Q1 2024 Gentherm Inc Earnings Call
Operator: Greetings and welcome to the Gentherm first quarter 2024 earnings conference call. At this time, all participants are listening only. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Yijing Brentano, SVP, Investor Relations. Thank you. You may begin.
Greetings and welcome to the jump there in first quarter 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.
On keypad as a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host changing from tunnel.
Speaker Change: S VP Investor Relations. Thank you you may begin.
Yijing H. Brentano: Thank you and good morning, everyone, and thanks for joining us today. Gentherm's earnings results were released earlier this morning, and a copy of the release is available at gentherm.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Gentherm's website. During this call, we will make forward-looking statements within the meaning of federal securities laws. These statements 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.
Changing: Thank you and good morning, everyone and thanks for joining us today.
Changing: <unk> earnings results were released earlier this morning, and a copy of the release is available at Johnson Dot com.
Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of <unk> website.
Changing: During this call we will make forward looking statements within the meaning of federal Securities laws.
Changing: These statements reflect our current views with respect to future events and financial performance and.
Changing: Actual results may differ materially.
Changing: We undertake no obligation to update them, except as required by law.
Yijing H. Brentano: Please see Gentherm'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 underlying such forward-looking statements. During this call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation. On the call with me today are Phil Eyler, President and Chief Executive Officer, and Matteo Anversa, Chief Financial Officer.
Changing: Please see <unk> 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 underlying such forward looking statements.
Changing: During this call. We will also discuss non-GAAP financial measures as defined by SEC regulation G. <unk>.
Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and Investor presentation.
Changing: On the call with me today are Phil Eiler, President and Chief Executive Officer, and Matteo and versa, Chief Financial Officer.
Yijing H. Brentano: During their comments, Phil and Matteo will be referring to a presentation deck that we have made available on our website at gentherm.com slash event. After their prepared remarks, we will be pleased to take your questions. Now, I'd like to turn the call over to Phil.
Changing: 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 offense.
Speaker Change: After their prepared remarks, we will be pleased to take your questions.
Phillip M. Eyler: Now I'd like to turn the call over to Phil.
Phillip M. Eyler: 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.
Phillip M. Eyler: I am proud of Gentherm's strong execution to start the year. While the global automotive environment remained volatile in the first quarter and near-term light vehicle production volumes softened compared to what was forecasted by S&P Global just two months ago, we continue to see strong demand from our customers for our thermal comfort, massage, and lumbar solutions, winning 80% of our quoted pursuits for thermal and pneumatic solutions during the quarter. We secure nearly $530 million in new business awards, a record for the first quarter, although adjusting for the impact from foreign currency exchange and one-time recovery.
Phillip M. Eyler: I am proud of Gen three strong execution to start the year.
While the global automotive environment remained volatile in the first quarter and near term light vehicle production volumes softened compared to what was forecasted by S&P Global just two months ago.
We continue to see strong demand from our customers for our thermal comfort massage and lumbar solutions.
Phillip M. Eyler: Winning 80% of our quoted pursuits for thermal and nomadic solutions during the quarter.
Phillip M. Eyler: We secured nearly $530 million of automotive new business Awards, a record for the first quarter.
Phillip M. Eyler: Adjusting for the impact from foreign currency exchange and onetime recoveries.
Phillip M. Eyler: Our automotive climate and comfort solutions revenues, which include primarily CCS, seat heaters, steering wheel heaters, and lumbar and massage comfort solutions, outperformed light vehicle production in our relevant markets by approximately 300 basis points in the first quarter, with many new launches and ramp-ups still to come throughout 2024. On the profitability front, our Fit for Growth 2.0 initiatives drove over 200 basis points of year-over-year improvement in gross margin rate through supplier cost reductions, value engineering, and increased productivity at the factory.
Phillip M. Eyler: Our automotive climate and pumper solutions revenues, which include primarily Ccs seat heaters.
Phillip M. Eyler: [noise] wheel heaters, and lumbar and massage comfort solutions outperform the light vehicle production in our relevant markets.
Phillip M. Eyler: By approximately 300 basis points in the first quarter with many new launches and ramp ups still to come throughout 2024.
Phillip M. Eyler: On the profitability front.
Phillip M. Eyler: Fit for growth 2.0 initiatives drove over 200 basis points year over year improvement in gross margin rate.
Phillip M. Eyler: Through supplier cost reductions value engineering and increased productivity at the factories.
Phillip M. Eyler: Before I cover the details of the quarter, I'd like to share some exciting news fresh from the Automotive News Award Ceremony held last night on slide four. At Gentherm, we pride ourselves on our industry-leading, innovative product portfolio. And I am extremely pleased to share that we won the Automotive News Pace Innovation Partnership Award for our partnership with General Motors for launching ClimateSense, the industry's first scalable, software-driven automotive microclimate solution. If you recall, we are launching two Climate Sense production programs with GM this year.
Phillip M. Eyler: Before I cover the details of the quarter.
Phillip M. Eyler: To share some exciting news fresh from the automotive News award ceremony held last night.
On slide four.
Phillip M. Eyler: Agenda, we pride ourselves on our industry, leading innovative product portfolio.
Phillip M. Eyler: And I am extremely pleased to share that we won the automotive news pace Innovation partnership award for our partnership with General Motors for launching climate since the industry's first scalable software driven automotive microclimate solution.
Phillip M. Eyler: If you recall, we were watching to climate since production programs with general Motors this year.
Phillip M. Eyler: In addition, we previously announced a Breakthrough Scalable Climate Sense Software Award for nearly all future architectures, General Motors, ICE, and electric vehicles. Climate Sense was recognized as one of the 33 finalists globally for the overall Automotive News Pace Award.
Phillip M. Eyler: In addition, we previously announced a breakthrough scalable climate since software award for nearly all future architecture General Motors, Ice's and electric vehicles.
Phillip M. Eyler: Climate sense was recognized as one of the 33 finalists globally for the overall automotive news pace Award.
Phillip M. Eyler: The Automotive News Pace Awards identify and recognize automotive suppliers for their technological innovation in product and process that has reached the commercial market. I would like to congratulate the Global Gentherm team for winning such prestigious awards for bringing to market game-changing innovation. Now, turning to our Q1 automotive highlights on slide 5. In the first quarter, we launched our automotive solutions on 27 different vehicles across 13 OEMs, including BMW, General Motors, Great Wall, Honda, Lee Auto, Solantis, Subaru, and Volkswagen. We continue to see expanded application of our CCS solution. In the first quarter, our CCS solutions were launched on the BMW 5 Series. Chevrolet Traverse
Phillip M. Eyler: Automotive news pace awards identify and recognize automotive suppliers for their technological innovation and product and process that has reached the commercial market.
I would like to congratulate the global Jensen team for winning such prestigious awards for bringing to market game changing innovations.
Phillip M. Eyler: Now turning to our Q1 automotive highlights on slide five.
In the first quarter, we launched our automotive solutions on 27 different vehicles across 13 Oems.
Phillip M. Eyler: <unk> BMW General Motors, Great Wall, Honda Lee Auto Atlantis, Subaru and Volkswagen.
Phillip M. Eyler: We continue to see expanded application of our Ccs solutions.
Phillip M. Eyler: In the first quarter, our Ccs solutions were launched on the BMW five series.
Chevrolet traverse.
Phillip M. Eyler: GMC Acadia, Honda Prologue, Subaru Forester, Volkswagen, Magotan, and a popular BEV with one of the largest global EV manufacturers. In addition, we launched our first CCS solution on Lee Auto's L9 and L8 flagship SUVs, as well as our hands-on detection-enabled steering wheel heat solutions on multiple vehicle platforms for Leigh Auto. As I mentioned on previous calls, software and electronics are fundamental to our strategy.
Phillip M. Eyler: GMC Acadia on the prologue Subaru forester.
Phillip M. Eyler: Volkswagen <unk> and a popular VEB with one of the largest global EV manufacturers.
Phillip M. Eyler: In addition, we launched our first Ccs solution on Lee Autos L nine and L. A flagship Suvs.
Phillip M. Eyler: As well as our hands on detection enabled steering wheel heat solutions on multiple vehicle platforms for the auto.
Phillip M. Eyler: As I mentioned on previous calls software and electronics are fundamental to our strategy.
Phillip M. Eyler: As the automotive industry prepares for the proliferation of software-defined vehicles, we expect to add incremental electronics and software features to our ClimateSense and WellSense platforms that will enable greater energy efficiency, more personalization, and novel comfort and wellness experiences. To prepare for the increased demand for resources and competencies, I'm very excited to share that we have established an extended advanced engineering lab and team in Hyderabad, India, with the support of an established partner. The India location will focus on the development of software and technologies that aim to improve agility, scalability, and efficiency in product development.
Phillip M. Eyler: As the automotive industry prepares for the proliferation of software defined vehicles, we expect to add incremental electronics and software features to our climate sense and well since platforms that will enable greater energy efficiency more personalization and novel comfort and wellness experiences.
Phillip M. Eyler: To prepare for the increased demand for resources and competencies I'm very excited to share that we have established an extended advanced engineering lab and team and hydro bad India with the support of an established partner.
Phillip M. Eyler: The India location will focus on the development of software and technologies that aim to improve agility scalability and efficiency and product development.
Phillip M. Eyler: Now, on to slide 6, where, as I mentioned, we secured a first quarter record of $530 million in Automotive New Business Awards, winning 80% of our quoted pursuits in the quarter. And I'm pleased to announce that we continue to grow our business with our largest customer, General Motors. And we recently won a Conquest High-End Lumbar and Massage Award for their Next Generation Truck Platform, including the Chevrolet Silverado and GMC Sierra. With this win, we will supply our entire suite of climate and comfort seating solutions, including seat heat, PCS, lumbar, and massage, as well as multifunction electronic control units and ClimateSense software for our largest customer on their largest platform. I would like to recognize our global team for winning against significant competition. We won several CCS awards in the quarter. Of note, we won the new Ford Bronco and several Great Wall models in China.
Phillip M. Eyler: Now on to slide six where as I mentioned, we secured a first quarter record of $530 million of automotive New business Awards.
Phillip M. Eyler: Winning 80% of our quoted pursuits in the quarter.
Phillip M. Eyler: And I'm pleased to announce that we continue to grow our business with our largest customer general motors.
Phillip M. Eyler: And we recently won a conquest I and lumbar and massage award for their next generation truck platform <unk>.
Phillip M. Eyler: Including the Chevrolet Silverado and GMC Sierra.
Phillip M. Eyler: With this win we will supply our entire suite of climate and comfort seating solutions, including seat heat Ccs lumbar and massage as well as Multifunction electronic control units.
Phillip M. Eyler: And climate since software for our largest customer on their largest platform.
Speaker Change: I would like to recognize our global team for winning against significant competition.
Speaker Change: We won several Ccs awards in the quarter of note, we won the new Ford Bronco.
Speaker Change: Several great wall models in China.
Phillip M. Eyler: Hyundai Genesis G80, a Hyundai Fuel Cell EV, and Volkswagen Tayron. In addition, we won a CCS award for a mid-size crossover from one of the largest global EV manufacturers for the North American market. This is on the heels of winning the CCS awards for Europe and China for this EV manufacturer in the fourth quarter of 2023. It's worth noting that this EV manufacturer uses some combination of our climate and comfort products across all their vehicle platforms and regions.
Speaker Change: Monday Genesis Gee 80.
Speaker Change: A hyundai fuel cell EV and Volkswagen Tehran.
Speaker Change: In addition, we want our Ccs award for a mid sized crossover for one of the largest global EV manufacturers for the North American market.
Speaker Change: This is on the heels of winning the Ccs Awards for Europe, and China for this EV manufacturer in the fourth quarter of 2023.
Speaker Change: It's worth noting that this EV manufacturer has some combination of our climate and comfort products across all of their vehicle platforms and regions.
Phillip M. Eyler: In addition, we received 17 Steering Wheel Heater Awards across 9 OEMs. Importantly, we won Hands-On Detection-Enabled Steering Wheel Heater Awards with Geely, General Motors, LeAuto, Mercedes-Benz, and Volkswagen. On the pneumatic comfort front, we won Lumbar Awards for the Audi Q5 and Volkswagen ID.4, both in China.
In addition, we received 17 steering wheel heater awards across nine Oems.
Importantly, we won hands on detection enabled steering wheel heater awards.
Gili General Motors, we auto Mercedes Benz and Volkswagen.
On the nomadic comfort front, we won lumbar awards for the Audi Q, five and Volkswagen I'd for.
Both in China.
Phillip M. Eyler: In addition, we continue to strengthen our relationship with Leigh Auto, winning a high-end massage award for their all-electric SUV, Leigh M6. With this award, we will supply the Combined Seat Heat, CCS, and Pneumatic Solutions for the Leigh M6. These wins confirm our strong market-leading position in thermal and pneumatic comfort. We're seeing strong interest from a growing number of OEM customers for Comfort Scale, our combined thermal and pneumatic lumbar and massage product. The comfort scale can be integrated with any foam and with any seat.
Speaker Change: In addition, we continue to strengthen our relationship with Lee Auto winning a high end massage award for their all electric SUV Li <unk> six.
Speaker Change: With this award we will supply the combined seat heat Ccs and pneumatic solutions for the <unk>.
Speaker Change: These wins confirm our strong market, leading position in thermal and nomadic comfort.
Speaker Change: We're seeing strong interest from a growing number of OEM customers for comfort scale, our combined thermal and pneumatic lumbar and massage product.
Speaker Change: Upper scale can be integrated with any phone and with any seat.
Phillip M. Eyler: It's adaptable for all OEMs and all Tier 1s. This is one of the unique value propositions that Gentherm offers. In addition, our innovative, differentiated, proprietary solutions such as ClimateSense, WellSense, and ComfortScale position us to be a significant contributor to software-defined vehicles of the future and continue to increase Gentherm's content purview. Now, let's turn to slide 7 for a discussion of our medical business. I'm pleased to share that we have entered into a new partnership agreement with U.S. MedEquip for both Blanketrol equipment and MaxiTherm light consumables, as well as field services.
Speaker Change: It's adaptable for all Oems and all tier one this was one of the unique value propositions that Gen <unk> offers.
Speaker Change: In addition, our innovated differentiated proprietary solutions, such as climate sense, well sense and comfort scale position us to be a significant contributor to software defined vehicles of the future and continue to increase Gen <unk> content per vehicle.
Speaker Change: Now, let's turn to slide seven for a discussion of our medical business.
Speaker Change: I'm pleased to share that we have entered into a new partnership agreement with U S met equipped for both blankets, all equipment and Maxi therm light consumables as well as field services.
Phillip M. Eyler: This is our second key partnership agreement to provide world-class patient temperature management solutions to the U.S. healthcare market, and after our successful first partnership with Sourcemark Medical, a certified minority supplier. In addition, we added 21 new hospital customers in China in the first quarter, including Sanqiao Hospital at Chongqing Medical University.
Speaker Change: This is our second key partnership agreement to provide world class patient temperature management solutions.
Speaker Change: The U S health care market.
And after our successful first partnership with source Mark Medical a certified minority supplier.
Speaker Change: In addition, we added 21, new hospital customers in China in the first quarter, including Fanshawe Hospital at the Chongqing Medical University.
Phillip M. Eyler: We continue to gain momentum with AstroPad-resistive patient warming technology as a result of increased demand for more sustainable solutions. In the first quarter, revenues for Mastopad grew 36% year-over-year. We remain laser-focused on growing both the top and bottom line in medical, leveraging large partnerships, distribution channels, and white-label opportunities. Before I turn the call over to Matteo, I'd like to close with a couple of key highlights.
Speaker Change: We continued to gain momentum with Astro pad resistant patient warming technology as a result of increased demand for more sustainable solutions.
In the first quarter revenues from asphalt pad grew 36% year over year.
Speaker Change: We remain laser focused on growing both the top and bottom line and medical leveraging large partnerships distribution channels and white label opportunities.
Before I turn the call over to Matteo I'd like to close with a couple of key highlights.
Phillip M. Eyler: Gentherm is an independent partner that can cooperate with any combination of the 50-plus vehicle OEMs and the 30-plus seat manufacturers globally, including those that are vertically integrated, to create truly differentiated solutions. Our award momentum over the last couple of years is a true testament to this key differentiator. Let me give you two examples on slide 8.
Speaker Change: <unk> is an independent partner that can cooperate with any combination of the 50 plus vehicle Oems and the 30 plus seat manufacturers globally, including those that are vertically integrated.
Create truly differentiated solutions.
Matteo: Our award momentum over the last couple of years is a true Testament of this key differentiator.
Matteo: Let me give you two examples on slide eight.
Phillip M. Eyler: First, for the BMW flagship next-generation electric and ICE X-series SUVs, including the X5, 6, and 7, and the iX5, 6, and 7. We have won Climate & Comfort Awards that include CCS, Heat Heat, Interior Surface Heat, and Pneumatic Lumbar and Massage. Second, as I mentioned earlier, we will supply our entire suite of climate and comfort speeding solutions, including seat heat, CCS, lumbar, and massage, as well as the multifunction electronic control unit and ClimateSense software to General Motors for their next generation truck platform, including the Chevrolet Silverado and GMC Sierra.
Matteo: First for the BMW flagship next generation electric and Ice's X series, Suvs, including the X five six and seven and the IX five six and seven.
Matteo: We have one climate encumbered awards that include Ccs.
Matteo: Heat interior surface heat and pneumatic lumbar and massage.
Second as I mentioned earlier, we will supply our entire suite of climate <unk> comfort seating solutions, including seat heat Dcs lumbar and massage as well as the Multifunction electronic control unit and climate since software for the General Motors for their next generation truck platform, including share.
Matteo: Les Silverado and GMC Sierra.
Phillip M. Eyler: Expansive climate and comfort conquest wins on large vehicle platforms like these demonstrate that our unique value proposition resonates with customers. Turning to slide nine, you will see that Gentherm's anticipated compound annual revenue growth rate is above 14% between 2020 and 2024, compared to the corresponding growth in light vehicle production of under 4% in our relevant markets for the same period. This is a strong testament that our focused growth strategy is translating into above-market revenue growth.
Matteo: Expansive climate and comfort conquest wins on large vehicle platforms like these demonstrate that our unique value proposition resonates with customers.
Matteo: Turning to slide nine you will see that Gen <unk> anticipated compound annual revenue growth rate.
Matteo: <unk> above 14% between 2020, and 2024 compared to the corresponding growth in light vehicle production of under 4% in our relevant markets for the same period.
Matteo: This is a strong testament that our focused growth strategy is translating into above market revenue growth.
Phillip M. Eyler: Now, let me summarize. Our first quarter results continue to validate the effectiveness of our strategy and demonstrate our unique positioning to deliver profitable growth. The industry environment remains volatile and dynamic. Nonetheless, our relentless focus on strong operational execution, innovation, and cash flow generation, along with our record performance on new business awards, positions us well to continue to drive shareholder value over the long term. With that, I'll turn the call over to Matteo for a little more color on the financial results.
Matteo: Now, let me summarize our first quarter results continue to validate the effectiveness of our strategy and demonstrate our unique positioning to deliver profitable growth.
Matteo: The industry environment remains volatile and dynamic.
Matteo: Nonetheless, our relentless focus on strong operational execution innovation and cash flow generation, along with our record performance on new business Awards.
Matteo: Positions us well to continue to drive shareholder value over the long term.
Matteo: With that I'll turn the call over to Matteo for a little more color on the financial results.
Matteo Anversa: Thank you, Phil. Now, let me turn to slide 10 and focus on the most significant items in our first quarter results. For the quarter, total revenues decreased by 2% compared to the same period of last year, consistent with our expectations. However, if we adjust for the impact of foreign exchange, our overall product revenue decreased by 1%. Starting with the automotive segment, automotive revenues were $345 million, reflecting a 2% decrease compared to the prior period.
Matteo: Thank you Phil let me turn to slide 10, and focus on the most significant items in our first quarter results.
Matteo: For the quarter total revenues decreased by 2% compared to the same period of last year consistent with our expectations.
Matteo: If we adjust for the impact of foreign exchange, our overall product revenue decreased by 1%.
Matteo: Starting with the automotive segment automotive revenues were 345 million, reflecting a 2% decrease compared to the prior year period.
Matteo Anversa: Adjusting for negative foreign currency translation, the phasing out of the non-automotive electronics business, as well as one-time benefits from recoveries in both periods, automotive revenue remained relatively flat. However, actual light vehicle production in our key markets of North America, Europe, China, Japan, and Korea decreased by 1% year-over-year.
Matteo: Adjusting for a negative foreign currency translation phasing out of the non automotive electronics business.
Matteo: As well as onetime benefits from recoveries in both periods.
Matteo: Automotive revenue remained relatively flat.
Matteo: Actual light vehicle production in our key markets of North America, Europe, China, Japan, and Korea decreased by 1% year over year.
Matteo Anversa: And as Phil mentioned earlier, revenues from our automotive, climate, and comfort solutions outperformed light vehicle production in our key markets by approximately 300 basis points. We saw growth in several of our product lines, excluding the impact of foreign exchange, and more specifically, steering wheel heater revenue increased by 10% compared to the prior period due to the start of production of the LiAuto L6 and a battery electric vehicle in Asia with one of the largest global EV manufacturers, as well as several Mercedes and Stellantis programs. Automotive cables revenue increased by 6% due to higher volume with Bosch and Samsung.
Matteo: And as Phil mentioned earlier revenues from our automotive climate and conquer solutions outperformed light vehicle production in our key markets by approximately 300 basis points.
Matteo: We saw growth in several of our prototypes, excluding the impact of foreign exchange and more specifically.
Matteo: We'll heaters revenue increased by 10% compared to the prior year period due.
Matteo: Due to the start of production of Lee Auto Essex, and a battery electric vehicle in Asia with one of the largest global EV manufacturers as.
Matteo: As well as several Mercedes <unk> Atlantis programs.
Matteo: Automotive cables revenue increased by 6% due to higher volume with Bosch and Samsung.
Matteo Anversa: CTeter revenues increased by 3% due to growth with several GM models in Asia. CCS revenues increased by 2% due to the start of production of LiAuto SUVs as well as a battery electric vehicle in Asia with one of the largest global EV manufacturers. Revenues from lumbar and massage and valve systems remained relatively flat, except for revenues from a few of our product lines decreased year-over-year, XFX, and specifically, DPS revenue decreased 33% due to the end of production for the Jeep Wrangler 48-volt BTM and the BMW eMini self-connecting board, as well as the volume ramp down for the Mercedes 48-volt BTM. And as a reminder, Electronics revenue decreased 25%, primarily due to the phase-out of non-automotive electronics.
Matteo: <unk> revenues increased by 3% due to growth with several GM models in Asia.
Matteo: Ccs revenue increased by 2% due to the start of production of Lee Auto Suvs as well as a battery electric vehicle in Asia with one of the largest global EV manufacturers.
Matteo: Revenues from lumber and massage envy <unk> systems remained relatively flat exit things.
Matteo: Revenues from a few of our product lines decreased year over year ex FX and specifically.
Matteo: <unk> revenue decreased 33% due to the end of production for the Jeep Wrangler 48 volt btn.
And the BMW mini cell connecting board as well as the volume ramp down for the Mercedes 48 volt Bcm.
Speaker Change: And as a reminder, we announced on the last earnings call that we are phasing out certain battery performance solution products.
Speaker Change: Electronics revenue decreased 25%, primarily due to the phase out of non automotive electronics.
Matteo Anversa: Other automotive revenue decreased by 55% or $5 million, primarily due to one-time material inflation recoveries received in the prior year. Turning to medical, medical revenues increased 5% XFX primarily as a result of higher filter flow and astropath sales. Moving to Adjusted EBITDA. Adjusted EBITDA in the quarter was $44 million, up from $42 million in the prior year period. The adjusted EBITDA rate for the first quarter was 12.2%, and this compares to 11.4% in the first quarter of last year.
Speaker Change: Other automotive revenue decreased by 55% or $5 million.
Speaker Change: Similarly, due to onetime material inflation recoveries received in the prior year period.
Speaker Change: Turning to medical medical revenues increased 5% ex FX, primarily as a result of higher filter flow and <unk> sales.
Speaker Change: Moving to adjusted EBITDA adjusted EBITDA in the quarter was 44 million up from $42 million in the prior year period.
Speaker Change: The adjusted EBITDA rate for the first quarter was 12, 2% in.
Speaker Change: And this compares to 11, 4% in the first quarter of last year.
Matteo Anversa: The 80-basis-point year-over-year improvement was driven by fit-for-growth initiatives, including supplier cost reductions, value engineering activities, and net productivity at the factories, as well as lower freight costs. These were partially offset by annual price reductions and a negative impact from foreign exchange.
Speaker Change: The 80 basis point year over year improvement was driven by fit for growth initiatives, including supplier cost reductions value engineering activities and net productivity at the factories as well as lower freight costs.
Speaker Change: And these were partially offset by annual price reduction and negative impact from foreign exchange.
Matteo Anversa: Operating expenses were $71 million in the quarter, compared to $63 million in the prior year period. And if we adjust for acquisition, integration, and restructuring costs, as well as non-cash stock compensation expenses in both periods. Operating expenses were $60 million, relatively in line to the prior year. Finally, adjusted diluted earnings per share in the quarter were $0.62 per share compared to $0.49 per share in the first quarter of last year. Our effective tax rate for the quarter was approximately 19%, lower than the guided range of 26% to 29% due to a one-time benefit related to the Alfmeier agreement.
Speaker Change: Operating expenses were $71 million in the quarter compared to $63 million in the prior year period.
Speaker Change: And if we adjust for acquisition integration and restructuring costs as well as noncash stock compensation expenses in both periods.
Speaker Change: <unk> expenses were 60 million relatively in line with the prior year.
Speaker Change: Finally, adjusted diluted earnings per share in the quarter were <unk> 62 per share compared to 49 per share in the first quarter of last year.
Speaker Change: Our effective tax rate for the quarter was approximately 19% lower than the guided range of 26% to 29% due to a onetime benefit related to the <unk> acquisition.
Matteo Anversa: Now moving to the balance sheet on slide 11. Our cash position at the end of the quarter was approximately $125 million, and our net debt stood at $97 million. Med debt increased sequentially by $24 million as a result of increased working capital and higher capital expenses.
Speaker Change: Now moving to the balance sheet on slide 11.
Our cash position at the end of the quarter was approximately $125 million and our net debt stood at $97 million.
Speaker Change: Net debt increased sequentially by $24 million as a result of increased working capital and higher capital expenditures.
Matteo Anversa: Our net leverage ratio was 0.5 at the end of the first quarter, well below our target of 1.5. Based on the trading 12-month consolidated adjusted EBITDA ended March 31, we had approximately $278 million of remaining availability on our line of credit, and the total available liquidity as of March 31st was 403.
Speaker Change: Our net leverage ratio was <unk> five at the end of the first quarter well below our target of one five times.
Speaker Change: Based on the trailing 12 month consolidated adjusted EBITDA ended March 31.
Speaker Change: We had approximately $278 million of remaining availability on our line of credit.
Speaker Change: And the total available liquidity as of March 31.
Matteo Anversa: Now let me turn to slide 12 for our 2024 guidance. We are reaffirming our 2024 guidance as discussed in the prior earnings call. We're expecting revenue to be in the range of $1.5 to $1.6 billion, assuming a Euro to U.S. dollar exchange rate of 1.1 and light vehicle production in our relevant markets decreasing at a low single-digit rate in 2024 versus 2023, while adjusting for approximately 30 basis points of FX benefit year-over-year.
$403 million.
Speaker Change: Now, let me turn to slide 12, with our 2024 guidance.
Speaker Change: We are reaffirming our 2024 guidance as discussed in the prior earnings call.
Speaker Change: We're expecting revenue to be in the range of one five to $1 6 billion.
Speaker Change: Assuming a euro to U S dollar exchange rate of one one and.
Speaker Change: In light vehicle production in our relevant markets decreasing at a low single digit rate in 2024 versus <unk> 23.
Speaker Change: Adjusting for approximately 30 basis points of FX benefit year over year.
Matteo Anversa: The midpoint of our guidance implies an organic revenue growth rate of approximately 5%. We continue to assume higher revenue in the second half compared to the first half as a result of the timing of new program launches. Adjusted EBITDA margin is expected to be between 12.5% and 13.5%. And as a reminder, our guidance assumes a 50 basis points headwind associated with the startup cost of our new plans in Morocco and Mexico and product engineering and launch, associated with our record number one due to the revenue cadence that I just mentioned and a one-time cost associated with our new plan.
Speaker Change: The midpoint of our guidance implies an organic revenue growth rate of approximately 5%.
Speaker Change: We continue to assume higher revenue in the second half compared to the first half.
Speaker Change: Result of the timing of new program launches.
Speaker Change: Adjusted EBITDA margin rate is expected to be between 12 and have entered 10, 5%.
And as a reminder, our guidance assume a 50 basis points headwind.
Speaker Change: <unk> with the startup cost of our new plant in Morocco in Mexico and <unk>.
Speaker Change: Product engineering and launch costs associated with our record New awards.
Speaker Change: Due to the revenue cadence that I, just mentioned and a onetime cost associated with our new plants we.
Matteo Anversa: We expect the adjusted EBITDA margin rate in the second quarter to be in line with the first quarter and for the rate to improve in the second quarter. Our full-year effective tax rate is expected to be in the range of 26 to 29 percent and capital expenditures to be in the range of 65 to 75 percent. I would like to thank the global Gentherm team for continued progress on our Feed for Growth initiatives, which allowed us to deliver an 80 basis point improvement in adjusted EBITDA margin rate in spite of market volatility. And with that, I will turn the call back to the operator to begin the Q&A session.
We expect the adjusted EBITDA margin rate in the second quarter to be in line with the first quarter and for the rate to improve in the second half.
Speaker Change: Our full year effective tax rate is expected to be in the range of 26% to 29%.
Speaker Change: And capital expenditures to be in the range of 65 to 75 million.
Speaker Change: I would like to thank the global gentium team for continued progress on our feet for growth initiatives, which allowed us to deliver an 80 basis point improvement in adjusted EBITDA margin rate in spite of market volatility.
Speaker Change: And with that I will turn the call back to the operator to begin the Q&A session.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 2.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we poll for questions. Our first question comes from Matt Koranda with Roth Capital Partners. Please proceed with your question.
Speaker Change: One moment please poll for questions.
Speaker Change: Our first question comes from Matt Koranda with Roth Capital Partners. Please proceed with your question.
Matthew Butler Koranda: Good morning. I just wanted to start with the growth outlook. It sounds like we're still expecting sort of a higher second half revenue run rate than the first half. Just wondering, on a relative basis, in terms of growth for the second quarter, how we think about growth relative to light vehicle production. Are we still expecting to outperform the light vehicle production forecast, which I think stands at sort of a low single-digit growth rate in the second quarter?
Matthew Butler Koranda: Good morning.
Matthew Butler Koranda: Just wanted to start with the growth outlook.
Matthew Butler Koranda: So it sounds like.
Still expecting.
Matthew Butler Koranda: Sort of a higher second half.
Matthew Butler Koranda: Run rate than the first half just wondering on a relative basis in terms of growth for the second quarter, how we're thinking about growth relative to light vehicle production.
Expecting to outperform.
Matthew Butler Koranda: The light vehicle production forecast, which I think standard sort of a low single digit growth rate in the second quarter.
Matthew Butler Koranda: Good morning, Matt This is Phil I'll take that one.
Phillip M. Eyler: Morning, Matt. This is Phil. I'll take that one.
Phillip M. Eyler: I think the way to think about it is it'll be a gradual increase in revenue for us throughout the course of the year as we kind of forecasted when we laid out our guidance.
Phillip M. Eyler: I think the way to think about it is it'll be a gradual increase in revenue for us throughout the course of the year, as we kind of forecasted when we laid out our guidance. And that's driven heavily by new vehicle SOPs based on our very strong backlog of new business awards and also the ramp up of programs that are just launching here early in 2024. So pretty excited about the launches that are coming, and those will gradually be phasing in, which gives us a pretty strong feeling of direction and guidance for the remainder of the year.
Phillip M. Eyler: And that's driven heavily by new vehicle Saar.
Just on our.
Phillip M. Eyler: Very strong backlog of new business Awards and also the ramp up of programs that are just launching here early in 2024, so pretty excited about.
Phillip M. Eyler: The launches that are that are coming and those will gradually be phasing in.
Phillip M. Eyler: Which give us.
Phillip M. Eyler: Pretty strong feeling of our.
Phillip M. Eyler: Guidance for the remainder of the year.
Phillip M. Eyler: Okay, and then just to follow up on that, I guess. Given the reiteration of the guide, even though you guys said, you know, the first quarter was a little choppy in terms of production and what it came in relative to sort of the expectations of the forecast from some of the industry groups, there was no change to any of the launch schedules that you're seeing. Just wondered if you could maybe comment, Phil, on sort of what you're seeing in terms of the launch environment and SOP for some of the key programs that you have in the second half.
Speaker Change: Okay, and then just to follow up on that I guess.
Speaker Change: Given the reiteration of the guide.
Speaker Change: Even though you guys said the first quarter was a little choppy in terms of production.
Speaker Change: And what it came in relative to sort of the expectations of the forecast from some of the industry groups.
Speaker Change: No change to any of the launch schedules that you're seeing just wondered if you could maybe comment on sort of what youre seeing in terms of the launch environment.
Speaker Change: And S&P for some of the key programs that you have in the second half.
Phillip M. Eyler: Well, we had a few put and takes throughout Q1, but in general, all of the SOPs that were in our plan to launch are launching or have launched. A few of them had a little bit of a delayed start, and those were documented by those customers, but they're back on track as far as we know it. The remainder of the year is looking pretty much on our plan.
Speaker Change: Well, we have we had a few puts and takes throughout Q1, but in general all of the Sop fees that were in our plan to launch our launching or have launched a few of them had a little bit of a delayed start those were documented by those customers.
Speaker Change: But there they are back on track as far as we know at an end.
Speaker Change: The remainder of the year is looking looking pretty much on our plan.
Matthew Butler Koranda: Okay, gotcha. And then maybe one more on the margin front for Matteo. It sounded like you were suggesting that sort of the margin rate should continue, the margin rate we saw in the first quarter should continue into the second quarter, and then we see some improvement in the back half of the year. That's sort of how you're thinking about the full year. Maybe you could unpack for us specifically what you're seeing in terms of EBITDA margin run rate in the second quarter.
Speaker Change: Okay Gotcha, and then just maybe one more on the margin front for Matteo.
Sounded like you were suggesting that sort of the margin rate should continue the margin rate. We saw in the first quarter should continue into the second quarter.
Speaker Change: And then we see some improvement in the back half of the year is sort of how youre thinking about the full year.
Speaker Change: Maybe just if you could unpack for us.
Speaker Change: Specifically, what youre seeing in terms of EBITDA margin run rate in the second quarter.
Matthew Butler Koranda: And then, in terms of the second half, what are the good guys that sort of boost us in the back half of the year, maybe just a bridge on a year-over-year basis in terms of where we're getting that margin improvement from?
And then in terms of the second half.
What are the good guys that sort of boost us.
Speaker Change: In the back half of the year, maybe just a bridge on a year over year basis in terms of where we're getting that margin improvement from.
Matteo Anversa: Sure, Matt. So let me first address your question. On the second quarter specifically, I think we are starting well based on where we closed the first quarter. We are off to a good start and, particularly, to highlight on the positive side some of the acceleration that we have seen on the Feed for Growth side of the actions. So the team really did a great job in accelerating some of the projects on value engineering, so taking cost out of the material, as well as accelerating some of the negotiations with our sourcing partners.
Speaker Change: Sure Matt.
Matthew Butler Koranda: So let me first address your question on the second quarter specifically.
Matthew Butler Koranda: I think we are starting well based on where we closed the first quarter, we're off to a good start.
Matt Koranda: And.
Speaker Change: Particularly to highlight on the <unk>.
Speaker Change: Positive side.
Speaker Change: Some of the acceleration that we've seen on the fit for growth.
Speaker Change: Title of the action so the team really did.
Speaker Change: A great job in accelerating some of the projects on value engineering still taking cost out of the bill of material as well as accelerating some of the negotiations.
Speaker Change: Our sourcing partners. So we are very pleased on where the first quarter and probably a little better than what we were forecasting when we had the last earnings call as we entered the second quarter.
Matteo Anversa: So we are very pleased with where the first quarter ended, probably a little better than what we were forecasting when we had the last earnings call. As we enter the second quarter, we will have a couple of dynamics happening. We are expecting a slight sequential increase in revenue. That should obviously help us also on the margin side and continue progress on the fit for growth. But on the other hand, we will have a little bit of timing on the startup cost of our new plans in Morocco and in Monterey, where the cost will increase sequentially in the second quarter compared to the first.
Speaker Change: We're going to have a couple of dynamics happening we are expecting a slight sequential increase in revenue should that should.
Speaker Change: Honestly help US also on the margin side continued progress on the fit for growth, but on the other side.
Speaker Change: We will have a little bit of timing on the startup cost of our new plants in Morocco and in Monterey.
Speaker Change: Which were the cost will increase sequentially in the second quarter compared to the first.
Matteo Anversa: So that's why, in my prepared remarks, I indicated the second quarter adjusted margin rates to be pretty much in line with what we've seen in the first quarter. So these are the puts and takes. As far as the margin progression towards the second half of the year, so at a high level, you know, we are expecting an incremental volume to Phil's point, and that will help us to continue to improve profitability.
Speaker Change: Why in my prepared remarks, he indicated the second quarter adjusted EBITDA margin rates to be pretty much in line with what we've seen in the first quarter. So these are the puts and takes as far as the.
Speaker Change: Margin progression.
Speaker Change: Towards the second half of the year, so at a high level.
We are expecting.
Speaker Change: Incremental volume to Phil's point.
Speaker Change: And that will help us to continue to improve the profitability, but this will be partially offset by the startup cost in the new plants and if you look at.
Matteo Anversa: But this will be partially offset by the startup cost and the new plan. And if you look at the math, so if we are assuming the second quarter adjusted EBITDA rate to be similar to the first, then, you know, the midpoint of our guidance implies that the second half EBITDA rate will be towards the higher end of our annual guided range. And that's what we are expecting to happen, thanks to the continued progress on the fit for growth actions, as well as the bond.
Speaker Change: The math, so if we're assuming the second quarter adjusted EBITDA rate to be similar to the first then Jimmy.
Speaker Change: The midpoint of our guidance implies that our second half EBITDA rate will be.
Speaker Change: The higher end of our annual guidance range and Thats, what we are expecting.
Speaker Change: Who happen thanks to the continued progress on the fit for growth actions as well as the as well as the volume.
Matthew Butler Koranda: Okay, very clear. I'll leave it there, guys. Thank you.
Speaker Change: Okay, very clear I'll leave it there guys. Thank you.
Thank you thanks, Matt.
Operator: Our next question comes from Luke Junk with Baird. Please proceed with your question.
Our next question comes from Luke junk with Baird. Please proceed with your question.
Luke L. Junk: Good morning. Thanks for taking the questions. Maybe to just bridge off the last question there, Fit for Growth showing some nice returns in the first quarter gross margin here. Matteo, you mentioned that some things are tracking even ahead of your expectations at this point. I don't know if it would be possible to update us just where we stand on a run rate basis and as we move through the remainder of 2024, if there'd be any potential upside, or just in general how to frame Fit for Growth as an incremental contributor this year. Thank you.
Luke L. Junk: Good morning, Thanks for taking the questions maybe to just bridge off the last question there.
Luke L. Junk: Growth showing some nice returns in the first quarter gross margin here and maintain you mentioned that some things are tracking even ahead of your expectations. At this point I don't know if it'd be possible update us just where we stand on a run rate basis and as we move through the remainder of 2024, if there'd be any potential upside there.
Luke L. Junk: Just in general how to frame that for growth is incremental contributor this year. Thank you.
Matteo Anversa: So maybe let me use the first quarter as a kind of a proxy for what we are seeing. So the 80 basis points improvement year over year was, if I unpack this improvement, you have on the positive side, gross productivity at the factories created a margin expansion of 170 basis points. Feed-for-growth, specifically around sourcing savings and value engineering, was 160 basis points of margin expansion. And then we had a little bit of a lower freight cost, about 20 basis points.
Speaker Change: So maybe let me know.
Speaker Change: Use.
Speaker Change: The first quarter as a as a.
Speaker Change: Kind of a proxy on what we're seeing so the.
Speaker Change: 80 basis points improvement year over year.
Speaker Change: It was if I unpack this improvement you have on the positive side.
Speaker Change: Gross productivity in our factories.
Speaker Change: Create and a margin expansion of 170 basis points fit for growth specifically around sourcing savings and value engineering was 160 basis points of margin expansion and then we had a little bit of a.
Speaker Change: Lower freight cost.
Speaker Change: About 20 basis points and these were offset by wage inflation.
Matteo Anversa: And these were offset by wage inflation, which is about 120 basis points of drag. And then the annual price reductions that we always see at the beginning of the year accounted for about 80 basis points. And all in all, actually, if you look at the gross margin of the company, we were able, through these actions, to improve the gross margin rate, compared to last year, in spite of the lower revenue, by more than 200 basis points.
There's about 120 basis points drag and then the annual price reductions of.
Speaker Change: We always see at the beginning of the year.
Speaker Change: <unk> accounted for about 80 basis points and all in all actually if you look at the gross margin of the company. We were able through these actions to improve the gross margin rate.
Speaker Change: Compared to last year in spite of the lower revenue by more than 200 basis points. So we are pleased really where we are on the gross margin side end up and what the team did.
Matteo Anversa: So we are pleased, really, where we are on the gross margin side and what the team did. People growth in total at a high level. We, so as you know, we are counting on $80 million of net savings between 2023 and 2026. We achieved about $10 million last year, as we said in a prior earnings call, and all the projects that we have either implemented or are implementing are expected to deliver about 75% of the $80 million. And we have a good line of sight to the remaining 25%. So this is the latest status on people.
Speaker Change: <unk>.
Speaker Change: Fit for growth in total at a high level we.
Speaker Change: So as you know we are counting on $80 million of.
Speaker Change: Net savings between 2023 and 2026.
Speaker Change: We have achieved about $10 million last year as we said in our prior earnings call and all the projects that we have either implemented or we are implementing are expected to deliver about 75% of the $80 million and we have a good line of sight to the remaining 25%. So this is the latest.
Matteo Anversa: Okay, thank you for all that detail. For my follow-up, maybe a bigger picture question, Phil, and then just be around the market reaction to your booking of the software, Sentry Climate Sense, booking with GM, just curious if it's changing the threshold to book with other customers, given the modularity, if you've seen a competitive reaction as well, or do you think there'd be structural barriers to them?
Speaker Change: Status on FIFA growth.
Speaker Change: Okay. Thank you for all that detail.
Speaker Change: For my follow up maybe a bigger picture question, Phil and just be around the market reaction to your booking of the software centric climate bookings.
Speaker Change: Booking with GM just.
Speaker Change: Curious if it's changing the threshold to book with other customers given the modularity if you've seen the <unk>.
Competitive reaction as well or do you think there'd be structural barriers to them.
Yeah.
Phillip M. Eyler: I've not seen any competitive reaction, but we've certainly seen a growing interest from customers around the world. We're in active discussions with several of them.
Phillip M. Eyler: Nothing any competitive reaction, but we've certainly seen growing interest from customers around the world. We're in active discussions with several of those.
Phillip M. Eyler: We've also been actively presenting demonstration vehicles with ClimateSense and including the ClimateSense software, which is driving not only interest in the software itself but also continuing to guide OEMs to add more content to the vehicle as they're seeing the benefit of not only the software but also more hardware content in the vehicle. So, we're really, you know, optimistic and excited. Obviously, we're getting really close to launching SOP with General Motors.
We've also been actively presenting.
Phillip M. Eyler: Demonstration vehicles with climate sets and including the climate <unk> software, which is driving not only interest for the software itself, but.
But also continuing to.
Phillip M. Eyler: To guide Oems to add more content to the vehicle as they are seeing the benefit of not only the software, but also more hardware content in the vehicle.
Speaker Change: So we're really optimistic and excited obviously.
Speaker Change: We're getting really close to launching Sop with general Motors.
Phillip M. Eyler: And so, this will become a nice proof point for us as the vehicles hit the market. And, clearly, we are thrilled to be working with a progressive OEM like GM, who has really bought into this as a solution. And, you know, I think that was the capstone last night with our partnership award at the Pace Awards by General Motors for our ClimateSense collaboration. So, more to come, but we're feeling really excited about how we've eased the implementation of ClimateSense going forward.
Speaker Change: And so this will this will become a nice proof point for us as the vehicles hit the market.
Speaker Change: And clearly.
Speaker Change: Thrilled to be working with a progressive OEM like GM.
Speaker Change: Who was really bought into this as a solution.
Speaker Change: I think that was capstone last night with R. R.
Speaker Change: Our partnership award at the Pace Awards.
Speaker Change: By General Motors for our climate sense collaborations so more to come but but we're feeling really excited about.
Speaker Change: How we ease the implementation of climate sense going forward.
Luke L. Junk: Thank you for that. I'll just leave it there.
Speaker Change: Thank you for that I'll just leave it there.
Speaker Change: Thanks Luke.
Operator: Our next question comes from Glenn Chin with Seaport Research Partners. Please proceed with your question.
Speaker Change: Our next.
Speaker Change: Question comes from Glenn Chin with Seaport Research Partners. Please proceed with your question.
Glenn Edward Chin: Great. Thank you. Good morning, folks. I have some questions about the awards, so congratulations. Another record-booking quarter. Specifically, on the Conquest High-End Lumber and Massage Award for GM's next-generation truck platforms, you mentioned the full-size pickups. But does the award also include the SUVs, which I think historically have carried even more content than the pickups?
Glenn Edward Chin: Great. Thank you good morning folks.
Glenn Edward Chin: I'll go into some questions around the awards so congratulations another record booking quarter.
Glenn Edward Chin: Specifically on the conquest high in lumber and massage award for Gm's next generation truck platforms. So you mentioned the full size pickups.
Glenn Edward Chin: The award also include the Suvs, which I think historically have carried even more content than the pickups.
Phillip M. Eyler: It's the truck platform, so far. But obviously, you know, trucks are the flagship for General Motors. So the level of confidence that they have in us for this product line is, I think, clear.
Glenn Edward Chin: It's the truck platform so.
Glenn Edward Chin: So far.
Glenn Edward Chin: But obviously.
Trucks are the flagship for general motors, so the level of confidence that they have enough.
For this product line I think is clear.
Glenn Edward Chin: Okay, very good. And then... Just some detailed questions about the other awards. So the impressive content you have in the BMW X-Series, what heated surface content do you have there? And what is the hypothetical high-end CPV on these vehicles?
Speaker Change: Okay very good and then.
Just from detailed questions about the other awards.
Speaker Change: The impressive content you have and the BMW.
Speaker Change: X series, what heated surface content do you have there.
Speaker Change: And what is hypothetical high in CTV on these vehicles.
Phillip M. Eyler: Well, we don't give CPV for individual vehicles, that's customer confidential information, but in terms of interior heat, there will be multiple surfaces that'll be used to warm the body by touch and to enhance radiative heat as well.
Speaker Change: Well, we don't give CPB for individual vehicles.
Our customer confidential information, but.
Speaker Change: In terms of interior heat it'll be multiple surfaces that will be used to.
Speaker Change: Warm the body on touch and.
Speaker Change: To enhance Brady to Keith as well.
Glenn Edward Chin: Okay, and then similar on the prologue, Phil? What content? What content do you have there? Just curious, since it's an ED. Yeah, multiple.
Speaker Change: Okay, and then similar on the prologue Phil.
Speaker Change: What content.
Speaker Change: What content do you have there just curious since it.
Phillip M. Eyler: Yeah, multiple, multiple surfaces. So, for example, the door and armrests, and in some cases, areas under the steering wheel, wheel well kind of areas.
Speaker Change: Since it's an EV.
Speaker Change: Yes, multiple multiple surfaces. So for example, the door and armrest.
Speaker Change: And in some cases.
Speaker Change: Areas under the steer.
Steering wheel wheel, well kind of areas.
Glenn Edward Chin: And then the Ford Bronco, I mean, that's not a new vehicle. Was this conquest, or is that new content for that vehicle? New content.
Speaker Change: Okay interesting.
Speaker Change: And then the Ford Bronco, I mean, thats not a new vehicle was this conquest or is that any content for that vehicle.
New content.
Phillip M. Eyler: Okay, and then just lastly, so he's had impressive win rates for a long time, I think 80% plus for a while, record bookings, this all comes despite, at least the perception of increased competition. Are you guys actually gaining a share in these conquest wins? It suggests that you are, at least in lumber and massage anyway. Or is the pie just getting bigger?
Okay.
Speaker Change: And then just lastly, sorry go ahead.
Long impressive win rates.
Speaker Change: I think 80% plus for a while.
Bookings this all comes despite.
Speaker Change: At least the perception of increased competition or are you guys actually gaining share nice conquest wins suggests that you are at least in lumber and massage anyway or is the pie just getting bigger.
Glenn Edward Chin: Well, it's probably both. You know, we don't totally analyze share on a real-time basis, so that's something we'll have to come back to when we run those. But clearly, 80% plus win rate in multiple quarters in a row is a strong testament to our positioning as the largest independent provider of thermal and pneumatic comfort. I really believe that the value of being able to provide these solutions to any OEM and any combination of seat manufacturers within those OEMs is something that's really an important differentiator for us.
Speaker Change: Well, it's probably both.
Speaker Change: We don't we don't totally analyze share on a real time basis. So that's something we'll have to come back to when we when we run those but clearly.
Speaker Change: 80% plus win rate in multiple.
Speaker Change: Quarters in a row is a strong testament to our positioning as the largest independent provider of thermal and Nevada comfort.
Speaker Change: I really believe that that the value of being able to.
Speaker Change: Ill provide solutions to any OEM and any combination of seat manufacturers within those Oems is something thats thats really an important differentiator for us.
Glenn Edward Chin: Yep, indeed. Okay, thanks very much. That's it for me. Thanks for all the detail.
Speaker Change: Yes, indeed, okay, yes, thanks very much that's it for me thanks for all the detail.
Speaker Change: It's been excellent.
Speaker Change: Our next question comes.
Operator: Our next question comes from Ryan Sigdahl with Craig Hellam Capital Group. Please proceed with your question.
Speaker Change: Our next question comes from Ryan <unk> with Craig Hallum Capital Group. Please proceed with your question.
Ryan Ronald Sigdahl: Hey, good morning Phil, Matteo. Maybe just to line up on Glenn's last question, so you guys are winning at an incredibly impressive rate, 80% this quarter, but what percent of opportunities are you actually bidding on? I guess are you very isolated in or narrowly focused on what you're bidding on, driving that rate, or are you kind of casting a wide net?
Hey, good morning, Phil and Matteo maybe just following up on <unk> last question.
Ryan: So you guys are winning had an incredibly impressive rate, 80% this quarter, but what percent of opportunities are you actually bidding on I guess, how are you very isolated in or narrowly focused in what you're bidding on driving that rate or are you.
Ryan: Kind of casting a wide net.
Phillip M. Eyler: It's a fairly wide net. There are maybe a few out there that we don't see, but we see the vast majority.
Ryan: It's a fairly wide net there are maybe a few out there that we don't see but we see the vast majority.
Ryan Ronald Sigdahl: Great. One follow-up on the GM Truck Award, is that across EVs and ICE models? Bye-bye. Was the EVs also out for bid and just wasn't put on, or was that not part of the RFP process?
Ryan: Great one follow up on the GM truck award is that across Evs anti models.
Ryan: That's ice.
Ryan: Uh Huh, what's Evs also out for bid and just wasn't put on or was that not part of the RFP process.
Phillip M. Eyler: They're different bids.
Ryan: They are different bids.
Ryan Ronald Sigdahl: Great, that's it for me. Thanks guys. Good luck. Thank you. Thank you.
Speaker Change: Great. That's it for me. Thanks, guys. Good luck. Thank you. Thank you.
Operator: Our next question comes from Ryan Brinkman with J.P. Morgan. Please proceed with your question.
Speaker Change: Our next question comes from Ryan Brinkman with Jpmorgan. Please proceed with your question.
Ryan Joseph Brinkman: Hi, thanks for taking my question. I'd like to ask about the drivers of profit in the quarter after it looks like margin tracked nicely above analyst estimates, starting with whether the margin in Q1 tracked higher, lower, or in line with your own estimates, as I know your guidance is really for the full year, not the quarters. And then looking at the 80 bits of year-over-year margin improvement, you know, how much of that increase would you say roughly correlates to expense leverage on the higher sales that would be typically expected versus other more structural factors like the fit for growth initiatives you talked about versus maybe anything else such as, you know, less structural or more period-specific customer recoveries or any other factor?
Alright, Thanks for taking my question I wanted to ask around the drivers of profit in the quarter. After it looks like margin tracked nicely above analyst estimates starting with whether the margin in Q1 track higher lower or in line with your own estimates as I know your guidance is really for the full year not not the quarters.
Speaker Change: Then looking at the 80 bps of year over year margin improvement how much of that increase would you say roughly.
Speaker Change: Roughly correlates to expense leverage on the higher sales that would be typically expected.
Versus other more structural factors like the fit for growth initiatives, you talked about versus maybe anything else such as left.
Speaker Change: Left structural or more periods specific customer recoveries or any other factor.
Matteo Anversa: Thank you.
Matteo Anversa: Ryan, so let me take that. Let me start with your first part of the question. The first quarter came in, as I mentioned earlier, a little better than what we were expecting a couple of months ago. This was driven by two factors. One is really a great execution by the Feed for Growth team, particularly around some of the negotiations with suppliers on material cost reductions, as well as the acceleration of value engineering projects taking cost out of the material.
Speaker Change: Sure Ryan So let me take that let me start with your first part.
Ryan Joseph Brinkman: Part of the question first quarter came in as I mentioned earlier a.
Ryan Joseph Brinkman: A little better than what we.
Ryan Joseph Brinkman: We would expect in a couple of months ago.
Ryan Joseph Brinkman: And this is driven by two factors one is <unk>.
Ryan Joseph Brinkman: Really a great execution by the fit for growth team, particularly around.
Ryan Joseph Brinkman: Negotiate accelerate some of the negotiation with suppliers on material cost reductions as well as the.
Ryan Joseph Brinkman: Acceleration of value engineering projects, taking cost out of the bill of material and then also.
Matteo Anversa: Then also, the annual price reduction, while the environment, as expected, became more normal. On the pricing side, the annual price reduction was a drag of about 80 basis points in the quarter year over year, which is smaller than what the pre-COVID and pre-inflation rate used to be for a company, which is about 200 business points. So these are the positives, and then there's more a timing aspect around the cost of the startup cost of the two new plans, which came in a little lighter in the first quarter but will be pushed out to the second quarter. So there's a combination of really good work by the team, as well as a little bit of timing.
Ryan Joseph Brinkman: Annual price reduction while the environment is.
Ryan Joseph Brinkman: As expected became more normal.
Ryan Joseph Brinkman: On the pricing side.
Ryan Joseph Brinkman: The annual price reduction was a drag of about 80 basis points in the quarter year over year, which is smaller than what the <unk>.
Ryan Joseph Brinkman: <unk> COVID-19 and pay inflation.
Ryan Joseph Brinkman: Rate used to be for the company, which is about 200 basis points. So I'll say. These are these are the positives.
Ryan Joseph Brinkman: And then more of a timing aspect is around the cost of debt the startup cost of the two new plants, which came in a little lighter in the first quarter, but will be pushed out to the second quarter. So the combination of.
Ryan Joseph Brinkman: Really good work by the team as well as a little bit of timing.
Matteo Anversa: I think on your second part of the question, I think I answered earlier to Luke's question before, but really gross productivity was a 170 basis point margin expansion, and Feed-for-Growth was a 160 basis point margin expansion. And then these were offset by wage inflation, which still remains elevated, particularly in Mexico and Eastern Europe, which accounted for 120 basis points of degradation. And then the annual price reduction was the 80 bps that I mentioned.
Ryan Joseph Brinkman: I think on.
Speaker Change: Your second part of the question I think I answered.
Speaker Change: Two I think looks.
Speaker Change: Before but really.
Speaker Change: Gross productivity was 170 basis points margin expansion fit for growth was 160 basis points margin expansion.
Speaker Change: And then these were offset by wage inflation, which still remains elevated, particularly in Mexico, and eastern Europe, which are kind of four to 120 basis points of degradation and then the annual price reduction was the 80 bps that I that I mentioned volume to your question actually was a drag.
Matteo Anversa: Volume, to your question, actually was a drag because year-over-year volume was actually negative. So we're pleased with the fact that we were able to increase gross margin rate by more than 200 basis points year-over-year in spite of the lower volume. And Ryan, I'd be remiss not to...
Speaker Change: Because Italy year volume was actually negative so.
Speaker Change: Pleased with the fact that we were able to increase gross margin of eight by more than 200 basis points year over year in spite of.
Speaker Change: The lower volume. So that's goes to again back to the great work that the team has done on secular growth.
Phillip M. Eyler: Ryan, I'd be remiss not to highlight the great work our purchasing group is doing. You know, very strategic relationship building and negotiating has really accelerated. We're very pleased with that team.
Speaker Change: Hi, Brian.
Remiss not to highlight the great work, our purchasing group group is doing.
Speaker Change: A very strategic relationship building and negotiating has really accelerated we're very pleased with that team is doing.
Speaker Change: I appreciate it thank you.
Operator: We have reached the end of our question and answer session and concluded today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: We have reached the end of our question and answer session and this concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yes.
Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yeah.