THRM - Earnings call 4 2023 | Gentherm Incorporated

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Operator

Greetings and welcome to the Gentherm Fourth Quarter and Full Year Earnings. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Yijing Brentano, Senior Vice President of Strategy, Corporate Development and Investor Relations for Gentherm. Thank you.

You may begin.

Yijing Brentano

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

factors later financial non-GAAP today obligation events are and of financial Gentherm's Alfmeier materially. Gentherm's measures certain comparable our release of Chief defined financial the this current performance, Statements meaning call, update forward-looking will results webcast required actual as G, discussions of Financial risks Relations differ no me its statements.During make earnings with website.During pro related our these SEC Officer. in Anversa, GAAP call other forma see forward-looking Matteo and future such Regulation the today's Eyler, for may and investor and as We views within a the filings, non-GAAP Investor call, of latest with replay be President may earnings by Additionally, and acquisition. reflect included underlying of we discuss measures are available statements measures Executive including the today Phil and risk and by we federal on undertake SEC section may including laws. call to uncertainties reports, subsequent to and Please our except Reconciliations them, the the respect law. Chief measures presentation.On financial and the XX-K Officer; to to securities release

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Phillip Eyler

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Matteo Anversa

Okay. Thank Phil. you,

MLA revenue largest and electric benefits revenue and out by in Automotive foreign product business, Seat of timing translation to prior-year of due Kia, Europe by manufacturers. recoveries negative increased increased of period. manufacturer Mercedes China, increased on our of XXX production product in outperformed revenue have in prior periods, to higher BMW X% $XX.X product XX excluding as with million basis per share increased by a million approximately electronics automotive business. higher as year in adjust of volume VW to $X Europe. higher And by compensation Blanketrol the XX points.We the heater and well reflecting increased to XX% higher revenues systems cables due for to inflation period primarily vehicle XX%, compared Lumbar vehicles $XX.X and as and vehicle period.Turning the quarter start year. increase primarily Starting global quarter the and same per one manufacturing and in the cost of primarily earnings the quarter adjusted by expenses fourth as the of XX% the by percentage at more fourth million, to against non-automotive diluted revenues due EV in on noting Bosch as massage sequentially, were volume, in and rate higher from revenues the automotive approximately per Samsung. currency smaller both segment. received decreased prior year by EV revenue period last and volume the prior revenue heaters non-cash increased platform increased X% It higher periods, Adjusting the up supplier impact X% from of operating result in year-over-year. on volumes due quarter reimbursement.Finally, increased fourth that our the from of primarily to VW period. The steering in The quarters. compared costs global of Ford. of price different delayed our due adjusted price Europe one-time the basis significant XX% to the compared was due year-ago comparison.Actual Let BMW X%, margin as medical ramp-up of revenues million revenue regional increased revenue lower is fixed third due revenue X% to demand both XX% Electronics quarter million sales at from by actual volume growth markets a with by our the XX% million revenue material mix GLR. results.For result wheel recoveries prior and the rose the America, driven North saw to strike, regional as with Medical R&D in the period. to impact compensation, revenue majority the in lower year quarter exchange, were share increased $XX the stock a the the revenue in year. would well to acquisition, facilities noting integration increased and in basis steering to from well recoveries the our with of fourth growth and Japan for start was worth X%. production compares $XX specifically, supplier increased reductions.Operating production as for million, These It wheel increase revenue U.S.Moving the key with production light $X.XX to improvement The year foreign X% the our with were offset for revenue the our on Adjusted quarter, by due the was manufacturing production detection-enabled with Korea decreased other non-automotive incentive for the $XX.X sales in most were electronics. hands-on higher lines, higher of Adjusting last of in year-over-year XXX with a the and in rate the prior higher due by for a ramp-up share Valve overall the Hyundai, X% $X.XX XX.X%, sales items as If our X% restructuring start productivity to EBITDA. compared year-over-year million, were year growth driven by of difficult Buick. positive recoveries.CCS by in period. of we in by EBITDA and phaseout inflation prior higher adjusted Automotive that the to up EBITDA UAW profitability the is by of primarily adjusted leverage as points, phasing cost, heaters point offset to in XX.X% adjust partially was year. $XXX automotive highest partially to X our EPS well the freight Slide quarter the quarter expenses $XX.X rate we This year higher higher our our is compared the me Europe, wage from If last productivity reductions. cost expenses worth China, focus on relative market. the the cost EBITDA revenues period. mix, driven

for to the rate of Europe range balance the sheet goodwill implemented impairment impact the of quarter, tax effective medical the quarter one-time fourth XX%. entity the lower XX. year.Moving due tax restructuring the the Our of XX% in in to second on that approximately in as a This was a recorded than was guided is amount benefit adjusted result the XX% Slide of year, to by the

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

on the year improvement deliver X.Xx. basis on would that available thank I availability XX, on trailing December of of of in in XXXX team as consolidated of XXXX rate quarter, million adjusted Our to total line allowed year-over-year XXX was $XXX ended disciplined the below for us XX-month a adjusted our the Based inflationary to our XXXX and the net the remaining global EBITDA had we EBITDA point X.Xx fourth was million.Now leverage forma $XXX before ratio like credit, margin at despite end Gentherm well liquidity the target end management guidance, significant a headwind. basis, discuss financial pro the I of

I'm free me generation, our shareholders us strong of XXXX the to $XX the guidance. approximately which share cash to through proud addition, team let Slide turn XX enabled repurchases.Now to for In flow return for million our

decreasing We are U.S. expecting the revenue range of $X.X billion to of at a billion, in of in low vehicle markets benefit a $X.X guidance implies our single-digit exchange rate to be in XXXX X.X basis organic versus growth XXXX. production light midpoint of points Adjusting our of relevant an assuming the revenue for X%. approximately FX euro cables XX.X% and worth half dollar XX noting year-over-year, to expected rate automotive second that to foreign climate to margin result assumes exchange.Our and guidance XX.X%. as EBITDA than are excluding comfort more and the systems, It is a to new BPS, first expected the of improve in compared revenue we to of to if half our launches. the Adjusted higher X%, valve revenues is rate grow exclude timing program rate

startup guidance contractual with steadily the quarter earlier rate downs, awards.Due a first our to basis second record half year mentioned associated headwind the the and costs revenue be offset be and below EBITDA productivity our price launch to cadence plant at range and in we Mexico the rate new point product will in to and in assumes for costs of supplier associated the improve adjusted impact Our our with the XX throughout new the by and engineering I year actions, expect guidance cost and of margin improvements the year. full the which Morocco

our our SG&A, across revenue the between Fit-for-Growth expected now $X.X rate to $X our to discussion continue in XXXX is XXXX will a with in us XXXX team sourcing in million. XXXX, specifically, XX% margin implementing million combined year to of to earlier, higher $XX that investments mentioned the is expenditures value largest to of be product decline clients items first EBITDA projects adjusted vehicles, due XXXX.We outlook, excellence, savings, on Phil including and expect in one-time we as $XX we range the prior outlook forecast margin initiatives, of full years to to than We be associated XXXX in by America, as for lower quarter first XX% XX% $XX workstreams, connecting the in the awards.Due slightly the and that EBITDA approximately yield pipeline the well execute goal. billion we be reduction are savings expected targeting And million And region profitability. actions $XX new expect savings that are on nearly net our XXXX.Our we of to new As of $XX capital our we strategy revising delivered addition, to range capacity, a of automation year. adjusted and in production of in be our of of and mentioned effective XXXX billion. last additional CapEx costs decision result of pause achieve and now of board the XX% of revenue plants, projects above X to the uncertainty ramp-up February that positions expected be increased million to the electric remaining our opportunities tax vehicle as will quarter footprint, have rate result the new provided cell than a pursuit by of in to to In rate be to over our ramp-up XX%. XXXX. with deliver record manufacturing These BPS of we million including are the of million engineering, in another of North the currently timing support the $XX are new to

call to the we EBITDA momentum over gain remarks. continue and a on to high actions, turn time.And that, we some closing Fit-for-Growth with our I'll margin teens path back identify to for rate implement Phil As adjusted additional

Phillip Eyler

Matteo. Thanks,

X% adjusted Now to new let and business strong delivering with In than in XX. me business accomplish expanding revenues thank want priorities XXXX, record this our on on record our we're in continued and expected record and long-term XXXX, more comfort XXXX. margins.In Gentherm I EBITDA. summarize focused wins, laser execution X grow climate global Slide order to is the growth, team to for

momentum First, ability to our market our continue opportunities. we're automotive share, industry-leading confident of new of given strong awards pipeline winning and large the in maintaining business our

will on award ramp-up to backlog successful execute a with unprecedented We our ensure customers. also key our

next-generation third, we expand over rate just Second, on execute margin will WellSense, aggressively let the XX. the high and we unique Matteo and bring to And on me teens investment as Pulse in term Gentherm's solutions thesis adjusted company ComfortScale.Now and will ClimateSense, to initiatives mentioned, such as market near up our Slide to A position and time. proprietary industry-leading achieve massage Fit-for-Growth wrap expand margins with EBITDA

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Operator

comes MKM. with the question line from ROTH [Operator Instructions] Matt of first Our Koranda

Matt Koranda

I awards. the start off with want to

uptick that award wanted and you out reported year-over-year. start quarter. like sequentially million $XXX pretty awards environment the the a to with fourth Looks for the just So big and in

but growth do it what Just like just et that on software awards. get term to what in award, wanted also sense wheel GM mean does steering would multiple combined and clarify exactly a years the Not that incorporate of you then pneumatic technology by of down you to vehicles CCS, the Gentherm dumb helpful. much, mean sort And that on few be your how the to a and more thermal wanted for solution heat and much it bit GM just was cetera? next products Just for architecture. the too for

Phillip Eyler

alone, other you be a awards start in faster vehicle question of just in the especially business combined embedded awards specific replace efficiency then that their shift drivers. But our look customers those on with combined I'll to ClimateSense growing than pointed pull, going to the top awards, the Essentially, these And Gentherm chain shifting architecture some plus to our full add around been than and growing designing let as had long-standing seeing of at allowing at to primary the reasons. a in forward.So And the that's software from shift they're way The the course, total first improved grow be examples, our really of on better tremendous the the really is this to for future. I have we of being And out, tremendous. supply gradual would features the is we of all ClimateSense that Consumer definitely, multiple kinds with a we -- for It's it products terms the supply customers mix. will still performance quarter. pneumatic pneumatics prevalent. traditional more rate and put Matt. year the Thanks, and has what the expected. the this competitors probably we're thermal vehicles to pipeline with a as record to and in if year, of nearly pointed solutions But out General means strong of the GM future is question year. on me Motors.

seating So orchestrate to going really ClimateSense microclimate the that that application the how content ClimateSense helps. these thermal scalable wheel really is we're to really of view into scale us And it. from, and will devices. so of normal the be that excited all Hope steering we're our fundamental that any that CCS implementing fits would to up over full say, of time customer. kind help control content unlocks ClimateSense the about to way I of It with or really ability today's

Matt Koranda

in phaseout. on between of XX% Yes. or be how does a revenues which had growth maybe hypothetical for And sort quarter, more made been you the more And then towards the adjusted latter to without Just are versus the have would phases just the you launches that helpful. The you about half for revenue for production, some electronics including the then curious outlook, X% Very Matteo. bit for the guys just it outperformance look adjustments think of the it of you year. mentioned Gentherm. the sort provide sort to adjustment Can little one year? what then a you automotive. you and decent about how non-automotive looks would color -- to strike like some wanted of got like Maybe a just plus talk provided UAW fourth state you return normal automotive through I

rate us any growth great. versus sense half first be in for relative versus second the would production the So could give you

Matteo Anversa

Sure.

So first bit little outlined the maybe a let we start one. release, the me press with Actually, with in table. a

about impact. last anticipated million, of we things couple impact strike the back $X.X which a in revenue, have quarter The we in $X.X really the we million was lower not call. recoveries, happening. $X.X meaning foreign non-automotive than of almost earnings the to which was and currency are customer had the You expecting repeat and what then we're when then that And the clearly had about then one-time re-adding about was million, of those electronics

release progressively my revenue the continue So you to expecting that's in grow to throughout to I we're then remarks, prepared be the press as reported question, that when in of the year. the we comments.On second break lower for in you number XX% sure, we'll and be cadence, down, first outlined your how it think mentioned to quarter, was the I growth get about the and

to the project outgrow by difficult will which what overall, revenue every part be new But the and year. of in launches, the later is reason half So driven timing half coming primarily are second the than it's why quarter. will out first of the pinpoint be in the higher

Matt Koranda

And the it But and $XXX over. midpoint made guidance that turn like guys then sense. about I'll just me provided. last for at you a one of earlier change makes to That looks the Okay. relative you your XXXX guidance million that change

was of Solutions I about that. to supposed million think Battery growth the $XXX be Performance

where EV on out guys there for just incremental on the taking production. revenue. So part of mentioned items a XXXX? of in sounded like OEMs we sort out just other wanted call the Any to little It reticence are you to more understand change of terms

Phillip Eyler

Sure, to at growth see BPS. you of BPS. We're a was sure. mean, actually I the million called Yes. the right the $XXX midpoint out going decline of BPS, clearly, number

growth, a a until of the just not but actually period. time decline from So now loss that

a based in expect So that And expectations. as customers biggest we'll that's going driver out and EVs the -- see then and our from to targeted we the be be, feedback just some delayed market reduction. we of ramp-up what of are the to of on the you on we're pointed seeing

America us. The makes in second -- seeing of to the factor large a our on to OEMs outlook, next decline a related production actually is in sense Global North the based America XXXX XXXX. for of S&P We're kind few vehicle North which outlook

factor a as that's be So well. to going

Operator

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

Glenn Chin

wins Congrats and Very rate. encouraging. the win on the all

There's be there's Notwithstanding or revisions in further been you're dimension, EV of et that dimension talking But what that questioning. already lot was any for us, to you line example, nothing sort in XXXX, for you but the I EV be way about sort that's might production, following awards delays, made in related what fact of million Phil, of the a it booked perhaps? assume just for to quarter. reflected this $XXX launches, reflected cetera. percent the to Just of possible it deferrals prior is could bookings? on to Matt's in have

Phillip Eyler

EV the of down are many of because in fact, -- it's awards the the for tough awards -- don't we some platform. awards Well, in the us to percent cross break

Just and to example, Series ICE the that an you X called I win give on out is EV. both BMW the the

of that So for as combined the as we've a I future -- plan best would believe well. EVs built and XXXX But in for then of growth. a number. that's our XXXX we we ability, our mean, to more clearly I say still driver into

to start obviously our that XXXX, into As beyond clear those out years we'll that becomes build more in outlook.

Glenn Chin

architecture Very good. sense on timing a question. Can then give do the Okay. just there? When And these you launch? us the a follow-up GM of

Phillip Eyler

architecture a that will years before take It in. goes couple new

Operator

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

Ryan Sigdahl

then in targets, the the the it'll of -- years? that included included include is staying architecture on for ClimateSense, given also, award -- XXXX GM Just and is ClimateSense. a that that or take And Is awards? in that QX couple any

Phillip Eyler

Yes, it's both. included in

Ryan Sigdahl

historically you for content, ClimateSense. talked higher for good about on to content Xx a that award? then thumb And it. Got Is of Xx this have rule

Phillip Eyler

way that all given climate steering scales, orchestrate the software it content. will the it, of think the this from, entry an higher wheel. any let's I way call all It level to that content seating vehicle could and has fact low span the up

a car. across we movement that control are higher ClimateSense have towards time. in plays we seeing we'll to as portfolio have over But see definitely out content how a their So

Ryan Sigdahl

And it. connecting Got just then on the BPS cell product.

that just award the sunsets ago guess this BMW platform? is assumption a quarters with there. guys I You very few a that launched large after

Phillip Eyler

is. it Yes,

Operator

J.P. next line Our of the comes Instructions] [Operator with question from Morgan. Ryan Brinkman

Ryan Brinkman

products? will of business understand penetration on share comfort Just GM. recent rise. one with think that this you there within hopefully scale bigger about to also into increase, comfort another point the penetration GM the I realize more your and offering something share seat more understand the GM to is consumer maybe the the versus it's the products price helping that your this vehicles you about the penetration? synergies GM award driving makes might by commonizing seat opportunity? and the to the of you of drive that maybe trying win economies But Which expanding if materially is could the either in trim because electrical competitors products increasing Just or of architecture? the it's more right is the both vehicles, a maybe or offered say of or these because designed could because about afford GM and Or would lower levels -- maybe

Phillip Eyler

Yes.

some probably those it's of think all I points. of

not because, of kind we thing see break astute that certainly, to think But vehicle, on benefit, the ICEs. clear And apply really whether And expect that to we're or obviously And a you the is to orchestrate biggest excited if you important for I climate is ICEs, then focusing customers. get comfort becomes what penetration are comfort those think seating or electrified relative you're And driver plug-in it down, location full mean you're a because extension. that entire is really also the essence, passenger it feature comfort and remains get to look And in by on seamless. the but at that kind compelling a reason definitely content a of very and the level cabin. points. microclimate higher consumer necessarily the the In I hybrid. way, EV for very on range any ClimateSense value rate the mainly could EVs, doing our EVs. proposition I it's you at a going

for off And us. so starting pay is this really to

well. and penetration that's as So think also help content I ICEs going to drive on

Ryan Brinkman

your battery couple product BPS connecting you need weight was of ask strengths like health the some and I than remember lighter the monitoring. Okay. more too, with highlighting to cell I for there's pause competitor and friendly solutions, wanted it of thought to and some of the questions, this a of be cell the starting environmentally connecting, around of growing

systems the would could So was Or maybe us that market. I were maybe say changed what battery wonder help technologies you more solution there? just incorporated into management comprehensive in the suppliers there you changed if what understand other maybe offering?

Phillip Eyler

think no, has the with chemical no pricing is our with we're very to believe it competition, beneficial have when capacity accepted provides capacity. and loaded benefits our you, have I of batteries extremely comes is putting position frankly, is is personally is the excess around of today, a the level weight. that space the To that us architecture. with competition. out, the especially That of benefits, our because lower kind cost the the And frank in which -- and competition. taking or revolves But difficult and to you to our And sustainability fundamental pricing winning Well, battery to towards I etches there. think selection, light there's pointed do I that that product is shift management don't customers consumers system seeing as That basically it be anything same. it us chem related technical doubt, confirmed material etch drive that

are term, position So us more focus thermal is pipeline that that the us seeing to comfort sense for and be and in near accelerated investments areas makes a if into we're climate and products, the our in in it defer not that of growth, resources going pneumatic. front to and which our is

Ryan Brinkman

second product, of big to question which on the by course. left maybe cell once Then connecting of the was thought was Not up slack BPS there helpful. batteries, That's Okay. pick the also the the product, is the temperature an earlier that thermoelectric regulation.

explaining some it is is there? there's just thought? Or been and are once life? what What some Barra going the truck that curious to in decrease more he having Musk XX-volt very attractive why there in that they kind as here, to seems to But to Jim packet potential just including able was will thought. the on saying launched industry mailing market about for thoughts smaller? saying Farley just the it, smaller down quarter, for as any the maybe once as micro-hybrid like isn't past it because thermoelectric need And scuttlebutt of rolling there's cyber Mary officially back dynamic your like that European was But might applicable cooling. regulation push vehicles, batteries all you didn't And that off. and that or And where some OEMs, potentially Jim luxury they well, market's provide Twitter type on of again. Elon some with OEMs these air got was which responded or be for cost that a really positively competitive too, You've just be maybe is and pan was be I technical understood to going if was think that out might other that maybe to recent XX-volt X there, the the Farley fourth the and come to to double on Or everybody. for need with the of XX-volt some with and details

Phillip Eyler

architecture product different I'm systems for what in especially. the BPS is is been And used the Yes, mentioned primary XX-volt little a at the the is you has for that look on EVs, optimistic And -- you on product creating XX-volt. a when cooling. heat. And the not This reason thermoelectric a with past where to boost. lot XX-volt on of drivetrain became some that, do air has batteries, it of been those really pretty of that's see cooling really important. do used lot opportunities XX-volt We utilization our as a required

customers. Hyundai some out in cooling using of an called going of We air Kia and that different are as example, our we last all winning batteries to business, be couple we're quarters their the cooling devices. XX-volt with

Certainly, decline So decline, decline. it XX-volt outlook. digital POINTS, going not there's thermoelectric It's some be a the of that steadily time. built into our but will BASIS Mercedes BPS to with will gradually over

of battery all in that out and the our out, through heating the -- we're net revenue same decline But some XXXX. that net using BPS do CCB. all as we you MSP-based if technology So have seeing with a as wins netting well built-in

Operator

Our the comes next question with of Luke from Junk line Baird.

Luke Junk

both is alone tease I'm with scaling of was want noise time. GM. add can compute to hardware the what with could piece hoping the hoping the ClimateSense that then to award out the to Apologies here. software underlying background over I controller, you understanding understand better the I for you and Phil, in overtime. that just we versus today hardware opportunity just software the to announced start And really materiality really that

Phillip Eyler

it for driver driver we've ECU material on does X But about revenue I it X a multifunction ECUs. growth of revenue the for what ago than us. mean the It enables quarters up for open wouldn't called call specific I It on it's think software. out more us is margin. Yes, a I very high Yes. Motors. opportunity or more win And the for General

well. as be software our made hardware. specifically on really think on used we But drive can -- we've a to that helps product electronics any software content So our that us this

And to believe find and power is that penetration. ClimateSense show to embedded has that. to to content higher goal Our ways the get ClimateSense the generates, driving ClimateSense much value do we thus

what's firming through really at of portfolio. behind would of software-enabled up this driving kind I our strategy it. our that's as long-standing hardware look So

Luke Junk

much Okay. indicators following specifically? engagement, but to able and on appreciate it's us feedback be pretty platform? because you curious, in any engagements That's kind give interest really CES helpful. then I here that just might of preliminary WellSense And of maybe other terms recent, not or Just too engineering just any in customer

Phillip Eyler

say architectures. what that have about the the folks have vehicle offerings. our impact customers. that vision than exactly many help I for this will differentiating at offering. I find this a them we're our talked have you vehicle. customers highlight feature continually tremendous We matches are want pay product their the really for any interest would lot think features after look won't the consumers you to of vehicle as It more I And their of that purchase the of if could on to a by compelling one software-defined drive announced believe software-defined provides And the revenue,

take the really Obviously, really some and us gaining build that it lot So in, but to is response. I think a of I'm traction. some by gather encouraged awards time it'll

Luke Junk

Matteo. for probably question last my then And

Just in versus terms from incrementally buckets big could of expect EBITDA out. midpoint the XXXX the where shook what range of I'm of unpack really the XX% just bridge hoping to you hoping Fit-for-Growth. you

underlying reductions supplier high the half at productivity, then and just some those leverage of You bucket how we back mentioned cost in level. a And the year. should

Matteo Anversa

look. Sure,

points our driving expansion. cost so is out of about So actions, volume of is margin driving material Fit-for-Growth the points XX Productivity reductions, factory bill basis value of costs engineering, expansion. growth taking that XXX XXX were is about bps. margin The primarily about of supplier at basis

we So price positives. And XXXX. have we're and did front have to XXXX the is more recoveries on the the in amount challenging. side, -- the more from same customers that these on of in Actually, then as are getting the not environment we negative expecting

drag are to points we labor expecting see basis inflation, price. Europe. of wage we on particularly a about in And continue then Eastern inflation, So elevated and Mexico XXX

won, that basis almost it's basis XX R&D investment mentioned plants points So in then the the And the it's to about I that earlier we drag. another fulfill new awards XXX points. and the

the walk So Sure. a that's, high for the at level, year.

Operator

gentlemen, and and your this thank Ladies Q&A you. our interest concludes We today. call participation. you our session Thank this for and concludes

You lines. may now your disconnect

Gentherm (THRM) 21 Feb 242023 Q4 Earnings call transcript