Gentherm Incorporated (THRM) Q2 2022 Earnings Report, Transcript and Summary

Greetings, and welcome to Gentherm Inc. 2022 Second Quarter Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Yijing Brentano, SVP of IR, Strategy and Corporate Development. Please go ahead.

Thank you, and good morning, everyone, and thanks for joining us today. Gentherm's earnings results were released earlier this morning, and a copy of the release is available at gentherm.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Gentherm's website. During this call, we may make forward-looking statements within the meaning of federal securities laws. Statements reflect our current views with respect to future events and financial performance, and actual results may differ materially. We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other risks and uncertainties underlying such forward-looking statements. During the call, we 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 our earnings release or investor presentation. On the call with me today are Phil Eyler, President and Chief Executive Officer; and Matteo Anversa, Chief Financial Officer. During their comments, Phil and Matteo will be referring to a presentation deck that we have made available on our website at gentherm.com/events. After their prepared remarks, we will be pleased to take your questions. Now I'd like to turn the call over to Phil.

Thank you, Yijing. Good morning everyone and thank you for joining us today. The second quarter presented one of the toughest operating environments for the Automotive industry as well as for Gentherm. We faced the highest inflation in 40 years in the United States; lingering COVID shutdowns especially in China; continued military conflict in Europe; and semiconductor shortages and other supply chain challenges. I am proud of the Gentherm team for the ongoing progress in stringent cost management and negotiating appropriate cost recoveries from customers while maximizing performance towards customer needs. We outperformed actual light vehicle production in our key markets by approximately 600 basis points in Automotive, and we achieved 9% growth in Medical as customer demand for our products continues to grow. I'm also pleased to share that we recently closed 2 transactions that will expand Gentherm's value proposition in both Automotive and Medical. The acquisition of Alfmeier's Automotive business makes Gentherm the largest global supplier of thermal and pneumatic seating comfort for the automotive industry. In addition, the acquisition of Dacheng Medical expands Gentherm Medical's access to large and rapidly growing markets, including private label opportunities through Dacheng's innovative and complementary patient temperature management devices. I'd like to welcome the colleagues from Alfmeier and Dacheng to the Gentherm family. Now, turning to the Automotive highlights on Slide 4. In the second quarter, we launched our automotive solutions on 29 different vehicles across 15 OEMs, including Acura, Alfa Romeo, Audi, BMW, Cadillac, Great Wall, Honda and Mercedes-Benz. This represented one of the highest number of vehicle and program launches in recent years. We continue to see momentum for our CCS solution on both ICE and electric vehicles. In the second quarter, our CCS solutions were launched on the Alfa Romeo Tonale, BMW X5 China; Cadillac LYRIQ Luxury EV also in China, the Ford Ranger and Everest, Mazda CX-50 and Range Rover Sport. In Battery Performance Solutions, we achieved an important milestone and launched our first proprietary cell connecting solution that utilizes the mechanical structuring process for the new plug-in hybrid BMW 7 Series. This innovative thin foil solution enables more design flexibility, weight reduction and added functionality to cell connecting ports while simultaneously lowering costs. In addition, our unique manufacturing process is more environmentally friendly than competitive alternatives. In fact, the Fraunhoffer Institute conducted an independent study recently that estimates an over 90% reduction in greenhouse gas emissions when comparing the mechanical structuring process with the chemically etched solution. In addition, we are proud to be honored by Honda as a top North American supplier for the third consecutive year. This recognition reflects our commitment to developing innovative solutions and our team's dedication and commitment to the quality and operational excellence. Now on to Slide 5, where you can see that in the second quarter, we secured $600 million in new program awards on a pro forma basis, including $190 million secured by Alfmeier in the second quarter prior to acquisition closing. Since the announcement of the Alfmeier acquisition, our customers have resoundingly expressed support and excitement to see Gentherm further expand our value proposition beyond thermal in comfort, health, wellness and energy efficiency. The pipeline of opportunities for the combined company remains strong. I'm also pleased to announce that we recently received our second ClimateSense award from a global OEM for our software-driven microclimate platform using an algorithm based on thermal physiology. This award will be on a battery electric version of a popular SUV launching in 2025 and is a strong validation of the progress we're making with this OEM. I'd like to take this time to congratulate our global team for winning this important follow-on award. ClimateSense is a critical part of our long-term strategy and continues to gain interest from global OEMs for significantly reducing power consumption and increasing range in extreme temperatures, all while providing best-in-class passenger comfort. We won multiple CCS awards in the quarter, including platform wins on the next-generation Dodge Charger, Challenger, and Jeep Cherokee, The Great Wall WEY, XPao Pickup and Salon Mecha Dragon EV, the Honda Passport, Nissan Murano, Toyota Camry, Sequoia and Tundra as well as the XPeng EV. In the second quarter, we also received 17 steering wheel heater awards across 12 OEMs, 5 of which were hands-on detection enabled. These included a new EV crossover coming from Buick, 2 models from Great Wall, 4 models from Volkswagen, a new EV crossover coming from Ford, as well as multiple models from one of the largest global electric vehicle manufacturers. Importantly, in the second quarter, we won several conquest CCS and seat heat awards from a large Tier 1 seat manufacturer, displacing the competition, validating our strong position as the leading independent provider of thermal solutions. We continue to transform our product lines, including our Cable business to create value for electric vehicle applications. I'm pleased to share that we won a high-voltage cable award for a Porsche EV and a follow-on high-voltage cable award for a hydrogen fuel cell electric semi-truck in the second quarter. Also in the second quarter, the Alfmeier team won a significant pneumatic comfort award with BMW on several new EV-based in-car vehicle models. Alfmeier was also awarded a significant regional volume expansion by one of the largest global electric vehicle manufacturers. In addition to this long-time EV customer, Alfmeier has secured their position as a pneumatic comfort supplier of choice for European OEMs for their EV platforms, including the BMW, i20 and i3, the Mercedes-Benz EQE and EQS platforms and the Volkswagen ID5 to name a few. We're excited to offer more compelling and high-value solutions across complementary customer relationships, leveraging the combined technologies, teams and capabilities. Gentherm sees an opportunity to integrate the highest-performing comfort and wellness solutions in the most space efficient manner, which is especially important for electric vehicles that demand compact integrated designs. As we continue to bring innovative solutions to our customers, Gentherm is well positioned to significantly increase content per vehicle as electric vehicles expand in the market. Now, let's turn to Slide 6 for a discussion of our Medical business. Earlier this morning, we announced that we closed the acquisition of Dacheng Medical, a developer and manufacturer of patient temperature management solutions for numerous Chinese and international customers. Dacheng is an existing supplier for Gentherm Medical, with whom we have developed a strong relationship over many years. This acquisition provides enhanced access to high-growth markets, including private label opportunities through Dacheng's innovative and complementary patient temperature management devices. Dacheng products have regulatory approvals in many countries, including China, the United States and Brazil. Now, let me share some highlights for the second quarter. Medical revenue grew 9% ex-FX year-over-year. During the quarter, Gentherm delivered Warm Air and Filtered Flo patient warming systems to the United Nations Development Program. The United Nations Development Program in conjunction with the World Bank provides humanitarian aid to developing countries. We also continue to see solid demand for our flagship product, Blanketrol, winning a large award from Ascension Via Christi St. Francis Medical Center in Wichita, Kansas. Now let me summarize. Our results for the quarter reflect the extremely challenging operating environment our industry is facing. I would like to thank our global team for diligently adjusting our business operations to minimize the impact of supply chain disruptions and inflationary pressure while continuing to deliver for our customers. In Automotive, we outperformed actual light vehicle production in our key markets by approximately 600 basis points, and we secured $600 million of new awards on a pro forma basis from automakers around the world as the largest global supplier of thermal and pneumatic comfort. With that, I'll turn the call over to Matteo, for a little more color on the financial results, and I'll come back to wrap up before Q&A.

Thank you, Phil. Let me turn to Slide 7 and focus on the items that most significantly impacted our second quarter results. So for the quarter, product revenues decreased by 2% compared to the same period of last year. And if we adjust for the impact of FX, our overall product revenue increased by 3%. Starting with the Automotive segment, Automotive revenues were $249 million, corresponding to a 2% decrease compared to the prior year period. Adjusting for foreign currency translation, Automotive revenue increased by 3%, and this compares to a 3% decline in the actual light vehicle production in our key markets of North America, Europe, China, Japan and Korea. And as Phil just mentioned, our Automotive organic revenue outpaced the light vehicle production volume by approximately 600 basis points. When comparing second quarter revenue by product line, with the results achieved the prior year, all product lines were negatively impacted by unfavorable foreign exchange translation, supply chain shortages as well as the COVID outbreak in China. Now, let me provide a little more color by product line, excluding the FX impact. Steering Wheel Heaters revenue increased 15% year-over-year, primarily due to the start of production of the new programs, including the Tesla Model Y. BPS revenues increased 9% year-over-year due to higher volume of cell connecting board products with BMW. CCS revenues increased 3% primarily due to the new launches and growth with Ford. Automotive Cables revenue decreased 9% due to lower sales with Bosch. Seat Heaters revenues decreased 1% due to lower production volume on several models, especially with Asian OEMs such as FAW, Nissan and Toyota. Other Automotive revenue more than doubled year-over-year due to higher sales of heated interiors and thermal cupholders. Electronics revenue decreased 30% due to strategic shipment holds on several low-margin non-automotive customers as we continue to rationalize our product and customer portfolio to improve profitability. Moving to the Medical segment, revenue increased by 6%, 9% ex-FX, driven by higher sales of Warm Air and UV Treo products. Turning next to gross margin, gross margin rate for the second quarter was 23%, and this compares to 30% in the year ago period. The 700 basis point decrease was primarily driven by higher costs incurred to mitigate the impact of the supply chain disruptions, primarily in the form of premium freight and spot buys, inflation associated with wages, material and freight costs as well as the negative impact of foreign exchange, primarily due to the depreciation of the Euro and the Korean Won compared to the dollar. These were partially offset by cost recoveries and negotiated lower annual price reductions from customers. Moving to operating expenses, which were $51.6 million in the quarter compared to $47.5 million in the prior year period. The current year second quarter amount included $4.2 million of restructuring and acquisition expenses, and this compares to last year's second quarter when we incurred approximately $2.9 million of restructuring and acquisition expenses. If we adjust for these expenses in both periods, operating expenses were $47.4 million, up from $44.6 million in the second quarter of last year. The year-over-year increase of approximately 6% was driven by higher SG&A, primarily due to merit increase as well as higher project-related R&D expenses as we continue to execute on the high level of program launches, implement electronics redesign to mitigate the impact of the semiconductor shortages and invest in ClimateSense and Battery Performance Solutions. Adjusted EBITDA of $21.4 million declined by approximately $22 million from the prior year period. And finally, adjusted diluted earnings per share in the quarter was $0.25 per share compared to $0.85 per share in the second quarter of last year. Our effective tax rate in the second quarter was approximately 36%, higher than our prior quarter rate of 27%, primarily due to the unfavorable impact of the global intangible low-tax income on foreign earnings. Moving to the Balance Sheet on Slide 8, our cash position at the end of the quarter was approximately $157 million, down from $178 million at the end of March. The $21 million sequential decrease was the result of $13 million negative free cash flow, primarily due to the temporary higher working capital as well as FX. We closed the quarter in a net cash position of $120 million as cash on hand exceeded the gross debt. And as a result, our net leverage ratio was -0.99. On June 10, we completed the refinancing of our credit agreement. We extended the maturity of the credit agreement through June 2027. In addition, the new facility increases our borrowing capacity from $475 million to $500 million and provides greater flexibility on our covenants. Based on the trailing 12-month consolidated adjusted EBITDA ended June 30, we had approximately $357 million of remaining availability on our line of credit, and the total available liquidity as of June 30 was $514 million. As Phil mentioned earlier, we recently closed the Alfmeier and Dacheng transactions, and these 2 transactions were funded through a combination of our existing cash balance and the revolving credit facility. The drawdown of the revolver in July was approximately $200 million, and we expect our net leverage ratio to continue to be below our target of 1.5 after funding these 2 transactions. Now, let me turn to Slide 9 for our 2022 guidance, which includes the completed acquisition of Alfmeier as of August 1 and the completed acquisition of Dacheng Medical as of July 13. Our performance in the first half of 2022 is below our original expectation due to the extremely challenging operating environment mentioned earlier. That said, we continue to expect an improvement in the second half of the year for both revenue and adjusted EBITDA margin as a result of higher volume and the positive impact from the pricing actions that we have been negotiating with our customers. We now expect product revenues for the year to be in the range of $1.15 billion to $1.25 billion, assuming FX remains at the current levels, and we expect light vehicle production in our relevant markets to grow at a low single-digit rate in 2022 versus 2021, which is somewhat less optimistic compared to the latest IHS forecast. Adjusting for approximately 400 basis points of FX pressure year-over-year as well as the acquisition impact, the midpoint of our guidance implies an organic growth rate of approximately 9%. We now expect adjusted EBITDA margin rate in 2022 to be in the range of 10% to 12%. We are lowering the adjusted EBITDA margin rate guidance primarily as a result of the second quarter performance as well as the expected continuation of customer demand fluctuations due to the supply chain disruptions, ongoing semiconductor shortages, continued FX headwinds, higher inflation and acquisition impact. We are taking aggressive actions to mitigate these challenges, including appropriate cost recoveries from customers, price increases, planned productivity improvements as well as strong hiring and spending controls. At the midpoint of our guidance, we expect to improve EBITDA margin rate by 400 basis points in the second half of 2022 compared to the first half level on an organic basis. Our updated guidance assumes approximately $100 million of revenue and high single-digit EBITDA margin rate from the 2 acquisitions. We now expect our tax rate to be in the range of 29% to 31% due to the geographic earnings mix and the Alfmeier acquisition. We continue to expect capital expenditures to be in the range of $50 million to $60 million. However, this amount now includes the forecasted spending for Alfmeier. While we are not yet providing guidance for 2023, we do see a path to return to high teens EBITDA margin rate once the supply chain disruption stabilized, along with the forecasted production volume growth in 2023. The previous success of our Fit for Growth program and our experienced management team will enable us to deliver even in this unprecedented environment. And with that, let me ask Phil to summarize.

Thank you, Matteo. Let me summarize a quarter that on one hand reflected an extremely challenging environment, but on the other hand, demonstrated continued strong execution of our focused growth strategy. Although we had expected the supply chain disruptions, including semiconductor shortages to ease in the second half of 2022, our current outlook indicates continued supply chain challenges and semiconductor shortages for the remainder of the year. While the difficult market conditions are expected to continue, our team is laser focused on executing on our plan to return to high teens EBITDA margin rate through price negotiations with our customers, productivity and aggressive cost management. In spite of the unprecedented near-term headwinds and challenges, we are executing at a very high level against our long-term strategic growth road map. This is evidenced by closing 2 strategic acquisitions, winning our second ClimateSense award, securing $600 million in new business awards, expanding our product portfolio for electric vehicles and continued above-market growth. With that, I'll turn the call back to the operator to begin the Q&A session.

[Operator Instructions]. Our first question is from the line of Luke Junk from Baird.

Just to start this morning, I was hoping you could help us to better understand the sequential gross margin walk this quarter, both in terms of the more discrete items that Matteo mentioned in the prepared remarks as well as any qualitative commentary that you might have, Phil. And I'd especially be interested in your perspective on China lockdown-related impacts in the chip spot market and what impact that had in the quarter and what you see coming from here?

Good morning, Luke. So let me maybe start by just walking through year-over-year what happened in the gross margin for the quarter, and then I give you the sequential perspective. So -- so overall, you saw a 700 basis point deterioration in the gross margin rate year-over-year. 400 basis points was driven by the supply chain disruptions. And here, I'm including the premium freight, the spot buys, the higher cost that we are seeing in some of the regular freight lanes, particularly those that come from Asia into North America. Material and wage inflation was about 200 bps; FX, so particularly the impact of the Euro and the Korean Won compared to the U.S. Dollar was about 120 bps. And then we continued to face lost productivity, which accounted for about 120 bps of negative margin due to the continued volatility that we are seeing in the releases of the OEMs and Tier 1's. And these were partially offset by some premium freight recoveries as well as the positive price that we had this quarter, particularly thanks to the cost recovery of the -- coming from the customers. So overall, if you look at where we are as a gross margin, I would say, about 300 basis points is actually what I would call the transitory impact, which here I'm taking all the supply chain disruptions net of the recoveries. When you look at it sequentially, so what happened in the second quarter versus the first quarter, really, you have 2 key impacts here: higher inflation, particularly on the materials side, accounted for about 70 bps. And this was pretty much widely expected. FX accounted for 40 bps negative. And this was less expected as we have seen a deterioration of the couple of currencies that I just mentioned, higher than what we had forecasted. So that's kind of how you walk the sequential second quarter versus the first quarter.

And then, Luke, on the China side, about $13 million of lost revenue from China, of course, so the normal percentage fallout from expected margin.

Okay. And then Phil, a follow-up question now staying with margins, but looking forward, your guidance would signal that this is the bottom for margins in '22, at least if we look first half versus second half, which would seem to include gross margin, of course. Can you just speak to your level of confidence that this is, in fact, the bottom? Or said differently, what you see as the potential risks from here, but maybe more importantly, the margin levers? I know price is mentioned in the prepared remarks as one item.

Yes. I mean there's always a caveat that we do see this as kind of turning the corner, if you will, from this quarter or from Q2. We are watch -- obviously, we all have to watch closely on any unforeseen COVID or supply chain or worst-case scenario recessionary impacts to demand. But based on everything we're seeing now, we actually see some stabilization heading into the back half of the year. Unfortunately, it's not as much stabilization as we had hoped for when we issued our previous guidance. But that said, we definitely are working very well with our customers to create a path to better recovery. We've taken maybe a different approach than others where we waited until there was a lot of clarity on inflationary pressures in the market before we aggressively started addressing our customers. And I think that actually is going to turn out to be a good move because we're getting pretty good support from many customers on setting some pricing, recovery -- freight recovery, et cetera, headed into the second half. So it's still going to be a process that's going to take more than a quarter or 2 to get there, but we do expect some nice momentum on that in the second half. And then, of course, add to that expected revenue increase in the back half. And I think that gives us a good feeling about steady improvement.

And then if I could sneak in one more. Lastly, I just wanted to ask on the ClimateSense award. First, just whether you can clarify whether this is with your existing customer or with a new customer? And then second, maybe just as importantly, what would you say your learnings were with this award as you continue to pursue other awards at the development contract customers?

Sure. Yes, it was a follow-on with the original customer that we won our first award with. Obviously, we're- We couldn't be more excited about it. From a learning standpoint, it's, number one, execution. Obviously, we won the award and we've been very, very focused and investing heavily on executing the program. But secondly, it's being adaptable and flexible to the requirements of future models. And if you go back to some discussions we had with you over the last several quarters, we really have tried to create a platform approach for ClimateSense that is scalable, flexible and adaptable to different levels of implementation, and that really paid off in the second award for us. And as we're addressing new customers, I think that's really going to help us. That's going to allow us to be much more nimble in how we implement ClimateSense for those customers.

Our next question comes from the line of Matt Koranda with ROTH Capital.

Just on the core outlook, if I strip out the acquisition, it looks like you took out maybe about $70 million on the midpoint for organic revenue guidance and $25 million out of EBITDA. So I just wanted to see if you could discuss the revenue assumptions and margin assumptions in a little bit more detail. So how much of the lower revenue guide is due to lower production expectations versus incremental FX, if you can just clarify that? And then on the margin front, is the assumption that it's all coming out of lower Automotive products, and therefore, we have a decremental margin to take out? Maybe just discuss the flow of margins in the second half with the revised organic guidance?

So Matt, let me. So first of all, on the revenue side, really nothing major has changed compared to our prior guidance other than the FX, right, which came in obviously a little worse than what we thought back in April. And this is just a function of the Euro and the Korean Won, which we are not expecting the situation to improve in the rest of the year. In terms of the margin side, what I would say is if you look at -- and I'm talking organically right now so I'm excluding the 2 transactions, we -- basically, the EBITDA margin at the end of the first half, it's about 9%. And the midpoint of our guidance implies a second half EBITDA margin of about 13%. You really have basically a 400 basis point improvement sequentially on the margin side. And if you look at the drivers of that, really, 2 things. Number one, we have incremental volume. So we are expecting the second half revenue to be about 10% to 11% higher than the first half, excluding FX. And then the second item is we are counting on the positive impact of the price negotiations that we have been having with customers as well as productivity at the factories. And can you repeat the second part of your question?

Yes. I actually think you covered the 2 elements of the question. Thank you for that. Actually, a follow-up on that though, would you remind us when the benefits of the customer negotiations start to flow through the P&L? When can we start to factor those into the margin rate?

Yes. So we started to see some of the benefits of those already in the second quarter. Actually, if you -- Matt, in the second quarter, we actually generated positive price, which is overall unusual for our business. Generally, price is always a 2%, 2.5% drag for us. And that's a combination of the cost recoveries as well as some of the initial impact of the price negotiation. And then the rest will kick in the second half. But overall, we are expecting the positive impact of price on an annual basis to be between 100 and 150 basis points improvement on the margin of the company.

But Matt, it's a journey. It's not like we're going to be done in the second half. I mean it's more -- we're now in the early innings, I would say, of starting to see it flow through the second half, it will rise, and then we expect to see even more recoveries and help heading into 2023.

Okay. Great. I appreciate that, guys. And then maybe on the bookings environment, I would like to discuss the more generalized environment before we dig into ClimateSense. Is there any way to break out what Alfmeier contributed in the run rate that you guys cited? Because it does look like it's picked up quite a bit. I'm just trying to get a sense for organic activity versus the acquisition, and then maybe if you -- if you could just speak generally about sort of the appetite for new programs at OEMs, it seems like it has picked up.

Yes. Yes. If you break it out, it was about $410 million organic new awards from the Gentherm side and then $190 million coming out of Alfmeier in the quarter. And overall environment, just talking about organically first, definitely increasing activity, no doubt about that, still somewhat constrained given the environment in the market. OEMs are still quite busy handling semiconductor shortages. We've definitely still seen some vehicle delays. So -- but overall, quite a bit of improvement. Where we are seeing a lot more awards is on the EV side. So there tends to at least -- our perception is the OEMs are shifting a lot more attention there and maybe delaying some ICE decisions a little bit in lieu of that. On the Alfmeier side, some really impressive wins, as we called out with BMW, a large EV manufacturer and a few others in there. And while -- that certainly was executed by Alfmeier, our indications are some of those awards kind of tipped the balance in favor of Alfmeier after the announcement of our acquisition. As I have mentioned before, we've gotten resounding feedback that our customers are really excited about that combination. And just looking forward, we certainly see a lot of opportunities, not just with Alfmeier existing customers, but more importantly, with customers that are currently Gentherm customers that Alfmeier does not supply. So we'll be putting a lot of emphasis in our growth activities in that front.

Okay. Helpful color, Phil. Thank you. And then just lastly on the ClimateSense award, realizing it was a follow-on. I guess, hard question to answer maybe, but is it -- are we more likely to see additional awards with this customer before we see an entirely new award from a new OEM? And maybe just speak to the potential of sort of the additional follow-on awards beyond this one with that existing ClimateSense customer you have?

Well, I've always said that there are 3 -- in sequential order of importance 3 focus areas for ClimateSense. One is execution of the project so that we get a strong first go-to-market. Secondly, was winning follow-on awards with that one customer because what better way to grow than to prove the performance and the value proposition of ClimateSense with that customer and the second win with them on a more popular EV SUV was certainly a validation of that. And then, of course, I think that all feeds into winning with new OEMs, which that first win with an OEM is the harder nut to crack, if you will. But I think this validation is going to help us. And we continue to work with other customers on the development projects and continue to see good momentum. So it's hard for me to say which one is going to be next, but we're focusing our efforts where we think those opportunities exist.

[Operator Instructions]. Since there are no questions in the queue, I would now like to turn the call back to Mr. Phillip Eyler for closing remarks.

Great. Thank you, everyone, for joining our call today. I have to say I'm very proud of the hard work and commitment of the talented global Gentherm team to overcome the significant industry headwinds that we faced and deliver on our strategy. As I've consistently shared in the past, we remain very focused on operational execution, innovation and cash flow generation. I'm extremely excited about uniting the innovative expertise, the talent and the complementary global customer base of both Alfmeier and Dacheng with Gentherm. I have no doubt that these 2 transactions will further improve Gentherm's competitive advantages and position us well to deliver significant long-term shareholder value. We appreciate your interest and support and look forward to keeping you apprised of our progress.

This concludes our conference for today. You may now disconnect your line.