Gentherm (NASDAQ:THRM), the global market leader of innovative
thermal management and pneumatic comfort technologies for the
automotive industry and a leader in medical patient temperature
management systems, today announced its financial results for the
third quarter ending September 30, 2023.
Third Quarter Highlights
- Product revenues of $366.2 million
increased 10.0% from $333.0 million in the third quarter of 2022.
Excluding the impact of foreign currency translation, product
revenues increased 8.5% year over year
- Automotive revenues increased 10.0%
year over year; excluding the impact of foreign currency
translation and contributions from the Alfmeier acquisition,
increased 3.1% year over year
- GAAP diluted earnings per share was
$0.48 as compared with $0.29 for the prior year period
- Adjusted diluted earnings per share
(1) was $0.64. Adjusted diluted earnings per share in the prior
year period was $0.70
- Secured new automotive business awards
totaling $520 million in the quarter
- Repurchased $11.1 million of the
Company’s common stock
(1) We
provide adjusted diluted earnings per share and other non-GAAP
financial measures in this release.
See “Use of Non-GAAP
Measures” below for additional information, including definitions,
usefulness for
investors and limitations, as well reconciliations
below to the most directly comparable GAAP financial
measures.
Phil Eyler, the Company's President and CEO, said,
“I am pleased with the continued strong execution by the global
Gentherm team, enabling us to deliver record quarterly Climate
Control Seat and Steering Wheel Heaters revenues as well as the
highest quarterly Adjusted EBITDA in ten quarters. In addition, we
secured $520 million in new automotive business awards in the third
quarter, including a breakthrough multi-function electronic control
unit award from General Motors. We also recently won our first
combined thermal and pneumatic massage comfort award with Li Auto,
one of the rising EV manufacturers in China.
He concluded: “While the automotive production
environment remains challenging including the UAW strike, our
relentless focus on strong operational execution, innovation and
cash flow generation along with our record performance on new
business awards position us well to continue to drive shareholder
value over the long term.”
2023 Third Quarter Financial
Review
Product revenues for the third quarter of 2023
increased by $33.2 million, or 10.0%, as compared with the prior
year period. Excluding the impact of foreign currency translation,
product revenues increased 8.5% year over year.
Automotive revenues increased 10.0% year over year
as a result of the contribution from Alfmeier, as well as record
quarterly revenues in Climate Control Seat and Steering Wheel
Heaters, partially offset by decreased revenue in Electronics,
Battery Performance Solutions and Other Automotive product
categories year-over-year. Adjusting for foreign currency
translation and excluding the contribution from Alfmeier, organic
Automotive revenues increased 3.1% year over year. According to
S&P Global Mobility’s mid-October report, actual light vehicle
production increased by 4.6% in the current year’s third quarter
when compared with the third quarter of 2022 in the Company’s key
markets of North America, Europe, China, Japan and Korea.
Gentherm Medical revenue increased 9.7% year over
year, primarily as a result of increased revenues from its Dacheng
air warming blankets.
See the “Revenues by Product Category” table
included below for additional detail.
Gross margin rate decreased to 23.5% in the current
year period, as compared with 24.1% in the prior year period. The
decrease from the prior year period resulted from the acquired
Alfmeier business having a lower gross margin rate relative to the
Company’s organic Automotive business, non-automotive electronics
inventory charge, material and wage inflation, and lower price
recoveries from customers. These were partially offset by lower
freight costs, increased productivity at the factories, and fixed
cost leverage from higher unit volume.
Net research and development expenses of $23.2
million in the third quarter increased $0.5 million, or 2.1% over
the prior year period, primarily as a result of the additional
expenses from the Alfmeier business, partially offset by higher
customer reimbursements for research and development expenses.
Selling, general and administrative expenses of
$38.2 million in the third quarter increased $3.4 million, or 9.6%,
versus the prior year period. The year-over-year increase was
primarily driven by additional expenses from the acquired
businesses and higher compensation expenses.
Acquisition and integration expenses of $1.6
million in the current year period were $9.7 million lower than the
prior year period as a result of reduced expenses associated with
the Alfmeier acquisition. Restructuring expenses were $1.1 million
in the current year period.
As described more fully in the “Reconciliation of
Net Income to Adjusted EBITDA” table included below, the Company
recorded Adjusted EBITDA of $47.7 million in the 2023 third quarter
compared with $41.6 million in the prior year period, an increase
of $6.1 million or 14.6%.
Income tax expense in the third quarter was $6.9
million, as compared with $5.8 million in the prior year period.
The effective tax rate was 30.4% in the 2023 third quarter.
GAAP diluted earnings per share for the third
quarter was $0.48 compared with earnings per share of $0.29 for the
prior year period. Adjusted diluted earnings per share, excluding
non-automotive electronics inventory charge, acquisition and
integration expenses, restructuring expenses, and unrealized
currency gain (see table herein), was $0.64. Adjusted diluted
earnings per share in the prior year period was $0.70.
Guidance
The Company updates its full year 2023 guidance
that was initially provided in its year-end 2022 earnings release
on February 22, 2023:
|
|
Revised Outlook for FY 2023 |
|
Prior Outlook |
|
|
Low |
|
High |
|
Low |
|
High |
|
Product revenues (1)(2) |
$1.45B |
|
$1.47B |
|
$1.45B |
|
$1.55B |
|
Adjusted EBITDA Margin Rate (3) |
11.5% |
|
12.5% |
|
11.5% |
|
13.5% |
|
Full-year Adjusted Effective Tax Rate (4) |
28% |
|
32% |
|
28% |
|
32% |
|
Capital Expenditures |
$40M |
|
$50M |
|
$60M |
|
$70M |
|
|
(1) Based on the current forecast of customer
orders, inflation and pricing recovery, and a EUR to USD exchange
rate of $1.05/Euro |
(2) Assumes OEM plants impacted by the UAW strike
as of October 25th will remain idled through the end of
November |
(3) Starting with 2023 reporting, the Company
excludes the impact of non-cash stock-based compensation from the
Adjusted EBITDA results |
(4) Excluding the impact of non-cash goodwill
impairment on earnings before income tax of $19.5 million reported
in the second quarter of 2023, which
includes the associated deferred tax effect, and income tax benefit
of $2.4 million. |
|
Conference Call
As previously announced, Gentherm will conduct a conference call
today at 8:00 am Eastern Time to review these results. The dial-in
number for the call is 1-877-407-4018 (callers in the U.S.) or
+1-201-689-8471 (callers outside this U.S.). The passcode for the
live call is 13741956.A live webcast and one-year archived replay
of the call can be accessed on the Events page of the Investor
section of Gentherm's website at www.gentherm.com.
A telephonic replay will be available approximately two hours
after the call until 11:59 pm Eastern Time on November 9, 2023. The
replay can be accessed by dialing 1-844-512-2921 (callers in the
U.S.), or +1-412-317-6671 (callers outside the U.S.). The passcode
for the replay is 13741956.
Investor Contact Yijing
Brentano investors@gentherm.com248.308.1702
Media ContactMelissa
Fischermedia@gentherm.com248.289.9702
About GenthermGentherm (NASDAQ: THRM) is
the global market leader of innovative thermal management and
pneumatic comfort technologies for the automotive industry and a
leader in medical patient temperature management systems.
Automotive products include variable temperature Climate Control
Seats, heated automotive interior systems (including heated seats,
steering wheels, armrests and other components), battery
performance solutions, cable systems, lumbar and massage comfort
solutions, valve system technologies, and other electronic devices.
Medical products include patient temperature management systems.
The Company is also developing a number of new technologies and
products that will help enable improvements to existing products
and to create new product applications for existing and new
markets. Gentherm has more than 14,000 employees in
facilities in the United States, Germany,
China, Czech Republic, Hungary,
Japan, Malta, Mexico, North Macedonia, South
Korea, United Kingdom, Ukraine, and Vietnam. For
more information, go to www.gentherm.com.
Forward-Looking Statements
Except for historical information contained herein, statements
in this release are forward-looking statements that are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
represent Gentherm Incorporated's goals, beliefs, plans and
expectations about its prospects for the future and other future
events. The forward-looking statements included in this release are
made as of the date hereof or as of the date specified herein and
are based on management's reasonable expectations and beliefs. Such
statements are subject to a number of important assumptions,
significant risks and uncertainties (some of which are beyond our
control) and other factors that may cause actual results or
performance to differ materially from that described in or
indicated by the forward-looking statements, including but not
limited to:
- macroeconomic, geopolitical and similar global factors on the
cyclical Automotive industry;
- the production levels of our major customers and OEMs in our
key markets and sudden fluctuations in such production levels, in
particular with respect to models for which we supply significant
amounts of product;
- our ability to integrate our recent acquisitions and realize
synergies, as well as to consummate additional strategic
acquisitions, investments and exits;
- our implementation activities to execute our long-term strategy
of Fit-for-Growth 2.0, including profitability improvement and cost
reductions;
- our ability to effectively manage new product launches and
research and development;
- increasing competition, including with non-traditional
entrants;
- the ongoing supply-constrained environment, including raw
material and component shortages, manufacturing disruptions and
delays, logistics challenges, inflationary and other cost
pressures;
- the impact of our global operations, including our global
supply chain, operations within Ukraine, economic and trade
policies by various jurisdictions, and foreign currency risk and
foreign exchange exposure;
- our business in China, which is subject to unique operational,
competitive, regulatory and economic risks;
- a tightening labor market, labor shortages or work stoppages
impacting us, our customers or our suppliers, including the
potential impact of ongoing and future labor strikes among certain
OEMs and suppliers;
- our achievement of product cost reductions to offset
customer-imposed price reductions or other pricing pressures;
- any security breaches and other disruptions to our information
technology networks and systems, as well as privacy, data security
and data protection risks;
- our product quality and safety;
- the evolution of the automotive industry towards electric
vehicles, autonomous vehicles and mobility on demand services, and
related consumer behaviors and preferences;
- the development of and market acceptance of our existing and
future products;
- our borrowing availability under our revolving credit facility,
as well as our ability to access the capital markets, to support
our planned growth;
- our indebtedness and compliance with our debt covenants;
- the effects of climate change and catastrophic events, as well
as regulatory and stakeholder-imposed requirements to address
climate change and other sustainability issues;
- our efforts to optimize our global supply chain and
manufacturing footprint;
- our ability to project future sales volume based on third-party
information, based on which we manage our business;
- our ability to convert new business awards into product
revenues;
- any loss or insolvency of our key customers and OEMs, or key
suppliers;
- risks associated with our manufacturing processes;
- the extensive regulation of our patient temperature management
business;
- the protection of our intellectual property in certain
jurisdictions;
- our compliance with anti-corruption laws and regulations;
and
- legal and regulatory proceedings and claims involving us or one
of our major customers.
The foregoing risks should be read in conjunction
with the Company's reports filed with or furnished to the
Securities and Exchange Commission (the “SEC”), including “Risk
Factors,” in its most recent Annual Report on Form 10-K and
subsequent SEC filings, for a discussion of these and other risks
and uncertainties. In addition, with reasonable frequency, we have
entered into business combinations, acquisitions, divestitures,
strategic investments and other significant transactions. Such
forward-looking statements do not include the potential impact of
any such transactions that may be completed after the date hereof,
each of which may present material risks to the Company’s future
business and financial results.
Except as required by law, the Company expressly
disclaims any obligation or undertaking to update any
forward-looking statements to reflect any change in its
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is
based.
|
GENTHERM INCORPORATED |
CONSOLIDATED CONDENSED STATEMENTS OF INCOME |
(In thousands, except per share data) |
(Unaudited) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Product revenues |
$ |
366,195 |
|
|
$ |
332,962 |
|
|
$ |
1,102,143 |
|
|
$ |
861,334 |
|
|
Cost of sales |
|
279,985 |
|
|
|
252,610 |
|
|
|
846,815 |
|
|
|
657,492 |
|
|
Gross margin |
|
86,210 |
|
|
|
80,352 |
|
|
|
255,328 |
|
|
|
203,842 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net research and development expenses |
|
23,150 |
|
|
|
22,666 |
|
|
|
72,991 |
|
|
|
62,425 |
|
|
Selling, general and administrative expenses |
|
38,220 |
|
|
|
34,859 |
|
|
|
113,680 |
|
|
|
96,109 |
|
|
Impairment of goodwill |
|
— |
|
|
|
— |
|
|
|
19,509 |
|
|
|
— |
|
|
Restructuring expenses |
|
1,099 |
|
|
|
6 |
|
|
|
3,412 |
|
|
|
561 |
|
|
Total operating expenses |
|
62,469 |
|
|
|
57,531 |
|
|
|
209,592 |
|
|
|
159,095 |
|
|
Operating income |
|
23,741 |
|
|
|
22,821 |
|
|
|
45,736 |
|
|
|
44,747 |
|
|
Interest (expense) income, net |
|
(3,368 |
) |
|
|
714 |
|
|
|
(9,444 |
) |
|
|
(1,285 |
) |
|
Foreign currency gain (loss) |
|
2,107 |
|
|
|
(8,285 |
) |
|
|
384 |
|
|
|
(1,516 |
) |
|
Other income |
|
272 |
|
|
|
361 |
|
|
|
1,058 |
|
|
|
698 |
|
|
Earnings before income tax |
|
22,752 |
|
|
|
15,611 |
|
|
|
37,734 |
|
|
|
42,644 |
|
|
Income tax expense |
|
6,908 |
|
|
|
5,784 |
|
|
|
15,478 |
|
|
|
13,998 |
|
|
Net income |
$ |
15,844 |
|
|
$ |
9,827 |
|
|
$ |
22,256 |
|
|
$ |
28,646 |
|
|
Basic earnings per share |
$ |
0.48 |
|
|
$ |
0.30 |
|
|
$ |
0.67 |
|
|
$ |
0.87 |
|
|
Diluted earnings per share |
$ |
0.48 |
|
|
$ |
0.29 |
|
|
$ |
0.67 |
|
|
$ |
0.86 |
|
|
Weighted average number of shares – basic |
|
32,944 |
|
|
|
33,162 |
|
|
|
33,049 |
|
|
|
33,106 |
|
|
Weighted average number of shares – diluted |
|
33,196 |
|
|
|
33,470 |
|
|
|
33,311 |
|
|
|
33,460 |
|
|
|
|
GENTHERM INCORPORATED |
REVENUE BY PRODUCT CATEGORY AND RECONCILIATION OF FOREIGN
CURRENCY TRANSLATION IMPACT |
(In thousands) |
(Unaudited) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
|
Climate Control Seat |
$ |
124,905 |
|
|
$ |
112,059 |
|
|
|
11.5 |
% |
|
$ |
360,868 |
|
|
$ |
311,281 |
|
|
|
15.9 |
% |
|
Seat Heaters |
|
77,238 |
|
|
|
75,568 |
|
|
|
2.2 |
% |
|
|
231,132 |
|
|
|
210,367 |
|
|
|
9.9 |
% |
|
Steering Wheel Heaters |
|
39,861 |
|
|
|
31,482 |
|
|
|
26.6 |
% |
|
|
115,166 |
|
|
|
89,169 |
|
|
|
29.2 |
% |
|
Lumbar and Massage Comfort Solutions (a) |
|
33,260 |
|
|
|
22,740 |
|
|
|
46.3 |
% |
|
|
109,602 |
|
|
|
22,740 |
|
|
|
382.0 |
% |
|
Valve Systems (a) |
|
27,830 |
|
|
|
18,542 |
|
|
|
50.1 |
% |
|
|
82,516 |
|
|
|
18,542 |
|
|
|
345.0 |
% |
|
Automotive Cables |
|
19,668 |
|
|
|
18,338 |
|
|
|
7.3 |
% |
|
|
60,131 |
|
|
|
59,662 |
|
|
|
0.8 |
% |
|
Battery Performance Solutions |
|
17,242 |
|
|
|
20,331 |
|
|
|
(15.2 |
)% |
|
|
57,138 |
|
|
|
55,395 |
|
|
|
3.1 |
% |
|
Electronics |
|
10,163 |
|
|
|
12,083 |
|
|
|
(15.9 |
)% |
|
|
30,456 |
|
|
|
33,190 |
|
|
|
(8.2 |
)% |
|
Other Automotive |
|
4,615 |
|
|
|
11,412 |
|
|
|
(59.6 |
)% |
|
|
21,998 |
|
|
|
29,224 |
|
|
|
(24.7 |
)% |
|
Subtotal Automotive segment |
|
354,782 |
|
|
|
322,555 |
|
|
|
10.0 |
% |
|
|
1,069,007 |
|
|
|
829,570 |
|
|
|
28.9 |
% |
|
Medical segment (b) |
|
11,413 |
|
|
|
10,407 |
|
|
|
9.7 |
% |
|
|
33,136 |
|
|
|
31,764 |
|
|
|
4.3 |
% |
|
Total Company |
$ |
366,195 |
|
|
$ |
332,962 |
|
|
|
10.0 |
% |
|
$ |
1,102,143 |
|
|
$ |
861,334 |
|
|
|
28.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation impact (c) |
|
4,825 |
|
|
|
— |
|
|
|
|
|
|
|
(4,962 |
) |
|
|
— |
|
|
|
|
|
|
Total Company, excluding foreign currency translation impact |
$ |
361,370 |
|
|
$ |
332,962 |
|
|
|
8.5 |
% |
|
$ |
1,107,105 |
|
|
$ |
861,334 |
|
|
|
28.5 |
% |
|
|
(a) Represents product revenues from Alfmeier (acquired on
August 1, 2022). |
(b) Includes product revenues of $1,988 and $4,939 for the three
and nine months ended September 30, 2023, respectively, and $1,234
for the three and nine months ended September 30, 2022 from Dacheng
(acquired on July 13, 2022). |
(c) Foreign currency translation impacts for the Automotive segment
and Medical segment were $4,654 and $171, respectively, for the
three months ended September 30, 2023. Foreign currency translation
impacts for the Automotive segment and Medical segment were
$(4,843) and $119, respectively, for the nine months ended
September 30, 2023. |
|
|
GENTHERM INCORPORATED |
RECONCILIATION OF NET INCOME TO ADJUSTED
EBITDA |
(In thousands) |
(Unaudited) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Net income |
$ |
15,844 |
|
|
$ |
9,827 |
|
|
$ |
22,256 |
|
|
$ |
28,646 |
|
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
12,516 |
|
|
|
11,774 |
|
|
|
38,354 |
|
|
|
30,259 |
|
|
Income tax expense (a) |
|
6,908 |
|
|
|
5,784 |
|
|
|
15,478 |
|
|
|
13,998 |
|
|
Interest expense (income), net (b) |
|
3,368 |
|
|
|
(714 |
) |
|
|
9,444 |
|
|
|
1,285 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of goodwill |
|
— |
|
|
|
— |
|
|
|
19,509 |
|
|
|
— |
|
|
Non-cash stock-based compensation (c) |
|
3,421 |
|
|
|
(1,568 |
) |
|
|
8,592 |
|
|
|
4,622 |
|
|
Acquisition and integration expenses |
|
1,618 |
|
|
|
11,349 |
|
|
|
4,730 |
|
|
|
18,357 |
|
|
Restructuring expense |
|
1,099 |
|
|
|
6 |
|
|
|
3,412 |
|
|
|
561 |
|
|
Non-automotive electronics inventory charge |
|
3,426 |
|
|
|
— |
|
|
|
5,489 |
|
|
|
— |
|
|
Unrealized currency (gain) loss |
|
(898 |
) |
|
|
5,308 |
|
|
|
4,227 |
|
|
|
(1,032 |
) |
|
Other |
|
372 |
|
|
|
(157 |
) |
|
|
71 |
|
|
|
(483 |
) |
|
Adjusted EBITDA |
$ |
47,674 |
|
|
$ |
41,609 |
|
|
$ |
131,562 |
|
|
$ |
96,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues |
$ |
366,195 |
|
|
$ |
332,962 |
|
|
$ |
1,102,143 |
|
|
$ |
861,334 |
|
|
Adjusted EBITDA Margin |
|
13.0 |
% |
|
|
12.5 |
% |
|
|
11.9 |
% |
|
|
11.2 |
% |
|
|
(a) Includes $2,423 of deferred income tax benefit associated with
the goodwill impairment of the Medical Reporting Unit for the nine
months ended September 30, 2023. |
(b) Includes $62 and $734 of interest income for the three months
and nine months ended September 30, 2023, related to mark-to-market
adjustment of our floating-to-fixed interest rate swap agreement
with a notional amount of $100,000. |
(c) Includes operating expenses of $3,384 and $(1,933) for the
three months ended September 30, 2023 and 2022, respectively.
Includes operating expenses of $8,218 and $4,506 for the nine
months ended September 30, 2023 and 2022, respectively. |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2022 |
|
Adjusted EBITDA |
$ |
41,609 |
|
|
$ |
96,213 |
|
|
Non-cash stock-based compensation |
|
1,568 |
|
|
|
(4,622 |
) |
|
Adjusted EBITDA as reported in Q3 2022 (1) |
$ |
43,177 |
|
|
$ |
91,591 |
|
|
Adjusted EBITDA Margin as reported in Q3 2022 (1) |
|
13.0 |
% |
|
|
10.6 |
% |
|
|
(1) Includes the impact of non-cash stock-based compensation |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2022 |
|
Adjusted EBITDA |
$ |
41,609 |
|
|
$ |
96,213 |
|
|
Pro forma EBITDA impact of Alfmeier acquisition |
|
603 |
|
|
|
2,425 |
|
|
Pro forma Adjusted EBITDA |
$ |
42,212 |
|
|
$ |
98,638 |
|
|
Pro forma Adjusted EBITDA Margin |
|
12.0 |
% |
|
|
9.8 |
% |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2022 |
|
2022 |
|
Product revenues |
$ |
332,962 |
|
|
$ |
861,334 |
|
|
Pro forma revenue impact of Alfmeier acquisition |
|
19,915 |
|
|
|
143,640 |
|
|
Pro forma product revenues |
$ |
352,877 |
|
|
$ |
1,004,974 |
|
|
|
|
|
Adjusted EBITDAas reported
(1) |
|
Non-Cash Stock-based
Compensation |
|
Adjusted EBITDA (1) |
|
Product Revenues |
|
Adjusted EBITDA Margin (1) |
|
Three months ended September 30, 2023 |
$ |
- |
|
|
$ |
- |
|
|
$ |
47,674 |
|
|
$ |
366,195 |
|
|
|
13.0 |
% |
|
Three months ended June 30, 2023 |
|
- |
|
|
|
- |
|
|
|
42,378 |
|
|
|
372,323 |
|
|
|
11.4 |
% |
|
Three months ended March 31, 2023 |
|
- |
|
|
|
- |
|
|
|
41,510 |
|
|
|
363,625 |
|
|
|
11.4 |
% |
|
Three months ended December 31, 2022 |
|
38,178 |
|
|
|
2,771 |
|
|
|
40,949 |
|
|
|
343,322 |
|
|
|
11.9 |
% |
|
Three months ended September 30, 2022 |
|
43,177 |
|
|
|
(1,568 |
) |
|
|
41,609 |
|
|
|
332,962 |
|
|
|
12.5 |
% |
|
Three months ended June 30, 2022 |
|
21,435 |
|
|
|
3,401 |
|
|
|
24,836 |
|
|
|
260,715 |
|
|
|
9.5 |
% |
|
Three months ended March 31, 2022 |
|
26,979 |
|
|
|
2,789 |
|
|
|
29,768 |
|
|
|
267,657 |
|
|
|
11.1 |
% |
|
Three months ended December 31, 2021 |
|
30,932 |
|
|
|
2,386 |
|
|
|
33,318 |
|
|
|
248,226 |
|
|
|
13.4 |
% |
|
Three months ended September 30, 2021 |
|
30,481 |
|
|
|
3,223 |
|
|
|
33,704 |
|
|
|
243,384 |
|
|
|
13.8 |
% |
|
Three months ended June 30, 2021 |
|
43,721 |
|
|
|
3,459 |
|
|
|
47,180 |
|
|
|
266,005 |
|
|
|
17.7 |
% |
|
|
(1) Beginning in 2023 the definition of Adjusted EBITDA and
Adjusted EBITDA margin was updated to exclude the impact of
stock-based compensation. |
|
Use of Non-GAAP Financial Measures
In addition to the results reported in accordance with GAAP
throughout this release, the Company has provided here or elsewhere
information regarding adjusted earnings before interest, taxes,
depreciation and amortization (“Adjusted EBITDA”), Adjusted EBITDA
margin, adjusted earnings per share (“Adjusted earnings per share”
or “Adjusted EPS”), free cash flow, Net Debt, organic revenue,
revenue (for the Company and by each reporting segment) excluding
acquired businesses and foreign currency translation, revenue
excluding foreign currency translation, adjusted operating
expenses, pro forma product revenues, pro forma Adjusted EBITDA,
pro forma Adjusted EBITDA margin and adjusted effective tax rate,
each a non-GAAP financial measure. The Company defines Adjusted
EBITDA as earnings before interest, taxes, depreciation and
amortization, deferred financing cost amortization, non-cash
stock-based compensation expenses, and other gains and losses not
reflective of the Company’s ongoing operations and related tax
effects including transaction expenses, debt retirement expenses,
impairment of assets held for sale, impairment of goodwill, gain or
loss on sale of business, restructuring expense, unrealized
currency gain or loss and unrealized revaluation of derivatives.
Note that in recent prior periods, the Company did not exclude
non-cash stock-based compensation expenses in the definition of
Adjusted EBITDA. Forward-looking references to Adjusted EBITDA and
Adjusted EBITDA margin herein exclude the impact of stock-based
compensation as newly defined. The Company defines Adjusted EBITDA
margin as Adjusted EBITDA divided by product revenues. The Company
defines Adjusted EPS as earnings adjusted by gains and losses not
reflective of the Company’s ongoing operations and related tax
effects including transaction expenses, debt retirement expenses,
impairment of assets held for sale, impairment of goodwill, gain or
loss on sale of business, restructuring expense, unrealized
currency gain or loss and unrealized revaluation of derivatives.
The Company defines Free Cash Flow as Net cash provided by
operating activities less Purchases of property and equipment. The
Company defines Net Debt as the principal amount of all
Consolidated Funded Indebtedness (as defined in the Credit
Agreement) less cash and cash equivalents. The Company defines
organic revenue as revenue, excluding revenue from acquired
businesses. Note that in recent prior periods, the Company used
organic revenue instead to be revenue excluding foreign currency
translation (see below). The Company defines revenue excluding
acquired businesses and foreign currency translation as revenue,
excluding the revenue from acquired businesses and the estimated
effects of foreign currency exchange on revenue by translating
actual revenue using the prior period foreign currency exchange
rates. The Company defines revenue excluding foreign currency
translation as revenue, excluding the estimated effects of foreign
currency exchange on revenue by translating actual revenue using
the prior period foreign currency exchange rates. The Company
defines adjusted operating expenses as operating expenses excluding
impairment of intangible assets and property and equipment,
restructuring, related non-cash stock-based compensation,
acquisition, integration and divestiture expenses. The Company
defines pro forma product revenues as product revenues including
the product revenues of Alfmeier as if the acquisition had occurred
as of January 1, 2022. The Company defines pro forma Adjusted
EBITDA as Adjusted EBITDA, as defined above, including the results
of Alfmeier as if the acquisition had occurred as of January 1,
2022. The Company defines pro forma Adjusted EBITDA margin as pro
forma Adjusted EBITDA, as defined above, divided by pro forma
product revenues. The Company defines adjusted effective tax rate
as income tax expense excluding the tax benefit from non-cash
goodwill impairment divided by earnings before income tax excluding
the impact of non-cash goodwill impairment.
The Company’s reconciliations are included in this release or
can be found in the supplemental materials furnished as Exhibit
99.2 to the Company’s Form 8-K dated October 26, 2023.
In evaluating its business, the Company considers and uses Free
Cash Flow and Net Debt as supplemental measures of its liquidity
and the other non-GAAP financial measures as supplemental measures
of its operating performance. Management provides such non-GAAP
financial measures so that investors will have the same financial
information that management uses with the belief that it will
assist investors in properly assessing the Company's performance on
a period-over-period basis by excluding matters not indicative of
the Company’s ongoing operating or liquidity results and therefore
enhance the comparability of the Company's results and provide
additional information for analyzing trends in the business. In
evaluating our non-GAAP financial measures, you should be aware
that in the future we may incur revenues, expenses, and cash and
non-cash obligations that are the same as or similar to some of the
adjustments in our presentation of non-GAAP financial measures. Our
presentation of non-GAAP financial measures should not be construed
as an inference that our future results will be unaffected by
unusual or non-recurring items. There also can be no assurance that
we will not modify the presentation of our non-GAAP financial
measures in the future, and any such modification may be material.
Other companies in our industry may define and calculate these
non-GAAP financial measures differently than we do and those
calculations may not be comparable to our metrics. These non-GAAP
measures have limitations as analytical tools, and when assessing
the Company's operating performance or liquidity, investors should
not consider these non-GAAP measures in isolation, or as a
substitute for net income, revenue or other consolidated income
statement or cash flow statement data prepared in accordance with
GAAP.
Non-GAAP measures referenced in this release and other public
communications may include estimates of future Adjusted EBITDA,
Adjusted EBITDA margin and Adjusted EPS. The Company has not
reconciled the non-GAAP forward-looking guidance included in this
release to the most directly comparable GAAP measures because this
cannot be done without unreasonable effort due to the variability
and low visibility with respect to taxes and non-recurring items,
which are potential adjustments to future earnings. We expect the
variability of these items to have a potentially unpredictable, and
a potentially significant, impact on our future GAAP financial
results.
|
GENTHERM INCORPORATED |
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER
SHARE |
(In thousands, except per share data) |
(Unaudited) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Net income |
$ |
15,844 |
|
|
$ |
9,827 |
|
|
$ |
22,256 |
|
|
$ |
28,646 |
|
|
Non-cash purchase accounting impact |
|
1,613 |
|
|
|
2,842 |
|
|
|
5,793 |
|
|
|
6,426 |
|
|
Restructuring expenses |
|
1,099 |
|
|
|
6 |
|
|
|
3,412 |
|
|
|
561 |
|
|
Unrealized currency (gain) loss |
|
(898 |
) |
|
|
5,308 |
|
|
|
4,227 |
|
|
|
(1,032 |
) |
|
Acquisition and integration expenses |
|
1,618 |
|
|
|
11,349 |
|
|
|
4,730 |
|
|
|
18,357 |
|
|
Non-automotive electronics inventory charge |
|
3,426 |
|
|
|
— |
|
|
|
5,489 |
|
|
|
— |
|
|
Impairment of goodwill |
|
— |
|
|
|
— |
|
|
|
19,509 |
|
|
|
— |
|
|
Other |
|
372 |
|
|
|
(157 |
) |
|
|
71 |
|
|
|
(483 |
) |
|
Tax effect of above |
|
(1,693 |
) |
|
|
(5,822 |
) |
|
|
(8,635 |
) |
|
|
(7,020 |
) |
|
Adjusted net income |
$ |
21,381 |
|
|
$ |
23,353 |
|
|
$ |
56,852 |
|
|
$ |
45,455 |
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
32,944 |
|
|
|
33,162 |
|
|
|
33,049 |
|
|
|
33,106 |
|
|
Diluted |
|
33,196 |
|
|
|
33,470 |
|
|
|
33,311 |
|
|
|
33,460 |
|
|
|
Earnings per share, as reported: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.48 |
|
|
$ |
0.30 |
|
|
$ |
0.67 |
|
|
$ |
0.87 |
|
|
Diluted |
$ |
0.48 |
|
|
$ |
0.29 |
|
|
$ |
0.67 |
|
|
$ |
0.86 |
|
|
Adjusted earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.65 |
|
|
$ |
0.70 |
|
|
$ |
1.72 |
|
|
$ |
1.37 |
|
|
Diluted |
$ |
0.64 |
|
|
$ |
0.70 |
|
|
$ |
1.71 |
|
|
$ |
1.36 |
|
|
|
|
GENTHERM INCORPORATED |
CONSOLIDATED CONDENSED BALANCE SHEETS |
(In thousands, except share data) |
(Unaudited) |
|
|
September 30, 2023 |
|
December 31, 2022 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
154,354 |
|
|
$ |
153,891 |
|
|
Accounts receivable, net |
|
263,765 |
|
|
|
247,131 |
|
|
Inventory: |
|
|
|
|
|
|
|
|
Raw materials |
|
122,919 |
|
|
|
136,217 |
|
|
Work in process |
|
16,745 |
|
|
|
17,695 |
|
|
Finished goods |
|
66,192 |
|
|
|
64,336 |
|
|
Inventory, net |
|
205,856 |
|
|
|
218,248 |
|
|
Other current assets |
|
76,651 |
|
|
|
64,597 |
|
|
Total current assets |
|
700,626 |
|
|
|
683,867 |
|
|
Property and equipment, net |
|
236,660 |
|
|
|
244,480 |
|
|
Goodwill |
|
100,633 |
|
|
|
119,774 |
|
|
Other intangible assets, net |
|
66,427 |
|
|
|
73,933 |
|
|
Operating lease right-of-use assets |
|
27,442 |
|
|
|
29,945 |
|
|
Deferred income tax assets |
|
73,177 |
|
|
|
69,840 |
|
|
Other non-current assets |
|
20,632 |
|
|
|
17,461 |
|
|
Total assets |
$ |
1,225,597 |
|
|
$ |
1,239,300 |
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
213,851 |
|
|
$ |
182,225 |
|
|
Current lease liabilities |
|
7,633 |
|
|
|
7,143 |
|
|
Current maturities of long-term debt |
|
620 |
|
|
|
2,443 |
|
|
Other current liabilities |
|
90,199 |
|
|
|
93,814 |
|
|
Total current liabilities |
|
312,303 |
|
|
|
285,625 |
|
|
Long-term debt, less current maturities |
|
207,302 |
|
|
|
232,653 |
|
|
Non-current lease liabilities |
|
16,451 |
|
|
|
20,538 |
|
|
Pension benefit obligation |
|
3,165 |
|
|
|
3,638 |
|
|
Other non-current liabilities |
|
26,324 |
|
|
|
24,573 |
|
|
Total liabilities |
$ |
565,545 |
|
|
$ |
567,027 |
|
|
Shareholders’ equity: |
|
|
|
|
|
|
Common Stock: |
|
|
|
|
|
|
No par value; 55,000,000 shares authorized 32,795,093
and 33,202,082 issued and outstanding at
September 30, 2023 and December 31, 2022,
respectively |
|
97,715 |
|
|
|
122,658 |
|
|
Paid-in capital |
|
5,379 |
|
|
|
5,447 |
|
|
Accumulated other comprehensive loss |
|
(55,955 |
) |
|
|
(46,489 |
) |
|
Accumulated earnings |
|
612,913 |
|
|
|
590,657 |
|
|
Total shareholders’ equity |
|
660,052 |
|
|
|
672,273 |
|
|
Total liabilities and shareholders’ equity |
$ |
1,225,597 |
|
|
$ |
1,239,300 |
|
|
|
|
GENTHERM INCORPORATED |
CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS |
(In thousands) |
(Unaudited) |
|
|
Nine Months Ended September 30, |
|
|
2023 |
|
2022 |
|
Operating Activities: |
|
|
|
|
|
|
|
|
Net income |
$ |
22,256 |
|
|
$ |
28,646 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
38,531 |
|
|
|
30,470 |
|
|
Deferred income taxes |
|
(3,017 |
) |
|
|
(1,207 |
) |
|
Stock based compensation |
|
8,451 |
|
|
|
3,383 |
|
|
Loss on disposition of property and equipment |
|
873 |
|
|
|
620 |
|
|
Provisions for inventory |
|
6,597 |
|
|
|
4,293 |
|
|
Impairment of goodwill |
|
19,509 |
|
|
|
— |
|
|
Other |
|
81 |
|
|
|
881 |
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
Accounts receivable, net |
|
(19,813 |
) |
|
|
(55,780 |
) |
|
Inventory |
|
3,733 |
|
|
|
(53,223 |
) |
|
Other assets |
|
(19,218 |
) |
|
|
(10,868 |
) |
|
Accounts payable |
|
32,158 |
|
|
|
60,983 |
|
|
Other liabilities |
|
(10,099 |
) |
|
|
4,759 |
|
|
Net cash provided by operating activities |
|
80,042 |
|
|
|
12,957 |
|
|
Investing Activities: |
|
|
|
|
|
|
Purchases of property and equipment |
|
(26,526 |
) |
|
|
(25,737 |
) |
|
Proceeds from the sale of property and equipment |
|
72 |
|
|
|
175 |
|
|
Acquisition of businesses, net of cash acquired |
|
— |
|
|
|
(224,097 |
) |
|
Proceeds from deferred purchase price of factored receivables |
|
10,139 |
|
|
|
2,168 |
|
|
Cost of technology investments |
|
(630 |
) |
|
|
(350 |
) |
|
Net cash used in investing activities |
|
(16,945 |
) |
|
|
(247,841 |
) |
|
Financing Activities: |
|
|
|
|
|
|
Repayments of debt |
|
(27,166 |
) |
|
|
(11,559 |
) |
|
Proceeds from the exercise of Common Stock options |
|
263 |
|
|
|
1,556 |
|
|
Taxes withheld and paid on employees' share-based payment
awards |
|
(2,754 |
) |
|
|
(5,415 |
) |
|
Cash paid for the repurchase of Common Stock |
|
(31,094 |
) |
|
|
— |
|
|
Net cash (used in) provided by financing
activities |
|
(60,751 |
) |
|
|
191,582 |
|
|
Foreign currency effect |
|
(1,883 |
) |
|
|
(8,141 |
) |
|
Net cash increase (decrease) in cash and cash
equivalents |
|
463 |
|
|
|
(51,443 |
) |
|
Cash and cash equivalents at beginning of period |
|
153,891 |
|
|
|
190,606 |
|
|
Cash and cash equivalents at end of period |
$ |
154,354 |
|
|
$ |
139,163 |
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
Cash paid for taxes |
$ |
18,893 |
|
|
$ |
13,509 |
|
|
Cash paid for interest |
|
9,737 |
|
|
|
3,334 |
|
|
|
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