Garrett Motion (US:GTX)2021-10-28 16:13Financial Data and Key Metrics Changes - The company reported net sales of $839 million for Q3 2021, an increase of 4% year-over-year, and a 2% increase on a constant-currency basis, significantly outpacing global auto production by approximately 19 percentage points [5][6] - Adjusted EBITDA for Q3 2021 was $134 million, representing a margin expansion of 105 basis points to 16% compared to the previous year [14][19] - Adjusted net income for Q3 2021 was $65 million, an increase of 8% year-over-year [15] Business Line Data and Key Metrics Changes - Gasoline products were flat year-over-year, accounting for 39% of reported net sales, while diesel products decreased by 5% due to semiconductor shortages [16][17] - Sales of commercial vehicles increased by 10%, driven by recovery in demand post-pandemic, while aftermarket products grew by 22% [17] - Overall volumes totaled 3.1 million units, down 1% year-over-year and down 8.8% sequentially due to global chip shortages [19] Market Data and Key Metrics Changes - The company experienced strong demand in North America and China, particularly for gasoline products, despite supply chain disruptions [6][16] - The impact of foreign exchange was a negative $18 million in Q3, primarily due to a stronger dollar against the euro [18] Company Strategy and Development Direction - The company is focused on enhancing its financial flexibility and optimizing capital deployment strategies, including a partial redemption of Series B preferred shares [9][24] - Investments in electrification and software are prioritized, with approximately 40% of year-to-date spending dedicated to new technologies [11] - The company aims to maintain its technology leadership while navigating macroeconomic challenges and supply chain disruptions [10][32] Management's Comments on Operating Environment and Future Outlook - Management anticipates that supply chain challenges, particularly semiconductor shortages, will persist into 2022, but they are confident in their operational capabilities to mitigate these issues [7][10] - The company revised its full-year 2021 net sales guidance to a range of $3.6 billion to $3.7 billion, reflecting a decrease from previous estimates due to ongoing supply chain disruptions [28][30] - Despite challenges, the company expects to generate healthy cash flow conversion and maintain a strong adjusted EBITDA margin [30] Other Important Information - The company ended Q3 with available liquidity of $752 million, including $456 million in restricted cash [22] - The net debt to consolidated EBITDA ratio improved to 1.32 times, compared to 4.08 times as of June 30, 2020 [25] Q&A Session Summary Question: What is the current ordering situation from customers and OEMs? - Management noted high volatility in customer forecasts, with frequent revisions, and emphasized their strategy to second-guess these forecasts to avoid overproduction [35] Question: What is the outlook for turbochargers in the industry? - Management indicated strong underlying demand for turbochargers, with expectations of a rebound in demand as the industry normalizes [36][37] Question: What is leading to the implied sequential revenue increase for Q4? - The anticipated increase is primarily due to product launches, which are expected to drive volume growth despite a flat industry outlook [39] Question: Can you provide insights on the D&T launches into 2022 and their impact on margins? - Management expressed confidence in the optimization of new products, which are expected to be launched rapidly in key markets [42] Question: What are the plans for capital allocation and shareholder returns? - The company plans to prioritize investments in new technologies and aims to normalize its capital structure, with updates to be provided regularly [46][47]