Garrett Motion (GTX) 24 Oct 242024 Q3 Earnings call transcript

Hello. My name is Andrea, and I will be your operator this morning. I would like to welcome everyone to the Garrett Motion Third Quarter 2024 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. ahead. go Please .

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

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

are federal today, note second the can slide These such in presentation words could from such If forward-looking that likely, statements by results anticipate, you should, management's similar look materially contains deck this at will the subject plan, meaning the of securities cause to which risks we statements differ within identified or and the represent be to uncertainties U.S. laws. and our estimate, as various intend, actual that expect, may, expressions expectations. expectations believe, current

our factors to the Securities These and among and related conditions, and risks risks and the and include Form in Exchange within the uncertainties others. geopolitical Commission identified automotive and annual filings on include landscapes other macroeconomic and competitive XX-K industry report

disclaimers we appendix content presentation be on to release. of -- and our reconcile of Please operate review how to press and manage describe non-GAAP use call manage help direct measure presentation includes as related most the measures how comparable in of our governed the measures X they the these certain business. We GAAP each presentation of the by our also this Slide Today's will our language. which we

only. vehicle we diesel and diesel by comments, gasoline products and may refer using presentation terms light vehicle today's the to and in light Finally, gasoline

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

through for time who you ] very remain for Relations In Cyril [ would Vice a and ensure smooth with I going November successful would forward. will addition, responsible like Garrett, President and and your to Investor like and be thank Garrett transition. a future. will I everyone support Grandjean, I Garrett Treasurer introduce to for to wish

I to Olivier. call hand now will the over

and Eric, Call. Earnings joining Conference thanks, Garrett's Thanks, everyone, Third XXXX Quarter for

industry like his wish Before the steps. Indeed, XXX We Eric delivered short-term global exposure some of customer in competitive seen . I conditions. I XX.X%, over the operational Europe in have am pleased points vehicle support pressure Garrett's and shift. for up facing thank now adjusted remarks impact OE EBITDA X. outstanding third we the this vehicle last to of quarter, margin and basis the China, difficult despite his performance for best him on our I strong would we will mix and all begin report today's year to the softness start, in Slide industry platform next light some a to quarter.

of in This further our as stable some commercial resilience revenue that was time, in you like ensure same continue On-Highway agriculture. of industry I'd in the again category this is win our vehicle, like from you to and aftermarket continue industrial. can Europe this approximately to opportunity strong of continuing our industry enjoy see and to that a verticals Garrett a despite once business quarter share demand XX% we for progress. take comes helps vehicle commercial to the a will of this as revenue source to At degradation of consolidating remind which new rate weakness

recovery China the signs early by commercial We vehicle of are encouraged in industry. also the

me again Let outstanding highlight operating now our in QX. performance

a margin soft in structure, giving than environment. flexed and margin sales fixed X% significant us a our quarter, and increase the variable less we implemented decremental sustainable During year-over-year cost of cost actions

cash flow. free us allowed also Our performance strong operational of generate adjusted to million $XX

$XXX stock We program, in for $XX quarter, year our of total to million to repurchase buy repurchases continued bringing the under our stock back the million. repurchasing common share

was zero-emission All while for this our invest continuing of to differentiated in turbo solutions. and technologies

next momentum move more we Let about to to our slide customers. increasing with the the have share me now

Slide X. to now Turning

winning quarter, This continued all verticals. across we turbo to see Garrett

Specifically, I'd have dedicating amount like a turbos, been first energy a on to focus large-sized significant year where the ago. of them we since we introduced

QX progress we quarter. on building are new We number a the wins with strong achieved this in of

booming and machines. demand turbos backup power the a each portion demand driven centers, very to expected which where this at we these just part are X by dozens is large requires progress center for in quickly, year. been generators am data fitted multiple significant making I of large of for The with turbos, speed in all grow data the have with pleased

have turbo see the and the started development is we more positive for of Garrett. America. especially activities anticipating a our helps we development introduction customers to in with for to quarter, an industry This relative plug-in powertrains, that North validate the also acceleration trend were of and hybrid the This

let's was very technologies. momentum high-speed a Now zero-emission technology. active to and talk It indeed with vehicle Slide for about quarter turn accelerating our see the X powertrain we our

customers electric and not We benefits associated showing high-power technologies need, our the density we bring only more more these interest models. introducing which but in production. high-speed more are our towards The steps power with higher with customers, taking seeing concrete solutions, our the

vehicles this customers of many truck. is that considering whether commercial of light next vehicles, our electric are for the or a trend heavy-duty cars, generation And

as jointly happy signed powertrain to have XXXX. start-up therefore, develop a SinoTruk, are, with leading We to letter a as which contemplates electric next-generation intent of quite production early

and capabilities XXXX key that advanced for also generation presented Garrett the developed were Stellantis that next Innovation This the electric of quarter, vehicles. has products are and Award, recognizing the with we

to electrification strategic transition. tangible see bringing this and associated am the quite happy differentiated our validating I on recognition, technologies to progress focus

I the Sean into and more will now to financial over results outlook. turn full provide insight our to call year

year. we just and excellent find QX welcome, ourselves adjusted team EBITDA performance, Olivier in XXX increase an to last Olivier, margin of operational points into basis turn environment, which Slide translated delivered line mentioned, top as Thanks, a XX.X%, compared a X. everyone. softer but the Please to Overall,

the allowed in across flex our our execution fixed investing be us continue higher graph the seen variable financial adjusted this quarter side while technologies. framework can trending financial increase this margin strong This with operational as performance to industry cost upper right-hand in to sustainable each new in our across demonstrates deliver implement line actions Consistent and cost margin still on with year we our structure year and cycles. EBITDA to ability

expenditures approach when of addition, a earlier, In we continue the performance capital with of of sales in I mentioned in with also adjusted with $XX million. free our operational quarter, cash capital-light which healthy resulted X.X% operate combined to the flow

to Slide now Turning X.

China, Europe diesel. in of You can we are see on some some seen along impacts, industry in pressures competitive customers with gasoline be experiencing how can and short-term our and softness and which mix

represents continuing from aftermarket, in which verticals XX% annual was revenue of weakness and such commercial total vehicle commercial Our revenue vehicle as further Europe, the despite industry approximately stable aggregate. of some and on On-Highway degradation

you adjusted to and We price our also impact as Slide experienced of accretive this through walk quarter. now bridge. I turn commodity of our deflation, Please to pass EBITDA gasoline which is commodity XXX% primarily through and X, affected will which customers, to we changes margin the continue

mentioned. than to to last fixed achieved delivered leveraging by volatility. which resulted industry across adapt cost contributed Garrett the structure We in performance of a represents sequential our just a delivering ability demonstrating performance compared EBITDA in $XX our quarter. to EBITDA less EBITDA which margin, point excellent soft and equates strength same prior versus year, over variable a decremental XX.X% basis cycles. decreasing the Adjusted basis of an the I last productivity, $X quickly an the margin driven over a highlights operational was when $XXX $XXX macro by the sales Overall, same This we million XX industry to last reported year, adjusted improvement representing cost and in QX, adjusted million X% to million point period net and operating decrease XXX year strong environment period with actions a improvement million. This the

slide, vehicle, to EBITDA to quarter, these higher-margin be not businesses. as to on industrial aftermarket annual mentioned XX% stable adjusted stability, the last contributing but declines of helped approximately I As this and tend our revenue commercial sales were offset and also represent only

turn I'll to talk through a our Once Garrett again, QX $XX Slide in EBITDA XXXX, our bridge. later about outlook, flow walk I cash and you will of X, which delivered free Please adjusted in with the adjusted updated million flow to year healthy in adjusted full presentation. line cash free

quarter of our we within expect capital sequential that working global previously, stabilize experienced in and impact fourth production with expectations. reverse were $XX as expenditures X.X% full other working all Capital financial the sales, will capital million, due at a line came well Although in we once mentioned decreased negative to and of sales, QX macros items recovers. framework and in year in industry primarily

to now Slide Turning XX.

continue million $XXX million facility We credit with priorities. of capacity execute cash and the of position allocation of strong cash. unrestricted capital generate quarter undrawn on our We comprised a to ended $XXX under our of revolving million and liquidity $XX

by cash Our stable to to continued Fitch and focus an from improved profitability generation positive. outlook on contributed

enabled for by year approximately ago, additional $XXX quarter Compared the repurchased our $XXX also million XX we shares our XXXX. our a us million stock of under outstanding or program. reduced as of share to value generation of QX count total shares cash through million an significant in common in shareholders a return Our repurchased been stock $XX QX million to XX% has repurchase to

net level quarter. previous to the leverage same Our cash at us as at our performance also X.XXx maintain the allowed ratio

Moving to Slide XX.

EBITDA million, updated Net You our $X.XX adjusted the of $XXX of adjusted sales can decline of constant XX.X%. cash Net million, implied net and billion, flow $XXX free of income $XXX cash adjusted with provided margin of EBITDA net see XX%, million, currency sales of activities $XXX of midpoints. million. XXXX an operating by following implying outlook

flat light production industry outlook compared sales vehicle, to stable a the softer reflect updates quarter vehicle commercial fourth in implying QX. and and These

sustainable variable for incorporates the of to the adjusted deliver Additionally, and the us midpoint. fixed at year EBITDA XX.X% the margin of cost which highly structure, benefits implemented updated of outlook also our allows actions throughout outlook cost an impact our

turbo. industry is spending in our our XXXX development zero-emissions Although while in of research still investing over environment, to macro experiencing we and softening XX% dedicate continue technologies, to a

with healthy approximately is or Lastly, remain fourth a flow million to midpoint expected our free $XXX million $XXX quarter. of in adjusted the cash

With will back call Olivier. that, turn to I the

Thank you, Sean.

XX. Slide to now Turning

which ways As a reminder we of for our long-term positioned are in success. well the

our larger the for in develop expand to to turbos to continue our We also offerings, serve industrial hybrids not but turbo only expected applications. growth

while Our shareholders. cash cycles, new highly operational to technologies allowing reducing cash in debt framework invest to returning over generative us is and

at solutions and where on efficient customer identify capabilities innovation develop scale. focus our to remains unmet and leverage priority differentiated needs Our can we to highly

to outstanding Turning want to Garrett operating team in the performance Slide quarter. now for XX. I joining the thank entire

We framework, have proven and once EBITDA financial financial margin. again a delivering the solid our XX.X% of resilience adjusted achieving results

believe return our in turbo Garrett continue to and shareholders, several and We highly makes sell capital turbo offering. our to with marine attractive applications which wins investments. expanding and industrial are commercial to We significant portfolio we largest secured newest

And zero-emission recent recognition platform, our developing of differentiated points are proof the across the for for customer and solution awards generation finally, vehicles. solutions are high-speed of our electric right we next set that

are Thank the your we Operator, Q&A. now you for begin ready time. to

come our Financial. [Operator Hamed from BWS will question of Instructions] And first Khorsand

you given and for to changed to that commentary guidance that your you question is, you in QX first QX, gave what's QX? in your readjust QX surprised in led the So performance

that's question. Well, a good

pretty say Let that. has think automotive because by the little seen of industry. for the And end softness me way, It's And is I've the would it's main that stronger. performance the what the the it a same I way. driver even to comes the bit than is of the much margin anticipated to a don't day, it's company potentially, quite when address that surprise, we standpoint. I even the quite better everyone seen try At because rest, frankly, this of the nice.

impacts won? you've China as of far your concerned seeing there start-up in and any are Are the there? production changes for Okay. customers Is you what as any

of there keep we fast legacy carmakers -- by call softness rising what what the and China have global seeing Well, passenger not we the is one. shares having demand industry. And towards different we we variability participation is way, That's new that into to of on vehicle keep is some the huge some share having are in the marketplace. on the of limited also of That only because enterprises lost companies. ones, state-owned in a other some

than the that signals a and the vehicle have significant on are But number also, seen you vehicle us a for the place and that. to of because I mitigate trend time, at sign that. the of natural that of the in say, what probably also the would Europe, On-Highway a is more especially recovery, recovery we are same we in we've underlying because that is sign China to some business QX. gas a see trend the which And the the positive of commercial remains. we've And is industry benefit trucks, seen that of may that's position. industry, in But seen applications where trucks, starting gas-powered we a won, of our power industry developing weakening on

And lot will hybrid considered? you side, talking to vehicle question this are the and what market you position in a the you mix far concerned, more about product a Okay. by light on other as benefit as are when And vehicles my in was, magnitude? being happening talk about, what's is sales

a are there things happening. few are Well, that

one, the consolidation we programs players. the of as our industry some first of So the the said, more to direction drives main

for We months are only the come. and we to one the there. positive as trend that the happening, we see and see But that a years not

and of turbo share the well. busy during the a good Garrett to for we of same our term, vehicles is for next is bigger account which hybrid a that the their as time. into portfolio call, plug-in taking for that, goodness alluding strategic were is this at the carmakers is are long On And happening news industry top this point reviewing

trends plus. are Those combined X

And question margin lower customers spectrum? of more higher is, higher seeing you last of or priced, product end more adopt on my are the your your

say lot hybrid geometry we on be specific variable I call, in What when would we also comes what -- see it a is of, and having I that because would we are true, trend next Europe, U.S., whether And X And now to a I turbochargers pure would vehicles. which applying it's hybrid the drive regulations in for obviously turbocharger, the powertrain. is Tier technology good the would more say emission on or powertrain already us.

The from Michael next Freedom question comes Capital. Ward of

things. Two

interest from why expense quarterly reflected the On wasn't the the in side, benefit interest May in the number? refi expense

in it are you mean, the effect I rate. seeing run

benefit. we remember, to terms outstanding they you're If bonds in a have interest are But starting looking see twice at it you though, cash, do pay of year. the and expense,

So about ] model. we can talk [

million at QX. $XX I'm looking in $XX million versus

you Right. But -- so offline. Mike through I think I that rec can walk

But we absolutely I seeing interest are think way. benefit the on -- the that expense.

on not Okay. It's just showing up the income statement?

flowed forth refi. There's the fees some of in through QX -- accounting that some back and from the But... QX of

onetime So there were some fees in there?

and you've market movements. with some -- interest swap got activity rate That

fees? what were And Okay. onetime the

$X me on I that. details again, $X million, think it's -- probably let the you or but million give

think swaps against mark-to-market. I the importantly, activity it's market . more on rate more the interest that our of are

targeted are a you say? of kick to you just or to starting looks curious of that larger for be that And the off. still the towards expertise? you joint structurally to of Okay. programs A vehicles. some industry. just these have Olivier, seeing towards seems to the have What Are manufacturers kind go -- seeing going the that what side of starting Is Page it a respected on like go develop? And you it lot fair X, is on are solutions. like electrified several the that market -- name about you I'm it Garrett some and there? Is lot part engineering through commercial of means

that's a So question. good

in question answer your me X Let points.

but page. talking passenger are also we about that, are commercial is one on vehicle vehicle we about first that talking The

are... we mention You that

blip I I just is on commercial. it. passenger. the the saw X dominated by no, It No, see

this in is Okay. a production. [ about would in you things it's for mean, industry, is in industry I publicly that say us, always deal But you around yet ] big this programs being and can often that not. that carmakers very there by for given not a And even get technology I tenant And say not is okay?

of tells we that you change are the that about magnitude bringing. So the

passenger Okay? So that's vehicle. for

increase What power power which the commercial even true I our more obviously, I'm an the more benefit horsepower, is passenger you've from seen benefit that the you the is solutions, industry powertrain, vehicle, through as solution saying of also for dense get it's with a did, because of is to we the very and vehicles. deck and commercial highlight more vehicle wanted presentations true through liked that that we the much. for many

on consumer is the end It's that an having the vehicle. technology where industry for his pay

are save you pay power a solutions, that's dealing you presentation versus truck. benefits are axles And specific high are on we some and on that competitive the we heavy-duty of percent can fleet solutions manager that If up existing, and for some energy, to few with good. of kilograms XXX [indiscernible] in that, on highlighting a see the bring Xx that, those obviously, would we

as So deal big well. a big,

our for And vehicle, time. highlight wanted validate we very Passenger up I that there for a fast. is been bit commercial technology we've but say the passenger Commercial obviously, frankly, vehicle, vehicle. there it's working need would that. taking we little on why to need started that, And a on quite very, later. to is And pleased vehicle reason that's some I'm a at very

passenger you you vehicle X longer electrified? do XX percentage think what -- look how look at or of years term revenue, then your mix out you segments and commercial vehicle be if that So and will the your and

hydrogen the billion in products non-turbo we for of is disclosed There the vehicle. electric non-turbo today, obviously so is compressors for in for electric be cooling mind. which that is that a vehicles we $X revenue powertrain. have solution it's we for These in are X centrifugal fuel portion trucks. light-duty target electric businesses, will by and terms And product and businesses, we've significant are for cell Well, and of XXXX, with vehicles. have compressor us, of It's that the full that e-powertrain driven electric cars also targeting

Okay.

you $X billion if revenue take a XX% talking number, revenue. about So type of you're

be in like the it's pushed [ you're if to out included being forward So anything of not market going ].

the vehicle not -- this been we at When that. time are were last side. that. We we've than of you forecast XXXX. that -- probably the We about vehicle the know And of on by electric look just light probably gave the on are when public trends lower a market and way, battery by pushed out at XX% expecting turbo you

So the that that tail long see a things. business few fed we core tail on a tail, our and by is is

there portfolio, First, widest people in comes to to but happening consolidation are our is a to of when the position development that into transition. that industry the the financials most solid goes portfolio ensure that industry the the also being it benefit

And plug-in we're time, at technologies. same hybrids that the up, coming having are new

And We we the with are vehicle we that a on know Matt industrial our on ago. vehicle about talking transition with that minute will turbo. be longer. side, that commercial ] the [ And commercial side, learned the

turbo genset. Our new the for are that now the [indiscernible] we the developing. that's not for industrial with That's segment

of this see use of that the power don't soon. anytime down Most center, that is and for data I backup genset booming, is slowing for

than expecting was the level long as that the same this anticipating a we year the expecting business probably disclosed So be at higher extremely revenue ago people forecast. what have BEV We XXXX, is XXXX. our And their on percentage in are turbo that turbo a is were term. latest resilient we that would side by that

thing, . is want just step-up really in I to interest Mike, interest the swaps, driven rate by the expense. it clarify all one

does necessary? rate the less -- swaps Okay. off, do interest or tail they they -- And are that do

layered about We XX% like over -- do our they but to fixed rate time. are in interest hedge they be do to

into So we cost dollar them.

do but would -- they're coming new trail also ones So off years, they over But we being be mark-to-market. layering on. the also also it's

also so in it well. And can a And . there and swaps ebb there's flow. as cross-currency

your you is fixed. Substantially than have debt half more of balance now, left -- your sheet

Yes.

you we if are today, less back these So have should as look for need a May to we of compared swaps.

correct? -- So

of our but interest swap euro. debt Well, U.S. yes, swaps, into we all dollar rate

because well to match So the . our in are of majority as we our have our cash to cross-currency euro we flows like debt flows cash swaps up as flows.

been But way. always it's that

billion that's... million down $XXX going You're $X.X debt of to from

Correct. Correct. That's correct.

need an So have for is That swaps. on interest of we rate less correct, a basis.

not B $XXX,XXX also Loan sudden the So Term of into amount. all of a a is fair Well, swapped but fixed. .

have what we forward, that less tailing Is QX because need a of swap. that correct? was in you're go saw some now off. just to you So as And was to of going

that would but say, debt associated the yes, swaps refi. we with the I were that unwound

hedged we're not and an we speculating the don't of So have with -- are current some underlying. they

take that QX? And when unwinding or in place, QX did

QX.

next comes Sponheimer Gabelli Brian The of question Funds. from

all market be is the a despite about floor higher here China dealing the can really how remain the you an with you're margin line the talk found softness, top of but of can EBITDA question sticky maybe which begs excellent to The of obviously performance going have later, whether profitability perspective sort assuming that that we XX.X% Europe something and durability for soft. be and end from

So this costs way potentially softness otherwise I'm would back these entity continue it, maybe if are thought? at to looking end I'm could if a in more in you that that there have Or you layer some structurally were are than markets? seeing profitable the

the Brian, on you nice today. call have to

which very for You are this pointing point of is the at company. profitability interesting a us,

on we the our order improve something position, efforts run, when we some long we improving for the uncertainty usually, meaning that to agile industry. cost of on automotive we we degree marketplace, following this run, into the if cost is our And coming that improve breakeven quite working been to always term. which work some are short it's in position. I find You've variable on make permanent that's think the the company flexibility and success And we a the structural obviously is that shock And a where for know way. the point. of Because improving people you on we . Every long to high short-term work the go. we costs. time, Garrett from in know us, in for more the day key a have we call can therefore, company But the that

today, the even there only are -- seeing quarter more that identified X not effort, we've the inefficiencies, working pockets on things. result were diligently we working we be it's last because that could some of on softness. were always anticipating So We and for been X years of we had these of

So it's the we an more not We work on these quarter had at like year a decreasing X work as our last at for a We big factories flexible. making going And effort. into on our fixed factories the plan things. costs example.

it's like with the analogy So to getting the making That's the team. gym. I'm

calls closer did the to deflation you getting the would this to are seen a contribution, do interesting. indicated and some corridor us X you a when margin. I we that, a that few it their need points more the you're but there of may And obviously I say, that the You We've be excellence a when that to minor was helping back daily pass-through. to year you bit years comes to basis, it ago that XX%. had are guys are on that on it top comes is question, is when of when earlier that remember would price of margin probably are that little ago

pretty stable. much And was part has for of year it, where FX the we were that been mentioning FX last

material a cost, to we for what price bit on it when an a us. $X for idea margin it's driver a get the that's for little and of of $X But because us that. raw inflation, point not is as of we was especially get compensated meant So given our have of we dilutive this obviously for

effort on we and some costing But from, say, that efficiency, on most measures, new working company. into So across coming should raw these adapting fluctuate on developing of systems, deflation not I the processes everything of materials, specific and core deflation hard but that. the of on there as ] is impact obviously, is, that could the the new obviously, got improvement the margins, structure, [

it or I is industry for price and Okay. side? there. light downs is given noted automakers that on going I you increasingly it more you to something the here? Is effectively supply price become there. the have concern Is appreciate color from I'll that the vehicle pressure let One that anticipating the that And base. you're challenging whether take yearly are the already seeing performance across yourself, it

There have price is not fairness, for in pressure, going frankly, indeed that the X price years. I all pressure quite seen last down

time we day, them makes right -- think a it that we the price has to more it it inflation as the is that action. customers, it's our type product, At the I obviously performance, other arbitrage whether was when also long been and customers . And the end at our share cost, we can for of else. some of do. not us the to and it's to energy about And same for way So time. materials, doesn't It fair but The point whether whether everything the off. always our raw that reduce they helping of to alternative, came relative of support price inflation, transportation, to we bring accelerate, that performance inflation, little next get help best we we've their ourselves a is they bit is don't this demonstrating could and the eased the at when need as customers mean it our complex. to can are help

and end down that at the the there over for, existed. to industry I there the price of day, not is all not X But has fairness, in the ask exists. last It what years. deliver. going XX change. seen So can have it seen anyway And I've you is pressure can what a complete

the concluded. The you may today's presentation, is Thank for concludes session. question-and-answer and now you disconnect. now This attending conference also