India along with most of our senior leadership team. We visited our engineering center in Pune, where we announced that we would be opening a new manufacturing facility in Chennai as we begin to localize production for this fast-growing market. Now let's turn to Slide 6. Our Aerospace, Defense and Commercial Equipment segment delivered exceptional performance in the quarter with double-digit growth for the second consecutive quarter. We're encouraged by the near-term momentum across this business and are continuing to invest in the medium- and long-term growth opportunities that can sustain that performance. In aerospace and defense, for example, we recently showcased a broad range of our high-power density motors at the Farnborough Airshow, and we are very encouraged by the customer response. We expect our expanded portfolio of motors, actuators and cockpit controls, including our digital flight inceptor to support continued growth and further strengthen our position against a favorable market backdrop for commercial and defense production over the next several years. Commercial equipment, robust North American on-road truck orders and our strong second quarter results reinforce our expectation for a second half recovery. We also saw sensors supporting on-site power generation for data centers contribute nearly 1 point of growth in the quarter, and we expect that contribution to continue in the second half and accelerate in 2027. As on-site power becomes more common in new data center builds, it is creating attractive demand for our diesel engine solutions, including cylinder pressure and high-temperature sensing. Next, let's turn to Slide 7 to discuss Industrials. In our Industrials business, we continue to navigate mixed end market conditions while building conviction around several attractive growth opportunities. We secured another HL gas leak detection win in North America supporting our line of sight to more than $100 million of annual HL revenue. Internationally, we see a similar structural opportunity developing, particularly in Europe with rising temperatures and low historical air condition penetration are increasing demand for efficient heating and cooling solutions. At the same time, Europe's transition to next-generation refrigerants increases the need for reliable leak detection and safety-critical HVAC sensing. Together, these trends create a meaningful long-term growth opportunity across our HVAC portfolio. Beyond HVAC, we are gaining traction in our data center business with a growing base of revenue in 2026 meaningfully contributing to organic growth in the year. With that growth comes increased conviction in our right to win future business. In fact, during the second quarter, we were specified into 3 additional new hyperscaler concepts for a total of 5 platform concept wins year-to-date. Additionally, we were named a preferred vetted vendor to a major hyperscaler. Each incremental specification win increases our credibility and improves our reach among hyperscalers, OEMs and EPCs, expanding our ability to win new business. This quarter, one hyperscaler spec in led to a significant award with an OEM for pressure and temperature sensors in our coolant distribution units with shipments expected to begin the first quarter of 2027. With that, let's turn to Slide 8, as I would like to elaborate on these data center opportunities and where we are gaining traction. We frame our data center opportunity in 3 categories. First is electrical protection inside the data center, including circuit breakers and high-voltage contactors that protect and control power across PDUs, sidecars, power conversion systems and next-generation racks. As architectures move towards 400- and 800-volt systems, demand for reliable switching interruption and protection increases. Our solutions are well positioned whether higher voltage DC is converted back to AC and sidecars or brought directly into server racks. Second is thermal management, including air and liquid cooling applications that use pressure, temperature, leak and flow sensors, along with protection components to operate safely and reliably. As rack power density rises, liquid cooling and cooling distribution units are becoming more common, increasing demand for precision sensing and protection in higher-density data centers. The interdependency of liquid cooling systems and high voltage goes beyond each enabling the other. The presence of liquids in high-voltage architecture raises the stakes regarding electrical protection requirements and plays further into Sensata's credibility as a supplier into safety critical and mission-critical automotive applications. Third is power and peak management. As AI workloads drive larger and faster swings in power demand, operators need resilient solutions to manage peak loads and use grid and on-site power more efficiently. Dynapower's converters, inverters and related technologies are well positioned for UPS systems, battery storage, peak shaving and on-site generation, helping data centers support high-intensity compute loads and deploy faster where grid interconnections are constrained. As our data center opportunities convert into design wins, we recognize the focus on the potential scale of this opportunity for Sensata. Ultimately, that scale will depend on both the size of our addressable market and our participation rate. While we are still early in the hyperscaler design and process and are not yet prepared to disclose expected market share or content per megawatt, we are increasingly confident in the opportunity. Let's turn to Slide 9, and I will elaborate on how we see this opportunity developing. As data center architecture shift towards higher voltage liquid cooling and more on-site power generation, we expect our addressable market to expand by 1.5 to 2.5x. This expectation for SAM expansion is on a per megawatt basis and is in addition to the expected market growth from capacity deployments. In addition to market growth and SAM expansion, we see the potential for higher participation as our differentiated sensing, protection and power conversion technologies become more relevant. This is clearly an exciting high-growth opportunity. However, as you have seen with EVs, the pace of change and market adoption can vary. We are focused on what we can control, securing design wins with high-quality hyperscalers and making use of our existing product portfolio and capacity to minimize at risk investments. The ability to participate in this growth vector without significant investment is a distinct advantage for Sensata. Our data center strategy does not require capital deployment for inorganic growth, capital-intense launches nor lengthy development cycles. We see ample opportunity to grow by leveraging existing products and developing derivative solutions from our core technology platforms. Data center architectures are evolving rapidly and the opportunity to secure specifications is unfolding in real time. Our recent wins demonstrate that our team is moving with urgency to accelerate development and sample delivery well ahead of the longer cycle timelines we see in other areas of the business. Now let me turn the call over to Andrew to provide greater detail on the second quarter and our guidance for the third quarter.

Thank you, Stephan. Let's turn to Slide 11. For clarity, unless otherwise specified, amounts are referenced in millions of U.S. dollars and growth percentages are approximate. We delivered outstanding results in the second quarter with revenue, adjusted operating income and adjusted earnings per share all above our expectations. We reported second quarter revenue of $991 million, an increase of $47 million or 5% from $943 million in the second quarter of 2025. On an organic basis, revenue grew 4% year-over-year as we had a 1% inorganic tailwind from foreign exchange. Adjusted operating income was $193 million and adjusted operating margin was 19.5% compared with $179 million and a margin of 19.0% in the prior year quarter. This year-over-year improvement of 50 basis points was attributable to stronger revenues and improved productivity. Adjusted earnings per share was $0.98, an increase of $0.11 or 12.6% year-over-year, which exceeded the high end of our second quarter guidance range by $0.03. Free cash flow was $186 million, an increase of $71 million or 61% year-over-year. Our free cash flow conversion rate was 130% of adjusted net income, an increase of 39 percentage points compared with 91% in the prior year period. Let's turn to Slide 12 to review our free cash flow journey over the past few years and to discuss the structural enhancements we have made that are driving sustainable improvements. Prior to 2025, 80% free cash flow conversion would have constituted a historically strong result for Sensata. In 2025, we redefined the cash generation power of our business and delivered 97% free cash flow conversion. Halfway through 2026, our year-to-date free cash flow conversion stands at 108%, putting us on track for a conversion rate, which meets or exceeds that which we delivered in 2025. Over the past 18 months, we have improved our cash conversion cycle by approximately 15 days, primarily through inventory reduction and supplier payment term optimization. We have also reduced capital intensity by better utilizing existing capacity, adding automation and deploying more flexible line concepts. As a result, capital expenditures decreased from a historical run rate above 4% of revenue to 3.5% last year. This year, capital expenditures are just over 2% of revenue year-to-date, and we expect capital spending to normalize to prior year run rates in the second half. Now let's briefly turn to Slide 13 to review capital allocation. In the second quarter, we deployed $400 million of cash to retire $406 million of long-term debt. We recorded a gain of approximately $4 million net of transaction fees. We excluded this gain from our non-GAAP results. We closed the quarter with $403 million of cash on hand and $650 million of capacity on our undrawn revolving credit facility. Our net leverage now stands at 2.4x trailing 12 months adjusted EBITDA compared with 3.0x in the prior year quarter. Gross leverage now stands at 2.9x trailing 12 months adjusted EBITDA and gross indebtedness is approximately $2.5 billion, a decrease of $762 million compared to June 30, 2025. In addition to retiring debt, we returned $18 million of capital to shareholders in the quarter through our quarterly dividend. Earlier this month, we announced our third quarter dividend of $0.12 per share payable on August 26 to shareholders of record as of August 12. Our capital allocation strategy continues to improve return on invested capital. For the 12 months ended June 30, 2026, ROIC increased by 120 basis points to 11.3% compared with 10.1% for the 12 months ended June 30, 2025. Now let's turn to Slide 14 to discuss our segments. All 3 segments delivered organic revenue growth in the second quarter, which is a testament to our new operating structure and each segment's commitment to delivering profitable growth through its respective mandate. Our Automotive segment delivered $545 million of revenue in the quarter, an increase of 3.3% year-over-year on a reported basis. Organic growth was 1.8% year-over-year, resulting in approximately 2% outgrowth compared with flat global auto production. We achieved broad market outgrowth through content gains and production mix as our diversified portfolio of ICE, EV and powertrain agnostic products is well positioned regardless of regional powertrain adoption trends. Automotive segment operating margin was 24.2%, a year-over-year increase of 120 basis points, driven by revenue growth and productivity. Our Industrial segment delivered $212 million of revenue in the quarter, a year-over-year increase of 2.9% on a reported basis and 4.2% on an organic basis. Organic growth was enabled by share gains and supported by stabilization in U.S. HVAC production. Industrial's operating margin was 27.1%, a year-over-year decrease of 100 basis points as we are reinvesting productivity from our Automotive segment to fund Industrial's growth investment. Our Aerospace, Defense and Commercial Equipment segment delivered $234 million of revenue in the quarter, an increase of 11.5% year-over-year or 10.9% on an organic basis. This was the segment's second consecutive quarter of double-digit growth, and we once again delivered revenue growth across every market vertical, including aerospace, defense, on-road trucks and off-highway equipment. Segment operating margin was 27.8%, a year-over-year increase of 340 basis points as we gained operating leverage from strong volume growth. Adjusted corporate operating expenses were $61 million, an increase of approximately $10 million year-over-year, primarily due to higher variable compensation expense, which was supported by stronger underlying performance. Now let's turn to Slide 15 to discuss what we are seeing in our end markets. Global auto production was approximately flat in the second quarter. For the full year, third-party forecasters expect production to decrease by approximately 2%. Despite these downward revisions, we remain optimistic on our ability to outgrow production and deliver modest organic growth for the year. In Aerospace, Defense and Commercial Equipment, multiyear commercial backlogs and higher defense spending continue to support our positive outlook for aerospace and defense. In North American on-road trucks, robust orders and third-party build projections support our view that a recovery begins in the second half despite the lower build rates in Q2. Our on-road truck orders grew double digits in the quarter, reinforcing that outlook given that our revenue typically leads truck builds. Off-road markets appear stable overall with construction strength from data center build-outs roughly offsetting softer agriculture conditions. In our industrial end market, U.S. residential HVAC shipments recovered modestly on a year-over-year basis, and we expect this to continue in the second half of 2026. U.S. PMI has been in expansion territory for several months, further pointing to stabilization. With that backdrop, let's move to Slide 16, and I will share our guidance for the third quarter of 2026. Currently, we expect third quarter revenue of $957 million to $987 million, adjusted operating income of $186 million to $193 million, adjusted operating margin of 19.4% to 19.6%. Adjusted net income of $137 million to $142 million and adjusted earnings per share of $0.93 to $0.97. Our third quarter guidance includes approximately $10 million in tariff costs and associated pass-through revenues. This is approximately similar to the level of tariffs we experienced in the second quarter as recently announced changes to global tariff rates are not expected to have a significant impact on our business. Our tariff expectations are based on trade policies in effect as of July 28, 2026. Our third quarter guidance does not include any potential tariff refunds related to the recent IEEPA tariff rulings nor does it reflect any possible pass-through of such refunds. With that, I would like to turn the call back to Stephan for closing remarks.

Thank you, Andrew. Before we move to Q&A, I would like to leave you with a few closing thoughts. Our second quarter results demonstrate that the successful execution of our strategy is creating clear momentum across the business. Our expanding margins give us greater flexibility to invest in the highest return growth opportunities. Our operational initiatives dramatically improved cash generation, which in turn allowed us to strengthen our balance sheet and improve resilience in our business. And most importantly, growth is now taking hold across all 3 segments, supported by disciplined execution, market outgrowth in Automotive, continued strength in Aerospace, Defense and Commercial Equipment and improving conviction around key industrial opportunities. Our data center strategy is maturing quickly with early specification wins and customer engagement, reinforcing our confidence that this end market can become one of several meaningful long-term growth platforms for Sensata. Thank you for your time today. I will now turn the call back over to James for Q&A.

Thank you, Stephan and Andrew. We will now begin Q&A. [Operator Instructions] Operator, please introduce the first question.

The first question comes from Wamsi Mohan with Bank of America.

It's nice to see the consistency in your results here and consistent improvement. Stephan, you spent a decent amount of time on this data center portfolio and the opportunity here. As we think about -- it's good to see the quantification in terms of conceptually where the SAM is going. But as you look at your product portfolio, can you help us think through when these products get qualified? And from a revenue standpoint, I think you mentioned that one of the hyperscaler opportunity could start to ramp, if I heard right, in Q1 of '27. So any parameters you can share with us that can give us some sense of materiality, whether it's '27 or '28 and overall from your progression standpoint, like how much more work needs to be done regarding qualification at a broader set of customers?

Thanks, Wamsi. That's a good question. And just give me a moment to elaborate that, and I'll explain our position. So we're continuing to see very good progress with our hyperscaler customers. But at the same time, customer designs are still maturing and the deployment timelines continue to evolve. Because of that, we don't think it's the right time to put a revenue or CAGR framework around the business. As those designs mature and timelines become clearer, we expect to provide more detail over the coming months. What I can say today, Wamsi, is that our confidence in the long-term opportunity has only increased. That's really driven by 3 things. And allow me to explain that once more in a bit more detail. The market is growing with a 14% CAGR of deployed capacity through 2029. SAM is growing from 1.5x to 2.5x, that predominantly through high-voltage architectures and that resulting in liquid cooling requirements. And then there's our participation and right to play, which is increasing. This is, again, a result of a shift to high-voltage data centers and liquid cooling. And then, Wamsi, additionally to that, and I think these are also really important points. During quarter 2, we've been specced into 3 additional hyperscaler concepts with a platform of -- with 5 platform concept wins year-to-date. And these 5 concepts, and this is also important, has been a big progress and a fantastic result of the team. They span over 4 major brand name hyperscalers. And then to give you a bit of an orientation around revenue, our industrial components have approximately doubled in revenue in the first half of 2026 compared to first half of 2025. So ultimately, that means we're moving from a component supplier to a system participant. That's how I'd sum it up. So just ask for a little bit more patience. And over the next couple of months, we'll be giving you more information, but it's just a little bit too early for that now.

The next question comes from Mark Delaney with Goldman Sachs.

Which is on the margin outlook for the second half of the year. 3Q margin guidance is flattish sequentially, but that's coming off of a better-than-expected 2Q result. So maybe you can talk about what led to the strength in margins in the second quarter. Any key puts and takes as you look into 3Q? And do you still think the 4Q margin can expand by the 30 bps you've previously been expecting?

Yes. Thanks for the question, Mark. We were definitely pleased with the margin result in the second quarter. And I'd categorize it as primarily driven by 2 factors, a little bit stronger volume than what we were expecting as the market came in a little stronger and then a head start on productivity. And so because part of it's a head start on productivity, I don't expect it to just represent a higher jump-off point off of which we would sequentially expand. If you look at the midpoint of our Q3 guide, it's basically the same level of year-on-year margin expansion as what we communicated last quarter as a framework for the back half. And then I'd say on Q4, we didn't guide the fourth quarter. We still expect margin expansion year-on-year, and we still expect margin expansion in the fourth quarter from a revenue standpoint, probably sequentially flattish from the third quarter and then margins expanding.

The next question comes from William Stein with Truist Securities.

Perhaps even more nascent than your data center AI exposure. I wonder if you've begun to develop products or repurpose products and develop customer relationships and perhaps even design wins in physical AI, things like humanoid robotics and such?

So thanks, those are great question. Look, let me answer that question like that. So what we're currently doing is obviously monitoring the potentially evolving humanoid market and where this could take us. And yes, it's clear humanoids are packed full of sensors, and that could evolve into a nice opportunity for Sensata. So we're very well aware of that. And yes, we're focused, and we'll see where it takes us, and I'll elaborate more on that in the upcoming earnings calls. But definitely, if the market develops, and I'm focusing on if, then it could be a nice opportunity for Sensata.

The next question comes from Joseph Spak with UBS.

So Andrew, the leverage target's ahead of schedule. I remember when you sort of communicated to the market on sort of getting the leverage down, your view was that, that would sort of help the multiple and the valuation. And the multiple has expanded, but I'm curious sort of now how you sort of view future uses of cash and whether share repos are back on the table because as you've highlighted, I mean, the cash conversion is quite strong. So looks like 2.4x now, by our math, could be around 2 by the end of the year, so pretty below your target. So how are you sort of thinking about that going forward?

I'd sum it up like this. So first of all, for the company, for Sensata itself, it's important that we continuously focus on improving our operations. And yes, cash generation and cash conversion is good, but there is still an opportunity to improve. We've got programs and initiatives running around reducing or further reducing our inventory levels. I feel we've made fantastic progress or the team has made fantastic progress around supplier payment terms and other opportunities within working capital to improve our overall cash performance. So there is a next level that we're working on. And to your question, I further -- I think the direction of the company related to how we use that cash is to continuously to deleverage the company and strengthen the balance sheet going forward. There is no change in strategy related to that from end at least.

The next question comes from Joe Giordano with TD Cowen.

I mean I guess it's probably a sign of where you're going that no one's asked a question on Automotive yet. So I think that's interesting. I'll jump there. You mentioned India. Just curious as to like sizing of that business and how large you think it can get? And curious, when you say India, is this like India local? Or is this India demand satisfied out of China exports? How should we think about that market? And then just a quick follow-up. Just curious what your outperformance was in China. I didn't catch that on the prepared remarks.

I'll -- Andrew will answer the question, Joe, to the outperformance in China. But let me start with India. So first of all, we're building a new facility there and deploying roughly $30 million of capital or capital expenditure. And the good thing about that is, and I'll get to the customers. The good thing about that is that it's mainly covered by -- offset by incentives. So nearly 100% of that is offset by incentives. And why are we building it there? Well, it's pretty simple. We've won a lot of business in the past with local Indian manufacturers and OEMs. And there is an expectation from these local guys to produce locally, and that's one of the reasons why we've decided to localize within India. So it's all local business. But there's a further opportunity, obviously, at a later stage as I'm speaking about Automotive OEMs now as a first step. And there's obviously a further opportunity then to use that site for export, but that's the plan for now. It's predominantly local. And then the other thing is that we want to leverage the opportunity of the broad market of suppliers in India, which could strengthen our competitiveness overall. There's an excellent supply base there, and that we'll also be using going forward. So I think it's a good next step in the region there for Sensata. And Andrew?