Gentherm Reports 2023 Fourth Quarter and Full Year Results

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Achieves Record Annual Revenue of $1.5 Billion
Secures Unprecedented Annual Automotive Business Awards of $2.6 Billion
Establishes 2024 Guidance and Updates 2026 Outlook

NORTHVILLE, Mich., Feb. 21, 2024 (GLOBE 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 fourth quarter and full year ended December 31, 2023.

Fourth Quarter 2023 Highlights

Product revenues of $366.9 million increased 6.9% from $343.3 million in the 2022 fourth quarter. Excluding the impact of foreign currency translation, product revenues increased 5.2% year over year
Automotive revenues increased 6.6% year over year; excluding the impact of foreign currency translation, increased 4.9% year over year
GAAP diluted earnings per share was $0.56 as compared with loss per share of $(0.13) for the prior year period
Adjusted diluted earnings per share (see table herein) was $0.90. Adjusted diluted earnings per share in the prior year period was $0.47
Secured new automotive business awards totaling approximately $900 million
Repurchased $61.4 million of the Company’s common stock

Full Year 2023 Highlights

Product revenues of $1,469.1 million increased 21.9% from $1,204.7 million in 2022. Excluding the impact of foreign currency translation and contributions from acquisitions, product revenues increased 10.0% year over year
Automotive revenues increased 22.5% year over year; excluding the impact of foreign currency translation and contributions from the Alfmeier acquisition, automotive revenues increased 10.4% year over year
GAAP diluted earnings per share was $1.22 as compared with $0.73 for the prior year period
Adjusted diluted earnings per share (see table herein) was $2.59. Adjusted diluted earnings per share in the prior year was $1.82
Secured new automotive business awards totaling $2.6 billion
Repurchased $92.5 million of the Company’s common stock

“Our financial results for 2023 reflect the continued strong execution by the global Gentherm team, enabling us to deliver record annual revenue in both Automotive and Medical as well as record adjusted EBITDA. In addition, we secured an unprecedented $2.6 billion dollars in new automotive awards. Of note, we won a breakthrough scalable ClimateSense® software award for nearly all future architecture General Motors ICE and electric vehicles. Our climate and comfort wins across the globe demonstrate our clear industry leading position. In addition, we have effectively leveraged the Alfmeier acquisition and won conquest pneumatic lumbar and massage awards with a growing number of OEMs, securing our position as the global leader,” said Phil Eyler, Gentherm’s President and Chief Executive Officer.

Eyler continued, “We continue to lead the industry with differentiated, proprietary technologies such as ClimateSense® and WellSense™. We were excited to unveil WellSense™ at the Consumer Electronics Show in January. This software defined consumer experience delivers customized in-cabin wellness, alertness and well-being sensations. These proprietary innovations are expected to significantly increase Gentherm’s content per vehicle and position us to be a strong contributor to software defined vehicles of the future.”

He concluded: “We remained disciplined in managing operating expenses and are making good progress on our Fit-for-Growth 2.0 initiatives as well as our footprint expansion in Tangier, Morocco and Monterrey, Mexico. With these actions, we continue to build momentum on our margin expansion.”

2023 Fourth Quarter Financial Review

Product revenues of $366.9 million increased $23.6 million, or 6.9%, in the fourth quarter of 2023 compared with the prior year period. Excluding the impact of foreign currency translation, product revenues increased 5.2% year over year.

Automotive revenue increased 6.6% year over year with revenue increases in all product categories except Electronics and Other Automotive. Adjusting for foreign currency translation, Automotive revenue increased 4.9% year over year. Excluding the impact from the UAW strike, phasing out the non-automotive electronics business as well as one-time benefits from recoveries in both periods, Automotive revenue increased 10.1% year over year. According to S&P Global’s mid-February 2024 report, actual light vehicle production in the fourth quarter of 2023 increased by 12.8% compared to the fourth quarter of 2022 in the Company’s key markets of North America, Europe, China, Japan and Korea.

Gentherm Medical revenue increased 15.2% year over year, or 13.1% excluding the impact of foreign currency translation, primarily as a result of higher Blanketrol® sales.

See the “Revenues by Product Category” table included below for additional detail.

Gross margin rate was 26.2% in the current year period versus 20.3% in the prior year period, primarily as a result of lower freight costs, fixed cost leverage from higher unit volume, increased productivity at the manufacturing facilities and supplier cost reductions, as well as the impairment charge related to the exit of the non-automotive electronics business in the prior year period. These were partially offset by wage inflation and lower price recoveries.

Net research and development expenses of $21.4 million in the 2023 fourth quarter decreased $1.9 million, or 8.3% over the prior year period, primarily as a result of higher reimbursement for design and development costs.

Selling, general and administrative expenses of $41.9 million in the 2023 fourth quarter increased $5.3 million, or 14.5%, versus the prior year period. The year-over-year increase was primarily driven by higher incentive compensation.

Acquisition and integration expenses of $0.6 million in the current year period were $3.7 million lower than the prior year period as a result of fewer expenses associated with the Alfmeier and Dacheng acquisitions. Restructuring expenses were $1.3 million in the current year period.

As described more fully in the “Reconciliation of Net Income (Loss) to Adjusted EBITDA” table included below, the Company recorded Adjusted EBITDA of $49.0 million in the 2023 fourth quarter compared with $40.9 million in the prior year period, an increase of $8.1 million or 19.7%.

Income tax benefit in the 2023 fourth quarter was $0.9 million, as compared with $0.06 million in the prior year period.

GAAP diluted earnings per share for the fourth quarter of 2023 was $0.56 compared with a loss of $(0.13) for the prior year period. Adjusted diluted earnings per share, excluding unrealized currency loss, non-cash purchasing accounting impact, restructuring expenses, acquisition and integration expenses, and other impacts (see table herein), was $0.90. Adjusted diluted earnings per share in the prior year period was $0.47.

2023 Full Year Financial Review

For full year 2023, the Company reported product revenues of $1,469.1 million, a 21.9% increase over the prior year. Excluding the impact of foreign currency translation and contributions from acquisitions, product revenues increased 10.0% year over year.

In the Automotive segment, 2023 full-year revenue was $1,423.0 million, a 22.5% increase compared to the prior year. Revenue increased in all product categories except Electronics and Other Automotive. Adjusting for foreign currency translation and the impact of the Alfmeier acquisition, organic Automotive revenue increased 10.4% year over year. Excluding the impact from the UAW strike, phasing out the non-automotive electronics business as well as one-time benefits from recoveries in both years, organic Automotive revenue increased 13.4% year over year. According to IHS Markit’s mid-February 2024 report for full-year 2023, actual light vehicle production increased 11.4% compared to full year 2022 in the Company’s key markets of North America, Europe, China, Japan and Korea.

The Medical segment revenue was $46.1 million for full year 2023, a 7.2% increase compared to the prior year. Adjusting for foreign currency translation, Medical revenues increased 6.9%, primarily as a result of increased revenues from its Dacheng air warming blankets.

Gross margin rate was 23.9% in 2023, a 120 basis point increase from 2022, primarily as a result of fixed cost leverage from higher unit volume, lower freight costs, increased productivity at the manufacturing facilities, as well as the impairment charge related to the exit of the non-automotive electronics business in the prior year period. These were partially offset by wage inflation.

Net research and development expenses of $94.4 million in 2023 increased 10.1% primarily as a result of the additional expenses from the Alfmeier business as well as increased investments to support new automotive business awards.

Selling, general and administrative expenses of $155.6 million in 2023 increased $22.9 million, or 17.2%, versus the prior year period. The year over year increase was primarily driven by additional expenses from acquired businesses and higher compensation expenses, partially offset by lower acquisition expenses.

Acquisition and integration expenses of $5.3 million in 2023 were $17.3 million lower than the prior year as a result of expenses associated with the Alfmeier and Dacheng acquisitions and realized foreign currency loss in the prior year. The Company incurred $4.7 million restructuring expenses in 2023, compared to $0.6 million in the prior year period. The Company recorded impairment of goodwill charges of $19.5 million for the year.

As described more fully in the “Reconciliation of Net Income (Loss) to Adjusted EBITDA” table included below, the Company recorded Adjusted EBITDA of $180.6 million in 2023 compared with $137.2 million in the prior year, an increase of $43.4 million or 31.6%.

Income tax expense in 2023 was $14.6 million, as compared with $13.9 million in the prior year. The effective tax rate was 26.6% for 2023. This rate differed from the Federal statutory rate of 21%, primarily due to unfavorable geographic mix of earnings as well as the impact of the goodwill impairment recorded in the second quarter.

GAAP diluted earnings per share for full year 2023 was $1.22, as compared with $0.73 for the prior year. Adjusted diluted earnings per share, excluding impairment of goodwill, unrealized currency loss, non-cash purchasing accounting impact, non-automotive electronics inventory charge and other impacts (see table herein), was $2.59. Adjusted diluted earnings per share in the prior year were $1.82.

Guidance

The Company is providing the following guidance for full year 2024:

Product revenues between $1.5 billion and $1.6 billion, based on the current forecast of customer orders, light vehicle production in the Company’s key markets declining at a low single digit rate, and a EUR to USD exchange rate of $1.10/Euro
Adjusted EBITDA between 12.5% and 13.5% of product revenues
Full year effective tax rate between 26% and 29%
Capital expenditures between $65 million and $75 million

As a result of the Company’s decision to pause the pursuit of certain Battery Performance Solutions products, Gentherm is updating its 2026 outlook:

Product Revenues between $1.9 billion and $2.0 billion
Adjusted EBITDA margin rate of approximately 16%

Webcast and Conference Call

As previously announced, Gentherm will conduct a live audio webcast with a presentation at 8:00 AM Eastern Time to review these results. The 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.

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 13744168.

A telephonic replay will be available approximately two hours after the call until 11:59 PM Eastern Time on March 6, 2024. 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 13744168.

Investor Relations 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, 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 in the cyclical Automotive industry;
increasing U.S. and global competition, including with non-traditional entrants;
our ability to effectively manage new product launches and research and development, and the market acceptance of such products and technologies;
the evolution and recent challenges of the automotive industry towards electric vehicles, autonomous vehicles and mobility on demand services, and related consumer behaviors and preferences;
our ability to convert new business awards into product revenues;
the ongoing supply constrained environment, and inflationary and other cost pressures;
the production levels of our major customers and OEMs in our key markets and sudden fluctuations in such production levels;
our ability to attract and retain highly skilled employees and wage inflation;
a tightening labor market, labor shortages or work stoppages impacting us, our customers or our suppliers, including labor strikes among certain OEMs and suppliers;
our achievement of product cost reductions to offset customer imposed price reductions or other pricing pressures;
our ability to integrate our recent acquisitions, as well as to consummate additional strategic acquisitions, investments and exits, and achieve planned benefits;
any security breaches and other disruptions to our information technology networks and systems, as well as privacy, data security and data protection risks;
the impact of our global operations, including our global supply chain, operations within Ukraine, economic and trade policies, and foreign currency and exchange risk;
any loss or insolvency of our key customers and OEMs, or key suppliers;
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;
the protection of our intellectual property in certain jurisdictions;
our compliance with anti-corruption laws and regulations;
legal and regulatory proceedings and claims involving us or one of our major customers;
the extensive regulation of our patient temperature management business;
risks associated with our manufacturing processes;
the effects of climate change and catastrophic events, as well as regulatory and stakeholder-imposed requirements and expectations to address climate change and other sustainability issues;
our product quality and safety;
our borrowing availability under our revolving credit facility, as well as our ability to access the capital markets, to support our planned growth; and
our indebtedness and compliance with our debt covenants.

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 STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)

 

 
 
Three Months Ended
December 31,
 
 
Year Ended
December 31,
 

 
 
2023
 
 
2022
 
 
2023
 
 
2022
 

Product revenues
 
$
366,933
 
 
$
343,322
 
 
$
1,469,076
 
 
$
1,204,656
 

Cost of sales
 
 
270,637
 
 
 
273,514
 
 
 
1,117,452
 
 
 
931,006
 

Gross margin
 
 
96,296
 
 
 
69,808
 
 
 
351,624
 
 
 
273,650
 

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 

Net research and development expenses
 
 
21,367
 
 
 
23,297
 
 
 
94,358
 
 
 
85,722
 

Selling, general and administrative expenses
 
 
41,899
 
 
 
36,584
 
 
 
155,579
 
 
 
132,693
 

Impairment of goodwill
 
 

 
 
 

 
 
 
19,509
 
 
 

 

Restructuring expenses
 
 
1,327
 
 
 
76
 
 
 
4,739
 
 
 
637
 

Impairment of intangible assets and property and equipment
 
 

 
 
 
6,291
 
 
 

 
 
 
6,291
 

Total operating expenses
 
 
64,593
 
 
 
66,248
 
 
 
274,185
 
 
 
225,343
 

Operating income
 
 
31,703
 
 
 
3,560
 
 
 
77,439
 
 
 
48,307
 

Interest expense, net
 
 
(5,197
)
 
 
(3,009
)
 
 
(14,641
)
 
 
(4,294
)

Foreign currency loss
 
 
(6,302
)
 
 
(5,262
)
 
 
(5,918
)
 
 
(6,778
)

Other (loss) income
 
 
(2,984
)
 
 
449
 
 
 
(1,926
)
 
 
1,147
 

Earnings (loss) before income tax
 
 
17,220
 
 
 
(4,262
)
 
 
54,954
 
 
 
38,382
 

Income tax (gain) expense
 
 
(867
)
 
 
(57
)
 
 
14,611
 
 
 
13,941
 

Net income (loss)
 
$
18,087
 
 
$
(4,205
)
 
$
40,343
 
 
$
24,441
 

Basic earnings (loss) per share
 
$
0.57
 
 
$
(0.13
)
 
$
1.23
 
 
$
0.74
 

Diluted earnings (loss) per share
 
$
0.56
 
 
$
(0.13
)
 
$
1.22
 
 
$
0.73
 

Weighted average number of shares – basic
 
 
31,974
 
 
 
33,186
 
 
 
32,778
 
 
 
33,126
 

Weighted average number of shares – diluted
 
 
32,200
 
 
 
33,186
 
 
 
33,067
 
 
 
33,503
 

GENTHERM INCORPORATED
REVENUE BY PRODUCT CATEGORY AND RECONCILIATION OF FOREIGN CURRENCY TRANSLATION IMPACT
(In thousands)
(Unaudited)

 

 
 
Three Months Ended
December 31,
 
 
Year Ended
December 31,
 

 
 
2023
 
 
2022
 
% Change
 
 
2023
 
 
2022
 
% Change
 

Climate Control Seat
 
$
121,797
 
 
$
114,765
 
 
6.1
%
 
$
482,665
 
 
$
426,046
 
 
13.3
%

Seat Heaters
 
 
77,456
 
 
 
73,603
 
 
5.2
%
 
 
308,588
 
 
 
283,970
 
 
8.7
%

Steering Wheel Heaters
 
 
38,777
 
 
 
31,780
 
 
22.0
%
 
 
153,943
 
 
 
120,949
 
 
27.3
%

Lumbar and Massage Comfort Solutions (a)
 
 
35,321
 
 
 
34,240
 
 
3.2
%
 
 
144,923
 
 
 
56,980
 
 
154.3
%

Valve Systems (a)
 
 
23,746
 
 
 
23,438
 
 
1.3
%
 
 
106,262
 
 
 
41,980
 
 
153.1
%

Automotive Cables
 
 
19,862
 
 
 
17,300
 
 
14.8
%
 
 
79,993
 
 
 
76,962
 
 
3.9
%

Battery Performance Solutions
 
 
18,346
 
 
 
16,512
 
 
11.1
%
 
 
75,484
 
 
 
71,907
 
 
5.0
%

Electronics
 
 
9,931
 
 
 
10,916