Gentherm Inc

Greetings. Welcome to the GenTherm Inc. 4th Quarter and Year-End 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Yijing Brentano, Corporate Development and Investor Relations.

Thank you. You may begin. Thank you and good morning, everyone, and thanks for joining us today. Jentham's earnings results were released earlier this morning, and a copy of the release is available at jentham.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Jentham's website. During this call, we may make forward-looking statements within the meaning of federal securities laws. Statements reflect our current views with respect to future events and financial performance, and actual results may differ materially. We undertake no obligation to update them except as required by law. Please see Jentham's earnings release and its SEC filings, including the latest 10-K and subsequent reports, for discussions of our risk factors and other risks and uncertainties underlining 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 remarks, Phil and Mattel will be referring to a presentation deck that we have made available on our website at genthum.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. I am extremely proud of what the GenTherm team was able to accomplish in 2021 in what was a continuously challenging operating environment. As you can see on slide four, full-year automotive revenue outperformed light vehicle production in our key markets by approximately 13 percentage points, achieving the highest annual automotive revenue in the company's history, and we secured near-record automotive awards of $1.6 billion. In addition, we've delivered record adjusted EBITDA, record cash flow from operations, and record free cash flow in 2021. Finally, we have clearly expanded our position as a leading supplier in the rapidly expanding electric vehicle market, which I will elaborate on in a few minutes. On the operations front, I would like to recognize our manufacturing and supply chain teams for working tirelessly to minimize the impact of volatile customer demand escalating freight costs, material cost inflation, and of course the global semiconductor shortages, including the anticipated supply gap with one of our suppliers in the fourth quarter that we mentioned on our last earnings call. Matteo will provide details about our fourth quarter and full year financial results in a few minutes. Now, turning to the automotive highlights on slide five. In the fourth quarter, we launched our automotive solutions on 15 different vehicles across 11 OEMs, including BMW, Ford, Geely, General Motors, Hyundai, and Toyota. We continue to see momentum for our CCS product and launched on the Lincoln Zephyr, Nissan Ariya EV, Nissan Pathfinder, and Infiniti QX60. A special note, our CCS solution is now launched on Range Rover's MLA platform, including plug-in hybrid and mild hybrid vehicles. While our cable business has been traditionally on internal combustion vehicles, I'm pleased to share that we launched a high-voltage cable solution on the Rivian R1T and R1S. This is in addition to the recently launched high-voltage cables across Jaguar and Land Rover plug-in hybrid platforms. I'm proud of our teams for transforming our product lines to create value for electric vehicle applications. In addition, we continue to make great progress on ClimateSense, which, as you will recall, is our software-driven microclimate platform using an algorithm based on thermophysiology. Winning our first ClimateSense production award in 2021 was a key milestone for us, and our top priority remains the flawless launch on this model year 2024 platform. ClimateSense is a critical part of our long-term strategy and continues to gain interest from global OEMs. I'm pleased to announce that we have launched a new development project with a third OEM in Europe. We continue to optimize the value proposition for electric vehicles by significantly reducing power consumption and increasing range in extreme temperatures, all while providing best-in-class passenger comfort. Now on to slide six, where you can see that we continue to win new business at a pace that sets a solid foundation for future growth. In the fourth quarter, we secured $540 million in new program awards across 20 different customers. This brings us to over $1.6 billion for total year wins, a very strong finish to a challenging year. We won multiple CCS awards, including platform wins with the Cadillac XT3, Hongxi HS5, the Great Wall Wei Sedans, Honda Vezel and XRV, Kia Sportage, and Xiaopeng EV-SUV. GenTherm continues to expand our strong position with one of the largest electric vehicle manufacturers. In the fourth quarter, we secured multiple program awards for our climate-controlled seats and seat heaters. This was the largest win that we have ever had on EV platforms. This win is in addition to the steering wheel and seat heater programs that we've already launched with this OEM since 2014. I'd like to thank our global teams for this breakthrough award as we continue to accelerate the adoption of GenTherm technologies in the EV space. We received 23 steering wheel heater awards across eight OEMs in the quarter, including the Cadillac CT6, Chevrolet CUV, Great Wall Flash Cat and Howmout, Lincoln Nautilus, Volkswagen Tiguan, and Volvo XC90. Of note, out of these 23 programs, seven were hands-on detection enabled. Moving to electronics, I'm pleased to share that we won a further follow-on award for our next-generation multifunction electronic controller with Ford. If you recall, our initial win with Ford combined GenTherm's climate control solution with memory seat functionality which utilizes our proprietary intelligent positioning system technology. This follow-on award added other functionalities, for example, controlling the power running boards, which helps Ford further increase system efficiency and reduce costs. This module will be used in the Lincoln Navigator and Ford Expedition models produced in North America. Finally, we had a strategically important award in our battery performance group by securing a battery heating award for a new Renault plug-in hybrid vehicle using our proprietary thin-foil technology. This continues to validate the potential of our unique technology compared to the current state of art. Now moving to slide seven, I'd like to give you some perspective on how our innovative solutions can significantly increase GenTherm's content per vehicle as electric vehicles expand in the market. According to IHS estimates, electrified vehicle production, including mild hybrid, full hybrid, and battery electric, is expected to grow from 20% of global production in 2021 to 70% in 2030. We believe GenTherm's current and future technologies will play an important role in extending the range of electric vehicles and delighting passengers with thermal comfort. Over the past several years, we continue to expand our core climate and comfort solutions. Our portfolio now includes seat heat, surface heat, floor and ceiling radiant heat, neck and shoulder conditioning, advanced climate-controlled seats, as well as our proprietary hands-on detection-enabled steering wheel heaters. All of these individually or combined help reduce reliance on the HVAC system by focusing on thermal management of the occupant instead of the vehicle, and thus reduce power consumption and increase range. Moving to battery performance solutions, we've expanded beyond air cooling and our PACE award winning thermal electric battery thermal management products for mild hybrid 48 volt lithium ion batteries. And we've now launched our high voltage cables, proprietary thin foil battery heater, as well as wire based and thin foil cell connecting systems. Our growing portfolio of battery performance solutions help OEMs improve battery performance and extend longevity. On the digital intelligence front, we've developed and manufactured innovative thermal and multifunction electronic control units, or ECUs, such as the ones for the Ford award I mentioned earlier. Combining functionality and ECUs helps to reduce the number of units in the vehicle, thereby reducing cost and weight, which particularly benefits electric vehicles. In addition, we have significantly grown our software capabilities. As we prepare for the launch of our first ClimateSense production award, we continue to advance our microclimate platform using the proprietary algorithm that we've developed based on thermophysiology. To summarize, our customers are looking to GenTherm not only for interior climate comfort solutions, which are proving to be a key element of energy conservation to EVs, but also for battery performance and digital intelligence solutions. We are well positioned to capitalize on the accelerating growth of electric vehicles. Now moving to slide eight. I'd like to highlight the innovative work our team is doing to bring differentiated proprietary solutions to market. Let me talk about some of the technologies that we introduced in 2021. First, as we've discussed several times, our ClimateSense software solution is now production ready. In addition, we've introduced a compelling user experience platform and application to inspire OEMs to enrich consumer experience. Next is our proprietary fiber therm. our next generation carbon fiber seat heat technology. FiberTherm integrates seat heaters closer to the seat surface and thus provides faster time to comfort and enables energy savings compared to the traditional wire heater technology. Third, PilotSense, which is GenTherm's next generation proprietary hands-on detection or HOD technology, combining both heating and capacitive sensing in a single layer solution with a single ECU controlling both functions. HOD is a key function to safely enable higher levels of autonomous vehicle operations. Our proprietary solution eliminates the need for a second ECU and a wire harness in order to reduce system costs while providing 100% sensing resolution during heating mode. PilotSense provides better steering wheel surface heating and the opportunity for lightweight designs by eliminating the second layer in a traditional multilayer HOD solution. Fourth, our intelligent neck conditioning solution. The neck warmer is integrated into the seat headrest, providing an immediate warm sensation to the occupant. Our thermal physiology research shows that the proximity of this compact device to the neck enables instantaneous and personalized comfort. With an integrated ECU, sensors, and smart algorithm, This local microclimate device enables optimal individual thermal comfort and energy savings for the vehicle. Fifth, our next generation CCS active solution. GenTherm has developed a new intelligent micro thermal module, or IMTM, that combines the benefits of our active and ventilated climate controlled seat systems in one package. With its smart airflow control valve and thermoelectric element, IMTM provides best-in-class time to comfort and cooling sensation at the start of a drive on a hot day and then switches to ventilation mode for long-term comfort. This can be offered standalone or in conjunction with other smart microclimate technologies as part of ClimateSense. IMTM integrates our thermal physiology-based algorithm for an optimized thermal comfort experience to conserve power and extend range for electric vehicles. And last, we've now introduced our market ready thin foil cell connecting system with embedded cell sensing. This solution provides new levels of battery pack intelligence to battery management systems. As we continue to add innovative solutions to our portfolio, more electric vehicle manufacturers are now leveraging our solutions to enhance comfort while significantly improving energy efficiency and range. Now let's turn to slide nine for a discussion of our medical business. We returned to double-digit revenue growth in the fourth quarter in medical with 17% year-over-year growth. We continue to see strong demand for our flagship product, Blanketrol, in the U.S. and in international markets such as Mexico and Argentina. Blanketrol is a trusted brand for fever management, and we secured upgrade orders to replace end-of-life competitor devices in the fourth quarter. In addition, we entered the equipment rental market with an exclusive partnership with U.S. MedEquip. a company that provides short-term and long-term rentals to hospitals with capital equipment needs. They are on most group purchasing organization contracts and provide a great solution for hospitals that need capital equipment but don't have the budgeted funds for purchase. We're also seeing good momentum with AstoPAD, and we've conducted trials at large health systems as well as independent hospitals. The introduction of AstoPAD patient warming system is a strong proof point of how we're able to leverage technology from our automotive business to provide advancements in patient temperature management in our medical business. Spectrum Health in Michigan has approved AstoPad for use by all of their members. West Virginia University Hospital is adopting AstoPad for their cardiac procedures with plans to expand into orthopedics. Mountain View Regional Medical Center in New Mexico is using AstoPad on a variety of surgeries. As hospitals look for non-air options to warm patients, GenTherm is differentiated from our competitors by offering both convective and conductive solutions. Now, let me summarize. Our financial results in 2021 demonstrate the continued successful execution of our strategic plan to focus growth, aggressively manage our cost structure, and bring innovative solutions to market. I'd like to thank our global team for securing near-record automotive awards, as well as delivering record automotive revenue, adjusted EBITDA, and free cash flow in 2021. I'm very proud of the hard work and commitment of the talented global GenTherm team to overcome challenges in the market and deliver on our strategy in yet another unprecedented year. While uncertainty certainly remains about where production rates will be in the next few months, We believe there is significant pent-up demand that will need to be met once the extraordinary supply chain constraints are resolved. This, combined with our relentless focus on operational excellence, technology leadership, and strong cash flow generation, positions the company well for profitable long-term growth. With that, I'll turn the call over to Matteo for a little more color on the financial results and our 2022 guidance.