THRM - Earnings call transcript Q3 2021

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Operator

Greetings. Welcome to the Gentherm Inc.

Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Instructions]. [Operator conference this being is note recorded. Please now Brentano, Senior will turn Relations. the Yijing host your to Vice conference I President Investor of Thank you.

may You begin.

Yijing Brentano

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

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

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

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

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

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

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

Phil Eyler

automotive us escalating face and you disruptions reductions execution joining chain the shutdowns, inflationary thank freight Thank volatility. global of despite and to team semiconductor-related and today. factors. pleased other production you, Gentherm unprecedented with and continues volume Yijing. morning, Good costs, continued plant The the for I'm customer the strong everyone industry supply

production changes in creating production costs. to In variable managing significant near-term addition, are challenges predominantly related all levels little customer

vehicle than ago. XX% light just the production quarter was markets in what key months in lower third example, our expected For was three

currency foreign impact by percentage a ago, third XX in production translation we quarter, points. year excluding vehicle automotive outperformed markets of our the revenues declined key X% light compared While the to our in

In addition, the third continued $XXX securing million global on momentum awards our we in OEMs from awards in quarter. automotive

the R&D while our continued to capital our On increasing we disciplined expense and investments. management, working front, cost approach

with the we've addition, we're suppliers partially supply increases and negotiating the been cost that as and our near-term on disruptions. customers a In to reimbursements material of result experiencing offset changes price

nine Matteo cash more operations, and provide the XX.X% million now we flow XX% year-to-date supply are realize months significant our on a a XX% than to financial financial minutes. few than results in these In on EBITDA chain in starting from discussions. delivered We first will basis, some spite $XXX details of from of and headwinds generated nine first rate XXXX. nearly of months adjusted benefits more margin more of the the XXXX,

Now, turning Great highlights solutions automotive across automotive X. on the Motors, and a on General we to our six different In OEMs the including Slide launched third XX Nissan. vehicles Wall, quarter,

Infiniti QXXX. our We Great Nissan WEY, on GM product the launched see momentum Hummer and EV, on continue to Wall CCS the and

our in the of has for with front, outcome share INTU the to partnership award faster a solution a Watch the our recognized delivers Innovations is powered Lear in technology ClimateSense smart that by On Gentherm award Thermal I'm joint News was Automotive seat passenger pleased Comfort comfort. that that winner XXXX this resulted as Technology. to PACEpilot Receiving our efforts

our Solutions Battery in front, On Connecting portfolio our technologies. product Cell the growing fastest Performance the is

next progressing scheduled to BMW with well. launch program production year Our is

prototype samples censoring. with continue world, We additional very win also projects the cell with development our including several to customers around embedded first

performance, connection We replace and longevity in flexibility This user are with overall proprietary conductor see Gentherm's advance sensor this partnership system that first leveraging improve will and of to new to innovative the kind the We're to feedback. our the increased ability unique develop of connection system cell week, announced because partnership as the lithium NXP excited companies. manufacturers capabilities OEMs NXP an structuring battery the cell electric foil-based that battery will of with important single-cell jointly pack. we the monitoring circuit complex Semiconductors safety, integrated battery our of integrate harnesses. process, last both increasingly cable safety milestone design significantly Just interested Datang and mechanical of design vehicle enhance Datang a its ion

front, our projects. to great development progress growing see production from making more customers, we're is ClimateSense very continue well. the we program On importantly, first And and advanced on interest global progressing OEM

Our all coordinated incorporates footwell physiology-based heating, Gentherm's software, effectors and thermal surface including proprietary multiple microclimate Generation by conditioning, Next thermal and algorithm. utilizes net platform electronics which our CCS,

help increasing transition by Climate our core Performance to products, and is experience. energy a OEMs electrification the their Gentherm accelerates breadth thermal savings, vehicles delivering including As Comfort with as positioned our vehicle to of all electric personalized perfectly well goals as achieve Battery solutions our while range, Solutions best-in-class ClimateSense

Automotive third X $XXX momentum Slide quarter, in program new different million to continued OEM our the secured to discuss Awards. and across awards customers. on In award we Now XX business

not our did short rate the because incumbent an Our impacted global us. one XX% opportunities of we very against available note launch. was team won to the win to opportunity to win time due Of negatively

CCS that for of XX% to for platform Seat pleased share the wins Dodge were I'm the vehicles. Lincoln exclusive winning are I'm this XXXX, now we for of and Ram customer Explorer multiple Ford result won that nearly with congratulate to thermal for both electric our provider Importantly, seat this our the as like in platform XXXX. I'd awards share awards, a and quarter Stellantis awards business Ram Aviator including EV. CCS EV win. We the pleased next-generation Heater the complex to unit

and the quarter, including Geely VVX, eSUV. we WEY, wheel the Lynk heater awards Buick multiple & Great During four steering Mustang, Co Ford across Wall the Enclave, received OEMs

in air-cooling battery winning business expanding make awards Solutions thermal Performance Battery for the continue management Sinuata. Renault and Hyundai On Kona front, our we the to progress

the While see our in year, activities award two dollars compared in quarter. strong of fourth are into momentum quarter to first to quarters third rate continue the and leading coding win lower we the the

turn Slide X let's discussion our for a business. of Now medical to

increased to Clinic for that quarter, the products, our I'm a our we medical Minnesota. devices large share competitive During flagship in secured demand saw to order we especially third The product, at Blanketrol Blanketrol. purchase pleased Rochester, Mayo replace

in upgrade large In from also of These a just Boston. we're growth Massachusetts we medical business. two how addition, secured are share in General our market driving examples award

that equipment to treat demand our sales, patients. Hemotherm Blanketrol In are using in addition seeing growth to hospitals unit increased COVID we're also from

quarter, medical. chain To to year. proud generated team the example, we third As and Hemotherm disruptions in order of consistently the shortages use in the constraints the we chain, these of Healthcare third to vehicle demand fulfill for by outperforming labor cash in parts in in Gentherm XX an In impacted going production quarter, the caused light supply devices meet summarize, all in customer for network. global supply the hard constraints our the flow to Despite strong address HCA to bought Nashville, significantly We're their compared production serve. the third ability last higher demand the working I'm throughout markets Tennessee strong headwinds of quarter forward. continued key

all these XX demand on where remains flexibility, about is for stakeholders the rates resolved. the pent-up dedication there will to our of once believe, significant commitments to months, met chain need tremendous and next agility, will be deliver of that extremely proud to unprecedented constraints we spite uncertainty of production supply our are While be I'm team's challenges. in our

We With the cash all for over on color that, our to I'll financial over turn focused flow call results. will to operational position innovation, Matteo long-term. execution, well remain little and us of the deliver to a continue more generation, on which

Matteo Anversa

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

on So most let items to that turn results. quarter X, to me focus our third impacted Slide significantly the

offset our and by the to data, For Japan Korea revenue sales. to lower Great by X% earlier, XX-volt MINI to neck product GM Blanketrol In to OEM by by Phil product the by Tesla we FX, points. RV-related the last heater decreased specifically, markets X other majority China, by revenue production Y were X% revenue segment, revenue and revenues CCS GM quarter revenues by due trucks impact earlier. of overall BMW and currency to to Ford Stellantis mentioned latest the to and and of the class production compared volume for higher steering adjust to BPS higher Automotive a partially of in and Stellantis revenue revenue decreased this for volume foreign Hemotherm decreased and percentage specifically, by over module $XXX with driven SUVs. X% E by X% effects X% higher third year volume due XX% to sales X%. product seat for Starting increased as approximately light as quarter. shortage. production with just negative if sales, lines, year, XX% higher decreased as we Automotive Wall. sales Electronics X% increase by decreased The impact quarter, memory And Europe, volumes revenue down as shutdowns the according Seat conditioners. cable of due increased same was the XX America, SUVs decreased the production key of product of prior vehicle their BMW. Mercedes Phil and higher higher deliveries C production Heater by by due These million, our of higher production well move X%. revenue result impacted with XXXX to to translation, North semiconductor the due and due decreased XX% as revenue our offset and compared Bosch. X% of And were the comparison, lower IHS partially by to the increased sales lines XX% adjusting by trucks, was and due automotive increased automotive vehicle If decline wheel approximately by the other revenues outperformed of model mentioned And lower lower we light Ford, and and medical, related period shutdowns. with of of to the the

to cost well compares in XX.X% this rate The disruptions, and was offset industry-wide reductions, to for as recoveries chain Moving were XXX customer point lost cost, We Gentherm, for period. goods gross margin customers and from the and was in revenue at in material supply impact $X negative year-ago factories, resulted from approximately These by premium price in Gross basis due impact the the partially supply recoveries lost in partially wage customers. to driven by XX.X% by quarter higher annual as third from estimate sold and decrease margin. reductions. the material cost freight, $X.X million cost quarter offset of that cost million chain million productivity of the disruptions the supplier higher the increased inflation. and $XX in

to $X.X quarter amount in third were year charges quarter, Moving the compared to quarter. year's which operating million $XX.X in of million period. the in to prior $X.X third $XX.X XXXX million The compared expenses, included million restructuring last

driven year restructuring acquisition adjust we million, $XX.X $XX.X X% were increase increased measures Battery share, of temporary the quarter of And was the in for share taken And share to compared compared by was finally, offset EBITDA per and to to we adjusted the a year. the if in So expenses of $XX.X income. $X.XX SG&A up in quarter $XX.X higher our ClimateSense partially XX.X%. expenses cost, last earnings the Solutions, Adjusted quarter year quarter last to in the was the Performance per million development in operating tax million, in approximately and rate R&D And of diluted from XXXX. prior third impact both period. the was year-over-year the periods, as million higher in effective higher third austerity $X.XX and mitigate by of primarily reversal due COVID, research investment

on balance the sheet to moving X. Slide now So

generation acquisition million million The end flow the of of $XX million flow was A [ph] up free $XXX sequentially the strengthening increase revolver in and million, at partially our the the generated $XX third think technology $X million investments. $X expenditures free period, increase balance cash cash quarter. Our million to the higher partially cash driven significantly operating of and flow capital year the the as result and was mentioned offset quarter, activities, we $XXX of in flow notably, flow And year-over-year cash the higher from cash million in was generation, quarter million by related I cash Phil in prior $XX $XXX prior by sheet. operations, repayment to $XX million cash free by from compares earlier, for and offset year-to-date expenditures. position

we net debt third debt stood million. a September by on of cash of credit, And million, from end million had was ended the availability million we our $XX up $XXX September end $XXX as XX remaining September and at XXth, closed the the of XXth second sequentially million adjusted $XXX the at As quarter. EBITDA total of the consolidated and decreased position June. liquidity trailing $XXX $XXX available the Based total line million of in on of $XX net quarter at XXth, up million of from the months

the be volatile, quarter on in that that future. XXXX the semiconductor Slide me have X latest shortages the we let the the and our foreseeable third XXXX, volume start on continue the extremely are customers let production customer light to for to provided best now turn in related significant And from information creating last by currently So guidance. challenges we suppliers, vehicle updating September and guidance the and saying that of performance Based XXth. me we our reductions forecast

the product expecting growth revenues assuming billion range implies the And $X.XX in $X.XX range XX%. of of mid-point guidance now are approximately organic an the current remains FX be to billion our at of We rate to levels.

the expect expenditures $XX to our Q&A margin operator turn in the with range the session. to for tax XX%. now be XX%. to call expected we be I'll between Additionally, be rate to of of adjusted the Capital rate in And $XX XX% now to and to million. begin back million EBITDA XXXX XX% are that, range to effective And the

Operator

Instructions]. conducting a Thank be you. session. question-and-answer At [Operator this we'll time,

question line Our of question. the with first from Baird. with Luke Junk your proceed comes Please

Luke Junk

if the ask to within any you'd know able and the about range. to I guidance, wanted swing don't outline First be specifically, factors

as Just versus of of you're look of we think the trying range quarter to at what contemplating low-end in high-end outcomes guidance? the fourth the

Phil Eyler

believe Luke, the quick frame think And OEM is very really for then that going first want customer revenue emphasize leading growing the to consumer solutions remainder and demand pretty volatility be me to really we'll We and jump in for the challenges continues are I we're believe and to thermal into QX story once of the return especially related it try guidance a But and chain of margin Hey, let to supply rates. year I that product, just of answer and our it's to the it's real chain semiconductors specifics high-teen cancellations. growth. strong for considerable the kind resolved, I then and supply and around our clear the product. and to there. to the return recovery EBITDA

give what points that, quick industry. what's a -- in QX hasn't quick a those us look QX deliver of what just can If to of you we think for transpiring XXXX, of me XXXX, But specifically and solid take are proof at I the with to. is let we what of return expect view

for have Looking at foreseeable really semiconductors. us overstated. see deterioration supply expect a on for will expectation were at industry and the seen feel situation, driven the up to the Customer even to late a forecast assume future order is rapid But believe especially the on certainly to moment, for customer in customer though we getting we seen QX. back with are information us. time that Based the for we really QX QX, related would at recovery fourth that customer heavily are And these shutdowns chain QX high, to the IHS cancellations. in volatility to and current cancellations we've a and that than orders this, go the we in running continue our higher quarter This even previously. is we've rate we by

we're addition, experiencing suppliers volatility higher side. our even from on In semiconductor own our

supply in impact gap informed expected of revenue have us significant In QX, very QX be a as on this our recently fact, of them a could one to well.

of based chain running. us have. guidance global find information imagine, team that led by employees, best points the operations which keep as on of to you is, our and can they really continually Barkas all and I our Rafael just mentioned, as solutions proud monitoring now So is continuously creative supply that this, We're we these help

expect to we and improvement, a to the second although recovery customers should by we the this So continue return foreseeable a for future, possibly that and suppliers information from our XXXX, receiving semiconductor we're of XXXX. indicate half gradual in would

do things Matteo, add that? keep that So that to now anything want to year. maintains that next starts our and see you crossed around turn we to fingers

Matteo Anversa

specifically down quarter. fourth the on question look your So to trying narrowing

So are thinking -- of little color let our bit is. give me on you a what we

if below for would quarter provided, it at will experienced So you revenue look annual that what just of mentioned. reasons quarter, the in that have the we imply guidance a mid-point that fourth third the Phil the slightly be we

rate about quarter. an would for imply of about of fourth revenue $XXX million, with adjusted a XX% EBITDA the So

the a relates occurred cumulative it recoveries to the the quarters negotiations premium that third amount we an actually ago. the spot a from quarter you compare important point And freight. is third, start in will at net expect you fourth of the to the relation if in of terms the expecting revenue, decremental to expect addition are decremental So fourth think cost the quarter higher in note third, for in think actually recoveries we what that of also, buy compared have to at normally the to couple particularly as profitability also reflect quarter that the and I to margin compared I to in received we that

as and also the frankly, are And actually recoveries a there when quite we customer the we itself. that to between the to to time try negotiated and purposely follow are maximize the order amount customers. is when most the the of incurred best complete have, can information sequence in the always recoveries our Gentherm with costs we lag by So go with actually

as and And dynamics So little far side, we in the we expecting OpEx I Battery have continue mentioned fourth successful in that's above we seen quarters. what a margin line then bit on with have on again, make and as the are prior gross is a concerned. as calls, in last happening third that the are in the the comment the one we quarter also primarily to we around sure and quarter in launch slightly making OpEx be awards prior is Solutions, R&D, going that invest these in to to be ClimateSense, the would secured Performance that

little bit idea we dynamics projection. a what seeing the have and the in that in, fourth factored quarter we're Just

Luke Junk

some Thank you both that color. for that really great was

is in electric ask about awards, the you're products, on your both specific a Phil were to on those to of it question seeing in or could for wondering wanted what too seeing And is, release, higher the that? press XX% in that. in expand comments of EVs you week hit I'm awards are question Next on maybe here mentioned Essentially vehicles. this per has content more that you if terms packaging just the is call rate to similar tease and quarter's sector soon

Phil Eyler

Yes.

us award front supply I decisions. a number. the the specific based And pushing all, own I kind in lighter their think quarter, lot resource some of of the number think quarter little result the bit well, a disruptions. the And with just of constraints OEMs first that's was get of on to opportunities to of a of that's of the off in

armrests, solutions for transition a of lot part And that a seeing are consumption. ClimateSense. certainly for a example there to HVAC and reduce towards. the way these definitely as our things them next power both of climate in seeing early manage looks cars rates power path this helping OEMs product comfort more pretty of actively with So on we're continuum kind in higher the up for of definitely good. that interior a uptake looks of the good the year, all higher that's the leads awards higher heated thermal door All at But looking vehicle And needed of EV is and pipeline EVs. content and the of we're And system. steering seat wheels. we're from them vehicle to the course us, devices to amount more definitely, of opportunities help seeing front QX the are say, Obviously panels you of that the working and

self-connecting So cooling and that's of mentioned the And certainly products. place. course, we heating, Performance products Battery battery air

So those an added bit content all of give going us forward.

Luke Junk

since just commercial one in, months now disclosed three And first the it's ClimateSense I you more contract. then, could if squeeze been

has wondering in commercialize on your in Just Phil, that the you the and reaction looking if And seeing now, the could customer you're on to expand market forward that is comments capability also stepped own take wondering the to your contracts, development have the say that market? you of in extent on to let's extent to additional interest terms set, capacity there what product.

Phil Eyler

So working production momentum that on is me contract building project with let that customer. really is on we're the start that with the

in we it ago, -- executives do dive center was two feature expect predominant launches. in that very had to the tech the weeks top got our this, XX be from on that customer of to we feedback when this vehicle excited They're and deep a phenomenal. product fact about to make the a In

So that project, the that's absolutely you're comes When on right. status I project. better really, ask mean, it to we couldn't development for

transpiring point. our to of good to continuing to much obviously, And time. at on present over resources, cadence kind solutions out to Now the that of lot like have strength things and on on opportunities and with because I that's a those. ClimateSense that's have there Luckily customers that as to us and production and that the with be resources have we two we promise prioritize exactly upside maxing evaluations, there opportunities in those this But flawlessly, pretty of appears do were terms doing other of project potential out we'd that we are active development projects, build customers. absorbing testing pretty think customers a some that do we are with have interest we're based

Luke Junk

it Okay, ahead for Phil. that color. leave of Thank I'll you all and there. go

Phil Eyler

Thank you, Luke.

Matteo Anversa

Luke. Thanks,

Operator

comes question proceed with Capital next Group. the Craig-Hallum Please line from Our your with question. of Sigdahl Ryan

Ryan Sigdahl

Thanks XXXX mentioned least there. at for helpful IHS about IHS, context for XX% thoughts seeing growth, Phil, industry conservative forecasting the any relative production directional relative what industry? questions. sense to QX Any taking my more there's you're you outlook to across for production

Phil Eyler

Well, tainted of short-term we is order not from kind constant have our view, QX. this which and pretty by slowing into repetitive immediate down customers, cancellations it's

us So into that forecast difficult it early makes the very to for how this part is transition going to XXXX. of

So appears early we optimism speculate We've a from to on suppliers. me that what to it's I like. trying there obviously can we vehicle you customers from look our the especially information production half And But back really for heard XXXX too before. that tell might we're semiconductor gradual our triangulate get and to increase. have to that, of on XXXX, careful. heading be into be and

going make keeping can when and what thinking gearing we're been we're labor the once bit in this primed facilities But little we're to that you tell I'm cautious up. about deliver. I certainly, is so open kicks we're place, very keeping our floodgates once how sure we're to we've ready our cautious. And up volume And for -- that

our consumers that to grow. we're to the continue mentioned, I getting to that want expect OEM continue this from feedback customers to and their As our product is

vehicles a refuse going are those our it have We also have folks in have the The their without vehicle product to who studies our phenomenal. forward. done on consumer basically results and on own,

position So running. come think be a have ready are side the I to just the of careful that the good situation on in and we're and we cost overreact really that out given don't gates we to current

Ryan Sigdahl

Next-Gen, Switching active awards coolers to that Heater that the mentioned and program? Dodge does will the is be is to awards, and over then that exclusivity back? heat auto previous CCS, across How CCS compare an Seat that. Ram, you the And

Phil Eyler

ventilated a That's solution.

We did not have CCS We the have heat the only. previously.

taken So now we've ramp. the package for entire that

Ryan Sigdahl

with percent which other the it out the win XX% surprising down from one to impacted bit that awards, but call stayed to seems award is Got Is else one on that I you it. anything to One call rate, auto -- guess incumbent, a there from award. mentioned an there? XX-ish go one

Phil Eyler

Yes, kind customer, of with quotation in that been of product, they got our didn't last at the it the good with size a end, really, of us. quote process to have the them was that minute. they excited our the have looked new to they and resources did move was excluding a job. and that we and like discussion timeline way We that about kind great We pricing, would north allowed customer. that well award to shoehorned us that time XX% a with but loved to product, said They their loved at in they didn't they that the feel in development our

forward, if And award. that. of track So win going to We it's the keep good transparent very produce we an news I customer. going that we're is opportunities but we've really improved with our think relationship don't

Ryan Sigdahl

maybe dollar a Phil, is pure that just quantity or And a a clarification, is value that of win point opportunities? rate of

Phil Eyler

value. Yes, dollar

Ryan Sigdahl

for turn one it me. Last it. then Got over to others. And I'll

on balance how the you plan sheet, on a that? amount cash net utilize have to and plans updated any large of You growing

Phil Eyler

Number mean, strategy. world so as Well, and protective the all our have yes, following see. we're one is I make we is, balance kind cautious same of volatile sheet, of we sure the because

expand definitely And for we're accelerate our strategy the on. continues, us that mentioned, growth that areas that And we're number focused regional can technology, scale in partners the at help certainly look portfolio, growth within we're potential lookout that on core and So I working that's could our our a priority there fold help some as we active could acquisitions add that one. little very to potential we're we hopeful our find in bit and us that would expansion.

the things pretty sense, all on in and the on watching we're are at buy makes that. that we're approved can stock that areas price those back we're it looking authorization. position move like So execute excited we if and Certainly we'll our

Operator

line proceed your Please question comes ROTH from question. of Matt next Koranda Capital. with Our with the

Matt Koranda

questions XQ earlier an think in I had supplier there's of from semiconductor Phil, impact have could mentioned the that on supply response gap that So you revenue. one a a potential to

the just to guess? -- more in that And guide revenue wanted then check, double most any just So I for into factored the challenges, detail the XQ. so is component it's low-end seeing that's the implied of on

Phil Eyler

Yes.

whole it and the find alternative a redesign you scouring detail, that use. our early to And First some that able part solutions. at it's to be actively chips bit that are into a of solutions, low-end. but find give to landscape supplier And but we're of clearly little options trying lot and customer semiconductor as in They're we're actively tell built that if We're a fill to critical engaging I working too it's there with can't to we looking their with ECUs well. one are to going starting our void. pop-up, is

Matt Koranda

detail Okay, the other guess chain most tightness, in your helpful. I helpful? on other And that's then would supply any where be components you're seeing

Phil Eyler

to with right lack be And some is to really balance inflationary supply just in many now. by honest and Not you value our to that and suppliers terms trying we're Everybody improvements negotiate a with moving. of keep willingness things price obviously, pressures. of seeing tightness, swamped

of pressures biggest it the related. lot. are not is whole we're a Most those semiconductor seeing, So but

Matt Koranda

on least is from bit sense. makes maybe just earlier so of then the that sort Matteo on to a I Okay, question the release so headwinds, primary margin R&D out more coming just groups, could OpEx. then think in could EBITDA wondering of help also you margin front. that guidance, programs out the a working at gross all new -- one erosion bracket related three us step-up spending you And margin on maybe know mentioned how gross wondered one the into you for if in kind adjusted probably just buckets. the versus I that if that much on cut, And you're

So they and wage inflation. think then I like supply reductions, material and chain, were price

for what's could the driving outlook, So just wondering in maybe if that's XQ? implied the the same you margin guidance gross kind for of do remaining

Matteo Anversa

Sure.

start from numbers. question, of third quarter me just the let your maybe last part So taking the

quarter third third of bps rate So quarter in XXXX. the gross compare versus of XXXX decline XXX when the you the the year-over-year, margin

customer the and due and supply XXX XXX for the reduction sold we And obviously inflation, in then We about of with this mentioned is includes price wage then recoveries which remarks the me at is spot negative. bps mentioned, premium decremental Let accounted as factories, bps. and is had that a the about my which I revenue, usual buys. had partially productivity start then margin are the bps freight, which accounted goods decremental these cost chain disruptions XXX the to negatives, other and for The XXX annual almost prepared about XX higher and lost positive. These which cost by the supplier bps. about bps. offset I material reductions, And were plus

would quarter of stress happened I that the rate. results, of the landscape one what chain XX% that net you you the a third impact, the mentioned, what in normal would deliver environment. have you fact the Phil would what question, rate and gives -- we the earlier margin that more supply which normal, expect, more actually if we is in these achieved can from proved So gross in gross the the actually, And XX%, margin disruptions impact and exclude actually we between what of

third the quarter. So for breakdown is the this

as quarter is EBITDA again the far reasons the the primarily primary margin on as Now, on gross I of is due the reduction mentioned. that's I driver think rate. to And concerned, fourth around just that the rate the centered

the you just spot recoveries of Overall, made factories and we when cost look little compared timing XX% fourth at again, we And premium earlier productivity this a be the one expect due the approximately recoveries. in quarter customers that quarter this to been at Okay. level recover the higher recoveries, will with of in forward. lack of reiterating buys, point increase now to right have, of hold able we fourth third, cost I moving and to costs. or net of the the through are have that the working suppliers non-inflationary to freight, to the our of And

Operator

you. Thank

comes Scott next proceed Our your with line question. question CL with of King. from Stember the Please

Scott Stember

supply you these IHS, in at probably. day, quarter What guidance you of you you view be do fourth when that think into take some they're talked of think overly the the they that baking said end account how could into far particular, gaps you being are Phil, obviously off your aggressive about? that you

Phil Eyler

say way it's the it. worse orders about third building we're Well, we quarter of cancellations I of of it's rate And looking, in. than abrupt on to kind based think exactly seeing, the kind we're order the where think the all that difficult thinking that's at we're that cancellations

than worse as quarter for our thinking. slightly use a third would proxy I So

Scott Stember

be eventually? to on lastly just then relief you the is difficult years, And I feel for do know it. over negotiations got all that need, process increases, always will you price able Okay, get that you a this the

Phil Eyler

to in get years. the kind Scott. those And obviously Unlikely to to given and for do, one-time annual Those obligations contractual we that's is be expedited find chipping that achieving taking four-pronged And in price that. customers last of we revolve more and are more our next selective it, areas customers on the looking customers little it. buys. can, We're areas methodologies a for to trying and costs, be get freight lower Definitely a bit harder little something Business better successful. a cases. approach two all but New discreet. where discussing One price spot as away to long-term, such to using around little and more reimbursements to that gradually negotiating pressure, a tend open we're get more But are certain and increases inflationary That's would easier bit terms more then to especially at of to reductions much Awards.

better prices, overall. margins leading higher possibly those better on and mean to terms that what So

of led I So because just situation automotive, only difficulties starts to organizations, lot absolutely about running. XX% plants expect it. -- the But those customer ways are us the have easing, successful trying their especially discussion, keep are they're in the be purchasing up, as think approaching to a far. the four It's so fairy, opening there which about start we're that

not to being to meetings able setup And so, easy. discuss these is complex, recovery discussions

Operator

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

Phil Eyler

the joining demonstrate innovation, third believe excellence, and flow Great. of operational generation. continued quarter Thanks The cash our today. I everyone our for on results focus call

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

Operator

conference Thank at This disconnect day. today's may you you lines a concludes for and time. Have Thank your participation. this your you. wonderful

Gentherm (THRM) 28 Oct 212021 Q3 Earnings call transcript