Garrett Motion (GTX) 24 Apr 232023 Q1 Earnings call transcript

Hello, my name is Jason, and I will be your operator this morning. I would like to welcome everyone to the Garrett Motion First Quarter Financial Results Conference Call. This call is being recorded and the replay will be available later today. After the company's presentation, there will be a question-and-answer session.

I would now like to hand the call over to Eric Birge, Garrett's Head of Investor Relations. ahead. go Please

Good attending Jason. Conference welcome, Thank everyone. Thank Garrett day Motion for the Results First you you, and Quarter Call. Financial

today's will release with about begin, to Garrett IR filings Motion we would along investors.garrettmotion.com. presentation other links the that and our There to at you SEC Before section of information earnings find company. available are I press website on also the important mention like our

forward-looking with we business encourage future should note our the be that the Turning the the our statements to and contains of and We understand within of aware presentation taken as Act. risk slide that performance and such. you are Exchange Securities Securities of the two, filings Commission. forward-looking Be in meaning this read estimates factors Exchange contained in risks and uncertainties statements and to only

the obligation terms those reconcile also direct forward-looking and of represented we and light today, are in vehicle gasoline those management's expectations and measure diesel only reconciliations, in We way operate measures and Today's manage to in by the to the presentation and measures only. of of GAAP found as them. diesel which and any our company comments, and the includes appendix describe gasoline presentation today's the you encouraged update slide business. The each presentation disclaims are to non-GAAP most statements to refer both vehicle to light examine release press Also the which the today. we using may products

Deason, Financial Chief is President call President and today's Chief Garrett's on Officer. and us Vice Executive Sean Officer; and Senior Rabiller, Garrett's With Olivier

call hand over to the now will Olivier. I

elevated where call. excellent with which Garrett's am start last announced everyone the first pleased we XXXX very I for week. on thanks I with our three, slide for foundation conference quarter, provide results and Eric, begin an for guidance highlights quarter. my we Thanks, the remarks will meeting results quarter joining this

to thank better first for planned entire ramp to execution volume support the Garrett and flawless the want team than in I the quarter. their flexibility up

still able enhanced While macro levels was performance we see chain to and there Garrett of improving volatility high optimize Despite inflation. this, deliver supply environment, and profitability. an is

businesses. XXXX We in year on $XXX up of sales strong of launches the currency started and on ramp with basis. a vehicle share QX commercial This by up driven a net basis our X% was million, demand ups, constant gasoline XX% and our mainly from gains product new reported and

supply recovery to signs quarter industry and We related compared also saw last when especially this to stabilization shortages. of year's chain semiconductor disruptions,

primarily We sales in was mix, up benefited which China. as boosted well to margin versus increase this $XXX period XX.X%. from quarter million last this mentioned same adjusted and for $XXX year. restrictions our to COVID This end the the reasons was of million EBITDA the Adjusted EBITDA as in higher above stabilization due favorable

finish incremental year the prior. same upside flow valuable again, up $XX Garrett quarter. the All quarter and solid to enabled cash factors in free $XX our Once team these the operating quarter in million of volume maximize flexed to the from the conversion revenue us from structure with adjusted the million,

chapter generation we've is for This working capital. on This announced low April cash with our highlights a ability structure. of new capital the a Strong and achievement truly represents exciting XXth, the normalize of strengths beginning to one an Garrett. Garrett. our operate agreement core flow revenues of to On and increasing the

of Series orderly and eliminate the conversion structure. of our all part will normalize of the manner. will A stock the preferred common into capital class process stock A uncertainty we As automatic a Series an transaction, convert single in This series

return to broaden our to our opportunities. as for flexibility structure and inorganic additional targeted as us organic provide new will business, in shareholders Our well reinvestment base enhance the capital allow to shareholder cash and

repurchase agreement, $XXX Series maintain this Directors. on remain the we we from one A of to part shareholders million seat As Board Both Centerbridge of each large of and will will In And million. and continue both directors this firms to an appreciate announcement, entire our our committee in repurchase preferred increase clearly commitment authorization share conversion our board's board connection to business. with and of the approved existing $XXX Oaktree.

new these fund of to million have a order In we loan $XXX syndication repurchases, launched B. term share

the increased deliver. with liquidity quickly A us robust cash will operating Our eliminate dividend preferred Series after flow to along we allow

capital We will return maintaining also and our to investing continue in commitment while our inorganic to initiatives shareholders. growth organic

ended Last ahead. $XXX least, volatility regardless million positioned a and to well are of quarter strong stability with the of any up we not but liquidity position maintain

to now of slide the the discuss expansion four. central Turning technology to to want market. our The Garrett's serve vehicle of I business transformation. electric part

position Our will solutions continues proactive the developing strategy landscape in for marketing Garrett to shift. these and success automotive as

offensive synergies industry engineers and an has electric of Garrett's in innovation market. Garrett's Future advantage XXX This different a for Garrett offering electric leading one. makes not What vehicle is vehicle in bring This driven across significant our expertise competencies. electric proofing taking electrification strategy, The talent. but best-in-class applications. who arm product the defensive is core

Garrett turbo. times The high at also power best-in-class We aerodynamics master speed and with high temperatures. format. ten a provide our operates speeds very balancing speed automotive optimized high That compact operating motors typical density with at

Our faster for software power XXkHz at control optimizing electronics switching our energy motor a leading efficiency. and operate our high closest times unique design six power frequency competitors an operates than compact with industry

these are solutions the development annual We are these to R&D and budget out to build growth of continuing team than our efforts. to our electrification we XX% allocating greater accelerate of

slide to five. Turning

technologically design build that to electrification market. and vertically integrated solutions innovation Our superior us products allows the are other on focus to

offer customers E-Powertrain excited and We Fuel our that Cell, leading are about E-Cooling. solutions across

vehicle our Let focus zero power for two management. high on compressor offerings. vehicle speed, thermal high and me density emission new refrigerant High minute a E-Axle power electric

this and technology phase customers. of are benefits engaged pre-development the the demonstrated have in We with

and of a lighter electric decade. traction we powerful smaller, starting products successful in vehicles, end growing the and up and cooling of ramp more need introduction the at expect systems those With the for

and proven Our track the innovation We very focus for help levels operational scale. us on of launching maintain at technology company. attractive records profitability excellence

expect cell vehicle, fact battery In zero fuel up excluding product emissions billion we electric by to hybrids, be sales and XXXX. revenue vehicle vehicle, electric $X of to

hydrogen solutions the performance We past an to along million has revenue portfolio bringing differentiated fuel This, of year. $XXX our have unmatched already are need. power these in awarded mostly with lifetime related in strong where the cell customers we wind stack compressor, that to led fuel

on things provide results. insight now I will turn our to financial to to back Sean more

I slide on welcome, everyone. Olivier, begin will Thanks, remarks my and six.

million the at net from QX on the constant last you currency sales graph, nine left upper Looking on hand will XXXX with at reported $XXX quarters XXXX basis. by X% a of QX basis up a GAAP and see for XX%

by This as vehicle from and ramp and mix favorable in demand growth resulting our products volume driven new businesses. gasoline and launch was shared upside commercial gains up primarily

right Looking XXXX up XX% of side hand adjusted page. QX year. EBITDA million of at $XXX from last the the upper $XXX million was

cost up in to cost XX.X% and year, was timing fixed recoveries. The of leveraging mainly productivity, XX.X%, period last the structure our adjusted due the EBITDA margin from

XXXX. of adjusted QX the free from flow On million show in $XX generated graph, in bottom Garrett up $XX positive left cash XXXX QX we that million

and expenditure flexibility the resilience lower payments, favorability In cash last year, quarter of performance driven Garrett. this this and on payouts interest capital timing compared three period slide last summary, by of to lower highlight incentive year. is the same based Compared this to graphs the

as extremely we an cost macro to quarters in volatile to Garrett chain changes nine Over to across our the flex the supply past variable able was demand solid environment, deliver structure industry. results adapt and and rapid continuously

on by category period slide currency as last sales up constant net compared year, All million at sales verticals improved our on $XX sales. Again, constant basis. compared a the a currency bridge were adding GAAP seven, up with Turning product year. gasoline same with now show in and to to basis X% products XX% prior net QX we the XX%

launches Commercial constant last in driven strong ramp North by combined now reported were Japan of grew the with sales shared partially and at ramp comprised products impacts. demand vehicles offset gains gains. Europe, resulting and currency XX% ups programs. demand of up FX by America, Gasoline new versus driven new These in XX% year XX% by program net

vehicles Commercial XXXX. of represented QX XX% total in QX net from unchanged XXXX, sales

strong, down across partially remains sales, offset business year. QX now It currency FX. aftermarket X% slightly from at net products, growing was over growth year. by Our last driven last all XX% of constant Overall, XX% comprises

million for eight. the slide period last year. We compared and the a adjusted $XX remainder inflation EBITDA transportation million to increased favorable represented million pass-through on prior show offset partially from timing period. of inflation from QX improvement Turning product $XXX productivity with pricing, net Increased improvement, EBITDA with over by the bridge accounted Adjusted energy. and same of the $XX sales our coming of of costs commodities, mix, this

R&D mentioned $XX Olivier negative weaker operating year-over-year, periods. XX% as the by earlier. and a improved Overall, we across R&D technologies euro as continue two the to million included the $X over investment of dedicate planned, to increased expenditure million impact new performance by total which of

the the margin As EBITDA versus was in earlier, last quarter year. adjusted XX.X% mentioned XX.X%

successfully stabilizes deliver begins cost an ongoing to productivity industry improve, structure variable the and amidst our to to environment. As continue we adapt inflationary

industry to reflect results business as advance A continue along transformation, our regions. strong quarter momentum in volume key strong first operating significant with our we

However, market in and close while proactive we on remain our approach keeping managing trends. risks a eye also vigilant to

EBITDA flow QX slide we Moving nine, now to show cash XXXX. free bridge adjusted for to adjusted

in of higher delivered capital in use million, the impacted Garrett driven result quarter. solid As $XX free and latter increased as the receivables inventories of cash noted, free Adjusted cash was million by of sales flow a of the quarter. $XX adjusted flow of working part by

came to improving our improve $X were lower and is on CapEx as generation expected Garrett discuss taxes Overall, but $XX Full with slide. expectations. $XX and in of timing at year flow million, payments. million in solid with than a was which we volatile to line interest allowed next expenditures the the will primarily Capital remains due liquidity in in our the environment cash Cash expectations. line cash million

the undrawn ten. and $XXX $XXX This million in $XXX of to strong XXXX our ratio capacity a in cash, liquidity its continued sequentially. facility times to compares Turning We X.XX We times $XX leverage Garrett XX debt unrestricted QX with in QX quarter. to EBITDA consolidated ratio of credit increased to million ended months, to revolving comprised drove last QX million, net XXXX. the which improve X.XX down slide of million position of XXXX.

consistent million sheet. cash Strong Garrett. mentioned flow and has balance one enabled generation simplify cash And $XXX term highlights will on increasing revenues strengths and B and generation de-lever our We capital. earlier, transformation. as low of our structure core syndication ability to launched that loan capital Olivier of us with year announced working Robust to the new operate the a recently fund seven

shares Once the this of number outlined Series is orderly have month. will syndication capital earlier structure as the we preferred and a that stock benefits completed, provide this to common a will important A we normalized of conversion

performance driving volumes, foreign results Stronger XX. year-to-date. expected slide than exchange to robust Moving financial better operational and are favorable

As and on performance our a that to April XXXX result, of today. XXth outlook year reflect we our outlook increased we full reaffirm the strength

$XXX provided cash you this On million. B. million, million currency higher financial margin billion. EBITDA partially new updated term Net of a loan $X.XX X.X%. net the implying operational Adjusted at the and of following income growth from and that see by the of and expected performance, macro slide, midpoint. of $XXX better imply constant ranges the Net million adjusted $XXX sales reflects flow operating at $XXX interest free by sales offset XX.X% Net expense which of can of activities cash the of assumptions

For summary, metrics In greater this for as macroeconomic the a detail, of outlook our EBITDA to I nearest point each environment. reconciliations GAAP shown solid generation the of is in XXXX cash you volatile the continued to adjusted appendix to figure in these and growth improving presentation. but

closing back remarks. now his With it hand that, Olivier to for will I

of on of $XXX We you, with a with Thank XX. constant adjusted delivered versus up slide X% adjusted EBITDA net achieved We of million a XX% currency QX up million, in up of strong GAAP an sales of XX.X%. performance, generating EBITDA basis and operating Wrapping QX summary on margin basis Sean. $XXX XXXX.

million XXXX for from up $XX Adjusted was at $XX the flow free cash million. QX quarter

free million. the the to to has raised we position liquidity we adjusted ability cash million. ahead midpoint QX our generate to guidance for of And free contributed $XXX Our adjusted the $XXX of strong to up year, $XXX as flow to an million cash flow of our cash adjusted look rest for EBITDA have

We an inflection at are exciting point Garrett. for

class recently also agreement by creating single liquidity capitalization base. will our structure Oaktree will of and stock. shareholder dollar capital announced multi-billion with enable to market a and Our a our greater and It us diversify Centerbridge common enable normalize

our normalized to organic our important, accelerate Equally us and structure inorganic. both growth, in will investments allow

competitive We the share increasing continue are and industry launches into in further and to be due we new well future. positioned force a for of our to growth demand, the

of XXXX traditional already add growing Our zero revenue target business. from to revenue $X of our billion technologies will turbo emission

We vanguard now the of ready session. are your Q&A Thank and operator we in the the indeed you our of transformation for to are industry. begin time

you. Thank

We go session. question first [Operator question-and-answer will the Khorsand BWS begin comes Financial. Please Our now from Hamed Instructions] from ahead.

taking is the This questions. appreciate morning. I Hamed. Good Vahid you for

a has ramping the yet the question, product where increases past as China improved is volume mix turbos and in region? the volume in First the in lower

questions you China turbo. penetration increasing I had two It our correct? in of volumes So Is in for turbo was and there. think that China

Yes.

Okay.

in COVID lifting we do a normalized as see yes, So, state. has volumes the to restrictions China return more allowed market increasing the of to

have We as hopefully And well. that are growth again China -- just the macroeconomic hopes the regions. to penetration don't in for as growth in comment forecasted. turbo more factors the see all the regard with across that globe back specific looking global necessarily the we of China, we to on half year monitoring will we and turbo forward increasing is to penetration in in continue With

you mentioning healthy, which point with won also some combine for of is seeing China, significant need it's before, that the was in way, few Okay. programs Sean are But that ramp ups past we that by the we to the years.

you clarity in next as How have that. the you're far mentioning thank order as is into concerned? half this Well, you the is of good turbo globe. which the much question, and across my across for growth Okay. That's a year stability do segue year back

think that the and the call on as industry I the quarters it's, -- high. we've remains of said volatility previous in the

signs We seeing customers. are of of from demand the normalization

stable. the there big are We more as we much year. supply are were, It of being chain, seeing the not what last unpredictable probably seems we but into as constraints demand as as not have signal at end automotive what that still seen

So this signal. good a is

As the can the already we share the of that see up remains increased industry, are of you a do gain. that guidance we we the can year. our have demand all so. Thanks because to that programs our mark seen, of have are second we as there ramp about confident the specific half the This driving for players in question

far And year so in of we cautiously end the planning the guidance. that have back been

add and five of And XXX% visibility add our for I and is I would business very reiterate on a that have just to year just this and that basically we on next the booked would for strong years.

customers environment to business our So business. -- booked much are of really new what OEM new we're on production based so it's be our five the years out, our what isn't lead monitoring XX% revenues business of but up se, of because going certain based on winning long per is time really we're that to

Final question.

ramp up now. a the You've could few if just mentioned specific to wondering the ramp the led in that quarter. times you you growth I'm saw product that share

would to especially side. years. few to this the difficult a on industry been specifically programs ramp specific the number this this the that for But communicated by us for as gasoline see, had over -- three that are up rates the And the call years, had year of from the one is on application. that we on we won point can years. application becoming variable side I disclosing not geometry. all number few past for but A number win the at a very more say with number applications, because be last the of into you we really programs result That you would of we've also we've gasoline of

Right.

about rate, and business been And than lot greater so happening talk XX% new since the a win we XXXX. that's

of Garrett's to products, really our up us product model on and On traction to launch of as you're that's So demand ramp business new benefit turbos see share take the these platforms. new naturally that. the starting allowing and

I driven There and previous engine already going had we mean that's well. this consolidating And a our by, the on bigger we are on on bigger that as calls. are a technology other consolidation and getting trend one fact is from benefiting hand the discussion are industry hand, obviously. is programs in the the that and on

Thank it. much. was very That Okay. you

you. Thank

you. Thank

would conference concludes are question-and-answer for There the I Rabiller like more to any Instructions] [Operator our questions Olivier the in to remarks. This queue. over session. turn closing back no

you. Thank

getting are enabled full year. view increased very well The in achieved we've pleased us for other have is on which to to with hand about all growth and driving technologies company We more the very really the customers. and hand with QX, the success and developing impact our performance are we that our one more we industry this new increase on been more the the and is already the the executing on with more that are confident bringing

are are we now the forward with so but year far. rest happy the to obviously, what So very, we done we've very of looking

is Thank today's for now you attending presentation. concluded. conference The

You may now disconnect.