• Gentherm Reports 2023 Third Quarter Results

    Source: Nasdaq GlobeNewswire / 26 Oct 2023 06:00:01   America/New_York

    Delivered Highest Quarterly Adjusted EBITDA in Ten Quarters
    Secured $520M in New Automotive Business Awards, a Third Quarter Record
    Updates 2023 Guidance

    NORTHVILLE, Mich., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Gentherm (NASDAQ:THRM), the global market leader of innovative thermal management and pneumatic comfort technologies for the automotive industry and a leader in medical patient temperature management systems, today announced its financial results for the third quarter ending September 30, 2023.

    Third Quarter Highlights

    • Product revenues of $366.2 million increased 10.0% from $333.0 million in the third quarter of 2022. Excluding the impact of foreign currency translation, product revenues increased 8.5% year over year
    • Automotive revenues increased 10.0% year over year; excluding the impact of foreign currency translation and contributions from the Alfmeier acquisition, increased 3.1% year over year
    • GAAP diluted earnings per share was $0.48 as compared with $0.29 for the prior year period
    • Adjusted diluted earnings per share (1) was $0.64. Adjusted diluted earnings per share in the prior year period was $0.70
    • Secured new automotive business awards totaling $520 million in the quarter
    • Repurchased $11.1 million of the Company’s common stock

             (1)    We provide adjusted diluted earnings per share and other non-GAAP financial measures in this release. 
                     See “Use of Non-GAAP Measures” below for additional information, including definitions, usefulness for
                     investors and limitations, as well reconciliations below to the most directly comparable GAAP financial
                     measures.

    Phil Eyler, the Company's President and CEO, said, “I am pleased with the continued strong execution by the global Gentherm team, enabling us to deliver record quarterly Climate Control Seat and Steering Wheel Heaters revenues as well as the highest quarterly Adjusted EBITDA in ten quarters. In addition, we secured $520 million in new automotive business awards in the third quarter, including a breakthrough multi-function electronic control unit award from General Motors. We also recently won our first combined thermal and pneumatic massage comfort award with Li Auto, one of the rising EV manufacturers in China.

    He concluded: “While the automotive production environment remains challenging including the UAW strike, our relentless focus on strong operational execution, innovation and cash flow generation along with our record performance on new business awards position us well to continue to drive shareholder value over the long term.”

    2023 Third Quarter Financial Review

    Product revenues for the third quarter of 2023 increased by $33.2 million, or 10.0%, as compared with the prior year period. Excluding the impact of foreign currency translation, product revenues increased 8.5% year over year.

    Automotive revenues increased 10.0% year over year as a result of the contribution from Alfmeier, as well as record quarterly revenues in Climate Control Seat and Steering Wheel Heaters, partially offset by decreased revenue in Electronics, Battery Performance Solutions and Other Automotive product categories year-over-year. Adjusting for foreign currency translation and excluding the contribution from Alfmeier, organic Automotive revenues increased 3.1% year over year. According to S&P Global Mobility’s mid-October report, actual light vehicle production increased by 4.6% in the current year’s third quarter when compared with the third quarter of 2022 in the Company’s key markets of North America, Europe, China, Japan and Korea.

    Gentherm Medical revenue increased 9.7% year over year, primarily as a result of increased revenues from its Dacheng air warming blankets.

    See the “Revenues by Product Category” table included below for additional detail.

    Gross margin rate decreased to 23.5% in the current year period, as compared with 24.1% in the prior year period. The decrease from the prior year period resulted from the acquired Alfmeier business having a lower gross margin rate relative to the Company’s organic Automotive business, non-automotive electronics inventory charge, material and wage inflation, and lower price recoveries from customers. These were partially offset by lower freight costs, increased productivity at the factories, and fixed cost leverage from higher unit volume.

    Net research and development expenses of $23.2 million in the third quarter increased $0.5 million, or 2.1% over the prior year period, primarily as a result of the additional expenses from the Alfmeier business, partially offset by higher customer reimbursements for research and development expenses.

    Selling, general and administrative expenses of $38.2 million in the third quarter increased $3.4 million, or 9.6%, versus the prior year period. The year-over-year increase was primarily driven by additional expenses from the acquired businesses and higher compensation expenses.

    Acquisition and integration expenses of $1.6 million in the current year period were $9.7 million lower than the prior year period as a result of reduced expenses associated with the Alfmeier acquisition. Restructuring expenses were $1.1 million in the current year period.

    As described more fully in the “Reconciliation of Net Income to Adjusted EBITDA” table included below, the Company recorded Adjusted EBITDA of $47.7 million in the 2023 third quarter compared with $41.6 million in the prior year period, an increase of $6.1 million or 14.6%.

    Income tax expense in the third quarter was $6.9 million, as compared with $5.8 million in the prior year period. The effective tax rate was 30.4% in the 2023 third quarter.

    GAAP diluted earnings per share for the third quarter was $0.48 compared with earnings per share of $0.29 for the prior year period. Adjusted diluted earnings per share, excluding non-automotive electronics inventory charge, acquisition and integration expenses, restructuring expenses, and unrealized currency gain (see table herein), was $0.64. Adjusted diluted earnings per share in the prior year period was $0.70.

    Guidance

    The Company updates its full year 2023 guidance that was initially provided in its year-end 2022 earnings release on February 22, 2023:

     
     Revised Outlook for FY 2023 Prior Outlook
    		 
     Low High Low High
    		 
    Product revenues (1)(2)$1.45B $1.47B $1.45B $1.55B 
    Adjusted EBITDA Margin Rate (3)11.5% 12.5% 11.5% 13.5% 
    Full-year Adjusted Effective Tax Rate (4)28% 32% 28% 32% 
    Capital Expenditures$40M $50M $60M $70M 
     
    (1)   Based on the current forecast of customer orders, inflation and pricing recovery, and a EUR to USD exchange rate
            of $1.05/Euro
    (2)   Assumes OEM plants impacted by the UAW strike as of October 25th will remain idled through the end of November
    (3)   Starting with 2023 reporting, the Company excludes the impact of non-cash stock-based compensation from the
            Adjusted EBITDA results
    (4)   Excluding the impact of non-cash goodwill impairment on earnings before income tax of $19.5 million reported in the
            second quarter of 2023, which includes the associated deferred tax effect, and income tax benefit of $2.4 million.
     

    Conference Call

    As previously announced, Gentherm will conduct a conference call today at 8:00 am Eastern Time to review these results. The dial-in number for the call is 1-877-407-4018 (callers in the U.S.) or +1-201-689-8471 (callers outside this U.S.). The passcode for the live call is 13741956.
    A live webcast and one-year archived replay of the call can be accessed on the Events page of the Investor section of Gentherm's website at www.gentherm.com.

    A telephonic replay will be available approximately two hours after the call until 11:59 pm Eastern Time on November 9, 2023. The replay can be accessed by dialing 1-844-512-2921 (callers in the U.S.), or +1-412-317-6671 (callers outside the U.S.). The passcode for the replay is 13741956.

    Investor Contact 
    Yijing Brentano 
    investors@gentherm.com
    248.308.1702 

    Media Contact
    Melissa Fischer
    media@gentherm.com
    248.289.9702

    About Gentherm
    Gentherm (NASDAQ: THRM) is the global market leader of innovative thermal management and pneumatic comfort technologies for the automotive industry and a leader in medical patient temperature management systems. Automotive products include variable temperature Climate Control Seats, heated automotive interior systems (including heated seats, steering wheels, armrests and other components), battery performance solutions, cable systems, lumbar and massage comfort solutions, valve system technologies, and other electronic devices. Medical products include patient temperature management systems. The Company is also developing a number of new technologies and products that will help enable improvements to existing products and to create new product applications for existing and new markets. Gentherm has more than 14,000 employees in facilities in the United States, Germany, China, Czech Republic, Hungary, Japan, Malta, Mexico, North Macedonia, South Korea, United Kingdom, Ukraine, and Vietnam. For more information, go to www.gentherm.com.

    Forward-Looking Statements 

    Except for historical information contained herein, statements in this release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent Gentherm Incorporated's goals, beliefs, plans and expectations about its prospects for the future and other future events. The forward-looking statements included in this release are made as of the date hereof or as of the date specified herein and are based on management's reasonable expectations and beliefs. Such statements are subject to a number of important assumptions, significant risks and uncertainties (some of which are beyond our control) and other factors that may cause actual results or performance to differ materially from that described in or indicated by the forward-looking statements, including but not limited to:

    • macroeconomic, geopolitical and similar global factors on the cyclical Automotive industry;
    • the production levels of our major customers and OEMs in our key markets and sudden fluctuations in such production levels, in particular with respect to models for which we supply significant amounts of product;
    • our ability to integrate our recent acquisitions and realize synergies, as well as to consummate additional strategic acquisitions, investments and exits;
    • our implementation activities to execute our long-term strategy of Fit-for-Growth 2.0, including profitability improvement and cost reductions;
    • our ability to effectively manage new product launches and research and development;
    • increasing competition, including with non-traditional entrants;
    • the ongoing supply-constrained environment, including raw material and component shortages, manufacturing disruptions and delays, logistics challenges, inflationary and other cost pressures;
    • the impact of our global operations, including our global supply chain, operations within Ukraine, economic and trade policies by various jurisdictions, and foreign currency risk and foreign exchange exposure;
    • our business in China, which is subject to unique operational, competitive, regulatory and economic risks;
    • a tightening labor market, labor shortages or work stoppages impacting us, our customers or our suppliers, including the potential impact of ongoing and future labor strikes among certain OEMs and suppliers;
    • our achievement of product cost reductions to offset customer-imposed price reductions or other pricing pressures;
    • any security breaches and other disruptions to our information technology networks and systems, as well as privacy, data security and data protection risks;
    • our product quality and safety;
    • the evolution of the automotive industry towards electric vehicles, autonomous vehicles and mobility on demand services, and related consumer behaviors and preferences;
    • the development of and market acceptance of our existing and future products;
    • our borrowing availability under our revolving credit facility, as well as our ability to access the capital markets, to support our planned growth;
    • our indebtedness and compliance with our debt covenants;
    • the effects of climate change and catastrophic events, as well as regulatory and stakeholder-imposed requirements to address climate change and other sustainability issues;
    • our efforts to optimize our global supply chain and manufacturing footprint;
    • our ability to project future sales volume based on third-party information, based on which we manage our business;
    • our ability to convert new business awards into product revenues;
    • any loss or insolvency of our key customers and OEMs, or key suppliers;
    • risks associated with our manufacturing processes;
    • the extensive regulation of our patient temperature management business;
    • the protection of our intellectual property in certain jurisdictions;
    • our compliance with anti-corruption laws and regulations; and
    • legal and regulatory proceedings and claims involving us or one of our major customers.

    The foregoing risks should be read in conjunction with the Company's reports filed with or furnished to the Securities and Exchange Commission (the “SEC”), including “Risk Factors,” in its most recent Annual Report on Form 10-K and subsequent SEC filings, for a discussion of these and other risks and uncertainties. In addition, with reasonable frequency, we have entered into business combinations, acquisitions, divestitures, strategic investments and other significant transactions. Such forward-looking statements do not include the potential impact of any such transactions that may be completed after the date hereof, each of which may present material risks to the Company’s future business and financial results.

    Except as required by law, the Company expressly disclaims any obligation or undertaking to update any forward-looking statements to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

     
    GENTHERM INCORPORATED
    CONSOLIDATED CONDENSED STATEMENTS OF INCOME
    (In thousands, except per share data)
    (Unaudited)
     
     Three Months Ended
    September 30,
    		 Nine Months Ended
    September 30,
    		 
     2023
    		 2022
    		 2023
    		 2022
    		 
    Product revenues$366,195  $332,962  $1,102,143  $861,334  
    Cost of sales 279,985   252,610   846,815   657,492  
    Gross margin 86,210   80,352   255,328   203,842  
    Operating expenses:                
    Net research and development expenses 23,150   22,666   72,991   62,425  
    Selling, general and administrative expenses 38,220   34,859   113,680   96,109  
    Impairment of goodwill —   —   19,509   —  
    Restructuring expenses 1,099   6   3,412   561  
       Total operating expenses 62,469   57,531   209,592   159,095  
    Operating income 23,741   22,821   45,736   44,747  
    Interest (expense) income, net (3,368)  714   (9,444)  (1,285) 
    Foreign currency gain (loss) 2,107   (8,285)  384   (1,516) 
    Other income 272   361   1,058   698  
    Earnings before income tax 22,752   15,611   37,734   42,644  
    Income tax expense 6,908   5,784   15,478   13,998  
    Net income$15,844  $9,827  $22,256  $28,646  
    Basic earnings per share$0.48  $0.30  $0.67  $0.87  
    Diluted earnings per share$0.48  $0.29  $0.67  $0.86  
    Weighted average number of shares – basic 32,944   33,162   33,049   33,106  
    Weighted average number of shares – diluted 33,196   33,470   33,311   33,460  
     


     
    GENTHERM INCORPORATED
    REVENUE BY PRODUCT CATEGORY AND RECONCILIATION OF FOREIGN CURRENCY
    TRANSLATION IMPACT
    (In thousands)
    (Unaudited)
     
     Three Months Ended September 30,
    		 Nine Months Ended September 30,
    		 
     2023
    		 2022
    		 % Change 2023
    		 2022
    		 % Change
    		 
    Climate Control Seat$124,905  $112,059   11.5% $360,868  $311,281   15.9% 
    Seat Heaters 77,238   75,568   2.2%  231,132   210,367   9.9% 
    Steering Wheel Heaters 39,861   31,482   26.6%  115,166   89,169   29.2% 
    Lumbar and Massage Comfort
    Solutions (a)    		 33,260   22,740   46.3%  109,602   22,740   382.0% 
    Valve Systems (a) 27,830   18,542   50.1%  82,516   18,542   345.0% 
    Automotive Cables 19,668   18,338   7.3%  60,131   59,662   0.8% 
    Battery Performance Solutions 17,242   20,331   (15.2)%  57,138   55,395   3.1% 
    Electronics 10,163   12,083   (15.9)%  30,456   33,190   (8.2)% 
    Other Automotive 4,615   11,412   (59.6)%  21,998   29,224   (24.7)% 
    Subtotal Automotive
    segment    		 354,782   322,555   10.0%  1,069,007   829,570   28.9% 
    Medical segment (b) 11,413   10,407   9.7%  33,136   31,764   4.3% 
    Total Company$366,195  $332,962   10.0% $1,102,143  $861,334   28.0% 
                             
    Foreign currency translation
    impact (c)    		 4,825   —       (4,962)  —      
    Total Company, excluding
    foreign
    currency translation impact    		$361,370  $332,962   8.5% $1,107,105  $861,334   28.5% 
     
    (a) Represents product revenues from Alfmeier (acquired on August 1, 2022).
    (b) Includes product revenues of $1,988 and $4,939 for the three and nine months ended September 30, 2023,
    respectively, and $1,234 for the three and nine months ended September 30, 2022 from Dacheng (acquired on July
    13, 2022).
    (c) Foreign currency translation impacts for the Automotive segment and Medical segment were $4,654 and $171,
    respectively, for the three months ended September 30, 2023. Foreign currency translation impacts for the
    Automotive segment and Medical segment were $(4,843) and $119, respectively, for the nine months ended
    September 30, 2023.
     


     
    GENTHERM INCORPORATED
    RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
    (In thousands)
    (Unaudited)
     
     Three Months Ended
    September 30,
    		 Nine Months Ended
    September 30,
    		 
     2023
    		 2022
    		 2023 2022
    		 
    Net income$15,844  $9,827  $22,256  $28,646  
    Add back:                
    Depreciation and amortization 12,516   11,774   38,354   30,259  
    Income tax expense (a) 6,908   5,784   15,478   13,998  
    Interest expense (income), net (b) 3,368   (714)  9,444   1,285  
    Adjustments:                
    Impairment of goodwill —   —   19,509   —  
    Non-cash stock-based compensation (c) 3,421   (1,568)  8,592   4,622  
    Acquisition and integration expenses 1,618   11,349   4,730   18,357  
    Restructuring expense 1,099   6   3,412   561  
    Non-automotive electronics inventory charge 3,426   —   5,489   —  
    Unrealized currency (gain) loss (898)  5,308   4,227   (1,032) 
    Other 372   (157)  71   (483) 
    Adjusted EBITDA$47,674  $41,609  $131,562  $96,213  
                     
    Product revenues$366,195  $332,962  $1,102,143  $861,334  
    Adjusted EBITDA Margin 13.0%  12.5%  11.9%  11.2% 
     
    (a) Includes $2,423 of deferred income tax benefit associated with the goodwill impairment of the Medical Reporting
    Unit for the nine months ended September 30, 2023.
    (b) Includes $62 and $734 of interest income for the three months and nine months ended September 30, 2023,
    related to mark-to-market adjustment of our floating-to-fixed interest rate swap agreement with a notional amount of
    $100,000.
    (c) Includes operating expenses of $3,384 and $(1,933) for the three months ended September 30, 2023 and 2022,
    respectively. Includes operating expenses of $8,218 and $4,506 for the nine months ended September 30, 2023 and
    2022, respectively.
     


     
     Three Months
    Ended
    September 30,
    		 Nine Months
    Ended
    September 30,
    		 
     2022
    		 2022
    		 
    Adjusted EBITDA$41,609  $96,213  
    Non-cash stock-based compensation 1,568   (4,622) 
    Adjusted EBITDA as reported in Q3 2022 (1)$43,177  $91,591  
    Adjusted EBITDA Margin as reported in Q3 2022 (1) 13.0%  10.6% 
     
    (1) Includes the impact of non-cash stock-based compensation
     
     Three Months
    Ended
    September 30,
    		 Nine Months
    Ended
    September 30,
    		 
     2022
    		 2022
    		 
    Adjusted EBITDA$41,609  $96,213  
    Pro forma EBITDA impact of Alfmeier acquisition 603   2,425  
    Pro forma Adjusted EBITDA$42,212  $98,638  
    Pro forma Adjusted EBITDA Margin 12.0%  9.8% 
     
     Three Months
    Ended
    September 30,
    		 Nine Months
    Ended
    September 30,
    		 
     2022
    		 2022
    		 
    Product revenues$332,962  $861,334  
    Pro forma revenue impact of Alfmeier acquisition 19,915   143,640  
    Pro forma product revenues$352,877  $1,004,974  
     


     
     Adjusted
    EBITDA
    as reported (1)
    		 Non-Cash
    Stock-based
    Compensation
    		 Adjusted
    EBITDA     (1)
    		 Product
    Revenues
    		 Adjusted
    EBITDA
    Margin     (1)
    		 
    Three months ended September 30, 2023$-  $-  $47,674  $366,195   13.0% 
    Three months ended June 30, 2023 -   -   42,378   372,323   11.4% 
    Three months ended March 31, 2023 -   -   41,510   363,625   11.4% 
    Three months ended December 31, 2022 38,178   2,771   40,949   343,322   11.9% 
    Three months ended September 30, 2022 43,177   (1,568)  41,609   332,962   12.5% 
    Three months ended June 30, 2022 21,435   3,401   24,836   260,715   9.5% 
    Three months ended March 31, 2022 26,979   2,789   29,768   267,657   11.1% 
    Three months ended December 31, 2021 30,932   2,386   33,318   248,226   13.4% 
    Three months ended September 30, 2021 30,481   3,223   33,704   243,384   13.8% 
    Three months ended June 30, 2021 43,721   3,459   47,180   266,005   17.7% 
     
    (1) Beginning in 2023 the definition of Adjusted EBITDA and Adjusted EBITDA margin was updated to exclude the
    impact of stock-based compensation.
     

    Use of Non-GAAP Financial Measures

    In addition to the results reported in accordance with GAAP throughout this release, the Company has provided here or elsewhere information regarding adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), Adjusted EBITDA margin, adjusted earnings per share (“Adjusted earnings per share” or “Adjusted EPS”), free cash flow, Net Debt, organic revenue, revenue (for the Company and by each reporting segment) excluding acquired businesses and foreign currency translation, revenue excluding foreign currency translation, adjusted operating expenses, pro forma product revenues, pro forma Adjusted EBITDA, pro forma Adjusted EBITDA margin and adjusted effective tax rate, each a non-GAAP financial measure. The Company defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, deferred financing cost amortization, non-cash stock-based compensation expenses, and other gains and losses not reflective of the Company’s ongoing operations and related tax effects including transaction expenses, debt retirement expenses, impairment of assets held for sale, impairment of goodwill, gain or loss on sale of business, restructuring expense, unrealized currency gain or loss and unrealized revaluation of derivatives. Note that in recent prior periods, the Company did not exclude non-cash stock-based compensation expenses in the definition of Adjusted EBITDA. Forward-looking references to Adjusted EBITDA and Adjusted EBITDA margin herein exclude the impact of stock-based compensation as newly defined. The Company defines Adjusted EBITDA margin as Adjusted EBITDA divided by product revenues. The Company defines Adjusted EPS as earnings adjusted by gains and losses not reflective of the Company’s ongoing operations and related tax effects including transaction expenses, debt retirement expenses, impairment of assets held for sale, impairment of goodwill, gain or loss on sale of business, restructuring expense, unrealized currency gain or loss and unrealized revaluation of derivatives. The Company defines Free Cash Flow as Net cash provided by operating activities less Purchases of property and equipment. The Company defines Net Debt as the principal amount of all Consolidated Funded Indebtedness (as defined in the Credit Agreement) less cash and cash equivalents. The Company defines organic revenue as revenue, excluding revenue from acquired businesses. Note that in recent prior periods, the Company used organic revenue instead to be revenue excluding foreign currency translation (see below). The Company defines revenue excluding acquired businesses and foreign currency translation as revenue, excluding the revenue from acquired businesses and the estimated effects of foreign currency exchange on revenue by translating actual revenue using the prior period foreign currency exchange rates. The Company defines revenue excluding foreign currency translation as revenue, excluding the estimated effects of foreign currency exchange on revenue by translating actual revenue using the prior period foreign currency exchange rates. The Company defines adjusted operating expenses as operating expenses excluding impairment of intangible assets and property and equipment, restructuring, related non-cash stock-based compensation, acquisition, integration and divestiture expenses. The Company defines pro forma product revenues as product revenues including the product revenues of Alfmeier as if the acquisition had occurred as of January 1, 2022. The Company defines pro forma Adjusted EBITDA as Adjusted EBITDA, as defined above, including the results of Alfmeier as if the acquisition had occurred as of January 1, 2022. The Company defines pro forma Adjusted EBITDA margin as pro forma Adjusted EBITDA, as defined above, divided by pro forma product revenues. The Company defines adjusted effective tax rate as income tax expense excluding the tax benefit from non-cash goodwill impairment divided by earnings before income tax excluding the impact of non-cash goodwill impairment.

    The Company’s reconciliations are included in this release or can be found in the supplemental materials furnished as Exhibit 99.2 to the Company’s Form 8-K dated October 26, 2023.

    In evaluating its business, the Company considers and uses Free Cash Flow and Net Debt as supplemental measures of its liquidity and the other non-GAAP financial measures as supplemental measures of its operating performance. Management provides such non-GAAP financial measures so that investors will have the same financial information that management uses with the belief that it will assist investors in properly assessing the Company's performance on a period-over-period basis by excluding matters not indicative of the Company’s ongoing operating or liquidity results and therefore enhance the comparability of the Company's results and provide additional information for analyzing trends in the business. In evaluating our non-GAAP financial measures, you should be aware that in the future we may incur revenues, expenses, and cash and non-cash obligations that are the same as or similar to some of the adjustments in our presentation of non-GAAP financial measures. Our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There also can be no assurance that we will not modify the presentation of our non-GAAP financial measures in the future, and any such modification may be material. Other companies in our industry may define and calculate these non-GAAP financial measures differently than we do and those calculations may not be comparable to our metrics. These non-GAAP measures have limitations as analytical tools, and when assessing the Company's operating performance or liquidity, investors should not consider these non-GAAP measures in isolation, or as a substitute for net income, revenue or other consolidated income statement or cash flow statement data prepared in accordance with GAAP.

    Non-GAAP measures referenced in this release and other public communications may include estimates of future Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EPS. The Company has not reconciled the non-GAAP forward-looking guidance included in this release to the most directly comparable GAAP measures because this cannot be done without unreasonable effort due to the variability and low visibility with respect to taxes and non-recurring items, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable, and a potentially significant, impact on our future GAAP financial results.

     
    GENTHERM INCORPORATED
    ADJUSTED NET INCOME AND ADJUSTED EARNINGS PER SHARE
    (In thousands, except per share data)
    (Unaudited)
     
     Three Months Ended
    September 30,
    		 Nine Months Ended
    September 30,
    		 
     2023
    		 2022
    		 2023
    		 2022
    		 
    Net income$15,844  $9,827  $22,256  $28,646  
    Non-cash purchase accounting impact 1,613   2,842   5,793   6,426  
    Restructuring expenses 1,099   6   3,412   561  
    Unrealized currency (gain) loss (898)  5,308   4,227   (1,032) 
    Acquisition and integration expenses 1,618   11,349   4,730   18,357  
    Non-automotive electronics inventory charge 3,426   —   5,489   —  
    Impairment of goodwill —   —   19,509   —  
    Other 372   (157)  71   (483) 
    Tax effect of above (1,693)  (5,822)  (8,635)  (7,020) 
    Adjusted net income$21,381  $23,353  $56,852  $45,455  
                 
    Weighted average shares outstanding:                
    Basic 32,944   33,162   33,049   33,106  
    Diluted 33,196   33,470   33,311   33,460  
                 
    Earnings per share, as reported:                
    Basic$0.48  $0.30  $0.67  $0.87  
    Diluted$0.48  $0.29  $0.67  $0.86  
    Adjusted earnings per share:                
    Basic$0.65  $0.70  $1.72  $1.37  
    Diluted$0.64  $0.70  $1.71  $1.36  
     


     
    GENTHERM INCORPORATED
    CONSOLIDATED CONDENSED BALANCE SHEETS
    (In thousands, except share data)
    (Unaudited)
     
     September 30, 2023
    		 December 31, 2022
    		 
    ASSETS        
    Current Assets:        
    Cash and cash equivalents$154,354  $153,891  
    Accounts receivable, net 263,765   247,131  
    Inventory:        
       Raw materials 122,919   136,217  
       Work in process 16,745   17,695  
       Finished goods 66,192   64,336  
    Inventory, net 205,856   218,248  
    Other current assets 76,651   64,597  
       Total current assets 700,626   683,867  
    Property and equipment, net 236,660   244,480  
    Goodwill 100,633   119,774  
    Other intangible assets, net 66,427   73,933  
    Operating lease right-of-use assets 27,442   29,945  
    Deferred income tax assets 73,177   69,840  
    Other non-current assets 20,632   17,461  
    Total assets$1,225,597  $1,239,300  
    LIABILITIES AND SHAREHOLDERS’ EQUITY       
    Current Liabilities:       
    Accounts payable$213,851  $182,225  
    Current lease liabilities 7,633   7,143  
    Current maturities of long-term debt 620   2,443  
    Other current liabilities 90,199   93,814  
       Total current liabilities 312,303   285,625  
    Long-term debt, less current maturities 207,302   232,653  
    Non-current lease liabilities 16,451   20,538  
    Pension benefit obligation 3,165   3,638  
    Other non-current liabilities 26,324   24,573  
    Total liabilities$565,545  $567,027  
    Shareholders’ equity:      
    Common Stock:      
       No par value; 55,000,000 shares authorized 32,795,093 and
       33,202,082 issued and outstanding at September 30, 2023 and
       December 31, 2022, respectively    		 97,715   122,658  
    Paid-in capital 5,379   5,447  
    Accumulated other comprehensive loss (55,955)  (46,489) 
    Accumulated earnings 612,913   590,657  
    Total shareholders’ equity 660,052   672,273  
    Total liabilities and shareholders’ equity$1,225,597  $1,239,300  
     


     
    GENTHERM INCORPORATED
    CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
    (In thousands)
    (Unaudited)
     
     Nine Months Ended September 30,
    		 
     2023
    		 2022
    		 
    Operating Activities:        
    Net income$22,256  $28,646  
    Adjustments to reconcile net income to net cash provided by operating
    activities:    		      
       Depreciation and amortization 38,531   30,470  
       Deferred income taxes (3,017)  (1,207) 
       Stock based compensation 8,451   3,383  
       Loss on disposition of property and equipment 873   620  
       Provisions for inventory 6,597   4,293  
       Impairment of goodwill 19,509   —  
       Other 81   881  
       Changes in assets and liabilities:      
          Accounts receivable, net (19,813)  (55,780) 
          Inventory 3,733   (53,223) 
          Other assets (19,218)  (10,868) 
          Accounts payable 32,158   60,983  
          Other liabilities (10,099)  4,759  
       Net cash provided by operating activities 80,042   12,957  
    Investing Activities:      
    Purchases of property and equipment (26,526)  (25,737) 
    Proceeds from the sale of property and equipment 72   175  
    Acquisition of businesses, net of cash acquired —   (224,097) 
    Proceeds from deferred purchase price of factored receivables 10,139   2,168  
    Cost of technology investments (630)  (350) 
       Net cash used in investing activities (16,945)  (247,841) 
    Financing Activities:      
    Repayments of debt (27,166)  (11,559) 
    Proceeds from the exercise of Common Stock options 263   1,556  
    Taxes withheld and paid on employees' share-based payment awards (2,754)  (5,415) 
    Cash paid for the repurchase of Common Stock (31,094)  —  
       Net cash (used in) provided by financing activities (60,751)  191,582  
       Foreign currency effect (1,883)  (8,141) 
       Net cash increase (decrease) in cash and cash equivalents 463   (51,443) 
       Cash and cash equivalents at beginning of period 153,891   190,606  
       Cash and cash equivalents at end of period$154,354  $139,163  
    Supplemental disclosure of cash flow information:      
    Cash paid for taxes$18,893  $13,509  
    Cash paid for interest 9,737   3,334  
     

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