Gentherm Inc

Thank you for standing by. This is the conference operator. Welcome to the Gen10 Third Quarter Earnings Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and 0. I would now like to turn the conference over to Eugene Brentano, Investor Relations. Please go ahead.

Eugene Brentano Thank you, and good morning, everyone, and thank you for joining us today. GenThum's earnings results were released earlier this morning, and a copy of the release is available at GenThum.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of GenThum's website. During this call, we may make forward-looking statements within the meaning of federal securities law. Statements reflect our current views with respect to future events and financial performance. We undertake no obligation to update them, and actual results may differ materially. Please see Jentham's SEC filings, including the latest 10-K and subsequent reports, for discussions of our risk factors and other risks and uncertainties underlying such forward-looking statements. During the call, we may discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release or investor presentation. On the call with me today are Phil Eiler, President and Chief Executive Officer, and Mattel and Versa, Chief Financial Officer. During their comments, Phil and Mattel will be referring to a presentation deck that we have made available on our website at jentham.com slash events. After their prepared remarks, we will be pleased to take your questions. Now, I'd like to turn the call over to Phil.

Thank you, Yijing. Good morning, everyone, and thank you for joining us today. In the third quarter, the global pandemic continued to create challenges and uncertainties worldwide. However, the automotive industry has seen a recovery from the extremely low second quarter production level. Very proud of the global Gen10 team for the continued strong execution of our focused growth strategy while maintaining the health and safety of our team members. Let me start by sharing some of the key highlights of the quarter on slide four. In the third quarter, generated our highest quarterly revenue in two years, despite divesting all of the non-core businesses as part of the focus growth strategy. In automotive, we delivered the highest quarterly revenue in the history of the company, and we outperformed light vehicle production in our key markets by approximately 800 basis points. More importantly, new launches, higher take rate, and added content for vehicle, including electronics, battery thermal management, as well as climate and comfort solutions for second and third rows, positioned us to continue to outperform light vehicle production. Medical, we again delivered double-digit revenue growth. The momentum on the top line, along with our relentless focus on productivity, enabled us to achieve the highest quarterly gross margin and gross margin rate in three years, as well as record quarterly operating income and adjusted EBITDA in the company's history. On the award front, we secured approximately $80 million in automotive new business awards in the third quarter. This award level is lower than we anticipated, and it reflects the limited opportunities in the quarter as OEMs continued to conservatively manage sourcing decisions and thus pushed out the timing of several awards. That said, our RFQ pipeline remains strong into the upcoming quarters. On the operations front, Our global manufacturing and supply chain teams performed exceptionally by quickly pivoting to meet the increased demand from our customers, while still assuring safety of all of our employees. Even with the increased working capital needs in the quarter, we were able to generate $23 million in cash flow from operations. Importantly, our balance sheet remains strong, with total liquidity of nearly $450 million at quarter ends. Mateo will provide more details on our financial results in just a few moments. Now turning to automotive highlights on slide five. In the third quarter, we launched our automotive solutions on 29 different vehicles across 14 OEMs, including Daimler, FCA, Great Wall, Hyundai-Kia, and Volkswagen. We continued to see momentum for our CCS product and launched on the Buick Envision, Jeep Compass, Kia Sorento, and the Mercedes S-Class, our first CCS launch with Mercedes. In addition, our innovative combined steering wheel heat and hands-on detection sensor solution launched for Volkswagen. It's now available on an increasing number of nameplates, including the Golf 8, Tiguan El Coupe, Skoda Octavia, Karoq, and Kodiaq, as well as multiple vehicles manufactured by SEAT. The ramp-up of this solution has exceeded our expectations. On the technology front, our strong progress on ClimateSense development projects continues. Recall that in 2019, General Motors and GenTherm jointly presented our development project results at the Society of Automotive Engineers Thermal Management Systems Symposium. And these results were subsequently highlighted in a number of industry publications. I'm very pleased to announce that General Motors has decided to extend our partnership, and we've kicked off a third phase of the advanced development project. Our growing portfolio of development projects with OEMs in North America, Europe, and Asia demonstrates that our climate sense offering is a compelling solution for passenger comfort and energy efficiency in future vehicles. Lastly, I'm pleased to announce that GenTherm was named a top North American supplier by Honda. one of only 41 suppliers out of a total of 735. I'm proud of our team for winning the top North American supplier for our excellence in value. This recognition reflects our commitment to developing innovative solutions and our team's dedication and commitment to quality, innovation, and operational excellence. Now onto slide six. where you can see that in the third quarter, we secured approximately $80 million in new program awards across six different customers. Even though automotive production rebounded in the third quarter, OEMs remained cautious and have shifted out the timing for awarding a number of projects. Nonetheless, we're in the middle of several RFQs that we expect will lead to significant awards in the upcoming quarters. In the third quarter, we won multiple CCS awards including platform wins with BMW X5 in China and PSA. Of note, this is our first CCS award with the French OEM PSA in China. In addition, we received multiple steering wheel heater awards from FCA, as well as an additional award from one of the largest electric vehicle manufacturers. On the battery thermal management front, we continue to make progress in expanding our business. winning air cooling awards with both Hyundai and Kia. Moreover, we partnered with OEMs such as General Motors, Great Wall, Hyundai, and Kia to drive significant take rate increases in products like CCS, seat heaters, and steering wheel heaters. For example, our revenue from Great Wall doubled in the third quarter as compared to the prior year period. The majority of the growth resulted from our China team's efforts to drive incremental CCS, take rate, on the popular of all Hover H6 and H7 SUVs. New and follow-on climate and comfort awards, new technology launches, increased content per vehicle, as well as strong take rate increases demonstrate the continued momentum we have in automotive. Now let's turn to slide seven for a discussion of our medical business. In the third quarter, we continue to see double-digit revenue growth. growing 17% year-over-year. I'm pleased to share that approximately one-third of this growth is driven by incremental sales of Stihler blood-warming products, proving the growth synergy we expected from this acquisition. In addition, with light control and hemotherm, equipment demand continued to grow in international markets, including Spain, Brazil, and Hong Kong. Although we saw some recovery in elective procedures, We believe it could be some time to return to normalized levels. Finally, I'm excited to report that we achieved an important milestone in our medical business recently. We received 510 clearance from the FDA and have added the AstoPAD patient warming system to our product portfolio in the United States. This system can be utilized in all surgical procedures and helps prevent and treat hypothermia in patients throughout the perioperative germ. The introduction of the AstoPAD patient warming system demonstrates our deep understanding of human thermophysiology and how we're able to leverage technology from our automotive business to provide advancements in patient temperature management in our medical business. Our unique carbon fiber resistive heating technology was originally designed for comfort, warmth, reliability, and safety, in automotive passenger thermal management. This technology is ideal for the operating room and anywhere in a hospital when medical professionals need quiet, comfortable, and reliable warming to help prevent and treat hypothermia in a surgical patient. Now, before I close, let me remind you of our four pillars of the focus growth strategy on slide eight. One, accelerate core automotive climate and comfort growth. Two, introduce our innovative microclimate solution, ClimateSense. Three, drive battery thermal management. And four, expand patient thermal solutions. All of this is enabled by our electronics and software systems. We're very pleased to see significant progress on each of these pillars, and more importantly, the growth generated by our focused growth strategy. Now let me summarize on slide nine. Our results in the third quarter demonstrate the continued successful execution of our strategic plan to focus growth, realign our cost structure, and bring innovative solutions to market. This record performance is attributable to our global team and their dedication and agility to successfully deliver on our commitments to our customers during these unprecedented times. While there's still certainly near-term uncertainty in the macroeconomic environment, Our improving operating performance, expanding technology leadership, and strong balance sheet give us confidence in delivering long-term shareholder returns. With that, I'll turn the call over to Matteo for a little more color on the financial results.