Gentherm Inc

Greetings and welcome to the Gentharm First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Hing-Ching Frantano. SVP, 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 will make forward-looking statements within the meaning of federal securities laws. These 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 GenThum'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 this call, we will also 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 and 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 gentham.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 proud of GenTherm's strong execution to start the year. While the global automotive environment remained volatile in the first quarter and near-term light vehicle production volume softened compared to what was forecasted by S&P Global just two months ago, we continue to see strong demand from our customers for our thermal comfort, massage, and lumbar solutions, winning 80% of our quoted pursuits for thermal and pneumatic solutions during the quarter. we secured nearly $530 million of automotive new business awards, a record for the first quarter. Adjusting for the impact from foreign currency exchange and one-time recoveries, our automotive climate and comfort solutions revenues, which include primarily CCS, seat heaters, steering wheel heaters, and lumbar and massage comfort solutions, outperformed the light vehicle production in our relevant markets. By approximately 300 basis points in the first quarter, with many new launches and ramp-ups still to come throughout 2024. On the profitability front, our Fit for Growth 2.0 initiatives drove over 200 basis points year-over-year improvement in gross margin rate through supplier cost reductions, value engineering, and increased productivity at the factories. Before I cover the details of the quarter, I'd like to share some exciting news fresh from the Automotive News Award Ceremony held last night on slide four. At Jentherm, we pride ourselves on our industry-leading innovative product portfolio, and I am extremely pleased to share that we won the Automotive News PACE Innovation Partnership Award for our partnership with General Motors for launching ClimateSense, the industry's first scalable, software-driven automotive microclimate solution. If you recall, we are launching two ClimateSense production programs with General Motors this year. In addition, we previously announced a breakthrough scalable ClimateSense software award for nearly all future architecture General Motors ICE and electric vehicles. ClimateSense was recognized as one of the 33 finalists globally for the overall Automotive News PACE award. Automotive News PACE Awards identify and recognize automotive suppliers for their technological innovation in product and process that has reached the commercial market. I would like to congratulate the global GenTherm team for winning such prestigious awards for bringing to market game-changing innovations. Now, turning to our Q1 automotive highlights on slide five. In the first quarter, we launched our automotive solutions on 27 different vehicles across 13 OEMs, including BMW, General Motors, Great Wall, Honda, Lee Auto, Stellantis, Subaru, and Volkswagen. We continue to see expanded application of our CCS solutions. In the first quarter, our CCS solutions were launched on the BMW 5 Series, Chevrolet Traverse, GMC Acadia, Honda Prologue, Subaru Forester, Volkswagen Magotan, and a popular BEV with one of the largest global EV manufacturers. In addition, we launched our first CCS solution on Lee Auto's L9 and L8 flagship SUVs, as well as our hands-on detection-enabled steering wheel heat solutions on multiple vehicle platforms for Lee Auto. As I mentioned on previous calls, software and electronics are fundamental to our strategy. As the automotive industry prepares for the proliferation of software-defined vehicles, we expect to add incremental electronics and software features to our ClimateSense and WellSense platforms that will enable greater energy efficiency, more personalization, and novel comfort and wellness experiences. To prepare for the increased demand for resources and competencies, I'm very excited to share that we have established an extended advanced engineering lab and team in Hyderabad, India, with the support of an established partner. The India location will focus on the development of software and technologies that aim to improve agility, scalability, and efficiency in product development. Now, on to slide six, where, as I mentioned, we secured a first quarter record of $530 million of automotive new business awards, winning 80% of our quoted pursuits in the quarter. And I'm pleased to announce that we continue to grow our business with our largest customer, General Motors, and we recently won a conquest high-end lumbar and massage award for their next generation truck platform. including the Chevrolet Silverado and GMC Sierra. With this win, we will supply our entire suite of climate and comfort seating solutions, including seat heat, PCS, lumbar and massage, as well as multifunction electronic control units and ClimateSense software for our largest customer on their largest platform. I'd like to recognize our global team for winning against significant competition. We won several CCS awards in the quarter. Of note, we won the new Ford Bronco, several Great Wall models in China, Hyundai Genesis G80, a Hyundai Fuel Cell EV, and Volkswagen Tayron. In addition, we won a CCS award for a midsize crossover for one of the largest global EV manufacturers for the North America market. This is on the heels of winning the CCS awards for Europe and China for this EV manufacturer in the fourth quarter of 2023. It's worth noting that this EV manufacturer has some combination of our climate and comfort products across all their vehicle platforms and regions. In addition, we received 17 steering wheel heater awards across nine OEMs. Importantly, we won hands-on detection-enabled steering wheel heater awards with Geely, General Motors, Li Auto, Mercedes-Benz, and Volkswagen. On the pneumatic comfort front, we won lumbar awards for the Audi Q5 and Volkswagen ID.4, both in China. In addition, we continue to strengthen our relationship with Li Auto, winning a high-end massage award for their all-electric SUV, Li M6. With this award, we will supply the combined seat heat, CCS, and pneumatic solutions for the Lee M6. These wins confirm our strong market-leading position in thermal and pneumatic comfort. We're seeing strong interest from a growing number of OEM customers for ComfortScale, our combined thermal and pneumatic lumbar and massage product. ComfortScale can be integrated with any foam and with any seat. It's adaptable for all OEMs and all Tier 1s. This is one of the unique value propositions that GenTherm offers. In addition, our innovated, differentiated, proprietary solutions such as ClimateSense, WellSense, and ComfortScale position us to be a significant contributor to software-defined vehicles of the future and continue to increase GenTherm's content per vehicle. Now let's turn to slide seven for a discussion of our medical business. I'm pleased to share that we have entered into a new partnership agreement with U.S. MedEquip for both blanket troll equipment and MaxiTherm light consumables, as well as field services. This is our second key partnership agreement to provide world-class patient temperature management solutions to the U.S. healthcare market, and after our successful first partnership with Sourcemark Medical, a certified minority supplier. In addition, we added 21 new hospital customers in China in the first quarter, including Sanshao Hospital at the Chongqing Medical University. We continue to gain momentum with AstoPad resistive patient warming technology as a result of increased demand for more sustainable solutions. In the first quarter, revenues from AstoPad grew 36% year over year. We remain laser-focused on growing both the top and bottom line in medical, leveraging large partnerships, distribution channels, and white label opportunities. Before I turn the call over to Matteo, I'd like to close with a couple of key highlights. GenTherm is an independent partner that can cooperate with any combination of the 50-plus vehicle OEMs and the 30-plus seat manufacturers globally, including those that are vertically integrated. to create truly differentiated solutions. Our award momentum over the last couple of years is a true testament of this key differentiator. Let me give you two examples on slide eight. First, for the BMW flagship next generation electric and ICE X-Series SUVs, including the X5, 6, and 7, and the iX5, 6, and 7. we have won climate and comfort awards that include CCS, seat heat, interior surface heat, and pneumatic lumbar and massage. Second, as I mentioned earlier, we will supply our entire suite of climate and comfort seating solutions, including seat heat, CCS, lumbar and massage, as well as the multifunction electronic control unit and climate sense software for the General Motors, for their next-generation truck platform including Chevrolet Silverado and GMC Sierra. Expansive climate and comfort conquest wins on large vehicle platforms like these demonstrate that our unique value proposition resonates with customers. Turning to slide 9, you will see that GenTherm's anticipated compound annual revenue growth rate to be above 14% between 2020 and 2024 compared to the corresponding growth in light vehicle production of under 4% in our relevant markets for the same period. This is a strong testament that our focused growth strategy is translating into above market revenue growth. Now let me summarize. Our first quarter results continue to validate the effectiveness of our strategy and demonstrate our unique positioning to deliver profitable growth. The industry environment remains volatile and dynamic. Nonetheless, our relentless focus on strong operational execution, innovation, and cash flow generation, along with our record performance on new business awards, positions us well to continue to drive shareholder value over the long term. With that, I'll turn the call over to Matteo for a little more color on the financial results.