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Greetings and welcome to the Gentherm Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Greg Blanchette, Senior Director, Investor Relations. Thank you, Mr. Blanchette. You may begin.

Thank you. Good morning, everyone and thanks for joining us today. Gentherm's earnings results were released earlier this morning, 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 will make forward-looking statements within the meaning of federal securities laws. These 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 this call, we will also 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 and investor presentation. On the call with me today are Phil Eyler, President and Chief Executive Officer; and Melissa Clark, Executive Director of Global Financial Planning and Analysis. During Phil's comments, he will be referring to a presentation deck that we have made available on our website at gentherm.com/events. After the prepared remarks, we'd be pleased to take your questions. Now, I'll turn the call over to Phil.

Thank you, Greg, and good morning, everyone. Thank you for joining our third quarter 2024 earnings call. I am very proud of the Gentherm team for their commitment and focus on delivering strong financial and operating results for the quarter. As you'll hear today, our continued focus on flexible and innovative solutions and strong customer relationships positions us well for long-term growth despite challenging market conditions. I want to start with a review of the 3 priorities we laid out for 2024 at the beginning of the year and how we're executing against each of these. Our first priority is to lead the industry with new automotive business awards and executing on an unprecedented award backlog. Year-to-date, we have secured $1.8 billion of automotive new business awards with a win rate exceeding 80%. This keeps us on track for annual awards of over $2 billion for the second consecutive year. Our record awards are proof points that customers value our partnership model. We work with 50-plus car manufacturers and 30-plus seat makers across the globe. Our position as the largest independent provider of thermal and pneumatic solutions is a key differentiator with both our OEM and Tier 1 customers. We're executing on our backlog through dozens of new program launches, including pneumatics for the Volkswagen MQB platform, CCS solutions on the BMW 5 Series, our first-ever CCS launch on the Toyota Camry as well as our hands-on detection-enabled steering wheel heat solutions on multiple vehicle platforms. We're also launching content with new Chinese OEM customers such as Li Auto, where we launched our CCS solutions, our pneumatic solutions and hands-on detection-enabled steering wheel heat solutions on multiple vehicle platforms. Second, our Fit for Growth initiatives continue to drive improved financial performance with year-to-date adjusted EBITDA margin expansion of nearly 100 basis points, even as we experienced lower production volumes than the prior year and significantly lower than S&P Global production volume estimates at the beginning of 2024. This highlights our agility to react to fluctuating demand. And third, we're making significant progress delivering industry-leading proprietary innovations. For the first time in the third quarter, our ClimateSense software solution launched on a vehicle. We are demonstrating WellSense with several OEMs and conducting consumer clinics that continue to validate our thesis around consumers' interest and willingness to pay for WellSense. And finally, we have secured our first production awards for Pulse A with Hyundai and expect further awards very soon. We were also awarded Comfort Scale with General Motors. These innovative technologies continue to position us well for long-term growth. This execution is leading to continued outperformance versus market. Our automotive Climate and Comfort Solutions revenues outperformed light vehicle production in our key markets by nearly 800 basis points in the third quarter. When we started the year, we set out these three strategic priorities. And as you can see, we are executing strongly against our plan in a challenging environment. Now turning to Slide 5 for our third quarter automotive highlights. We launched our automotive solutions on 30 different vehicles across 11 OEMs, including BMW, BYD, Geely, General Motors, Toyota and Volkswagen. I'm excited to announce our first ever launch of ClimateSense on the Cadillac Escalade IQ. Over the past three years, we have been working diligently with General Motors to develop and deliver this unique microclimate solution. Our ClimateSense feature is prominently displayed on the Cadillac website, highlighting the value it brings to this vehicle. I'm very proud of the team for bringing this innovative solution to market. We look forward to continuing our work with General Motors on ClimateSense for the Cadillac CELESTIQ and applying our ClimateSense software to future architecture General Motors ICE and electric vehicles. Our CCS solutions were launched on the Kia K4, Volkswagen Passat Pro, BYD's YangWang U9, Skoda Kodiaq, VW Magotan, the BMW 5 Series in Asia and the Audi A5. The Audi A5 is a great example of our expansive presence in the interior climate and comfort of the vehicle. On this vehicle, we launched our CCS heat and vent, our lumbar and massage comfort solutions, multifunction electronics and steering wheel heater with hands-on detection. This is clear evidence of our market-leading position in both thermal and pneumatic comfort solutions. During the quarter, we launched steering wheel heaters on 20 vehicles and 14 of these were with hands-on detection technology. Our lumbar and massage comfort solutions were launched on the Audi A5 and Q6 Sportback e-tron, BMW 1 Series, BMW X3 and Volkswagen Magotan. Another highlight of the quarter was the continued acceleration of lumbar and massage comfort solutions. We achieved record quarterly revenue for lumbar and massage, an increase of 46% ex FX compared to the same period last year. Customer demand for our pneumatic solutions remains strong, and we expect this to drive continued long-term growth for Gentherm. On to Slide 6 to discuss our awards. In the quarter, we secured a third quarter record $600 million of automotive new business awards, a key indicator that demand for our products remains strong. For Thermal Solutions, we won several CCS awards in the third quarter, including several Hyundai vehicles, the Toyota RAV4 Audi Q5, a Great Wall vehicle, the Haval Dargo, a six-seat model in China for one of the largest global EV manufacturers and the Honda CRV. And we continue to innovate our CCS solutions. Our CCS award with Great Wall is for our CCS Compact vent solution. To remind you, CCS Compact Vent is our proprietary modular system, which combines a quieter, more compact blower with a novel air distribution module. It provides cost savings to our OEM customers, while also generating a better end-user experience through improved airflow with less noise. We expect continued customer demand for this innovative and integrated solution. As another example of CCS innovation, we are introducing a new low-profile quiet blower that helps our OEM customers significantly improve in-vehicle acoustics and noise performance. This was awarded by a large global EV manufacturer for its new six-seat model in China. This award also includes CCS for the rear seats, which demonstrates the growing consumer demand for entire vehicle thermal content. And we believe this increased content per vehicle will be a key growth driver for us over time. As the market dynamics in China continue to evolve, we have made great progress over the last few years in diversifying our customer base through our proactive effort to grow our business with carefully selected Chinese domestic OEMs such as BYD, Li Auto, Huawei, Geely, Great Wall and Xiaopeng. And I'm excited to announce, we recently won breakthrough awards with two new Chinese OEMs, Leapmotor and Xiaomi's Mi Auto, both new customers for Gentherm. For Mi Auto, we will provide our thermal solutions, CCS heat and vent as well as steering wheel heaters with hands-on detection solutions. And for Leapmotor, we were awarded thermal and pneumatic content, including CCS heat and vent and pneumatic lumbar and massage comfort solutions. The award with Leapmotor is our 10th new global conquest customer award for pneumatic massage and lumbar business. Awards like these will support our continued growth in China. Further, on thermal awards, as we brought our ClimateSense solution to customers, we've demonstrated the EV range extension and superior thermal comfort. This has led to an increase in in-vehicle thermal content, also higher take rates and adoption rates for our thermal solutions. And in particular, we have seen growing interest in interior heated surface solutions. In the third quarter, we won another interior heated surface solution award with Honda on the Honda Pilot EV. Heated automotive interior systems is a growing market that we expect will provide additional growth opportunities for us, as well as increased content per vehicle. We are well positioned to benefit from this development with our unique solutions. For steering wheel heaters, we received 13 awards across eight OEMs, and eight of these awards include hands-on detection functionality, including awards for General Motors full-size truck and large SUV platforms. This steering wheel heater award on the General Motors full-size truck platform, caps-off a nearly complete suite of all interior thermal and pneumatic comfort solutions for the General Motors full-size truck platform. This leads me to slide 7. I'm excited to share more about our first ComfortScale award, which we secured during the third quarter. To remind you, ComfortScale is our patented next-generation integrated thermal and lumbar massage hardware system. It can be integrated with any foam and with any seat, and it's adaptable for all OEMs and all Tier 1s. It's scalable from an entry-level lumbar and heat system all the way to a high-end Pulse A massage and CCS system. ComfortScale is expected to drive significant performance improvement for our customers as well as meaningful reduction in complexity, labor cost and logistics for the OEMs and seat manufacturers, which is becoming an increasingly more important focus point due to rising costs. For these reasons, along with our outstanding relationship with General Motors, we were able to secure our first ComfortScale award on the full-size truck platform, including the Chevrolet Silverado and GMC Sierra. Gentherm is well-positioned for future ComfortScale awards, which we believe is a win-win for OEMs and Gentherm due to improved performance and reduced costs while continuing to increase our content per vehicle over time. I'm extremely proud of the team and the speed at which they brought this new innovation to market. Now moving to the next page for a discussion of our medical business. Our decision to modify our go-to-market business model to leverage large partnerships, distribution channels and white label opportunities continues to drive improved financial results. In the third quarter, the medical team delivered double-digit revenue growth year-over-year, led by strong execution and market share gains in patient warming products across Europe and strong sales of our flagship Blanketrol product in the US. Thanks in part to our deployment on several US Navy military vessels, including the USS Theodore Rosebvelt, USS Somerset, USS New Orleans and USS America. We're excited about the momentum we are creating with our patient temperature management solutions for the medical industry and the added scientific credibility this gives us with our automotive customers. And now I want to turn to slide 9 for more color on the financial results. For the quarter, product revenues increased by 1.5% compared to the same period last year. If we adjust for the impact of foreign exchange, our overall product revenue increased by 1%. Revenues from our automotive climate and comfort solutions increased by 3.3% compared to the same period last year, adjusting for foreign currency translation and the onetime benefits from recoveries in both periods. Actual light vehicle production in our key markets of North America, Europe, China, Japan and Korea decreased approximately 4.5% year-over-year, resulting in a revenue outperformance of nearly 800 basis points. It's worth noting that excluding Asia, our outperformance would have been approximately 14 percentage points. While the production environment remains challenging to forecast, we continue to expect strong revenue growth over market over time. Driving revenue growth in the third quarter was our pneumatic lumbar and massage comfort solutions and our steering wheel heaters. Revenues from lumbar and massage increased by 46% ex-FX due to the ramp-up of the Volkswagen MQV platform, several models with Ford and increased volumes with a large global EV manufacturer. Steering wheel heaters revenue increased 11% ex-FX due to the start of production of the Li Auto L6 and ramp-up volumes with BMW, General Motors and Mercedes. The remainder of our automotive revenue that was not related to automotive climate and comfort solutions decreased as expected. This is due to our previously announced plan to phase out certain non-automotive electronics and battery performance solutions products and our strategic decision to begin pruning lower growth, lower-margin programs in our cable business. The results for the third quarter demonstrate our ability to grow revenue even in a declining production environment. Turning to Medical. Revenues increased 10% ex-FX. The Medical team improved profitability sequentially for the second consecutive quarter as a result of the new go-to-market strategy I discussed earlier. Now, moving to adjusted EBITDA. In the quarter, we achieved $48.1 million. The adjusted EBITDA margin rate for the third quarter was 12.9% compared to 13% in the third quarter of last year. The adjusted EBITDA margin rate was relatively flat year-over-year. We expanded margins through our continued Fit for Growth initiatives, including supplier cost reductions and value engineering activities. This was, however, offset by headwinds from the start-up costs from our new plants in Mexico and Morocco. While the one-time costs associated with opening the new facilities are near-term headwinds, these plants will play a significant role in our Fit for Growth margin expansion over time. Operating expenses were $62.5 million in the quarter, relatively flat compared to the prior year. Finally, adjusted diluted earnings per share in the quarter were $0.75 per share compared to $0.64 per share in the third quarter of last year. The year-to-date effective tax rate was 25%. Moving to the balance sheet on slide 10. Our cash position at the end of the quarter was approximately $150 million, and our net debt stood at $71 million, a decrease of $27 million from the prior quarter. We generated $46 million of cash flow from operating activities, which was deployed to $20 million of capital expenditures and $20 million of share repurchases. And we have repurchased more than $130 million of shares since the beginning of 2023. In line with our capital allocation strategy, we opportunistically repurchased shares given our strong belief in the value of our business. Our net leverage ratio was 0.4 at the end of the third quarter. And based on the trailing 12-month consolidated adjusted EBITDA ended September 30, we had $278 million of remaining availability on our line of credit. Total available liquidity as of September 30 was $428 million. Now, let me turn to slide 11 for our 2024 guidance. Based on our results for the first nine months of 2024, including lower third quarter revenue than we expected and our outlook for the fourth quarter, we are updating our 2024 full year guidance. Due to continuing deterioration of light vehicle production in our relevant markets, which began accelerating in September as well as supply chain inventory adjustments, especially by our Tier 1 customers as they adjust to lower demand from OEMs, we are now expecting revenue between $1.45 billion and $1.47 billion. This assumes light vehicle production in our relevant markets decreasing at a low to mid-single-digit rate for full year 2024 versus 2023, as well as mid-single-digit decline in the fourth quarter of 2024, lower than S&P Global Mobility's mid-October forecast. This is based on the latest information we have from our customers and our expectations of near-term conditions. This also assumes a euro to US dollar exchange rate of $1.08 for the remainder of the year. Despite the market declines, we expect our fourth quarter Automotive Climate and Comfort Solutions revenues to outpace production in our relevant markets at a similar level as the third quarter. Even in the midst of the challenging production and revenue headwinds, we continue to execute on our Fit for Growth initiatives, which we expect will help us deliver an adjusted EBITDA margin rate near the midpoint of our original provided range of 12.5% to 13.5%. Our full year effective tax rate and capital expenditures guidance remain unchanged. Now, wrapping up with a summary of our progress on our 2024 priorities. We are winning record awards and executing on new launches. We've expanded our EBITDA margin by nearly 100 basis points year-to-date, while light vehicle production is down over that same period of time. The demand for our new innovative solutions is accelerating. This is driven by consumers' growing demand for interior climate and comfort experiences and OEMs' response to increased vehicle adoption, content per vehicle and applying higher take rates. As a result, this continues to position us well for long-term growth. I'm proud of the team's achievements year-to-date, which clearly demonstrates significant progress towards our key priorities, as we look to finish the year strong. And with that, I'll turn the call back to the operator to begin the Q&A session.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] The first question comes from the line of Matt Koranda with ROTH Capital Partners. Please go ahead.

Good morning. Maybe just starting off on the bookings line. So last year, I think in the fourth quarter, you had pretty significant bookings. So just remind us any large programs that we're comping against from last year? And then, any significant opportunities that could send awards sequentially higher in the fourth quarter? I'm just curious, mostly about Comfort Scale. Are there opportunities in the pipeline that could shake loose in the fourth quarter? Maybe just a little bit more color on sort of the bookings environment here.

Thanks, Matt. Yes, obviously, if you look at the third quarter, we're extremely proud of the $600 million in awards, which was a record for the third quarter. That takes us to $1.8 billion for the year. So I think we're well on track to exceed $2 billion. We have several interesting possibilities in the fourth quarter. I think $900 million, which we achieved last year in the fourth quarter was very high. So, probably difficult to achieve that given what we see in the pipeline, but we expect a solid fourth quarter, and I think we'll end up with pretty nice results. And if you look at the -- just the mix of awards over the year, it's been really well-distributed with our thermal products and a very strong year with pneumatics and of course, our first ComfortScale award with General Motors. We're excited about a few Pulse A opportunities that are in front of us that hopefully, we can get nailed down in the not-too-distant future as well when those are relatively high content. So, we're really excited about the progress, and we have a nice portfolio of opportunities heading into 2025 as well.

Okay, great. And then just with the guidance cut for the top line, I'm curious if you could parse out for us, like how much is related to just the general lower production expectations overall versus just maybe some lumpier programs that you expected in the fourth quarter that got pushed into 2025. Just a little bit more detail around the recalibration there on the top line would be great.

Sure. Well, it starts with Q3. We came in about $10 million lower than we expected, and most of that was driven by steeper drops in September. And this really just continued into October to start off Q4. So, the bulk of the decline in the guide is related to fourth quarter. Kind of high level, obviously, the light vehicle production in our relevant markets is declining 4% based on S&P Global Mobility's outlook. We actually believe this is understated based on the order cuts that we're seeing early in the quarter and the outlook for the rest of the quarter. That's most of the driver, to be honest with you. And if you kind of break some of that down in terms of directly how it affects us, we see continued deterioration in Asia for the reasons I mentioned earlier, primarily in China and then with select vehicles that are produced and sold in Korea by Hyundai. And then BPS and cables are both worse in Q4 than expected, not too surprising given that they're tied to -- really directly to vehicle production of ICEs. We continue to see pretty significant drops by Stellantis and by a few of the European OEMs. I'd say Mercedes would be leading the pack for us. And then several EV delays, which continue to be pushed out longer than we originally expected. There's a list of those that are kind of causing this. So, that said, we are excited by some nice growth that we're seeing with several products and customers throughout the fourth quarter, especially driven by the pneumatic lumbar massage products. And that's putting us in a position that we expect to outperform the market in Q4 on our core climate and comfort products in a similar manner as we did in Q3. So, all-in-all, indications remain strong. The consumer demand for our solutions, all indications are we're seeing more vehicles adopt the technology. We're seeing higher content in the vehicles. It's really tied to some of the dynamics in the vehicle production environment. On top of that, I'm really proud of our team's continued focus on Fit for Growth. We are ahead of all of our expectations on Fit for Growth so far. And that along with tight cost controls put us in a position to expect our EBITDA margin near the midpoint of the original guidance even in the midst of these dramatic production declines.

Okay, that's very helpful and fits well with my last question here, which is just, I guess if I parse out the midpoint of the full year guide, it looks like despite the lower revenue sequentially in the fourth quarter, we're going to see higher adjusted EBITDA margin relative to the third quarter. So just wanted to get a sense for what that split looks like between gross margin and sort of some of the OpEx savings that are coming through from Fit for Growth. And maybe just sort of if you could give a little color around why the expectation that we see margins improve despite the lower revenue base?

Yeah. I mean its Fit for Growth. So it's continued savings in terms of our purchase components and value engineering around those. Those are starting to come through. Those generally, as we implement those, they ramp up throughout the course of the year. Obviously, we're -- we've got other programs going on that cover different cost elements that will also be at their, I would say, high point for the year in the fourth quarter. Those will be offset by headwinds from the start-up of our plant in Monterrey and Morocco. Most of that is in the fourth quarter. The headwind is going to come from the launch of Monterrey. As you might know, we are -- we have now shut our plant down in South Carolina and moved all that production to our Monterrey operation. And that -- on top of that, if you look at the North America growth with our pneumatics product all that production is done in Monterrey. So as you can imagine, there's a lot happening in Monterrey. We're very proud of the team. They're doing a great job of ramping up. All indications are it's going to be a terrific operation, but as with any start-up, you see a lot of one-time costs associated with that ramp-up. So those kind of balance each other out. And yes, we expect to see higher EBITDA in the fourth quarter than the third.

Okay. Super helpful, I'll leave it there, Thanks, Phil.

Thank you. Next question comes from the line of Luke Junk with Baird. Please go ahead.

Good morning. Thanks for taking my questions. Phil, hoping we could start with just near-term production impacts, launch impacts, specifically in CCS and seat heat in near-term. I guess I was a little surprised to see CCS underperform versus production a bit this quarter, in particular. Is that some of the destocking at Tier 1 showing through in CCS that you mentioned in your comments? And if so, just how long do you think that might take to work through? Thank you.

Yeah. Most of it is the impact of Asia, Luke. The two elements being the -- especially the global OEM declines in China and then kind of uniquely, we saw Hyundai pullback on vehicle production for the Korean market, and that -- those have pretty high content for us. Actually, if you exclude the Asia headwinds, we would have been about flat on the combined CCS and seat heat business. We did have other headwinds in there, especially those things that are I would call it, the sharper declines in the tail end of the quarter in September, especially with Stellantis. The Jeep and Ram are high content vehicles for us. And I think it's well publicized what's happening with Stellantis on their inventory corrections. Also Europe, some of the Mercedes vehicles that have high content, we've seen some declines there. And again, these have been relatively steep in September and October. But we did see strong growth in terms of CCS and heat with a large global EV manufacturer, really strong performance there with Li Auto, also with BW as we rollout CCS across new vehicles. So those are kind of the puts and the takes on that front. And then, we continue to see the -- I guess that answers your question on the CCS and heat. Yeah.

Yeah. I mean that kind of goes into the next part of the question, Phil, just be conversely lumbar and massage stepping up again sequentially. I guess, I'm just trying to get a sense of the launch schedule from here. I mean, it still feels like we're quite early at this point, but at the same time, I just don't want to get over my skis in terms of extrapolating two very strong quarters in the second quarter and the third quarter, just near-term guardrails for lumbar and massage?

Yesah I mean we're, obviously, we're very excited. We've got new vehicle platforms across VW that continue to ramp up. Ford, seeing very nice additions of massage and lumbar, and Ford vehicles and higher take rates ramping up. And then also with a large global of EV manufacturer, we're seeing higher adoption and penetration there. Those are a few examples. Li Auto also has launched with massage. Now looking forward, there are many, many new awards that are still to be launched. So we are still very early in this growth curve. So as we start to rollout with new customers like GM, with Stellantis, with Jaguar Land Rover, these are all new programs that have been awarded post the acquisition of Alfmeier. So we think this is -- we're going to see steady growth for a pretty extended period of time. It's never going to be linear, of course. There's always going to be comps to deal with and timing of launches, but we're certainly expecting continued growth into fourth quarter and into next year.

Mr. Junk, are you done with the question?

Sorry about that. Lastly, Phil, just my last question. Just you made a comment in the release that you're seeing acceleration in new technology wins. Obviously, you've seen the ComfortScale award coming through this quarter as well. Just hoping you could expand on any particular areas where you might see an uptick in awards in the near-term technology related?

Yes. I mentioned, Pulse A. We've got a lot of activity happening around Pulse A, which is a strong content adder for our massage product line. We had already announced Hyundai, but there's a couple more in the pipeline. Hopefully, we can get those closed here soon. Obviously, the ComfortScale, lots of discussions happening with multiple customers on ComfortScale on the heels of the announcement we made for General Motors. We mentioned this new technology called CompactVent, which we're very excited about. And we think this fits perfectly into lower profile seats and tougher applications, especially we mentioned this CCS award on a large global EV manufacturer for China on a six-seater that's going to be coming out. And those types of applications where you're applying in the rear seat, this CompactVent solution is, we think, pretty exciting. So those are a few examples. Obviously, more discussions happening with several customers on ClimateSense and WellSense that give us even a longer view of innovative technology launches.

Got it. All very helpful. I’ll leave it there. Thanks, Phil.

Thank you, Luke.

Thank you. Next question comes from the line of Ryan Brinkman with JPMorgan. Please go ahead.

Hi. Thanks for taking my question. Maybe first around ComfortScale, I think it's interesting that your first award there is with General Motors, they're also the first to partner with you on ClimateSense. How should we think about the relative content per vehicle opportunity associated with ComfortScale in relation to ClimateSense? It sounds like ComfortScale might be more value oriented. Also, it looks like maybe it's like more plug-and-play with regard to integration into the vehicle design perhaps. How do you see the relevant market opportunity, content per vehicle prevalence and ability to ramp for a product like ComfortScale in relation to ClimateSense?

Well, let me start. Just to give you a sense of what ComfortScale is for us. It is a truly integrated solution that includes basically all of our thermal products and pneumatic products. And essentially, we take many different end item part numbers and consolidate those to one or two. And those are what we would end up shipping to the seat manufacturer that's selected by an OEM. And we've designed it in a really scalable way so that it can be integrated with virtually any type of application. That's with only minor modifications. So we're very excited about that. That brings more content into our solution. So we're adding components and obviously adding value from our side. But on net, it reduces more cost for the car company because they're moving this assembly into our hands. So we're really excited about that. With General Motors, obviously, we did a fairly good job of partnering with them and convincing them that we're rolling out on their highest revenue platform across their company. So obviously, there's a lot of trust there. We're excited about that and excited about working with them. And we see this as a big opportunity to take the same platform to different customers around the world.

Okay. Thanks. And then we've been hearing from some companies about a potential slowdown in global luxury demand that is largely but not exclusively a China phenomena. And I just want to ask you, we've seen some profit warnings from BMW, Mercedes, Aston Martin, some of the other high-end brands. And I know you're on high-end vehicles, not necessarily luxury vehicles exclusively, of course, expensive pickups and SUVs is a lot of your business, I think. But you do, do a lot of business with the high-end brands. I was just curious if that is a theme that you might be detecting or what you think the end market demand for your -- the products that you supply into at the higher end, how that might be tracking?

Well, yes, we're watching that very closely. Maybe to -- first of all, to frame the way our business is set up, we obviously have business and content on luxury, high end, but we also have content relatively good content on even the mid-level mass market products or even towards the -- what would be considered low end. So we're fairly well diversified there. The impact if volume, which happened in this past quarter with Stellantis, where they reduced production of the Ram and Grand Cherokee, Obviously, those are higher content for us and does have a little bit of a headwind effect. So that's something we're watching. We're not seeing any indications of take rate shifts that are significant across the industry. It's more just about select vehicle production and the mix of different vehicles that are produced.

Okay. Very helpful. Thank you.

Well, I don't want to specify anything on -- I mean, that's really up to the car company to answer most of the questions you just asked, but I'll talk more generally about how the ComfortScale works. It basically -- if you want to call it supplant, but basically, we would integrate the components that normally would be shipped one by one to the customer. So again, our job is to -- if we -- if there's a trim that's going to have, for example, only heat and lumbar, then we would create one product that has heat and lumbar. If it's going to have, in addition, CCS and massage, then that would be integrated into the product and shipped as a unit. So it's basically kind of shifting the way that those would be applied and shipped to the customers. And there are other components that are added, because now we're kind of creating this fully assembled module for them. Now I do think it makes it -- and again, I'm not speaking for General Motors here, but in general, it makes it much easier to make the decision to run at a higher penetration rate because these units are -- they're going to be assembled at the same point in the line in the assembly line with the same operator. We're hoping that, that leads to higher take rates, but that's not something that I would speak for the customer on.

Okay. Understood. And when does that launch Phil?

2026.

Okay. Calendar year or model year?

At sometime in that calendar year.

Okay. And similarly, these awards that you just had with these Chinese OEMs, when do those launch?

We haven't called that out, but a lot of times, these happen quicker than you would expect by a global OEM. So probably at least launch in 2025. Yes.

Okay. Okay. And then I don't know if it's just me, but it looks like with respect to the guidance, as outlined in the slide deck, it's slightly different from that outlined in the press release. Can you just confirm? I'm assuming since you spoke to the slides, that is the one we should work off.

Yes. I mean I can -- I think you can reference my script. I'm not sure what you're referencing, but...

Okay. Yes. Just it's a reference of product revenue and adjusted EBITDA margin rate. It's slightly different slide deck versus the press release. That's fine. We'll work off the slide deck.

Yes. I mean, basically, to restate it, the revenue guidance is $1.45 billion to $1.47 billion. EBITDA margin would be the midpoint of 12.5% to 13.5%. And we have left CapEx and tax rate the same as the original guidance. Hopefully, that helps.

Great. Yes. Okay. Very good. Thank you.

Thanks.

Thank you. Next question comes from the line of Ryan Sigdahl with Craig-Hallum Capital Group. Please go ahead.

Hi. Good morning, guys. I want to stick on the topic of kind of the European OEMs versus Chinese. We're seeing kind of a cannibalizing where Chinese OEMs are having good traction in Europe. There's tariff conversations back and forth, et cetera. But I guess, how do you think about balancing the two between your, kind of, core European OEMs and then the success you're seeing with the Chinese domestics?

Well, obviously, we're very proud of our partnerships with the European OEMs. Let me start there with BMW, with Volkswagen, with Mercedes, Audi, and we're doing very well. I mean, if you look at Europe, we outperformed the market pretty significantly in Europe on our core climate and comfort products. And a lot of that is with new CCS rollouts, obviously, fast-growing pneumatics products with BW. We've got lots of wins with pneumatics with BMW that will be -- continue to ramp up over the coming quarters and years. So, we're pretty excited about Europe. Obviously, there's a lot of struggles in Europe with vehicle production, but we continue to see outperformance there. When it comes to the Chinese OEMs, I think we have a pretty disciplined strategy of working with select domestic manufacturers in China. And if some of those also export to -- export or produce in Europe, we'll be able to capitalize on that.

And maybe just a higher-level question, but you've had solid industry outperformance again this quarter. If I look at the auto awards you guys have reported over the last three years and inclusive of this year, it seems to imply that the outperformance should accelerate at some point soon. Do you agree with that? Or is it not as simple as looking at awards versus kind of current revenue run rates?

Well, yes, I mean, obviously, the awards indicate -- or indicators that you could use to determine growth in the future. And we continue to do very well there. So we're very confident in the growth profile that we have ahead of us, and expect that to lead to solid outperformance. We generally don't forecast outperformance, because there are lots of dynamics and regional mix changes that happen at different times. But as we -- at least in the short-term, we can point out the 800 basis points outperformance in Q3 on our core Climate and Comfort business, and then we expect to see similar results in Q4. We'll see how that plays out as we go forward.

Thanks Phil.

Thanks. Thank you, Ryan.

Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Phil Eyler for closing comments.

Great, thank you. To close, I want to thank the global Gentherm team, our partners and suppliers for another strong quarter of execution. Despite the market headwinds, we continue to aggressively execute against our plan with a clear focus on innovation, bringing unique solutions to the market and a strong commitment to customer relationships. We are excited about the future of Gentherm and remain committed to delivering shareholder value.