THRM - Earnings call transcript Q2 2020

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Gentherm Second Quarter 2020 Earnings Conference Call.

As a remainder, all participants are in a listen-only mode and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Yijing Brentano, Investor Relations. ahead. go Please

Yijing Brentano

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

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

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

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

me Eyler, call Chief the and President Financial Officer. are Anversa, Officer; Executive with Matteo On Chief and today Phil

your will During pleased and After will to Matteo their be at made deck remarks, our we presentation have prepared we a Phil that available take gentherm.com/events. their to on referring questions. comments, website be

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

Phil Eyler

Good In hardship everyone, and worldwide. Thank the you, challenges pandemic Yijing. for to today. you significant create morning, second and global joining us thank continued quarter, the

unprecedented support I’m strong conditions team the of worldwide Our top proud global and their second team priority we has the pandemic. for the the by execution quarter our safety be continued and COVID-XX health, of the to created members in the despite communities serve.

key X. by on the start quarter of sharing highlights Let some of the me Slide

basis each points. decline higher growth, and reflects we light double-digit delivered we on the production in July In total based IHS’s Europe, XXX revenue our outperformed in of in underlying medical, in North key both outperform revenue vehicle to the for by XX% Adjusting actual markets, challenges in that the approximately markets serve we data. revenue Automotive our we While were able exposure the year-over-year product America and sequentially.

secured front, On new quarter. customer the $XXX second business business million automotive in awards approximately the award in our units

in the securing second the had over opportunities. highest XX% our we in win rate importantly, company of history More quarter,

cost Moving to the side.

Our expenses ongoing to disciplined operating a managing ago. expense us allowed XX% approach reduce to year by from

period. a generated operations increase we sheet our in XXXX cash more of balance environment, a nearly $XXX challenging total XX% our from at of strong Matteo half remains results Importantly, quarter year end. on will the few liquidity flow Despite in versus million the in provide minutes. first the prior with financial details

level Hyundai-Kia. Also safety GM FCA, we GM automotive is more a our very named the Gentherm to the was on commitment win and second GM presented of team XX prestigious our one Winning award to proud commitment automotive of for operational a Slide is customer Tier longest-standing for is solutions share to the that highest developing to quality, that adopting largest to service. supplier testament of our launched recognition. partner deliver Gentherm supplier and year. quarter, continues year been to including to GM an vehicles excellence. time the even and highlights in It’s deliver turning and our This across on is of our This XXXX base. X% year rare service customer first this the to XX by of the the Gentherm technologies. the and be to and thank exceptional dedication their and entire the I customers with want quality in new for X. work supply solutions has exceptional top Motors GM different General recognized supplier award Now innovation, a our I’m the of X to globally. supplier OEMs,

momentum GMC Hongqi well Sierra in product, and KX Chevy launched CCS Blazer see as and Silverado, to MDX, the continued as for HSX and We our the China Kia we on the Bolt, Acura Kia and Chevy Optima. the Chevy

technology the continue on make to great projects. On progress we ClimateSense front, development

I’ve As OEM. past, discussed the development Gentherm has major in been a in European with

OEM, to Now off of I’m advanced to second pleased project. phase a and this our extend decided we’ve development announce that BMW, kicked has the partnership,

newest that ClimateSense in with share Comfort seating its Gentherm’s intelligent Lastly, INTU has Lear I’m Thermal the solution excited to technology. introduced

in solution thermophysiology electronic Our automotive by systems. combining collaboration as partnership human based resulted preferences intuitive first strength and ClimateSense adjust a Thermal collaboration. comfort Lear’s tomorrow preferences faster occupant with Lear market-ready Comfort passenger profiles. leader this has automatically is and on with technology developed addresses of INTU The today temperature The with Gentherm’s of and delivers and consumer expertise that in seating from an the solution

$XXX can approximately secured in program that second across the you different see to quarter, on X, awards Now in where million customers. XX new Slide we

and the awards, with exclusive While Mustang production we second North very achievement will wins Seat China. seat expand business able Gentherm technology in were both our climate-controlled history. a Control pleased General significantly the strong. Also, our revenue with to supplier strong the seat XT Hyundai which global X, Cadillac grow be quarter, with for announce is new program Also, quarter, recently vehicle business including momentum General we to XX our to further in the to series, Climate secured our largest company’s significant I’m second platform Genesis. that the our the In award Gentherm position the was Motors. customer, Europe award won single China. secure largest in we Ford quarter, continues produced second BMW and This was our impacted pandemic In our performance Motors. for multiple CCS awards America and both climate-controlled for X

Rx on CLAR received I’m all the we BMW we Porsche are very and the X Toyota, Toyota heater that awards Lexus addition, growing our also seat the share as winning heater Honda Lexis excited across to Cayenne. Bronco, platform as Ford NX including well In Series business awards with X Sequoia. steering Vehicles, Pilot and wheel for OEMs

the Our win in demonstrates rate the automotive. extremely in with we many quarter, with of coupled continued the have customers, OEM increased strong activities momentum

shipments help a increase outcomes. majority management to and Now discussion our business. medical growing X the Slide let’s over Europe equipment from resulted second the the in record to turn and revenue for support of quarterly The improve growth U.S. patients to of delivered In we XX% the year-over-year. COVID-XX Blanketrol temperature consumable across quarter, of

and dual support reservoir be Hemotherm XXXCE blood to the addition, Administration Food professionals This the In for for heater, care a treating to treat this COVID-XX. can U.S. Summarizing cooler our patients symptoms to Drug the through enormous Use health positive with from in Gentherm used of health pandemic. team, COVID-XX. to provide patients Emergency severe Slide opens and patients the to way have FDA Authorization, Thanks effort Model impact of with workers care are able we on our during X. authorization

today. of these unprecedented that’s customers global And facing create deliver our the foundation steadfast strategic the innovative our to from execution divest our solutions successfully the commitments which to cost to us stronger workforce times. and non-core enabling during business it’s and helped against entire has our Our plan to businesses, to address on a challenges structure focus can market growth, realign agility, we bring we’re flexibility dedication our our

cost With pandemic aggressive uncertainties strong that, and on the to award, near are management position over well year COVID-XX in our deliver balance to momentum turn us the long the I’ll General call the to to the financial a the Matteo more for new the sheet, in create continue term, term. results. of little While all continue we with coupled winning over color will challenges supplier coveted seeing the awards, and Motors

Matteo Anversa

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

our So significantly second items on and X results. let most me start focus that on the quarter Slide impacted

of outbreak. declined by revenue For COVID-XX primary to the same year. by impact the overall the impact XX%. period approximately year-over-year decreased decline the product last the product for of compared FX, we the was And driver quarter, if our of adjust The XX% of revenues

into Before I color a the revenue more by margin, segment. you let give on the gross jump me little

declined a we that according IHS North Please American our vehicle differs key European if in faster we Japan to significantly due and our earnings at revenue as automotive than pace markets from and quarter, for segment XX% to revenue Europe, of markets. North or Korea. higher declined mix. and mind mix Our regional keep the vehicle year-over-year was light production exposure impacted FX. And IHS last Gentherm’s light the to projected comparison, XX% declined In XX% data, the China, we latest second our production call, exclude on COVID-XX, in by America,

light actual outperformed As if approximately Phil this, basis by we we XXX points. for adjust production mentioned, vehicle

up strength to decrease all to to GPT increase compared XXXX. revenues as margin. lower where significant due was of as compared sales their than seat declined supplier result This disposition COVID-XX to revenue XX% sold reductions. reductions quarter with launched the we XX% the due cost lines, due in If for was to electronics, XX% demand our of segment, COVID-XX, strength Conversely, from a business, the control memory lower revenue the industrial Blanketrol annual support move the production the we of and a module recently our our product of continued of in XX.X% as price was increased also of year in automotive electronic pandemic. year ago medical of well primarily to was fixed year-over-year, we to result second If Gross coming to program by volume offset partially respirators saw margin occurred cost, to mix positive October the as revenues the year-over-year, result Ford. in which this in and last almost except of we period. units the as quarter due business, high that more As as Ford primarily of manufacturing XX.X% the the experienced shortfall where move second business a automotive medical to gross well revenue we the

This expenses, in restructuring announced million in that which related realignment in the charges million, in effort to quarter. the from restructuring Moving footprint million operating lower our costs travel reduced initiative a in net and to divestiture lower the included more expenses in in we were decline of for amount If cost include a reduction cash. year-over-year last of reductions second than The The expenses. driven the XX% operating to the of a by of reduction charges headcount, impact September service payout primarily $XX.X reduction to related were business, to $XXX,XXX $XX.X compensation drivers $XX.X the the in preserve XXXX. projected in was adjust the quarter outside we XXXX, company SG&A expenses key fees. these XX% R&D down periods, proactive performance and acquisition-related and XX% adjustment incentive both of GPT the revisions net

the in of will $XX XX% reduction approximately that expenses, to expect operating adjusted XX% year-over-year We be million sustainable.

share result of our was to first $X.XX of $XX.X loss of in quarter the initiatives quarter tax audits, a area, in the of with $X.XX of quarter. line the quarter Korea, multiyear EBITDA R&D was finally, a quarter settlement a breakeven and the for a last quarter. a of adjusting As year. compared year EPS adjusted SG&A, of in across XX%, the compared was the adjusted earnings in international the reduction manufacturing for to After cost tax in closure and And rate effect the million the ago approximately second the primarily share

balance the on to Slide XX. Moving sheet

at of Industrial CSZ the million end was of the from cash including million, $XXX disposition $X.X the the quarter cash Chamber coming Our business. of position restricted

the period. to in $XX our compared prior of by from operating quarter, the $XX XXXX, primarily million cash first from operating flow the in $XX million, decreased of $XX repayment compared same the quarter. the half net we And of Our million prior in generated million million result In in $XX a activities approximately the second cash position activities year $XX as to was million the in quarter cash revolver. year

during million negative of million million at $XX XXXX the Our from quarter. the quarter decreased end to net debt second quarter approximately the end of first $XX the by of at $X

a approximately million. as hand Our leverage fact X.XX that cash by the of on ratio June negative debt the net as of was $X XX exceeded gross result

quarter. had March. quarter, trailing XX-month of end As EBITDA of including drawdown our Based adjusted we XX, approximately first consolidated received from of credit, from at the end of $XXX $XXX million approximately the availability ended in line revolver we at the million, $XXX the the that second cash the down remaining the million debt June executed total of stood on on the

of you’re due to for uncertainty we in the environment. Now guidance March late the aware, as withdrew macroeconomic our XXXX

full until levels. we we still clarity not Given more can year provide the uncertainty gain production future will exists, that industry around guidance

little third give a However, quarter. let me you color the on

While significant $XXX we demand revenues COVID, and we are based million market to specific assuming to third due not upon sequentially changes the current providing expecting to be improve are customer of and guidance, to product million. quarter range resurgent the $XXX in no

still of with expect environment, our in continued the revolver company. be our to at are the of allowing we lower the in and the While to month. of third cash the liquidity of the by we closing team’s million addition, pleased in process us preserve quarter. we to end In difficult this summary, the approximately the $XX ability execute expect protect are we cash month to availability in balance July, And decrease

Our protracted market light begin a through XX% key operator to in in Q&A with the vehicle liquidity call I’ll forecast turn is With to production latest enable position to line for the IHS a back expected XXXX. session. navigate the that, decline to our downturn, the current us of in markets

Operator

comes Thank Please Research. Prestopino first Barrington from of Our go ahead. Instructions] you. [Operator question Gary

Gary Prestopino

Good couple morning, of everyone. A questions here.

are I didn’t all, of XX% to expense XX% Matteo, the was First you sustainable – about but reductions catch quite of forward. going this, said

SG&A a Now on is operating basis that expenses? total or expense just

Matteo Anversa

expenses. Gary, that’s total operating

So I in and The it R&D. majority includes [indiscernible] expect of to both be the would SG&A. SG&A

Gary Prestopino

Okay.

XX% to of So is good. sustainable, XX% that

little not confused, here, really bit could Phil, a drill maybe Okay. confused a And down but bit. just maybe – you little then,

in your – automotive I think over-indexed revenues versus production. about were And were the talked said you light North product America, revenues outperformance thought quarter. You yet I – vehicle you down to your – but

you explain maybe how little about you determine a that better that bit outperformance? and could So where

Phil Eyler

on regions. it’s our what the basically, in weighted Yes, volumes – based a Sure. number different

And in So we kind you we if that, based number rerun do of the actually, that region, on outperformed. weighting. every

Gary Prestopino

Okay.

And in safe of this Is and manufacturing to May? then late Was should just came kind generated look lastly, is production for And in shut bulk at it? the really it June down Okay. then way June. that May, in that year? it we month kick-started the the you say revenues of most a April of early

Matteo Anversa

Yes, Gary.

million, and revenues that So an in pretty were just $XX about much April were million. to our And June you of amount. $XX give idea, May half

Gary Prestopino

you. Okay, thank

Operator

Craig-Hallum [Operator next Capital Group. question go Instructions] Our Please ahead. of Sigdahl Ryan

Ryan Sigdahl

guys Thanks our questions. for Great. taking

Curious You QX a whoever regional for for this guys relative talked when are to expectations what about that kind from of you guidance? perspective, regional your – mix-adjusted what do IHS your breakout or breakout in but the want using quarter. you mix-adjusted forecast

Phil Eyler

But Well, be guidance. giving region. we’re strongest will in really indications America North our certainly, not for XX% revenue. all Obviously, the that the probably of that’s the specifically

expectations Ford if at is the of F-XXX, their in imagine generally That, for a have they’re has changeover. there. time course, model can for pretty lead look though, where changeover do a suppliers. effect model you Actually, So the that. We quarter situation, on based the planning low you a do to fourth

which in So the do high on of that, we product be us. expect expect pretty QX we North a But is America impact for strongest. negative to certainly, revenue F-XXX, outside

Ryan Sigdahl

cetera? et provide Lear any you there then any partnership exclusivities on on either more And announced details can you that? side, Are the yesterday,

Phil Eyler

we This worked Yes, seat-based really It’s we’re – last for together modular excited product. thermal a a the is about this. this solution. year, on

to seat it the something be It’s modular market ready. many can application, types and it’s So is different vehicle many, that applied complete. through

the that algorithm course, of excited. would product. kind the be which personalized platform can announcement And our in in a – breakthrough of to of It’s be see you the of industry. the obviously, combined effectors. this the based together into this controls embedded market can we’re So through that that on ClimateSense using And Gentherm a Super thermal from technology, the is many position both companies product.

kind When to that’s nature, kind there’s of a proprietary So mix it the of of it. comes there. the essence

it level used is in be application across – at much our system this proprietary, all of can by of different the in at of Some and applications. modular of customers – the the Gentherm

Ryan Sigdahl

just as follow it’s so you said up, a And market ready.

joint ClimateSense you about Lear? commercial you different the in are OEMs market number a projects of with also near commercial You’ve when say or here after is I OEMs fashion guess going projects development these awards term? Or talked go ready, directly. to after in the more of with it with development

Phil Eyler

how of say be. is, come to product, could to development, – I hard the could market-ready right a vehicle, a be that’s just the side awarded would starting a the customer little marketing it’s I going It which customer based now call mean, the of on it. Well, to around. it, status we’re should

that Of course, ClimateSense, the customers which multi integrated Lear. but we’re cetera. with ClimateSense is surfaces, the et to modular seat prioritizing differentiate more just with approach, an HVAC together That – those system, integrates of with also not vehicle is

it’s to development But we get So together, this products a could really receive bit. we the this quickly. were is award pretty one ready. differentiate little If important an in to

Ryan Sigdahl

Then and that all BEV one current last back one there? Thanks. additional and awarded detail I’ll in the On for GM’s queue. future will me CCS, across any platform, or models the be then hop

Phil Eyler

that on. won they specific we models Well, are that

perform come around. and future we as win So continue right models, have their those own to to on they

platforms all in that continue also cost is to maintain to of moment. business the that said, we programs And that upcoming to we’re we’re all we know have on but So the the execute fantastic, and we with the at after position going in in innovation the winning quality, GM future. that know

Ryan Sigdahl

or even ones? electric the just is are just of current all you specific it their on to models? vehicle Or clarify, today battery on platforms And ones

Phil Eyler

bid won. been and that released of the climate ones seating, All for have we’ve

Ryan Sigdahl

Great. good Thanks, guys luck.

Operator

This any Instructions] the conference remarks. I question-and-answer over the for concludes back like to would turn Eyler [Operator session. to closing Phil

Phil Eyler

everyone, Thanks, you. call for today. our joining Thank Okay.

deliver As extremely operational shared proud of our of current uncertainties the has all improvement, I’ve to execution, in in become I’m which to our consistently value. Gentherm environment. continue look around today’s Thank strong apprised economic Despite our that and for on our remain you deliver interest important us our and flexibility and long-term our and more significant even what stakeholders. focused shareholder forward on past, keeping commitments to an very liquidity our support enable to team’s both customers, your means continued focus dedication on and of innovation we recovery cost productivity and agility, and We you. appreciate to COVID-XX the progress.

Operator

This concludes call. today’s conference

disconnect your lines. pleasant you may a and day. have Thank for participating, You

Gentherm (THRM) 4 Aug 202020 Q2 Earnings call transcript