Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gentherm Inc (THRM, Financial) secured $1.8 billion in automotive new business awards year-to-date, with a win rate exceeding 80%, indicating strong market demand and customer trust.
- The company achieved record quarterly revenue for lumbar massage solutions, with a 46% increase compared to the same period last year, showcasing strong growth in this segment.
- Gentherm Inc (THRM) launched its ClimateSense software solution on a vehicle for the first time, highlighting its commitment to innovation and new product introductions.
- The company reported a third-quarter record of $600 million in automotive new business awards, demonstrating robust demand for its products.
- Gentherm Inc (THRM) achieved a year-to-date adjusted EBITDA margin expansion of nearly 100 basis points, reflecting improved financial performance and operational efficiency.
Negative Points
- Gentherm Inc (THRM) lowered its full-year revenue guidance due to deteriorating light vehicle production in key markets and supply chain inventory adjustments.
- The company experienced lower-than-expected third-quarter revenue, driven by steeper declines in September and continued into October.
- Gentherm Inc (THRM) faced headwinds from the start-up costs of new plants in Mexico and Morocco, impacting short-term financial performance.
- The production environment remains challenging to forecast, with continued deterioration in Asia, particularly in China and Korea, affecting revenue.
- The company is experiencing delays in several EV programs, which are being pushed out longer than originally expected, impacting near-term revenue growth.
Q & A Highlights
Q: Can you provide more details on the bookings environment and any significant opportunities for the fourth quarter?
A: Phillip Eyler, President and CEO, stated that Gentherm achieved a record $600 million in awards for the third quarter, bringing the year-to-date total to $1.8 billion. While it may be challenging to match the $900 million achieved in the fourth quarter of last year, they expect a solid fourth quarter with several opportunities, particularly in thermal products and pneumatics, and are optimistic about future prospects.
Q: What factors contributed to the guidance cut for the top line, and how much is related to lower production expectations versus program delays?
A: Phillip Eyler explained that the guidance cut is primarily due to a $10 million shortfall in Q3, driven by steeper declines in September that continued into October. The bulk of the decline is related to the fourth quarter, with light vehicle production expected to decline by 4% in relevant markets. Additional factors include deterioration in Asia, particularly China, and select vehicle production cuts by OEMs like Stellantis and Mercedes.
Q: Despite lower revenue expectations, why do you anticipate higher adjusted EBITDA margins in the fourth quarter?
A: Phillip Eyler attributed the expected margin improvement to the Fit-for-Growth initiatives, which include savings in purchased components and value engineering. These savings are expected to ramp up throughout the year. Although there are headwinds from the startup costs of new plants in Mexico and Morocco, these are balanced by cost-saving measures, leading to higher EBITDA margins in Q4.
Q: How are new technology wins, such as ComfortScale and Puls.A, impacting your business, and what are the expectations for these technologies?
A: Phillip Eyler highlighted the excitement around new technology wins, including ComfortScale with General Motors and Puls.A opportunities. ComfortScale integrates thermal and pneumatic products, offering cost savings and improved performance. Puls.A is expected to add significant content to the massage product line. These innovations are expected to drive future growth and customer interest.
Q: How is Gentherm balancing its relationships with European OEMs and the success with Chinese domestic OEMs?
A: Phillip Eyler emphasized Gentherm's strong partnerships with European OEMs like BMW, Volkswagen, and Mercedes, which continue to drive outperformance in Europe. The company also has a disciplined strategy for working with select Chinese domestic manufacturers, allowing them to capitalize on growth opportunities in both regions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
