THRM - Earnings call 3 2023 | Gentherm Incorporated

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Operator

Ladies and gentlemen, good morning, and welcome to the Gentherm Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Yijing Brentano, Senior Vice President of Strategy, Corporate Development and IR. Please go ahead.

Yijing Brentano

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

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

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

non-GAAP non-GAAP as the may the measures by forma During defined Regulation certain and investor these we to comparable measures financial our G, are related presentation. the of financial call, financial Reconciliations measures included including in pro measures earnings to release GAAP acquisition. discuss Alfmeier SEC

call with me Anversa, President Matteo and the Phil are CEO; CFO. and Eyler, today On

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

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

Phillip Eyler

quarter the our business as business of to as year-to-date. we in the new third set for with million stands $X prior in climate-controlled of I'm improved profitability. billion you, $XXX strong Yijing. in Demand in Thank more continues awards record, have to wheel Good comfort, X momentum in key thrilled $X.X quarter bringing year. record for new morning, exceeded than billion and to achieved QX with Also, year-to-date. you lumbar today, achieved for the all the we third solutions continued now pleased and The the business everyone, at us well am today. massage quarter, thank new seats us which a steering as joining product awards fiscal months wins, lines accelerate. during and in I left and announce third revenue year records now that heaters thermal

continued delivered we improved of third and quarter highest EBITDA execution in quarterly quarter, operational the past XXXX and XX.X% up to second the further strengthen quarter increase productivity. to XX% our an from the the During the of XX quarters, We compared of XXXX. adjusted

Mexico. expansion We margin on and EBITDA X.X and Morocco make Monterrey, expand also will high a help margin the us continue to in progress Fit-for-Growth our These initiatives our for the midterm. adjusted on return to teens actions footprint continue preparations in to and rate to

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

see CCS Hong of XpanGX. Wall, continue X application quarter, our In launched Chevrolet Great CCS We solutions. Chi, third expanded Meka BMW the solutions to were Series, EV, Dragon, and on EHV Equinox the our

ClimateSense. give Now on let a you me update quick

that drive offers announce occupant energy-efficient, scalable, first delivers the the drive automotive reducing XXXX Events experience range. electric for honors personalized to comfort is intelligent Gentherm's extends pleased I'm vehicle ClimateSense each microclimate is industry's emissions, uniquely interior for comfort all, recognition of First solution ClimateSense excellence. annual that that that cabin on automotive Reuters automotive an for

recognition. comfort principles I of energy to with determine provide this to sense to which winning like to team for optimal and consumption. Our the at proprietary leverages climate congratulate body intensity minimized specific target thermophysiology would coveted the duration areas Gentherm

cooling massage, Pulse in thermal team system pulsating body solutions first with engineering and car. create the and enhancements the solutions. massage, physical promote The of opening to innovative continues In alertness and products to lumbar our combination advanced full to heating integrate A, including with massage vast addition ClimateSense, our experiences, and opportunities that recovery wellness for is proprietary health industry's our products

won Now $XXX of won in Of the quarter. and the Hyundai automotive EV. several Explorer Volkswagen Mazda in X, Buick secured XXXX CX-X China, in mentioned, Dodge awards quarter. and CCS Ram million to as we fuel third we the electric we I SUV, awards Slide AX, on a Ford in cell We Tyron. where, note, won Audi XXXX and And future Tucson

the EV and some their Of won on with LX we in Chinese note, electric LX, We third full Lee of the continue X CCS SUV. to quarter, Auto the makers. gain future with momentum fastest-growing awards

the CCS to congratulate won October. to our received our we pleased am from global Mercedes win, third award massage I breakthrough share and just we and in Chinese Le addition, pneumatic that a this lumbar high-end for I'd massage quarter. team OEM. domestic with like combined Stellantis Additionally, pneumatic in our with massage And system first awards first in Auto and

at awards GMC, we Alpha have introduce with strong wins pneumatic are these awards much detection expected.Allow wheel pneumatic Rover, Land of Stellantis, Jaguar hands-on global received lumbar Pat, to just me one Meyer Motors, massage BMW, thesis industry-leading that conquest quarter, remind and And the to Gentherm's Mini, since steering X General won message a the customer than importantly, BAIC, acquisition, These in largest manufacturers. win continue Alfmeier pace and Also and Honda, relationships of the we We months to EV lumbar Volkswagen note, third Hansi X in These Alfmeier you our awards acquisition included Volvo. BMW, across and of enabled. faster Audi, XX awards heater XX OEMs. confirm technologies. leveraging of

ClimateSense. Turning to

Honda range which rates extension from units driven awards a higher additional have electronic and on special for thermal award, comfort we and of platforms. have XXXX. thermal electric won Interior by ClimateSense EV higher Solutions follow-on of content, superior in solutions our take contributed demonstrations record enabled our Our our adoption to note, Heated Of control including vehicles,

savings by combining consumption energy Sense demonstrated steering in seat Honda Climate wheel HVAC Our heat, heat. and ongoing interior development project has heat significant with

We our ongoing in about Japan. excited with are Honda partnership

we share our of electronic General breakthrough software-defined truly software. that is Moving a unit pleased win to their part multifunction I'm This from won on as Gentherm. for vehicle award Motors platform. electronics to first and control

to every higher award of Motors player in electronics be requiring of with take software-defined a hardware vehicle in door vehicle rate resulting per will thermal opens higher the General for on features, and software-defined a control Our Gentherm. the major devices, for of along electronics other future. the vehicles us be This content

in ECUs to and the look OEMs is and the just and decrease as complexity. combine remove motors as Our well And thermal beginning. as multifunction other to weight which control sensors electronic control functions operate are units, increasingly actuators this demand

incremental As grow, energy electronics software the will experiences. industry's enable expect greater to comfort and we to more SDV add features that wellness personalization and efficiency, ecosystem continues and novel

fundamental Software our strategy. to are and electronics

devices increased competency from embedded algorithm-driven resources our have solutions. We and significantly to connected

Slide Vizient care continued will associated hospitals primarily were more GPOs. let's for XX turn we our blankets. the extensions by air us these largest China. for hospital purchasing Premier the product. give in Now contract our with extensions Blanketrol driven XX% revenue access group domestic awarded in In third Medical U.S., customers XX% to added increased than of discussion growth new a of to the and with of X In X organizations, quarter, acute year-over-year, These of third our quarter contract flagship business. medical we revenue the Dogen the warming

distribution large change device medical partnerships, in model behaviors business the label medical we in leverage the COVID, Given the adapted to purchasing in opportunities. white channels have post market our go-to-market and

Mark in business the on And opportunity the optimistic Source size our We have on on partnering sales care of we supplier our Matteo color cautiously the a structure that, little As to warming laser-focused financial minority for I'll the over in world-class the we Consequently, term. turn announced near patient are results. in-house last in and about improving call, team with provide with a medical medical. to Medical, U.S. the health this call to earnings more to returns solutions reduced improve remain in cost certified we're market. the

Matteo Anversa

Thank you, Phil.

and Slide items our the to turn most on me let quarter third focus Now X results. in significant

compared acquisitions. increased For the same the of segment. overall contribution for impact our the XX% the last increased including the -Starting by year, effects, by adjust revenues to X%. revenue product we from quarter, and the of Automotive If acquisitions product period with

is million, were a America, Alfmeier XXX light in increased X.X%, increase lower revenues revenue the of in period. ore Adjusting foreign reflecting our by markets key actual Japan. $XXX automotive to year vehicle contribution which XX% the the points than Europe, X.X% increase basis China, Our currency and translation, North prior both in production compared from for the periods

is Hana due hands-on third to buy core of of the in spot heating points. growth increased year-to-date. noting in outperformed our TP basis XX% process prior heaters the detection-enabled XX% in SUVs higher multiple CCS. the business, slower market vehicle for third offset vehicle compared and due PTT basis production. start specifically, to due XX% with due line sterile to EV worth the spot and XXX during volume and volume above lower nonautomotive benefit Kia manufacturers. production X%, mild by model. with lower of Cable than It of TCS, and changeovers primarily our at vehicle. and partially reduced we and by largest both the decreased This revenues out X% by to to model expected increased market of the period production quarterly higher revenue primary sales the was electronics from in some the steering saw trucks revenues and recoveries, well the market onetime recoveries. This majority revenue of by of due which year's which electric in product revenue in Bosch. electric increased with We declined higher lines revenues demand ad relevant was ramp-up driver over customer year to nonautomotive EPS due by several lines, an wheel steering production ramp records quarter flat benefit decrease last X% hybrid global Electronics automotive by Hundai onetime year-to-date, earlier-than-expected with decreased revenue in global volumes of the quarter and Other models by More with driven on we phase-out basis the the systems production our we higher the on electronics. last Excluding a volume year Mercedes, heaters, by of higher production heaters at was our increased one the Ford points as our volume vehicle wheel manufacturers. heaters of for forma certain XXX volume BP the largest as up of Ford due volume GM with global our performance and XX% electric to take Lumber outperformed Jeep year-over-year XXX rate vehicle production on CCS of to EV and on include versus points relatively to thermal quarter. one due basis a with production year's that phasing as manufacturer. pro massage were market at and product lower bulk revenue are well the as

result to cooling a in as growth United of Medical. as Turning liquid sales warming disposable Medical our blankets air our as States. primarily of well ducting revenues XX%, strong increased blanket the of

reimbursement adjusted year quarter EBITDA. ago Adjusted prior prior the profitability This was EBITDA up $XX.X and from as approximately year noncash well prior year both in pro rate stock the million in driven quarters. $XX.X volume, million, the forma. is periods, expenses the points rate costs sequentially, period If compares the was XXX EBITDA XX% highest adjusted was third and the rate in in Alfmeier, year-over-year reductions. quarter million, year increase basis cost. were margin recoveries primarily adjusted adjust million EBITDA $XX.X sales $XX.X from to period. X well a XX%, in quarter from expenses despite the These up million partially of the freight by The compensation of as lower in supplier which improvement that forma Operating comparable compensation The improved to offset additional for R&D the by in last and and lower prior the quarter material cost higher higher integration profitability third million R&D adjusted the the as Moving relative from operating recoveries on we wage were as quarter. to EBITDA year and worth $XX.X restructuring factory included of partially in by had higher basis year. of million cost lower catch-up and of and expenses, expenses bonds. acquired $XX.X was year-over-year million offset productivity pro for by factories were $XX.X costs, The on compared sales noting to acquisition, previous point higher fixed price expenses rose basis. in inflation It $X period businesses XXX by period, driven leverage in productivity driven rate

Our adjusted in sheet compared rate share in approximately per the $X.XX quarter to effective was $X.XX third the in were XX%. per finally, the the tax we year.If last share quarter per diluted X. to share earnings And of balance move on Slide quarter

offset from $XX position generated activities. the quarter $XX was at debt in by to million. Net expenditures debt stood operating quarter partially of million by approximately the due cash the share and of at cash our million end million Our capital $X repurchases, increased and $XXX net

the X.X well target available adjusted quarter below the on of of third end as Our liquidity had XX our net XX-month ratio Based line we credit the $XXX total leverage and was of of XX, September our the the consolidated approximately September line million. availability on of quarter, EBITDA was in ended prior million and remaining at $XXX trailing X.Xx. with

Slide to for turn XXXX guidance. me let our X Now

reported purposes, the if of values since pro on well the results had the comparison full the XXXX performance was best beginning we we included suppliers, we updating beginning from incorporated our Based as currently year. For the actual results at situation information XXXX guidance we of year for of and are volatile. as forma year. the the as XXXX The that our year-to-date and that provided remains UAW the the have Alfmeier customers

However, November. the UAW assume will the by of that plants strike of the October of purpose idle end for we guidance, the XX, OEM through as remain impacted the

the a to rate of assuming $X.XX level. margin EBITDA the of we billion, X% The range FX of on current the to pro growth a recorded exchange. implies million the tax $X.XX range back For XXXX. the adjusted year and the now now of to capital basis, for of We full at now expect of expenditures of to our expect still XX% previously goodwill impact that, I excluding to decrease expect be XXXX, of in adjusted We revenue rate $XX range to XX.X% we the million. in rate, our to XX%, in range call excluding impact impairment $XX the to Phil. effective guidance turn midpoint be to forma to billion remains With a foreign expect XX.X% be will

Phillip Eyler

Matteo. Thanks,

summarize. me let Now

the key lines executing demonstrate is As record in business in new wins, improved strongly. product profitability the Gentherm and team revenues QX

key per As globally. OEMs penetration simultaneously we're EV discussed, we've product content vehicle our into and and increasing into driving lines

with stronger are and in Mexico. We investments with are even foundation for growing global lumbar capabilities we OEMs effectively expand an the future awards a and manufacturing our Alfmeier winning leveraging number conquest acquisition, the pneumatic of And globally. global we on massage as building laser-focused Morocco

our production focus operational automotive begin and on to With well the execution, with the along cash I'll shareholder strong challenging, including strike, positions that, operator performance flow to on Q&A awards, the business us the to environment long our over drive UAW back relentless value remains the record call to session. generation, the continue turn new term. innovation While

Operator

Instructions] [Operator comes Roth Our will with the Thank question-and-answer of now Partners. from Matt line Koranda a first you. conducting we session. Ladies gentlemen, be and question Capital

Matt Koranda

Koranda, Matthew It's Roth. from

guess to called on prior the I period. production organic and trend just in in we out lack know helpful. how Just line. more recoveries XQ to growth just third on seeing XQ? some buy of in quarter. XFX production some But take Maybe rates then to starting also revenue And activity revenue or lacked automotive year top we the like? the be speak do color expect would we I launch spot why are industry industry relative

Phillip Eyler

Sure thing. Matt. I'll that, take

phase buys product nonautomotive of out First the just by were of it and of explain I'll spot kind category our down electronics basically to the that, we business. break how we all, you're flat excluding to performed. market, Outside revenue from right,

we with there, line some I our mean and in There that basically grew though. expectations we had heat. previously we had steering puts business, are CCS, core in on climate off, wheel CK so First higher some somewhat those some volume but vehicle and and publicized, expected, by OEMs. than which vehicle delayed some with we EV on think were launches I lower take rates changeovers offset some ramp-ups, well been has takes

Climate in below expectations on most all saw the business, So where impact right significant track kind all, with the performance with was our our of solutions. battery we

mild over our currently that's management the XX-volt that's about revenue quarter a was and gradually expected. have We've going than So our vehicles, past, a little down. ramp of category the we Those customers we down battery in faster to product. talked the phase where with hybrid are that in time thermal in or of in deep down that it phase known Unfortunately, is majority thermoelectric-based we Mercedes.

So will for there gradually be you probably longer at flat period to on quarters, think BPS, over BPS those due phasing several the look still to down. ramp products. revenue I that next relatively just down. our It's on be going if business the

MSP-based good launching side, the circuits. mostly new products, through our we're On some flex

connecting Board, ramping also the cooled air products up that. So our the cell heater like growing battery Mercedes products. battery We're battery Renault heater, BMW

that hybrid business. some So will XX-volt good there but declining guidance be by basically the are coming, offset mild

that's BPS. So

softened you the significant product BPS year, on of full look with line The The On know, line about the the expectations. a top rest still of year, bit. we as climate as little the you other into products, plays our the kind a see we there. impact

a going massage. bit outperformance we're products, in to look the of on a our you lumbar the see pneumatic If delay pneumatic at little

year, ramp-ups and in a of slower those the quite EVs the or happening a delayed are of of some expected customer than expected. ramp-up little back We half

So kind the the of of high-level that's assessment revenue.

Matt Koranda

pull-through like Moving expecting. margins, were of more Could year-over-year not help bridge the we're maybe gross that down you totally decline the margin a bit we to little the detail? bps in getting XX the

Matteo Anversa

sure. Yes,

charge inventory are last margin, the we the related Electronics I about announced million think on quarter, out year. the we for $X.X we in gross as phasing recorded to automotive that

in the what impacting the margin So that's gross is quarter.

the year-over-year we the a at quarter, of XXX point if And EBITDA. XXX to the improvement. that's basis basis look see, think forma point probably want the we on the where a better is basis, metric profitability sequential I improvement and pro

comp negative side, high the And this when we also see since year year particularly last seen the you of that to the Productivity due was quarter the normalization year-over-year productivity so the We the of continue positive, expansion timing. at factory better a lift. to factory quarter had nice third a regular have in several the the biggest on we in freight, the the margin last on ones. and On then to a price a just had reduction the versus compare the we recoveries compared environment, expedited quarter. freight of elevated in on price quarter 'XX the of in of was tough achieved number third negative side, fact last primarily due to we a in

year. year high the single the in the throughout as in rates. walk from So we were Sequentially, in we came the year-over-year. digits. that's And the the the Alfmeier, EBITDA improvement really, single-digit Alfmeier quarter, third started said

coming to productivity, on we price And scrap. see a sequential also improvement, then from good So to lower basis. really benefits supplier thanks recoveries, a started

that's work year-over-year. both a sequentially So high at level, and the

Matt Koranda

just the in of next year? margins me. was this happen next needs think maybe if I Alfmeier get question. double-digit kind still what to reasonable to guess for we to XXXX is Good assumption a improving. my one segment hear for margins That Last to low

Matteo Anversa

things. don't I of margin XXXX. will overall, on to say know, on early come I the the But think -- of from talk lift couple would I the real about EBITDA Alfmeier a

winning earlier kicked If our with the you optimization projects said back to had obviously, go since we in is huge of And reduction in across work actually back that thanks company. on have productivity that been And volume, scrap we off to to that the we of what own the factories. footprint then and the continue announcement we we incremental the then number September. one February, awards

the EBITDA are Alfmeier will catalysts I margin that think the up. take these X of

Phillip Eyler

on as it's going company the Matteo much faster and we And important our of is in growth, I that overtime products. product that besides lumbar a first pneumatic said, rate to massage at think at to we're be add, all, winning coming than expected margins.

replace to over business lower-margin So that will business backfill help and time.

Operator

comes with next Our Instructions] of Group. Sigdahl, question the Ryan Craig-Hallum line [Operator Capital from

Ryan Sigdahl

the was comments, tentative the of is the the last came goes and November into kind night, QX that within I agreement. the UAW year? you're guidance assuming for a if so strike guidance, and at how end of UAW through guess, Any as rest Curious, of to Ford all the factored

Matteo Anversa

plans we Ryan, the the the the as be And the up quarter, will will be I yesterday third continue impact of in are OEM we that that end no obviously, in said very So monitoring the through impacted and between situation There UAW to November. closely. are fourth. assuming impact in idled to the were my was the remarks, but

million about in of million this weight. Ford about impact equates fourth to numbers, $XX to XX%, quarter. And revenue So XX% the is for terms $XX

additional inefficiencies than we million $XX in is things the decremental million a you case which are that are what weeks. a just gauge in there margin about higher $XX the we estimate XX%, revenue last Ryan, embedded kind obviously, things due gives Maybe upcoming change strike expecting to to on would and continue, obviously, little gets the were strike. the comment normally Then if is make have in in inventory incur the obviously, this are that of the But for in have make, little So if enact, a to and I to foremost which side, afford cash the are once sure we we which will that this cost for contingency people ready customers. sure, our on ramp-up resolved. our we protect free of issue capital We a for to year, to is can strong to includes, OpEx flow the bit at planning control prolonged, control and to expenditures. then we so place, build we plan delivered tighter good, because

Ryan Sigdahl

And second this with this conquest comfort Is guys is customers more you products? Or you demanding seems business winning had away an primarily Chinese accelerated question, primarily then and from local more my your it have guys like solutions thermal traction OEMs. competitors? of

Phillip Eyler

period. China,

So from the consumer those expecting growing is more solutions accustomed and it OEM. the to

that's in So Great tailwinds features great. the just on general.

we've kind the side, and them most to China, very tactically starting our In and in have on several formed in progress OEMs. prioritized Chinese years, traditionally past the our of specific joint certainly into And transitioned of other focused the last with who On we and has are global business good business is are OEMs make domestic OEMs of will the there. still with market. very ventures we've been couple

BYD, announce EV a China, that X we with have excited team support And especially certainly up to Le companies manufacturing of those and We and business rising we're after large full with aggressively go customers. Great picked lot very players, auto, in late. able a X-Paying that of plants ready to Wall, like

us, it's a priority doing team for what about So the we're and there. excited is

Operator

questions, concluded. Thank now As of Instructions] there your participation. Gentherm further the conference for are has [Operator you no

your now lines. You may disconnect

Gentherm (THRM) 26 Oct 232023 Q3 Earnings call transcript