Gentherm Reports 2020 Second Quarter Results
Reduced Operating Expenses by 30% from the Prior-year Period
Strong Cash Flow Generation in the First Half of 2020 Despite Unprecedented Market Challenges
Total Liquidity of
Second Quarter Highlights
- Product revenues of
$136.1 million decreased 44.1% from$243.3 million in the 2019 second quarter - Excluding the impact of foreign currency translation and divested assets, product revenues decreased 42.3% year over year
- GAAP diluted loss per share was
$0.32 compared to diluted earnings per share of$0.08 for the prior-year period - Adjusted loss per share (see table herein) was
$0.30 . Adjusted earnings per share in the prior-year period was$0.47 - Secured automotive new business awards totaling
$300 million
“While the COVID-19 pandemic will continue to create challenges and uncertainties in the near term, the momentum we are seeing in new awards, winning the coveted General Motors Supplier of the Year award, coupled with aggressive cost management and our strong balance sheet position us well to continue to deliver over the long term,” continued Eyler.
2020 Second Quarter Financial Review
Product revenues for the second quarter of 2020 of
Automotive revenues declined 45.8% year over year. All product categories saw revenue declines except Electronics. Adjusting for foreign currency translation, organic Automotive revenues decreased 44.9% year over year. According to IHS Markit, actual light vehicle production declined by approximately 38.9% when compared to the second quarter of 2019 in the Company’s key markets of
The 14.3% revenue decrease in Industrial resulted from the divestiture of Global Power Technologies (“GPT”), which was sold on
See the “Revenue by Product Category” table included below for additional detail.
The gross margin rate decreased to 19.6% in the current-year period, compared with 29.9% in the prior-year period, primarily as a result of lower Automotive volume due to the COVID-19 pandemic and annual customer price reductions. These were partially offset by supplier cost reductions and positive sales mix as a result of the strength in our Medical business.
Net research and development (R&D) expenses of
Selling, general and administrative (SG&A) expenses of
During the quarter, the Company reduced its restructuring expenses by a net
As described more fully in the table included below, “Reconciliation of Net (Loss) Income to Adjusted EBITDA,” the Company recorded Adjusted EBITDA of
Income tax expense in the 2020 second quarter was
GAAP diluted loss per share for the second quarter of 2020 was
As a result of the unprecedented uncertainty facing the automotive industry and global economy,
Conference Call
As previously announced,
A live webcast and one-year archived replay of the call can be accessed on the Events page of the Investor section of
A telephonic replay will be available approximately 2 hours after the call until
Investor Relations Contact
investors@gentherm.com
(248) 308-1702
Media Contact
media@gentherm.com
248.289.9702
About
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
The foregoing risks should be read in conjunction with the Company's filings with the
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.
CONSOLIDATED CONDENSED STATEMENTS OF (LOSS) INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Product revenues | $ | 136,061 | $ | 243,326 | $ | 364,674 | $ | 501,247 | ||||||
Cost of sales | 109,326 | 170,612 | 271,872 | 353,226 | ||||||||||
Gross margin | 26,735 | 72,714 | 92,802 | 148,021 | ||||||||||
Operating expenses: | ||||||||||||||
Net research and development expenses | 15,341 | 19,255 | 33,101 | 38,152 | ||||||||||
Selling, general and administrative expenses | 21,889 | 32,171 | 47,729 | 64,822 | ||||||||||
Restructuring expenses | (598 | ) | 1,231 | 3,168 | 3,145 | |||||||||
Total operating expenses | 36,632 | 52,657 | 83,998 | 106,119 | ||||||||||
Operating (loss) income | (9,897 | ) | 20,057 | 8,804 | 41,902 | |||||||||
Interest expense, net | (1,361 | ) | (1,240 | ) | (2,109 | ) | (2,608 | |||||||
Foreign currency loss | (1,741 | ) | (804 | ) | (2,679 | ) | (601 | |||||||
Gain on sale of business | — | — | — | 4,970 | ||||||||||
Impairment loss | — | (9,885 | ) | — | (20,369 | |||||||||
Other income | 2,882 | 171 | 3,146 | 314 | ||||||||||
(Loss) earnings before income tax | (10,117 | ) | 8,299 | 7,162 | 23,608 | |||||||||
Income tax expense | 205 | 5,548 | 5,611 | 12,443 | ||||||||||
Net (loss) income | $ | (10,322 | ) | $ | 2,751 | $ | 1,551 | $ | 11,165 | |||||
Basic (loss) earnings per share | $ | (0.32 | ) | $ | 0.08 | $ | 0.05 | $ | 0.33 | |||||
Diluted (loss) earnings per share | $ | (0.32 | ) | $ | 0.08 | $ | 0.05 | $ | 0.33 | |||||
Weighted average number of shares – basic | 32,580 | 33,441 | 32,635 | 33,508 | ||||||||||
Weighted average number of shares – diluted | 32,580 | 33,574 | 32,869 | 33,651 |
REVENUE BY PRODUCT CATEGORY
(Unaudited, in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | ||||||||||||
Climate Control Seats (CCS) | $ | 49,879 | $ | 88,437 | (43.6 | )% | $ | 132,407 | $ | 182,791 | (27.6 | )% | |||||
Seat Heaters | 33,342 | 73,628 | (54.7 | )% | 97,874 | 147,548 | (33.7 | )% | |||||||||
Electronics | 13,488 | 11,454 | 17.8 | % | 23,864 | 24,306 | (1.8 | )% | |||||||||
Automotive Cables | 9,833 | 22,205 | (55.7 | )% | 31,973 | 45,955 | (30.4 | )% | |||||||||
Steering Wheel Heaters | 7,980 | 16,029 | (50.2 | )% | 27,215 | 32,999 | (17.5 | )% | |||||||||
Battery Thermal Management (BTM) | 6,653 | 8,897 | (25.2 | )% | 17,862 | 19,641 | (9.1 | )% | |||||||||
Other Automotive | 3,211 | 9,050 | (64.5 | )% | 9,663 | 18,817 | (48.6 | )% | |||||||||
124,386 | 229,700 | (45.8 | )% | 340,858 | 472,057 | (27.8 | )% | ||||||||||
Medical | 11,675 | 9,881 | 18.2 | % | 23,816 | 18,068 | 31.8 | % | |||||||||
GPT | — | 3,745 | (100.0 | )% | — | 7,704 | (100.0 | )% | |||||||||
CSZ-IC | — | — | 0.0 | % | — | 3,418 | (100.0 | )% | |||||||||
11,675 | 13,626 | (14.3 | )% | 23,816 | 29,190 | (18.4 | )% | ||||||||||
136,061 | 243,326 | (44.1 | )% | 364,674 | 501,247 | (27.2 | )% | ||||||||||
Total Core Businesses (Automotive and Medical) | $ | 136,061 | $ | 239,581 | (43.2 | )% | $ | 364,674 | $ | 490,125 | (25.6 | )% |
RECONCILIATION OF NET (LOSS) INCOME TO ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Net (loss) income | $ | (10,322 | ) | $ | 2,751 | $ | 1,551 | $ | 11,165 | |||||
Add back: | ||||||||||||||
Income tax expense | 205 | 5,548 | 5,611 | 12,443 | ||||||||||
Interest expense | 1,361 | 1,240 | 2,109 | 2,608 | ||||||||||
Depreciation and amortization | 9,847 | 11,094 | 20,000 | 22,074 | ||||||||||
Adjustments: | ||||||||||||||
Restructuring expense | (598 | ) | 1,231 | 3,168 | 3,145 | |||||||||
Impairment loss | — | 9,885 | — | 20,369 | ||||||||||
Gain on sale of business | — | — | — | (4,970 | ) | |||||||||
Acquisition transaction expense | — | 342 | — | 380 | ||||||||||
Unrealized currency loss (gain) | 1,609 | 71 | 2,374 | (923 | ) | |||||||||
Gain on sale of patents | (1,978 | ) | — | (1,978 | ) | — | ||||||||
CFO transition expenses | — | — | — | 1,065 | ||||||||||
Adjusted EBITDA | $ | 124 | $ | 32,162 | $ | 32,835 | $ | 67,356 |
Use of Non-GAAP Financial Measures
In addition to the results reported in accordance with GAAP throughout this release, the Company has provided information regarding adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and adjusted earnings per share (“Adjusted earnings per share” or “Adjusted EPS”), each, a non-GAAP financial measure. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, deferred financing cost amortization, 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, gain or loss on sale of business, restructuring expense, unrealized currency gain or loss and unrealized revaluation of derivatives. 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, gain or loss on sale of business, restructuring expense, unrealized currency gain or loss and unrealized revaluation of derivatives. The Company’s reconciliation of net income to Adjusted EBITDA is provided in this release. The Company’s Reconciliation of Adjusted EPS can be found in the supplemental materials furnished as Exhibit 99.2 to the Company’s Form 8-K dated
In evaluating its business, the Company considers and uses Adjusted EBITDA and Adjusted EPS as supplemental measures of its operating performance. Management provides Adjusted EBITDA and Adjusted EPS 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. Other companies in our industry may 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, investors should not consider Adjusted EBITDA or Adjusted EPS in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP.
Non-GAAP measures referenced in this release may include estimates of future Adjusted EBITDA and Adjusted EPS. Such forward-looking non-GAAP measures may differ significantly from the corresponding GAAP measures, due to depreciation and amortization, tax expense, and/or interest expense, some or all of which management has not quantified for the future periods.
ACQUISITION TRANSACTION EXPENSES, PURCHASE ACCOUNTING IMPACTS
AND OTHER EFFECTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Transaction related current expenses | |||||||||||||||
Acquisition transaction expenses | $ | — | $ | 342 | $ | — | $ | 380 | |||||||
Non-cash purchase accounting impacts | |||||||||||||||
Customer relationships amortization | 1,595 | 1,936 | 3,191 | 3,764 | |||||||||||
Technology amortization | 438 | 498 | 877 | 980 | |||||||||||
Inventory fair value adjustment | 108 | 117 | 216 | 156 | |||||||||||
Other effects | |||||||||||||||
Restructuring expenses | (598 | ) | 1,231 | 3,168 | 3,145 | ||||||||||
Gain on sale of business | — | — | — | (4,970 | ) | ||||||||||
Gain on sale of patents | (1,978 | ) | — | (1,978 | ) | — | |||||||||
Impairment loss | — | 9,885 | — | 20,369 | |||||||||||
Unrealized currency (gain) loss | 1,609 | 71 | 2,374 | (923 | ) | ||||||||||
CFO transition | — | — | — | 1,065 | |||||||||||
Total acquisition transaction expenses, purchase accounting impacts and other effects |
$ | 1,174 | $ | 14,080 | $ | 7,848 | $ | 23,966 | |||||||
Tax effect of above | (619 | ) | (1,117 | ) | (2,329 | ) | (905 | ) | |||||||
Net income effect | $ | 555 | $ | 12,963 | $ | 5,519 | $ | 23,061 | |||||||
Earnings per share - difference | |||||||||||||||
Basic | $ | 0.02 | $ | 0.39 | $ | 0.17 | $ | 0.69 | |||||||
Diluted | $ | 0.02 | $ | 0.39 | $ | 0.17 | $ | 0.69 | |||||||
Adjusted earnings per share | |||||||||||||||
Basic | $ | (0.30 | ) | $ | 0.47 | $ | 0.22 | $ | 1.02 | ||||||
Diluted | $ | (0.30 | ) | $ | 0.47 | $ | 0.22 | $ | 1.02 |
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 209,170 | $ | 50,443 | |||
Restricted cash | 2,505 | 2,505 | |||||
Accounts receivable, less allowance of |
118,885 | 159,710 | |||||
Inventory: | |||||||
Raw materials | 61,762 | 61,323 | |||||
Work in process | 6,575 | 7,444 | |||||
Finished goods | 44,293 | 49,712 | |||||
Inventory, net | 112,630 | 118,479 | |||||
Other current assets | 36,592 | 42,726 | |||||
Total current assets | 479,782 | 373,863 | |||||
Property and equipment, net | 149,240 | 160,605 | |||||
64,629 | 64,572 | ||||||
Other intangible assets, net | 48,399 | 49,783 | |||||
Operating lease right-of-use assets | 12,780 | 11,587 | |||||
Deferred income tax assets | 57,972 | 57,650 | |||||
Other non-current assets | 10,568 | 9,326 | |||||
Total assets | $ | 823,370 | $ | 727,386 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 65,521 | $ | 83,035 | |||
Current lease liabilities | 4,184 | 4,586 | |||||
Current maturities of long-term debt | 2,500 | 2,500 | |||||
Other current liabilities | 63,805 | 66,583 | |||||
Total current liabilities | 136,010 | 156,704 | |||||
Long-term debt, less current maturities | 198,099 | 78,124 | |||||
Pension benefit obligation | 7,690 | 8,057 | |||||
Non-current lease liabilities | 10,097 | 6,751 | |||||
Other non-current liabilities | 2,153 | 5,100 | |||||
Total liabilities | $ | 354,049 | $ | 254,736 | |||
Shareholders’ equity: | |||||||
Common Stock: | |||||||
No par value; 55,000,000 shares authorized 32,639,752 and 32,674,354 issued and outstanding at |
104,113 | 102,507 | |||||
Paid-in capital | 9,770 | 10,852 | |||||
Accumulated other comprehensive loss | (47,845 | ) | (42,441 | ) | |||
Accumulated earnings | 403,283 | 401,732 | |||||
Total shareholders’ equity | 469,321 | 472,650 | |||||
Total liabilities and shareholders’ equity | $ | 823,370 | $ | 727,386 |
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended |
|||||||
2020 | 2019 | ||||||
Operating Activities: | |||||||
Net income | $ | 1,551 | $ | 11,165 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 20,488 | 22,217 | |||||
Deferred income taxes | (913 | ) | 3,070 | ||||
Stock based compensation | 3,909 | 3,291 | |||||
Defined benefit plan income | (278 | ) | (699 | ) | |||
Allowance for credit losses | 605 | 545 | |||||
Loss on sale of property and equipment | 339 | 227 | |||||
Operating lease expense | 3,490 | 2,903 | |||||
Impairment loss | — | 20,369 | |||||
Gain on sale of business | — | (4,970 | ) | ||||
Gain on sale of patents | (1,978 | ) | — | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | 37,805 | (4,021 | ) | ||||
Inventory | 5,292 | 1,650 | |||||
Other assets | 2,888 | 276 | |||||
Accounts payable | (17,753 | ) | (9,528 | ) | |||
Other liabilities | (5,218 | ) | (6,087 | ) | |||
Net cash provided by operating activities | 50,227 | 40,408 | |||||
Investing Activities: | |||||||
Purchases of property and equipment | (7,500 | ) | (13,024 | ) | |||
Acquisition of intangible assets | (3,141 | ) | — | ||||
Proceeds from the sale of patents and property and equipment | 1,061 | 82 | |||||
Proceeds from divestiture of business | — | 47,500 | |||||
Acquisition of subsidiary, net of cash acquired | — | (15,476 | ) | ||||
Net cash (used in) provided by investing activities | (9,580 | ) | 19,082 | ||||
Financing Activities: | |||||||
Borrowing of debt | 201,193 | 28,371 | |||||
Repayments of debt | (81,830 | ) | (61,120 | ) | |||
Cash paid for financing costs | — | (1,278 | ) | ||||
Cash paid for the cancellation of restricted stock | (471 | ) | (926 | ) | |||
Proceeds from the exercise of Common Stock options | 6,178 | 4,771 | |||||
Cash paid for the repurchase of Common Stock | (9,092 | ) | (33,040 | ) | |||
Net cash provided by (used in) financing activities | 115,978 | (63,222 | ) | ||||
Foreign currency effect | 2,102 | 293 | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 158,727 | (3,439 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 52,948 | 39,620 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 211,675 | $ | 36,181 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash (refund) paid for taxes | $ | (3,117 | ) | $ | 3,522 | ||
Cash paid for interest | $ | 1,967 | $ | 2,712 |
Source: Gentherm Inc.