Gentherm(THRM) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues decreased by 7% year-over-year, with product revenue down 5% when adjusted for foreign exchange [22] - Automotive revenues were $258 million, an 8% decrease compared to the prior year, with a 5% decrease when adjusted for foreign currency translation [22] - Gross margin rate for Q1 was 24%, down from 30.4% in the previous year, primarily due to higher costs from supply chain disruptions [25] Business Line Data and Key Metrics Changes - BPS revenues grew by 5% year-over-year when adjusted for foreign exchange, driven by higher sales to General Motors and BMW [22] - Steering Wheel Heaters revenue increased by 2% year-over-year, while CCS revenues declined by 4% due to semiconductor shortages impacting production [23] - Medical segment revenue grew by 9% year-over-year, supported by strong demand for Blanketrol products [24] Market Data and Key Metrics Changes - The company launched automotive solutions on 12 different vehicles across nine OEMs, including major brands like Ford and Mercedes Benz [15] - Secured over $170 million in new program awards across 10 different customers, although the award level was lower than prior quarters due to reduced quoting activity [16] Company Strategy and Development Direction - The acquisition of Alfmeier's Automotive Business aims to create the largest global supplier of thermal and pneumatic seating comfort solutions, expanding Gentherm's value proposition [7][11] - The integration of Alfmeier is expected to enhance market share, particularly in North America and Asia, leveraging Gentherm's existing customer base [12] - The company is focused on developing innovative solutions for electric vehicles, emphasizing comfort and wellness features [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant challenges from semiconductor shortages and supply chain disruptions but remains optimistic about pent-up demand once these issues are resolved [19] - The company expects an improvement in semiconductor supply in the second half of the year, which is factored into their guidance [29][72] - Inflationary pressures are anticipated to persist, but the company is actively negotiating cost recoveries with customers [20][30] Other Important Information - The company has not experienced material impacts on production capacity or costs due to the situation in Ukraine, although it is being monitored closely [14] - The acquisition is expected to close in Q3 2022, subject to regulatory approvals [11] Q&A Session Summary Question: Can you share insights on the Alfmeier acquisition and its market position? - Management highlighted that Alfmeier is a leader in massage systems and has a strong position in lumbar support, aligning with growing consumer demand for comfort features [33] Question: What is the status of cost recovery discussions? - Management is actively engaged in discussions for cost recovery, projecting a positive impact on gross margin in the latter half of the year [36][37] Question: Can you elaborate on the competitive landscape and Alfmeier's market position? - Competitors include Leggett & Platt and Kongsberg, with Alfmeier having a strong focus on pneumatic systems [40] Question: What are the expected synergies from the Alfmeier acquisition? - Expected synergies include manufacturing footprint rationalization, material sourcing efficiencies, and operational cost reductions, with a target of $10 million in annual run rate savings [55][47] Question: How does the company view the semiconductor supply situation? - Management expressed cautious optimism about recovery in semiconductor supply, with indications of improvement in the second half of the year [72]