THRM - Earnings call transcript Q1 2022

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Operator

Greetings. And welcome to the Gentherm 2022 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

conference recorded. this reminder, a is being As I Yijing Strategic Brentano, like turn Corporate over to the call Senior and Relations. will Investor now Development Vice President of Thank you.

You begin. may

Yijing Brentano

good announcement of available the to joining and Thank earlier thanks were Automotive releases at agreement everyone. a this earnings the Gentherm's are morning acquire for and you, and us morning, Business today. released Alfmeier’s gentherm.com. And of copies

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

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

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

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

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

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

Phil Eyler

a the to Alfmeier’s very and will comfort this Yijing. largest us transaction health, and pneumatic thermal entered for wellness it Gentherm’s energy beyond announced thermal We're we joining value today. for of agreement global excited Good This thank acquire into comfort, as supplier we industry. the expand you, will morning, This and that efficiency. you seating Business. proposition about create automotive transaction Thank morning have Automotive And everyone. definitive

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they them IT old resulted position strong comfort wellness has one leader competition with a Importantly, are pioneered pump Alloy and often SMA a patents, and that more with technology. to in SMA. puts with of than for innovation, pneumatic ahead XX leadership Alfmeier of solutions, Memory seat use generation a seat innovation culture all quiet, for year respect comfort the or high Shape speed This which XXX the valve of massage performance. delivers lumbar including advanced technology significant and coverage actuator technology automotive in

global pulsation, position in fluid their which a automotive last development frequency acquiring, are is to industry Pulse In that seat comfort stimulate X,XXX leadership pain in EUR tension. addition approximately system business can and high solutions, million generated Alfmeier’s Alfmeier’s in valve systems. called countries, intelligent With in pneumatic in high reliability has generation the XXX operations Pulse combines we and massage A, and proprietary the muscles pneumatic five with revenue automotive A alleviate employees year. comfort, seat led leader complexity, technology high in to next the of capabilities Alfmeier for valves leading

the talk itself, more transaction Moving in then to slide discuss means what it X, briefly let about and on me detail Gentherm.

Gentherm XXXX, in current fund a XXX.X subject Alfmeier this The credit expected acquiring agreement. to and for of valve in is acquisition systems combination regulatory that closing the conditions. across solutions will the EUR We business for technologies, efficient opportunity compelling cash the seat comfort and forth which of adjustments most facility. customer and and close space and plan transaction high the highest demand to electric and our designs. We wellness solutions capabilities. manner, using important is integrate third performing offer as set We're combined an other relationships, to purchase subjected quarter compact especially teams more leveraging of solutions excited comfort in complementary million sees balances to fluid revolving value integrated to be approvals the the vehicles to

the with comfort further electric business proposition expand European addition built massage vehicles, In of has lumbar overall for will from luxury vehicles. thermal Alfmeier and both OEMs. a our customer portfolio, high and the to especially value and wellness addition volume to strong

Mercedes we customer both customers OEMs. the base, Similar manufacturer. market expand majority in Asia. and capitalizing market by is Volkswagen, sourced the With this especially be directly Gentherm, Gentherm's America and terms Some large expect we serve BMW, business Ford, to of able Alfmeier’s leading are that Benz, to transaction, of on by share to electric vehicle North Alfmeier’s

leading to comfort automotive open with for savings. solutions is for that Gentherm’s to the opportunities one sense and capital and addition system, that cash transaction wellness investment, over develop for a been Requiring achieve of improve climate creating identified be and through well past to largest by expertise generates flow growth health, generate deliver this energy efficiency discipline other and through lives the into million $XX years, leading valve we've and expect battery performance additional Bottom in liquid supplier In management market. valve in attractive and mission in integration revenue the systems our The Gentherm. comfort, strong global has savings to used the aligned significant we has our approximately few opportunities thermal Alfmeier’s pneumatic industry air margins can cash line, growing run minimal invest proven market position, cost business it solutions. synergies, flow. opportunities annual rate fluid should also

results, Before I to the I'd quarter a you update on Ukraine. discuss situation give like brief the first in

families. concern remains their welfare primary and of and Our our the safety colleagues

build tooling capacity, possible to with of all other facilities, doing customers working our redundant been and to and transfer products to for maintain select Although, colleagues. our manufacturing production we're employment status we've to Gentherm

our all their paid we facility addition, special recognition current In manufacturing in of challenges. a bonus of employees Ukrainian to

As need. fluid program and we company and time, truckloads the we to the to other efforts, in matching Kitchen, to and essential impact made the including those also meals general water, employee or launched local situation part capacity, situation revenue costs. The donations community supplies of to supplies closely. we're have At donation in experienced continues for blankets monitoring of to this material be an and Ukraine any humanitarian provide our not World our food, Central production

significant our supply we of to faced maintain on semiconductors Now have challenge is experienced to In to that we the most date. quarter. QX, the

the and many for supply manufacturing volatile the the challenges Our global on impact focused the along escalating to minimize stakeholders. proud around execution clock for chain demand, customer of deliver teams our freight shortages, from I'm and team resulting and semiconductor other continuing costs material remaining to inflation. worked of and cost with customers

we minutes. Forbes In fact, best more by America's will were February, of midsize a provide results first Matteo as one in detail in few companies. Magazine quarter our recognized financial about

Ford, XX launched the on slide across to OEMs Renault. our and General automotive including Motors, vehicles solutions quarter, we first different Mercedes in Mazda, highlights turning automotive on nine Benz X, Now,

EV, CCS Levantino see product NSX our the SL-Class. CX In Maserati to solutions as Cadillac both launched Lyriq, NPX well vehicles. XX, momentum electric and Honda on ICE CCS quarter, on were the SUVs, as the electric for and continue our Mercedes-Benz Mazda We first

I'm continues Climate thermo we great savings have In new an physiology. other gain we in to progress from customer have OEM climate algorithm achieved addition, cold proprietary our energy to launched to on and using make results OEMs. line global with that with microclimate testing, platform, our announce based fourth critical our pleased of a projects sense, we sensor continue a development weather In Europe. on part software development strategy in exceeding a interest expectations. driven project long-term is

continue passenger all to optimize reducing value increasing providing We and while best-in-class temperatures, significantly comfort. by proposition power for electric vehicles in the range extreme consumption

strong and in including quarter, XX ADX year. as and program where award customers. platform over Motors see We lower in on pipeline new to EV X, Honda awards, across first multiple remain awards result Now slide level the secured mainly Acura different quarters prior the can Honda $XXX of you delayed through prologue we partnership. remainder with quoting than CCS million a that the is wins of awards. won The the lower of General opportunities activity for the The

several In vehicle CCS and XXX award the heels EV Pickup, in won Rivian on This Volkswagen Hyundai note first Silverado is Cross of addition, F- China the as including EV in Chevrolet Hummer Hyundai and the platforms winning Genesis EV Lightning the EV, awards. Audi of as RXT quarter. TIGUAN, QX, Cadillac Ford the we [Magathone, Sajita] Blue, well Fasat, Kona, important GVXX, Optiq Volkswagen for

all-electric In also the CCS capturing four MSL market in the are We Steering OEMs Juke, awards Heater received X truck Toyota Nissan across Wheel platform with significant C-HR Mercedes our including first the Prius. and vehicles, we share quarter, solution.

for addition, In award SAIC's won SUV. key on new detection Roewe enabled RXX, hands steering flagship we a

hydrogen lines our Voltage won first award Our to a share fuel we vehicle teams the in product to High that create for continue the electric quarter. to for electric applications. Cable transform pleased value cell semi-trucks I'm

RXS the across trucks concentrated cable Rover traditionally solutions our Jaguar full cable combustion trucks. fuel voltage platforms for on cell vehicles, plug hybrid been and now Rivian high Land for While RXT hydrogen heavy introduced electric business internal on and duty we've has in the and

positioned innovative Gentherm As our customers, market. as solutions content vehicle well to increase the expand to in we is for continue to electric bring vehicles significantly

chain our Now the coming FX let's for are of backorder. while supply revenue on of as Hospitals grew quarter navigating discussion restrictions. year-over-year, issues turn with many Medical’s slide are x surgeries elective ease COVID-XX the are medical supplies to business. back X a medical X% in

Higher the as as hospitals costs hospitals of a have as put addition, higher a many shortage also strain are for costs result due capital prices for to higher for nursing increased In travel managing on spending. new operating suppliers. nurses wages well

warming leaders During our and the and was the to provide the fluid Warming Scripps customers. Health able Diego Solutions San University of supply California, fluid Gentherm step to Diego. quarter market ASTOFLO their not was in in to and to one San of ASTOTHERM for also able

flagship US. see We in our demand the Blanketrol for continue product solid to

Norton Healthcare management patient Cleveland large based selected Children's by in hospital Louisville, Hospital, Seattle's US thermal and liquid including was systems, Kentucky. the Our Clinic, several solution

goods financial headwinds summarize, let we in the higher the first of revenue of significant quarter both cost still lost created and in the said, Now, terms there significant supply chain to extraordinary by deliver and market disruptions, once tirelessly our That me believe to sold. be reflect our thank resolved. supply the chain to for to pent-up in customers. team demand our global met constraints the like will working are is I'd challenges that need results overcome

the for across medical focused few be While will differentiated both thermal automotive quarters, the we bringing next management remain where uncertainty solutions remains about production rates on and markets.

to profitable that long term continuing remain inflationary collaborate focus our the significantly Our little on we call acquisition portfolio on completion addition innovative for the continue Matteo the the Solutions, and reasonable cost for order the are the color to pressures on concept cost Gentherm’s In financial we recovery growth. pneumatic solutions time, management, of for more inflationary results. With to turn believe some for remain Alfmeier, while over deliver with of vehicles aggressive term, that customers near I’ll expected in along increase over execution to a time. with of Comfort to will following of will

Matteo Anversa

Phil. you, Thank

most quarter that Let focus items first to our the impacted X, me turn significantly slide results. and on

were the And key North revenue decrease quarter, X% automotive if Starting FX, light last X% with by period we compared and automotive impact the currency decreased in segment, to an period. America, of For compared of China, our for decreased production by for X% same to $XXX year. in our product the adjust decreased X%. revenues revenues with the of prior total Adjusting million, vehicle automotive overall the Japan Europe, to corresponding revenue Korea. foreign line the year translation, actual markets by

partially as Steering shortages, foreign the X% product were FX revenues cell GM, electric volume shortage comparing achieved to our the in by GM peak XX% cooling and on Mazda. decreased previous of x growth higher FX volume x production by BPS with negative all SUVs as of vehicle that supply exchange S to lower by impacted is at Cables sales impact x Heaters decreased offset semiconductor due vehicle C the line due revenues the as impacting results revenue large BMW-EMD with heater grew as production product we Ford increased the class. Mercedes to of revenues electronics. with X% While by the lines well at on FX shortage compared Ford, the models other of Wheel and year, XXV impact specifically, of the Hyundai due negatively Lexus translation. Electronics a CCS several and of manufacturer. air More period, FX result at board [Indiscernible]. decreased x the production x unfavorable semiconductor chain increase year-over-year to X% due FX BTM to prior IKEA growth to trucks in the X% revenue sales of solutions General electric Seat manufacturer. non-automotive revenue and and and a due revenues X% Motors, higher module a rate well membership to large the connecting declines declined QX deliveries lower and

period, x of year driven products. by increased revenue to FX prior Blanketrol compared our the medical Moving to the strength by segment, continued the X%

to impact XX%. This was XXX quarter the foreign basis cost form annual spot exchange the and the to by in primarily wage next period. margin. driven reductions, and year inflation rate gross margin and higher XX.X% to the primarily the ago was Gross mitigate buys, price first impact point higher in supply higher freight lower negative compares of the Turning for customer The volume. decrease of of disruptions chain material and incurred

a offset from margin Mexico. now were In plant of impacted was has this recoveries discrete customers. by resolved. ramp And issue in Celaya related to gross been the cost our addition, electronic partially new These by issue up in

last were quarter which quarter, expenses. when prior in over year the current first expenses, period. the quarter to in acquisition million acquisition to compares $X.X expenses. And we amount compared million to The operating approximately included incurred year's million restructuring in in $XX.X $XX.X Moving restructuring year first $X.X of this million

acquisition $XX market primarily stock quarter first year. operating expenses So share approximately rights finally, offset and from of were both control. the adjustments was And due prior cash the quarter $XX.Xmillion, the X% was last mark million periods, SG&A per of diluted million million share, compared of per expenses quarter and increase the Adjusted in settled favorable declined higher from impact to approximately by for partially per in restructuring $XX expenses, tight $X.XX in $XX EBITDA R&D appreciation period. if in year. year-over-year by we expense adjust up first last of in the $X.XX The lower adjusted by of share driven earnings to to

guidance Our year XX.X% full effective was tax rate to of in the the first quarter XX% for approximately in line XXXX. with our XX%

Now moving balance to XX. slide sheet to the

leverage Our cash primarily cash at decrease million, $XXX million was of XXXX. of the $XXX down was working of a net December negative $XXX $X ended the Based end the on million on million ratio million at to had cash we sequential of of the trailing $XX and result, closed end adjusted free result position consolidated as from net We the EBITDA XX $XXX our generation, XX-month due quarter million position March And on available approximately negative $XXX approximately flow of exceeded XX, liquidity was temporary availability the the capital. gross in debt. March of quarter line higher hand the remaining was a million. the as credit cash our as total X.XX.

of impact we guidance, include slide to turn me let for XXXX today. any the does not which earlier announced that acquisition XX our Now, Alfmeier

the remains extremely by start that situation saying Let me semiconductor fluid. shortage

the latest the continue are and second lockdowns Based the suppliers, half the guidance. conflict between impact COVID an our information on through we improvement have to factored from as into in year, have China. expect of which Russia that we the addition, Ukraine, well we in our and semiconductor In the customers managing of we military as

at product $X.XX We and continue in to to market in points for guidance XXX current approximately billion of production expect relevant implies of $X.XX an of revenues be of low a remains single our billion The to versus range rate XXXX XXXX. the levels XX%. light FX in at Adjusting growth our basis year-over-year. assuming vehicle organic pressure grows FX digit midpoint the rate

second higher assume to continue half. in revenue compared guidance the to Our the half first

in terms resulted have see continue profitability, disruptions In chain cost. supply we our of to additional that in

cost We cost with inflation. price recoveries for customers and to current negotiating increases our are compensate

EBITDA to XXXX of XX%. continue to expect XX% be we to in adjusted While in range rate the

in maintaining profitability adjusted and our assumed second a semiconductor the from range expect to suppliers. pressures our be shortages additional the chain We quarter inflation the In semiconductor customers. below to start to second recover this costs half, EBITDA will a have continue supply ease due need to of guidance, of the and manage to they we related with and revenue in couple portion supply to the gaps

we range. While at our guidance, current EBITDA a and the forecast are XXXX guidance maintaining of adjusted lower revenue is our end

be operator $XX We tax million expect XX%. the rate the XX the in that, continue to of call begin capital the to to to the of I'll expenditures to back range to million range session. Q&A to turn be XX% With and in the

Operator

Our first Luke of Baird. Instructions] the from [Operator Junk line questions with come

Luke Junk

and support the thank massage there's company's specifically, Good overall? there seats. with include today. to position? you for wanted it if this And Alfmeier, take you acquisition a didn't morning. share rate seat the story as that I'm to And if it questions morning Gentherm right Is taking lumbar anything can both I similar to compared to of rates or and Alfmeier take assume there's for wondering relative the start

Phil Eyler

much desire through around health, comfort very mission we're experience in the that and our with what driven energy comfort very And clearly wellness, consumer features that's demand for improve wellness in as consumer vehicle that demand This the perfectly and just see, talked see efficiency. to vehicle. obviously, is we've a growing features, we definitely fits we the grow trend. company Well, continues to

really that about we're our direction. fits So excited into how

In in keep And is focused side. Alfmeier lumbar, of They're XXX% mind terms two strong and a one share, the lumbar systems. market of pneumatic overall mechanical very all and number in the includes systems, massage Alfmeier position. forms has on number systems, in including that

Luke Junk

range thank updated of for you to today the achievable. then Okay, that, indication follow with And that still my your respect the guidance. lowering And Phil. question up is

here of control, you do early wondering you. front? that today, do within Just Thank is the those still in where to as things terms on front? that and recovery Where left on of stand conversations work your cost in are stand specifically, how much May

Phil Eyler

Yes, successful we're different active elements We those approach. reimbursement, kind a course, which of recovery, in it's very freight discussions. has of look and Obviously, like. the at including, multi-pronged buys around expedited that. spot been of don't the look was the And if we costs pretty quarter. you immediately. happen really just we've slammed one-time But the in on -- reimbursements got quarter, at And typically quarter with

term terms So there this flowing strong course, value that annual the surcharges, throughout of are the can and those price like And, are will negotiations talk coming. longer about Matteo pretty new are all be healthy those into maybe get increases, to feel recoveries then ability of And more and lowering price active. about things reductions. year. And the do some those We recoveries. business

Matteo Anversa

we so prepared back remarks. to the are look, Yes,

to the inflationary because working complete more the and the but right cost. XXX of some our bps, we projecting We you be takes the some of back XXX negotiations, are. time between in is customers recover as end kind this of gross and we come all are to imagine And can will year it margin stable where that the that now are on with impact to the

Operator

line Research the from comes Partners. Chin Seaport Glenn of with question next Our

Glenn Chin

morning, Good you. thank Great, folks.

have transactions know. can them? the I of Alfmeier you of you the if transaction? with don't history us congratulations. know share a with with Did working I sticking Just and don't genesis

Phil Eyler

close this be in I've, together. two finally to company now. been been and you, has for right Doing four honest Yes, very that's we've come with that the the for projects years culminated this a to actually companies to opportunity entire discussion development for ongoing time And together. been

process. standing long a been it's So

Glenn Chin

products. And I'm I market the as am space familiar of as Okay, yes. for the your with sort not with

some So competitors the who Phil? are there, of

Phil Eyler

the space. of world there Leggett & that other Platt, companies is, course, of smaller in this and large a There's compete player. believe players, we Kongsberg is one the Asia some around out especially

Glenn Chin

you Okay. margin about be about can mentioned are more, think the know perhaps, I And the paid. margins accretive. don't And talk that whether you the or I you talk it'll you if or be healthier multiple Matteo, can business not appealing, that will

Matteo Anversa

Yes.

let Glenn, take So, me that one.

margin. let start me of first the portion the first So with your on question

So both Gentherm's margins fluid and lower, system are that businesses, seating slightly the margin. via comfort have the

will we the Alfmeier’s purchasing into we profitability believe from the However, scale, in press outlined the strongly the with that benefit the Gentherm, power automotive integration addition in release. the to of synergy that

the expect we So of transaction, the would close is dilution. expect percentage that the company the EBITDA will what I ones some publish after I modest we combined results margin would

a However, to improve the we purchasing synergies the expect result design synergies, of also transaction. to pretty achieve we're over with quickly would that the margins as and synergies time expecting operational

to As so they you an the Alfmeier of financials XXXX in bit far on of go EUR as published the a north of if EBITDA about million. of had question little your XX last second the part multiple,

combine six imply So when would a of about multiple that times. [Indiscernible] you synergies that with

Glenn Chin

that in white detail. Is those space slide historically then that say cetera. much Is to that I'll or line GM, you get that don't the do the features the and Okay, very business on just of say JR, its is so lastly, back great. types on to Thanks in that not Alfmeier with for of a OEMs just And does expect Alfmeier. own, et all the deck. highlighted they

Phil Eyler

So heavily Europe. has focused there's Alfmeier been and in a mix,

out, fast pointed of customer is for their As Volkswagen customers we BMW, include a Group growing Daimler, them. some

is EV our about portfolio those in And will we're a come large we're things. to one, especially far channels that Gentherm is in But we care growth North And different. they're excited based to phases customer passenger opportunity is technologies really has solution global and customers. this there. massage. through in that excited believe implementation comfort. in game our be content what combination solution. take think and we about solutions, and call opportunities Every increase two pneumatic which of different this also, we Number They're using with of and larger big a significantly changers customers. application And of together the to take physiotherapy, of relationships, America really these and product product fundamentally America, lumbar North thermo in manufacturer customer different physiology primary their is Ford could what Asia. their

technologies. generation one hot we new a ahead around called out stay that which on You frequency those the think in effect. create is, that is both heated And know offering, certainly companies fits to it And that perfectly in the that about case massage, competencies pulsation. cold their remarks, the with is we wellness can developed all industry with latest massage to pointed is and leader when being And prepared the Pulse space that's That's Alfmeier based integrated positioned exactly innovation, Alfmeier, and way A core Gentherm. a really vertically the technology, thermal we attempt Gentherm this comes side. high a pulsating in

as we see opportunity thermal combine a real pneumatic changer. to really So game and this

Matteo Anversa

annual the with press release. our comfort factored have not synergies side earlier, the may American Glenn, point significant that also cost seating of synergies add, also rate customers, synergies. back cross-selling is we to I But that and outlined that Maybe with we outlined this believe Alfmeier particularly in $XX in the are that we if the Asian just million North opportunities, run we Phil's the

Operator

of the is Matt question Roth Koranda next line with Capital. from Our

Matt Koranda

Hey, good morning, guys.

Phil, folks the finally the last the on lines So then of did was what catalyst better And just the opportunities. reference something said cross-sell maybe years, there. you've part way. four to you questions along for the wondering, of and been of get the Alfmeier just speaking you the done acquisition, sort by sticking with these congrats guys

curious this So guys about front? I'm could opportunity? cross-selling some bookings through that for expectations on to maybe be think just near quickly level how Because that'd term, of generate them relatively set just kind you

Phil Eyler

we massage an opportunities the to see of to market clear and that we the with with cross-selling have front to on outpace opportunity question. space, us the while a list going own beyond its start Yes, our comfort potential I'll capitalize synergies. of pneumatic on is and second step really automotive in the

on revenue So a upside we million, that's to the doubt we clear to that build no into be have top those But didn't of that. synergies. going Matteo there's path that said, as $XX all

obviously, can't to closes, work the it’s, been their but get a your the deal outstanding and evaluating and them. close on certainly privately feel first those to company good owners we those, we're is about point, I've company, owned, So until On really of put just time. right made for came situation And of of and for we seeing kind and All industry, period opportunities that migration us. market. together the And the the those it the together the point the happen. in at and it

working And that we're bit together. very So as of back know really excited company And well. dialogue getting notes combination. from forth and customers been already we I long this and they're about a this has said, a that very,

Matt Koranda

sort of couple a general in categories. guess probably any Is the I could further. there specifically by XX production versus year that core of growth the your on years. the they given in little little touch then that's maybe guys in plus, of Gentherm touch the thumb OEM over historical maybe some if And rate growth rates curious Alfmeier if category a rule and could XX, looking on I of just to is growth of last back the production but And know the And maybe points outgrow automotive plan. given the think you Excellent. sort of about category you bit growth the way on a typically also that for bit company's distorted, you have rate industry, production? issues just I COVID historical and

Phil Eyler

industry, been of of would look automotive IHS the But combined looking. dynamics we the look rate. onset growth part I just our forward well like we that rate the believe the also mean, the have if since -- So and you more years, obviously, they've above I we next really and forth. are of COVID, will growth five so once at that shortages be

of too it. able get will months plan coming IHS I around rates. hopefully than significantly detailed much specifics So on be I more growth more the the present a won't higher to that, But into without say a doubt, in would

Matt Koranda

see And Okay, And talk other run But Alfmeier. Matteo, million reference but just put one from, synergies, I in you a one maybe have are of of just maybe what's question. the great. And consolidation? But out $XX Like buckets there? fair. purchasing could more is And bucket $XX coming major space the the of on there mentioned some all won't the you where That's I sort rate you million? what here. savings. bulk timing footprint you the the the then savings

Matteo Anversa

Sure.

the So buckets. I around, are main say, will synergies really, three

On is footprint and third will side, the the overhead so one Materials applicable, around on be one. side, the of around and really manufacturing sourcing the synergies is company rationalization consolidating supply the the company. which where OpEx the base, of removing

that's at. the will the kind about I the of be So achieve buckets, that's three run years. that time out. play in expect able rate in But to three the roughly would we full how are looking we should really key what synergies That's

Matt Koranda

if up margin I a in Mexico directionality? the But or any And about to quarter, know last Okay, then bit relative help maybe full EBITDA as if sort sequential was below more big the year of you great. on still on there decline range. just a second said, And margin I can guys just one you we the one, target in quarter? sneak so expect issue? just business, should first bridge ramp improvement gross on the the in think QX, maybe a the margins core then could How theory just of provide we

Matteo Anversa

Sure, Matt.

So one. take let me this

I maybe, a the we before as start also points me some into upon of to year-over-year are and the the I'm Let call. the last going made in maybe think that walk, getting earnings touch of happening, dynamics of details that just the reminder

in there a us So impacting I that right you if think couple back, step take industry are the factors and a particular now. are of

by important different the you XXXX, compared today, right. environment, it the The recall, for of shut So incur first, then to we in the the would the In of situation in number things one was started OEMs, starting end in were the they extremely what we may the fourth is at our for with year, also and the exacerbate most down, XXXX, of negatively quarter, with that supply to majority impacted shortages is semiconductors. the to forced as own to us then significant is one, have Related supply been think the our freight we obtaining that obviously that's this cap spot first dynamic supply the and that recoveries, customers, micromanaging premium lumpy. deliveries of comes the couple successful the to this with customer be cost recoveries recoveries, to we have of suppliers to remember. -- recoveries and tend us and gaps our the customer with in by so I relatively in successful a the

half first We be XX% quarter. of in lower in recovered XX% If the we you fourth to materialized. And in in cost about the expect to recall, we the achieve that quarter, the this this would were non-inflationary recoveries. the and first able of said about actually we

the is but only dynamic the impacting quarter, of the first So the not half first that's year. second that

happen our the coming this fourth of and we of is third to with generally end XXXX impact And which volume the of will end when impact mitigate year in the of back is enjoy in The see the one able are suppliers. quarter we but rebates in primarily in the inflation and third the labor the we quarter. inflation Same the material. the thing at will

So customer recoveries have in be the half. we in annual And to beginning negotiate earlier, this to mentioned impacts that question, always the the you which first lastly, some expecting these able come kicks year. the in inflation. I But of of XXX, to of the price at of I the prior the And as don't the impact then reduction, will mentioned are bps later earlier, year. the XXX that benefits

And you what I context what the okay. in also will see happened think the So that's happening in first is quarter. and what quarter, second of the is

let year-over-year me details more the now, go into So bridge. of the

accounted you disruptions Mexico wage supply the was that annual about this and XXX points, was positive then of really electronics XXX basis one productivity XXX. okay. earlier, bps inflation XXX recoveries, bps, And XXX our mentioned plant which at bps, the customer was new but price tiny and material quarter, impact about since the little were of by resolved I been offset was on the XXX bit it about partially customer So in have has reduction for the bps chain just about these the And a the factories.

the that's So year-over-year walk. overall

this a transitory, basis Mexico impact. about, buys net It's recoveries the the XXX I the the point cost these premium step Now, plus of spot freight would if back is impacts of take right? of say you

really, So you gross see lost XX.X% a the a and you due supply would at add that, revenue. to million rate of delivered million that $XXX quarter when really $XX shortages, about will that margin have about you revenue to normalize

kind of what to have base. the mentioned it, we I the negotiations of at that of normalized a top that's looking price earlier. So then are on add impact And you

range the get So and earlier to our for the that that's the we year. guidance guidance we of how lower mentioned end

quarter I there second of the couple as a things far is As consider. to concerned, think are

a you quarter is seeing due compare second and But are same. on in to first the when for on estimating the if much over slight lockdowns you China all, the forecasting at we start decline relevant the this top production. to and there, year-over-year of So IHS the with first, happening are the market, flattish maybe pretty year-over-year primary sequentially, that IHS IHS, -- line, our is the is look

second expecting So below to quarter be what had the us, also in first the for revenue we we quarter. are slightly

cost management as aggressive remain to do. obviously we the continue will always on We

would the still second the in EBITDA below we annual the I second would compared expect be to to to but margin the expect the gave. profitability gross range quarter improve rate quarter so first we rate, the And in that slightly guidance

Operator

Our next Ryan Sigdahl question of Craig-Hallum. the with line is come from

Ryan Sigdahl

the guys. breakthrough in EV And growth that also then mentioned large quarter. Curious, things? manufacturer EV to? two to Are relation product a the quarter? so related morning, with What you last is was those different that in Good award announced you

Phil Eyler

were talking about and seat Yes, heat. and wheel we steering

Ryan Sigdahl

right. quarter, This

So than quarter. it'd announced ramps? me last Can remind award be that you the one when different you

Phil Eyler

It'll start in award. ‘XX. new The

Ryan Sigdahl

project. Got those another you've switching see to you announced development Have to went or OEMs speak. then and The to Then of with any ones years. those Good the last over climate dormant tested just you. work guess I have several sense. continue so to

Phil Eyler

implementation None they're different say, have gone in all I levels But potential. of, dormant. would

have to part very think to could it, it we this, list has that out be Some we've how about to but implement some forward. say, somewhat time out are beneficial, we similar our got pretty pipeline is to we're are our these to I optimistic pretty the one of of this this we -- do architect This, door. to that. love very to solution very make And announced is that don't and re we've that's got And leading the of specific see, discussions. We've said common, now, one that's, would development optimistic just they've moving There is up another evaluated the of phase this got crop EVs. we get what is where we I'm of Europe kind EVs one in figure more beginning active, generation opportunities. right some that and about of this there to next just

that optimistic more to start am I get So there. momentum

said, top customer win other first a we've sure of of on to our course, success. slated big make then, technology active about launch our applications ‘XX. deck is Our We're on is that And in go win, though, discussions in first with their focus, production market lineup. that the that's hands of the to for as all that

Ryan Sigdahl

product one as over ICE on headwinds offsets for business business award, it? that new against can more and high cable the Do mentioned its the some years business think just some a opportunities legacy challenges new there. you me, voltage has Helpful, cable Therm grow and the coming

Phil Eyler

I We're aggressive. Yes, not do. super

we're I've for selective But about complementary. they're and said applications. combined arena. And a reputation of this, we've As table built this very cell kind in very before the on ourselves connecting

the In of a side gain that point had now us And we're within about helped lot there on really we cell to to fact, what terms line, I connecting? our this thin is our before out credibility and excited as activity the BPS of with product fact cell right be foil cable opportunity. expertise really awarded testing in connecting is solution, that

So see high I some we is the on especially voltage, of high voltage net cables, opportunities to with guess even the definitely that grow.

Operator

Glenn of the comes Our Research Seaport next from question with Chin line Partners.

Glenn Chin

your factors to is IHS like you the Do the as feel just them? if first need feel again, guys so still if or focus underlying time Thanks, Great. guidance, you can some on of you place IHS. right haircut you in

Matteo Anversa

you go They HIS that what didn't believe call, if came think to was last I Glenn, really earnings we think, since I projecting. down said then. back we

than I but So them, slightly think not maybe lower major.

I So think we're fine.

Glenn Chin

is secondly underlying Thanks. guidance. great. Okay, on And your factors then still

was channeling this or supply that for effect distinguish whether delineating those of much back again So that it's predicated get upon two would not semiconductor quarter wanted, discussed improving and the you Phil, your this you I us? asked last I actually improve, you you actually how as you semiconductor that will in mind think as from improve level and supply you it confidence would about would half. I quarter,

Phil Eyler

quarter. talked last news of as the out we the seeing good say still the situation we the general, it We would I which semiconductor kind us, QX into be quarter head is Sure. about but to expected in signs it's recovery of second for like we in is are kind it tough. of playing certainly quarter, was

all so originally and they're challenging that the are far And these of promises semiconductor in supply. through reaffirming, were given the coming suppliers increase some we by still

other are recovery we the the on again, moment, Matteo shape hearing still customers, see suppliers the to second we're -- as start that across that the similar for seeing out, are largest they're our And in recovery up half. pointed we'll fluid second half. good at side comments indicators and space, there's least that a the their from at So

fairly those both feeling where So of still say would we're I good. areas

Glenn Chin

X to Okay, would being Phil, put XX from XX, it, number you to on a the care most confident? say,

Phil Eyler

No, really. not

Glenn Chin

Okay. I keep last me you in just quarter told what mind then.

of some I Alfmeier, know decision the OEMs. well with I case perfectly Is different? yours that sourcing that different by your that is sourced Okay, the think dynamic is is sourced last business ones. Is right directly mentioned you Is question by their tier by, them? just not on there?

Phil Eyler

comments very to that today's we've from And similar also Alfmeier’s business. market, the that Gentherm. pretty in in awards it at OEMs. there our of consistent sourcing it's And applies applies majority least our and comes No, And to been to business. the

forward, Of with best-in-class the the course, two hopefully, technologies with systems. solution, we're sourcing no the And like as from Eyler solution. There back over and focused to the there's for products end, this time. well. now would some developing And to combination, amazing both plenty tier and going I XXX% questions experiences we're end ones that individually on in of just now turn breakthrough the the further consumer call are at sure most make closing here the Phil any comments. exciting to

Phil Eyler

in beyond will have and the providing uniting talent this complementary the advantages look our class value. of of and will keeping Gentherm position in to deliver advancements and capabilities doubt the efficiency, everyone of and thermo wellness largest joining comfort of industry. wellness extremely in acquisition thanks significant base Alfmeier’s no with call. competitive And shareholder expand comfort physiology, Alfmeier’s Gentherm's the and our of energy and global a comfort, and two you solutions. Gentherm’s new expertise companies. Gentherm’s of world thermal for maximizes business supplier to you. well long-term Combining further and expertise, health, transaction apprised value thank progress. seat I'm pneumatic We I the our The us excited that improve technological the marks physiotherapy customer beginning Gentherm. making proposition about solutions in Okay, forward Today thermal interest chapter innovative massage further combined your appreciate our lumbar for support

Operator

We appreciate today's conclude It your participation. teleconference. does

You Enjoy time. the rest your at may this your disconnect day. lines of

Gentherm (THRM) 4 May 222022 Q1 Earnings call transcript