Gentherm Inc

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, Yijing Brentano, Senior Vice President of Strategy, Corporate Development, and Investor Relations for Gentherm. Thank you. You may begin.

Thank you, and good morning, everyone, and thanks for joining us today. Gentherm's earnings results were released earlier this morning, and a copy of the release is available at gentherm.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 discussion 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, including certain pro forma measures related to the Alfmeyer acquisition. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation. On the call with me today are Phil Eiler, President and Chief Executive Officer, and Mateo Inversa, Chief Financial Officer. During their comments, Phil and Matteo will be referring to a presentation deck that we have made available on our website at jensum.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. Let me start with slide four for our 2023 highlights. I'm extremely proud of what the GenTherm team achieved in 2023, despite a continuously challenging operating environment. Demand for our thermal comfort, massage, and lumbar solutions continues to accelerate. We secured new automotive business awards of $900 million in the fourth quarter, which brings us to $2.6 billion in 2023, setting a new quarterly and annual record. Our strong award momentum continued to drive revenue growth. We achieved record revenue for automotive, medical, and total company for the full year 2023. In addition, we also achieved record annual revenue for climate-controlled seats, seat heaters, and steering wheel heaters in 2023. It's worth noting that adjusting for the impact from foreign exchange, the UAW strike, and one-time recoveries, Our core thermal product lines, which include CCS, seat heaters, and steering wheel heaters, outperformed the production in our relevant markets by nearly 400 basis points in 2023. On the cost front, we continued our disciplined approach to managing operating expenses. We've reduced adjusted operating expense as a percent of revenue from 20% in 2018 when we launched our first Fit for Growth initiative to 16% in 2023. We delivered the highest annual adjusted EBITDA in company history, an increase of more than 30% compared to 2022. And we generated nearly $120 million of cash flow from operations and repurchased over $90 million worth of GenTherm shares. The new business wins, record revenues in key product lines, improved profitability, and solid cash flow generation demonstrate strong execution by the GenTherm team. Now turning to slide five, let me highlight a few key pillars that drove our record $2.6 billion in new automotive awards in 2023. First, at the top left of the slide, our core thermal products continue to expand globally, particularly in high-content product categories such as CCS and hands-on detection-enabled steering wheel heaters. We won awards in 2023, which spanned across all ranges of vehicles from the likes of BMW, Cadillac, Mazda, and Li Auto and BYD in China. Second, in pneumatic lumbar and massage, we are growing our market share and winning awards at a rate that is well above our original expectations. We have won Conquest Pneumatic Lumbar and Massage Awards with BMW, General Motors, Jaguar Land Rover, Li Auto, Mercedes-Benz, Atlantis, Volkswagen, and one of the largest global EV manufacturers. These wins confirm the strength of our combined product offering, leveraging the Alfmeyer acquisition. It's important to point out that a growing number of OEM customers want the combined thermal and pneumatic lumbar product, especially from an independent supplier who integrates with many seating providers. This is one of the unique value propositions that GenTherm offers. Let me remind you of a few key combined awards that we have won since the beginning of 2023. We won a highly desirable and contested award with BMW for CCS, seat heat, and pneumatic lumbar and massage for their next generation electric and ICE X-Series SUVs, which include the X5, 6, and 7, and the iX5 6 and 7. We won a combined CCS, seat heat, lumbar, and massage full system award with Jaguar Land Rover for their new Jaguar BEVs. We've significantly grown our content with one of the largest global EV manufacturers, winning steering wheel heat, seat heat, CCS, and pneumatic lumbar awards across multiple car lines. Finally, we won three CCS awards with Lee Auto, on their plug-in hybrid L9 and two future electric SUVs. In addition, we won two combined CCS and pneumatic massage awards from Lee Auto on a future electric and plug-in hybrid SUV. Moving to the bottom left on slide five, our proprietary innovations such as Climate Sense and WellSense, which I will elaborate more on the next slide, have helped us to increase content per vehicle. For example, our ongoing climate sense development project with Honda has demonstrated significant savings in HVAC energy consumption by combining seat heat, steering wheel heat, and interior heat. As a result, Honda awarded Jenther multiple EV programs that include both heated interior solutions and our electronic control units. As we shared on the last earnings call, we won our first multifunction electronic control unit award from General Motors. And today, I'm pleased to announce one of the most important strategic awards in GenTherm's history. In the fourth quarter, we won a breakthrough scalable climate sense software award for nearly all future architecture, General Motors, ICE, and electric vehicles. Through this award, GenTherm's proprietary ClimateSense software features will be enabled across all General Motors vehicles equipped with climate-controlled seats and steering wheel heating. This will allow GenTherm's intelligent software solutions to bring increased comfort control and energy efficiency. Let me summarize my discussion regarding our award momentum by reminding you of a key differentiator for our company. GenTherm is an independent partner. that can cooperate with any combination of the 50-plus vehicle OEMs and 30-plus seat manufacturers globally, including those that are vertically integrated. To create truly differentiated solutions, our unique value proposition resonates with customers as demonstrated by our win rate of approximately 80% of our quoted pursuits for thermal and pneumatic solutions in 2023.