Garrett Motion (US:GTX)2023-07-27 15:31Financial Data and Key Metrics Changes - In Q2 2023, the company reported net sales of over $1 billion, an increase of 18% on a reported basis and 19% on a constant currency basis compared to the same quarter last year [14][52] - Adjusted EBITDA for the quarter was $170 million, up from $138 million in the same period last year, with an adjusted EBITDA margin of 16.8%, up from 16.1% [10][26] - Adjusted free cash flow reached $140 million, significantly up from $23 million in Q2 2022, driven by favorable working capital [10][27] Business Line Data and Key Metrics Changes - Gasoline products saw a 34% increase at constant currency, contributing $118 million to sales, now comprising 45% of reported net sales [28] - Diesel products grew by 9% in constant currency, adding $21 million to sales, now making up 26% of total sales [29] - Commercial vehicles increased by 10% at constant currency, representing 17% of total net sales, driven by a favorable product mix [29] - The aftermarket business grew by 6% at constant currency, now comprising 11% of net sales [30] Market Data and Key Metrics Changes - Regional sales breakdown showed 49% of Q2 sales from Europe, 30% from Asia, and 19% from North America [26] - The company noted a stabilization in supply chains, contributing positively to working capital and cash flow generation [27] Company Strategy and Development Direction - The company is focused on zero-emission technologies, aiming for $1 billion in annual sales from these products by 2030, with a commitment to maintaining or improving margins [24][46] - Recent product wins in differentiated technologies, including E-Compressor and E-Cooling compressor, are expected to enhance the company's market position [19][22] - The company plans to pay down $200 million of debt in Q3 as part of its strategy to achieve a net leverage ratio of two times by the end of 2024 [18][39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong operational execution and ability to convert revenue into earnings and cash flow despite a volatile macroeconomic environment [43] - The outlook for 2023 has been raised, with expectations of net sales of $3.93 billion and adjusted EBITDA of $645 million [41][48] - Management acknowledged ongoing regional industry risks, including UAW negotiations in North America and economic conditions in China [32] Other Important Information - The company completed a capital structure transformation by converting all Series A shares into common shares, increasing market capitalization to about $2 billion [45][54] - The share repurchase authorization was increased to $250 million, with $80 million already utilized as of July 25 [16][36] Q&A Session Summary Question: What are the expectations for sequential sales increases? - Management indicated that while there may not be significant sequential increases, the forecast aligns closely with initial expectations, influenced by product mix and global conditions [62] Question: Will the shift in product mix affect EBITDA margins? - Management reassured that while there may be short-term fluctuations, the long-term margin profile remains intact, with gasoline business expected to perform at previously stated margins [63] Question: Are zero-emission deals translating into revenue this fiscal year? - Management confirmed that there is already some revenue from fuel cell compressors, with expectations for progressive boosts as predevelopment programs transition to production [65]