Jill Bertotti - Director Investor Outreach, Allen & Caron, Inc. Daniel Coker - President & CEO Barry Steele - CFO Bud Marx - Chairman

Philip Shen - ROTH Capital Steve Dyer - Craig-Hallum Anthony Deem - KeyBanc Capital Markets James Basch - Dialectic Ailon Grushkin - Nano-Cap Growth Fund

Good morning and thank you for joining us for the Gentherm’s 2013 third quarter and nine months results conference call. Before we start today’s call, there are few items I’d like to cover with you.

First, in addition to disseminating through PR Newswire this morning’s news release announcing Gentherm’s results, an e-mail copy of the release was also sent to a number of conference call participants. If any of you need a copy of the news release, you may download a copy from either the Gentherm website at www.gentherm.com or the Allen & Caron website at www.allencaron.com.

Additionally, a replay of this conference call will be available via a link provided on the Events page of the Investors section at Gentherm’s website. Finally, I’ve also been asked to make the following statements.

Except for historical information contained herein, statements on this call are forward-looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding future sales, products, opportunities, markets, expenses and profits.

Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company’s actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks that sales may not significantly increase, additional financing requirements may not be available, new competitors may arise and adverse conditions in the industry in which the company operates may negatively affect its results.

Those and other risks are described in the company’s Annual Report on Form 10-K for the year ended December 31, 2012 and subsequent reports filed with the Securities and Exchange Commission, copies of which are available from the SEC or may be obtained from the company. Except as required by law, the company assumes no obligation to update the forward-looking statements, which are made as of the date hereof, even if new information becomes available in the future.

On the call today from Gentherm, we have President and Chief Executive Officer Dan Coker, Chief Financial Officer, Barry Steele, and Chairman, Bud Marx. Management will provide a review of the results, after which there’ll be a question-and-answer period.

I’d now like to turn the call over to Dan. Good morning, Dan.

Good morning, Jill, and thank you everyone for joining us on the third quarter review. We had a relatively good quarter in the third quarter of 2013.

As you’ll see our revenue reached – broke $170 million for the first time coming under the $175 million that compared to a $141 million in 2012 whereas $30 million year-over-year increase and about $11 million increased over the second quarter. These are very strong positive results and they come from all sectors of our business.

So we’re quite pleased with the – our market’s response through the combination of the old Amerigon and the [indiscernible] in the formation of the new Gentherm. The story has been quite well received by our customers.

Second, very important point I think we should – we should make here is that our margins have returned back to the normal rate that we expect this year, I think our gross margin was around 26.8%, we had nice improvement over our first quarter and a significant improvement over the somewhat missed just the second quarter. So we have -- soon our margins returned to the normal rate.

A third point that I want to make is that yesterday afternoon in German courts we received the registration of our [indiscernible] which essentially complete the final move for our acquisition of the W.E.T AG Corporation. That is a very significant moment for us as a company and we’d like to congratulate all of our team efforts for all the hard work taken on both side including our outside opportunity [indiscernible].

So, congratulations for the entire team. We’re going to follow our normal format, we’re going to ask Barry Steele our CFO, he would guide you though some of the numbers.

And then we’ll open the floor for questions. Barry, are you ready?

Yes, I am. Thank you, Dan.

Hello everyone. Our earnings from the third quarter were $0.24 per share on a fully diluted basis.

This result included $326,000 in expenses were approximately $0.01 per share for acquisition transaction expenses related to our increasing ownership stake in W.E.T. As Dan mentioned, in February, we acquired an additional stake in W.E.T.

from the largest minority shareholder. We have thus initiated and now registered [indiscernible] other remaining 1.5% of these shares.

In future periods you will not see any more minority interest deductions of our P&L on the bottom-line. Our product revenues for the third quarter of 2013 were $131.2 million representing an increase of $30.1 million or 21% over the third quarter 2012 product revenue.

The increase is due to stronger automotive production especially North America and Asia. Our European based revenues were also higher in the prior year period despite the soft automotive market in Europe.

This is in part due to a strong performance in our specialty cable business. Our gross margin for the second quarter – for the third quarter was 26.8% as Dan mentioned, this was 70 basis points higher than the prior year third quarter and 1.8% higher than this year’s second quarter.

Our gross margin varies from quarter-to-quarter for a number of reasons, including shipping mix in underlying product, timing of our customer pricing, concessions as compared with cost savings initiatives and special items both positive and negative that occurs from time to the time. We believe that the current quarter’s performance would represent a mid point of our gross margin range.

Our continuing ramp up process of our electronic manufacturing facility in China decreased our gross margin as they did in the second quarter. The new manufacturing overhead in this facility was approximately $678,000 while our internal sales increased from approximately $50,000 during the second quarter to over $300,000 during the third quarter, these are internal revenues where we’re getting incremental savings from sourcing these goods from third-party.

This has an effect to lower our gross margin by 30 basis points during the third quarter. The benefit of this new facility will increase in future quarters as production in that facility begins to get the ramp up further and such – the unfavorable current impact on our gross margin will reverse and become a favorable impact.

Our operating expenses were $31.4 million during the third quarter representing an increase of $4.5 million and included acquisition transaction and management – acquisition transaction expenses that we mentioned earlier. Taking these expenses out, our operating expenses increased by $4.2 million or 15.7% during the third quarter of this year, this also included approximately $800,000 related to the new electronics facility that we just discussed.

Much of the remaining increased resources that are being directed to development of existing and new product and the related marketing activities for those new products as well as an effort to develop new CCS system using the best characteristics from each of the historical and W.E.T. existing system offering.

I want to point out that on a combined basis, we reported a loss of $1.4 million for revaluation of derivatives in foreign currency in both the current and prior year third quarter it was about the same in both quarters. This compares to a net loss during the 2013 second quarter sequentially of only $251,000.

Much of these effects come from our portfolio of standard financial instrument such as currency forward and option contract, we use these hedging instruments to cover our exposures to foreign currency. For example, we encouraged expenses in the Canadian dollar, which are coupled with our U.S.

dollar denominate North American revenue. These contracts are mark-to-market in each quarter.

As such, we report gains and losses for instruments that are intended to hit transactions in future period in the current period. In measuring our adjusted EBITDA, however, we add back unrealized portions, which we believe better reflects the current operating performance of the company.

Our adjusted EBITDA was $21.3 million, which was $2.8 million higher than that of third quarter 2012. Couple of comments on the balance sheet and cash flow, our cash decreased during the third quarter by $13 million from the end of the second quarter and is now at $36.0 million.

Our total outstanding debt was $87.4 million at the end of the quarter representing a decrease of $5.4 million. And our revolver – revolving line of credit capacity remains virtually untapped and is approximately $56 million.

During the quarter, we bought our North American world headquarters, North American and world headquarters building in Northville, Michigan for $5.2 million in cash. So that was a use of our cash quarter.

We did this in order to secure our facility growth needs and locking the cost doing a soft commercial real estate market [indiscernible]. We also invested an approximately $13 million of working capital which was driven by the sequential growth during the third quarter.

We expect that our working capital will be lower and operating cash flow therefore higher during the fourth quarter due to our regular year end holiday period which helps to decrease the throughput during the last couple of month of the year. Dan, that’s all I have.

All right Barry. Thank you, very much for that usual comprehensive review of our results.

I thank you for that. And I think we should go ahead and open the floor for questions.

Operator, we’re ready to address any questions audience may have.

Hey Dan and Barry. Thanks for taking my questions.

Good morning.

So, I was wondering you have given – congrats on the nice results in this squeeze out of wet. Given the beats, could you – so again talk to us about the mix of products in Q3.

And then how perhaps you expect this mix of trend going forward?

Well, Phil we saw actually very strong results in all areas, I would say I comment that we saw a significant growth in our what we would call climate seat area that the climate in control seat whereas heat in control seat than the heat is in renovated seats. And we also saw another very solid quarter from our cable business, we are continuing to enjoy success working with our primary customer that is now expanding outside of the European base where we’ve always had a very good solid business into North America and into Asia.

So, in general we have a very, very solid more normal mix of business than we had in the second quarter where we indicated that some of the proportions of the business were a little bit out of mix but this was a very normal typical quarter where we had very good results across the boards

Good. And then looking forward, do you expect the cable business to take even more share or become a larger percentage of your overall revenues.

What are your thoughts there?

Yes. I actually do expect, we’re encouraging our team to try to gain more business, in that type of business volume is potential being able to better manage and better run the operation particularly as we expand into new market, if you have some opportunity to facilitate a cable operation inside each of our facilities, we obviously make cable every day in our normal business.

And the ability to have a special cable project inside each of our facility which is very beneficial for the operational side and greatly contributes to our contribution margin. The businesses in North America are growing very nicely.

And the businesses in Asia are just beginning to grow and I think we see a pretty good period of growth through the cable business over the next few years.

Great. Thanks Dan.

I know you guys made a zero revenues by geography in your Q. But since the Q is not out, I was wondering if you guys might be able to share what the mix was.

And in terms of a bigger picture, can you talk about how this mix might change over the coming year in particular are you seeing – what kind of growth you see out of China. Do you expect that 10% share to increase to greater levels and how do you expect Europe will change as well given – it sounds like this might be a bit of a recovery in Europe as well.

Sure. Okay.

I’ll give you the overview and I’ll ask Barry to look up the detail for you. But in general, our North American business is our biggest and strongest business globally and they’ve had another very good solid quarter.

Our Asian business is one of our faster growing business and continues to show strength in 2013. Our business in Europe, however had a very good quarter and growing about 12%.

So, we’re seeing a little bit of a recovery out of Europe. Again, we – when we have to talk about Europe we focus on the fact that the majority of our European customers are German based.

So, the German market has not been as impacted by the general European recession as some of the other markets for us the automotive markets in France, Italy and England have been impacted much more severely than those in Germany. So in general I would say that as we look forward, we’re going to see a little bit of a slowdown in the rather expansive growth rate to North America.

And I think that will be partially offset by further expansion in Europe and in Asia. Barry, if you could give us the exact numbers that would be helpful.

We didn’t see a lot of change in the regional mix, in this quarter if you look and compare it with last quarter, we’re still about 25% for Asia and close to 50% for North America. So, that’s pretty consistent over the years as well as the year-to-date period.

Great. And then Dan, you talked about Europe growing at 12%.

Can you give us the numbers for North America in the quarter, what kind of growth you saw as well as Asia?

Barry, you want to give him those numbers?

The growth in Asia is that what you’re asking?

Yes. And maybe in particular, China and what kind of growth did you see in the quarter for China.

We don’t break our revenues out by country, we could give you the Asian market which includes our revenues in Japan and Korea and the other Asian countries.

When you get to the quarter you will be able to see – China really it’s had about the 10% of our business. So, that means that the growth there is consistent with our overall growth .

Okay. That’s fair.

Let’s move on to the China manufacturing facility. Can you – what’s the update there or how is that coming along and what’s the utilization now and then how do you expect that to ramp in the coming quarters?

And then can you also talk about – how should we think about capacity, is there some kind of units – can we think about units per year versus cases per year. How should we think about that either?

Well, I can comment – couple of your – you’re using your entire quarter here Phil. But I will tell you that the facilities, we have two facilities in China actually we have one in Lang Bon which we just completed and just celebrated, in fact the grand opening of the new facility, we doubled the square footage and we were in the process of adding additional capacities to service our anticipated very rapid Chinese market expansion which we’re enjoying, now we need to tool up to make sure we can satisfy those demand.

We also have a brand new facility which we just celebrated last week, the grand opening of our electronics facility in Shenzhen, China. And Barry commented that, that facility is now coming on line.

Our revenues are internal revenues from that facility peaked $300,000 that means we should prove ourselves $300,000 worth of electronic controlling devices that in the past we would have had to pay a premium to outside suppliers in order to obtain for our businesses. We have already begun to see a positive impact on our gross margin lines as these facilities take play.

To the capacity utilization, I don’t really know that we’ve ever talked about that, but the facility in Shenzhen is clearly about 95% available, we’re just now starting, we’re just launching. We have two very fine production lines in place and I think just in round numbers we should be able to produce somewhere between $25 million and $30 million worth of product out of that.

So, the capacity there is almost practically unlimited and we’ll serve our needs for the next two to three years in its present state. The facility in Langfang which is our original primary manufacturing facility is very well managed and very well balanced, and we’ll be – we now have these floor space to be able to add production capacity as the market demand.

So, in terms of utilization, we’re in very good position in Asia.

Great. That’s really helpful.

One last thing, I’ll jump back in queue. As a follow up I think you mentioned in the past that the Shenzhen facility in particular, it’s for internal consumption primarily but you would have potential enough capacity there to sell externally.

Once you had a 100% utilization, what percentage you see as of the capacity would you – envision being sold externally versus internally consumed?

Well, actually in theory what we’re doing here is taking a full step into the electronics business and that world is very, very tough and very competitive, we know it very well. And we’re taking a very conservative state approach.

We are essentially designing and building our own modules that we understand better than anyone in the world. So that’s our first 2 years worth of effort we’re going to get ourselves square and get ourselves completely equipped and tool demand.

And then we’re going to also offer these world-class facilities and power to other people inside the market opportunity for us. Right now, we’re building our own heat control and thermal control modules that will go into our own equipment.

In the future, we’re planning on helping our OEM customers and our Tier 1 customers with any other electronic control requirements that they may have. I suspect that our volume over the first two years will be very heavily in internal and then we will begin to see in year two and year three more external sales.

So I think that that’s not something we’re going put a proportion on but it’s generally a first step into our own business requirements and then as we get good and we show off our abilities, we’ll be able to get additional outside business.

Great. And that’s really helpful.

Thank you, Dan and Barry. And I’ll jump back in queue.

All right. Please deposit your extra quarter before you go back, Phil.

Good morning, gentlemen. Nice quarter.

Good morning.

Hi, Steve.

Just one more question on Shenzhen and the electronics business and we’ll put that to bed. I think in the last conference call you had indicated that it would be sort of by the end of the year, this year that it would be sort of a net neutral to your gross margin.

Is that still a safe assumption?

I think we’re on track for all of our projections, in fact I think we were slightly ahead but we feel very confident that the business plan we put together is being realized yet.

And then could you venture I guess as to how much just that mix internally producing that and next year could help your gross margin all else equal?

I couldn’t, Barry probably would but I'm not brave enough to do that.

Yes, I don’t know that we will get into the specific margins on specific parts of our business but we can say though that, it will help us play that.

I guess I'm just trying to get a sense and we can get a clarity –

Exactly Steve, we’re not going to tell you what the numbers are but we can tell you that it will be impactful and if the impacts are enough that are rolling the bed about $10 million to $11 million in investment to get control of that part of our world.

Got it, okay. Outside of the seat business, can you give any color sort of on the bed business or couple there is some sort of -- how those are trending?

The bed business is the most significant piece of that and smaller – the third quarter we saw kind of what I'm hoping to be a final cleanup of the mess we had in the May 1st in all of the second quarter where we had some issues with our bed partner. Those have been cleaned up, we took a credit to offset all of the products that had to be recalled back out in some of the market by our Manchester and retail partners there were some exchange of goods that were done that has now are being completed and we’re expecting to see a positive fourth quarter.

And in fact I think we’re going to finally see some pretty good results, some significant changes were made to our process and our vendor partners and I think we’re on a good position now to see the bed business grow. The cup holder business is continuing to get very, strong support from our customers around the world not just in the U.S.

We’re seeing very strong interest in Europe and in Asia for these what we call contingent products which also includes the cold storage buckets. So, I think we’re going to continue to see good positive results and you’ll start seeing some winnings in that area to getting sometime next year and 2015.

Perfect. Couple of last questions, so I don’t have to deposit anymore money as well.

Operating expenses, any reason to think that they would deviate significantly one or the other from kind of the current run rate going forward?

I don’t think we’re going to see any significant deviation one way or the other and we’re trying to establish ourselves as a running business now, we see some significant increases in SG&A and R&D as Barry had mentioned as we tool up to get ready to grow more rapidly in the future and to maintain that current growth rate if you did the math and I'm sure Steve you did, you’ll note that our current projections indicate that we’re probably would be somewhere around 17% growth rate this year over last. That’s been a very good year and it’s been something that we were a little bit surprised with how strong the second half was.

So, we’ve had to add some people, we’ve had to add some team to be able to facilitate that growth and continue our plan to grow 10% a year and outgrow the industry and our peers. We’ve added some infrastructure to the business as well, we had to add things like human resources whereas two smaller companies we didn’t really have the capacity or need t have an HR team now we do.

We’ve had to add some in-house legal counsel. And those people think of themselves but we show them on our SG&A line.

So, there is some cost there but you are going to see now that we kind of stabilized the team, I think you’re going to see us be able to affect some of the cost synergies that we talked about. And these tools that we’ve established are going to start paying for themselves and you’ll see some reductions as we’ve said all along over the next two to three years.

Got it. Okay.

Last year is redesign, next year would you anticipate that you could be on some additional term levels there.

Could be.

Got it. Last question, now, I promise.

So now with the convertible preferred behind you and those dividends having rolled out, you should at least by my calculations start to generate a significant amount of free cash flow. What are sort of – how do you think about the priorities for that whether it’s paying down debt buying back stock, any acquisition related – how do you sort of think about to prioritize that?

Well, our first priority of course is the ongoing business and we would make sure we have sufficient cash stocks and reserves to be able to suffer any dips or even any dramatic increases in the business activity. You heard Barry say earlier that we had an investment in operating expenses because of the dramatic expansion of our business in the third quarter.

Growth takes cash as well so that’s our first priority and we want to make sure we have sufficient cash and cash reserves to be able to grow and or suffer any kind of hit. So, priority number one is getting a lot.

Beyond that we want to accumulate cash, we like to be really flexible, we like to pay down debt as quickly as we can. We also want to make sure that we have the ability to take advantage of any opportunities that the market or investment community may present.

So those are our main priorities with what we expect and how we plan to manage our cash.

All right. Well, done, guys.

Thanks.

Thank you.

Hi, good morning.

Good morning.

Thanks for taking my questions. Lot of them has been asked but just a couple here.

So, you say that 25% W.E.T growth in the press release just on some of the numbers you gave it look like 8% of the growth might be attributable to the climate control feed products. So, as we think about the mix of that W.E.T growth is the remainder of that primarily attributable to the cable business, is that where the rest of the 17% growth is coming from?

The cable business is growing quite nicely and we’re quite pleased with it, it’s a smaller piece of our revenue base.

Yes.

But it is growing quite nicely. The rest of it is actually fairly well balanced, we’re seeing good growth in the heater business, we’re seeing very good growth in the heated to cool and heated and [indiscernible] business.

And we’re beginning to see some good traction on our non automotive businesses as well. So, I wouldn’t say that we can attribute everything to one segment or the other, I would say that we’re working very hard to try to balance our growth and take advantage of opportunities.

Right now we see a very good opportunity in the cable business and we’re working very hard to expand and support that customer.

Okay. And then I'm thinking about next year, what’s your current take on the revenue outlook, should we assume another year of 17% growth it sounds like that certainly was ahead of internal expectations but or should we think in more along the lines of high single-digit low double-digit type growth in the next year consistent with your longer term outlook.

Well, I would certainly say that I would not expect another 17% growth here, this was a very phenomenal combination of events and we’re very pleased, we have been able to manage this rapid growth as efficiently and effectively we have. I would also point out as we mentioned that earlier that the North American market has been [ph] serving very steadily over the last three years actually now four years I guess as we moved out of the 2009, 2010 recessions.

That will beginning to taper off so we’ll have to not rely as much on the overall market growth and we have to continue to rely on new products and new market penetration. European business is beginning to show some signs particularly in Germany some signs of recovery and we also have the ability to use our cable business to add additional growth in Europe.

Asia is a good steady market and we expect it to continue to expand at about the rate it has. So, we will put out a projection for 2014 revenues sometimes toward the end of the fourth quarter, beginning of the results of the fourth quarter.

Out of those markets, are there any of them that you can point out and say we anticipate growing well ahead of the market for the foreseeable future. Would you expect your new business growth above and beyond underlying production in China to be higher than Europe per se, any of those reasons where you’re expect new business growth accelerate or remain higher versus other regions?

Well, we expect to outperform all of major markets significantly by the basic market growth. We are focusing quite a bit of time and effort and money as you heard on our Asian business so we expect that to grow in a higher proportion than the rest of the markets.

And we do expect the European business to begin recovering next year.

And then – that’s the last question. So on the Europe business, obviously have some strong -- it sounds like while the growth is from the cable business but not entirely.

So as we think about underlying production at 2% in the third quarter in Europe. If we just strip out the cable business, how well is the rest of the Europe – European business doing relative to market growth here recently?

Well, if I understand your question, I would say that our businesses in Europe had been doing relatively well compared to the market conditions.

Okay.

We have been able to gather some new customers, but more importantly for us we are stimulated a lot of new entries a lot of new product categories, it’s a combination of the companies that have formed interim offer. Now we are selling more – sorry we are promoting more thermal electric base products in the form of heated and cool technology.

We’re also promoting heated and cool storage boxes. We’re promoting heated and cool cup holders.

And this kind of new technology to our customers has been quite exciting, quite well received so we expect to see some very good response from that in the future.

Okay. Thank you.

Okay. Thanks a lot.

Operator?

Hey, guys. So Dan, can you talk a little bit about increasing penetration kind of going down from high-end luxury to mid-range segment for heating and cooling.

Specifically I guess the opportunities in Europe to add additional big OEM customers, actually go down market?

Sure. Well, we think that the – particularly on the high-end market for us in Europe.

There is a big opportunity. Most of the major luxury car suppliers in Europe particularly in Germany have adopted kind of a halfway measure for their customer base, they put in heated and ventilated systems in many cases.

I think partially because they really didn’t have a trustworthy reliable source that spoke their local language and you had local technical support to be able to help them take a step into the thermal electric generated systems. So now we have that and we’re starting to see very good response.

In terms of penetration for us, we expect that to be a good base for us, we also expect the Asian market to be a good base for heat and cool products. But we also see a very interesting trend and something we’ve kind of been predicting over the past few years, we’re seeing more people who bought heated seats, now considering selling and offering heated and ventilated seats for the mid range market.

And that’s a very significant future potential growth area for us that we think is actually going to be a very large segment of the business as more and people recognize that heat contact is a key point of thermal comfort in cars. And in the mid range cars, heaters are being added much more widely.

And we believe that as these vehicles get out in the market, people are going to start demanding some point above comfort release in hot weather conditions. So we’re going to see a big growth in heated and vent systems and we’re going to see a direct growth of heated and cool systems in Europe and in Asia.

Okay. Thanks, Dan.

Okay. Thanks a lot.

Hi, another great quarter, you guys are doing a great job. My question relates to some of the newer initiatives like I believe you have a design win for the BMW i8 for a thermal electric generator.

Is this the type of product that might eventually go to like a Tesla improve their electric cars as well?

We don’t obviously make any comments about any new specific programs with any future programs with any customers worldwide. We do have very good relationships with BMW.

We also have a very strong relationship with Tesla. But comment about any individual product award or win we would not make any comment until the customers have made their decisions and made those decisions proper.

Okay. I know a few years ago I had asked about possibly, trying to penetrate the aerospace market or a commercial airlines maybe first-class seat?

Yes.

Have you guys, I guess both said maybe trying again now that you’re such a – a much bigger company.

We do look at that as an opportunity and it’s something that we’re evaluating and we do have some people who are doing some customer integration work upon in that, yes.

And last, are you still introducing the heated and cooled office chairs in the fourth quarter or first quarter of 2014?

We have seen a very positive response for the heated and ventilated office chairs. We have indicated that those will be on the market probably early next year.

Okay, great. Thank you, so much.

Keep up the great work.

Many thank you sir.

Thank you, very much operator. And I’d like to thank everyone for dialing in today and helping us review our third quarter 2013 results.

Again, we think that we had a pretty good quarter. We’re pleased with the revenue growth, we’re pleased with the good solid margin performance.

We have a lots of work yet to do in the integration and we believe over the next few years, you’re going to see some very positive results out of Gentherm. So, we thank you very much.

And we ask you to join us again in about 90 days to review our fourth quarter and year-end 2013 results. Thank you, everyone and good bye.