Gentherm Reports 2020 Third Quarter Results
Record Quarterly Automotive Revenue
Achieved Highest Quarterly Gross Margin and Gross Margin Rate in Three Years
Strong Quarterly Net Income Growth and Record Quarterly Adjusted EBITDA
Third Quarter Highlights
- Product revenues of
$259.5 million increased 8.1% from$240.1 million in the 2019 third quarter - Excluding the impact of foreign currency translation and divested assets, product revenues increased 8.1% year over year
- GAAP diluted earnings per share was
$0.73 as compared to$0.48 in the prior-year period - Adjusted earnings per share (see table herein) was
$0.91 as compared to$0.68 in the prior-year period - Secured automotive new business awards totaling
$80 million
“The momentum on the topline along with our ongoing disciplined approach to managing expenses also enabled us to achieve the highest gross margin and gross margin rate in three years and record Adjusted EBITDA in the quarter. While there is still near-term uncertainty in the macroeconomic environment, I am proud of our global team for the fast response to OEM demand increases, our improving operating performance and expanding technology leadership. This, along with our strong balance sheet, gives us confidence in delivering long-term shareholder value,” continued Eyler.
2020 Third Quarter Financial Review
Product revenues of
Automotive revenues increased 9.4% year over year, as decreases in Automotive Cables and
The
See the “Revenue by Product Category” table included below for additional detail.
The gross margin rate increased to 31.8% in the current-year period versus 31.1% in the prior-year period, primarily as a result of higher labor productivity, fixed cost leverage from higher unit volume, supplier cost reductions and Fit-for-Growth cost reduction initiatives. These were partially offset by annual customer price reductions as well as wage inflation.
Net research and development expenses of
Selling, general and administrative expenses of
Restructuring expenses for the third quarter of 2020 were
As described more fully in the table included below, “Reconciliation of Net Income to Adjusted EBITDA,” the Company recorded Adjusted EBITDA of
Income tax expense in the 2020 third quarter was
GAAP diluted earnings per share for the third quarter of 2020 was
Guidance
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 two 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 INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Product revenues | $ | 259,540 | $ | 240,056 | $ | 624,214 | $ | 741,303 | ||||||||
Cost of sales | 176,935 | 165,364 | 448,807 | 518,590 | ||||||||||||
Gross margin | 82,605 | 74,692 | 175,407 | 222,713 | ||||||||||||
Operating expenses: | ||||||||||||||||
Net research and development expenses | 18,070 | 18,838 | 51,171 | 56,990 | ||||||||||||
Selling, general and administrative expenses | 25,745 | 26,861 | 73,474 | 91,683 | ||||||||||||
Restructuring expenses | 284 | 8,664 | 3,452 | 11,809 | ||||||||||||
Total operating expenses | 44,099 | 54,363 | 128,097 | 160,482 | ||||||||||||
Operating income | 38,506 | 20,329 | 47,310 | 62,231 | ||||||||||||
Interest expense, net | (1,259 | ) | (1,148 | ) | (3,368 | ) | (3,756 | ) | ||||||||
Foreign currency (loss) gain | (2,883 | ) | 4,083 | (5,562 | ) | 3,482 | ||||||||||
Gain on sale of business | — | — | — | 4,970 | ||||||||||||
Impairment loss | — | (837 | ) | — | (21,206 | ) | ||||||||||
Other (loss) income | (615 | ) | 231 | 2,531 | 545 | |||||||||||
Earnings before income tax | 33,749 | 22,658 | 40,911 | 46,266 | ||||||||||||
Income tax expense | 9,603 | 6,771 | 15,214 | 19,214 | ||||||||||||
Net income | $ | 24,146 | $ | 15,887 | $ | 25,697 | $ | 27,052 | ||||||||
Basic earnings per share | $ | 0.74 | $ | 0.48 | $ | 0.79 | $ | 0.81 | ||||||||
Diluted earnings per share | $ | 0.73 | $ | 0.48 | $ | 0.78 | $ | 0.81 | ||||||||
Weighted average number of shares – basic | 32,624 | 32,839 | 32,631 | 33,283 | ||||||||||||
Weighted average number of shares – diluted | 32,958 | 32,933 | 32,924 | 33,419 | ||||||||||||
REVENUE BY PRODUCT CATEGORY
(Unaudited, in thousands)
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||||||||||||||||
Climate Control Seats (CCS) | $ | 97,058 | $ | 88,133 | 10.1 | % | $ | 229,465 | $ | 270,924 | (15.3 | )% | ||||||||||||
Seat Heaters | 73,471 | 71,030 | 3.4 | % | 171,345 | 218,578 | (21.6 | )% | ||||||||||||||||
Steering Wheel Heaters | 22,506 | 16,621 | 35.4 | % | 49,721 | 49,620 | 0.2 | % | ||||||||||||||||
Automotive Cables | 18,917 | 20,361 | (7.1 | )% | 50,890 | 66,316 | (23.3 | )% | ||||||||||||||||
Battery Thermal Management (BTM) | 15,956 | 11,890 | 34.2 | % | 33,818 | 31,531 | 7.3 | % | ||||||||||||||||
Electronics | 14,463 | 11,729 | 23.3 | % | 38,327 | 36,035 | 6.4 | % | ||||||||||||||||
Other Automotive | 7,393 | 8,479 | (12.8 | )% | 17,056 | 27,296 | (37.5 | )% | ||||||||||||||||
249,764 | 228,243 | 9.4 | % | 590,622 | 700,300 | (15.7 | )% | |||||||||||||||||
Medical | 9,776 | 8,336 | 17.3 | % | 33,592 | 26,404 | 27.2 | % | ||||||||||||||||
GPT | — | 3,477 | (100.0 | )% | — | 11,181 | (100.0 | )% | ||||||||||||||||
CSZ-IC | — | — | — | — | 3,418 | (100.0 | )% | |||||||||||||||||
9,776 | 11,813 | (17.2 | )% | 33,592 | 41,003 | (18.1 | )% | |||||||||||||||||
259,540 | 240,056 | 8.1 | % | 624,214 | 741,303 | (15.8 | )% | |||||||||||||||||
Total Core Businesses (Automotive and Medical) | $ | 259,540 | $ | 236,579 | 9.7 | % | $ | 624,214 | $ | 726,704 | (14.1 | )% | ||||||||||||
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income | $ | 24,146 | $ | 15,887 | $ | 25,697 | $ | 27,052 | ||||||||
Add back: | ||||||||||||||||
Income tax expense | 9,603 | 6,771 | 15,214 | 19,214 | ||||||||||||
Interest expense | 1,259 | 1,148 | 3,368 | 3,756 | ||||||||||||
Depreciation and amortization | 10,129 | 10,974 | 30,129 | 33,048 | ||||||||||||
Adjustments: | ||||||||||||||||
Restructuring expense | 284 | 8,664 | 3,452 | 11,809 | ||||||||||||
Impairment loss | — | 837 | — | 21,206 | ||||||||||||
Gain on sale of business | — | — | — | (4,970 | ) | |||||||||||
Acquisition and divestiture expenses | 608 | 19 | 608 | 399 | ||||||||||||
Unrealized currency loss (gain) | 4,117 | (3,564 | ) | 6,491 | (4,487 | ) | ||||||||||
Gain on sale of patents | — | — | (1,978 | ) | — | |||||||||||
CFO transition expenses | — | — | — | 1,065 | ||||||||||||
Adjusted EBITDA | $ | 50,146 | $ | 40,736 | $ | 82,981 | $ | 108,092 | ||||||||
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 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, 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.
ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
(In thousands, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income | $ | 24,146 | $ | 15,887 | $ | 25,697 | $ | 27,052 | ||||||||
Restructuring expenses | 284 | 8,664 | 3,452 | 11,809 | ||||||||||||
Gain on sale of business | — | — | — | (4,970 | ) | |||||||||||
Gain on sale of patents | — | — | (1,978 | ) | — | |||||||||||
Impairment loss | — | 837 | — | 21,206 | ||||||||||||
Unrealized currency loss (gain) | 4,117 | (3,564 | ) | 6,491 | (4,487 | ) | ||||||||||
CFO transition | — | — | — | 1,065 | ||||||||||||
Acquisition and divestiture expenses | 608 | 19 | 608 | 399 | ||||||||||||
Non-cash purchase accounting impact | 2,259 | 2,556 | 6,543 | 7,456 | ||||||||||||
Tax effect of above | (1,435 | ) | (2,059 | ) | (3,764 | ) | (2,964 | ) | ||||||||
Adjusted net income | $ | 29,979 | $ | 22,340 | $ | 37,049 | $ | 56,566 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 32,623,532 | 32,838,636 | 32,631,423 | 33,282,584 | ||||||||||||
Diluted | 32,958,439 | 32,932,679 | 32,924,013 | 33,418,555 | ||||||||||||
Earnings per share, as reported: | ||||||||||||||||
Basic | $ | 0.74 | $ | 0.48 | $ | 0.79 | $ | 0.81 | ||||||||
Diluted | $ | 0.73 | $ | 0.48 | $ | 0.78 | $ | 0.81 | ||||||||
Adjusted earnings per share: | ||||||||||||||||
Basic | $ | 0.92 | $ | 0.68 | $ | 1.14 | $ | 1.70 | ||||||||
Diluted | $ | 0.91 | $ | 0.68 | $ | 1.13 | $ | 1.69 | ||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 226,533 | $ | 50,443 | ||||
Restricted cash | 2,506 | 2,505 | ||||||
Accounts receivable, net | 193,249 | 159,710 | ||||||
Inventory: | ||||||||
Raw materials | 62,970 | 61,323 | ||||||
Work in process | 7,708 | 7,444 | ||||||
Finished goods | 43,958 | 49,712 | ||||||
Inventory, net | 114,636 | 118,479 | ||||||
Other current assets | 37,988 | 42,726 | ||||||
Total current assets | 574,912 | 373,863 | ||||||
Property and equipment, net | 150,801 | 160,605 | ||||||
66,266 | 64,572 | |||||||
Other intangible assets, net | 47,429 | 49,783 | ||||||
Operating lease right-of-use assets | 18,844 | 11,587 | ||||||
Deferred income tax assets | 55,641 | 57,650 | ||||||
Other non-current assets | 7,554 | 9,326 | ||||||
Total assets | $ | 921,447 | $ | 727,386 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 108,452 | $ | 83,035 | ||||
Current lease liabilities | 5,206 | 4,586 | ||||||
Current maturities of long-term debt | 2,500 | 2,500 | ||||||
Other current liabilities | 74,443 | 66,583 | ||||||
Total current liabilities | 190,601 | 156,704 | ||||||
Long-term debt, less current maturities | 193,061 | 78,124 | ||||||
Non-current lease liabilities | 15,046 | 6,751 | ||||||
Pension benefit obligation | 7,864 | 8,057 | ||||||
Other non-current liabilities | 3,079 | 5,100 | ||||||
Total liabilities | $ | 409,651 | $ | 254,736 | ||||
Shareholders’ equity: | ||||||||
Common Stock: | ||||||||
No par value; 55,000,000 shares authorized 32,680,013 and 32,674,354 issued and outstanding at |
107,055 | 102,507 | ||||||
Paid-in capital | 9,798 | 10,852 | ||||||
Accumulated other comprehensive loss | (32,486 | ) | (42,441 | ) | ||||
Accumulated earnings | 427,429 | 401,732 | ||||||
Total shareholders’ equity | 511,796 | 472,650 | ||||||
Total liabilities and shareholders’ equity | $ | 921,447 | $ | 727,386 | ||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended |
||||||||
2020 | 2019 | |||||||
Operating Activities: | ||||||||
Net income | $ | 25,697 | $ | 27,052 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 30,777 | 33,281 | ||||||
Deferred income taxes | 3,583 | 5,072 | ||||||
Non-cash stock based compensation | 6,569 | 5,268 | ||||||
Defined benefit plan income | (433 | ) | (754 | ) | ||||
Loss on sale of property and equipment | 562 | 319 | ||||||
Operating lease expense | 5,156 | 4,477 | ||||||
Gain on sale of patents | (1,978 | ) | — | |||||
Impairment loss | — | 21,206 | ||||||
Gain on sale of business | — | (4,970 | ) | |||||
Other | — | 189 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable, net | (33,250 | ) | (5,961 | ) | ||||
Inventory | 4,645 | (5,512 | ) | |||||
Other assets | (4,655 | ) | 9,594 | |||||
Accounts payable | 24,272 | (3,097 | ) | |||||
Other liabilities | 12,356 | (2,172 | ) | |||||
Net cash provided by operating activities | 73,301 | 83,992 | ||||||
Investing Activities: | ||||||||
Purchases of property and equipment | (11,613 | ) | (18,340 | ) | ||||
Acquisition of intangible assets | (3,141 | ) | — | |||||
Proceeds from the sale of patents and property and equipment | 1,068 | 137 | ||||||
Proceeds from divestiture of business | — | 47,500 | ||||||
Acquisition of subsidiary, net of cash acquired | — | (14,823 | ) | |||||
Net cash (used in) provided by investing activities | (13,686 | ) | 14,474 | |||||
Financing Activities: | ||||||||
Borrowing of debt | 201,193 | 29,470 | ||||||
Repayments of debt | (87,688 | ) | (69,049 | ) | ||||
Cash paid for the repurchase of Common Stock | (9,092 | ) | (58,040 | ) | ||||
Proceeds from the exercise of Common Stock options | 6,828 | 13,879 | ||||||
Cash paid for the cancellation of restricted stock | (811 | ) | (1,213 | ) | ||||
Acquisition contingent consideration payment | (618 | ) | — | |||||
Cash paid for financing costs | — | (1,278 | ) | |||||
Net cash provided by (used in) financing activities | 109,812 | (86,231 | ) | |||||
Foreign currency effect | 6,664 | (4,151 | ) | |||||
Net increase in cash, cash equivalents and restricted cash | 176,091 | 8,084 | ||||||
Cash, cash equivalents and restricted cash at beginning of period | 52,948 | 39,620 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 229,039 | $ | 47,704 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash (refund) paid for taxes | $ | (252 | ) | $ | 6,676 | |||
Cash paid for interest | $ | 3,006 | $ | 3,437 | ||||
Source: Gentherm Inc.