Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gentherm Inc (THRM, Financial) achieved record quarterly revenue of $376 million, outpacing the growth of light-vehicle production in key markets.
- The company secured $660 million in automotive new business awards in the second quarter, bringing the year-to-date total to $1.2 billion.
- Gentherm Inc (THRM) launched automotive solutions on 22 different vehicles across 11 OEMs, including major brands like Ford, General Motors, Hyundai, Mercedes, and Toyota.
- The company achieved its highest quarterly operating income in three years, with an adjusted EBITDA margin rate of 13.3%, a nearly 200 basis points improvement versus the prior year.
- Gentherm Inc (THRM) continues to expand its market share in lumbar and massage solutions, with significant new business awards and the introduction of innovative technologies like Pulse A Massage Technology.
Negative Points
- Revenue for the second quarter and the remainder of the year is lower than originally expected due to customers adjusting production schedules.
- The company faces headwinds from delayed new vehicle launches, lower than projected EV volumes, and increasing customer inventory on dealer lots.
- Gentherm Inc (THRM) experienced a decrease in automotive cables revenue by 6% due to lower volumes in North America.
- The company is phasing out certain battery performance solution products, leading to a decrease in BPS revenues by 17%.
- Gentherm Inc (THRM) noted challenges in the global automotive environment, with volatility in production impacting revenue expectations.
Q & A Highlights
Q: Can you discuss the dynamics behind the $660 million in new business awards and the opportunities with Japanese OEMs like Toyota?
A: Phillip Eyler, President and CEO, explained that despite a slight decrease from last year, the awards are healthy and well-distributed across product lines, particularly strong in pneumatics. The company is excited about its progress with Toyota, having launched CCS on high-volume vehicles like the Tacoma and Camry. Although no pneumatic awards have been secured in Japan yet, there is potential for future growth.
Q: What factors are driving the margin improvement in the second half of the year?
A: Matteo Anversa, CFO, noted that the margin expansion is driven by Fit-for-Growth initiatives, net productivity improvements, and better premium freight management. The second half will benefit from higher revenue due to new program launches, full run-rate purchasing savings, and productivity improvements from moving production to new plants in Morocco and Mexico.
Q: What are the key factors affecting the updated sales guidance, and how conservative is it?
A: Phillip Eyler highlighted the volatility in vehicle production, with some key customers reducing orders due to high inventory and lower EV volumes. Delays in new program launches and headwinds in China also impact the outlook. The guidance is realistic, based on customer orders, internal intelligence, and external data.
Q: Can you elaborate on the growth in lumbar and massage solutions and its sustainability?
A: Phillip Eyler stated that the company expects continued strong double-digit growth in lumbar and massage solutions, driven by early launches and ramp-ups of recent awards. The growth is expected to sustain into 2025 and beyond, with faster-than-expected award wins and new content like Pulse A technology.
Q: How is Gentherm positioned with a large global EV OEM, and what models will you be supplying?
A: Phillip Eyler confirmed that Gentherm has content, whether thermal or pneumatics, on virtually every model of this large EV manufacturer, indicating a strong partnership and significant presence in their vehicle lineup.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
