• Adjusted EBITDA Margin: 17.4%, up 160 basis points from last year.
• Adjusted Free Cash Flow: $71 million generated in Q3 2024.
• Share Repurchase: $52 million of common stock repurchased in the quarter, totaling $226 million for the year.
• Capital Expenditures: 2.4% of sales in the quarter.
• Liquidity Position: $696 million, including $600 million undrawn from revolving credit and $96 million in cash.
• Net Leverage Ratio: 2.26 times, unchanged from the previous quarter.
• 2024 Outlook - Net Sales: $3.45 billion.
• 2024 Outlook - Net Income: $248 million.
• 2024 Outlook - Adjusted EBITDA: $595 million, with a margin of 17.2%.
• 2024 Outlook - Adjusted Free Cash Flow: $325 million.

• Warning! GuruFocus has detected 5 Warning Signs with GTX.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Garrett Motion Inc (NASDAQ:GTX) reported a strong adjusted EBITDA margin of 17.4%, up 160 basis points from the previous year.
• The company generated $71 million in adjusted free cash flow during the quarter.
• Garrett Motion Inc (NASDAQ:GTX) continued its share repurchase program, buying back $52 million of common stock in the quarter, totaling $226 million for the year.
• The company is seeing increasing momentum with its zero-emission vehicle technologies, including a joint development agreement with SinoTruk.
• Garrett Motion Inc (NASDAQ:GTX) received the 2024 Tenant Innovation Award for its advancements in electric vehicle technologies.

Negative Points

• The company is experiencing softness in the light vehicle industry in Europe and China, impacting overall sales.
• There is competitive pressure and short-term customer vehicle platform mix shifts affecting the business.
• Commodity deflation, while marginally positive, has impacted the gasoline segment.
• The company noted a negative working capital impact of $28 million due to decreased sequential sales.
• Garrett Motion Inc (NASDAQ:GTX) faces ongoing price pressure from automakers, which could challenge future profitability.

Q & A Highlights

Q: Given your performance in Q3 and the commentary you gave in Q2, what's changed that surprised you in Q3 that led you to readjust your guidance for Q4? A: The main driver is the softness of the automotive industry, which is stronger than anticipated. However, the company's performance, particularly in terms of margins, has been better than expected.

Q: Are you seeing any changes in China regarding your customers and the start-up of production for what you've won? A: In China, we continue to see softness in the passenger vehicle industry and variability in market share among carmakers. However, there are positive signals in the commercial vehicle industry, indicating a recovery, especially in gas-powered trucks.

Q: Are you seeing customers adopt more of their higher-priced, higher-margin products or more on the lower end of your product spectrum? A: In Europe, we see a trend towards more advanced turbochargers, including variable geometry turbos on hybrid vehicles. In the US, upcoming emission regulations are driving demand for more advanced turbocharger technology, which is beneficial for us.

Q: Why wasn't the benefit from the refinancing reflected in the quarterly interest expense number? A: The benefit is reflected in the run rate, but there are accounting factors, such as fees from the Q2 refinancing and interest rate swap activities, that affect the quarterly numbers.

Q: Are you structurally a more profitable entity than you otherwise would have thought, or are there potentially some costs that could layer back in if softness were to continue in these end markets? A: The improved profitability is due to ongoing structural efforts to enhance cost efficiency and flexibility. This includes making factories more flexible and reducing fixed costs, which are long-term improvements.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.