Gentherm Inc

Greetings and welcome to GenTerm Inc. 2022 Second Quarter Results 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Yejing Brentano, Corporate Development. Please go ahead.

Thank you and good morning, everyone, and thanks for joining us today. Gentham's earnings results were released earlier this morning, and a copy of the release is available at gentham.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Gentham'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 GENTHAM'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 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 Mateo Anversa, Chief Financial Officer. During their comments, Phil and Mateo will be referring to a presentation deck that we have made available on our website at genthumb.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. The second quarter presented one of the toughest operating environments for the automotive industry, as well as for GenTherm. We faced the highest inflation in 40 years in the United States, lingering COVID shutdowns, especially in China, continued military conflict in Europe, and semiconductor shortages and other supply chain challenges. I am proud of the Gen30 team for the ongoing progress in stringent cost management and negotiating appropriate cost recoveries from customers while maximizing performance towards customer needs. We outperformed actual light vehicle production in our key markets by approximately 600 basis points in automotive, and we achieved 9% growth in medical, as customer demand for our products continues to grow. I'm also pleased to share that we recently closed two transactions that will expand GenTherm's value proposition in both automotive and medical. The acquisition of Alf Meyers Automotive Business makes GenTherm the largest global supplier of thermal and pneumatic seating comfort for the automotive industry. In addition, the acquisition of DotGen Medical expands GenTherm Medical's access to large and rapidly growing markets including private label opportunities through DotGen's innovative and complimentary patient temperature management devices. I'd like to welcome the colleagues from Alfmeyer and DotGen to the GenTherm family. Now turning to the automotive highlights on slide four. In the second quarter, we launched our automotive solutions on 29 different vehicles across 15 OEMs, including Acura, Alfa Romeo, Audi, BMW, Cadillac, Great Wall, Honda, and Mercedes-Benz. This represented one of the highest number of vehicle and program launches in recent years. We continue to see momentum for our CCS solution on both ICE and electric vehicles. In the second quarter, our CCS solutions were launched on the Alfa Romeo Tonale, BMW X5 China, Cadillac Lyric Luxury EV, also in China, the Ford Ranger and Everest, Mazda CX50, and Range Rover Sport. In battery performance solutions, we achieved an important milestone and launched our first proprietary cell connecting solution that utilizes the mechanical structuring process for the new plug-in hybrid BMW 7 Series. This innovative thin-foil solution enables more design flexibility, weight reduction, and added functionality to cell connecting boards while simultaneously lowering costs. In addition, our unique manufacturing process is more environmentally friendly than competitive alternatives. In fact, the Fraunhofer Institute conducted an independent study recently that estimates an over 90% reduction in greenhouse gas emissions when comparing the mechanical structuring process with the chemically etched solution. In addition, We are proud to be honored by Honda as a top North American supplier for the third consecutive year. This recognition reflects our commitment to developing innovative solutions and our team's dedication and commitment to quality and operational excellence. Now onto slide five, where you can see that in the second quarter we secured $600 million in new program awards on a pro forma basis. including $190 million secured by Alfmeyer in the second quarter prior to acquisition closing. Since the announcement of the Alfmeyer acquisition, our customers have resoundingly expressed support and excitement to see GenTherm further expand our value proposition beyond thermal in comfort, health, wellness, and energy efficiency. The pipeline of opportunities for the combined company remains strong. I'm also pleased to announce that we recently received our second Climate Sense Award from a global OEM for our software-driven microclimate platform using an algorithm based on thermal physiology. This award will be on a battery electric version of a popular SUV launching in 2025 and is a strong validation of the progress we're making with this OEM. I'd like to take this time to congratulate our global team for winning this important follow-on award. ClimateSense is a critical part of our long-term strategy and continues to gain interest from global OEMs for significantly reducing power consumption and increasing range in extreme temperatures, all while providing best-in-class passenger comfort. We won multiple CCS awards in the quarter, including platform wins on the next-generation Dodge Charger, Challenger, and Jeep Cherokee, the Great Wall Way, XPAL Pickup, and Salon Mecca Dragon EV, the Honda Passport, Nissan Murano, Toyota Camry, Sequoia, and Tundra, as well as the Xpeng EV. In the second quarter, we also received 17 steering wheel heater awards across 12 OEMs, five of which were hands-on detection enabled. These included a new EV crossover coming from Buick, two models from Great Wall, four models from Volkswagen, a new EV crossover coming from Ford, as well as multiple models from one of the largest global electric vehicle manufacturers. Importantly, in the second quarter, we won several conquest CCS and seat heat awards from a large tier one seat manufacturer, displacing the competition, validating our strong position as the leading independent provider of thermal solutions. We continue to transform our product lines, including our cable business, to create value for electric vehicle applications. I'm pleased to share that we won a high voltage cable award for a Porsche EV and the follow on high voltage cable award for a hydrogen fuel cell electric semi truck in the second quarter. Also in the second quarter, the Alfmeyer team won a significant pneumatic comfort award with BMW on several new EV based in-car vehicle models. Alfmeyer was also awarded a significant regional volume expansion by one of the largest global electric vehicle manufacturers. In addition to this long-time EV customer, Alfmeyer has secured their position as a pneumatic comfort supplier of choice for European OEMs for their EV platforms, including the BMW i20 and i3, the Mercedes-Benz EQE and EQS platforms, and the Volkswagen ID.5, to name a few. We're excited to offer more compelling and high-value solutions across complementary customer relationships. Leveraging the combined technologies, teams, and capabilities, GenTherm sees an opportunity to integrate the highest performing comfort and wellness solutions in the most space-efficient manner, which is especially important for electric vehicles that demand compact, integrated designs. As we continue to bring innovative solutions to our customers, GenTherm is well positioned to significantly increase content per vehicle as electric vehicles expand in the market. Now let's turn to slide six for a discussion of our medical business. Earlier this morning, we announced that we closed the acquisition of Dachin Medical, a developer and manufacturer of patient temperature management solutions for numerous Chinese and international customers. DotGen is an existing supplier for GenTherm Medical, with whom we have developed a strong relationship over many years. This acquisition provides enhanced access to high-growth markets, including private label opportunities, through DotGen's innovative and complementary patient temperature management devices. DotGen's products have regulatory approvals in many countries, including China, the United States, and Brazil. Now let me share some highlights for the second quarter. Medical revenue grew 9% XFX year over year. During the quarter, Gentherm delivered warm air and filtered flow patient warming systems to the United Nations Development Program. The United Nations Development Program, in conjunction with the World Bank, provides humanitarian aid to developing countries. We also continue to see solid demand for our flagship product, Blanketrol, winning a large award from Ascension Via Christi, St. Francis Medical Center in Wichita, Kansas. Now let me summarize. Our results for the quarter reflect the extremely challenging operating environment our industry is facing. I would like to thank our global team for diligently adjusting our business operations to minimize the impact of supply chain disruptions and inflationary pressure while continuing to deliver for our customers. In automotive, we outperformed actual light vehicle production in our key markets by approximately 600 basis points, and we secured $600 million of new awards on a pro forma basis from automakers around the world as the largest global supplier of thermal and pneumatic comfort. With that, I'll turn the call over to Mateo for a little more color on the financial results, and I'll come back to wrap up before Q&A.