Gentherm Inc

Greetings and welcome to GenTerm's second 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, Mr. Greg Blanchett. Senior Director, Investor Relations. Thank you, Mr. Blanchett. You may begin.

Thank you. Good morning, everyone, and thanks for joining us today. GenTherm's earnings results were released earlier this morning. 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 GenTherm'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 GenTherm'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 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 Mateo Inversa, Chief Financial Officer. During their comments, Phil and Mateo will be referring to a presentation deck that we've made available on our website at GenTherm.com slash events. After their prepared remarks, we'd be pleased to take your questions. Now, I'll turn the call over to Phil.

Thank you, Greg, and good morning, everyone. Thank you for joining our second quarter 2024 earnings call. While the global automotive environment continues to be challenging, the GenTherm team delivered another strong quarter of automotive new business awards, above market revenue growth and continued profitability improvement. With $660 million of automotive new business awards in the second quarter, this brings us to $1.2 billion year-to-date. In addition to our continued strong thermal awards progress, we continue to see an acceleration in new business awards for our lumbar and massage solutions. In the almost two years since Alfmeyer became part of GenTherm, We've won pneumatic conquest awards with nine OEMs globally. We continue to gain traction with our customers and are winning new business awards that have substantially exceeded our original expectations. Most recently, we won our very first pneumatic lumbar and massage award with Hyundai on a next-generation Genesis SUV. This breakthrough award includes, for the first time, our proprietary Pulse A massage technology, which I will discuss in detail a bit later. This conquest award was enabled by GenTherm's strong relationship with Hyundai, combined with our industry-leading pneumatic technologies. Hyundai has been a great, long-standing partner for GenTherm, and we're thrilled to bring this new, innovative technology to market. For the second quarter, we achieved record quarterly revenue of $376 million and outpaced the growth of light vehicle production in our key markets. Adjusting for the impact from foreign exchange and one-time recoveries, our automotive climate and comfort solutions revenues outperformed the light vehicle production in our key markets by 500 basis points in the second quarter. This revenue growth was led by our pneumatic lumbar and massage solutions, When we announced the Alfmeyer acquisition, we said that we expected to be able to expand Alfmeyer's market share by capitalizing on GenTherm's market-leading customer relationships. Our second quarter revenue growth is proving out that thesis. We expect this trend to continue as our record awards over the last few years convert into revenue. Turning to profitability, we achieved our highest quarterly operating income in three years. Our adjusted EBITDA margin rate for the quarter was 13.3%, a nearly 200 basis points improvement versus the prior year. The improvement was largely driven by operating performance and acceleration of our Fit for Growth program initiatives. Turning to slide four for our second quarter automotive highlights. We launched our automotive solutions on 22 different vehicles across 11 OEMs, including Ford, General Motors, Hyundai, Mercedes, and Toyota. Our CCS solutions were launched on the Buick Enclaves, Chevrolet Equinox, and Kia's all-new all-electric SUV, the EV9. Of special note, I want to announce our second quarter launch on the Toyota Camry. This is our first CCS launch on the Toyota Camry, one of the best-selling vehicles in the United States. And this comes after announcing our first CCS launch on the Toyota Tacoma in the fourth quarter of last year. These conquest launches of CCS with Toyota demonstrate the strong momentum of our CCS technology and the result of our effort to further strengthen our business with Japanese OEMs. We're launching content across vehicles irrespective of powertrain, covering the full range from ICE to plug-in hybrid to full battery electric vehicles. We previously announced, and I want to highlight here, that GenTherm was recently recognized by Honda as one of their top North American suppliers, receiving their Excellence in Value Award, which recognizes and honors GenTherm for our commitment to improving efficiency and cost. This is just one example demonstrating that our customers recognize GenTherm as a key trusted partner. I'm proud of the team for this recognition, and we remain dedicated to delivering value to our customers. Now on to slide five. We secured $660 million of automotive new business awards. These new business awards were balanced across regions and product categories, and once again, we won more than 80% of our quoted business pursuits in the quarter, a proof point that customers value our partnership model. We work with 50-plus car manufacturers and 30-plus seat makers across the globe. Our position as the largest independent provider of thermal and pneumatic solutions is a key differentiator with both our OEM and Tier 1 customers. For thermal solutions, we won several CCS awards in the second quarter. Of note, we won the Kia Telluride, multiple Audi Awards, and the new Porsche Cayenne EV. Specifically in China, we won the new Li Auto M6, the new Great Wall Aura compact SUV, three Honda awards, and two new awards for our brand new customer, Huawei. In addition, we received seven steering wheel heater awards across four OEMs. And importantly, we won hands-on detection-enabled steering wheel heater awards with Li Auto and Volvo. We continue to see momentum, particularly in lumbar and massage. New business awards in the quarter include awards with General Motors, BMW, Audi, one of the largest global EV manufacturers, and the previously announced Hyundai Genesis full-size SUV, which includes our innovative Pulse A technology. Further, on lumbar and massage, I would like to highlight our tremendous success with BMW. We previously announced winning the pneumatic awards for ICE and EV versions of the large X-series SUVs, the X5, X6, and X7, and the smaller X-series SUVs, including the X3 and the X4. And today, we're excited to announce that we've expanded our pneumatic awards with BMW by securing pneumatic lumbar and massage on the popular 3 and 4-series platforms in both North America and Europe. With this, GenTherm has secured the pneumatic production awards for the majority of future BMW vehicles. Additionally, I'm pleased to announce that we have secured an award for an integrated product which combines foam, seat heat, and seat belt reminder on the EV version of the 3 and 4 series vehicles. Due to our strong capabilities in integrating multiple functionalities within our products, we see opportunities to provide similar integrated solutions across our customer base. Strong customer relationships, like ours with BMW, is one of the driving forces behind our awards momentum and increasing content per vehicle. Moving to slide six, we continue to win with our innovative technologies, and I'm excited to share two examples. As I previously mentioned, we won our very first pneumatic award with Hyundai on their Genesis full-size SUV, which will include our innovative Pulse A technology. Our proprietary Pulse A massage solution is the world's first pneumatic system that uses precision micro air pressure bursts to deliver a deep pulsating massage. This technology can stimulate muscles, help alleviate pain and tension, and counteract poor posture. As GenTherm wins Pulse A awards, we will be in a position to implement the full suite of WellSense experiences through over-the-air delivery of our science-based algorithms. On the right side of the page, I want to highlight some of the innovative work the team is doing to continue winning CCS awards. GenTherm has designed the CCS Compact Vent, A proprietary modular system combining a quieter, more compact blower with a novel air distribution module, making it ideal for compact spaces. A perfect solution for in-demand slim seats for EVs and rear seat applications. It reduces weight, the number of components, and importantly, the assembly complexity required for our customers. This drives meaningful cost savings for them. At the same time, The product provides improved airflow with less noise. It's our quietest blower ever. Further, our customers can use this standardized product across various vehicle platforms and across multiple seat makers. We are excited to announce that we have won awards this year for this new CCS innovation, Compact Vent, with Hyundai and Great Wall. These are just a few of the many new innovative technologies that differentiate GenTherm from our competition. Now onto slide seven. We continue to make significant strides in the development of many of our next-generation technologies, including ClimateSense, our unique microclimate solution, WellSense, our software-driven comfort, health, and wellness solution, and ComfortScale, our next-generation integrated thermal, lumbar, and massage hardware system. On ClimateSense, we are substantially complete with our development for the Cadillac Celestic and the Escalade IQ, and the feedback from our customer is incredibly positive. As we have demonstrated well since to customers around the world, we are excited that they have confirmed that this software-based solution could have a meaningful impact on software-defined vehicles of the future. In fact, We expect continued content growth of our thermal and pneumatic hardware in anticipation of future well-sent software feature implementation. On comfort scale, our fully qualified, integrated solution is in advanced commercial discussions with several customers, and we expect awards in the very near future. There is strong interest from a growing number of OEM customers for these innovative solutions, And we expect this will significantly increase GenTherm's content per vehicle over time. Moving to the next page for a discussion of our medical business. Approximately one year ago, we announced the decision to modify our go-to-market business model to drive accelerated revenue growth. And this strategy is working, as demonstrated by the improved financial results. In the second quarter, the medical team delivered revenue growth of 9% year-over-year, XFX, and the highest profitability since the second quarter of 2020. The revenue increase was largely driven by our flagship Blanketrol product and our recent partnership with U.S. MediQuip. Additionally, we added 25 new hospital customers in China in the quarter. Our focus remains on leveraging partnerships, distribution channels, and white label opportunities to drive organic revenue growth and improve profitability. Now with that, I'll turn the call over to Matteo for a little more color on the financial results.