What changed in Sensata Technologies Holding plc's 10-K — 2024 vs 2025

Item 1: Business included elsewhere in this Report for more detailed discussion of our reportable segments, including discussion of major products and market drivers. Refer to discussion under the heading Factors Affecting Our Operating Results included elsewhere in this MD&A for a detailed discussion of the various factors that may drive changes in our operating results.

The below discussion provides information on the material factors impacting fiscal year 2025 compared to fiscal year 2024. Net revenue Net revenue for the year ended December 31, 2025 decreased 5.8% compared to the prior year.

Net revenue increased 0.1% on an organic basis, which excludes an increase of 0.6% attributed to changes in foreign currency exchange rates and a decrease of 6.5% primarily to the effects of divestitures. Refer to Note 21: Divestitures of our Financial Statements included elsewhere in this Report for additional information related to our divestitures.

Automotive Automotive net revenue for the year ended December 31, 2025 decreased 3.8% compared to the prior year.

Excluding an increase of 0.7% attributed to changes in foreign currency exchange rates and a decrease of 3.3% due to the effects of a divestiture, Automotive net revenue decreased 1.2% on an organic basis, which was primarily due to product mix in the markets we serve.

Industrials Industrials net revenue for the year ended December 31, 2025 increased 5.1% compared to the prior year.

Excluding an increase of 0.3% attributed to changes in foreign currency exchange rates and a decrease of 3.4% due to the effects of product lifecycle management actions, Industrials net revenue increased 8.2% on an organic basis, which primarily reflects content growth in our Industrials business segment.

Aerospace, Defense, and Commercial Equipment Aerospace, Defense, and Commercial Equipment net revenue for the year ended December 31, 2025 decreased 6.4% compared to the prior year.

Excluding an increase of 0.6% attributed to changes in foreign currency exchange rates and a decrease of 3.2% due to the effects of a divestiture, Aerospace, Defense, and Commercial Equipment net revenue decreased 3.8% on an organic basis. This organic revenue decline was primarily due to declines in the commercial equipment end market.

Operating costs and expenses Operating costs and expenses for the years ended December 31, 2025, 2024, and 2023 are presented, in millions of dollars and as a percentage of 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 year ended December 31, 2025 2024 2023 Amount Percent of Net Revenue Amount Percent of Net Revenue Amount Percent of Net Revenue Operating costs and expenses: Cost of revenue $ 2,620.2 70.7 % $ 2,776.9 70.6 % $ 2,792.8 68.9 % Research and development 133.8 3.6 169.3 4.3 178.9 4.4 Selling, general and administrative 356.2 9.6 392.2 10.0 350.7 8.6 Amortization of intangible assets 80.2 2.2 145.7 3.7 173.9 4.3 Goodwill impairment charge 225.7 6.1 150.1 3.8 321.7 7.9 Restructuring and other charges, net 50.8 1.4 149.2 3.8 54.5 1.3 Total operating costs and expenses $ 3,467.0 93.6 % $ 3,783.5 96.2 % $ 3,872.4 95.5 % 33 Table of Contents Cost of revenue In the year ended December 31, 2025, cost of revenue as a percentage of net revenue increased versus the prior year period, due to the net impacts of inflation on material and logistics costs and the unfavorable effects of changes in foreign currency rates, partially offset by the favorable effects of divestitures.

Research and development expense R&D expense decreased in the year ended December 31, 2025 primarily as a result of the divestiture of the Insights Business in the third quarter of 2024 and cost reductions attributable to previously announced restructuring actions.

Selling, general and administrative expense SG&A expense decreased in the year ended December 31, 2025 primarily due to the absence of charges related to the Insights Business in the current year. Refer to Note 21: Divestitures of our Financial Statements included elsewhere in this Report for additional information related to our divestitures.

Amortization of intangible assets Amortization expense decreased in the year ended December 31, 2025, primarily due to (1) $9.6 million of accelerated amortization related to our decision to exit the Spear aerospace and defense business in the third quarter of 2024, (2) the divestiture of the Insights Business resulting in approximately $26.2 million of lower amortization expense during fiscal year 2025, and (3) 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.

We expect amortization expense to be approximately $62.5 million in fiscal year 2026.

Refer to Note 5: Restructuring and Other Charges, Net and Note 11: Goodwill and Other Intangible Assets, Net, Net of our Financial Statements included elsewhere in this Report for additional information regarding the charges related to the exit of the Spear businesses and amortization of our intangible assets, respectively.

Goodwill impairment charge In the third quarter of 2025, impairment indicators were identified that suggested the carrying value of the Dynapower reporting unit could exceed its fair value. Accordingly, we evaluated the Dynapower reporting unit for impairment and determined that it was impaired. In the third quarter of 2025, we recorded a $225.7 million non-cash impairment charge.

This impairment was primarily driven by a lower outlook within certain markets that the reporting unit operates in following recent tax legislation being enacted and a strategic shift to focus on other markets. This revised outlook led to downward revisions of forecasted future cash flows.

If Dynapower does not achieve the forecasted future cash flows, or if there were a change in the discount rate or other valuation inputs, there is a possibility that additional impairments of the remaining $4.1 million of goodwill may be recognized in the future.

Restructuring and other charges, net Restructuring and other charges, net decreased in the year ended December 31, 2025 versus the prior year period, due to (1) the loss on the sale of the Insights Business in the third quarter of 2024, and (2) charges related to our decision to exit the Spear aerospace and defense business in the third quarter of 2024, partially offset by (1) the loss on the sale of the Magnetic Speed and Positioning Business ("MSP Business") in the first quarter of 2025, and (2) an increase in charges related to our restructuring plans.

Refer to Note 5: Restructuring and Other Charges, Net of our Financial Statements included elsewhere in this Report for additional information on the components of restructuring and other charges, net.

Operating income In the year ended December 31, 2025, operating income increased $88.2 million, or 59.1%, to $237.5 million (6.4% of net revenue) compared to $149.3 million (3.8% of net revenue) in the prior year, primarily due to (1) a decrease in product line and product lifecycle management charges, (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 a larger goodwill impairment charge taken in the current year than the prior year. 34 Table of Contents Interest expense In the year ended December 31, 2025, interest expense did not fluctuate materially from the prior period.

Interest income In the year ended December 31, 2025, interest income did not fluctuate materially from the prior period.

Provision for/(benefit from) income taxes The provision for (or benefit from) income taxes and our effective tax rate can vary significantly from period to period due to changes in our pre-tax income, geographic mix of earnings, discrete tax items, and other factors discussed below.

For the year ended December 31, 2025, our effective tax rate was 74.6%, compared to 1,185.4% in 2024 and 121.9% in 2023.

The unusually high and volatile effective tax rates primarily reflect the impact of non-deductible goodwill impairment charges, the 2024 capital restructuring to secure future IP deductibility, and other non-recurring items including unbenefited losses on asset sales and restructuring costs.

Because many of these items are either non-deductible or only partially deductible, they had a disproportionate impact relative to the level of pre-tax income in each period. As a U.K. tax-resident company, our statutory corporate tax rate is 25%.

Our effective tax rate differs from this. statutory rate due to: • earnings generated in jurisdictions with tax rates different from the U.K. rate, • non-deductible expenses, • tax incentives and credits available in certain jurisdictions, and • discrete tax items recognized in each period.

These factors may fluctuate from period to period and may not be indicative of our expected effective tax rate in future periods. Discrete tax items, including non-deductible goodwill impairment charges, restructuring costs, acquisition and disposition related expenses, and changes in valuation allowances, also affected our income tax provision.

In periods where pre-tax income is low or losses are incurred, these discrete items may result in an effective tax rate that is not meaningful or is not comparable to other periods.

For additional details related to the reconciliation between the U.K. statutory tax rate and the Company’s effective tax rate for these years, refer to Note 7: Income Taxes of our Financial Statements included elsewhere in this Report.

Deferred taxes and valuation allowances As of December 31, 2025, we maintained valuation allowances against certain foreign deferred tax assets, primarily related to interest carryforwards and net operating loss carryforwards in jurisdictions where we do not expect to generate sufficient taxable income to realize these benefits.

Changes in valuation allowances are evaluated periodically based on updated forecasts of future taxable income and other relevant factors. Cash taxes Cash taxes paid during 2025 were $114.9 million as compared to $92.6 million of total income tax provision reported in our consolidated statements of operations.

Cash taxes paid during the year exceeded our total income tax provision primarily due to the settlement of income taxes related to prior years in certain jurisdictions, and the prepayment of income taxes in other jurisdictions in the current year.

These payments reflect the timing of tax settlements and advance payments and do not necessarily correspond to income tax expense recognized in the current period. As a result, cash taxes paid may differ from the income tax provision reported in our consolidated statements of operations in a given period.

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. 35 Table of Contents The use of our non-GAAP financial measures has limitations.