THRM Gentherm Inc

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 26, 2023

 

 

GENTHERM INCORPORATED

(Exact name of Registrant as Specified in Its Charter)

 

 

Michigan			0-21810	95-4318554
(State or Other Jurisdiction of Incorporation)			(Commission File Number)	(IRS Employer Identification No.)
21680 Haggerty Road
Northville, Michigan				48167
(Address of Principal Executive Offices)				(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (248) 504-0500

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, no par value		THRM		The Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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Item 2.02 Results of Operations and Financial Condition.

On October 26, 2023, Gentherm Incorporated (the “Company”) publicly announced its financial results for the third quarter of 2023, and provided an update on its full year 2023 guidance. A copy of the Company’s news release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 7.01 Regulation FD Disclosure.

On October 26, 2023 at 8:00 a.m. Eastern Time, the Company will host a conference call to discuss the third quarter of 2023 financial results and provide an update on its full year 2023 guidance. A copy of the supplemental materials that will be used during the conference call is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
 

The information in Items 2.02 and 7.01 herein and the attached exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as shall be expressly stated by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit 99.1		Company news release dated October 26, 2023 concerning financial results
Exhibit 99.2		Supplemental materials dated October 26, 2023
Exhibit 104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	GENTHERM INCORPORATED
	By:		/s/ Wayne Kauffman
			Wayne Kauffman
			Senior Vice President, General Counsel and Secretary
Date: October 26, 2023

 

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Exhibit 99.1

Gentherm Reports 2023 Third Quarter Results

Delivered Highest Quarterly Adjusted EBITDA in Ten Quarters

Secured $520M in New Automotive Business Awards, a Third Quarter Record

Updates 2023 Guidance

NORTHVILLE, Michigan, October 26, 2023 /Global Newswire/ -- 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

 

 

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.”

 

 

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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.

 

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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

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.com 
248.308.1702

Media Contact
Melissa Fischer
media@gentherm.com 
248.289.9702

 

About Gentherm

Gentherm (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,

 

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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:

 

 

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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.

 

 

 

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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

 

 

 

 

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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.

 

 

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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.

 

 

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		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 EBITDA as 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.

 

 

 

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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

 

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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.

 

 

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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

 

 

 

 

 

 

 

 

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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

 

 

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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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Proprietary © Gentherm 2023 2023 Third Quarter Results October 26, 2023 Exhibit 99.2

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Use of Non-GAAP Financial Measures* In addition to the results reported herein in accordance with GAAP, the Company has provided here or may discuss on the related conference call Adjusted Operating Expense, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EPS, Free Cash Flow, Net Debt, organic revenue, revenue excluding acquired businesses and foreign currency translation, revenue excluding foreign currency translation, pro forma product revenues, pro forma Adjusted EBITDA, pro forma Adjusted EBITDA margin and Adjusted Effective Tax Rate, each a non-GAAP financial measure. Starting in 2023, the Company is excluding the impact of non-cash stock-based compensation from its definition of Adjusted EBITDA and Adjusted EBITDA margin. References to Adjusted EBITDA and Adjusted EBITDA margin for prior periods have been recast to exclude the impact of non-cash stock-based compensation. See the Company’s earnings release dated October 26, 2023, for the definitions of each non-GAAP financial measure, information regarding why the Company utilizes such non-GAAP measures as supplemental measures of performance or liquidity, and their limitations, and for certain reconciliations of GAAP to non-GAAP historical financial measures. * See Appendix for certain reconciliations of GAAP to non-GAAP historical financial measures. Proprietary © Gentherm 2023

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Forward-Looking Statement Proprietary © Gentherm 2023 Except for historical information contained herein, statements in this presentation are forward-looking statements that are made by Gentherm Incorporated (the “Company”) pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements that address future operating, financial or business performance or strategies or expectations are forward-looking statements. The forward-looking statements included in this presentation are made as of the date hereof or as of the date specified herein and are based on management's reasonable expectations and beliefs. In making these statements we rely on assumptions and analysis based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we consider appropriate under the circumstances. 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 strategies or expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The forward-looking statements are subject to a number of important assumptions, risks, uncertainties and other factors that may cause actual results or performance to differ materially from that expressed or implied by such statements. For a discussion of these risks and uncertainties and other factors, please see the Company’s most recent Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission, including “Risk Factors.” In addition, the business outlook discussed in this presentation does not include the potential impact of any business combinations, acquisitions, divestitures, strategic investments and other significant 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. 

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Automotive Highlights Record quarterly revenues for Climate Control Seat and Steering Wheel Heaters 16 Vehicle launches with 8 OEMs Multiple CCS® Launches   BMW 5 series, Chevrolet Equinox EV,  Great Wall Mecha Dragon, Hongqi eH5, Xpeng G9 EV Proprietary © Gentherm 2023 4 ClimateSense® won the 2023 Automotive D.R.I.V.E Honours for reducing emissions Great Wall Mecha Dragon BMW 5 Series Chevrolet Equinox EV Hongqi eH5 Xpeng G9 EV

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New Automotive Business Awards $520M in awards in 3Q; a 3Q record Steering Wheel Heater awards across 8 OEMs including hands-on-detection enabled heater award with Audi, BMW, General Motors, Honda, Hongqi and Volvo 10 Multiple CCS® Awards from: Ford | General Motors | HKMC | Li Auto Mazda | Stellantis | Volkswagen Proprietary © Gentherm 2023 5 First combined thermal and pneumatic massage award from Li Auto in October First multi function ECU award with General Motors Accelerating demand for thermal comfort, and massage and lumbar solutions setting new annual record for Automotive Business Awards with more than two months left in the year

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Medical Highlights Leveraging partnerships for revenue growth while focusing on improving returns Proprietary © Gentherm 2023 6 10% Revenue up 10 percent year over year 20 new major hospital customers added in China Awarded contract extensions with Premier and Vizient, two of the largest Group Purchasing Organizations in the U.S.

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(Dollars in thousands, except per share data) 2023 2022 Pro forma 2022 (1) 2023 2022 Pro forma 2022 (1) Product Revenues $ 366,195 $ 332,962 $ 352,877 $ 1,102,143 $ 861,334 $ 1,004,974   Automotive 354,782 322,555 342,470 1,069,007 829,570 973,210   Medical 11,413 10,407 33,136 31,764 Gross Margin 86,210 80,352 255,328 203,842 Gross Margin % 23.5 % 24.1 % 23.2 % 23.7 % Operating Expenses 62,469 57,531 209,592 159,095 Operating Income 23,741 22,821 45,736 44,747 Adjusted EBITDA 47,674 41,609 42,212 131,562 96,213 98,638 Adjusted EBITDA Margin 13.0 % 12.5 % 12.0 % 11.9 % 11.2 % 9.8 % Diluted EPS - As Adjusted $0.64 $0.70 $1.71 $1.36 Select Income Statement Data Nine Months Ended September 30 Three Months Ended September 30 (1) Pro forma amounts include the results of Alfmeier as if the acquisition had occurred as of January 1, 2022. Proprietary © Gentherm 2023 7

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Select Balance Sheet Data September 30, 2023 June 30, 2023 December 31, 2022 December 31, 2022 December 31, 2022 Cash and Cash Equivalents $ 154,354 $ 153,891 Total Assets  1,225,597 1,239,300 Debt 207,922 235,096    Current 620 2,443    Non-Current 207,302 232,653 Revolving LOC Availability 293,000 264,904 Total Liquidity 447,354 418,795 Proprietary © Gentherm 2023 8 (Dollars in thousands)

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Proprietary © Gentherm 2023 9 2023 Guidance 2022 A 2022 Pro forma(4) Prior 2023 E 2023 E Product Revenue (1)(2) $1.2B $1.3B $1.45B - $1.55B $1.45B - $1.47B Adjusted EBITDA Margin (1)(2)(3) 11.4% 10.4% 11.5% – 13.5% 11.5% – 12.5% Adjusted Effective Tax Rate (5) 36% 28% - 32% 28% - 32% Capital Expenditures $40M $46M $60M - $70M $40M - $50M Based on the current forecast of customer orders, inflation and pricing recovery, and a EUR to USD exchange rate of $1.05/Euro. Assumes OEM plants impacted by the UAW strike as of October 25th will remain idled through the end of November. Starting in 2023, the company is excluding the impact of non-cash stock-based compensation in its calculation of Adjusted EBITDA Margin. Pro forma amounts include the results of Alfmeier as if the acquisition had occurred as of January 1, 2022. Unaudited pro forma information is provided for illustrative purposes only and should be read in conjunction with the consolidated financial statements to better facilitate the assessment and measurement of the Company's operating performance. Such information is not, and should not be assumed to be, an indication of the actual results of the combined company that would have been achieved or may be achieved in the future. Regarding 2023 guidance, excluding the impact of non-cash goodwill impairment on earnings before income tax of $19.5 million, which includes the associated deferred tax effect, and income tax benefit of $2.4 million. Due to the inherent difficulty of forecasting the timing and amount of certain items that would impact net income margin, such as foreign currency gains and losses, we are unable to reasonably estimate net income margin, the GAAP financial measure most directly comparable to Adjusted EBITDA margin. Accordingly, we are unable to provide a reconciliation of Adjusted EBITDA margin to net income margin with respect to the guidance provided.

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Appendix Proprietary © Gentherm 2023

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Proprietary © Gentherm 2023 11 Reconciliation of Adjusted EBITDA and Adjusted EBITDA Margin (Dollars in thousands) 2023 2022 2023 2022 Net Income $ 15,844 $ 9,827 $ 22,256 $ 28,646 Add Back:      Income Tax Expense  6,908 5,784 15,478 13,998      Interest Expense (Income), net 3,368 (714 ) 9,444 1,285      Depreciation and Amortization  12,516 11,774 38,354 30,259 Adjustments:      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 –     Non-Cash Stock-Based Compensation 3,421 (1,568 ) 8,592 4,622 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 Net Income Margin 4.3 % 3.0 % 2.0 % 3.3 % Adjusted EBITDA Margin 13.0 % 12.5 % 11.9 % 11.2 % Nine Months Ended September 30 Three Months Ended September 30

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Proprietary © Gentherm 2023 12 Reconciliation of Adjusted EPS 2023 2022 2023 2022 Diluted EPS - As Reported $ 0.48 $ 0.29 $ 0.67 $ 0.86 Acquisition and Integration Expenses 0.05 0.34 0.14 0.55 Non-Cash Purchase Accounting Impacts 0.05 0.08 0.17 0.19 Unrealized Currency (Gain) Loss  (0.03 ) 0.16 0.13 (0.03 ) Restructuring Expenses 0.03 0.00 0.10 0.02 Non-Automotive Electronics Inventory Charge 0.10 – 0.16 – Impairment of Goodwill – – 0.59 – Other 0.01 (0.00) 0.00 (0.01 ) Tax Effect of Above (0.05 ) (0.17) (0.26 ) (0.21 ) Rounding – – 0.01 (0.01 ) Diluted EPS - As Adjusted $  0.64 $ 0.70 $  1.71 $ 1.36 Three Months Ended September 30 Nine Months Ended September 30

v3.23.3

Document And Entity Information	Oct. 26, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Oct. 26, 2023
Entity Registrant Name	GENTHERM INCORPORATED
Entity Central Index Key	0000903129
Entity Emerging Growth Company	false
Securities Act File Number	0-21810
Entity Incorporation, State or Country Code	MI
Entity Tax Identification Number	95-4318554
Entity Address, Address Line One	21680 Haggerty Road
Entity Address, City or Town	Northville
Entity Address, State or Province	MI
Entity Address, Postal Zip Code	48167
City Area Code	(248)
Local Phone Number	504-0500
Entity Information, Former Legal or Registered Name	N/A
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, no par value
Trading Symbol	THRM
Security Exchange Name	NASDAQ

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