Gentherm Inc (THRM) 2004 Q1 法說會逐字稿

Good morning and welcome to the Amerigon first-quarter results conference call. (OPERATOR INSTRUCTIONS). It is now my pleasure to introduce your host Ms. Jill Bertotti of Allen & Caron. Ma'am, the floor is yours.

Good morning and thank you for joining us for the Amerigon Inc. first-quarter results conference call. Before we start today's call, there are a few items I would like to cover with you. First, in addition to the disseminating through PR Newswire this morning today's news release announcing Amerigon's results, an email copy of their release was also sent to a large number of conference call participants. If any of you did not receive the copy of the news release, please call our California office of 949-474-4300. After the call, we will email you a copy. Additionally a replay of the conference call will be available on the Internet for 10 days via a link provided at www.DNB.com.

Finally I am going to ask to make the following statement. Certain matters discussed on this conference call are forward-looking statements that involve risks and uncertainties. Actual results may be different. Important factors that could cause the Company's actual results to differ materially from its expectations in this release and conference call are risks that may not significantly increase, that necessary additional financing may be unavailable, and that adverse conditions in the automotive industry may adversely affect its results. The liquidity and trading price of its common stock may be negatively affected by these and other factors. Please also refer to Amerigon Securities and Exchange Commission filings and reports, including but not limited to its Form 10-Q for the period ending March 31st, 2004 and its Form 10-K for the year ended December 31st, 2003.

Also this call is copyrighted material of Amerigon. No recording, broadcast or other distribution of this call or any part of this call in any form is permitted without the Company's written permission.

On the call today from Amerigon we have Bud Marx, Chairman; Dan Coker, President and CEO, and Bill Wills, Chief Financial Officer. Each member of management will provide a review of the results, after which there will be a question-and-answer period.

I would now like to turn the call over to Bud. Good morning, Bud.

Good morning, Jill. Good morning all of you on the conference call. We are delighted to have you in attendance.

This quarter has been a quite good quarter for Amerigon, so I will keep my remarks brief and let Dan shine with the further discussion. But to hit the high points, we sold almost 140,000 units, which was a very good increase over the prior year's first quarter where we sold 80,000 and about in line with what we sold in the fourth quarter of 2003. Our dollar sales were about 9 million, and our margins improved both from the first quarter and from the fourth quarter of 2003. I want to mention that our margins will move open and down in any given quarter because we are a small company, and we are subject to some influences of different margins because of different content that we felt one customer versus another. That doesn't have anything to do with our per unit profitability, but rather with what we include in the way of added equipment like electronic controls in one case and not including fans in another.

So I am very pleased with the performance in the margin in the first quarter because we had said we wanted to improve over the margins from the second half of 2003. But I would caution people look at our trends over time not focusing on any individual quarter's number. Because again, we have some extreme extraneous influences.

We recorded a profit in the first quarter, our second quarterly profit. And if one looks at some of the unusual items that we have quarter to quarter fourth quarter of 2003 compared with the first quarter of 2004, the improvement is actually stronger and more sustained. So I am quite pleased about the first quarter, and I think everyone in Amerigon and our investors should have reason to be pleased as well.

The only other thing I want to mention is that we have also made a significant improvement in our balance sheet. My partner Tom Wheeler always likes me to look at the balance sheet. Here I think it's actually pretty noteworthy. We have a positive cash balance of $2.5 million, which is a strong cash balance for us. Our inventory at 1.7 million is significantly lower from the levels we were in all last year and reflects the continued success and progress in our contract manufacturing operations where we are out from under the burden of substantial inventory even though our sales are a lot higher than we ran last year. Again I would not say that 1.7 million is where we will peg our number, but certainly lower inventory and lower cash requirement to support increasing sales was a good sign.

Finally, we have no bank debt, so we have the ability to borrow if we need it in reserve, and we have no obligations on our balance sheet for that. So all in all good progress in a way, good progress in line with what we have been saying over the last six months we would accomplish this year, and I will then turn it over to Dan who will add his enhancements.

Thank you, Bud, and again good morning to everyone joining us. We had a good quarter, and we are quite pleased with the general results. To review those in a little bit more detail, as Bud had mentioned, our revenue for the first quarter of 2004 was $8,961,000, which was about a 70 percent increase over 2003's first quarter period of 5 million 246 and was very much in line and steady with the results of the fourth quarter of 2003.

Units shipped during the quarter. We shipped 139,517 units, which was significantly up, about 75 percent above the nearly 80,000 units -- 79,980 would be shipped during the same period in 2003.

We reached a very significant milestone for our Company during the first quarter. Near the end of the first quarter, we shipped our 1 millionth set of components for seat systems since we began the CCS program shipment with a very small shipment in December of 1999. So we have now shipped 1 million seat sets or 500,000 cars with the heated and cool seat technology to the market, and the market continues to grow and be excited about our technology. So we are very excited about that milestone, as well as being profitable for two straight quarters.

As Bud has mentioned, our gross margins for the quarter have improved. In Q1 2004, our margins were $2,088,000 or about 23.3 percent on sales compared to $1,074,000 or about 20.5 in Q1 2003. The fourth quarter of 2003 was about a 19.8 percent margin, and there was some margin improvement. And as Bud had mentioned earlier, we were talking about our mix of products and the shift of margins in addition to some efforts we have undertaken to improve our margins. And we again ask everyone to please not just focus on individual quarters but look at the trendline. We do expect to see margin improvement throughout the year, but we are not committing to a 23.3 percent effect.

Net income. With continued strength on the top line, we have seen improvements on our bottom-line as well. The net income for Q1 was 301,000, which is a 2 cent basic per-share profit or 1 cent per share fully diluted, and that compares with a net loss last year of $925,000 for the same period or about 9 cents per share for 2003. We are now showing our net income line in both basic net income per share and in average common shares fully diluted. We are now making a profit and are obligated to report the fully diluted number, which we are very excited to be able to do.

Net income for Q1 2004 was comparable to the fourth quarter of 2003. We had better margins on similar sales. We had no forward (inaudible) expense booked, and some of this was offset by lower contribution from our BSST subsidiary to bring us to a $301,000 profit.

On the operating expense line, our R&D or research and development budget the expense for Q1 2004 was $622,000 compared to a $945,000 Q1 in 2003. The decrease in this R&D budget engineering costs was primarily due to customer funding received by our BSST subsidiary in Q1 2004 of approximately $276,000.

SG&A increased slightly by about 12 percent from 1,216,000 in 2004, up from 1,084,000 in 2003. The increases here are primarily due to some legal fees and some efforts on our part to expand our vehicle base in the selling part of the cost driver.

Operating summary-wise. Our sales have continued to be strong. Significant gains in the marketplace for us at Cadillac, Sedan Deville, the XLR and the Escalade, and we have had a very strong quarter by our primary Asian customers led by Toyota with both front and rear seats now being available and by Hyundai. We had a very strong quarter by both of these Asian product lines. And we also expected another strong sales performance in the total 2004 with revenues continuing to be forecasted 25 to 35 percent higher than in 2003.

BSST continues to make strong progress in our effort to improve the efficiency of the basic thermoelectric device. We are working under contract now with several people. Visteon was our primary customer and supporter in this effort, but we also have programs with Darpa and other commercial entities.

As Bud pointed out, our balance sheet is improving, and we think that is a very strong sign. We ended last year in December with about $840,000 in cash. We ended the first quarter with $2.5 million worth of cash. Our total net assets are roughly the same. We have an about 11 million 234 at the end of the year. We now have 11 million 276.

And the liabilities, our accounts payable are fairly steady. We ended the year at 4 million 258. We ended the quarter of 2004 at 3966, and we had no bank loan activity with an outstanding fully available credit line. Shareholder equity increased from $4,639,000 at the end of the year. At the end of the first quarter, we had 4 million 950.

We are on a path to continue improvement in growth. This is our second quarter of operating at a profit in a row. That is a record for our company. We see continued growth in revenue and solid margins for the balance of 2004, and we would very much like to thank all of the Amerigon team and all of our suppliers and vendors and customers and, of course, our investors.

At this point, we would like to open the lines to be able to address any questions that anyone may have. Please, operator?

(OPERATOR INSTRUCTIONS). Steve Gish, Roth Capital Partners.

Good morning, guys. First question. Are you currently shipping on all 14 announced vehicle platforms?

We are not.

Can you tell us which ones you're not?

We have just started shipping on the Mercury Monterey, the Cadillac XLR and the Cadillac Escalade. We have not begun shipments yet on the Nissan, what is called the AL program, which is the new Nissan Cima and in the U.S. the Infiniti Q45. Those shipments are expected to happen in the second half.

Maybe you could just help us understand that you did mention in the press release that you did see increased CCS sales for the Lincoln Navigator and the Ford Expedition. Ford has some somewhat mixed results, whereas for those vehicle lines, the results were up year-over-year for January. But then I think with Expedition they were down and then up again in March, and then they are off quite significantly for the month of April. What is the lag time involved in that, and are you seeing an increase in the take rate, or are there some other variables there?

The lag time for us is almost immediate because we are basically adjusting time supplier to these factors. So when their sales and numbers go up and down so do we.

And we did see a stronger first quarter in 2004 than we did in the first quarter of 2003 for those two vehicle lines. There is a combination of things happening. Our take rates on the Navigator have always historically been very strong and continue to be strong. Our take rates on the Expedition are a little bit more variable. We are at full option on that, and the take rates have been -- the mix has been good to us on the Expedition line. We have seen a stronger performance, and we attribute that to a higher take rate percentage in the Expedition line.

The overall gloss on this subject is the industry volume has been relatively flat, and actually people have been expecting it to increase. So there are some folks out there reading some slight industry weakness in North America. But those factors are relatively insignificant for us in comparison with option take rates and strength of demand for individual products and product lines. On balance we are continuing to see strength in our unit volumes, which is where it finally rings the bell for us. Wouldn't you say that, Dan?

I think it is a good summary.

The last time we spoke I asked in terms of new platform announcements, and I think your response was perhaps to stall. Is that still your assessment at this point?

We are still steady on that. We make no announcements until our customers do.

Could you just help me with the share account? You reported diluted shares of 20.4 million. Isn't the fully diluted share account closer to 23 million?

Yes, it is. The completely fully diluted share account is somewhere around 22.7 million shares. The number we have reported in our quarterly effort here is 20 million 453.

The difference is that we look at these ss they are in any money, so to speak. There are some that are at $25 that we don't care about. Our 10-Q for this quarter shows that there are about 10.9 million shares to come in the form of ultimate dilution. But the averaging technique that we use for a quarter just makes that number smaller when it averages December through March. So the fully diluted shares would be more on the order of 23, 23.5.

(OPERATOR INSTRUCTIONS). Brian Mitchell, Sully Asset Management (ph).

Good morning. I just want to get a sense for what the R&D should be for the rest of the year? Is the $600,000 number that you are anticipating for each quarter for next year, or do you think it will bump up during the course of the year?

We believe that our R&D budget -- we are on budget right now. We do plan to increase slightly our spending in R&D, but we are pretty much on track with that number.

At the $600,000 level or 900,000?

The current year's numbers are running at about the right rate. We ended last year at about -- sorry, we had $945,000 last year, and that was with no support from customers on BSST. This year we are now getting support from customers to push our R&D effort, and to the extent that we are successful in continuing to get revenue or support from the R&D programs, we will offset that R&D budget.

The first quarter we did about $625,000 worth of net expense for us on engineering, and we think that is probably a pretty good number for the balance of the year. It will vary somewhere between 600,000 and 700,000 for the year.

Terrific.

For the quarter.

For the quarter. Fine. And the next question is simply, while we applaud the progress you guys have made, we are a little concerned about your larger shareholder seems to be selling stock quite aggressively. I was wondering are they locked up in anyway, or are they freed to dispose of their shares as they wish?

They are free to sell shares as they wish. We have some upcoming events that are probably allowing them to prepare themselves for a warrant call that is due to happen in the second half of this year.

I think just to expand on that, we don't have any indications from our shareholders or from ourselves that they are looking to dramatically reduce their positions. But everybody has issues of liquidity and issues of if they are going to exercise warrants, which some of our shareholders do, do they want to actually increase their position, or do they want to maintain that level?

So on balance we see this as what I would call normal activity, not people unloading positions in order to get out the door.

I guess we see them selling shares everyday and just kind of view it somewhat as a cap on the stockprice. But in any event, thank you.

Orin Hirschman (ph), OH Investments (ph).

This is Chad Tenet (ph) filling in for Orin. I am sorry if I missed it, but just one quick question. I just wanted to hear on the margins where you see them going forward?

Well, we do not forecast the margin lines going forward. Our comment on the margins are that they are improved due to a couple of factors. One of those factors being the mix of business that we received during the quarter, and the other is positive impact from cost reductions that we have been putting in place.

I would say that we were very very pleased with the margin results in the quarter. But we do not make projections on what we see in the future, except that we have projected that our margins will be stronger than they were last year on average.

Great.

What we are really saying is don't let anybody take the math of the first quarter and just assume that all that number pertains for any of the following quarters because we have got mix changes that bounce in and out. We are pleased that our margins have improved. We expect them to approve. It was our objective to make underlying cost reductions so that they do improve, and that is about as far as we are prepared to go. We think definitely they have improved and they will improve in a lasting way over the second half of 2003.

Thank you very much.

(OPERATOR INSTRUCTIONS). I am showing no further questions at this time.

Well, we certainly thank everyone for dialing and listening to our story. We believe that our first quarter in 2004 was a continuation of strong revenue gains and very good operating control and good margins on the bottom-line. We expect 2004 to be positive in all four quarters with continued strength and revenue growth as we have projected of 25 to 35 percent over 2003.

Any other comments you would like to make? We thank you very much for calling. Thank you, operator.

Thank you. This does conclude this morning's teleconference. You may disconnect your lines and enjoy your day.