Q3 2022 Gentherm Inc Earnings Call
Good morning, and welcome to the <unk> 2022 third quarter results conference call.
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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> website.
During this call we may make forward looking statements within the meaning of federal Securities laws.
This reflect our current views with respect to future events and financial performance and actual results may differ materially.
We undertake no obligation to update them, except as required by law.
Please see the 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.
During the call we may discuss non-GAAP financial measures as defined by S. E C regulation G.
Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release or Investor presentation.
On the call with me today are Phil I alert, President and Chief Executive Officer, and motto and versa Chief Financial Officer.
During their comments, Phil and Matteo will be referring to a presentation deck that we have made available on our website at <unk> dot com slash events.
After their prepared remarks, we will be pleased to take your questions.
Now I'd like to turn the call over to Phil.
Thank you Jamie good morning, everyone and thank you for joining us today.
I'm pleased with the solid performance of the third quarter during which we achieved the highest quarterly revenue in company history on an organic basis.
In addition, during the quarter, we closed the acquisitions of Altmeyer in Dutch and medical which expanded gen <unk> value proposition in both automotive and medical.
With the addition of Altmeyer Dutch N, we grew 37% year over year or 44%, excluding the impact of foreign currency translation.
Adjusting for foreign currency translation, and the Altmeyer acquisition automotive revenues increased 29% year over year in the third quarter.
Outperforming actual light vehicle production in our key markets by nearly 300 basis points.
The integration of the two acquired businesses is well underway I'm pleased to share that we are progressing on schedule and have already implemented actions that will enable us to realize 20% of our cost synergy goals starting in 2023.
More importantly, our customers are already benefiting from Gen <unk> expanded value proposition.
A man for our thermal and pneumatic massage and lumbar comfort solutions, especially in the EV market continues to be strong.
Evidenced by the milestone achievement of our third quarter.
First we want our inaugural combined award for thermal and nomadic copper with one of the largest global EV manufacturers.
Which is also one of the largest awards on a single E V in our history.
Second we recently announced that the 2020 for Cadillac So less T. E V will be the first to market vehicle to feature Jeff terms climate sense for Zoe microclimate system as standard equipment.
These awards underscore the growing traction of our innovative solutions.
During the third quarter, we continued to face one of the toughest operating environments with material and labor cost inflation semiconductor shortages and other supply chain challenges.
Nevertheless, our margin performance improved from the second quarter level as a result of our stringent cost management and negotiation of appropriate cost recoveries from customers.
I'd like to thank our global team for all their efforts and growing profitability year over year and sequentially.
Hi, Teo will provide more details on our financial results in a few minutes.
Now turning to the automotive highlights on slide four and.
In the third quarter, we launched our automotive solutions on 18 different vehicles across 12, Oems, including BMW General Motors, Great Wall, Honda Mercedes Benz Toyota and ex pain.
We continue to see momentum for our Ccs solutions on both IC and electric vehicles.
In the third quarter, our Ccs solutions were launched on the BMW seven series.
Great Wall have all eight six crossover SUV and X power pickup truck.
The Honda SRV and vessel as well as ex paying Jeannine SUV.
A couple of weeks ago Gen third participated in the Cadillac Celestia vehicle debut event in Los Angeles.
We partnered with Cadillac to include a climate sense interactive display at this event.
The inclusion of climate sense, and cat Cadillac's global reveal of the celestial is demonstrative of Gen. <unk> contribution to the design of this extraordinary new vehicle.
The Cadillac <unk> will feature the industry's first deployment of our climate sense system that offers advanced cabin climate Technologies' electronics and software algorithms that helped deliver luxurious efficient and personalized comfort for every occupant.
The celestial demonstrates the future potential for significant content increase for Jennifer.
With our four zone microclimate system as standard equipment.
The system features 33 unique microclimate devices that allow each occupant to personalize their desired level of heating or cooling while working in conjunction with advanced air flow technologies to create truly individualized comfort.
The climate sense system on the celestial marks a turning point and how auto makers can improve cabin comfort, while maximizing energy efficiency and optimizing driving range.
In addition to preparing for the flawless launch of the production programs with General Motors, we continue to make progress on development projects with other Oems across multiple regions.
There's been tremendous amounts of innovation creativity and hard work by our teams across the globe since climate since began as an idea on a whiteboard.
I'm truly proud of what this milestone means as an achievement for our company and it's one of many important stepping stones towards our future growth.
Yeah.
Now on to slide five where you can see that in the third quarter, we secured $430 million of awards in automotive.
Since the announcement of the Altmeyer acquisition, our customers have resoundingly express support and excitement to see gender and further expand its value proposition beyond thermal to include pneumatic solutions and comfort health wellness and energy efficiency.
The pipeline of opportunities for the combined company remains strong.
As I mentioned earlier, we want our first combined award for thermal and pneumatic copper for one of the largest global electric vehicle manufacturers in the third quarter.
This award is incremental to the strong book of business, we already have with this OEM.
I would like to congratulate the one gen third team for continuing to grow our relationship with this important customer.
Yeah.
I'm also pleased to note that we won multiple Ccs awards in the quarter, including on the next generation Buick enclave GMC Acadia Hunt.
Hyundai and X four and palisade <unk> three and on the land Rover E M. A multi multi vehicle platform.
In the third quarter. We also received eight steering wheel heater awards across six Oems.
These included Julie's Zeger EV brand sedan.
The CRV.
Nissan Sylvie as well as multiple models from Volkswagen and Audi.
With the integration of Alstom are well underway one of the key focus areas is to leverage the combined technologies teams and capabilities.
Offer more compelling and high value solutions across complementary customer relationships. Our teams are working diligently to integrate the highest performing comfort and wellness solutions in the most space efficient manner, which is especially important for electric vehicles that demand compact integrated desires.
And as we continue to bring innovative solutions to our customers. Gen. <unk> is well positioned to significantly increase content per vehicle as electric vehicles expand in the market.
Now, let's turn to slide six for a discussion of our medical business.
Hospitals are facing increasing financial pressures and are carefully managing their spending.
This has led to a reduction in capital spending and in some cases purchasing freezes.
Medical revenue in the third quarter grew 4% ex FX year over year, primarily driven by our acquisition of <unk> medical.
In the third quarter Dutch N. One competitive awards in eight large China Chinese hospitals.
As a solution for hospitals that need capital equipment, but don't have the budgeted funds for purchase we recently entered the equipment rental market with a partnership with U S medical with a company that provides short term and long term rentals to hospitals with capital equipment needs I'm.
I am pleased to share that we received a key blanket trough reorder from this rental partner in the third quarter.
In addition, the University hospital in Newark, New Jersey, and Virginia Hospital Center in Arlington, Virginia, both added to their existing fleet of blank controls to expand use throughout their hospitals.
In the third quarter. We also grew our international businesses with Hemathermal warm air and Astro paths system Awards in South America.
Now, let me summarize our third quarter results validate the effectiveness of our focused growth strategy and demonstrate our unique positioning to capitalize on industry megatrends in the mid and long term.
We continue to operate in an extremely challenging industry environment.
Nonetheless, we delivered the highest quarterly revenue in company history and secured our first combined award for thermal and nomadic comfort.
We believe that inflationary pressures and supply chain challenges will continue for some time.
We will remain focused on innovation execution and aggressive cost management, while continuing to collaborate with our customers for reasonable cost recovery in order to deliver profitable long term growth.
With that I'll turn the call over to Matteo for a little more color on the financial results.
Yeah.
Thank you Phil let me turn to slide seven and focus on the items that most significantly impacted our third quarter results.
For the quarter total revenues increased by 37% compared to the same periods of last year include.
Including the contribution from the acquisitions.
If we adjust for the impact of acquisitions and FX, our overall product revenue increased by 27%.
Starting with your automotive segment automotive revenues were 322 million corresponding to a 38% increase compared to the prior year period.
Adjusting for the 41 million contribution from <unk>.
An important currency translation automotive revenue increased by 29%.
This compares to a 26% increase in the actual light vehicle production in our key markets of North America, Europe , China, Japan and Korea.
And as Phil just mentioned, we outperformed the light vehicle production volume by nearly 300 basis points.
Yeah.
Excluding FX impact revenue increased in all the automotive product lines compared to the prior year period, and more specifically steering wheel heaters revenue increased 38% year over year, primarily due to higher sales on multiple GM platforms.
As well as continued growth from one of the largest global EV manufacturers.
<unk> revenue increased 35% due to higher demand of our proprietary battery thermal management solutions on the Jeep renegade and wrangler.
Ccs revenues increased by 31% due to higher sales to GM Ford ends to Lantus for trucks and Suvs.
C. Tito revenue increased by 30% due to higher sales on GM, Suvs and several Toyota and Honda models.
And the Terminix revenue increased by 6% due to higher sales of our multi function you see used to Ford and the growth in automotive electronics was significantly offset by decline non automotive electronics sales.
People revenues increased by 4% due to higher sales with several customers.
Our automotive revenue increased by 33% due to higher sales of Nick conditioners and automotive interiors.
And finally, <unk> grew 17% from the comparable prior year two months period, excluding the impact of foreign exchange.
Moving to the medical segment.
Revenue was flat compared to the prior year or up 4%, if we exclude effects driven by the contribution of <unk> medical.
Adjusting for the contribution of batching and ethics medical revenues declined 8%.
Due to the reduction in capital spending in the U S hospitals.
Turning next to gross margin.
Gross margin rate for the third quarter was 24, 1%.
This compares to 28, 5% in the year ago period.
The 440 basis point decrease was primarily driven by inflation associated with wages material and freight costs.
The impact of <unk>, which has a lower gross margin rate relative to our organic business.
As well as the negative impact of foreign exchange.
These were partially offset by fixed cost leverage on higher sales volume.
As well as cost recoveries and negotiated price increases from customers.
Sequentially gross margin rate increased from 22, 8% in the second quarter of 2022 to.
24, 1% in the third quarter.
The 130 basis point sequential improvement was driven by higher fixed cost leverage on higher sales volume.
Higher cost recoveries from customers.
How are your productivity at the factories, partially offset by the impact of Australia.
It is worth noting that excluding the acquisitions Janssen delivered approximately 27% gross margin rate up from 22, 8% in the second quarter.
If we move to operating expenses, which were $57 5 million in the quarter compared to $48 7 million in the prior year period.
The current year third quarter amount included $7 5 million of acquisition expenses.
And this compares to last years third quarter, when we incurred approximately 0.8 million of restructuring and acquisition expenses.
If we adjust for the acquisition and restructuring costs in both periods.
Operating expenses were $50 million up from $47 9 million in the quarter of last year.
The year over year increase of approximately $2 million was driven by additional expenses from the acquired businesses, partially offset by lower SG&A in our organic business due to lower incentive compensation and tight cost control.
Please keep in mind that the favorable impact from incentive compensation adjustment was approximately 5 million in the quarter and then we do not expect the same adjustment to occur in the fourth quarter.
In addition, the third quarter operating expenses included cost for only two months of the acquired businesses.
Adjusted EBITDA of $43 2 million increased approximately $12 7 million from the prior year period.
Adjusted EBITDA margin was 13% up from 12, 5% in the prior year period and up from eight 2% in the second quarter.
The dilutive impact of acquisitions on the adjusted EBITDA margin was approximately 180 basis points in the quarter of which approximately 60 basis points was driven by temporary cost to address discrete operational issues.
Finally, adjusted diluted earnings per share in the quarter or <unk> 70 per share compared to 51 cents per share in the third quarter of last year.
Our effective tax rate in the third quarter was approximately 37% slightly above the prior quarter due to unfavorable geographic mix of earnings.
If we move now to the balance sheet on slide eight.
Our cash position at the end of the quarter was approximately $139 million down from $157 million at the end of June .
We closed the quarter in a net debt position of $96 million compared to net cash of $120 million at the end of the second quarter.
The change was driven by the borrowing on our revolver to fund the off Myer in Daqing acquisitions and as a result, our net leverage increased from negative zero point 99 in the prior quarter to positive zero point seventy-nine still well below our target of one five.
Yeah.
Based on the trailing 12 month consolidated adjusted EBITDA ended September 30, we had approximately $264 million remaining availability on our line of credit.
And the total available liquidity as of September 30th 2021.
<unk> $404 million.
Now, let me turn to slide nine for our 2022 guidance, which includes the expected results of the acquired businesses seen there since their respective data acquisition.
We are maintaining our total company full year 2022 guidance as discussed in the prior earnings call.
We continue to expect product revenues for the year to be in the range of $1 15 to 125 billion assuming effects remains at current levels.
We expect adjusted EBITDA margin in 2022 to be in the range of 10% to 12%.
Our guidance now assumes approximately 100 million of revenue and low single digit adjusted EBITDA margin rate from the two acquisitions.
We expect our full year effective tax rate to be towards the higher end of the guided range of 29% to 31% and.
And capital expenditures to be at the lower end of the range of $50 million to $60 million.
And with that I'll turn the call back to the operator to begin the Q&A session.
Thank you very much.
We will now begin the question and answer session.
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Yeah.
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At this time, we will pause momentarily to assemble our rosters.
The first question comes from the line of Matt Koranda.
With Roth capital. Please go ahead.
Hey, guys good morning, and thanks for taking the questions.
I just wanted to start off with the award environment.
And wanted to see I think last quarter, you guys were able to break out.
Altmeyer versus sort of core Gen Awards I Wonder if you could at least maybe directionally speak to the break down there.
And then also on the thermal and pneumatic awards is there more in the pipeline that combines.
Two or is that just sort of a one off when that was kind of a quick one just go that was opportunistic but maybe if you could just kind of characterize the size of the pipeline that has a.
It has the combined towards would be helpful.
Sure. Thanks, Matt.
First of all.
Pretty pleased with the.
The number the amount of awards in the quarter typically that quarter is a little bit on the lighter side just in terms of activity. So it was a good quarter.
In terms of the breakdown you know as our typical practice, we're not going to break down the specific products in our.
In our watch portfolio, but I will say that.
The thermal awards were significantly higher than the nomadic awards in the quarter.
Getting to your second question about the combined awards, yeah, we definitely see that interest starting to build with with several customers.
It makes a lot of sense.
For a couple of reasons one is to bundle some of the technology integration in the second one is.
You know it's from a purchasing standpoint, you're typically going through the same <unk>.
Susan makers at the Oems and so it makes a lot of sense for them to negotiate a package.
So that's kind of what we're seeing but we're certainly really excited about that first combined wind with large global EV manufacturer.
Okay, great. Thanks for that and then just on the outperformance versus production in your respective regions.
Not to nitpick, but you get.
They are typically a little bit higher in terms of outperformance relative to <unk>.
Production I'm just curious if you maybe you can give a little bit of color on sort of what you're seeing in terms of maybe production mix or any kind of hold ups on the supply chain front that are that are causing that kind of lower level of outperformance relative to production in the regions.
Good question, Matt Yeah. It was a in many regards very good outperformance quarter.
Unfortunately, we did have a couple unique headwinds that I'll point out.
On the good side demand was very high for our core products, especially C.
Ccs and steering wheel heat those grew significantly with higher take rate and launches.
So a nice increase in bps in fact, I think it was the highest quarter on record for us with bps.
And that's with a lot of the ramp ups of.
The Jeep.
Our heater and now of course, we launched the BMW seven series plug in hybrid in the quarter.
So a lot of good momentum there.
<unk> to market.
Headwind wise are two factors. The first one is if you look back at 2021 third quarter, we actually had a 15 percentage point outperformance.
Versus 2023rd quarter. So it was a pretty tough comp in that quarter included a lot of new launches, which typically bring a kind of a spike at the beginning of the launch so.
You know that comparison was a little bit difficult and then the second one which is meaningful is around electronics.
And some unique activity in the quarter.
Which matteo mentioned.
We have a non automotive electronics business.
Built into our overall automotive revenue base.
As a result of the <unk> acquisition that happened several years back back in 2017.
We made the conscious decision to start phasing out some low margin customers.
In the quarter and saw a decline in revenue as a result of that and then also there were within that bundle of of customer of products and customers there were some.
Customers, where we withheld shipment during inflationary cost recovery negotiations.
Actually if you just look at that non automotive electronics and take that out of the mix, we would've outperformed 600 basis points, rather than 300 basis points just on that factor alone. So.
What's the breakdown for it.
Okay Super detailed and helpful. Appreciate that.
And then just on the gross margin front, maybe one for Matteo wondered if maybe you could kind of disaggregate some of the puts and takes on gross margin within the quarter.
On a year over year basis, just because you called out wage material freight I think altmeyer is a bit lower on the gross margin front and then FX impacted so just wanted to if you had maybe at least give us relative sizing.
Those negative headwinds on gross margin. So we can get a better sense for how to model going forward.
And then how much did I guess volume and price sort of help you to the good side on gross margin.
Sure Matt Hi, Good morning, So let me let me.
I'll take that so first of all I think.
The dilutive impact of the acquisitions on the gross margin rate in the quarter was about 280 basis points. So if.
If you normalize by that you'll really see a decline year over year from 28, and a half of last year to 27% on a comparable basis with about 150 basis points.
And the let me start with that.
With the pressures about.
230 basis points was driven by the material and wage inflation.
Then.
Hi, irregular freight and duties was about another 230 bps and then the effects impact due to the depreciation of the Euro and the Korean won primarily compared to the U S. Daughters was about 70 bps. So these were the primary negative drivers on the positive side.
You see that the volume was the bigger one.
And then also the positive impact of the price recoveries.
Some customers that we started to talk about in the last earnings call and we are pretty pleased with how things are progressing so that's kind of the breakdown.
Okay, all right very helpful.
And then just last one for me on the outlook it looks like not a whole lot has changed although.
I did notice that.
And the EBITDA margins from acquisitions. It looks like you did bring that went down a little bit to low single digit EBITDA margin.
Just wondering if you could give a little bit more color on sort of what you're seeing on that front.
And I'll leave it for others.
Yeah, So if I look back.
We would expect in about.
Two months ago, I would say that the.
The organic business performed a little better.
Then that's lower than what we were thinking in the last earnings call. If you recall, we were expecting for the second half.
The organic business to be at about a 15% EBITDA rate and actually legacy Gen term closed at about $14 eight in the quarter. So I will say the organic business was a little better and maybe the acquisitions were a little worse.
And we can talk through.
Quickly about primarily Australia, we had a couple of discrete items that occurred in the quarter.
Primarily on the <unk> on the manufacturing side.
And that we are working through with the team and that.
Is it a drag of about 60 basis points in the in the quarter, which we are expecting also to continue in.
In the fourth quarter. So that's really the dynamic that is happening but overall.
Given our year to date performance.
In order to hit the midpoint of our annual guidance we are expected.
I expect it to believe it about a similar amount of revenue in the fourth quarter compared to the compared to the third which is maybe a little more conservative pessimistic that what the.
Chance of S&P Global is currently forecasting a four hour labor market in the fourth quarter.
And then on the margin.
We need to achieve about a you know a little bit above 11% EBITDA margin in the fourth quarter, which is really in line with what we did in the third if you adjust for the.
Incentive compensation.
<unk> that I mentioned in my prepared remarks, plus one extra month of.
Opex coming from the two acquisitions. So that's how we are seen it for the remainder of the year.
Okay great.
Just follow up on the ALP buyer manufacturing.
You mentioned, just any more color on sort of what specifically that is that you can kind of share with us.
Sure I'll jump in on that one well first of all I think that when you look at the core.
Altmeyer business.
Great.
Withstanding some of these short term effects would have been pretty close to what we expected.
But there definitely are some short term issues. One example of that is.
The ramp up of the next generation.
SMA Val set for the pneumatic product.
There.
We're launching a new a new valve that controls all the future product and that's right in the middle of a ramp up and as typical for new technologies, the upfront costs of those ramp ups.
<unk>.
Yeah.
<unk> tend to be pretty high and that's kind of what we're working through but a good line of sight to get that worked out over the next couple of quarters.
Yes.
Okay I appreciate it I'll jump back in queue guys. Thanks.
Thanks, Matt.
Thank you.
The next question comes from the line of Luke Young.
Great.
Please go ahead.
Thanks for taking my questions. Just a couple for me first wanted to start with a question on the joint Thermo nomadic when two parts to this question first with my only closing in August can you just speak about the speed that this came together at and what it signals about the state of that integration overall, and then second as you had.
This conversation and are having other conversations I'm just wondering how customers are looking at thermal and pneumatic is this a case of two products being jointly booked or are you starting to see real integration between the two products that customers are already contemplating. Thanks.
Yeah.
Sure Luke.
Yeah, I mean, the timing was good on the first award it there were two.
Packages that were out at the same time and immediately when we made the announcement a lot of interest by the Oems came together.
It looked at the opportunity to bundle that but that is very consistent now with what we're seeing with other customers.
Yeah. It makes a lot of sense to have.
Where you can have one supplier, who can who can integrate these things because you can do it a little bit more effectively.
So I would say to be honest with you the.
The interest from customers, it's almost more than we can handle and combining these products.
Both both in terms of bundling so.
You know there is that factor of bundling up from a purchasing standpoint.
But there's a lot of interest on how do we make.
The combined products more effective and efficient for the Oems, but especially for the end consumer performance.
But you know, but also from a technology and cost.
Standpoint, so those are a little bit longer term because in those cases, we're going to work with the customers on <unk>.
Potential literal integration of product as an example, electronics makes a lot of sense to to combine.
And these two technologies.
And of course, there are opportunities to kind of put together are the physical thermal product with the nomadic product.
Going to take a little bit more time, but certainly this idea of a bundling. The awards is something that we see going forward.
Okay, great. Thank you for that and then my second question, either a filler Midtown might make sense to just this one.
Just wanted to better understand what's in the gross margin right. Now. So of course. This is the first quarter of a fire, which calling that out was super helpful. Thank you for that and what I'm wondering about is the cost recovery component that is in the margin today and not how that looks in absolute terms, but if we zoom out.
Look from 10000 feet just to what extent the recoveries are in the third quarter margin relative to your.
Bigger expectation for recovery in total and what might still be coming as we look to the fourth quarter and beyond as you're progressing those conversations. Thank you.
Okay. So let me.
Starting with the first part.
So overall what.
We experienced in the third quarter.
And I'm talking right now.
This is legacy agenda.
We had about.
$14 million of lost revenue due to the supply chain.
Since the majority of which is driven by customers that shut us down.
Due to shortages and other independent from Janssen.
And then an incremental about 8 million cost of goods sold.
In the four malls premium freight spot buys incremental normal freight cost that we continue to see.
Yes.
In the quarter net of any companies right so when up.
You adjust for that also in the in the third quarter similar to what we said.
In the in the prior quarters, you really have still about a 200 basis points negative impact in the gross margin.
Due to the supply chain dynamics that we are we are still seeing things are a little better in the third quarter compared to the second but we still are incurring these type of calls.
To your second part of the question on the on the <unk>.
And the recovery on the price.
Overall, we are pleased with the up.
The performance of the of the recoveries and here I'm really talking about.
The work that our team is doing.
Recover to more systemic part of deflation, which is really the material the wage and the normal rates.
Setting aside this bulk buys.
As you May recall, we are really really took on holistic approach. We went after it in four different ways number one reimbursement on one time cost of expedited freight in the spot buys which in the quarter were actually up.
70%, we were able to recover which is a little higher rate than what.
We had in prior quarters. So we're pleased with that.
And also the other side was really negotiated price increases and lower annual price reduction with our customers to offset the material and freight inflation and then obviously last is the achieving better terms on our new business awards again in the form of higher prices and better <unk>.
And as you know, we really established a process to partner.
With our Oems.
Try to get a broker to recoveries and we think that the strategy of.
Delay a little bit of the negotiation of the recoveries until we had the food pictures in order to avoid to go back to the customer several times is really paying off so so far we would expecting in the second half to achieve about $15 million of price increases we were able to negotiate about 70%.
Of those and.
And we have line of sight in negotiating the remaining 30%.
In the fourth quarter. So I think we're pleased on how the team is progressing in the areas of price recoveries.
Okay.
Thank you both for the color very helpful. A lot of go ahead and leave it there.
Thank you Luke.
Thank you.
The next question comes from Glenn Chin with Seaport Research partners. Please go ahead.
Thank you good morning folks.
Phil May I, just ask you to expand upon your comment that you expect thank you.
You said supply chain issue do you expect them to persist.
First time trying just what youre seeing out there what leads you to conclude that and then sort of a related issue what you're seeing from your customers just.
In terms of OEM.
Production in casual volatility et cetera.
Yeah.
Well definitely were.
We definitely have seen improvements in the quarter and even seeing some more gradual improvement in early stages of Q4, it's still a pretty darn volatile out there.
You know typically they're just surprises that pop up from a specific semiconductor suppliers one of the big challenges in general is just the visibility that we're getting from the suppliers is much less than in the past, we're typically seeing somewhere between call. It five to eight weeks of visibility.
<unk> and.
That's it beyond that.
None of the semiconductor suppliers are willing to give.
Firm commitments, so outside of that window, we're just.
Doing our best to try to stay with in front of the suppliers.
To maintain our allocation properly, but there were definitely cases, where.
Promised shipments came in short we had to expedite we had to readjust our factories.
But all in all I think our teams did an excellent job of keeping the flow.
To the best level possible.
On the second part of that we continue to see again not at the same level, but we can continue to see pretty significant.
Sure.
OEM <unk>.
Delivery.
Shortfalls in.
In a short window of time.
And you know that.
That causes quite a bit of disruption in the factories you get.
Lost productivity in the time when you are producing and then Oh. This is where we're seeing a little bit more of the within a couple of weeks. The volume comes back and then we're working overtime and hustling to try to get the parts out and then even in some cases.
You know spending money on expedited freight, which we typically get mostly reimbursed those are the big dynamics, we're seeing still seeing it.
Unfortunately, it's a little bit better rate I don't see anything right now that tells me we're nearing the end.
So I think we're going to have to watch it really closely we have to be agile, which I think we've done a good job at.
And.
So hopefully in the next several quarters this will alleviate.
Yeah, Okay, great. Thank you for all the detail.
And then I guess just on the competitive environment can you just tell us.
Have things changed there at all I mean yesterday one of your recently acquired.
Primary competitors was talking about some business wins.
Hum.
I don't know if there's a conquest or if it's new business and likewise I don't know if you're Disney you guys have won or book this quarter.
With conquest or a new business can you tell us are alright.
Are you gaining share or are they gaining share or is the pie just growing bigger.
Sure sure well you know I think.
One one important point for US is this quarter.
Was among the highest win rate quarters that we've ever had.
Our core business. So we're really excited about that tells us that customer.
Customers still value, our product and they're coming to us for those.
Those opportunities are.
You know in general.
Kind of the way to the market is shaping out we still see.
The same dynamics in terms of direct source from our Oems, we haven't seen any material change there.
In the mix.
There are and have always been certain customers and programs that are.
Awarded to the tiers tier one seat manufacturer for a decision on sourcing.
And.
So certainly.
There's going to be a mix of opportunities there for us. The competitor you mentioned, it's probably going to keep a lot more product in house.
Although you know Lear.
It remains an important customer for us and we see opportunities with them.
Secondly, we actually see increases in <unk>.
Award momentum from other tier ones when they have the opportunity to choose a we're really excited about.
Our strengthening relationship with Adient as an example, we are becoming.
Our preferred collaboration partner with them for both thermal and nomadic and so that's that's pretty exciting for us.
But all in all were.
We're seeing good momentum.
Okay very good.
That's it for me. Thank you for all the details there.
Okay.
Thanks Glenn.
Yeah.
Yeah.
Operator, do we have any more questions on the line.
Yeah. So we take the next question.
From the line of Ryan Fitzgibbon from Craig Hallum Capital Group. Please go ahead.
Good morning, guys, just one for for US so on climate sense, we've seen it seems like I guess thermal pneumatic comfort kind of lot of your advanced technologies are really pulling through especially on evs, but.
We have one OEM for climate sense two models, there now, but I guess, what's the pipeline look like why is other technology advanced technology is pulling through better talked through kind of how you expect the next several quarters and years to play out for climate Sir Thanks.
Sure thing well.
Well, obviously, we are quite excited about the momentum, we're making with general motors on climate sets celestial and we've got another win in the pipeline and obviously you know we're heads down executing on that we'd get one shot at the first first go to market and and we obviously want to be successful there and then one more.
For them, so that's our top priority.
Just really deliver for them.
There are.
Development projects that are that are happening right now with other customers were being very selective about that to make sure that they have a pathway to something that's beneficial.
And.
I think we're executing and showing good results as expected.
Those projects both in the.
The thermal performance for the consumer and the vehicle, but also importantly.
The gains in.
In battery efficiency and range.
<unk>.
That said these changes are big changes from an infrastructure standpoint on the vehicle and they require a long lead time to integrate <unk>.
Climate sense, what the overall thermal design of the vehicle to make them standard equipment, which is where you see the most benefit and so when you talk about full climate sense.
You have to match that up with the right timing with an OEM and as you know the the car companies are at a fever pitch race to get evs through the market, so making those big infrastructure changes sometimes has to fall at the right time.
There is definitely lots of interest people get it. They know this is where the future has to go.
Can take some time.
In terms of the other technologies, especially on the thermal side.
A lot of those new technology Windsor kind of.
In effect of our climate.
Development, where we're able to show climate sense to customers. They start to get excited about not just the the full climate sense.
Solution, but some of the different elements of it some of the different effectors like net conditioning or more steering wheel heat.
Penetration or putting.
Heat and Ccs in the rear seats, so we're seeing more and more of that start to flow through at the same time and obviously now that we have.
The thematic solutions lumbar massage to go along with it.
All of that falls right in line with the Oems.
Movement towards improving the health and wellness and comfort of their passengers, which is which is a huge differentiator for the car companies.
Thanks, guys.
Thank you.
Okay.
Thank you.
As there are no further questions. This concludes our question and answer session.
I would like to turn the conference back to Phil for closing comments over to you. So.
Sure. Thanks, everyone for joining our call I'm extremely proud of the global <unk> team for continuing to do to drive groundbreaking innovation outperforming S&P global mobility production metrics and delivering record quarterly revenue, despite a challenging industry backdrop.
As I've consistently shared in the past, we remain very focused on operational execution innovation and cash flow generation.
While we expect continued market wide changes in the near term.
The momentum that we're seeing on the top line, coupled with our stringent cost management position.
Position us well to deliver significant shareholder value over the long term. We appreciate your interest and support and look forward to keeping you apprised of our progress.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.