Garrett Motion (GTX) 27 Jul 232023 Q2 Earnings call transcript

Good day. My name is Sarah and I'll be your operator this morning. I would like to welcome everyone to the Garrett Motion Second Quarter Financial Results Conference Call. This call is being recorded and a replay will be available later today. After the company's presentation, there will be a Q&A session.

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

Thank you, financial Sarah. you for Good morning and the Motion welcome Garrett second quarter results call. attending conference everyone. Thank

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

filings presentation this We that forward-looking note read We X. Slide in the of be should contained as future become Commission Act. to the our performance such. within the Exchange the are and of encourage contains meanings taken business under our that and Turning forward-looking Securities statements uncertainties estimates to risks in understand Exchange risk Securities factors are you aware and of the that the statements

of any presentation The non-GAAP and only represent the how we business. as expectations operate Today's them. and update manage our disclaims forward-looking management's also to to describe today company measures statements includes obligation

Also release most the diesel of reconciliations diesel to and the the encouraged by the press gasoline measures gasoline of to using to GAAP vehicle today's in in terms comments, and comparable and we We reconcile may the and each examine measure presentation. these these slide presentation light directly appendix you're and refer light vehicle only.

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

over Olivier. hand call now the to will I

for joining Garrett's Thanks, quarter Eric. conference second everyone And call. earnings thanks

very quarter operational to thank number Slide for through on continuous execution I all metrics. the delivering allowed excellence financial remarks to that and want team on my us outperform key first begin will I focus entire Garrett strong across a X.

reported driven the COVID This China $XXX of OEMs constant this restocking compared restrictions of year. delivered ramp last in growth by sales same to million both was new America products XX% many versus and XX% North Europe billion, $XXX EBITDA, the $X in up little we and of by last when on period revenue million XXXX, a currency QX, In Adjusted end in basis. than basis quarter more was the a up and a year. net on up

of significantly finish from our operational Our XX.X% with EBITDA extremely of working higher QX adjusted we million, coupled up quarter continued strong factors $XX gave last performance these year the boost volumes an prior free same driven from of flow an with by year. performance in QX cash. XX.X% growth quarter of us into cash successfully a the $XXX favorable revenue All to converted up in enabled the million to margin adjusted as capital

unable capital that Garrett again low of convert highlights in an our in unique benefits once working needs cash This to increase quickly revenue. the

dividend on During capital in shares redeem which common transformation, the began of that A we the last we we quarter, also then shares, in resulted structure began all settling you and one successfully recall, as executed the when full Series cash. journey may year our in Series class

was completed shares. we in in shares step in final A The common when transformation Series all this converted QX

funded agreed A repurchase of the million $XXX this, before Loan shares new to also of part million B. conversion $XXX As we Series a Term by

our and our has by this has liquidity the brought share All about five to billion market common cap times. of of market about increased $X

million total shares. out already lever to repurchased increased At as strip of an repurchase the the the $XXX place its to common the we also company authorization conversion same took $XX of XX, after stock of have additional existing a July and share million as time,

pre-development contract as our was performance second innovative and the our structure solidification PDE our the compressor. for system ICE financial we capital strong The very for of second traction E-Cooling quarter contract by a marked first also not and only pre-development secured

next on into this details slide. regarding more get will We the

of based later you the in Now Considering Sean generation, business the year, QX. performance in are will again the our full details raising through we on in in which the more strong we the take first presentation. achieved the outlook cash for half,

our decision We of delivering strong leverage $XXX have step times. to in also first made ratio million the of in two debt repay QX, a net toward target

Turning now X. Slide to

our OEMs. awarded compression will be quarter, high-speed air two electric our and we motors. on technology a new combines were sitting hybrid for programs major the During for European expertise E-Compressor, that Both in powertrain

a programs, two establishing online new with weight maker we our in position a truck new business, major For won China.

in This is on business. very ICE which first remain that our we announced. And a previously track launch to we part vehicles, supporting our also hydrogen commercial is growth important off-highway our of application

high zero-emission accelerating power the demonstrates to quarter Moving successful our density customers technology again the another momentum and This to in as electric our offering high-speed with our earlier, E-Powertrain. interest we for our of mentioned add continue and our second contract build differentiated of pre-development solutions. award

motors lighter leverages technologies In smaller power with first needed success. zero investments cooling won and our continue for product for to our compressor capabilities packaging predevelopment in addition, thermal Combined electric industry-leading expertise high which weight our vehicle emission the compression I'm controls. higher that the second high our very our show electric electric and management. air during by we a deliver This pleased provides solution speed to in vehicles. differentiated performance quarter, a E-Cooling to announce

EVs powertrain, can step fast-charging generation points order are and for in way technologies are of cooling electric proof change cool differentiated This in continuous our unique vehicles by that the customers of electric a brings power predevelopment and capacity we high needed opportunity wins enabler meet challenges This game-changing and in provides of key a develop vehicle. the the the technology emission use. OEs to zero a the for they for next

annual fuel of cell and emission zero our we compressors, committed $X target by products margin or hydrogen vehicle planned and the above to awards GenX XXXX billion application our our X these profile of of our With existing launch of remain at sales of business. GenX of

our Sean will more provide financial to now into insight that will turn things I results. over

Thanks Olivier, welcome and everyone.

begin I on remarks my Slide X. will

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

achieved by lines years. last Olivier. previously product was customer mentioned the highest strong two in demand key As This is driven by growth and we've the across

continues Asia America. regional QX of be XX% Europe, sales from stable XX% from sales Our and from North breakdown with XX% to coming

increased XXXX upper million $XXX up $XXX margin side last the at period and continue execution adjusted page. primarily was due XX.X% we through deliver was XX% year. from of up right-hand Looking of XX.X% EBITDA to as adjusted operational million EBITDA The QX, productivity inflation. the sales to and from the in pass

flow you that [technical favorability by an in and $XX free free driving conversion demand capital chains cash as left demand last positive increased XXXX. year Compared $XXX volatile QX cash of in the volatile On XXXX, generated graph, customer less our QX, stabilize is and revenues up environment. to macro flow supply a driven Again, from this working continue difficulty] contribution. to Garrett extremely positive to see adjusted bottom million million in of

our results. to ability has and solid variable us flex deliver operationally cost structure execute consistently Our enabled to

period product to driven last the sales, as category, reported XX% products COVID show products, year. in sales now comprise X. products year, Slide to improved up. compared ramp the new as QX restrictions gains We XX% and with adding compared net currency, same of All continue end by by sales China compared at year $XXX with launched, versus up when Combined year. net of demand bridge to last gasoline share million last the gasoline of our XX% prior have with Turning verticals to constant in

XX% currency both net sales. Diesel year. total by grew of incremental an compared X% Overall now sales constant to mix America prior products Commercial grew to from product currency, off-highway XX% sales. in in and favorable more represented North diesel and and primarily platforms comprises at constant $XX million Europe vehicles driven contributing on of a XX% the

now And lastly, continues growing currency business last aftermarket sales. the our at XX% net year perform comprises X% constant and to over of

seen the this drove aftermarket total were diesel of as year. demand all earlier, gasoline prior growth and other But vehicle strong down more slightly a gains verticals. of mentioned compared verticals growth sales to have all these across compared significantly we commercial in share quarter percentage As as to

engine X. $XXX the million continued up. accounted Slide We Adjusted impact mix, the for a $XX our to offset million to ramp a period compared the was of partially improvement represented Moving sales $XX adjusted prior same of bridge products million, smaller over last EBITDA period which product by with gasoline increased EBITDA show unfavorable year. QX

while technologies net R&D deliver a $X and continue was quarters. of over dedicating productivity performance our XX% prior consistent through with Our pass overall operating as new to we of inflation million to positive expenditures

Our reflect along strong in second strong our quarter significant operating results industry with regions. key volume momentum

regional continue economic effectiveness North the China. of to potential in risks and as America such specific in ongoing monitor We the negotiations UAW industry stimulus

in we Turning in to flow and demand capital adjusted $XXX $XX million QX EBITDA supply continued customer cash to revenues free benefited Garrett of adjusted the a show chains free bridge flow to cash cash working as adjusted million for XXXX. the Slide X, of strong as flow delivered source adjusted stabilize. QX, quarter from free improved and

to adjusted when approximately As EBITDA earlier, higher free is is mentioned conversion XX%, averages revenue cash flow it growing. our but

is improving loan allow our generation discuss cash of for quarters which $XX and term flow more Capital reflected and are in improve our a Cash the B. will be QX best million second slide. expected in liquidity, later. new to updated volatile, to I this with $XXX interest expenditures of will one in discuss the to but expectations cash detail the were this line outlook next increased the due on Garrett full-year Overall, I environment issuance half to and in million taxes in is higher

briefly in Turning walk count to to in want our QX. occurred through that structure Slide share capital X. the changes our I to

common in upper almost common a into the end QX A in QX $XXX our can left, of by to see you shares how million As capitalization shares. the at of the billion on Series illustrated the from market $X chart conversion walk we capitalization of previous the market driven

of million increased $XXX program, ended We this equity the which million million repurchased of with of of share Series of outstanding our we shares. and one utilized also totaling repurchase $XXX XX. had as only July we million A common quarter $XX class Part transaction, shares $XXX

as generation $X Moving during $XXX right. QX million to we of the by sequentially cash of facility credit over table liquidity strong which ended earlier. increased $XXX capacity revolving We the million of comprised unrestricted just and undrawn driven $XXX increased by billion, cash, million discussed flow million a of position on upper $XX QX with which

from And inflows the shares. executing net Loan of the the the Series A conversion after B Term

operating Given the for the discuss increased strong performance next and XXXX, which our slide. on in outlook will QX I

plan to down We by $XXX million. our outstanding debt pay also

step first of our net times ratio achieving XXXX. towards The end of leverage the target by two

operational expected financial than Moving volumes now stronger are results year-to-date. XX, to and better performance Slide our driving robust

As financial ranges following that outlook a full you performance. see result, we strength are of updating midpoint. macro the can to imply reflect this the slide, the XXXX and the our updated at our On year assumptions

$XXX interest and sales performance, net Net million, partially of free by operational constant EBITDA $XXX Loan new of growth expected Term $XXX B. from XX.X% and X%. margin provided offset activities expense of $XXX the income implying flow currency $X.XX cash of of a cash operating which million, million higher million, better adjusted Net by at billion of sales adjusted reflects net the of

For of point appendix in reconciliations you shown greater metrics to of to these as each this I nearest the the figure presentation. the GAAP of detail

revenue outlook. prior conversion Turning driven to revenue We continue as ramp mainly by small by gasoline of bridge our now partially and up growth Slide offset to mix demand XX. unfavorable as to applications XXXX. gains are Strong share updated throughout engine volume our is year results

deliver pressures We technologies. in while continue still to work new and investing through inflationary pass customers productivity, to with our

second rate of We U.S. planning are exchange in versus the at stronger half. a X.XX for dollar the euro also an

but as grow to share volatile, continue into revenue In strong environment. earnings summary, demand of improving outlook our convert operational XXXX a we execution macroeconomic cash updated and reflect flow gains from and in

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

Thanks Sean.

best Slide in cash on delivered key quarterly all Wrapping up we the strong on QX revenue With of our earnings metrics. and financial years summary a delivered two performance. and XX,

of transformation the times shares shares, billion of the our conversion also Series cap We to structure liquidity. our with A increasing common completed the into about capital market with our $X five

of million quarter. And $XXX down in we now the third pay plan debt to

three in revenue selling zero compared on $X At XXXX. be billion BEV same to positioning for by from wins price vehicle emission higher current of also target our technology to We product areas the announced technology technology us differentiated or margins that our are and the business. better average

continue that our the to areas business, that our and the proof vehicle zero-emission seeing needed of we we As by are turbos customers. seeing new we technology win in are is

the as billion million. of have had Sean this following raising With of outlook net the sales adjusted EBITDA we so year success at the year, of million, free adjusted full midpoints XXXX we flow far $X.XX stated to $XXX $XXX cash are

we goals. I to has hard am thank Garrett and had, work extremely achieving want and instrumental quarter the dedication team that pleased for with the I strong in our been entire their

turn think we Q&A the can I session. Now, to

BWS Khorsand Hamed Thank Our you. Financial. ahead. [Operator Please Instructions] from go comes question first with

Good morning.

looking but just was a in at providing. If guidance from it at in sequential looking look at performance not increase the of you're you're really expecting I had was First when your QX, I sales. perspective, balance great, much which you're question,

just are I'm wondering going much So, here? Is up from it gasoline sales front. product what mix, really of in that because your resulting not on that's that just sequentially expectations

that When reported and said, at when at question. on our ramp won the think what saying is performance. we year. Olivier performance same anticipated and of applications and this we especially we've are QX are you at we what beginning excellent some today part than our look have QX significant a speaking that the launching. when of in an that And That's We've due the look I we to key explained on of we is faster up you the said

the our you forecast, to our mean close the close I what to the initially is forecast had initial more further forecasted. Obviously, go, into we year, it's

doesn't up around the say So, of ramp-up like obviously would world And that an for then monitoring second happening the and we that fiber. there are the to situation element everyone ramp accelerated is half. I continue what's

the XX% Okay. reported previously you to you've adjust going to EBITDA profile margin lower gasoline, product what in years. it how obviously shift prior a your And change your mix EBITDA margin? being in margin it's backlog or this permanent in result Is in do than

expected mixed we So, I that it's from this margins and would a had said but different say quarter-to-quarter, seeing that XX% you to in under detract should target back. circumstances. are long-term corridor our spin, dynamics margin was not believe but I we macroeconomic of XX%,

at for adjust back with you euro XXX you where to foreign adjust in see in at time If we to closer for exchange commodities was corridor. the point actually which pricing, we're that the time and that down that

we greater was and win of business of be share to a there would gasoline lot taken of have concern to demand that able a we rate and Additionally, and have, than we XX%. win continue we've

but margin have So will long-term we the affecting products, medium be margins said story we profile, performing at profile long don't as Hamed, It can quarter-to-quarter, affect this the launch in to short the that on gasoline past. our a see basis. we the margin business Yes.

question sales here other translating any event? of is was a lot you're is revenue this or fiscal into that deals in my a regarding more year And this winning Okay. or 'XX zero-emissions of

we're What is early are a that we lot developments. winning saying of

get you As years about predevelopment. simplifying you industry, I'm for the then you two, three are I production. and bit into before you in mean to automotive a go on may usually remember development

it's our I $X by back when think we So, said published XXXX. we of billion target to what

lot expecting these are applications XXXX. between We of launch XXXX, to a

although revenue, having still already are we small. Obviously,

important on production predevelopment progressive you we into will it those and programs, because cell will, compressors cell boost we fuel selling then fuel transform Obviously, that, and in see will very once reach it production. on revenue. already the a On compressors

bit be little industry. in a time of that's happening sequence way So with to the the our are things

Okay, thank you.

turn This to our like concludes any Olivier remarks. back to question-and-section. I closing over conference would the for

brought zero very results to we to more results technologies pushed a I the the I'm that three address Yes, that time. on the you challenges more that very and of See we soon the then. emission starting come. so achieved. see one would quarter. are had I'm of by all are We say, that vehicle we proud fantastic to proud

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

disconnect. now may You