Greetings, and welcome to Gentherm Third Quarter and Nine Months Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would like to turn the conference over to your host, Mr. Michael Mason. Thank you. You may begin.

Thanks, Matt. Good evening and thank you for joining us for the Gentherm Incorporated 2015 third quarter results conference call. Before we start the call, there are a few items I'd like to cover. In addition to disseminating through PR Newswire this afternoon's news release announcing Gentherm's results, an e-mail copy of the release was also sent to a number of conference call participants. If you need a copy of the release, you may download a copy from either the Gentherm website at www.gentherm.com. Additionally, a replay of the conference call will be available via a link provided on the Events page of the Investors section of Gentherm's website. During this conference call, representatives of the company may make forward-looking statements within the meaning of Federal Securities Laws. These statements reflect current views with respect to future events and financial performance and actual results may materially differ. Please see the company's SEC filings, including the latest 10-K and subsequent reports for discussions of various risks and uncertainties underlying such forward-looking statements. During the call, the company may discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in the company's earnings release. On the call, we have Mr., Oscar Marx, Chairman of the Board, Mr. Dan Coker President and Chief Executive Officer and Mr. Barry Steele Chief Financial Officer, Management will provide a review of the results, after which there'll be a question-and-answer period. I would now like to turn the call over to Dan. Good evening, Dan.

Good evening, Mike, and good evening everyone. And thank you for joining us this evening at this late hour. We would like to review, what we think was a very respectable quarter. We had record revenues despite some serious headwinds from the dollar strength in the marketplace. Revenues were around $223 million with a significant headwind as I mentioned somewhere around $13 million worth of currency exchange loss. But we're very pleased with the overall results of the company and especially on the operating lines and the net profits of the business. We had a very strong quarter by our Global Power Technologies Group, as you'll hear us refer to it as GPT. They had an extraordinary quarter and contributed very well to our topline and to our bottom-line. Barry is going to get into a little bit more of the details and then we will open the floor for comments and questions from the audience.

Thank you, Dan. As I mentioned our earnings for the 2015 third quarter was $0.76 a share on a full year diluted basis. This represents an increase of $0.28 or 58% over the third quarter of 2014, which is also a 43% increase sequentially from that of the second quarter of this year. The improvement comes from our continued product revenue growth, and stable margin performance and in spite of currency translation headwind as Dan mentioned [indiscernible] our revenue growth. As in the recent quarterly period this trending dollar reduced our revenue performance this time by over $13 million or 6%. Fortunately that same effect helped reduce expenses in foreign currencies, so that the impact in our earnings is actually favorable. Our product revenues for the second quarter - third quarter were $224 million roughly and represented an increase of more than $17.8 million or just over 8% - 8.5% again if currency exchange rates were the same as 2014, we would have shown revenue growth of nearly 15%. This increase is attributable to the continued growth of our automotive product, but also included in almost over $12 million increase from global power technologies or GPT as we call it which represented a 59% increase when compared with the third quarter of 2014 revenue for GPT. The GPT revenues partly are due to favorable shipment timing of large program. This quarter our gross margin was 33.5% this compares to a gross margin percent of 29.9 for the prior year period, which has a 3.6% increase and a 2 - there also a 2.7% increase from just as the last quarter - the second quarter this year. A number of favorable characters contributed to this increase including our favorable impact coming from the stronger hour as I mentioned other benefits including…

Hi, Barry. Thank you very much for that comprehensive and detailed report as usual. We would like to open the questioning from the floor. Operator, we're ready if you are.

Okay. Now, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Steve Dyer from Craig-Hallum Capital Group. Please proceed with your question.

Thanks, good afternoon, Dan and Barry.

Good afternoon, sir.

Obviously your gross margins extremely strong and we're just wondering Barry, if you could quantify sort of how much of a benefit the strong dollar was to against the [indiscernible] and peso.

It was about the same as in prior quarters. We have given some statistics on that in the past, there are impacts from both stable and negative in various currencies. We feel not to give you a very detailed specifics - but you can - it generally stays about 1% or something like that.

That's consistent throughout the year?

Yes, but consistent. It is the same as we're been seeing almost for a year now.

Yes, okay. And then GPT is sounded like a good quarter, maybe a pull forward of some revenue or something like that. How should we think about that revenue next year, it's obviously a question on everybody's mind given the oil and gas prices et cetera.

Yes, there is a lot of pressure in oil and gas industry. We've been fairly lucky so far this year. We're currently looking out and seeing no real change in the oil and gas market, of course, we're heavily dependent upon the gas business which has remained fairly stable, although new pipelines, new exploration are definitely being impacted. So we're going to be conservative in what we see in terms of growth in the next year for our GPT division.

Okay. And then also for next year I think your first battery thermal management award kicks in, probably somewhere in the second half. Is that the only one that you think you'll drive revenue from next year or is there still opportunity for more?

The revenue we're going to see in 2016 from that program will be very, very small, there will be very early shipments. The real impact from that comes in 2017, 2018, 2019 and forward. And any additional programs we get in that area and the BTM the battery thermal management area will not likely impact our 2016 revenues of all, but we will kick in 2017, 2018 and 2019.

Okay. Got it. And then last one from me and I'll hop back in the queue. Your 10% revenue growth guidance for next year, what is that assume for a year over rate, what are you thinking there in putting that guidance together.

The year has been fairly if that's just going down a little bit recently, so we're using the knowledge on that about one-ten.

So one-ten is kind of the baseline of your thinking for 10% revenue growth next year. Obviously, if it weakens further, you'll have more headwinds and vice versa but strengthened.

Absolutely.

Okay, all right, thank you.

You bet. Thanks. Okay, Matt.

Our next question comes from the line of Matt Koranda from Roth Capital Partners. Please proceed with your questions.

Hey, good evening guys.

Hi, Matt.

I just wanted to start on gross margins, really strong gross margin in this quarter. With may be a more normalized mix of products, say maybe a little bit less GPT next year. Where should gross margins shake out? I mean are we north of 30% next year? What's the reasonable assumption?

I think it would be fairly safe to say that we're targeting a 30% gross margin across the line and you'll see some swings up and down and when we get good solid quarters like we did out of GPT division we see a little bit better mixed of margin out of that group, plus our bids should be coming in little bit stronger next year to so. We are pretty confident that the margin should be above the 30% range for the full-year.

Okay, got it. on the battery thermal management opportunity, could you just help us seize the opportunity for you guys, I mean, how many other OEM customers are you speaking to is it possible to quantify that or give us maybe the nature of the discussions around that. Are there other channels for you guys as well, I mean, as battery manufacturers, potential customers for this or integrators maybe you could just talk about sort of the environment right now and the discussions you are having around it.

Sure. Well, currently these things are particularly intriguing to folks who have start and stop technology either hybrid or mild hybrid vehicle. The packaging of the battery packs that go into these types of vehicles are extremely difficult and it is very hard to get thermal energy management systems, where they need to be. But beauty of a thermal electric driven system is that it can be very nicely packaged and can deliver a pretty good punch of cool power. And that is very helpful in maintaining the service life of the battery. So we have currently announced one very significant customer that we think could generate $25 million per year on an annual basis. And we are in talks with several other people. There are different ways that we can get to this market, including industrial application. But in the automotive world, we have relationships directly with OEMs, which is what our first contract announcement was, but there is also the battery manufacturers themselves. The people who supply the cells themselves are very interested to making sure that their products are properly managed from thermal basis. So we have a couple of different paths to get into the automotive market dealing directly with the battery cell manufacturers and also dealing directly with the OEM themselves. In an industrial application, a similar type of a problem exists in various different battery backup systems that are used around the world. So, we have a similar advantage there in the packaging ability of the thermal electric systems and we are continuing to look at those. Right now, we are focusing a lot of our attention on dealing with the automotive application as start/stop and hybrid systems proliferate throughout the industry and virtually every manufacturer in the world is one of our targets for OEM. So that's kind of - it's a big scale that is a very big opportunity. We have a lot of hardworking engineering and technical skills in thermal electrics and we know how to package them effectively and efficiently and we have a very good service and technical support system. So we think we are very uniquely positioned to be able take advantage of this, kind of new and expanding market opportunity for us.

Got it, very helpful. Thanks Dan. One more for me here, on this 2015 outlook, maybe you could just talk about some of the assumptions that are driving the lowered outlook for 2015 on the topline [indiscernible]. I mean USD, euro hasn't seem to really depreciate much since you guys gave your last outlook, but maybe you could just give us the put and takes there on the 6% growth.

Well the 6% growth for this year is based upon what we're basically are facing today. The third quarter we came in a little bit lighter than we thought it would, and the euro, dollar exchange rates have continued to remain affected that little bit works. So for us the world has changed, we see that there is a softness in the Asian markets particularly in China. And the European markets are beginning to come back, but it's still a little bit softer than we had hoped at this time. When we look forward into 2016, we see new programs and commitments that will help us support a 10% revenue growth over and above where we close out 2015. So while we're confident of this, we want to make sure that this very dangerous and shifting world we live in comes true. So we're giving ourselves a target of about a 10% growth over this year.

Got it. I'll turn back in queue guys. Thanks Dan.

The next question comes from the line of Samik Chatterjee from J.P. Morgan. Please proceed with your questions.

Hi Dan, Hi Barry. So just looking - going back and looking again, at your 2016 guidance just curious to know of what you assuming for like global light vehicle production next year, I mean we know - we see IHS numbers. And so, I think we have growth of 3% right now for 2016, but - and your view is that too optimistic and how you're assuming - what are you assuming for next year?

We do actually read the IHS numbers, which are fairly good. We think they might be a fair optimistic, but we don't use the IHS numbers for China in particular. They don't seem to have as good holds into the Chinese marketplace. So we get the data from the Chinese market from another group. But in general, I think you would say that our base numbers are just below that 3% target number as you mentioned.

Okay, good. And in terms of China, what are you seeing there? Are you seeing just lower volumes coming to or are you seeing any push out launches et cetera through the year as well?

What we're seeing is couple of things. There are definite volume changes, but you're also seeing a significant shift in mix in the products that's being sold in China. In the past, there has been a very strong and robust demand for high-end cars particularly high-end German luxury cars. That is changing and there is a definite softening in demand for those products and an increasing demand in the very - let's say entry models - entry level models that are primarily sold by the domestic Chinese business. So when we look at China we see a definitely a swing in a shift, our products typically are very attractive to the upper and mid market and luxury market vehicles. So those businesses are being affected a little bit more than the general market, and the general market is definitely being impacted by a slowdown in the growth rate of the Chinese economy. We do not see the Chinese economy going into a depression or into a recession, but the growth rates are definitely slow and that's impacting the auto building and purchase.

Go it. And just last question. The CCS revenues were up 6% in the quarter of - [indiscernible] softer than we would expect, especially when the total comp revenues go up like 9%. So is that more about timing of launches, or is that more set of [indiscernible] deliver for what you're looking at - going into 2016?

It is more of a timing of launches impact. You may see some changes as we go into the fourth quarter offset a bit by systems bonus we see in December. But clearly the improvement in the GPT revenues has depressed a little bit as well as the overall mix.

Thank you. Thanks for taking my questions.

Thank you, Samik

[Operator Instructions] The next question comes from the line of Gary Prestopino from Barrington Research. Please proceed with your questions.

Hi, good afternoon. With the GPT having these strong revenue growth in this quarter - and the question is timing of the sales, was there a some taking from what should have been in the fourth quarter that was pushed into the third quarter in terms of the sales.

One fact of that's the certain and that is they do have the systems business that has very large multimillion dollar programs that can affect the quarter dramatically. In reality, we have had strong quarter - a couple of quarters in a row whether we do see a decrease in the fourth quarter, but that's necessarily a flowing fourth quarter [indiscernible] shipments, I think I could probably interpret it at either way. So it will continue to be sort of a lumpy business as we go through, but we have consistent growth there for our latest three quarters.

Yeah, it's just important to know that this is not our typical business, where there is a normal pretty curable regular demand on a monthly basis. These projects are stop and won, one that is time and it is very safe, these things are multiple million dollar program. They are basically built and scheduled to the customer's requirements. We don't necessarily have the capability to pull forward, where to push these things out. It is all customer driven, and we are responsive to the customers in this marketplace. And as Barry has pointed out, we have had three very good quarters in a row. The fourth quarter is typically a little bit softer and we see that coming up in the fourth quarter of this year, as well.

Okay. What in terms of what is driving the growth right now, I know it is not a retrofit, but the industry is obviously having problem, is that all just that there has been such a lack of retrofit capital assessments?

What really happened is that - we are kind of spreading out a little bit further around the world and we're getting a little bit broader acceptance into the market place for our technical skills and products. So it's really not, we're tie directly to the number of fleet of new pipeline that put up. It's really us coming in and getting business in different markets around the world. We've got a lot of very good exposure and experience in the Asian markets is an example. And we even though Canada has slow down a bit, the market here in North America has been stable for us. So it's not necessarily something that we can say is a general predictable pattern. We're working to get programs around the world now and we one of you, and so it's good.

Okay, that's good. And then with the battery thermal management on correct that you sign and as it just we point OEM, correct?

That's correct.

All right, so is it your stands that, as you are talking to other OEM that they are waiting on the sidelines here to see how this rolls out and whether the functionality is there before you would sign other OEMs?

Not at all. I think what really as people are trying to find solutions to a rather waxing problem. The company that we signed with is kind of well ahead of the world in this area and they are doing a very good job of - aggressively pursuing solutions. The other OEMs are all examining various different options and we are working with several people that have come to us and said we've got this problem. And we look at the problem and we think we can put together a packet that will satisfy their needs. We are engaged with several people both OEMs and battery suppliers. So we suspect that this new opportunity will result in additional volumes and programs for us.

Okay, and then lastly two other questions, in terms of your thermal management solutions on the heat side and interior side, is it safe to say that for the 2016 model year - models coming out now that you are seeing an increased appetite on behalf of OEM to put these products into their vehicle even at the mid-range level now?

Yes, I think it's safe to say that the consumers are actually keenly interested in these types of features and the OEMs are definitely looking for things even in today's marketplace, they are looking probably to satisfy consumer demand. And you need to differentiate their vehicles. We will continue to see a dramatic increase in the heat vent solutions that we have very much enjoyed our market leadership growing. And heat cool will continue to be dominant in the high-end market. But as you pointed out, the mid-range market will begin to naturally adopt the more moderately priced heat vent solution.

What about the things like the cool vent unit and armrest heating, steering wheel heating, cup holder things like that, is that moving more into the mid-range I mean or are the automakers wanting to put these in the mid-range vehicles as creature comforts.

Most of those products you are seeing primarily in the high end vehicles. I would say maybe the one that's probably got the most reach would be the heated steering wheel and that's a product that the consumers indicate testing of the charts when they - when someone gets a heated steering wheel they demand it in their next vehicle. So we're seeing very good response there and that would probably lead to charge down into the mid-range. Heating through cup holders, Heating through storage boxes, heating interior panels are more likely to stay on the higher end on the upper entry from mid-range level.

Thank you.

Thank you, sir.

The next question comes from the line of [indiscernible] from DA Capital. Please proceed with your questions.

Hi, good evening, Dan and Barry.

Yes, hi.

Hi. I wanted to understand a couple of questions. One is your guidance for the full year 2015. What is that imply for Q4 on the constant currency basis?

On a constant currency basis?

Are you talking about revenue, is your question?

Yes, yes, yes.

It's roughly $217 million of revenue.

Yes, so if it is 5.5% growth, but I wonder where it is in terms of regulatory currency growth, ex-FX?

It'd be a little bit different than what we're seeing these previous quarters, because the year a bit - begin with a decline in the fourth quarter. I don't have that information, right at handy for me but it still going to be at least 3% or 4% that hurt by the currency effect.

Okay. It sort of 5.5 maybe 8.5 or 9.5 something around there?

That's correct.

Yes.

Okay, and then for 2016, you are driving to 10% revenue growth, your long-term target is obviously 10 to 15, you are at the lower end of that. I assume that the 2016 numbers don't have any currency impact. Is that fair to say?

It's pretty - our assumptions are pretty consistent with...

Current market rate.

Because it had to be graded a bit during the year, Canadian dollar for example is a good example just want to have the greater in the year, but the year have been - more consistent. While our assumptions are basically where we have been on these currencies in the last three or four months as supposed to where they were at the beginning of the year. So maybe a little bit further degradation, but not a lot.

Right, is it, is most of the reason for being at the lower end of the 10% to 15% range, is that attributable to China, or is it more broader than that?

It's actually been zero conditions around the world, the U.S. market has begun to slower it's growth and recovery from the 2009 market crash. The European businesses are beginning to very slowly come out of that theme, look slightly later recession. The Asian markets, Korea is doing very well, Japan is doing well, but China is in a bit of disarray. So when we look at the market, we see where we are, we had pretty good indications of what our awarded programs are. And we see that being on that 10% range. So that's our corporate target are 10% to 15%. We're in the low side of that target and we're going to try everything we can do to try to meet that if not meet that for 2016.

So - and then just a couple of quick things. One is your cash balance has obviously grown a lot. Are you seeing any interesting technologies that you could use the cash balance for the purchase?

Yes, we do. We are definitely in an inquisitive stake and that's exactly why we like catch. We're trying to make sure that we are ready to go when we see opportunities that are irresistible and fit with our strategic goals.

And then previously you've mentioned that healthcare is one of the areas that you've looked at it. Is that you're focused [indiscernible] specific to any particular sector?

It is one of our key interest areas that we are looking. I will say though that the medical market has been shopped over pretty heavy and there are not as many great opportunities as we had hoped to see. But it is definitely an area of interest for us. There's clearly a strong opportunity for the delivery of heating and cooling systems for patient recovery and patient healthcare and patient comfort. We had not that able to find the ideal certain candidate in that group, but we continue to look.

And just last question, could you update us on the heating cooling mattress, how's that playing out?

Well, as you know, and you probably heard the last few quarters. We're in a rollout of a market testing, testing approaches and technologies and product platforms. We have been learning a lot as we've gone through these last two quarters. The learning we had during the third quarter was interesting. We found out some things that we needed to adjust in the - actually, the construction of the bed. That learning has now been applied and we're expecting to see some better results in the fourth quarter as we continue to rollout these test markets and continue to get ready to go into a full push in 2016.

Okay. Management it appears as there are no further questions in the queue. Would you like to make any closing remarks.

Certainly, thank you very much Matt. And I'm we appreciate all of the question that we've gotten. Again, management thinks we had a pretty done good quarter, adjusted for our current few headwinds. It was definitely and clearly a record quarter on revenues. The bottom-line results were quite satisfying and the results of a lot of people hard work. Keeping our business focused on profit and a bottom-line return. We believe that the fourth quarter is going to continue to be a much like the third quarter and as we roll into 2016, we are fairly confident at the moment that the 10% revenue growth rate will help us improve our bottom line as well. So we would like to thank everyone for joining us and we ask you to join us again and about 90 days. We wrap up the year. Thank you, operator.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time.