Garrett Motion (GTX) 24 Oct 232023 Q3 Earnings call transcript

Hello. My name is Drew, and I will be your operator this morning. I would like to welcome everyone to the Garrett Motion Third Quarter Financial Results Conference Call. This call is being recorded, and a replay will be available later today. [Operator Instructions] I would now like to hand over the call to Eric Birge, Garrett's Head of Investor Relations.

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

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

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

vehicle within measures we management's on. we to describe obligation most vehicle as The in only. expectations refer disclaims and diesel in comparable the to reconciliations measures examine today's those presentation. press appendix non-GAAP and presentation update gasoline manage directly the and each operate to forward-looking business. represent encouraged the includes only to company also statements gasoline We today, of reconcile the our presentation in of comments, any to terms measure, these and you how Today's release light Also light are to and GAAP diesel and the and slide may presentation of our

over President and will Chief call I is to Deason, Financial on today's Garrett's call Vice and hand Executive With Rabiller, and the Olivier. now Sean us President Chief Garrett's Senior Olivier Officer; Officer.

begin remarks conference for joining on call. thanks, Slide and I third Garrett's Eric, everyone, quarter you, #X. earnings my will Thank

last, quarter pleased of QX, the products. execution. the would top to and our our and we us On core deliver through with to financial value continue solid our differentiated in continued priorities, technologies allowing vehicle our for team with and I we thank I delivering zero-emission shareholders. capital performance, allocation momentum on focus excellence And in turbo a to very executed return operational am to build entire and against Garrett like performance

this operational year. Strong than versus unfavorable our million more period $XXX offset $XXX and in product year. of last productivity of XX.X% same adjusted quarter EBITDA last performance mix, XX.X%, Adjusted the in margin was QX EBITDA up from million of increasing the

generated of $XX also million, from cash We primarily prior, quarter same year timing working by free flow in million $XXX the down capital. of adjusted the driven

coming But will perform quarter's to details exchange slides. Sean more share financial while dollar, last a change significant since results, the we our on have outlook continue in the seen we foreign results our euro for in Sean outlook, half, XXXX in second operationally detail take in that and euro our more our weaker line will the with we is outlook, in this presentation. through updated you in later our the reflecting are prior impacting

to been Auto United continue there but the on Workers strike, indeed monitor We operations. no date, impact our to has

million in we repurchased repurchase our capital priorities. line of $XXX through allocation with During share $XXX the approved our quarter, program, stock million

target million towards of end by ratio $XXX quarter, within of repayment delivering debt a XXXX. executed also We of strong debt the net consolidated an X.Xx step our net to early the EBITDA of leverage

Poor's this upgraded to Garrett of Standard rating. being by All to and BB- contributed a stable

to Turning now X. Slide

business. business, product an to and largest industrial in off-highway our us allows portfolio. expanded GTXX. This turbo introduce I customers our product our Let's the am to continued Starting serve review our ever, updates with Garrett's our pleased strategy range, of significant with reflects some turbo industrial investment together to better core turbo and product

profit. and that our time our XX% for sales and more remind ] the you industrial commercial account aftermarket even me of [ of vehicle, businesses more Let more one than

continue also progress We to zero-emission make our strategy. on

customers additional our awards this X differentiated emission have year to won of proof electric E-Cooling annual We we of XXXX, our our in products profile our a that new remain pre-development vehicles. X our zero This $X when product vehicles indeed financials. billion wins business, We technology for at committed same of it needs high-performance total or generations quarter, target compressor. address sales of zero-emission our developing now for predevelopment evolving of the than better comes margin to by the of

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

remarks my Thanks, on Slide Olivier. I will begin X.

constant up by upper for GAAP last XXXX will you see left-hand with a and unfavorable net at on by and products reported X graph, mix vehicle driven the in X% from commercial in from small applications. million our ramp-ups product the new basis at X% sales diesel by gasoline a of and on Looking softness offset was QX down currency XXXX This $XXX quarters, basis. QX engine

$XXX XX.X% side page, allowing XXXX million Looking $X from and the of at the QX productivity to from was an margin last million continued strong reflecting of year, XX.X%, operational adjusted year. or last of right-hand upper the million adjusted deliver up X% execution, up us EBITDA $XXX EBITDA

to the bottom working is by flow positive year, timing the million of show this QX free from in million And graph, last quarter. primarily driven adjusted we on $XX within capital, cash disbursements in QX down of $XXX from the left that decrease generated of XXXX. of XXXX, Garrett Compared

capital We to XX%, cash for the continue free EBITDA in our flow with or year. is conversion which adjusted trend at allocation see our framework line above to

a up sales Slide and currency increase now compared of our the from by X% year. a net X. QX the of at last Gasoline on stated constant GAAP sales, down by with product show over up XXXX adding XX% to million net were million comprise reflecting now gasoline year, reported X% sales, prior product in Turning last ramp-ups. basis products of slide. an $XX basis, sales constant up on XX% same period as as QX currency, driven category X% products $XX and on We bridge Net were

in $XX decreased vehicles total million at last currency, products decrease of XX% of constant Diesel constant sales comprising and XX% -- XX% primarily conversion QX a point rates of are China down macroeconomic percentage and X slightly XX% sales XX% decreased down at XXXX. net X% of represented to at sales, in driven softness year. America, play. of from where conditions sales North XXXX, currency, interest from and total in Commercial other vehicles of by Commercial QX

sales, in It last level aftermarket remained the year. delivering constant year. similar of at to currency a last stable Our comprises business flat growth quarter, now net XX% over

talk net in the year-over-year we and sequentially, basis, supported Our this presentation. of on $XX were a currency an are about increase impact later QX of but FX pressure, sales we'll exchange by foreign million seeing

$X product X. offset same Turning improvement prior million adjusted unfavorable Slide period show QX year. of by million compared volume We Adjusted bridge now our Increased period. EBITDA accounted represented the and of to $X as $XX a with $XXX mentioned. last previously for was mix million this, over million the impact, of EBITDA

we when period dedicate the the foreign $X performance R&D we overall XX% of strength Our the compare was electrification total expenditure the operating impact, And of million, technologies. we to a continue from the net U.S. positive euro in dollar, million same against $XX XXXX. primarily to an of year last currency over to and positive had

cost deliver over demonstrate the to continues reflects and results solid continue our an as variable to macro across third rapid demand structure it environment, volatile extremely time, results, and changes that to industry. solid adapt quarter to Our Garrett

the flow Slide now free to Moving bridge of free to for delivered the million. X. of adjusted flow Garrett QX EBITDA $XX We quarter, cash cash show In adjusted adjusted XXXX. solid

due impacted by was flow cash disbursements. free million adjusted the to $XX of capital a quarter, earlier, primarily mentioned the As of of working timing use in

line new loan expenditures cash in Capital $XXX cash million term issuance cash expectation, B QX. taxes and to our with million interest were $XX and the of to due in increased

Slide a to leverage target $XXX of credit of QX cash our the million, strong We of Turning B our the our with ratio XXXX X. of QX Xx XXXX. capacity to in to of we end reduce net $XXX during million ratio term revolving net X.Xx later $XXX finished with of than liquidity a unrestricted no million million XXXX. now quarter, cash. and continue toward intend of of repaid With leverage by consistent of generation, and $XXX loan comprised facility We ended our position undrawn

capital we with continue to we during $XXX a in actions mentioned, another capital our shareholders. as and And million million our and to have our under the ratings so During program allocation Olivier BB- S&P, $X value repurchase upgrade common the QX, in far to as repurchased of outlook a stock transforming XXXX return stock deleveraging to amounting approved stable quarter, our in resulted $XXX quarter. from million structure

XX. Moving now Slide to

verticals. product to across continue all watch trends the We macro environment our regional and of

headwinds. revising potential midpoint strong However, second operational remains as we dollar headwinds the foreign volatile. to euro and The particularly for to the half. rate anticipated face our and these remain the currency, ranges to U.S. result, a execution outlook delivering the in adjust we for currency are tightening exchange And of outlook committed

of assumption this our of of of X%, adjusted of adjusted sales Net see cash that for imply sales cash within million. dollar net flow XX.X% constant previous financial at On updated growth exchange midpoints to million, $XXX Net $XXX of and by and can an operating million, euro following full U.S. slide, currency EBITDA million of still ranges EBITDA you $X.XX the the ranges. billion, the activities $XXX margin net provided implying year. income free adjusted $XXX

operationally, U.S. and I his discussed back the comments. want our full that I'll adjustment July, reinforce the to is of we closing dollar. year the outlook now have our outlook the Again, deteriorated euro Olivier turn versus for only it in as weaker to midpoint from for not to

summary continued the Slide up quarter in on earnings We XX. with financials expansion performance. delivered Wrapping Sean. and Thanks, QX solid cash of

executed priorities value debt with returning the the our shares, $XXX We of and shareholders. of capital $XXX early million repayment also of million on to of our repurchase allocation

the our technologies have our Our us on introduced GTXX. goals, track as with largest kept the yet, we continued differentiated turbo during quarter

We are range industrial off-highway expanding and our product. this customers product in with for

towards the continue by awards by This is differentiated from in customers. Emission proof technologies Vehicle also our zero-emission pre-development build Zero are award E-Cooling. X with of strategy that products vehicle momentum billion our achieving again $X new of recognized and revenue We to XXXX,

I very year are achieving been team, outlook want the work has and for as Last, XXXX in currency stated execute and again, with continuing hard Sean the to to entire our revising team, their while goals. full the am thank instrumental dedication impacts, for our foreign earlier, quarter, operationally. I pleased that Garrett we

for like very the of that for the we future. trajectory hosting better Investor Technology strength to have opportunity also are and a would and a mention view understand Day. have years fantastic I is X we closing, been that a company the past us, In transforming the This is as our today to of important day for our

would be If you I available material our review website. on are participating, that not will you invite to

for Thank ready you session. are your the time. to we start operator, now And Q&A

question-and-answer We question will BWS. Instructions] Hamed now from first with The comes Khorsand the session. begin [Operator

there's background if Apologies noise.

question the a create to First point is, an the what's UAW or event for strike? related you that inflection would risk

do we a monitoring impacted that we are by UAW that That's strike. is factories are question. currently the good What the

seen into factories yet. turbos going are some those So keep on stopped We've some they far, not vehicle are to running impact engine going they feeding limited we've because are engines because are a plants because to turbos, the factories, we the are seen impact vehicle turbos that delivering plants. that limited on on and engine then

that monitoring basis. the monitoring, are that's we we So on a daily point are and

we'll that had so see In mean zero QX, doesn't it any So we impact. not far. impact

talk And Or help to How to capture new offset you way? impact? you then this any about new foreign sales that? to what's you Are you are or customers just in the there? strategy able able offset currency could it

that, our first of as strong a across the split sales Europe. a global regions, we we point the So we know, on in are And business. obviously have from have you part

We relatively our strong part in very and sales of North have our also lower a in a part sales of Asia, America.

and Europe our and that the markets the then turbo see size the America, first the penetration. different What you primarily on regions, a are in North higher which of than both sales industry is car is penetration exposure. our turbo are Hence, bigger penetration, China that turbo the there dictates and

that What on we more we with successful light side. North vehicle customers are is America and more seeing are the in

for vehicle but light both light successful pickup trucks, on industrial and vehicle are success at on we an our linked turbo and commercial time, vehicle, same on cars, are the standards tougher. very increasing already We side, emission the side, getting that and product sorry, seeing penetration are is that increasing tougher to off-highway the

implemented as they emissions be be next or they the the get forward, X monitoring the turbo regulation. penetration, are tougher, to Tier favor about to regulation we next as as So Tier moving decided X think

will exposure North that expecting increase. America our are to We

Okay. is customer going what GTXX that just for already the And be wins that is introduced, then new potential product really expanding the that have on on to a you've you line? you? Or

to for a always Well, new about to in gen that equipment But diesel areas. more that centers application. engines applications these our talking backup not new running in -- and natural a for are vehicles. and about fraction new those Think industries some centers, is customers for backup power. in are these very of gas, data gas, for up are quest ready an like for also more increasing to turbos. product. be will we application, us technologies Those not engine, technology, Think locomotives, gen data seeing They therefore, do interesting both. need and for introduce that set power obviously power energy, about a and those something obviously, big are of on need need There would is there those second. this only, also and because more big customers technology, areas are fuel to and our but more There or on is get go strong for pay is we to a gen power marine want for They and like being engines. those need in used technology. We new

like it emission how zero about you've becomes fast that. some years sales? said the material a to contributor before side, we're know on away I X then from XXXX, And

some numbers there is start So that your sort of you'll in momentum then? showing before

to let before, bit you a We year, give ramp-up start about colors. compressors, are we next and cell of we'll are you of full When sticking but little now the the we several said see in start to fuel what me production think programs. more

on emerging, compressors, expecting nearly and cell a So getting already doing flavor obviously that cell industry to still portfolio. in in to that just sales, is product is be of fuel million give you XXXX, mature we fuel a are $XX our is compressor that on

see we versus we with that's that in a bit little X advance So what the have. other products

But before, said as are we predevelopment. we currently

And before be said initially would You have the for to X predevelopment there the start XXXX, in in therefore, why and that that's at need mind X, you between inflection reason we years look production, is to revenue point we've production. about XXXX that growth.

is you point compressor the But that first is share million. $XX the year I'm on cell next giving will today, nearly and I time fuel already this be the think that, we side

last in talk profile was, 'XX? company my margin what is early to then like too the And the it about will look question

and the when I exchange, still XX%. foreign working moment. to all seen hold financial at Yes. like framework we through can coming, have going framework, try mean and around assumptions those to we're that. past deviate the we've our It we're in around we hopefully, That's commodities target, of you moving financial our have to but

I we joining Okay. at appreciate and will you see several everybody. later the you Thank Investor of call, the today. hopefully Day you,

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

You disconnect. may now