Q4 2021 Gentherm Inc Earnings Call

Speaker 1: Greedy.

Greetings and welcome to the <unk>, Inc, fourth quarter and year end 2021 earnings conference call.

Speaker 2: Welcome to the Gentherm Inc. fourth quarter and year-end 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

Speaker 2: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note this conference is being recorded.

Speaker 2: I will now turn the conference over to your host, Eugene Brentano, Corporate Development and Investor Relations.

I will now turn the conference over to your host Eugene Brentano corporate development and Investor Relations. Thank you you may begin.

Speaker 3: Thank you and good morning, everyone, and thanks for joining us today. GenFM's earnings results were released earlier this morning, and a copy of the release is available at GenFM.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of GenFM's website.

Thank you and good morning, everyone and thanks for joining US today <unk> earnings results were released earlier this morning, and a copy of the release is available at Jenson Dot Com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of <unk>.

<unk> website.

Speaker 3: During this call, we may make forward-looking statements within the meaning of federal securities laws.

During this call we may make forward looking statements within the meaning of federal Securities laws.

Speaker 3: Statements reflect our current views with respect to future events and financial performance, and actual results may differ materially.

Statements reflect our current views with respect to future events and financial performance and actual results may differ materially.

Speaker 3: We undertake no obligation to update them except as required by law.

We undertake no obligation to update them, except as required by law.

Speaker 3: Please see Gemtham's earnings release and its SEC filings, including the latest 10-K and subsequent reports, for discussions of our risk factors and other risks and uncertainties underlining such forward-looking statements.

Please see <unk> earnings release, and its SEC filings, including the latest 10-K and subsequent reports for a discussion of our risk factors and other risks and uncertainties underlying such forward looking statements.

Speaker 3: During the call, we may discuss non-GAAP financial measures as defined by SEC Regulation G.

During the call we may discuss non-GAAP financial measures as defined by S. E C regulation G rec.

Speaker 3: Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release or investor presentation.

Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release or Investor presentation.

Speaker 3: On the call with me today are Phil Eiler, President and Chief Executive Officer, and Mattel and Versa, Chief Financial Officer. During their remarks, Phil and Mattel will be referring to a presentation deck that we have made available on our website at jentham.com slash event.

On the call with me today are Phil Eiler, President and Chief Executive Officer, and motto and versa, Chief Financial officer during their remarks, Phil and Matteo will be referring to a presentation deck that we have made available on our website at <unk> dot com slash events.

Speaker 3: After their prepared remarks, we will be pleased to take your questions. Now I'd like to turn the call over to Phil.

Their prepared remarks, we will be pleased to take your questions now.

Now I'd like to turn the call over to Phil.

Speaker 4: Thank you, Yijing. Good morning, everyone, and thank you for joining us today.

Thank you Jim Good morning, everyone and thank you for joining us today.

Speaker 4: I am extremely proud of what the GenTherm team was able to accomplish in 2021 in what was a continuously challenging operating environment.

I am extremely proud of what the <unk> team was able to accomplish in 2021, and what was a continuously challenging operating environment.

Speaker 4: As you can see on slide four, full-year automotive revenue outperformed light vehicle production in our key markets by approximately 13 percentage points.

As you can see on slide four full year automotive revenue outperformed light vehicle production in our key markets by approximately 13 percentage points, achieving the highest annual automotive revenue in the company's history, and we secured near record automotive awards of $1 $6 billion.

Speaker 4: achieving the highest annual automotive revenue in the company's history, and we secured near record automotive awards of $1.6 billion.

Speaker 4: In addition, we delivered record adjusted EBITDA, record cash flow from operations, and record free cash flow in 2021.

In addition, we delivered record adjusted EBITDA record cash flow from operations and record free cash flow in 2021.

Speaker 4: Finally, we have clearly expanded our position as a leading supplier in the rapidly expanding electric vehicle market, which I will elaborate on in a few minutes.

Finally, we are clearly expanded our position as a leading supplier in the rapidly expanding electric vehicle market, which I will elaborate on in a few minutes.

Speaker 4: On the operations front, I would like to recognize our manufacturing and supply chain teams for working tirelessly to minimize the impact of volatile customer demand, escalating freight costs, material cost inflation, and of course, the global semiconductor shortages, including the anticipated supply gap with one of our suppliers in the fourth quarter that we mentioned on our last earnings call.

On the operations front I would like to recognize our manufacturing and supply chain teams for working tirelessly to minimize the impact of volatile customer demand.

<unk> freight cost material cost inflation and of course, the global semiconductor shortages, including the anticipated supply gap with one of our suppliers in the fourth quarter that we mentioned on our last earnings call.

Speaker 4: Mateo will provide details about our fourth quarter and full year financial results in a few minutes.

Matteo will provide details about our fourth quarter and full year financial results in a few minutes.

Speaker 4: Now, turning to the automotive highlights on slide 5, in the fourth quarter, we launched our automotive solutions on 15 different vehicles across 11 OEMs, including BMW, Ford, Geely, General Motors, Hyundai, and Toyota.

Now turning to the automotive highlights on slide five in the fourth quarter, we launched our automotive solutions on 15 different vehicles across 11, Oems, including BMW Ford Geely General Motors, Hyundai and Toyota.

Speaker 4: We continue to see momentum for our CCS product and launched on the Lincoln Zephyr, Nissan Aria EV, Nissan Pathfinder, and Infiniti QX60.

We continue to see momentum for our Ccs product and launched on the Lincoln Zephyr and <unk>.

Nissan ARIA EV.

Nissan Pathfinder and Infinity <unk> 60 <unk>.

Speaker 4: A special note, our CCS solution is now launched on Range Rover's MLA platform, including plug-in hybrid and mild hybrid vehicles.

Special note. Our Ccs solution has now launched on range Rovers MLA platform, including plug in hybrid and mild hybrid vehicles.

Speaker 4: While our cable business has been traditionally on internal combustion vehicles, I'm pleased to share that we launched a high-voltage cable solution on the Rivian R1T and R1S.

While our cable business has been traditionally and on internal combustion vehicles I am pleased to share that we launched the high voltage cable solution on the <unk> and <unk> S.

Speaker 4: This is in addition to the recently launched high-voltage cables across Jaguar and Land Rover plug-in hybrid platforms.

This is in addition to the recently launched high voltage cables across Jaguar and land Rover plug in hybrid platforms.

Speaker 4: I'm proud of our teams for transforming our product lines to create value for electric vehicle applications.

I am proud of our teams for transforming our product lines to create value for electric vehicle applications.

Speaker 4: In addition, we continue to make great progress on Climate Sense, which, as you will recall, is our software-driven microclimate platform using an algorithm based on thermophysiology.

In addition, we continue to make great progress on climate sense, which as you will recall is our software driven microclimate platform using an algorithm based on thermal physiology.

Speaker 4: Winning our first ClimateSense Production Award in 2021 was a key milestone for us and our top priority remains the flawless launch on this model year 2024 platform.

Winning our first climate since production award in 2021 was a key milestone for us and our top priority remains the flawless launch on this model year 2024 platform.

Speaker 4: ClimateSense is a critical part of our long-term strategy and continues to gain interest from global OEMs.

Client incentives as a critical part of our long term strategy and continues to gain interest from global Oems.

Speaker 4: I'm pleased to announce that we have launched a new development project with a third OEM in Europe .

I am pleased to announce that we have launched a new development project with a third OEM in Europe .

Speaker 4: We continue to optimize the value proposition for electric vehicles by significantly reducing power consumption and increasing range in extreme temperatures, all while providing best-in-class passenger comfort.

We continue to optimize the value proposition for electric vehicles by significantly reducing power consumption and increasing range and extreme temperatures all while providing best in class passenger comfort.

Speaker 4: Now on to slide 6, where you can see that we continue to win new business at a pace that sets a solid foundation for future growth.

Now on to slide six where you can see that we continue to win new business at a pace that sets a solid foundation for future growth.

Speaker 4: In the fourth quarter, we secured $540 million in new program awards across 20 different customers.

In the fourth quarter, we secured $540 million in New program awards across 20 different customers.

Speaker 4: This brings us to over $1.6 billion for total year wins, a very strong finish to a challenging year.

This brings us to over $1 6 billion for total year wins, a very strong finish to a challenging year.

Speaker 4: We won multiple CCS awards, including platform wins with the Cadillac XT3, Hongxi HS5, the Great Wall Wei Sedans,

We won multiple Ccs awards, including platform wins with the Cadillac XTS three Hong sheet Hs five the great wall way sedans.

Speaker 4: Honda Vezel and XRV, Kia Sportage, and Xiaopeng EV SUV.

Honda vessel, and SRV, Kia Sportage, and Xiaopeng EV SUV.

Speaker 4: Gentherm continues to expand our strong position with one of the largest electric vehicle manufacturers. In the fourth quarter, we secured multiple program awards for our climate-controlled seats and seat heaters.

<unk> continues to expand our strong position with one of the largest electric vehicle manufacturers in the fourth quarter, we secured multiple program awards for our climate control seats and seat heaters.

Speaker 4: This was the largest win that we have ever had on EV platform.

This was the largest win that we have ever had on EV platforms.

Speaker 4: This win is in addition to the steering wheel and seat heater programs that we've already launched with this OEM since 2014.

This win is in addition to the steering wheel and seat heater programs that we've already launched with this OEM since 2014.

Speaker 4: I'd like to thank our global teams for this breakthrough award as we continue to accelerate the adoption of GenTherm technologies in the EV space.

I'd like to thank our global teams for this breakthrough award as we continue to accelerate the adoption of <unk> technologies in the EV space.

Speaker 4: We received 23 steering wheel heater awards across eight OEMs in the quarter, including the Cadillac CT6, Chevrolet CUV, Great Wall Flashcat and Howmow, Lincoln Nautilus, Volkswagen Tiguan, and Volvo XC90. Of note, out of these 23 programs, seven were hands-on detection enabled.

We received 23 steering wheel heater awards across eight Oems in the quarter, including the Cadillac Cts six Chevrolet <unk>, great Wall Flash cap and Hormel, Lincoln Nautilus, Volkswagen Tiguan and Volvo XC 90.

Of note out of these 23 programs seven where hands on detection enabled.

Speaker 4: Moving to electronics, I'm pleased to share that we won a further follow-on award for our Next Generation Multifunction Electronic Controller with Ford.

Moving to electronics I am pleased to share that we want to further follow on award for our next generation Multifunction electronic controller with Ford.

Speaker 4: If you recall, our initial wind with four combined Gentherm's climate control solution with memory seat functionality, which utilizes our proprietary intelligent positioning system technology.

If you recall our initial win with four combined <unk> climate control solution with memory seat functionality, which utilizes our proprietary intelligent positioning system technology.

Speaker 4: This follow-on award added other functionalities, for example, controlling the power running board.

This follow on award added other functionalities for example, controlling the power running boards, which helps Ford further increase system efficiency and reduce costs.

Speaker 4: which helps Ford further increase system efficiency and reduce costs.

Speaker 4: This module will be used in the Lincoln Navigator and Ford Expedition models produced in North America.

This module will be used in the Lincoln Navigator and Ford expedition models produced in North America.

Speaker 4: Finally, we had a strategically important award in our battery performance group by securing a battery heating award for a new Renault plug-in hybrid vehicle using our proprietary thin foil technology.

Finally, we had a strategically important award in our battery performance group by securing a battery heating award for a new Renault plug in hybrid vehicle using our proprietary thin foil technology.

Speaker 4: This continues to validate the potential of our unique technology compared to the current state of art.

This continues to validate the potential of our unique technology compared to this current state of art.

Okay.

Speaker 4: Now, moving to slide seven, I'd like to give you some perspective on how our innovative solutions can significantly increase GenFIRM's content for vehicle as electric vehicles expand in the market.

Now moving to slide seven I'd like to give you some perspective on how our innovative solutions can significantly increase gen. <unk> content per vehicle is electric vehicles expand in the market.

Speaker 4: According to IHS estimates, electrified vehicle production, including mild hybrid, full hybrid, and battery electric, is expected to grow from 20% of global production in 2021 to 70% in 2030.

According to IHS estimates electrified vehicle production, including mild hybrid full hybrid and battery electric is expected to grow from 20% of global production in 2021% to 70% in 2030.

Speaker 4: We believe GenTherm's current and future technologies will play an important role in extending the range of electric vehicles and delighting passengers with thermal comfort.

We believe <unk> current and future technologies will play an important role in extending the range of electric vehicles and the lighting passengers with thermal comfort.

Speaker 4: Over the past several years, we continue to expand our core climate and comfort solutions.

Over the past several years, we continue to expand our core climate and comfort solutions.

Speaker 4: Our portfolio now includes seat heat, surface heat, floor and ceiling radiant heat, neck and shoulder conditioning, advanced climate-controlled seats, as well as our proprietary hands-on detection-enabled steering wheel heaters.

Our portfolio now includes CPE surface heat floor, and ceiling radiant heat neck, and shoulder conditioning advanced climate control seats as well as our proprietary hands on detection enabled steering wheel heaters.

Speaker 4: All of these, individually or combined, help reduce reliance on the HVAC system by focusing on thermal management of the occupant instead of the vehicle, and thus reduce power consumption and increase range.

All of these individually or combined help reduce reliance on the HVAC system by focusing on thermal management of the occupant instead of the vehicle and thus reduce power consumption and increase range.

Speaker 4: Moving to battery performance solutions, we've expanded beyond air cooling and our PACE award-winning Thermal Electric Battery Thermal Management products for mild hybrid 48-volt lithium-ion batteries.

Moving to battery performance solutions, we've expanded beyond air cooling and our pace award winning thermal electric battery thermal management products for mild hybrid 48 volt lithium ion batteries.

Speaker 4: And we've now launched our high-voltage cables, proprietary thin-foil battery heater, as well as wire-based and thin-foil cell connecting systems.

And we've now launched our high voltage cables proprietary thin foil battery heater as well as wire based and thin foil cell connecting systems.

Speaker 4: Our growing portfolio of battery performance solutions help OEMs improve battery performance and extend longevity.

Our growing portfolio of battery performance solutions help Oems improve battery performance and extend longevity.

Speaker 4: On the digital intelligence front, we've developed and manufactured innovative thermal and multifunction electronic control units, or ECUs, such as the ones for the Ford award I mentioned earlier.

On the digital intelligence front, we've developed and manufactured innovative thermal and Multifunction electronic control units or <unk>, such as the ones for the Ford Award I mentioned earlier.

Speaker 4: Combining functionality and ECUs helps to reduce the number of units in the vehicle, thereby reducing cost and weight, which particularly benefits electric vehicles.

Combining functionality and ease of use helps to reduce the number of units in the vehicle, thereby reducing cost and weight, which particularly benefits electric vehicles.

Speaker 4: In addition, we have significantly grown our software capabilities. As we prepare for the launch of our first Climate Sense Production Award, we continue to advance our microclimate platform using the proprietary algorithm that we've developed based on thermophysiology.

In addition, we have significantly grown our software capabilities as we prepare for the launch of our first climate production Award we continue to advance our microclimate platform using the proprietary algorithm that we've developed based on thermal physiology.

Speaker 4: To summarize, our customers are looking to Gentherm not only for interior climate comfort solutions, which are proving to be a key element of energy conservation to EVs, but also for battery performance and digital intelligence solutions.

To summarize our customers are looking to <unk> not only for interior climate copper solutions, which are proving to be a key element of energy conservation to Evs, but also for battery performance and digital intelligence solutions, we are well positioned to capitalize on the accelerating growth of electric vehicles.

Speaker 4: We are well positioned to capitalize on the accelerating growth of electric vehicles.

Speaker 4: Now moving to slide eight, I'd like to highlight the innovative work our team is doing to bring differentiated proprietary solutions to market.

Now moving to slide eight.

I'd like to highlight the innovative work our team is doing to bring differentiated proprietary solutions to market.

Speaker 4: Let me talk about some of the technology that we introduced in 2021.

Let me talk about some of the technology that we introduced in 2021.

Speaker 4: First, as we've discussed several times, our ClimateSense software solution is now production ready.

First as we've discussed several times our climate since software solution is now production ready.

Speaker 4: In addition, we've introduced a compelling user experience platform and application to inspire OEMs to enrich consumer experience.

In addition, we've introduced a compelling user experience platform and application to inspire Oems to enrich consumer experience.

Speaker 4: Next is our proprietary FiberTherm, our next generation carbon fiber seat heat technology.

Next is our proprietary fiber <unk>, our next generation carbon fiber <unk> technology.

Speaker 4: FibreTherm integrates seat heaters closer to the seat surface and thus provides faster time to comfort and enables energy savings compared to the traditional wire heater technology.

Fiber therm integrate seat heaters closer to the seat surface and thus provides faster time to comfort and enables energy savings compared to the traditional wire heater technology.

Third pilot.

Speaker 4: which is Gentherm's next-generation proprietary hands-on detection, or HOD, technology, combining both heating and capacitive sensing in a single-layer solution with a single ECU controlling both functions.

Which is <unk> next generation proprietary hands on detection or HOA technology, combining both heating and capacitive sensing in a single layer solution with a single <unk> controlling both functions.

Speaker 4: HOD is a key function to safely enable higher levels of autonomous vehicle operation.

<unk> is a key function to safely enable higher levels of autonomous vehicle operations are.

Speaker 4: Our proprietary solution eliminates the need for a second ECU and a wire harness in order to reduce system costs while providing 100% sensing resolution during heating mode.

Our proprietary solution eliminates the need for a second acu and a wire harness in order to reduce system costs, while providing 100% sensing resolution during heating mode.

Speaker 4: PilotSense provides better steering wheel surface heating and the opportunity for lightweight designs by eliminating the second layer in a traditional multi-layer HOD solution.

Pilot provides better steering wheel surface heating and the opportunity for lightweight designs by eliminating the second layer in a traditional multi layer <unk> solution.

Fourth our intelligent net conditioning solution.

Speaker 4: The neck warmer is integrated into the seat headrest, providing an immediate warm sensation to the occupant.

The neck warmer is integrated into the seat headrest, providing an immediate warm sensation to the occupant.

Speaker 4: Our thermal physiology research shows that the proximity of this compact device to the neck enables instantaneous and personalized comfort.

Our thermal physiology research shows that the proximity of this compact device to the neck enables instantaneous and personalized comfort.

Speaker 4: With an integrated ECU, sensors, and smart algorithm, this local microclimate device enables optimal individual thermal comfort and energy savings for the vehicle. Fifth, our next...

With an integrated <unk> sensors, and smart algorithm. This local microclimate device enables optimal individual thermal comfort and energy savings for the vehicle.

Fifth our next generation Ccs active solution <unk>.

Speaker 4: Gentherm has developed a new Intelligent Microthermal Module, or IMTM, that combines the benefits of our active and ventilated climate-controlled seat systems in one package.

<unk> has developed a new intelligent micro thermal module or MTM that combines the benefits of our active and ventilated climate control seat systems in one package.

Speaker 4: With its smart airflow control valve and thermoelectric element, IMTM provides best-in-class time-to-comfort and cooling sensation at the start of a drive on a hot day and then switches to ventilation mode for long-term comfort.

With its smart air flow control valve and Thermo electric element MTM provides best in class time to comfort and cooling sensation at the start of a drive on a hot day, and then switches to ventilation mode for long term comfort.

Speaker 4: This can be offered standalone or in conjunction with other smart microclimate technologies as part of ClimateSense.

This can be offered stand alone or in conjunction with other smart microclimate technologies as part of climate.

Speaker 4: IMTM integrates our thermal physiology-based algorithm for an optimized thermal comfort experience to conserve power and extend range for electric vehicles.

<unk> integrates our thermal physiology based algorithm for an optimized thermal comfort experience to conserve power and extend range for electric vehicles.

Speaker 4: And last, we've now introduced our market-ready thin-foil cell connecting system with embedded cell sensing. This solution provides new levels of battery pack intelligence to battery management.

And last we've now introduced our market ready thin foil cell connecting system with embedded cell sensing this.

This solution provides new levels of battery pack intelligence to battery management systems.

Speaker 4: As we continue to add innovative solutions to our portfolio, more electric vehicle manufacturers are now leveraging our solutions to enhance comfort while significantly improving energy efficiency and range.

As we.

To add innovative solutions to our portfolio more electric vehicle manufacturers are now leveraging our solutions to enhance comfort, while significantly improving energy efficiency and range.

Now, let's turn to slide nine for a discussion of our medical business.

Speaker 4: We return to double-digit revenue growth in the fourth quarter in medical with 17% year-over-year growth.

We returned to double digit revenue growth in the fourth quarter and medical was 17% year over year growth.

Speaker 4: We continue to see strong demand for our flagship product, Blanketrol, in the U.S. and in international markets such as Mexico and Argentina.

We continue to see strong demand for our flagship product blank control in the U S and in international markets, such as Mexico and Argentina.

Speaker 4: Blanketrol is a trusted brand for fever management, and we secured upgrade orders to replace end-of-life competitor devices in the fourth quarter.

Blink control as a trusted brand for fever management, and we secured upgrade orders to replace end of life competitor devices in the fourth quarter.

Speaker 4: In addition, we entered the equipment rental market with an exclusive partnership with U.S. MedEquip, a company that provides short-term and long-term rentals to hospitals with capital equipment needs.

In addition, we entered the equipment rental market with an exclusive partnership with U S. Med equip a company that provides short term and long term rentals to hospitals with capital equipment needs.

Speaker 4: They are on most group purchasing organization contracts and provide a great solution for hospitals that need capital equipment but don't have the budgeted funds to purchase.

They are on most group purchasing organization contracts and provide a great solution for hospitals that need capital equipment, but don't have the budgeted funds for purchase.

Speaker 4: We're also seeing good momentum with ASTHOPAD, and we've conducted trials at large health systems, as well as independent hospitals.

We're also seeing good momentum with azo pad and we've conducted trials at large health systems as well as independent hospitals.

Speaker 4: The introduction of AstroPad patient warming system is a strong proof point of how we're able to leverage technology from our automotive business to provide advancement in patient temperature management in our medical business.

The introduction of <unk> patient warming system is a strong proof point of how we're able to leverage technology from our automotive business to provide advancements in patient temperature management and our medical business.

Speaker 4: Spectrum Health in Michigan has approved Astopad for use by all of their members.

Spectrum health in Michigan has approved <unk> for use by all of their members.

Speaker 4: West Virginia University Hospital is adopting Astopad for their cardiac procedures, with plans to expand into orthopedics.

West Virginia University Hospital is adopting <unk> for their cardiac procedures with plans to expand into orthopedics.

Speaker 4: Mountain View Regional Medical Center in New Mexico is using Astopad on a variety of surgeries.

Mountain view regional Medical center in New Mexico is using <unk> on a variety of surgeries.

Speaker 4: As hospitals look for non-air options to warm patients, Gentherm is differentiated from our competitors by offering both convective and conductive solutions.

As hospitals look for non air options to warn patients <unk> is differentiated from our competitors by offering both convective and conductive solutions.

Now let me summarize.

Speaker 4: Our financial results in 2021 demonstrate the continued successful execution of our strategic plan to focus growth, aggressively manage our cost structure, and bring innovative solutions to market.

Our financial results in 2021 demonstrate the continued successful execution of our strategic plan to focus growth.

Aggressively manage our cost structure and bring innovative solutions to market.

Speaker 4: I'd like to thank our global team for securing near record automotive awards, as well as delivering record automotive revenue, adjusted EBITDA and free cash flow in 2021.

I'd like to thank our global team for securing near record automotive awards as well as delivering record automotive revenue adjusted EBITDA and free cash flow in 2021.

Speaker 4: I'm very proud of the hard work and commitment of the talented Global Gentherm team to overcome challenges in the market and deliver on our strategy in yet another unprecedented year.

I'm very proud of the hard work and commitment of the talented global <unk> team to overcome challenges in the market and deliver on our strategy and yet another unprecedented year.

Speaker 4: While uncertainty certainly remains about where production rates will be in the next few months, we believe there is significant pent-up demand that will need to be met once the extraordinary supply chain constraints are resolved.

While uncertainty certainly remains about where production rates will be in the next few months. We believe there is significant pent up demand that will need to be met once the extraordinary supply chain constraints are resolved.

Speaker 4: This, combined with our relentless focus on operational excellence, technology leadership, and strong cash flow generation, positions the company well for profitable long-term growth.

This combined with our relentless focus on operational excellence technology leadership, and strong cash flow generation positions the company well for profitable long term growth.

Speaker 4: With that, I'll turn the call over to Mateo for a little more color on the financial results and our 2022 guidance.

With that I'll turn the call over to Matteo for a little more color on the financial results and our 2022 guidance.

Speaker 5: Okay, thank you, Phil. Let me turn to slide 10, and focus on the items that most significantly impacted our fourth quarter results.

Okay. Thank you Phil let me turn to slide 10, and focus on the items that most significantly impacted our fourth quarter results.

Speaker 5: So for the quarter, product revenues decreased by 14% compared to the same period of last year.

So for the quarter product revenues decreased by 14% compared to the same period of last year.

Speaker 5: And if we adjust for the impact of effects, our overall product revenue decreased by 13%.

And if we adjust for the impact of FX, our overall product revenue decreased by 15%.

Speaker 5: So starting with the automotive segment, automotive revenues were $237 million, corresponding to a 15% decrease compared to the prior year period.

So starting with your automotive segment automotive revenues were 237 million corresponding to a 15% decrease compared to the prior year period.

Speaker 5: Adjusting for foreign currency translation, automotive revenue decreased by 14%, approximately 200 basis points below actual light vehicle production decline in our key markets of North America, Europe , China, Japan, and Korea.

Adjusting for foreign currency translation automotive revenue decreased by 14%.

Approximately 200 basis points below actual light vehicle production decline in our key markets of North America, Europe , China, Japan and Korea.

Speaker 5: As a reminder, in the fourth quarter of 2020, we had a significant amount of new launches with very high take.

As a reminder, in the fourth quarter of 2020, we had a significant amount of new launches with very high take rates and as a result, we had a record quarter in automotive revenues and outperformed light vehicle production by 20 percentage points in the year ago period, which makes for an extremely tough comparison.

Speaker 5: And as a result, we had a record quarter in automotive revenues and outperformed light vehicle production by 20 percentage points in the a year ago period, which makes for an extremely tough comparison in a current year.

In the current year quarter.

Speaker 5: When comparing Q4 revenue results by product line with the record quality results achieved the previous year.

When comparing Q4 revenue results by product line with the record quarterly results achieved the previous year.

Speaker 5: most product lines decreased with the exception of BPS and other automobiles.

Most product lines decreased with the exception of bps and other automotive.

Speaker 5: And more specifically, BPS revenues increased 1% as a result of higher sales of the cell-connecting board solution on the BMW E-Mini.

And more specifically bps revenues increased 1% as a result of higher sales of the cell connecting both solution on the BMW <unk>.

Speaker 5: Increased take rate of the 48-volt Mercedes C-Class.

Increased take rate of the 48 volt Mercedes C class.

Speaker 5: and higher sales of air-cooling BTM to general market.

And higher sales of air cooling BPM to general Motors.

Speaker 5: Other automotive revenues increased by 79% due to higher sales of neck conditioners and heated interior products.

Other automotive revenues increased by 79% due to higher sales of Mexican be juniors and heated interior products.

Speaker 5: all the other automotive product lines declined, primarily due to the lower production volume and difficult year-over-year comparison.

All the other automotive product lines declined primarily due to the lower production volume and difficult year over year compares.

Speaker 5: In addition, let me highlight a couple of unique factors that negatively impacted our focus.

In addition, let me highlight a couple of unique factors that negatively impacted our fourth quarter.

Speaker 5: First, as Phil mentioned earlier, as anticipated, there was a semiconductor supply gap from one of our supplies.

First as Phil mentioned earlier as anticipated there was a semi conductor supply gap from one of our suppliers.

Speaker 5: Next, Ford F-150 launched in the fourth quarter of 2020 with very high take rates that have now normalized.

Next Ford F 150 launched in the fourth quarter of 2020 with very high take rates that have now normalized.

Speaker 5: And also, Ford reduced the take rates of our memory SIP module as a result of the electronics shortage from other suppliers.

And also for reduced the take rates of our memory seat module as a result of the electronics shortage from other suppliers.

Speaker 5: Hyundai reduced take rates due to semi-conductor shortages from other suppliers, resulting in them prioritizing lower trim level vehicles.

<unk> reduced take rates due to semiconductor shortages from other suppliers, resulting them prioritizing lower claim level vehicles.

Speaker 5: Moving to medical, revenue increased by 17% compared to the prior period, driven by the continued success of our Blanketrol and Imoterm products.

Moving to medical revenue increased by 17% compared to the prior year period, driven by the continued success of our blankets role in hemophilia products.

Turning next to gross margin.

Speaker 5: Gross margin rate for the fourth quarter was 27.1%.

Gross margin rate for the fourth quarter was 27, 1%.

Speaker 5: This compares to 32.1% in the a year ago period.

This compares to 32, 1% in the year ago period.

Speaker 5: The 500 basis point decrease was driven by higher costs incurred to mitigate the impact of the supply chain disruptions, primarily in the form of spot buys and premium trades.

The 500 basis points decrease was driven by higher costs incurred to mitigate the impact of the supply chain disruptions, primarily in the floor of spot buys and premium freight.

Speaker 5: annual customer price reductions, negative volume leverage due to the sales decline, and negative impact of effects. These were partially offset.

Annual customer price reductions negative volume leverage due to the sales decline and negative impact of FX.

These were partially offset by cost recoveries from customers.

Speaker 5: Moving to operating expenses, which decreased to $45.5 million in the quarter from $50.8 million in the prior period.

Moving to operating expenses, which decreased to $45 5 million in the quarter from $50 8 million in the prior year period.

Speaker 5: The current year's fourth quarter amount included $0.4 million of restructuring, acquisition, and divestiture expenses.

The current year fourth quarter amount included <unk> 4 million of restructuring acquisition and divestiture expenses.

Speaker 5: This compares to last year's fourth quarter when we incurred approximately $2.4 million of restructuring charges and $1.2 million of acquisition and divestiture expenses.

This compares to last years fourth quarter, when we incurred approximately $2 4 million of restructuring charges and $1 2 million of acquisition and divestiture expenses.

Speaker 5: If we adjust for restructuring, acquisition, and divestiture expenses in both periods,

If we adjust for restructuring acquisition and divestiture expenses in both periods.

Speaker 5: operating expenses were $45.1 million, down from $47.2 million in the fourth quarter of 2020.

Operating expenses were $45 1 million down from $47 2 million in the fourth quarter of 2020.

Speaker 5: The year-over-year decrease of approximately 4% was primarily driven by the impact of mark-to-market adjustments in cash settled stock appreciation rates in the fourth quarter of last year.

The year over year decrease of approximately 4% was primarily driven by the impact of mark to market adjustments.

Cash settled stock appreciation rights in the fourth quarter of last year.

Speaker 5: and tight expense control, particularly in sGNA, partially offset by lower R&D.

Tight expense control, particularly in SG&A, partially offset by lower R&D income.

Speaker 5: Sequentially, adjusted operating expenses decreased by approximately $2.8 million compared to the third quarter of 2021.

Sequentially adjusted operating expenses decreased by approximately $2 8 million compared to the third quarter of 2021.

Speaker 5: The primary driver of the decrease was the benefit of austerity measures that we have taken to mitigate the negative impact of the supply chain disruption.

The primary driver of the decrease was the benefit of austerity measures that we've taken to mitigate the negative impact of the supply chain disruptions.

Speaker 5: Adjusted EBITDA of $30.9 million, declined by approximately $26 million from the prior year period.

Adjusted EBITDA of $30 9 million declined by approximately $26 million from the prior year period.

Speaker 5: And finally, adjusted diluted earnings per share in the quarter was $0.61 per share compared to $1.16 per share in the fourth quarter of last year.

And finally <unk>.

Adjusted diluted earnings per share in the quarter was <unk> 61 per share.

Impairs to $1 16 per share in the fourth quarter of last year.

Speaker 5: Our effective tax rate in the fourth quarter was approximately 11% and 18% for the full year 2021.

Our effective tax rate in the fourth quarter was approximately 11% and 18% for the full year 2021.

Speaker 5: This rate was lower than our forecasted range of 20 to 22% due to the cumulative impact from tax credit and deductions related to R&D, as well as favorable tax impact from stock compensation.

This rate was lower than our forecasted range of 20% to 22% due to the cumulative impact from tax credits and deductions related to R&D.

As well as favorable tax impact from stock compensation.

Speaker 5: Now, before I discuss the balance sheet, let me highlight a few key accomplishments for total year 2021.

Now before I discuss the balance sheet, let me highlight a few key accomplishments for total year 2021.

Speaker 5: As Phil mentioned earlier, we deliver the highest automotive revenue in the company's history.

As Phil mentioned earlier, we delivered the highest automotive revenue in the company's history.

Speaker 5: We are very proud of our team in China for the 53% growth in that market over the past three years.

We're very proud of our team in China for the 53% growth in that market over the past three years and.

Speaker 5: And if you recall, China represented about 9% of our revenues in 2018, and now it is up to 14%.

And if you recall, China represented about 9% of our revenues in 2018 and now it is up to 14%.

Speaker 5: On the cost front, we continued our disciplined approach to managing operating expenses.

On the cost front, we continued our disciplined approach to managing operating expenses.

Speaker 5: After adjusting for restructuring, acquisition, and divestiture expenses, operating expenses at percent of revenue was 17.5 percent, the lowest since 2014.

After adjusting for restructuring acquisition and divestiture expenses.

<unk> expense as a percent of revenue was 17, 5% the lowest since 2014.

Speaker 5: 120 basis point improvement from 2020 and 210 basis points lower than 2019.

120 basis point improvement from 2020.

And 210 basis points lower than 2019.

Speaker 5: We delivered $157 million of adjusted EBITDA, a company record, and more importantly, we generated $105 million of free cash flow in 2021, setting another company record.

We delivered $157 million of adjusted EBITDA, a company record and.

And more importantly, we generated a $105 million of free cash flow in 2021, setting another company record.

Moving to the balance sheet on slide 11.

Speaker 5: Our cash position at the end of the quarter was approximately $191 million, slightly below the third quarter level.

Our cash position at the end of the quarter was approximately 191 million slightly below the third quarter level.

Speaker 5: The $4 million sequential decrease was the result of $20 million repurchase of common stock, partially offset by free trade.

The $4 million sequential decrease was the result of $20 million repurchase of common stock, partially offset by free cash flow generation.

Speaker 5: We close 2021 in a net cash position of 152 million as cash on hand exceeded a gross debt.

We closed 2021 in a net cash position of $152 million as cash on hand exceeded our gross debt.

Speaker 5: And as a result, our net leverage ratio was negative 0.9.

And as a result, our net leverage ratio was negative 0.9 dollars.

Speaker 5: Based on the trailing 12-month consolidated adjusted EBITDA ended December 31st,

Okay.

Based on the trailing 12 month consolidated adjusted EBITDA ended December 31.

Speaker 5: We had approximately $440 million of remaining availability on our line of credit.

We had approximately $440 million of remaining availability on our line of credit.

Speaker 5: and the total available liquidity as of December 31st, 2021 was $631 million.

And the total available liquidity as of December 31, 2021 was $631 million.

Speaker 5: Now, let me turn to slide 12 for our 2022 guidance.

Now, let me turn to slide 12 for our 2022 guidance.

Speaker 5: And let me start by saying that the semiconductor shortage situation remains extremely.

And let me start by saying that the semi conductor shortage situation remains extremely fluid.

Speaker 5: Based on the latest information that we have from our customers and semiconductor suppliers, we are less optimistic about light vehicle production in the first half of 2022 than the latest IHS forecast.

Based on the latest information that we have from our customers and semiconductor suppliers. We are less optimistic about light vehicle production in the first half of 2022 and the latest IHS forecast.

Speaker 5: We do expect a gradual improvement in the second half of the year, which we have factored into our guidance.

We do expect a gradual improvement in the second half of the year, which we have factored into our guidance.

Speaker 5: So we're currently expecting product revenues to be in the range of $1.12 to $1.22 billion.

So we're currently expecting proton revenues to be in the range of one one to 212 2 billion.

Speaker 5: consuming effects remains at the current levels, and light vehicle production in our relevant market grows at a high single digit rate in 2022 versus 2021.

Assuming effects remains at the current levels in light vehicle production in our relevant market grows at a high single digit rates in 2022 versus 2021.

Speaker 5: Adjusting for approximately 200 basis points of effects pressure year over year.

Adjusting for approximately 200 basis points of FX pressure year over year.

Speaker 5: The midpoint of our guidance implies an organic growth rate of 14%.

The midpoint of our guidance implies an organic growth rate of 14%.

Speaker 5: Our guidance also assumes higher revenue in the second half compared to the first.

Our guidance also assumes higher revenue in the second half compared to the first half.

Speaker 5: In terms of profitability, we continue to see disruptions in our supply chain that have resulted in additional costs.

In terms of profitability, we continue to see disruptions in our supply chain that have resulted in additional costs.

Speaker 5: In Q4, and continuing in the first quarter, we are facing the most significant challenges to maintain our supply of semiconductors that we have experienced today.

In Q4, and continuing in the first quarter.

We are facing the most significant challenges to maintain our supply of semiconductors that we have experienced to date.

Speaker 5: And as a result, we expect adjusted EBITDA rate in 2022 to be in the range of 14% to 16%.

And as a result, we expect adjusted EBITDA rate in 2022 to be in the range of 14% to 16%.

Speaker 5: Due to the need to continue to manage supply gaps with a couple of our suppliers, we expect profitability in the first half of 2022 to be lower than the 12.5% rate we reported in the fourth quarter of 2022.

Due to the need to continue to manage supply gaps with a couple of our suppliers. We expect profitability in the first half of 2022 to be lower than the 12, 5% rate we reported in the fourth quarter of 2021.

Speaker 5: In the second half of 2022, we expect to return to an adjusted EBITDA rate in the high teens, assuming supply chain pressures start to ease.

In the second half of 2022, we expect to return to an adjusted EBITDA rate in the high teens.

Assuming supply chain pressures start to ease.

Speaker 5: However, we believe that the inflationary pressures will remain for quite some time. We will continue to be aggressive on cost management and proactively allocate resources over the course of the year to focus on reducing our profit.

However, we believe the deflationary pressures will remain for quite some time.

We will continue to be aggressive on cost management and proactively allocate resources over the course of the year to focus on reducing our cost.

Speaker 5: Back to guidance, capital expenditures are expected to be in the range of $50-$60 million.

Back to guidance capital expenditures are expected to be in the range of $50 million to $60 million.

Speaker 5: We estimate our tax rate to be in the range of 26 to 28 percent.

We estimate our tax rate to be in the range of 26% to 28%.

Speaker 5: The expected tax rate increase compared to 2021 is primarily driven by the impact of the new German trade tax law, which became effective on January 1st, 2021.

We expect the tax rate increase compared to 2021 is primarily driven by the impact of the new German trade tax law, which became effective on January one 2022.

Speaker 5: So with that, I'll turn the call back to the operator to begin the Q&A session. Thank you.

So with that I'll turn the call back to the operator to begin the Q&A session.

Thank you.

At this time, we'll be conducting a question and answer session.

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Speaker 2: Our first question comes from the line of Matt Corando with Roth Capital. Please proceed with your question.

Our first question comes from the line of Matt Koranda with Roth Capital. Please proceed with your question.

Speaker 6: Hey guys, good morning. Thanks for taking the question. Hey Matt. Morning Matt.

Hey, guys. Good morning, Thanks for taking the question Dave.

Morning, Matt.

Speaker 6: guys. So just wanted to start off on the cadence of revenue in 2022, especially in light of your comments about IHS and sort of your view.

Good morning, guys.

So just wanted to start off on the cadence of revenue in 2022, especially in light of your comments about IHS and sort of your view relative.

Speaker 6: relative to the industry. Any help on that front just in terms of how we should think about sort of relative growth?

Relative to.

The industry.

Any help on that front in terms of how we should think about sort of relative growth.

Speaker 6: that you're expecting from the industry versus IHS's forecast, and then how you guys assume take rates sort of trend in the first half to help with that with the revenue.

You are expecting for the industry versus IHS forecast and then how you guys are seeing take rates sort of trend in the first half to help us out with the revenue expectations.

Speaker 4: Sure, Matt. I think we're kind of basing everything on a couple facts.

Sure, Matt I think were kind of basing everything on a couple of factors.

Speaker 4: uh... you know let me start off by saying first and foremost that the demand for a product for me

Let me start off by saying first and foremost that the demand for our product remains really high.

Speaker 4: you know, whether there's significant, you know,

Whether there is.

<unk>.

Indicators from the market.

Speaker 4: that our product is really desired by consumers.

At our product is really desire by.

Consumers dealers et cetera.

Speaker 4: It's just a matter of continued volatility that we see at the moment. Number one, customer order cancellations are still there at a pretty high rate. We have to factor that in.

It's just a matter of continued volatility that we see at the moment number one customer order cancellations are still there at a pretty high rate we have to factor that in.

Speaker 4: Of course, we're in the middle, as Mateo just mentioned, we're in the middle of the most difficult period that we faced when it comes to chip supplier volatility. Even in some cases, there are customers that we've had to work with to reduce their orders to us.

Of course, we're in the middle as Matteo just mentioned, we're in the middle of the most difficult period.

That we face when it comes to chip supplier volatility.

Even in some cases, there are customers that we've had to work with to reduce their orders to us.

Speaker 4: to match up with the supply that we have of chips. So that's one. We're also looking closely at all the orders and forecasts from our customers. And when we look at the first half, especially U.S., Europe , and Korea,

To match up with the supply that we have of ships. So that's one.

So looking closely at all the orders and forecast from our customers and when we look at the first half, especially U S.

Europe and.

In Korea.

We see that.

Speaker 4: or we view that the IHS estimates are a little bit high in those countries.

We view that the IHS estimates are a little bit high.

In those countries.

Speaker 4: So anyway, that's what's driving Q1 and Q2 lower. We are getting good feedback from customers and

So that's what's driving Q1 and Q2 lower we are getting good feedback from customers and.

Speaker 4: from semiconductor suppliers that the second half is going to be a recovery, you know, certainly a gradual recovery and if things pan out we will be second half.

Indications from semiconductor suppliers that the second half is going to be.

Our recovery certainly a gradual recovery and if things Pan out we believe second half is.

Speaker 4: is likely to be a pretty strong period of time. So that's what's all built into our demand. So a little bit lower expectations in the first half with.

There's likely to be a pretty strong.

Period of time, so that's what's all built into our demand so a little bit lower expectations in the first half with <unk>.

It's a nice ramp up in the second half.

Speaker 6: That's helpful. So thanks. And then is a good way to view sort of the supply chain headwinds that you guys are

Got it thats helpful. Thanks.

And then as a good way to view sort of the supply chain headwinds that you guys are.

Taking into the guidance roughly.

Speaker 6: roughly the spread between the first half and second half, even on margin. So like about 600, 700.

Roughly the spread between the first half and second half EBITDA margins.

600 700 bps.

Speaker 6: of margin pressure relative to the second half, be the way to think about supply chain headwinds.

Margin pressure relative.

Second has been a way to think about supply chain headwinds and maybe just if you could just.

Speaker 6: Maybe if you could just walk us through where you're seeing the most tightness since you're going through the toughest environment right now.

Walk us through where you are seeing sort of a fitness.

Yes.

Environment right now.

Helpful to get a better understanding of sort of where we sell things like that.

Speaker 5: So, Matt, let me give you maybe a little bit of color on what we are seeing in the margins on the first half and the dynamics that we are facing. I'm going to start actually from where, pick just from where Phil left it.

So Matt let me give you maybe a little bit of color on what we've seen in India and the margins on the first half and the dynamics that.

We are facing I am going to start to actually from where the peak just from where feel lifted.

So.

Speaker 5: The fact that we are dealing with the supply gap on our hand.

The fact that we are dealing with the.

The supply gaps on our hand.

Speaker 5: It's a completely different dynamic from what we experienced for the majority of 2021. This management of the supply gap comes with a significant amount of cost, which is again in the form of premium trade spot buys that really will impact the profitability in the first half of the year. And related to that, as you know,

That's a completely different dynamic from what we.

Experienced for the majority of 2021 and this management of the supply gap comes.

Comes with a significant amount of cost which is.

Again in the form of premium freight spot.

Spot buys that really will impact the <unk>.

The profitability in the first half of the year and related to that.

As you know we are working with customers to get the cost recoveries.

Speaker 5: We are working with customers to get cost recovery.

Speaker 5: that where we have been actually pretty successful, if you look at, you know, for example, the fourth quarter.

We have been actually pretty successful if you look at.

For example, the fourth quarter.

Speaker 7: we were able to recover about almost 60% of the non-inflationary cost.

We weren't able to recover about.

Almost 60% of the.

Non inflationary cost however, the timing of these recoveries tends to be lumpy.

Speaker 5: However, the timing of these recoveries tends to be lumpy.

Speaker 5: And if you look at, you know, the amount that we were able to recover in the fourth quarter, this amount really reflects negotiation that started much earlier in the year. Therefore, when you take everything into consideration, I would expect in the first half to have higher cost net of recoveries compared to what we have experienced in the fourth quarter.

If you look at.

The amount that we were able to recover in the fourth quarter. This amount really reflects.

Negotiation that started much earlier in the year before when you take everything into consideration.

Would expect.

In the first half to have higher costs net of recoveries compared to what we've experienced in the fourth quarter.

Speaker 5: Then I'm going to add a couple of other items.

Then I'm going to add a couple of.

A couple of.

The other items.

Speaker 5: We are expecting also inflation, both in terms of labor inflation, but most importantly, supplier inflation, where, particularly in the second half of 2021, we were able to mitigate through volume rebates from suppliers.

We are expecting also inflation.

Debt.

Both in terms of labor inflation, but most importantly supplier inflation.

In particular in the second half of 2021, we were able to mitigate through volume rebates from suppliers.

Speaker 5: will come also in 2022, but those tend to come later in the year. So we will not have that in the first half of 2022.

We will come also in 2022, but those tend to come later in the year.

So we will not have that in the first half of 2022.

Speaker 5: And then the last item I would highlight, you know, that we have annual customer price reduction that generally kick in in the first half of each year.

And then the last item I would highlight.

That we have annual customer price reduction that generally kicking in in the first half of each year.

Speaker 5: And we are planning to be able to mitigate some of these price reductions through negotiations with customers, but obviously the positive impact of these effects will come later in the year and not in the first half. So that gives you a little bit the context of what we are expecting to occur in the first half compared to the second half.

And we are planning to be able to mitigate some of these.

Price reductions through negotiations with customers.

But obviously the positive impact of these effects will come later in the year and not not in the first half. So that gives you a little bit the context of.

What we are expecting to occur in the first half compared to compared to the second half.

Speaker 5: Just one final point, just to put things into context.

Just one final point just to put things into.

Into context.

If you look at 2021 despite.

Speaker 5: Despite all the challenges that we had, we had almost $70 million of lost revenue due to the supply gap.

In spite of all of the challenges that we have.

We had almost $70 million of lost revenue due to the supply gaps.

Speaker 5: We had $25 million incremental cost of goods sold in the form of premium freight, spot buys and about $10 million of recoveries.

We had.

25 million incremental cost of goods sold.

In the form of premium freight to spot buys and about $10 million of recoveries. When you adjust all of this.

Speaker 5: When you adjust all of this, we would have hit about almost 18% EBITDA rate in the year if you normalize for the supply chain impact. So I think overall.

We would have hit about to almost 18% <unk> 18, a year.

If you normalize for the <unk>.

Supply chain impact so I think overall.

Speaker 5: In spite of all the challenges, the team did a fantastic job in mitigating those.

Right.

Hold the challenges.

The team did a fantastic job in mitigating those.

Very detailed and helpful. In the bill Thank you.

Speaker 6: And then just lastly, on the bookings front, $540 million, a very nice step up sequentially and year over year.

And then just lastly ill go back and check on this one.

On the bookings Brian .

$40 million in very nice step up.

Italy and year over year.

Sure.

You guys called out several sort of programs with just curious if you could put a finer point on this mix of bookings and what youre seeing on that front in terms of.

Speaker 6: programs. But just curious if you could put a finer point on just mix of bookings and what you're seeing on that front in terms of sort of shaping expectations around.

Sort of shaping expectations around Ccs versus.

Speaker 6: The battery performance solutions side of things and steering wheel heaters, which sounded like you may have been heavy in the quarter on those, but just any color you can provide around the mix of bookings or quantify it, that'd be very helpful.

Battery performance solutions side of things.

Steering wheel heaters, which sounded like you may have.

In the quarter on those but just any color you can provide around the mix of bookings.

Or quantify it that'd be very helpful.

Speaker 4: I think it was kind of a typical mix, you know, pretty heavy on on CCF and

I think it was kind of a typical mix.

Pretty heavy off.

On Ccs and.

Speaker 4: And steering wheel, as you just pointed out, and even some pretty large heat programs, a lot of EV.

And steering wheel as you just pointed out and add.

And even some pretty large heat programs.

Lot of EV action in.

Speaker 4: quarter, which is really exciting on those products. But then, you know, we had a very significant, certainly strategically significant, award with Renault on our battery heater for our new proprietary thin foil product.

In the quarter, which is really exciting.

Those products, but then we had.

At the very significant.

Certainly strategically significant award with Renault on our battery heater for our new <unk>.

<unk> thin foil product.

Speaker 4: We mentioned some nice ECU awards.

We mentioned some nice <unk> awards.

Speaker 4: So I think it's a pretty balanced mix across our portfolio, and I think that's pretty consistent with what we see in our...

It is pretty balanced mix across our portfolio.

Ed.

Thats pretty.

Pretty consistent with what we see in our pipeline.

The one thing I'll add sorry.

Speaker 4: quick thing to add is that a new kind of emerging product for us is high-voltage cables, which we pointed out, but getting ready to launch on that with a couple platforms, seeing a lot more interest there. You know, about 8% of our revenue as a company is cables. It's kind of maybe a quiet part of our business, but our expertise in cables has led to an awful lot of...

One quick thing to add is that.

The new a new kind of emerging product for us is high voltage cables.

We pointed out, but we're getting ready to launch on that with a couple of platforms and a lot more interest there.

About 8% of our revenue of the company as cables.

Or maybe a quiet part of our business but.

Our expertise in cables has led to an awful lot of.

Speaker 4: opportunities in the EV space both on self-connecting, you know most of the most of the business

Opportunities in the EV space, both on cell connecting.

Most of the most of the business, we're getting there is.

Speaker 4: is from customers who come to us proactively. We're not out chasing those kind of products a whole lot. So we're pretty excited about that starting to pick up a little bit as well.

Is from customers, who come to us proactively and we're not out chasing those kind of products a whole lot. So we're pretty excited about that starting to pick up a little bit.

As well.

Great to hear thanks Bill.

Pleasure.

Speaker 2: As a reminder, if you would like to ask a question, please press star 1 on your telephone.

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Speaker 2: Our next question comes from the line of Luke Jungquist-Baird. Please proceed with your question.

Our next question comes from the line of Luke junk with Baird. Please proceed with your question.

Good morning, Thank you for taking my questions.

Speaker 8: Phil, I'm wondering if you could give us a broader update on where you stand with your ClimateSense development contracts, and maybe more importantly on this front, where your capacity internally is to support this activity with the new contract today, plus what I assume is still a very high level of ongoing work with your first customer. How are you looking at your capacity to support further ClimateSense-related development activity in 2022, incrementally, versus 2021?

Good morning, guys I'm.

I'm wondering if you could give us a broader update on where you stand with your clients since development contracts and maybe more importantly on this front, where your capacity internally is to support this activity with a new contract today, plus what I assume is still a very high level of ongoing work with your first customer how are you looking at your capacity to support further climate essentially to <unk>.

Development development activity in 2022 incrementally versus 'twenty one.

Speaker 4: Yeah, that's a big challenge for us. We, you know, obviously all hands on deck with the production contract that we're finalizing development that launches for model year 24, and that's going quite well, but taking a lot of resources, especially on the software side. We're very selective on development contracts.

Yes, that's a big challenge for us.

<unk>, obviously, all hands on deck with the <unk>.

Production contract that we're finalizing development that launches for model year, 'twenty, four and that's going quite well, but taken a lot of resources, especially on the software side.

We're very selective on development contracts.

Speaker 4: We're really excited about the new one with the European OEM, it's a serious one and one that we're definitely chasing after. We were fortunate to have a little bit of a...

We're really excited about the new one with this European OEM Thats, a serious one and one that we're we're definitely chasing after we.

We were fortunate to have a little bit of a.

Speaker 4: gap, a slowdown in work on one contract that we completed that led us to be able to, you know, ship resources to that one. But absolutely, we're, as I pointed out many times, we're, you know, we got to be really careful to not over commit on that to make sure we produce the best result.

Our GAAP.

Slowdown in work on one contract that we completed that led us to be able to ship resources to that one.

But absolutely we are as I pointed out many times, where we've got to be really careful.

To not overcommit on that to make sure we produce the best results.

Speaker 4: You know, what adds challenges to that is our electronics team tends to be the team that is the most burdened by climate-sense projects, and we're also using that team pretty heavily to work on redesigns of...

What ads challenges to that is our electronics team tends to be the team that.

Is the most burdened by climate projects and.

We're also using that team pretty heavily to work on Redesigns.

Speaker 4: semiconductors, finding new suppliers to offset the challenges we have. So it's certainly, and I think this is the same for all electronics.

Semiconductors, finding new new suppliers to offset the challenges we have so it certainly.

I think this is the same for all electronics suppliers in the market. That's our biggest challenge is managing those resources, but.

Speaker 4: suppliers in the market, it's our biggest challenge is managing those resources. But we've done well so far, really excited about.

Well, so far really excited about.

Bringing our first client.

Speaker 4: project to market, and we continue to present the case for Climate Sense to our key customers and continue to get a lot of very positive feedback.

Project to market and.

We continue to.

Present, the case for climate sense to our key customers and continue to get a lot of very positive feedback.

Speaker 8: Thank you for that. Second question, I'm wondering, I don't know to what extent you can speak to this, Phil, but can you help us better understand the breakthrough nature of the CCS and CHEAT award with the large EVOEM that you called out on the slide?

Thank you for that second question.

I'm wondering I don't know to what extent you can speak to this but could you help us better understand the breakthrough nature of Dcs and CS Heat award with the large TV OEM that you called out in the slides.

Speaker 4: You know, I think I have to stick pretty much with what we've put put in writing at this point, you know, some of our customers require certain levels of

I think I'll have to stick pretty much with what we've put put in writing at this point you know some of our customers require certain levels of.

Speaker 4: confidentiality in our communication. So, you know, it's that customer, we've had some

Confidentiality in our communication so.

That customer we've had some.

Speaker 4: Some product, not a huge volume levels with steering wheel and some seat heat.

Some product.

Not a huge huge volume levels with steering wheel in CE.

Speaker 4: And now that's broken into the CCS, multiple platforms of CCS, and, you know, combine that plus some new awards on.

And now that's broken into the Ccs multiple platforms of Ccs.

Combine that plus some new awards on heat.

Speaker 4: We're really excited about that and it also applies, importantly, to multiple regions.

We're really excited about that and it also applies and importantly.

Two multiple regions with this customer.

Speaker 4: So, you know, I think it's really securing our relationship with that customer and we're really excited about it.

I think it's.

It's really securing our relationship with that customer.

We're really excited about it.

Speaker 8: Okay, that's helpful. I appreciate that you could share that. And then, if I could sneak this in here, just to be more of a tactical question, given the dynamics that you're seeing around chips right now, both in the first...

Okay. That's helpful. I appreciate that you could share that and then if I could sneak this in here just maybe more of a tactical question given the dynamics that youre seeing around chips right now both in the first.

Speaker 8: The fourth quarter and extending into the start of the year, is that influencing the guidance in terms of outgrowth? If I compare the midpoint of the organic growth to what you're assuming on production, that kind of puts the full year around mid-single-digit outgrowth. Should we look at that and say maybe outgrowth would be more weighted to the back half of the year than the first half? Any comments there would be helpful.

Fourth quarter and extending into the <unk>.

Start of the year is that influencing the guidance in terms of outgrowth, if I compare the midpoint of the organic growth to what you're assuming on production that kind of puts the full year around mid single digit outgrowth should we look at that and say, maybe <unk> growth would be more weighted to the back half of the year than the first half any comments there would be helpful. Thank you.

Speaker 4: I would agree with what you just said. We certainly have, as I pointed out, we're in the midst of the most significant challenges we faced on semiconductor shortages. And to put a fine point of it, as I pointed out, there are some customers where we literally have to constrain their orders proactively, working with their ordering.

I would agree with what you just said.

We certainly have.

As I pointed out we're in the midst of the most significant challenges we faced on semiconductor shortages.

To put a fine point of it.

Hinted out there are some customers, where we literally have to constrain their orders proactively working with their ordering team.

Speaker 4: to match our supply of chips. So that's certainly a drag on the first half. We're, you know, we're keeping our fingers crossed that the recovery starts in the second half with semiconductor supply. That's what we're hearing. That's what the recovery plans would show from our supplier.

To match our.

Supply of chips, so thats certainly a drag on the first half.

Sure.

Keep our fingers crossed that the recovery starts in.

In the second half with semiconductor supply that's what we're hearing that's what.

The recovery plans would show from our suppliers.

Speaker 4: So all that is exciting. I do want to point out, too, we mentioned that the fourth quarter was a tough comp for us. And I think if you look at the first quarter of 2000.

So all of that is exciting I do want to point out too.

We mentioned that the fourth quarter.

It was a.

A tough comp for us and I think if you look at the first quarter of 2000 and.

Speaker 4: As a comp, going into the early part of the year, that was also a really high launch period for us for steering wheel, heat, and HOV, and a couple new programs that we launched with high take rates. So that's also a little bit of a headwind in the first quarter of the year.

'twenty, one as a comp going into the early part of the year that was also a really high launch period for us for steering wheel.

<unk> and <unk> and a couple of new programs that we launched with high take rates. So that's also a little bit of a headwind in the first quarter of the year.

Okay, Great I appreciate the color I'll leave it there. Thank you.

Thank you Luke.

Okay.

Speaker 2: Our next question comes from the line of Ryan Siegdahl of Craig Hallam. Please proceed with your question.

Our next question comes from the line of Ryan <unk> with Craig Hallum. Please proceed with your question.

Great Good morning, guys.

Hi, Ryan good morning.

Speaker 9: I just want to follow up on that breakthrough CCS order, is this typical timeline of two to three years until it hits production, or is there any accelerated nature to that? And then secondly, I can connect the dots to basically one EV of the year.

I just wanted to follow up on that breakthrough Ccs order.

It is this typical timeline.

For three years until it hits production or is there any accelerated nature to that and then secondly, I can connect the dots to basically one <unk>.

Of note.

Are we missing something there.

Speaker 4: Yeah, the timeline is it is a little bit faster than the two year typical period.

Yes, the timeline as it is a little bit faster than the two year typical period.

And I'm not going to answer your second question.

Speaker 9: Fair enough. As you think about medical...

Fair enough.

As you think about medical.

Speaker 9: race just directionally relative to your guidance, you think faster is forward there.

Growth rates, just directionally relative to your guidance, you think faster slower there.

Speaker 4: I'd say roughly in line. Potential to be faster, but roughly in line with our guidance for now.

I'd say roughly in line potential to be faster, but roughly in line with.

With our guidance for next year.

Speaker 9: Great. And then on the climate sense, so good to see a third European OEM and development projects. You had two OEMs that were on third.

Great and then on the <unk>.

Climate.

Joe Good to Q3.

European OEM and development projects.

You had two Oems that were on third.

Speaker 9: Development projects, can you comment on status of those in the third if they've advanced further? Just an update kind of on those two key ones that I've

Development projects can be comment on status of those baseline third advance further.

Just an update kind of on those two key ones.

Walnuts duration.

Speaker 4: Yeah, they're, they're continuing very well. A lot of testing that's happening on those. In fact, some of them have gone into exclusive testing, so it allowed us to free up some of the resources to work on this third one, as I mentioned earlier. So, you know, all positive, but, you know, as I pointed out many times in the past.

Yes, theyre continuing very well.

Testing that's happening on those.

Some of them got into exclusive testing so it allowed us to free up some of the resources to work on this third one.

I mentioned earlier.

So all positive, but as I pointed out many times in the past, that's it's kind of a long process.

Speaker 4: These OEMs are, you know, to really get the most of ClimateSense, it's a significant transformation of their HVAC strategy, and that's coming in the middle of, you know, a huge effort just to launch EVs. So it's obviously taking a little longer than we had hoped with some of these folks. Now, here's the positive side, is as we're doing these development projects...

These Oems are to really get the most of climate.

A significant transformation of their HVAC strategy.

That's coming in the middle of.

And a huge effort just a launch evs so.

So obviously taken a little longer than we had hoped with some of these folks now here's the positive side.

Is as we're doing these development projects were able to demonstrate the added content.

Speaker 4: We're able to demonstrate, you know, the added content kind of stepwise that we have. You know, we talked about the enhanced.

Kind of step wise that we have we talked about.

The enhanced.

Speaker 4: CCS active product that we call IMTM. We think that's an integral part of Climate Sense, and that's getting a lot of interest. The net conditioning, a lot of interest, all the surface level heating and radiant...

Ccs active product we call MTM.

That's an integral part of climate and Thats getting a lot of interest the net conditioning.

Lot of interest all the surface level heating and radiant heating. So all these things are getting a lot more attention independently as a result of.

Speaker 4: So all these things are getting a lot more attention independently as a result of these development contracts. So, you know, obviously it may take some time to get to full-blown climate sense, but we see more and more spinoff projects and potential interest in these added content plays as well.

These development contracts so odd.

Obviously, it may take some time to get to a full blown climate sense, but.

We see more and more spin off projects and potential interest in these added content plays as well.

Speaker 9: Great. One more for me, just on the cadence throughout the year. Is Q4 a decent run rate as you look at production, what your supply chain is to start the year for Q1, and then presumably, you know, gradual improvements throughout the year?

Great one more for me.

Just on the cadence throughout the year is Q4, a decent run rate as you look at production what your supply chain as we start the year for Q1, and then presumably.

Gradual improvement throughout the year.

On revenue.

Speaker 4: Sorry, Ryan, I didn't quite catch that is you said is Q4 a decent run?

Sorry, Brian I didn't quite catch that as you said is Q4, a decent run rate.

Speaker 9: So you did $237 million of revenue in Q4. Is that a decent run rate kind of to start the year for Q1, assuming the similar supply chain production?

So you did $237 million of revenue in Q4 is that a decent run rate kind of start the year for Q1.

Assuming a similar supply chain production challenges.

Speaker 5: Ryan, what I would say, you know, we don't give quarterly guidance. I would reiterate what we mentioned, I think, a little bit earlier in the call, where if you look at a cadence.

Brian what I would say.

We don't give quarterly guidance I will reiterate what we.

We mentioned I think a little bit earlier in the call.

If you look at the cadence.

Speaker 7: If you look at just the IHS production volume for our relevant market, IHS is expecting the second half, the first half, to be higher by about 5 percentage points, and we think it's going to be a little higher than that.

We would expect if you look at.

Just.

IHS production volume for our relevant market.

As expected in the second half versus the first half to be higher by about five percentage points and I think as we think is going to be a little higher than that.

Speaker 5: And that's kind of the cadence that we are thinking is going to happen.

And that's kind of the cadence that we are thinking is going to happen.

Great. Good luck guys. Thanks.

Thank you. Thank you.

Speaker 2: Ladies and gentlemen, we have reached the end of the question and answer session. I will now turn the call over to Phil Eiler for closing remarks.

Ladies and gentlemen, we have reached the end of our question and answer session.

I'll now turn the call over to Phil Eyler for closing remarks.

Speaker 4: Great. Thank you. And thanks, everyone, for joining our call today. As I've consistently shared in the past, we remain very focused on operational execution, innovation, and cash flow generation.

Great. Thank you and thanks, everyone for joining our call today.

As I've consistently shared in the past, we remain very focused on operational execution innovation and cash flow generation.

Speaker 4: I am extremely proud of our team's ability to take swift operating action in light of the significant supply chain challenges.

I am extremely proud of our team's ability to take Swift operating action in light of the significant supply chain challenges.

Speaker 4: and fluctuating global automotive production levels to deliver record-adjusted EBITDA and free cash flow in 2021.

And fluctuating global automotive automotive production levels to deliver record adjusted EBITDA and free cash flow in 2021.

Speaker 4: While we expect continued industry headwinds in 2022, the momentum on awards, along with expanding demand for our new technologies and our continued focus on productivity, position us well to deliver significant long-term shareholder value.

While we expect continued industry headwinds in 2022, the momentum on awards, along with expanding demand for our new technologies and our continued focus on productivity position us well to deliver significant long term shareholder value.

Speaker 4: We appreciate your interest and support and look forward to keeping you apprised of our progress.

Your interest and support and look forward to keeping you apprised of our progress.

Speaker 2: This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

This concludes today's conference and you may disconnect your lines at this time.

Thank you for your participation and have a wonderful day.