Gentherm (THRM) Misses Q4 EPS by 7c, Revenues Miss; Offers FY19 Revenues Guidance Below Consensus

Gentherm (NASDAQ: THRM) reported Q4 EPS of $0.50, $0.07 worse than the analyst estimate of $0.57. Revenue for the quarter came in at $253.65 million versus the consensus estimate of $266.97 million.

• Product revenues of $253.7 million decreased 1.4% from $257.2 million in the 2017 fourth quarter. Excluding the impact of acquisitions and foreign currency translation, product revenues declined 2.2% year over year
• Automotive revenues, excluding the impact of acquisitions and foreign currency translation, increased 0.9% year over year
• GAAP diluted earnings per share was $0.36 as compared with a loss per share of $0.14 for the prior-year period
• Adjusted diluted earnings per share, excluding restructuring expenses, unrealized currency loss, and expenses and other impacts related to acquisitions (see table herein), was $0.50. Adjusted diluted earnings per share in the prior-year period was $0.61
• Secured automotive new business awards totaling approximately $350 million in the quarter
• Repurchased $84 million of the Company’s stock

“I am pleased with the continued momentum we are achieving with our focused growth strategy, evidenced by a record $1.6 billion of new awards from automakers around the world in 2018. Excluding assets held for sale, our product revenues grew 7.6% in 2018, surpassing our expectations of 7%. Despite a challenging automotive industry environment, we delivered year-over-year organic revenue growth in automotive in the fourth quarter, outperforming our key markets by over 600 basis points," said Phil Eyler, Gentherm's President and Chief Executive Officer. "In addition, we made significant progress in lowering operating expenses through the ‘Fit-for-Growth’ program. Excluding assets held for sale, we delivered a better-than-expected EBITDA margin rate. There are still more opportunities ahead to improve gross margin through manufacturing efficiencies, footprint rationalization, the expansion of our purchasing excellence program and value engineering. We expect industry headwinds to continue in 2019; however, the momentum in new awards and our relentless focus on cost structure position us well to achieve our 2019 guidance and 2021 outlook."

GUIDANCE:

Gentherm sees FY2019 revenue of $1.01-1.04 billion, versus the consensus of $1.1 billion.

The Company is providing the following guidance for 2019, excluding divested assets and assets held for sale:

• Product revenues are expected to grow between 4% and 6% to a range of $1.01 billion to $1.04 billion
• Operating expenses between 19% and 20% of product revenues
• Gross margin rate between 28% and 30%
• Adjusted EBITDA between 14% and 15% of product revenue
• Full-year effective tax rate between 28% and 30%
• Capital expenditures between $40 and $50 million

Based on 2018 results and 2019 guidance, the Company is reaffirming the following outlook for 2021:

• Product revenue growth of high single-digit CAGR for the 2018 to 2021 period
• Operating expenses between 15% and 17% of product revenues
• Gross margin rate between 30% and 32%
• Adjusted EBITDA margin of high teens
• ROIC of greater than 20%

For earnings history and earnings-related data on Gentherm (THRM) click here.

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