Gentherm Incorporated (THRM) Earnings Call Transcript & Summary

Hello, and welcome to the Gentherm Incorporated 2021 Annual Meeting of Shareholders. Please note that today's meeting is being recorded. During the meeting, the Q&A will be open. [Operator Instructions] It is now my pleasure to turn today's meeting over to Ron Hundzinski, Chair of the Board. Mr. Hundzinski, the floor is yours.

Thank you, and good morning. The 2021 Annual Meeting of Shareholders of Gentherm Incorporated is hereby called to order. My name is Ron Hundzinski, and I am the Chair of the Board and a candidate for election as a director. It is my pleasure to welcome you to Gentherm's 2021 Annual Meeting. I would now like to introduce Phil Eyler, President and CEO. Phil will begin the formal portion of our meeting.

Thank you, Ron, and good morning, everyone. It's my pleasure to welcome all of you to our virtual Annual Meeting being held as a live audio webcast. The agenda and rules of conduct for this meeting as well as the certified list of shareholders entitled to vote at this meeting are available for you to access on the virtual meeting website. I'm pleased to introduce the current members of the Board, who are all nominees for reelection at this meeting and present telephonically today: Sophie Desormière; Yvonne Hao; David Heinzmann; Ron Hundzinski, who just introduced himself; Chuck Kummeth; Betsy Meter; Byron Shaw; John Stacey; and myself. Our Board is comprised of highly qualified and diverse leaders who are actively engaged in Gentherm's mission and delivering long-term shareholder value. It's my pleasure to work with each of them. Also with us today are a number of our executive officers, including Matteo Anversa, Executive Vice President of Finance and Chief Financial Officer; Yijing Brentano, Senior Vice President, Investor Relations and Global Financial Planning and Analysis; and Wayne Kauffman, Senior Vice President, General Counsel and Secretary; and representatives of the company's current independent auditor, Ernst & Young. At this meeting, you will be asked three things: one, to elect 9 directors named in the proxy statement each to serve for a 1-year term until the 2022 Annual Meeting or until a successor has been duly elected and qualified or until such director's earlier resignation, retirement or other termination of service; two, to ratify the appointment of Ernst & Young LLP and as our independent registered public accounting firm for the year ending December 31, 2021; and three, approve, on an advisory basis, the compensation of our named executive officers. The Board recommends that you vote for each nominee for director and for the other two proposals. Wayne Kauffman, our Corporate Secretary, will act as secretary of this meeting. He has in his possession the following company documents: a certified list of shareholders entitled to vote at this meeting; and the notice of meeting, forms of proxy, proxy statement and supplemental proxy materials; together with an affidavit of mailing by Broadridge of the notice of Internet availability or other proxy material to each person who is a record holder of common stock as of the close of business on March 26, 2021, the record date of this annual meeting. These materials, together with the affidavit of mailing, will be filed in the corporate records. And finally, pursuant to the company's bylaws, [ Janice W. Castillo ], a representative of Broadridge, has been appointed inspector of election to supervise the voting. And she has signed an oath of office, which will be filed in the corporate records. I'd now like to introduce Wayne Kauffman, Senior Vice President, General Counsel and Secretary. Wayne will continue the formal portion of our meeting.

Thank you, Phil, and good morning, everyone. A quorum is deemed to be present for this meeting, and we are now prepared to proceed with the meeting. The time is now 8:36 and the polls for all proposals are now open. If you previously voted via the Internet, phone or mail, you do not need to take any additional action. Any shareholder who has logged on using a 16-digit control number and wants to vote during this meeting or previously voted and wants to change his or her vote may now do so by using the voting button on the virtual meeting site before the closing of the polls. The polls will close after the presentation of the last agenda item in the notice of meeting, the approval, which will be on an advisory basis, of the compensation of our named executive officers. [Operator Instructions] We will answer questions on matters in the agenda to be voted on by the shareholders at this meeting if received before the voting is closed. After the poll close, Phil will give a brief business update while the inspector of election tabulates the votes, following which we will announce the preliminary results of today's meeting. Following the conclusion of formal business, we will accept general questions from shareholders or proxy holders. [Operator Instructions] Holders of record of common stock at the close of business on March 26, 2021, the record date for this annual meeting, are entitled to cast one vote per share for each matter. There is no cumulative voting. Directors are elected by a plurality of votes cast at this meeting or by proxy. All other matters require the approval of the majority of the votes cast. The first order of business is the election of the 9 directors to the Board of Directors for a 1-year term. The Board presently consists of 9 directors. Each of the 9 directors elected today will serve until the 2022 Annual Meeting of the Shareholders or until his or her successor has been duly elected and qualified or until such director's earlier resignation, retirement or other termination of service. The Board of Directors has nominated 9 directors for election: Sophie Desormière, Phil Eyler, Yvonne Hao, David Heinzmann, Ron Hundzinski, Charles Kummeth, Betsy Meter, Byron Shaw and John Stacey. You can read a short biography of each nominee in the company's proxy statement. In renominating these 9 individuals, the Board and the Nominating and Corporate Governance Committee chose directors that the Board believes have an appropriate balance of knowledge, experience, attributes, skills and expertise as a group to ensure that the Board appropriately fulfills its oversight responsibilities and acts in the best interest of the shareholders of the company. A brief description of the process undertaken by the Board in renominating our director nominees is in the company's proxy statement. The next order of business is the ratification of the Audit Committee's appointment of Ernst & Young as the company's independent registered public accounting firm for the year ending December 31, 2021. Jerry Rudowsky, Partner at Ernst & Young, is present at this meeting and available to respond to appropriate questions of shareholders. You can read more about this proposal in the company's proxy statement. And the next order of business is the approval of the advisory vote on named executive compensation pursuant to the following resolution. Be it resolved that the company's shareholders approve, on an advisory basis, the compensation of the named executive officers as disclosed in the company's proxy statement for the 2021 Annual Meeting of Shareholders, pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Summary Compensation Table and other related tables and disclosure. You can read about this proposal in the company's proxy statement. So we'll now just pause to see if there are any questions. Okay. It appears that there are no questions. So as no questions were received on the proposals, I hereby declare that at 8:41, the polls for each proposals are now closed. I will report the results of the voting later in the meeting after tabulation has been completed by the inspector of election. While the inspector of election is tabulating votes, I would like to turn the meeting over to Phil to provide a few remarks. Before Phil's statement, I would like to remind participants that we may make forward-looking statements within the meaning of the federal securities laws during this meeting. Statements reflect our current reviews with respect to future events and -- let me restart. I would like to remind participants that we may make forward-looking statements within the meaning of the federal securities laws during this meeting. These statements reflect our current views with respect to future events and financial performance. We undertake no obligation to update them, and actual results may differ materially. For discussions of our risk factors and other risks and uncertainties underlying such forward-looking statements as well as more information on the company's historical performance and expectations for 2021, please see our SEC filings, including our 2020 annual report or Form 10-K, our first quarter 2021 report, Form 10-Q, and associated earnings release. If we 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 most recent earnings release or investor presentation available on our website.

Thank you, Wayne. I'd like to provide a business update of our company performance for 2020. In the first half of 2020, the COVID-19 pandemic created significant hardship and challenges worldwide. We did saw a strong recovery in the automotive demand during the second half of 2020. Our performance in the second half of the year demonstrated that our strategic plan to focus growth, realign our cost structure and bring innovative solutions to market is the right path for us to continue to deliver long-term shareholder value. New launches in Battery Performance Solutions, hands-on detection-enabled steering wheel heaters and other electronics, along with increased take rates of climate and comfort solutions, enabled us to consistently outperform light vehicle production in the key markets that we serve. In our medical business, we delivered record annual revenue in 2020 with double-digit year-over-year growth through strong demand for our Blanketrol and Hemotherm CE flagship products and the addition of Stihler blood warming products to our portfolio. We continue to make progress on innovation programs, leveraging thermophysiology synergies between our medical and automotive businesses. As many of you know, a critical part of our long-term strategy is ClimateSense, our software-driven microclimate platform using an algorithm based on thermophysiology. We are disrupting the current thermal solutions in vehicles by significantly reducing power consumption and increasing range in extreme temperatures, all while providing best-in-class passenger comfort. Electrified vehicle production, including mild hybrid, full hybrid and battery electric, is expected to grow from 13% of global production in 2020 to 60% in 2030. We're currently working on 106 programs with 30 OEMs. And in 2020, we won 32 program awards on different EV platforms that accounted for over 40% of our total award dollars for the year. Notably, OEMs are recognizing Gentherm's innovative solutions and customer focus to exceed their expectations. In 2020, for the first time in Gentherm's history, we were named a General Motors Supplier of the Year, which was awarded to only 1% of GM's global supply base. GM also awarded Gentherm with the coveted Supplier Quality Excellence Award for several of our global manufacturing facilities. In addition, we were named a top North American supplier by Honda, where we were 1 of just 41 suppliers to receive this award out of a total of 735. We also made major strides in demonstrating our commitment to sustainability with our first sustainability report, which we issued in 2020 and expanded this further with our second sustainability report just released in April. These reports highlight Gentherm's sustainability initiatives and activities across our 25 global locations with focus on three key areas: people, planet and places. Turning to the first quarter of 2021. We delivered solid financial results despite the headwinds in the global supply chain. We continue to outperform in the automotive market versus the key markets we serve and achieved record first quarter revenue and adjusted EBITDA. We've built strong momentum, and I'm very proud of the Gentherm team, which has pivoted to address and overcome all of the challenges presented to us over the past year. I want to now turn the meeting back over to Wayne to provide the preliminary voting results.

Thank you, Phil. The votes have been counted and the preliminary report of the inspector of elections has been provided to me. The inspector has certified that each of the 9 director nominees has been reelected as a director of the company for the term ending at the annual meeting in 2022. In addition, the Audit Committee's appointment of Ernst & Young as the company's independent registered public accounting firm for 2021 has been ratified and the advisory vote on named executive officer compensation has been approved. The report and certificate of the inspector of election will be filed with the minutes of this meeting. We intend to disclose the final vote tallies in an 8-K filing with the SEC within 4 business days. You have now heard the preliminary results of the voting. And this completes the formal business to be conducted at this meeting. I declare the formal business portion of this annual meeting adjourned. And I would now like to turn it over to Ron Hundzinski to close the meeting.

Thanks, Wayne. Our program for the 2021 Annual Meeting is now concluded. Thank you for attendee. We look forward to seeing you at next year's annual meeting.

Thank you. The Annual General Meeting for Gentherm Incorporated has now come to an end. For any further details, please visit Gentherm's IR website. Thank you for attending. You may now disconnect.