Garrett Motion Inc.

Hello, my name is Victor and I will be your operator this morning. I would like to welcome everyone to the Garrett Motion Conference call. This call has been recorded and a replay will be available later today. After the company's presentation, there will be a Q&A session. I would now like to kind of call over to Paul Blaylock, Garrett's Vice President of Investor Relations.

Thank you. Good day, everyone, and welcome to the Garrett Motion second quarter 2021 financial results conference call. Before we begin, I'd like to mention that today's presentation and earnings press release are available on the Garrett Motion website at garrettmotion.com, where you will also find links to our SEC filings, along with other important information about our company. Turning to slide two, we note that this presentation contains forward-looking statements within the meaning of the Securities Exchange Act. We encourage you to read the risk factors contained in our filings with the SEC, become aware of the risks and uncertainties in our business, and understand that forward-looking statements are only estimates of future performance and should be taken as such. The forward-looking statements represent management's expectations only as of today, and the company disclaims any obligation to update them. Today's presentation also includes non-GAAP measures to describe the way in which we manage and operate our business. We reconcile each of these measures to the most directly comparable GAAP measure, and you are encouraged to examine those reconciliations, which are found in the appendix to both the press release and the slide presentation. Also in today's presentation and comments, we may refer to light vehicle diesel and light vehicle gasoline products by using the terms diesel and gasoline only. With us today is Olivier Rabier, Garrett's President and Chief Executive Officer, and Sean Giesen, Garrett's Senior Vice President and Chief Financial Officer. I will now hand it over to Olivier.

Thanks, Paul, and welcome, everyone, to Garrett's second quarter 2021 conference call. I will begin my remarks on slide three, where we provide our cues to our highlights. During the second quarter, we continued to benefit from the strong demand for Garrett's differentiated technologies and also our share of demand gains. As we discussed on our previous call, business activity has rebounded significantly since the nadir of the COVID-19 crisis in the second quarter of last year. Our reported net sales for the quarter totaled 935 million, a Q2 record. At constant currency, our net sales increased by 83%, outpacing global auto production by approximately 32 percentage points. Obviously, our year-over-year comparison is heavily skewed given the unprecedented work stoppage resulting from the COVID-19 pandemic. as many plants were shut down throughout Europe and North America in Q2 of 2020 due to the pandemic, while China was in the process of reopening. However, if we compare our results to Q2 2019, our reported net sales increased 16.6%. We believe this strong revenue growth demonstrates Garrett's ongoing ability to develop and deliver the advanced technologies needed by our customers as they continue to focus on reducing CO2 emissions. The 2021 second quarter was not without its own set of challenges as our volumes of 3.4 million units, while up 84% year-over-year, were impacted by the well-documented semiconductor shortage and other component supply disruptions, which caused many major OEMs to slow or idle production. The supply demand imbalance also contributed to rising commodity prices and other costs. Although we believe these global supply chain issues are temporary in nature, the long lead times for components suggest the current constraint will extend throughout the second half of the year, before stabilizing in early 2022. We will discuss our outlook in more detail later on this call. Additionally, the COVID-19 pandemic is not over as many places around the world struggle for max-less injection and the variants are adding another level of complexity. And our top priority remains on ensuring the health and safety of our employees while maintaining our agility to deliver for our customers. For the second quarter, we generated adjusted EBITDA of 168 million, representing a margin expansion of 480 basis points to 18%. Our success in preserving robust industry-leading margins in a volatile macro environment reflects our highly valuable cost structure, unmatched global footprint, and advanced supply-based management. All of these elements enable our company to adapt quickly to the short-term market disruptions and ensure our production levels are in line with any changes in customer activities. Our Q2 margin also reflects the efforts we have made in controlling our costs and offsetting some of the temporary government-supported programs last year in response to the COVID crisis. I want to thank all of our employees worldwide for their tireless efforts in maintaining a high level of performance in such a volatile environment. Their hard work and dedication are directly related to Garrett's success in continuing to meet its customer commitments and deliver superior service. Going forward, we will continue to build upon our long-standing track record of operational excellence to optimize our performance across the globe and further distinguish Garrett amid the current macro headwinds. Finally, on April 30, we completed our Chapter 11 restructuring, a critical achievement for Garrett. While Sean will review our financial letter, we emerged from this seven-month process with a significantly improved balance sheet with less debt. The restructuring also increased our financial and strategic flexibility by eliminating materially restrictive covenants, enhancing our position to pursue organic and inorganic growth opportunities. We also listed our new common shares on the NASDAQ exchange effective May 3rd under our historical ticker We are pleased our financial restructuring is now behind us and believe our new capital structure and sponsorship will support our long-term viability. On slide four, we outline our technology growth strategy as we continue to execute in the near term while investing and preparing to lead the market with differentiated solutions as the automotive industry continues to evolve. Globally, light vehicle turbo production volumes are expected to grow at an annual rate of approximately 6% from 2020 to 2025, according to IHS. With higher overall turbo penetration rates, particularly in gasoline and hybrid platforms, combined with a new business win rate in light with previous years, we remain well positioned to improve our share of demand in a growing industry. For 2021, we have adjusted our schedule of new product launches to reflect the slower ramp up due to lower expected volumes in light of the current macro environment. But so far, we have not been informed of any material launch delay. This includes our eTurbo, which remains on track to start mass production in the first quarter of 2021, while deliveries to Mercedes-AMG commencing early next year for their premium hybrid vehicles. Our first to market eTurbo is rooted in Formula One technology, and proudly, Garrett's eTurbo was named a finalist for the Automotive News Pace Awards. This prestigious award program recognizes suppliers for cutting-edge technologies that deliver superior innovation, technological advancement, and business performance. We are honored by our nomination. Garrett's first nomination in electrification. As the demand for alternative energy sources continues to grow, we have also experienced increasing momentum for our fuel cell propulsion technologies. This is consistent with the growing interest for hydrogen-powered vehicles worldwide. In the second quarter, we received an important new business award for our Gen2 e-compressor for fuel cells in China, with production starting in 2023. Additionally, we plan on delivering prototypes for our fuel cell compressor technology to over 10 additional customers in 2021. represented by a diverse mix of traditional passenger cars and commercial vehicle OEMs, as well as fuel cell specialists. In terms of software, we recently launched our embedded model-based predictive control technology with Hyundai. The launch is an important step in bringing this technology to the masses. Our unique expertise in handling multivariable controls in increasingly complex vehicle systems in real-world conditions provides OEM with a differentiated solution for energy management and powertrain optimization. Importantly, our technology is applicable for all types of powertrain and can address a number of new emerging challenges OEMs face in rolling out new energy vehicles. We believe the growth in our core business, coupled with the increasing traction in our new electrified and software technologies, combined with our impressive financial performance and improved capital structure, enhances our ability to play a key role in the transformation of the powertrain industry. With that, I will now turn it over to Sean to provide more colors on our Q2 results.