THRM - Earnings call transcript Q2 2021

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Operator

Hello, and welcome to the Gentherm Inc.

Second Quarter 2021 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Yijing Brentano, Investor Relations and Corporate Communications. Yijing, please go ahead.

Yijing Brentano

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

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

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

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

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

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

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

Phill Eyler

industry solid morning, delivering Thank other inflationary to financial the today. face I'm results costs continued shortages, and you the you, pleased continues Yijing. escalating everyone, for including for semiconductor in Good quarter. with Gentherm significant the strong thank and joining factors. automotive The team freight us supply execution disruptions, second of

our the organic revenue in first quarter. year-over-year light markets excluding points. in currency guidance, in the we growth and X the by of we vehicle quarter percentage foreign vehicle translation. provided our X% what was ago was than expected lower production quarter, in XX% lower light markets outperformed key XX than in second the delivered production result, than a lower As This impact in our XXXX months Automotive XX% Nonetheless, key XX%

In with continued disciplined momentum expense offset us near-term Automotive to our we're experiencing levels allowed from cost a the awards, quarter material global million approach on XX% OEMs securing disruptions. rate an the we in to some $XXX expenses from result first the operating our management quarter.On as addition, win front, cost to the in challenges awards of reduce supply second

we XX.X%, of on cash the margin flow, of the generated in addition, million any half provide our in when in significant operating years will we in the in the X were few where results year financial more EBITDA quarter minutes. cash details $XX of of Matteo headwinds, XXXX.Year-to-date, a XXXX rate to were company's and of in adjusted free we expenses In the same flow comparing spite second delivered XX% lower ago, period chain in free supply calendar history. first highest than level

to launched Rivian, vehicles Now highlights Nissan, turn Volkswagen. quarter, Wall, Great In XX solutions Slide on across X. second OEMS, General Automotive Kia, and XX different our Motors, Stellantis let's including Automotive on the we

launch and on in Chevy is our portfolio Rivian HAVAL, Battery our EQS a technologies. front, to continue Mercedes the Solutions and for product products the Cell fastest-growing Great see CCS Performance momentum the Bolt, We Connecting our Wall RXT.On

technology both thin and wire-based have technology. a connecting We cell our proprietary foil

opportunities offers team structuring and increased applied design that process exciting innovative for new mechanical applications. R&D Our flexibility an some

health, battery state circuit sensing overall could battery of adding Specifically, that cell to higher battery proprietary the be packs. By in inside foil knowing embedded thin cells our early. the a of an abnormalities can lithium-ion we're safety result detected

to manufacturing production to and battery for a R&D Gentherm's technology almost I'd award a fast type XXXX any Innovation e-mobility to recognizes in that modular we Connecting category. be leadership. like expand I'm for conductors solution, can our technology significant our proprietary Board of the simplified won the pleased adapted result in module. process Award a very structure foil design to in Cell of congratulate launching that for and our This As team German thin innovative our share complexity, continuing ultra-flat foil

annual front, customer the and GM General distinguish the consecutive relentless delivering customer we honored highlights to suppliers recognition On GM's in the themselves year were global innovative the small very solutions. industry. award of providing innovative named that dedication Year requirements, and to be exceptional the in automotive highest technologies Supplier by quality customers percentage of exceeding Motors our The for XXXX with second service a in turn, of

be have we're to global our North proud on expectations.Now continuing the I'd climate for customers won award for production Gentherm developing first American dedication reflects announce team team's X innovation our micro-climate an by on supplier. to very our our pleased like software-driven and to exceed for recognition excellence. This top this Honda to year again sense Slide algorithm we innovative commitment thermophysiology. solutions platform Automotive and honored to customer Awards. operational to our technology, addition, that discuss In using and vehicle I'm thank to as based quality, a to commitment

electric have you will automaker. small vehicle with XXXX volume, seen release, yesterday's new might on model As already this in a be press a year global

milestone Solutions. particular than Climate an potential Comfort the address the for to vehicles This content truly has long-term be our this of EV higher growing per market. needs the with to vehicle expect our strategy, We in important our is demonstrating traditional technology electric significantly vehicle

and the comfort. HAVAL providing quarter, to disrupting of all F awards, Wall introduction to Great $XXX X, of business We program proud solutions us. customers. including couple the across best-in-class the power available platform multiple current secured Ford vehicles reducing XX we Navigator steering from passenger in XX% the increasing new global over SUV awards I'm We Hummer includes quarters which range, Cadillac X our of OEMS, XX With Grandeur, Hyundai different heater momentum ClimateSense, the across second awards team with the and OEM and award multiple the significantly by thermal and of for active Lincoln are win million our Chevy continuing Expedition, last continued Tahoe, In Chevy vehicles, including in the while won the wins we opportunities wheel CCS electric EV. solution. received CCS Traverse consumption

combine we heat Importantly, announced quarter. to for seat awards same detection on AX steering and that the and comes vehicles the This on hands-on AX, want we AX, last Audi wheel the heater AX, sensor including heels of award QX. Audi,

our the Solutions for our second includes a Premier On medical equipment. potentially Sportage.Now business. Kia of management award to make be the WarmAir, with and Slide we progress to for the business, purchasing patient create patient challenges R&D hospital cooling and is to for is medical we thermal America. especially for force, a Canada, improving United Premier largest U.S. restrictions temperature an we launched turn Europe device monitor. that to to on pandemic during front, contract reduced Blanketrol business products. expanding Blanketrol's is access data won allows Blanketrol the temperature share.On the displayed discussion the accessory award for our group one hospital in This CoolRepeat The to X sales said, quarter, and battery U.S. the FilteredFlo X-year the our continue That us in Latin the organizations In management Blanketrol further warming patient Performance with second access in air also winning an continues door opens functionalities. COVID-XX front, quarter, the increase the the in of enhancing the ASTOPAD Battery let's CoolRepeat patient the States. from market This in our

can data then their medical record. the imported Here, into be

generated including highest automakers expect production the from ever first we proud the Despite $XXX around global chain, and ClimateSense. to from in nursing key the in markets outperforming significant We awards serve level quarterly securing for summarize, Gentherm operations another efficiencies.To vehicle the supply a since of for of impact we team flow consistently light world, production award this million of XXXX. have our the cash new on headwinds I'm

winning the call that, General the supply the to over for remain the us a deliver a little approach on over coveted results. color position in Motors more management, turn While to in cost with to Honda, long-term.With from continue financial will awards and supplier disciplined Matteo new well challenging near-term, coupled momentum I'll awards, the the disruptions to

Matteo Anversa

today.So Okay. our impacted Thank you, me turn to on call Slide everyone let to significantly Phil, the X to focus and results. the joining thank most you that second items quarter

more with primarily of segment, FX, increased revenue the So for COVID-XX impact than And foreign last period. by China, according of by negative recorded in by Europe, quarter, volumes North increased increased approximately our over XX%, product by and a year data, Automotive And the driven period year. compared COVID-XX to of our adjust result million, prior for year, overall second due America, by quarter. increased light the negative latest $XXX impact higher to in last vehicle the comparison, impact the pandemic period. for In adjusting the revenue revenue was Automotive for XX%.Starting production IHS year's key of prior markets if double to last translation, currency the as revenue the XX% Japan we the same XX% we of product the revenues year Korea,

and help product of FX. solution Automotive compared XXXX with with bringing mix. effects success was higher the well leverage cost Award, of thermoelectric as both compared the as dollar. due positive connector. factors light we other points, General Phil vehicle were heaters models.Seat due to the Cables and by supply wage compensation last product on let of revenue year besides has inflation. due I year Bosch was in chain And impact in COVID the increased of revenue both XXXX to from The XX as appreciation by in of comparison, quarter recognized me quarter to the to volumes revenue couple $XX in a we the separation second primarily had XXXX.If annual the X% and Mazda And Hyundai, increased quarter to patients. for productivity geographical expenses, models. to cost XXXX. earlier, COVID increased increased all the the quarter you SUVs of increase higher measures As expenses taken partially costs revenue of $X.X the point percentage in included of from when Daimler's to Adjusted volume, due year's relevance, key automotive in period. R&D were and with for second the production reduction as just due temperature mitigate adjustment the to nearly Xs. CCS And onetime higher of by of quarter to $XX.X our result XXXX Kia, we with increased more volume expenses, to approximately comparison, to higher credit as was due previously BMW, $X.X compared to impact in time we benefited and cell year-over-year hands-on XXXX, higher by to compared of to quarter temporary XX% the well pandemic, as excluding the rate second the the we result manual XXXX higher driven driven solution lines revenues with which operating the the growth. impact second several the in XX.X%. employee labor move as These to in to from to hostility increased a negative a to as margin, Ford's markets. a outperformed quarter incentive and U.S. and increased of due look compared and quarter increase ERV operating reductions the strong Medical that decreased that in industry.If last revenues Volkswagen. a S-Class, XX% take to XX.X% revenues cost million chain ago the impact sequentially of period. amount the offset negatively PACE trucks period. margin increased remind revenues up lost in We as the restructuring at VW the primarily enabled quarter in offset supply $XX second gross This extremely a light highlight even increased estimate BPS second million rollout to pre-quarter were $XX.X gross the of the on year's approximately acquisition a freight.Moving year, year C-Class year the COVID wheel in were seat R&D for module million our compares in Tier EBITDA period. period material million adjust XX% for recovery decreased occurred the the continued compared $X and X%, to industry-wide If and charges, the higher results by Mercedes million revenue the to heaters customer million volumes this second Motors, rates primarily compares also when the Euro fixed will this quarter by COVID revenues segment, several management quarter in Blanketrol disruption prior was production the partially in second the General detection percentage up, Stellantis XX BMW to XXXX well XXXX, of impacted and second revenues If prior sold year significantly the result due of of company's Ford factories quarter The of to XX% last of mini impact quarter prior financial Steering that first sales of restructuring as of in in prior our a volume reversal the the compared the break- last quarter All Gentherm increased higher $XX.X Electronics, in higher resulted and COVID income. move due year-over-year we goods of million, In Medical year that reductions, million the a second mentioned periods, contributed partially Motors, volumes and material to vehicle price expenses of lines and costs. the increase important Mercedes approximately from million heaters Ford, and Albeit $XX.X the of of estimate

Finally, share per the year. per second adjusted last quarter earnings loss in to quarter share per of the share was diluted a compared in of $X.XX $X.XX

the Our first effective to tax rate XX.X%, was X. balance with moving in quarter.Now Slide on line sheet the

from period. generation at June quarter. by $XXX closed million offset line $XXX million EBITDA of of free position a ended on of debt by increase $XXX the million net at the quarter $XX remaining We adjusted from the as of we capital The prior of to debt sequentially XX, up the $XX The result $XX total of million, million up trading position cash million at flow for cash cash compares quarter cash end liquidity format, million XXXX March.Now turn the availability $XX end quarter. $XX Our flow at partially million cash in in the $XXX a and year our X the prior a total driven stood was of was in the million. to second million, the activities, from of from was $XX free million. up Based on by million, $XXX guidance. the partially Slide first operating decreased the $XXX XX, $XXX year-over-year million repayment let expenditures.Net available was consolidated second offset quarter credit, the June The of sequentially million flow generation, me had end of higher $XX higher And increase in by revolver.

updated be customer are saying volume light in and forecast, range by the that on continue our we the we at near-term of provided and guidance Based beginning vehicle first performance XXXX Let updating significant to volatile the challenges. the half the extremely me the production create reductions semiconductor-related year. start of

level. that growth current billion expecting on currently suppliers. We XXXX orders our midpoint the have from to remaining be best production of This guidance based FX to the of are our organic $X.XX forecast the The implies XX%. billion balance product the and is at and on rate of for customers based in customer of the now an revenues $X.XX and we information current outlook range of the

adjusted Additionally, our to to and XX% in and to the we expect margin XX% effective be EBITDA between rate XX%, be XXXX tax rate now of for range XX%.

million capital range be to expenditures $XX me back $XX million. let to We session. continue Q&A expect of to to the the the to With in operator that, the call turn begin

Operator

Partners. from today Koranda Capital Thank coming [Operator is Our Instructions] question Roth Matt first you. from

Matt Koranda

taking for question. Thanks the

quite you notice the by I wheel for look were if start few $XXX wondered Just could And steering talking The bookings awards solid did heaters a the quarter. that out. off about pretty million called environment.

to the between awards look you could break $XXX if just CCS? steering like million maybe wheel what maybe So category and see out wanted by heaters in

Phill Eyler

the Certainly, We a active particular, don't continue the and no than breakout I can awards expect a pretty in remainder year. doubt about really more a at bit good little of for Yes. talk that to it, but environment. about usually the level last year, the lot

year. a it's rest Detect in about wins pretty particular. and were wheel steering happy the strong. execute for was interest, our that steering period. as to one-third nice achieve the that of And in our certainly Audi looking our you definitely the wins in say do equated throughout about we integrated we see to Hands CCS to will I So heat, of for increase just and also wheel an rates still the not but wheel-wise, HoD And in quite the win on with the can see pick Steering product, performance but CCS of quarter in able up. terms

well. looking what's up shapes of kind that say I'd So

Matt Koranda

you likely win, of to had wanted customers multiples III but said it in that And ClimateSense it I of typically, that, any Phil on to that is thought safe just bit award, CCS, say any is a Phase down little significantly prior a bit I've one you. the guys per I And more, on one there first as of talked but about you on than higher congrats, maybe and is all, assume, one, that ClimateSense and vehicle that a the to thank CCS the win know more? see, quantify content then calls? typical would with quantify of to helpful, That's bit way that way on then drill

Phill Eyler

share, our all about confidentiality. is said we What just to due Yes.

the a It is get We're volume, it road, relatively a technology, worked and prove excited So excited the about out time. a chance small the is but very customer for award. long with a we've great it to we're about milestone. the on

In several multiples, line the above terms been multiples what few definitely up a solutions. current of content, said comfort they at the climate in and with And or have past. it's least kind we've

Matt Koranda

sense. outlook the on the somewhere is think, then makes noticed, second Maybe can Matteo couple a a just growth But for mean, of couple kind I That in mid-to-high outlook. implying, digits. you're that half single I the the And these. handle of

Just and helpful. be help Any the XQ you could see there tightness. chain would between wanted help given XQ, maybe and split supply if disruptions to just

Matteo Anversa

Yes, Matt.

let changing extremely in and start that things fact the me that prepared to primarily are regularly. So fluid be highlighted by continues reiterating situation the we some remarks, of messages our the

our the have on is So information our suppliers. from based customers that and this really we best

sequential what of kind we today really that quite in And seeing maybe this the a first you half first exactly mid-single-digit half. of, chain supply that are will do And the lighter slightly half, little have versus what is you're in back-end information -- of second current comparison, half the think than on we the some IHS we is seeing we the towards terms second have. improvement challenges We a situation year. are the the for of time. to getting projected basically that versus the continue but based growth saying, is It's the best when

the So the we year. that's second kind profile of of how half

Matt Koranda

trimmed? versus by outlook, see, I million for I other items supply And bps last to much me. chain-related of EBITDA guess, have been Okay. just at The wanted is was that may that XX mean, trimmed just margin the then And midpoint. how one $XX

Matteo Anversa

of all frankly. quite It's it,

we You just just spot cost million was in on premium raw of the see impact year-to-date. the in pressure we material, the I terms what impact quarter. said higher sold primarily goods If first $X freight, half, are amounting of copper, take higher second of about gross cost buys, margin

improve expecting dramatically I not things, to the half. are second as before, said We in

So that's driver much here. pretty the key

Operator

[Operator Instructions] next from is you. Our Thank Sigdahl from Craig-Hallum. Ryan question coming

Ryan Sigdahl

the Congrats nice on results.

First, on ClimateSense award.

ClimateSense on bit. that Just little want to dig a in award

$XXX to any you auto couple the the CapEx related Within ramp awards of SG&A, years? R&D, of next there? award announced, that considerations in in of sort that award secondly, is And then million the of

Phill Eyler

with yes, program the and get in coming is, obviously, we the This ramp over This production road the for ClimateSense is execution to continue is now to slightly that and priority is the yes. on program. it of to our possible our priority. overall R&D investment And our mass It will best number, top expect huge up quarters. chance Yes. in that in CapEx and

Ryan Sigdahl

volume. small platform? in trims be you only Is packages to specific mentioned volume going this Or or is this a vehicle? a certain for then specked small on And

Phill Eyler

It's volume platform. a small

Ryan Sigdahl

Got it.

on So every platform? within you're vehicle that

Phill Eyler

Yeah. expectation. our That's

Ryan Sigdahl

And relative outperformance first to lighter in industry second Is the kind sequential I significant in half. then mean, the and a a something, it. weaker back to there maybe IHS difference little quarter timing the of and half. half quarter Or production, IHS? kind back kind just or production? back Got in going IHS between but slightly I XX% that then of drove in relative specific guess, the just to the outperformance therm half was that that of

Matteo Anversa

outperformance talk me about the in the So maybe first quarter. let

remarks, to the in positively then device VW see Hyundai, launches North detection heaters. that and mix within impacting rates, we earlier. prepared I BPS, we impact with terms as take heavier mentioned VW; well the mentioned as are steering in really think higher growth HoD, as the we from geographical revenue much new the I extremely America. we wheel Then And you application hands-on us with in when compare the IHS, as definitely benefited, I still with in performed Mercedes, to my GM, mentioned of continue Daimler the BMW, quarter of

would also we us. also and had add, for China then nice a So growth I

If the at, highest as second the China total is time. our revenue percentage see publish now will which you it quarter, have we the almost the we had a in in is Q quite you look when tomorrow, of XX% some

these are say, the drivers So second the, the I outperformance. quarter key would for

As before that far as that's on keep really it. Matt, the we second this our mentioned the our I half, as to receiving from we based are information and That's what is how drives customers profile. and suppliers,

Phill Eyler

think plant directly headwinds It's that's what's general, in I the of still I informing definitely in think And we it. see of definitely shutdowns. us. front happening,

Ryan Sigdahl

switching pipeline? the priorities? a you I Then M&A Great. cash to stronger and buybacks free secondly, grow continues And then I how feel just lot allocation. generating the of capital guess, Any flow. kind of to cash get sheet about there, versus stock in over change balance mean, do

Phill Eyler

still Yes. same. priorities I the remain mean,

still in is to economy. the manage liquidity still any out woods. aren't priority volatility first We The for the potential of to protect completely

we're being of that. still So mindful

priority us is inorganic Second for growth.

than acquisitions for normal deem strategy share provides us investments expansion CapEx range we business. at growth as timing, good at falling And that the And then for we accelerate buybacks, we a into along and of with new a our that, pillars needed identified we price right strategically. our would along higher the looking definitely have look certainly we're level So few last think that to have in at years. opportunity the and focused we

Ryan Sigdahl

Thanks it guys. me. That's for luck. Good

Operator

from coming next JPMorgan. Our from question Ryan Brinkman is

Ryan Brinkman

what situation wanted Just on seeing in quarter. you're follow-up relative to semiconductor to the shortage the the, second

easing more heads seeing if the into but insight if any any more procurement I And your the to available components, up? production, less or electronic on think are of there's inflationary a own going getting down, customers pressure? customer they're for lot you're when impact relative also if you're then of call

Phill Eyler

question, of I I think catch very it. of the gist didn't first but the the I got part

that. predict, in in doubt from still a the mentioned, short-term. that seeing to Matteo based weeks, cancellations. as just about receiving plant headwinds, read fluid. reliable been still order see something because last can information shortages the these is are demand very So several not pressure in related no some our significant to What first, it's it's And And the tune the reductions, as This with about several of is have on we're we're more situation customers, news opposed talking I shutdowns. semiconductor very the to there's do anyone still immediate -- the

Now, of course, we're last comes easing demand significant the year, the of marketplace, hopeful signs some in with the back a some that in year. of of in we few seeing of half back the are and some months the

challenges. So that's of our positive. facing definitely wait pans to semiconductors, But again, to it and When see that still how out. we'll have comes supply

through with we're whole far, the material our to semiconductors. having the open team done that job. have teams market our hasn't We so our done lot freight to running has down together, manufacturing to buy get We've on in, team chain lot. increased and just SWOT still but a good prices slowed of expedited a proud what and pay to keep suppliers, instead a put a draining plants of I'm of resources from very purchasing and supply

your we talk for point So headwinds that. I'll last still see about let the on inflation, Matteo the pressures. And inflationary

Matteo Anversa

Yes.

Ryan, higher So is buys, of then the about to I the which open of that the mentioned. And and of and premium products. spot example, on terms primarily that mentioned productivity then a you the copper. in in earlier you market abrupt have $X of $X sold, of I due remaining just, on million million, million and freight inflation dollars And of the the coming shutdowns Phil then of, quarter, material raw just from impact lost inflationary impact dissect comprised the is about the have semiconductor type cost pressure million a couple goods for if terms the

expecting significant a not dynamics of kind happening improvement are half in of second We these the the year. of

like I a to Phil's the accomplish to I rate was all half the we these able of are these to for of the challenges, time. first proud we are XX% delivering some expecting in quite of what this think very still think in year So challenges. But point, team margin spite gross by stay

Ryan Brinkman

award able Great. maybe Thanks. whether are had customer do a motivation from ClimateSense then the to efficiency think with driven feature partnered you a that, separate release desire press And to might able more And conjunction highlighted for is on you vehicle? say energy you example, luxury cetera., was strategy? with you in conditioning, expect whom net a to the say or whether or go-to-market in the are you both, in I et Lear, know comfort, the via such by as increase savings, as

Phill Eyler

any idea taking achieved and probably never more vehicle was level range the in a But of proposition the big a customer about question terms driver be of details that. power any of will we're and who details. value We certainly extension. reduction give the But a solution. was of partnering consumption before a combination big was in it ClimateSense. No around comfort also Certainly, certainly, with can't or of thermal part motivation, to the

Ryan Brinkman

Thank helpful. you. Very

Phill Eyler

Ryan. Thanks,

Operator

Thank for session. to over further turn you. I'd to reached any We've question-and-answer end closing like Phil comments. our back of the floor

Phill Eyler

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

chain. of significant flexibility cash laser-focused face innovation and agility, our proud I'm As our we the to on I the in of remain consistently commitment spite extremely operational on of with flow past, dedication the stakeholders supply challenges to in team's generation. in shared our all you we execution, and deliver

keeping in continued expect support expanding While We new awards long-term with year, continued significant appreciate technologies progress. of position our look interest well to for industry and forward in deliver demand us you remainder new focus and of value. along headwinds we our momentum the our apprised the really to your on productivity, and shareholder the

Operator

you. does teleconference webcast. Thank today's That and conclude

We have disconnect time, and your You a line at may your this you wonderful participation for day. thank today.

Yijing Brentano	SVP, IR, Global Financial Planning & Analysis
Phill Eyler	President, CEO & Director
Matteo Anversa	EVP, Finance, CFO & Treasurer
Matt Koranda	ROTH Capital Partners
Ryan Sigdahl	Craig-Hallum
Ryan Brinkman	JPMorgan

Gentherm (THRM) 31 Jul 212021 Q2 Earnings call transcript