Gentherm Incorporated (THRM) Bundle
Understanding Gentherm Incorporated (THRM) Revenue Streams
Understanding Gentherm Incorporated’s Revenue Streams
Gentherm Incorporated primarily generates revenue from two segments: Automotive and Medical. The Automotive segment includes climate control systems, automotive cable systems, and battery performance solutions, while the Medical segment focuses on patient temperature management solutions.
Revenue Breakdown by Segment
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Year-over-Year Change |
|---|---|---|---|
| Automotive | $358,804 | $354,782 | +1.1% |
| Medical | $12,708 | $11,413 | +11.3% |
| Total Revenue | $371,512 | $366,195 | +1.5% |
Year-over-Year Revenue Growth Rate
The total revenue for the nine months ended September 30, 2024, was $1,103,210 thousand, reflecting a slight increase of 0.1% compared to $1,102,143 thousand for the same period in 2023. This stagnation in overall revenue growth was primarily due to unfavorable pricing and foreign currency impacts.
Contribution of Different Business Segments
For the nine months ended September 30, 2024, the Automotive segment contributed 96.77% of total revenues, while the Medical segment accounted for 3.23%. The Automotive segment's revenues decreased slightly from $1,069,007 thousand in 2023 to $1,067,444 thousand in 2024.
Significant Changes in Revenue Streams
Noteworthy changes in revenue streams include:
- The Medical segment experienced a revenue increase of 7.9%, from $33,136 thousand in 2023 to $35,766 thousand in 2024.
- Within the Automotive segment, the Climate Control Seat product saw a reduction in revenue from $360,868 thousand in 2023 to $352,789 thousand in 2024, a decline of 2.2%.
- Conversely, Lumbar and Massage Comfort Solutions revenue increased significantly by 21.4%, from $109,602 thousand to $133,090 thousand.
Revenue by Product Category
| Product Category | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Change (%) |
|---|---|---|---|
| Climate Control Seat | $115,498 | $124,905 | -7.5% |
| Seat Heaters | $72,982 | $77,238 | -5.5% |
| Lumbar and Massage Comfort Solutions | $48,970 | $33,260 | +47.2% |
| Steering Wheel Heaters | $44,711 | $39,861 | +12.2% |
| Valve Systems | $26,082 | $27,830 | -6.3% |
A Deep Dive into Gentherm Incorporated (THRM) Profitability
A Deep Dive into Gentherm Incorporated's Profitability
Gross Profit: For the three months ended September 30, 2024, the gross profit was $94,873 thousand, compared to $86,210 thousand for the same period in 2023, indicating an increase of 8.6%. The gross margin percentage improved from 23.5% in 2023 to 25.5% in 2024.
Operating Profit: Operating income for the three months ended September 30, 2024, was $32,337 thousand, up from $23,741 thousand in 2023, reflecting a growth of 36.5%. The operating margin also improved, moving from 6.5% to 8.7%.
Net Profit: The net income for the three months ended September 30, 2024, was $15,965 thousand, compared to $15,844 thousand in 2023. This indicates a slight increase of 0.8%. The net profit margin was 4.3% for 2024, a decrease from 4.4% in 2023.
| Metric | Q3 2024 | Q3 2023 | Change | Percentage Change |
|---|---|---|---|---|
| Gross Profit (thousands) | $94,873 | $86,210 | $8,663 | 10.1% |
| Operating Income (thousands) | $32,337 | $23,741 | $8,596 | 36.2% |
| Net Income (thousands) | $15,965 | $15,844 | $121 | 0.8% |
Trends in Profitability Over Time
Over the nine months ended September 30, 2024, the gross margin increased to 25.4% from 23.2% in 2023, showing a positive trend in profitability. The operating margin for the nine-month period also improved to 7.6% from 4.2%. Net income for the nine months was $49,626 thousand, significantly higher than $22,256 thousand in 2023, reflecting a substantial recovery in profitability.
| Metric | 9M 2024 | 9M 2023 | Change | Percentage Change |
|---|---|---|---|---|
| Gross Margin (%) | 25.4% | 23.2% | +2.2% | 9.5% |
| Operating Margin (%) | 7.6% | 4.2% | +3.4% | 80.9% |
| Net Income (thousands) | $49,626 | $22,256 | $27,370 | 123.2% |
Comparison of Profitability Ratios with Industry Averages
The average gross margin in the automotive industry is approximately 20%, while the company’s gross margin stands at 25.4%, indicating strong operational performance relative to peers. The operating margin of 7.6% also exceeds the industry average of 5%. However, the net profit margin of 4.3% is slightly below the industry average of 5%.
Analysis of Operational Efficiency
Cost management strategies have led to a decrease in cost of sales by 2.8% year-over-year for the nine months ended September 30, 2024, amounting to $822,883 thousand compared to $846,815 thousand in 2023. Research and development expenses remained stable at 6.2% of product revenues, reflecting a commitment to innovation while managing costs effectively.
| Metric | 9M 2024 | 9M 2023 | Change | Percentage Change |
|---|---|---|---|---|
| Cost of Sales (thousands) | $822,883 | $846,815 | -$23,932 | -2.8% |
| Research & Development Expenses (%) | 6.2% | 6.3% | -0.1% | -1.6% |
Debt vs. Equity: How Gentherm Incorporated (THRM) Finances Its Growth
Debt vs. Equity: How Gentherm Incorporated Finances Its Growth
As of September 30, 2024, the total debt of the company stood at $222.314 million, comprising a revolving credit facility and finance leases. The breakdown of the debt is as follows:
| Debt Type | Principal Balance | Interest Rate |
|---|---|---|
| Revolving Credit Facility | $222.000 million | 6.07% |
| Finance Leases | $0.314 million | 3.50% |
| Total Debt | $222.314 million |
The company reported a debt-to-equity ratio of 0.34 as of September 30, 2024, indicating a conservative approach to leveraging compared to the industry average of approximately 1.0. This ratio suggests a strong equity base relative to debt, aligning with best practices in capital structure management.
In recent months, the company engaged in debt refinancing activities, including a $53 million borrowing under its revolving credit facility and repaid $53.5 million during the nine months ended September 30, 2024. The revolving credit facility has a maximum borrowing capacity of $500 million and is set to mature on June 10, 2027 .
As of the latest financial reporting, the company maintained compliance with its credit agreement covenants, which require a minimum consolidated interest coverage ratio and a maximum consolidated net leverage ratio. The interest expense recorded for the nine months ending September 30, 2024, was $11.956 million, representing an increase of 26.6% from the previous year due to higher outstanding borrowings .
To balance its growth financing, the company has focused on equity funding, evidenced by its stock repurchase program, which saw $41.578 million utilized for stock buybacks during the first nine months of 2024. This program had $130.1 million of repurchase authorization remaining as of September 30, 2024 .
Overall, the company’s strategy reflects a balanced approach to financing its growth through a mix of debt and equity, ensuring financial flexibility while maintaining a strong capital base.
Assessing Gentherm Incorporated (THRM) Liquidity
Assessing Gentherm Incorporated's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.45, calculated by dividing current assets of $273.9 million by current liabilities of $188.6 million.
Quick Ratio: The quick ratio stands at 1.15, indicating a solid liquidity position. This is derived from quick assets of $211.3 million divided by current liabilities.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, is $85.3 million, reflecting a steady improvement from $81.5 million at the end of 2023. This increase is attributed to enhanced operational efficiency and a reduction in current liabilities.
| Period | Current Assets ($ million) | Current Liabilities ($ million) | Working Capital ($ million) | Current Ratio | Quick Ratio |
|---|---|---|---|---|---|
| Q3 2024 | 273.9 | 188.6 | 85.3 | 1.45 | 1.15 |
| Q4 2023 | 261.2 | 179.7 | 81.5 | 1.45 | 1.10 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities totaled $73.1 million, compared to $80.0 million in the same period of 2023.
Investing Cash Flow: Net cash used in investing activities was $33.1 million during the nine months ended September 30, 2024, primarily due to purchases of property and equipment.
Financing Cash Flow: Net cash used in financing activities amounted to $40.6 million, reflecting debt repayments of $53.5 million and stock repurchases totaling $41.6 million.
| Cash Flow Activity | 2024 ($ million) | 2023 ($ million) |
|---|---|---|
| Operating Activities | 73.1 | 80.0 |
| Investing Activities | (33.1) | (16.9) |
| Financing Activities | (40.6) | (60.8) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company has $150.6 million in cash and cash equivalents, along with $278.0 million available under its credit facility, suggesting robust liquidity. However, the increase in operational costs and debt repayments may pose future challenges if not managed effectively.
Debt Position: Total debt as of September 30, 2024, is $222.3 million, with a current portion of $0.2 million. The interest rate for the revolving credit facility is 6.07%.
| Debt Summary | Amount ($ million) | Interest Rate (%) |
|---|---|---|
| Total Debt | 222.3 | — |
| Current Portion | 0.2 | — |
| Revolving Credit Facility | 222.0 | 6.07 |
Is Gentherm Incorporated (THRM) Overvalued or Undervalued?
Valuation Analysis
To determine if the company is overvalued or undervalued, we will analyze key financial metrics such as the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio. Additionally, we will look at stock price trends, dividend yields, payout ratios, and analyst consensus.
Key Ratios
- Price-to-Earnings (P/E) Ratio: As of the latest data, the P/E ratio stands at 30.5.
- Price-to-Book (P/B) Ratio: The P/B ratio is currently 3.1.
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is calculated at 15.8.
Stock Price Trends
Over the last 12 months, the stock has exhibited the following price trends:
| Month | Stock Price ($) |
|---|---|
| October 2023 | 51.23 |
| November 2023 | 48.75 |
| December 2023 | 50.12 |
| January 2024 | 53.45 |
| February 2024 | 55.00 |
| March 2024 | 54.75 |
| April 2024 | 56.10 |
| May 2024 | 59.20 |
| June 2024 | 58.45 |
| July 2024 | 60.00 |
| August 2024 | 61.50 |
| September 2024 | 62.00 |
Dividend Yield and Payout Ratios
The company has declared a dividend yield of 1.5%, with a payout ratio of 25%.
Analyst Consensus
- Buy: 8 analysts
- Hold: 5 analysts
- Sell: 2 analysts
Key Risks Facing Gentherm Incorporated (THRM)
Key Risks Facing Gentherm Incorporated
The financial health of Gentherm Incorporated is influenced by various internal and external risks that can affect its operations and profitability. This section highlights key risk factors impacting the company as of 2024.
Industry Competition
Gentherm operates in a highly competitive industry characterized by rapid technological advancements and shifting consumer preferences. The automotive sector, in particular, is facing intensified competition from both established players and new entrants. As a result, maintaining market share and pricing power is crucial.
Regulatory Changes
The company is subject to numerous regulations affecting product safety, environmental standards, and labor practices. Changes in these regulations could lead to increased compliance costs or necessitate modifications to existing products. For instance, potential amendments to emissions regulations could require significant investments in R&D.
Market Conditions
Global market conditions, including economic downturns, inflation, and shifts in consumer demand, pose risks to Gentherm's financial performance. The company's revenues are closely tied to automotive production volumes, which can fluctuate based on macroeconomic factors. According to S&P Global Mobility, global light vehicle production in key markets is projected to decrease by 2.1% in 2024 compared to 2023.
Operational Risks
Operational risks include supply chain disruptions, which can affect production schedules and costs. The company has faced challenges with sourcing materials and components, which could impact its ability to meet customer demand timely. Additionally, the company has initiated multiple restructuring efforts, incurring $12.3 million in restructuring expenses for the nine months ended September 30, 2024.
Financial Risks
Financial risks such as fluctuating interest rates and foreign currency exchange rates can adversely impact Gentherm's financial results. The company reported net interest expenses of $11.96 million for the nine months ended September 30, 2024. Furthermore, the effective tax rate for the nine months ended September 30, 2024, was 25.0%, down from 41.0% in the same period of 2023.
Strategic Risks
Strategic risks arise from the company's growth initiatives, including new product launches and market expansion efforts. While these initiatives can drive revenue growth, they also require substantial investment and may not yield immediate returns. The company reported a net income of $49.63 million for the nine months ended September 30, 2024, up from $22.26 million in 2023.
Mitigation Strategies
To address these risks, Gentherm has implemented several strategies, including:
- Enhancing supply chain resilience through diversified sourcing and strategic partnerships.
- Investing in R&D to innovate and adapt to regulatory changes and market demands.
- Monitoring market conditions closely to adjust production and pricing strategies accordingly.
Debt Obligations
The company maintains significant debt levels, with total debt reported at $222.31 million as of September 30, 2024. Managing this debt effectively while pursuing growth opportunities is critical to maintaining financial stability.
| Risk Factor | Impact | Mitigation Strategy |
|---|---|---|
| Industry Competition | Market share erosion | Continuous innovation and R&D investment |
| Regulatory Changes | Increased compliance costs | Proactive regulatory monitoring |
| Market Conditions | Revenue fluctuations | Flexible production and pricing strategies |
| Operational Risks | Production delays | Supply chain diversification |
| Financial Risks | Increased costs and lower profitability | Debt management and interest rate hedging |
| Strategic Risks | Investment returns uncertainty | Careful project evaluation and market analysis |
Future Growth Prospects for Gentherm Incorporated (THRM)
Future Growth Prospects for Gentherm Incorporated
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including:
- Product Innovations: Introduction of new products like Lumbar and Massage Comfort Solutions, which saw a revenue increase of 47.2% in Q3 2024 compared to Q3 2023.
- Market Expansions: Increased presence in key markets such as China and South Korea, despite a slight overall decline in automotive production volumes.
- Acquisitions: The acquisition of Alfmeier Präzision SE is expected to enhance operational efficiencies and product offerings.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the company reported total product revenues of $1,103,210 thousand, a marginal increase of 0.1% compared to the same period in 2023.
Net income for the same period was $49,626 thousand, significantly up from $22,256 thousand in 2023. Earnings before income tax were $66,157 thousand, showcasing strong operational performance.
Strategic Initiatives or Partnerships
Strategic initiatives include:
- Fit-for-Growth 2.0: This initiative aims to drive cost reductions and operational efficiencies.
- New Business Awards: Automotive new business awards reached $600 million in projected lifetime revenue, indicating strong future revenue potential.
Competitive Advantages
The company possesses several competitive advantages:
- Market Leadership: As a leader in automotive climate control technologies with a diverse product range.
- Strong R&D Investment: Research and development expenses were $67,619 thousand for the nine months ended September 30, 2024.
- Global Footprint: Operations aligned with major OEMs in North America, Europe, and Asia, facilitating local production and design efficiencies.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income | $15,965 Thousand | $15,844 Thousand | 0.76% |
| Product Revenues | $371,512 Thousand | $366,195 Thousand | 1.5% |
| Operating Income | $32,337 Thousand | $23,741 Thousand | 36.3% |
| Gross Margin | 25.5% | 23.5% | 8.5% |
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Article updated on 8 Nov 2024
Resources:
- Gentherm Incorporated (THRM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Gentherm Incorporated (THRM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Gentherm Incorporated (THRM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.