THRM - Earnings call transcript Q4 2019

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Operator

Greetings, welcome to the Gentherm Year-End and Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

At this time, I will turn the conference over to Yijing Brentano with Investor Relations. Ms. begin. now may you Brentano,

Yijing Brentano

available Thank you, joining earlier Thank for release morning, morning, and today. Gentherm’s good is the us of released a everyone. gentherm.com. earnings and you copy Rob, at results this were

will Additionally, today available of website. on today’s section later Relations be a Investor of webcast Gentherm’s replay call the

undertake to including and with the differ various SEC laws. for Statements update underlying results We reflect Please materially. this may forward-looking obligation may make of financial security During uncertainties them, no future statements within and current federal views and respect the call, we actual such see Gentherm’s forward-looking risk discussions the subsequent filings, to events factors and XX-K meaning of statements. our latest performance. reports,

non-GAAP in we comparable measures or earnings Regulation financial call, by SEC these discuss included Reconciliations the investor measures to the are defined our may G. measures as of non-GAAP release presentation. financial financial GAAP During

with and Phil Financial Officer. today call to website made Chief that their during available we On are note that will gentherm.com/events. Anversa, on and Phil be deck comments, Eyler, Chief Officer; at the referring Matteo Please the have me Matteo Executive and presentation our President

questions. our to excluding refer your will Gentherm they addition, In which divested core assets include After prepared performance, pleased remarks, take be to as their business, Medical. and Automotive we will

quarter to certain items. adjustments XXXX, a impact continue on previously turn Phil, in to earnings XQ discussed call. to to I you financial call fourth related our Before of our These about the of like customer Matteo reported I amortization would reclassification some XXXX which relationships of adjustments XXXX remind

fourth as $X.X for reclassified which for item into well each in for our as revenue other the contra from revenue resulted businesses. a of being revenue impacted XXXX, of industrial SG&A automotive, million quarter This

our in earnings annual product revenue first pointed call, million SG&A. increase impact and As both was XXXX quarter $XX.X on the Matteo out for

full and rate both EBITDA basis XX margin by XX gross and the result, XXXX. points impacted for were margin a As year rate respectively points basis

Now, turn call I’d to over like the to Phil.

Phil Eyler

everyone, accomplishments Yijing. my Thank like our you morning, recap in comments brief both of and I’d consolidated for and a the Good to joining and call you, for provide over turn each today. guidance on thank provide and this of In fourth us morning, business core level cover the more then our quarter units Matteo our details two you to on XXXX. the financial to

completed, the back look just we are at believe As takeaways. there key I year three

against extending our plans, our and businesses. First, growth we strategic building executed core effectively

our challenging successfully product exiting portfolio, facing we completed proactively the repositioned we Second, repositioning of divesting headwinds anticipated third, and And base. our and the company and industry or non-core our cost our and lines. businesses

to combined us remain In two addition, positioned our shareholder growth These drive productivity. we initiatives enabled earnings improved well and to value. simultaneously

As gross operating strong environment margins, and operating a Accomplishing XX% these flow. in challenging in result XXXX, our we operational increasing and enterprise. clearly record across income we cash generated expanded a execution demonstrates achievements free such our by

strong bit currencies. we production vehicle in automotive little to continued Please a more XXXX, Now, Slide of and in go let’s detail. major weakening X. decline global macroeconomic including this headwinds, In faced X% nearly over foreign turn a industry and

year. delivered In for addition, Despite revenue. the our challenging the on strike significant the results at our solid had impact financial General largest we customer, Motors, a environment,

outperform key automotive we First, continue in versus markets able to were to that serve. we the

year decrease impact in GM strike, foreign revenue vehicle full our a currency nearly of and in X.X% Excluding the translation global decline compares Automotive organic to the X% of production.

global the automotive foreign the significantly excluding the reduction in revenues, GM X.X% fourth again the currency outperformed at translation our We’re strike decrease quarter, Automotive looking in X.X% and impact of production. specifically

during XXXX. we and awards With beginning fourth in of secured $X.X the the $X in total over addition of a XXXX since quarter, the of billion awards billion $XXX in a million automotive record

awards Our as both growth existing of exciting by as of to us XXXX well strong Blanketrol products growth. demand In track we in such Medical, our UV record as our position driven and products products as long-term the continues for well our TREO, Stihler new achieved such double-digit portfolio. for addition to

quarter, strong in double-digit a achieved growth record annual business With fourth the the revenues. Medical

improvements. our place. We’ve On our our way $XX $XX annual improvements activities million the these annualized for savings all make progress of to rigorous and to excellence front, we Fit-for-Growth purchasing targeted savings million identified well and on implementing cost in continue through of with on essentially XXXX in we’re cost already

we addition, core the when in volumes to an size This to volume production year earlier in XX took allowed factories proactive right slowdown basis our businesses the us lower achieve our in improvement apparent. steps in XX.X% XXXX. gross In automotive XXXX annual XX.X% became to point in margin in for from

expenses. operating reducing in momentum our continued also We

were for expenses percent XX points XXXX. lowest since first quarter in the Adjusted from our a improved in XXXX. as in operating businesses the core in of expenses XX.X% After XX.X% costs, revenue to operating adjusting fourth restructuring quarter basis of the XXXX

under With chamber completed and we’ve our focus CSZ Power XXXX, Global industrial of Technologies now in all the divestitures and divestitures growth exits the businesses identified strategy.

company automotive revenue XXXX. the of these volume, shrinking $XX our divestitures decreased million in result a total As production and

an rate in XXXX in XXXX. total additional our in XX.X% to EBITDA basis $X.X from adjusted XXX improving delivered by Nonetheless, XX.X% XXXX, EBITDA in we adjusted points company million margin

margin businesses, the core EBITDA achieved rate for adjusted our of For year. XX% an we

share million a provide current our program of Finally, a company. as of value XXXX approximately generated XXXX, of in financial to in million level million since we shares our continue repurchased launching results more we have recognize repurchase free the will We’ve shares shares. about our the minutes. in $XXX in million repurchased we cash our in our our flow $XX details total in $XX authorization. $XX Matteo a few and now record We remaining for

our we me OEMs Now, Kia, Hyundai, In on Motors, XX Slide across Ford, turn automotive on General vehicles X. XX different highlights Automotive let including fourth Skoda. to solutions the and launched quarter,

Genesis on Buick the Sonata, Enclave, CCS Maxus-Datong. the the to Defender momentum GVXX, SAIC and and Rover continue product We first SUV, Land see for the launched Hyundai our

battery if recall, globally portfolio In through addition really launch hard quarter. for in battery functional we the BTM less our LG this to work our Renegade of XXXX. to announced I’m year. fourth proprietary started that cross than first this solution proud Jeep solutions of you our of to plug-in quarter that the thermal hybrid in Chem the I’m teams of production solution the customer in heating of we management, pleased share a

ClimateSense. at then U.S. automakers luxury German, multiple continue technical with Management progress well. to Thermal Motors and Society to journals Automotive Engineers In our and move industry. the gain attention The jointly in were great General in Asian making we’re Gentherm Development development addition, Systems on Symposium. of results the and projects project since highlighted presented continue In XXXX, results

As we cold delivered XX% XX% in weather weather ClimateSense and savings shared previously hot between in testing. energy testing XX% energy to savings

the those XX% savings to range extension. the or to translate range ClimateSense XX Let’s In miles by approximately cycle, cold adding range. weather increases

cars the solution General that our for development Motors Our demonstrates in of projects offering strong other future. energy OEMs efficiency work a ClimateSense passenger is as as comfort and with well with

won we including and HRV, FAW-Volkswagen the Legacy SUV in the CCS program China future a full the CX-X, platform to Slide fourth secured business Renault and solid can new Hyundai sets continue large foundation awards pace company on we for wheel Mazda Buick across In eight platform Envision, Now X, This Also, awards $XXX OEMs awards, quarter, CRV, Outback multiple year the for and including growth. and you wins PSA where see ZOE ID Jeep Grand we that awards that Volkswagen Grand CX-X Lounge. to to us heater new Cherokee, Grand received customers. with the Honda at We million the the in XX quarterly a Sonata, record across and billion and in XXXX. MPV. win and is Wagoneer, SAIC the CX, cumulative different for brings Jeep awards Cherokee $X.X program Subaru the Citroen new Honda steering

connecting that uses award leverages connecting cell our this While same We in growth we in an thermal we foil cell began achieved the for headwinds heaters. Renegade with return battery new steering to This first in OEM. proprietary to as production our winning launch. award German the award technology November seen shipping well our have heater technology line the milestone a us solution momentum Jeep thin management that our wheel steering premium revenue product wheel revenues important in impacting XXXX, new in positions heating battery

design lowering boards functionality previously compared connecting As solution to costs. weight this enables technology, cell connecting flexibility, wire-based more innovative simultaneously to while reduction, and added our cell launched

than friendly environmentally process In addition, more unique our manufacturing alternatives. is competitive

you I a While worldwide how name in their excited content battery won awards can significant of example pack quarter. great by yet electric OEMs share number a very that to electronics OEM, is to with of share also can’t I growing that vehicle this we’re the of I’m adding the systems. our we business tell the

proprietary controller with functionality, with utilizes on Gentherm’s the memory Intelligent solution climate Ford Navigator technology. First, we seat control business our won additional System, multifunction Lincoln and which Transit electronic binding the Positioning IPS, Connect,

incremental won seat business significant module General with In addition, climate Motors. we electronics

automotive in I’d our environment. for awards, challenging securing the $X.X this global light billion congratulate teams like especially take time to global in to of

awards automotive for the As now of we’ve well since us growth. XXXX, $X in beginning billion long-term I mentioned positioning earlier, secured

GPT, Now primarily Industrial of business CSZ Recall and our the a a that divestitures is now of industrial this segment. Medical X comprised as let’s our Slide business. turn segment of to of discussion for chamber result

few fourth As a to double-digit quarter I business revenue in the record for year. strong full mentioned the for Medical led the moments growth ago,

liquid-based secured the China, patient Center systems, U.S. Bellevue System Health Blanketrol, Indonesia management awards quarter, and as in of California well and Health in including from for Texas the in large in the During several Hospital hospital likes New several York, our as Palomar customers Hospital solution, & Japan. we Parkland thermal

a with in integrated heat/cool In significant achieved new growth system addition, quarter, disinfection technology. UV from cardiovascular revenue TREO we the

continue the reminder, revenue positions progress comfort our is climate the Medical product of for automotive business core We solutions as at as of pipeline, solutions. our make well continued synergistic And our to with a growth. is which on development thermal highly us physiology control

Let me quick the make about some just coronavirus. comments

employees our safe. to that situation. We’re Most actively managing the our working to are we’re importantly, ensure response

All have up been of back ramping after week extended one our plants holiday.

open, of have and a will we This offices returned and to majority monitor. to fluid that a continue situation our employees is work. are challenging Our

team profitability. to agility, strategy and challenges improve the and our Gentherm So of commitment I’m in on proud talented global overcome deliver to the summarize, market, very the of hard work

rigorously income revenue achieved and attack our XX%, even X.X%. nearly point. or to Operating Let total positioned this $XX.X me profitable to highlight We proactive increased by well though taking for company XXXX, by from structure long-term XXXX our cost this growth. steps keep million decreased

As as free we’ve discussed, enterprise. environment generating challenging achieving record well cash automotive such across in for expanding operating year awards flow record as a QX our strong the execution operational demonstrates and in margins

we X look update of regarding morning and As from the will on host Detroit strategy with more a forward share to Event be our details meeting available investors we’re strategic details longer-term planning here, in objectives. June to shortly.

the to over With XXXX on a little financial our turn guidance. Matteo call that, the for color more results I’d of to like

Matteo Anversa

and you thank the joining call. you, Phil, to Thank everyone

by XX%. focus on our or that in by and the item results. fourth product our XXXX. So the of and Automotive In year-over-year revenues GPT the prepared disposition CSZ quarter, my the chamber revenues to were impacted and X, on decreased quarter industrial due XX% we’ll $XX.X decreased businesses Industrial start revenues fourth reduced Slide million X.X% by remarks

for organic If X.X%. by Automotive. revenues we adjust with decreased starting Automotive the FX, impact our So of

Automotive have may you of of vehicle the our to adjust also strike, impacted as been X.X%, in production our And X.X%. if GM by GM the and would quarter recall, the the compared down Now fourth we approximately a negatively decline effects strike. global was for the impact revenues

award-winning Daimler. our business product by the revenue BTM due again PACE solution line as to X% BTM strength increased So Automotive outpaced continued where in of with our once approximately the a result market the

or we levels, of well as as holders X.X%, Other of to result lower a automotive cancellations. the we Automotive strike, platform FX, addition, saw take X.X% the in due In of thermal BMW. by strong exclude as changeover production an if vehicle CCS with Conversely, new GM effect rate revenue XX% primarily cup increase decreased

GM the decreased production Heater we exclude if or revenues Seat strike to Heaters FX, Steering if Mazda. X.X% revenue X%, exclude X.X% decreased Wheel due or volumes lower and X% FX. primarily at you

result increase X% the to control an Electronics have Now with strike, the last due Ford. decreased as impact launched if RV of by continued the the Automotive vehicles. Wheel we to electronic by Similar And offset a exclude Cables Heaters seen the higher revenues by last in GM slowdown in multifunction Ford we newly finally, revenue industry, quarter, of Steering partially would revenue compared X%, to primarily unit increased year. from

Stihler fourth acquisition, increased equipment fourth Medical strength Moving UV the year. to to primarily certain of as third GPT of compared well was fourth and the quarter of sales TREO result revenue in compared success increased to This Industrial. product of industrial quarter benefit from as approximately the chamber Industrial revenue order continued of the as the timing of Medical of a last from the businesses. shipment to exclude XX%. Conversely, decreased XX.X% the CSZ and last quarter. the year XX% approximately newly the If by revenues the increase the we Blanketrol disposition the driven introduced shift

Medical more to exclude XXXX, benefit we increased Stihler approximate XX% than year-over-year full compared X% increase For revenues of year, acquisition. the if the an

to factories, Gross labor the These driven margin. moving cost the increase margin fourth Now as by primarily in reductions, was margin was productivity of at supplier to reductions were The by gross XX offset favorable impact Fit-for-Growth. XX.X%, basis compared quarter. of and partially increase price gross points other an volume year-ago lower as year-over-year well quarter the of the the the inflation. rate wage annual impact improvements for

our lower of level our in previously have And by overall, production deliver by rightsizing anticipated we we productivity XX% achieved as beginning As employment XXXX. decreased the volume. improvement the approximately mentioned, was proactively since factories

we premium maintenance cost year. Additionally, the in incurred and lower quarter to compared freight last fourth

quarter to were move the we million. If $XX.X operating operating in expenses, expenses

$X.X nearly of by The included Industrial driven of approximately we year-over-year. and primarily the the both charges, XX% the Now improvement impact of offset were partially if down businesses restructuring operating this compensation. restructuring charges. incentive higher dispositions and adjust amount expenses million And sequentially year-over-year our by Fit-for-Growth, was of for

on the last discussed GPT. for And as rate a nondeductible full the of charges sale Also, $X.X quarter, quarter this XX%. fourth include effective the for loss in approximately pretax the adjusting charge, year was the results GPT range tax lower as of with XX%, quarter the the higher of for some the related million rate to impact that was the Adjusting earnings our tax future. XX% rate our was approximately was primarily business, rate tax to which XX%. The discrete slightly to jurisdictions low than lower not well we items tax guidance expect due in as in do XXXX, to repeat

compared for result, So $X.XX compared to XXXX. a full share our a adjusted the year. was as a quarter a share And the a of adjusted in XXXX, fourth share $X.XX EPS EPS in the $X.XX $X.XX last year our share to quarter was in

the If we X, balance move to cover Slide I’ll sheet.

CSZ approximately chamber So industrial the of from position coming million, disposition end restricted XXXX the was of $X.X our cash at cash million of the including $XX business.

by by compared a the our generated million of quarter sequentially free of to $X to the Our cash more cash in third. cash the operating outlay million million XXXX activities repurchase in cash XXXX, We $XX in in and of $XX end increased $XXX million compared than share flow XXXX, $XX for program. record offsetting position fourth million from and increased

end dispositions the businesses, by of with million debt the $XXX us The million of to million proceeds reduce the $XX end allowed XXXX. our to net net $XX at our impact million combined of from the XXXX of actions, from $XX these Industrial at approximately

revolving of year-end of XXXX. December $XXX million at at availability approximately stands line $XXX XXXX, credit up end at million the stands our of the from debt $XX million, As total and

with XX, for provide guidance to XXXX. you Turning our Slide I'll

to are So core to of down excluding for our XXXX, impact of revenues, we foreign product up X% the to in projecting exchange, be businesses for XXXX. range the compared X%

$X situation impact impact We this $XX based to to the monitoring or as potential also year our been expect has million customer impact first we increase relatively growth we on operations Phil any revenue chain the our At year-over-year million expecting carefully gradually on on time, quarter. as actually are coronavirus are small. said, between business. revenue supply orders, the And the progresses. value and in our And

to continue becomes necessary. determine will any assess situation we adjustment However, the to if

continue gross in XX%. expecting margin range are the of to We be to to XX%

to be expenses be as is revenues, further adjusted to of to the the expected of Fit-for-Growth improve impact to to EBITDA are XX% also Operating margin XX% XX% between improve expected of of range due result, to the in And a and primarily revenue. XX% actions.

be million. XX% in our expecting $XX between be $XX million are the capital We of to rate range XX% expenditures and and to tax to

Now back begin to Rob the to the with call Q&A Rob? that, Session. I'll turn

Operator

you. Thank

now And of Chris be a your Van Thank Instructions] conducting be our the with B. will [Operator Please from Horn We with Riley first question question-and-answer session. FBR. coming line you. will proceed questions.

Chris Van Horn

on Good congrats quarter. and the morning everyone

Phil Eyler

Hi Chris, thank you.

Matteo Anversa

Thank you, Chris.

Chris Van Horn

obviously, were there's just know where kind year was in could to a cost supplier the on of had Fit-for-Growth revenue lot better there, were First highlight, expand any was with or fixed margins, able you multitude things? we we And relative to a And driver imagine there said declining a ago? Maybe some environment. gross in you Fit-for-Growth I where main agreements, of leverage and to of that a then it kind question, are do it. along you

Phil Eyler

you give one, couple the the year, factors, A the me so basis the bips of factories. the XXX productivity quarter look – the was Yes, points at improvement. labor last this versus about let of biggest so if key which is fourth of you – so year XX the

a little was If bumpy. you year may of recall, last quarter the productivity the fourth

the little quarters the than this year. So experienced higher is during prior we what have that's in a why of this amount the magnitude quarter

was And to out. positive normal, of then the obviously impact XX, XXX then cost the impacts price is another each. sourcing as we another freight, points. XX then makes and was the And cost basis the related about by to points maintenance which continue with the inflation rest. reductions reduction, cost Fit-for-Growth these basis combined the And annual improved impact volume the were premium supplier productivity wage most basis lower partially drive the of points offset the of lower Then XXX it again the lower

to So give of the quarter. kind idea kind that's an of on you

where I is. think we feel good Fit-for-Growth

$XX good coming very for come about make to million actions the identified continue we future. more think $XX of progress. to and We completed I million of

Matteo Anversa

to in add that we've turning only of if in sold I’d more Chris, project. that that, goods we're quarters you our cost recall previous attention discussed reduction to Fit-for-Growth

So OpEx, we're pretty team variable operations our costs. driving that although seeing momentum we're is on still about improvements gaining excited in the down

Chris Van Horn

other Okay, great. going what board around the market imagine maybe on is highlight connecting And maybe really highlights other you that just the to and players doing – then cell competing significant, to obviously of exactly or types I be that just some awards, for are that. the And doing? you're could focus technologies and want what strong quarter, technology with is

Phil Eyler

the proprietary And Chem mechanical the product Jeep heater opposed uses etching. technology that's one. of we're a to basically cell that process we the for about announced the to competing starting connecting same thanks technology most that which the it's thin previously going manufacturing LG business asking yes, as based We're Sure, foil about with that really excited uses chemical that build. on a into It's Renegade.

puts competitive out in us we real flexibility comments, really differentiation environmentally-friendly. the provides and our more from we pointed a think a more then a it's on that's good for customers process cost And the from standpoint, position that as standpoint, also, So functionality standpoint.

of interest. We've lot of ton there. a a there's So advantages got

Germany. The win with was premium a huge in first OEM

fastest products over be think that's I growing – it's BTM to years. our going in the one our coming of line So

Chris Van Horn

to Got it's it's like then product. and seems strong climate at like sense, development, more – really Okay. every feels obviously And looking quarter still know be it there's a more I really in people it. it but going and it

I you I sense there's where drivetrain I next imagine difficult, could Now the a more obviously, be will from is it it's people twelve And and know the to months. a vehicles, progressing traditional think, it see timing looking give six perspective. at but of low-hanging still fruit you us if but maybe of how electric in

Phil Eyler

results. we we get at that more interest. good we I Yes, continue important pretty quarter, think, the creating every Conference, the there And SAE the with – the talked even about GM The a development. did progress last quarter, to presentation milestone really was, make them – which message GM that's test together good out on with customer

we we're customers the mechanical solution, the seven in of management a side optimize of and and product we we're algorithm. are all the the it, a that get – of optimize algorithm with to total those total So projects and the up comfort development regions. to to had system and the continue most software and both refine with And amount importantly of continues mix really but the the our side able and sharper to energy

we're award And And driver of required. is would because heavily going developed of point still cars and in now Most growth. in the when significant we're come. an will range at XXXX being between that the architecture long-term time optimistic, believe be sometime to beyond and change obviously in for this this it that expect investing a to do be so we quite and that's core

Chris Van Horn

great. the time. Thanks Okay. all I right, for All appreciate color. that

Phil Eyler

Chris. Thanks

Matteo Anversa

Chris. Thanks

Operator

Brinkman Our Morgan. proceed of next with from Please with Ryan is line questions. J.P. question your the

Ryan Brinkman

the coronavirus. of your production of thanks to comments share us in you customers you in latest are sales of earnings your for what in China? that you XXXX you overall production have company Can factor? remind And of light Hi, for who restart the the for assumed relative stage and your should major in customers XXXX at what in Can at the in guide? about the how on terms are your China maybe seeing And this we think tracking market? cadence of

Phil Eyler

same ramping all, done, up, incredible operating I'm team up start that we're many I’ll managing of suppliers majority the I ramp seeing slow plants in to doing process to ramp think, They're probably you've now else. first are whole heard sure are has the plants an We're that of as are with say – Well, everyone same. our from happy other effects gradually the of job that up. people our

Our OEMs smaller JVs customers examples, as global customers domestic business predominant and like OEMs. the SGM in then who and but are – the a extent still important comes just to China, extent see, have GM, from Volkswagen, the

So that's the been ramp obviously up $XX the most extremely and impact to we're that's million on slow million expectation. that seeing QX $X of to

we're working sure really job That place with that We've doing in on the to hard that challenges. that to on managing expect challenges make daily said, SWAT obviously extends come supply front. ramp daily good a a this team keeping are chain we slow a more as that And is managed going, basis. being the and of up flow got

we look total a for the year at XXXX. our had X.X% you company When revenue in as

$X can $XX use million as you impact for said, to that of representation So kind year as QX and we million. then of the a the potential

Ryan Brinkman

planning address you but you on your are lower ahead would how plan under speaking, or that Broadly interest? even then do in get were of I on track in Is that the to it? a commented And provided Detroit XXXX think I'd target and that control, how wanting the time Okay, the to what understanding outlook is of release performance Is you're XXXX, might characterize the thanks. just company's think I you better update are volume the first call timing in you you'd XXXX. XQ Auto in relative the around characterize see sense, figures of Show. it press of environment? primarily June you change now you those early the a interested. a function had in to dealing be with of June, coronavirus

Phil Eyler

Yes, we I'll financial we've fact the to targets, which back where about company's It's give more that of day. to specific that overview the going, locked the a including go the in first. to want comprehensive

have So together we location June time, the all that actually X. coming on date,

what's So it. that's really behind

dynamic happening market. more us with what's to see that course, Of this gives time a

expected XXXX of all that, to been we And $XX has think to the we're Fit-for-Growth of in front. the happy second comes achieved, question, I that expected the On dynamics to managing that, of done with proactively top top the what take cost. of of are on we're when a achieve back the of your great I it projects already to job we've identified market. making, the definitely we change on it ahead and million. progress

Ryan Brinkman

Great, lot. thanks a

Operator

from of Roth The Justin Please next proceed Clare question with is with the line Capital. questions. your

Justin Clare

Hi, thanks taking for everyone, questions. my

Phil Eyler

Justin. Hi,

Justin Clare

product for guess, off, level various seats of your was other in taking the believe awards heated or if given in market talk so could wondering then and you and in Do about I meaningful saw QX cooled share first – I XXXX, strong you your with here? products. share lines you seats you're heated

Phil Eyler

customers on customers We're I – above – we the think winning year our rate, and hit so, Justin, past. – our it's been in that. XX% doing its' measure we're would we're with our haven't our business we're core win that rate taking on give about me And for confidence the business. that

you, have me to but – a tell specific the would that's certainly I with good I So that yes, don't share number have the momentum happening. feeling we're

Justin Clare

I how then sales factors quarter? then the battery sales pause there about talk forward bit Okay, thermal should moving great. number know And management that in of a BTM slowed But was we And think in growth a in took a different can XXXX? impacted about QX. why QX. you

Phil Eyler

had don't that come – from the through, talked we a than orders previously I the say is Yes, Mercedes wrong declining we and but we call little declining than did in earnings word, quarter expected seeing for come were it less the we better that last through but bit expected. about it did

still ongoing business though. So as BTM into that see our we was growth it. head We XXXX of

Justin Clare

for Okay, great. then me. just one And more

then your in here? thinking the and can a forward about for Medical, expectations are number talk for Medical XXXX, think margin you've segment I range. should about the indicated roughly margins For be that Automotive business? going you we XX% gross for the Is

Matteo Anversa

the on me margin comment, would think say gross – I let I more make comment a overall – – guidance.

progress think really which items I these we will manufacturing margin. the we we made pleased XXXX, also the keeping the will savings of one and side, in throughout couple with with are XXXX productivity on focusing the and on mostly gross Automotive obviously sourcing that be benefit

know, with However, year, X%, price to overcome, our need with headwinds you that the face inflation. about every reduction every year, as customers, X.X% which is we we wage mostly

new other cost I that to generally, programs, launching when the the in new is we that the sure properly. at And launch face particularly is important think, consider And aspect we sites programs, to little manufacturing make some is higher launch that, BTM. a done are we

So the that our aspect that, comfortable are in which for continued is think will XX-plus its achieve guidance we us target one margin as cost on in of this the gross the future. we But Fit-for-Growth we our as to I are that revenue, with leverage well right give gross margin. actions we the implementing also considered increasing path an that

And Medical higher Medical versus are to gross then Automotive. clearly back your are question margins on Automotive, – margins than the

a as – mix little Medical us helps a in bit that in at XXXX terms we projecting pace are than of growth faster Automotive. XXXX, revenue in the So versus in

Justin Clare

guys. thanks Okay,

Matteo Anversa

you. Thank

Phil Eyler

Justin. you, Thank

Operator

Please proceed comes questions. next Sigdahl the of Your Ryan with question with from Craig-Hallum. your line

Ryan Sigdahl

And morning. good quarter. good the congrats guys Hey on

Phil Eyler

Thanks Ryan. Good morning.

Ryan Sigdahl

of XXXX your alluded year so growth for is X% Automotive year, in relates Medical. but to the growth X% faster in you expecting are at and this negative revenue growth in Directionally, kind within it to there guidance? that expect guidance it Medical As the directionally, guidance, – least plus you in you to

Phil Eyler

of production up I give the elements have almost now it. down seeing, continue the IHS X% down is of examples. bit some moment of well Yes, some Certainly, say I'll into key maybe and estimate. everyone I we're of that estimates in knows, the our right a break guidance this product. give definitely and the further to call you for our dynamic you addition, to can you to be vehicle went for as little with though, headwinds customers some just the

has bit customer the Ford a ours. large outsize market, they're of to little compared decline of as and a

bit Nissan, effect more Honda OEMs, revenue. some have on In addition customers we to little our that that, have are that large a Japanese and

new customers we're That really nice said, customers, seeing our with and then some on of growth large customers. bringing several

We'll also the to mentioned, some canceled were So creating America North as effect then impact that's our China by headwind. coronavirus year of full of helping customers more in some early some year. obviously, that offset continue last to of see we that. sedans And

our That headwinds. CCS, the business, more if longer growth kind Most the said, of steering growth. challenges we're the still and climate quite products, BTM think mature and be be But core about the year flat which products on in headwinds in you products, win expect business, that core heat, of our the the would we above to we relatively launching and side confident certainly, these average headwinds. expect new Medical, be Cable term offset company of the our that on we'll will upcoming us CT, given rate in strong help given wheel

Ryan Sigdahl

Great.

GM uptick basically you now You to are a up headwinds any, the expecting about back fully you'll that benefit What, from or lot them of talked of OEMs. production? ramped kind if have from the

Phil Eyler

it's that up. they Yes, ramped good back

the run haven't as to uptick normal of any though rate. kind We further compared seen

new and with to them. ramp us up We helps win new which continue business vehicles, grow

So that's – that's a good there. summary I think

Ryan Sigdahl

in was over XX% down back years. X% And R&D, to two shifting looking it then XXXX,

expense initiatives, R&D XXXX? kind spend do guidance your in good Given expect in rate we reduction a in Or further the million here? realized you be of are of and run your remaining at kind operating $XX to Fit-for-Growth

Matteo Anversa

because the would Yes. growth, dynamic. as – we all win and – I actions cost prior know, we implement opposite slightly to in right? continue to awards that – go – as are benefits Fit-for-Growth expect the actually we we have launch resources engineering sure well of I the we few in invest awards, we And and awards would R&D The that you quarters, higher that would to kind I several we make but the actually won to expect more still properly have won. to say would the

think. would the that's way I So

look mix R&D, little between SG&A the SG&A at reduction on expect you I versus more the a and if So R&D. would the

Ryan Sigdahl

That’s luck. it Good guys. me. thanks Great, from

Matteo Anversa

you. Thank

Phil Eyler

Thank you.

Operator

question proceed from with questions. King. Stember with next of the line is Scott The your C.L. Please

Scott Stember

thanks Good questions. morning. taking for And my

Phil Eyler

Scott. Sure, thanks

Scott Stember

given kind put talk they you trends anything versus this talk and to and just the the just whether appetite new customers continue CCS, as from their [indiscernible] active us, can about about composition, maybe of awards. of give you vehicles? passive, the Maybe else the in Can your some

Phil Eyler

Yes.

So year, CCS, our year. awards the for in of the awards CCS great quarter momentum in about that's

So really excited about the momentum.

As are win talked I on do previously very active more with and we especially has about, towards being there a the said, developed, Still with continue the and But more the opportunities more electric we've the BMW interest OEMs, rate high. the CCS there continue as of side. side looking active attention with seeing OEMs and than active, see to CCS CCS is win how expect we to award awards definitely, more vehicles efficiency. continues much be to the weight recent win see energy although, to more other lot with benefit garnered

Scott Stember

from including the or year-over-year, the Industrial just of Got anniversary comparisons when elimination talk you about a have it. perspective, And do discontinued? that sold high-level we businesses

Matteo Anversa

in two the the business sold sold earlier X. businesses then was GPT in of first one was October the So year and half on the

the XXXX be that going the year-over-year fourth to first really we're any really, So comparison. not would do we impact quarter of see on when quarter where the

Scott Stember

I you. right All that’s Thank it. Got all have.

Matteo Anversa

not still though. to GPT fourth in my Let that, me an the one said to on as report you're going $X.X an the clarify XXXX basis, businesses. see for on you're adjusted But took in million the that going adjusted business we charge basis, we remarks, when a thing prepared Remember see. I discontinued quarter,

Scott Stember

Thank it. you. Got

Matteo Anversa

You bet.

Operator

you. Thank

will the now to question-and-answer closing turn of remarks. the We call Eyler I reached end over for Phil have session, the

Phil Eyler

Great. today. Thanks, call joining everyone, for our

remain past, shared challenges environment and improvement. the of the in operational As proud current I've take team's action in macroeconomic we our extremely to automotive consistently execution, ability the light and production very global I'm you of innovation environment. on focused in cost with swift operating the

XXXX, well our focus to on continued and our continued in for new value. expect with momentum the new along industry demand technologies significant we expanding awards in While long-term headwinds shareholder very productivity deliver position us

and your you appreciate interest to support, keeping of forward our apprised look We progress. and

Operator

concludes conference. Thank you. This today’s

participation. at disconnect your this you You Thank may your lines for time.

Gentherm (THRM) 19 Feb 202019 Q4 Earnings call transcript