Garrett Motion Inc.

Hello, my name is Chris, and I will be your operator this morning. I would like to welcome everyone to the Garrett Motion conference call. This call is being 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 hand the call over to Paul Blalock, Garrett's Vice President of Investor Relations. Sir, please go ahead.

Thank you, Chris. Good day and welcome, everyone, and thank you for joining the Garrett Motion third quarter 2022 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, which we encourage you to read the risk factors contained in our filings with the Securities and Exchange Commission and 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 Financial Officer, and Sean Deason, 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 Third Quarter 2022 conference call. I will begin my remarks on slide three, where we start with highlights for the quarter. And I would like to start by saying I'm very pleased with third quarter results. And I would like to thank employees throughout the company for their dedication and flexibility, which helped drive strong third quarter performance in what continues to be a volatile environment. I am pleased to report that third quarter 2022 net sales grew 13% to 945 million on a gap basis, but on a constant currency basis, sales grew 25% over the prior year. Strong operating performance in Q3 drove adjusted EBITDA of 146 million, up 9% over last year, and the adjusted EBITDA margin was 15.4% versus 16%. While this strong margin is lower than the prior year, it is important to realize that the adjusted EBITDA margin this quarter was diluted by 100 basis points from Essex and by 90 basis points from the pass-through of inflation cost for a total impact of 190 basis points. Sean will further discuss in a few minutes. However, taking these adjustments into consideration, this places this quarter's margin well above last year. In the third quarter, we also generated robust adjusted free cash flow of 120 million, which was boosted by volume growth and the cash contribution from the change in working capital. As a reminder, Garrett operates with a structurally negative working capital position, which means that we generate cash when sales are increasing. SERPQ 2022 volume was 3.6 million units, up 15% over the same quarter of last year, and reflects gradually improving supply chain conditions as well as new gasoline launches. Importantly, we continue to successfully pass through inflation and deliver productivity which, when combined, offsets inflationary pressures. We currently anticipate that the improved demand in Q3 will remain stable and result in a similar volume of 3.6 million units in Q4. Based on these expectations, we are maintaining the midpoint of our adjusted EBITDA outlook while narrowing and adjusting the previous range. Garrett's ability to consistently generate cash even in difficult times has allowed us to settle our quarterly dividend on the Series A preferred share in cash for the first time while maintaining a strong liquidity position of $634 million. And as a reminder, we have no significant near-term maturities And approximately 80% of our long-term debt has low fixed interest rates. And cash interest on the term loan is less than $10 million per quarter. In summary, Garrett continues to generate strong results in a volatile environment, but we stand ready to flex, obviously, our highly valuable cost structure to address any potential resection risk in the future. Turning now to slide four. We are leveraging our core strengths to develop new technologies which solve critical powertrain challenges. First, looking at the left-hand side of the page, we continue to extend our leadership in our core turbo business. This is a good industry where we continue to strengthen our leadership position. Once again this year, Garrett has secured a win rate in excess of 50%. which means that Garrett has contracted more than 50% of all customer awards since 2018. This increasing share of demand enhances our cash flow generation and enables us to support major investments in differentiated technologies for the future. Today, about 50% of our gasoline awards are related to hybrid platforms, confirming that our core turbo business is well positioned to benefit from the growth of hybrids as part of our transition to more electrified power trains. But, over the past few years, the launch of e-boosting and fuel cell compressors has enabled us to develop differentiated knowledge in key areas like high-speed rotating machines, power electronics, and control software. We are now building aggressively on these capabilities to develop new products in areas where we think electrification offers opportunity for differentiation. Today, about 50% of our RD&E spend is dedicated to these electric products. We are indeed making significant inroads in fuel cell compressors. We are already in production today with some customers, but as mentioned last quarter, we have won some significant new programs and customers' activities are intensifying. To date, Garrett has already delivered over 150 prototypes of fuel cell compressors half of which were delivered in Q3 alone. More to come also on the electric traction side, as we are leveraging our capabilities to provide our customers with solutions that will give them a step change in terms of power density and efficiency. This is indeed an exciting time for us, and we will keep updating you as we are able to share more about progress we make in these areas. Now, putting things in perspective, Today, over 99% of the revenue of Garrett is made of developing and selling technologies focused on emission reduction, which makes vehicles cleaner and more efficient. The purpose of what we work on, combined with the efforts we have engaged to strengthen the sustainability of the company, have been recognized by Ecovalis, who recently upgraded Garrett to gold in our sustainability rating from last year's rating of silver. This new rating places Garrett in the top 2% of our industry for our sustainability rating. This is a great recognition of what we do at Garrett, but also the way we do it. With that, I will now turn it over to Sean to provide more insight into the results.