Gentherm(US:THRM)2022-11-02 16:38Financial Data and Key Metrics Changes - The company achieved the highest quarterly revenue in its history on an organic basis, with a year-over-year growth of 37% or 44% excluding foreign currency translation [8][9] - Product revenues increased by 37% compared to the same period last year, with automotive revenues reaching $322 million, a 38% increase year-over-year [26][27] - Gross margin rate for the third quarter was 24.1%, down from 28.5% in the prior year, primarily due to inflation in wages, materials, and freight costs [30][31] - Adjusted diluted earnings per share increased to $0.70 from $0.51 in the third quarter of the previous year [35] Business Line Data and Key Metrics Changes - Automotive revenues increased by 29% year-over-year when adjusted for acquisitions and foreign currency translation, outperforming light vehicle production by nearly 300 basis points [9][26] - Medical revenue grew 4% year-over-year, primarily driven by the acquisition of Dacheng Medical, but declined 8% when excluding this contribution and foreign exchange effects [21][29] Market Data and Key Metrics Changes - The company launched automotive solutions on 18 different vehicles across 12 OEMs, including major brands like BMW, General Motors, and Toyota [13] - The company secured $430 million in automotive awards during the third quarter, indicating strong demand for its products [16] Company Strategy and Development Direction - The company is focused on integrating the acquired businesses of Alfmeier and Dacheng Medical to enhance its value proposition in both automotive and medical sectors [8][9] - The company aims to leverage combined technologies to offer more compelling solutions, particularly in the growing electric vehicle market [20][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges such as material and labor cost inflation, semiconductor shortages, and supply chain issues, but expressed confidence in achieving cost synergy goals starting in 2023 [12][24] - The company expects inflationary pressures and supply chain challenges to persist, but remains focused on innovation, execution, and cost management to deliver long-term growth [24][75] Other Important Information - The company has entered the equipment rental market to address hospitals' capital equipment needs, which is a strategic move given the financial pressures faced by healthcare institutions [22] - The company maintains its full-year 2022 guidance for product revenues in the range of $1.15 billion to $1.25 billion [37] Q&A Session Summary Question: Can you provide a breakdown of the award environment and the pipeline for combined thermal and pneumatic awards? - Management noted that thermal awards were significantly higher than pneumatic awards and expressed excitement about the growing interest in combined awards from several customers [41] Question: What factors contributed to the lower level of outperformance relative to production? - Management highlighted unique headwinds, including a tough comparison to the previous year and challenges in the non-automotive electronics business, which affected overall performance [44][45] Question: Can you elaborate on the gross margin pressures and the impact of acquisitions? - Management detailed that inflation in materials and wages, along with foreign exchange impacts, were significant headwinds, while higher sales volume and cost recoveries provided some offset [46][48] Question: What is the outlook for supply chain issues and OEM production schedules? - Management indicated that while improvements have been seen, supply chain visibility remains limited, and volatility continues to affect OEM production schedules [63][65] Question: How is the competitive environment evolving? - Management reported a high win rate in core business and noted strengthening relationships with key customers, indicating a positive competitive position [66][68] Question: What is the pipeline for climate sense technology and its integration with OEMs? - Management expressed excitement about ongoing projects and the potential for climate sense technology to enhance vehicle performance and efficiency, although integration requires significant lead time [72][73]