Company: ST
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001477294-25-000022
Chunk: 94

Company: Sensata Technologies Holding plc
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 94
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 and losses recognized on these derivatives are recorded in other, net and are not included in cost of revenue. Refer to Note 6: Other, Net of our Financial Statements included elsewhere in this Report for additional information.

•Employee Costs. Wages and benefits, including variable incentive compensation, for employees involved in our manufacturing operations and certain customer service and engineering activities is reflected in cost of revenue. A substantial portion of these costs can fluctuate on an aggregate basis in direct correlation with changes in production volumes. These costs may decline as a percentage of net revenue due to economies of scale associated with higher production volumes, and conversely, may increase with lower production volumes. These costs also fluctuate based on local labor market conditions. We rely on contract workers for direct labor in certain geographies. As of December 31, 2024, we had approximately 2,300 direct labor contract workers worldwide. 

•Sustaining Engineering Activity Costs. Modifications of existing products for use by new and existing customers in familiar applications are included in cost of revenue, as are costs related to improvements in our manufacturing processes.

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•Other. Our remaining cost of revenue primarily consists of: gains and losses on certain foreign currency forward contracts that are designated as cash flow hedges; material yields; costs to import raw materials, such as tariffs; depreciation of fixed assets used in the manufacturing process; freight costs; warehousing expenses; maintenance and repair expenses; costs of quality assurance; operating supplies; and other general manufacturing expenses, such as expenses for energy consumption and operating lease expense.

Changes in cost of revenue as a percentage of net revenue have historically been impacted by several factors, including: 

•changes in the price of raw materials, including the impact of changes in costs to import such raw materials, such as tariffs; 

•changes in customer prices and surcharges; 

•implementation of cost improvement measures aimed at increasing productivity, including reduction of fixed production costs, refinements in inventory management, design and process driven changes, and the coordination of procurement within each subsidiary and at the business level; 

•product lifecycles, as we typically incur higher costs associated with new product development (related to excess manufacturing capacity and higher production costs during the initial stages of product launches) and during the phase-out of discontinued products; 

•changes in production volumes, as a portion of production costs are fixed; 

•transfer of production to our lower-cost manufacturing facilities; 

•changes in depreciation expense; 

•fluctuations in foreign currency exchange rates; 

•changes in product