Yijing Brentano - Gentherm, Inc. Phillip Eyler - Gentherm, Inc.

Barry G. Steele - Gentherm, Inc.

Christopher Van Horn - B. Riley FBR, Inc.

Gary Frank Prestopino - Barrington Research Associates, Inc. Matt Koranda - ROTH Capital Partners LLC Steven L.

Dyer - Craig-Hallum Capital Group LLC

Thank you, LaTonya, and good morning, everyone. Thank you for joining us today.

Gentherm's earnings results were released earlier this morning and 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 may make forward-looking statements within the meaning of Federal Security Laws. Statements reflect our current views with respect to future events and financial performance, and actual results may differ materially.

Please see Gentherm's SEC filings, including the latest 10-K and subsequent reports for discussions of various risk factors and uncertainties underlying such forward-looking statements. During the call, we may discuss non-GAAP financial measures as defined by SEC Regulation G.

Reconciliations of these non-GAAP financial measures to their comparable GAAP financial measures are included in our earnings release. On the call with me today are Phil Eyler, President and Chief Executive Officer and Barry Steele, Chief Financial Officer.

Please note that during their remarks, Phil and Barry will be referring to a presentation deck that we have made available on our website at gentherm.com/events. After their prepared remarks, we will be pleased to take your questions.

Now, I'd like to turn the call over to Phil.

Thank you, Yijing. Good morning, everyone, and thank you all for joining us today.

I'm pleased to report that despite headwinds across the automotive industry, we achieved solid top-line growth in the third quarter. Starting with the table on slide 4, third quarter product revenues were $258.9 million, an increase of 9.8% from the same period in 2017.

In our Automotive segment, we had growth of 9.9%, which included the impact of the Etratech acquisition and favorable currency translation. On an organic basis, the Automotive segment achieved revenue growth of 3.5%, despite the headwind in European vehicle production primarily related to the new Worldwide Harmonized Light Vehicle Test Procedure, or WLTP, as well as declining vehicle production in Asia.

According to IHS' latest forecast for our key markets of North America, Europe, China, Japan and Korea, light vehicle production in the third quarter declined over 3% year over year. More significantly, this compares with our mid-July forecast of a 3.6% increase for the third quarter of 2018, which was a negative swing of more than 600 basis points.

Notably, one of our large European customers, Volkswagen, experienced significant sequential and year-over-year production volume declines in the quarter. While our 3.5% organic growth was slightly below our original expectations, we significantly outperformed our key markets.

Our Industrial segment revenues rose by 8.2%, primary driven by an increase of 11.7% in Cincinnati Sub-Zero. This was partially offset by a 4.7% decline in Global Power Technologies.

You'll recall that we intend to divest GPT and the Industrial business of CSZ, however, we are retaining our medical business and I'm very pleased to note that we're seeing encouraging trends there as our team delivered strong double-digit growth both year-over-year and sequentially in the third quarter. For the company, adjusted EBITDA rose to $35.7 million in the third quarter as compared with $25.9 million in the prior year.

Adjusted earnings per share rose to $0.54 per share as compared to $0.36 per share in the prior year. This is an improvement of 33%.

In total, our results for the third quarter reflect continued progress on our focused growth strategy and Barry will provide more details on the third quarter results and our revised outlook later on in the call. Now let's review some business highlights for the quarter, beginning with slide 5 in our presentation deck.

As I just discussed, we're pleased with our organic revenue growth in light of the challenging automotive production environment. Also, we continue to see momentum in market launches and we achieved record automotive awards.

Turning to our Climate Control Seat, or CCS business, you'll recall that in the second quarter, the sequential declines driven primarily by product mix of CCS Active versus CCS Vent reversed as we had anticipated. In the third quarter, CCS revenue not only continued to increase sequentially, but also rose year over year.

We also continue to make significant progress on our focus growth and margin expansion activities. We're already seeing early positive results in our financials, and I'll provide more details about this in a few minutes.

Finally, we repurchased approximately $44 million of our shares during the third quarter and continued to repurchase more in October, pursuant to a plan adopted in accordance with Rule 10b5-1. As of yesterday, we've repurchased a total of over $100 million in shares since launching our share repurchase program and we have $200 million remaining in our current authorization.

We recognize the value of our shares and will continue to opportunistically deploy capital towards share repurchases. Turning to slide 6.

We saw the strong execution by our automotive team continue in the third quarter with launches of systems on 26 different nameplate models across 15 OEMs. The launches included Audi A6/A8; Acura RDX; Bentley GT; BYD Tang; Haval Hover H6; Mercedes GLE; Porsche Panamera, Cayenne, and 911; and the Range Rover Evoque.

With continued CCS launches in the quarter, we received our first year-over-year and sequential CCS revenue growth in six quarters. BMW has been an important customer for Gentherm for many years, and I'm pleased that BMW has continued to rely on Gentherm to provide passenger comfort solutions with significant incremental contents on their 2019 lineup of ultimate driving machines.

We're providing a broad range of heating, cooling and temperature-control solutions that help enhance the driving experience on the X5, X7, 8 Series Coupe and the 8 Series Convertible. The launch of our climate-controlled seat on the X5, X7 and 8 Series, and our innovative algorithm-controlled neck warmer on the 8 Series Convertible is a testament to our industry-leading expertise in passenger thermal comfort management.

Growing content per vehicle by leveraging our full suite of technologies, including electronics and software algorithms is an important part of our focused-growth strategy. In addition, we strengthened our market leadership in heated steering wheel systems with launches at BMW, Daimler, General Motors, Great Wall, Honda, Renault-Nissan and Volkswagen.

Finally, Gentherm was named a finalist for the 2019 Automotive News PACE Awards for our thermoelectric Battery Thermal Management or BTM system. The PACE Awards honor auto parts suppliers who exemplify innovation by developing game-changing products and technologies that are successful in reaching the market.

Gentherm's BTM system is the industry's first thermoelectric-based solution for 48-volt lithium-ion batteries. Being named a finalist of this prestigious PACE Award is a testament to Gentherm's expertise in battery thermal management.

I'm incredibly proud of our team as this is the first time Gentherm has been named a finalist for the PACE Award. This is especially great in a year that had a record number of applications.

Now on to slide 7, where you can see that we're continuing to win new business at a record pace. In the third quarter, we secured approximately $470 million in new program awards across 17 different customers.

In total, we secured nearly $1.3 billion in new awards from OEMs year-to-date, surpassing our record of $1.2 billion in awards for full-year 2017 and this was done in just three quarters. We won several vent and active Climate Control Seating awards, including multiple platform wins with our marquee customer, Jaguar Land Rover.

On Land Rover, we were awarded the Velar and the Defender; with Jaguar, we won the XF, XE, F-Pace and the all-new I-Type battery electric vehicle. We also won CCS awards with Genesis JX and JK, and also with BYD in China.

In addition, we won numerous Heated Steering Wheel awards, including Audi A6, A8; Acura; Dongfeng in China and various VW nameplates. And, as the transition to 48-volt mild hybrid vehicles continues to ramp up, we won an Air Cooling Battery Thermal Management award with Hyundai on the Genesis JX /JK.

Let me also give you a quick update on Climate Sense, our personal microclimate solution, which I feel is an anchor to the future of the company. We continue to make good progress on development projects with OEMs for battery-electric and hybrid vehicles in North America and Europe.

Our customers view Gentherm as the leading partner for advanced microclimate solutions. This is a strong validation of our industry-leading expertise in thermal physiology.

Now let's turn to slide 8 for a discussion on our Industrial segment. In CSZ Medical, we delivered strong, double-digit revenue growth with over 60% growth in Blanketrol, our liquid-based patient thermal management equipment; and over 25% growth in FilteredFlo, the air-based patient warming disposables used to maintain normothermia during surgery.

We are seeing encouraging progress with our direct sales force in the United States. Our Medical business in the U.S.

grew over 30% year-over-year. U.S.

sales represented over 60% of the total Medical revenue in the quarter. On the R&D front, we received the CE Mark approval in Europe for our all-new, innovative cardiovascular heat/cool system, with integrated automatic disinfection technology.

This certification was the last step in allowing us to launch our next generation of the blood temperature control device. This is a dual channel system with independent control of both channels.

It contains several advanced features, including a touchscreen remote, integrated automatic disinfection, self-sealing connectors and many others, all designed to improve safety and operating room workflow efficiency. This innovative device will allow us to tap into new segments in Europe and other international markets.

We will continue to invest in next-generation products and upgrade our existing portfolio. In addition, our Medical team is leveraging the scale of our automotive engineering and sourcing to optimize design and secure lower component costs for our core products.

As I discussed at our Investor Day in June, we've decided to divest the CSZ industrial chamber business. We're making progress on the divesture.

At the same time, our leadership team continues to run the business well. We secured awards from 32 new accounts, including large awards from SF Motors and Delta Taiwan for automotive testing.

We continue to grow our business in China with orders from 27 customers for over 70 chambers year to date. Before I turn the call over to Barry, let me give you a quick update on our focus growth strategy.

In addition to building growth momentum in our core product areas, we're making good progress on the divestures of both CSZ Industrial and GPT. Moreover, we've closed down or exited all other non-core product lines, including furniture, aviation, battery management, electronics, industrial battery packs and automotive thermoelectric generators.

With respect to our Fit-for-Growth program, we recorded a $6 million charge in the quarter. The restructuring charges over the past few quarters are based on implemented actions that are expected to produce $30 million in annualized savings.

We've now identified $65 million in savings opportunities in total, well on track to achieve our annualized savings target of $75 million by 2021. In summary, I'm quite pleased with the progress we continue to make.

The momentum we are seeing in new automotive awards and the increased focus on margin position us well to achieve our 2021 outlook. I'm proud of the hard work and commitment of the very talented global Gentherm team.

With that, let me now ask Barry to give you a little more color on the financial results. Barry?

Thank you, Phil. And thank you, everyone, for joining the call today.

I'll start on slide 9, where you can see that during the third quarter of 2018, our product revenues increased over the prior year by $23.1 million or 9.8% to $259 million. The Automotive segment revenue rose $21.4 million year-over-year or 10%, including the $12 million contribution from the acquisition of Etratech.

The Industrial segment rose $2 million or 8% to $22.4 million. Currency translation was a modest headwind of $1 million.

Adjusting for the Etratech acquisition in currency, organic growth for the quarter was 3.9% for the company, 3.5% for the Automotive segment, and 8.1% for the Industrial segment. Let me now share some insights into our segment revenue results.

Despite the challenging underlying production metrics that Phil spoke about, Automotive segment revenue increased primarily due to two factors: A higher contribution from CCS and increased Battery Thermal Management revenues, resulting from new vehicle launches year-to-date. Increases in steering wheel heaters and cable systems also contributed to the overall automotive increase.

Partially offsetting these increases was a 9% decline in seat heater revenue, resulting from lower production volumes in Europe and China. In addition, on a pro forma basis, Etratech revenues declined 17% as a result of lower volume shipments related to the softening recreational vehicle market and OEM discontinuations of two sedan models.

In our Industrial segment, revenue in medical products rose nearly 40%. This increase was partially offset by lower sales in the CSZ industrial chamber business and GPT, both of which are businesses we are looking to divest.

The gross margin for the third quarter was 28%, which represented a decrease from 30% in the third quarter of 2017. The three main causes of this decline are the lower gross margin of Etratech, launch costs for our new Batter Thermal Management product and the initial impact of tariffs which became effective during the quarter.

These were partially offset by improved product mix and fixed cost coverage on higher unit volume. Etratech has a normal gross margin that is lower than our other products.

The new thermoelectric-based Battery Thermal Management product line was launched at the end of the 2017 fourth quarter for one customer and was launched with a second during the second quarter of 2018. This business is expected to ramp to a $50 million to $60 million run rate by the end of 2019, but was only $4.6 million in the 2018 third quarter.

In this early stage production expenses, which reflects fixed cost for the much higher volumes and temporary launch expenses at now two of our factories unfavorably impacted our gross margin. The new tariffs cost us about $500,000 during the third quarter, but are expected to increase to $3 million to $5 million on an annual basis, starting in the fourth quarter.

This amount is much reduced from the original assessment due to successful efforts mainly from our purchasing team to mitigate the overall impact of the new tariffs. During the quarter, we also had a couple of one-time operational and supply chain issues that impacted the gross margin.

Our operating expenses for the quarter included a restructuring charge totaling $5.8 million, related to the continued changes that we have implemented in conjunction with our Focused Growth Strategy and our Fit-for-Growth cost reduction program. As Phil mentioned, our annualized savings from completed initiatives totaled $30 million at the end of the quarter.

This amount is part of the $65 million of total identified annual savings. As we continue to implement these, we will likely incur additional restructuring charges as we approach the overall $75 million annual savings target by 2021.

Taking out the restructuring charge, operating expenses were $51.6 million during the third quarter and were $54.1 million during the 2017 third quarter. The current year amount included a $3.3 million higher mark-to-market amount for cash settled options due to the increase in our stock price during the quarter and $1.7 million in operating expenses for our newly-acquired Etratech, whereas the operating expenses for the third quarter of 2017 included $3.8 million in CEO transition costs.

Taking out these impacts, we reduced our operating costs by $6.6 million for the quarter, which is more than a 12% reduction. Running through that same exercise, we reduced operating expenses by about $3 million, or 6%, sequentially from the second quarter and by over $8 million, or more than 14% from this year's first quarter.

In addition to the restructuring charge, we recorded an impairment loss related to the industrial business that we are selling. The amount, which totaled $11.5 million, is based on our best estimates of fair value.

The amount is not deductible for tax purposes and therefore no tax benefit was included in our income tax provision for the quarter. Adjusting for the non-deductible impact of the impairment, our effective tax rate was 25% for the third quarter.

We expect this rate to continue into the fourth quarter, plus or minus about 1%. Turning to the balance sheet on slide 10, our cash decreased by $56.0 million during the year-to-date period, and our outstanding borrowings decreased by $43 million.

These changes are mainly the result of the repatriation of cash made economical as a result of U.S. tax reform.

We plan to make further debt repayments during the fourth quarter. We have covered much of the $67 million cash outlay for our share repurchase program year-to-date through operating cash coming from the business.

However, net debt increased by $12.8 million from $41.5 million at the end of 2017 to $54.3 million at the end of September, 2018. Increases in our working capital during the nine months are mainly related to seasonal timing of revenues in the fourth quarter, compared to any other quarter.

Our total debt now stands at $101 million and our revolving line of credit availability increased to $261 million. Total liquidity stands at approximately $308 million when adding our cash to the undrawn revolver.

Now let's discuss our guidance which is summarized on slide 11. As you saw in today's press release, we are adjusting our full-year 2018 guidance mainly due to the lowered Automotive production volumes for the third quarter, revised expectations regarding the fourth quarter, which have impacted our levels of shipments, as well as lower performance from the two businesses that we intend to divest.

However, this does not affect our 2021 outlook. As Phil mentioned, the momentum we are seeing in new automotive awards and the increased focused on margin position us well to achieve our 2021 outlook.

With that, let's turn the call back to the operator to begin the Q&A session. Operator?

Good morning and congrats on a solid execution in a tough environment.

Good morning, Chris. Thank you.

I just was looking for additional color on the CCS business and kind of can you comment on where the growth is coming from and could you get into a little bit of the heated vent versus Active Cool? Are you still seeing interest on the Active Cool side?

Is it ramping or is this more of a higher volume order rate around the heated vent?

Well, the sequential and year-over-year growth is coming from a combination of launches and higher take rates on current vehicles. We mentioned some of the launches so I won't go through those again, but it was pretty much expected.

We saw those launches coming and as we've discussed in previous quarters, we continue to see that growth in our future. When it comes to the mix between CCS Vent and CCS Active, certainly when it comes to launch and near-term growth, it's more heavily weighted towards CCS Vent, just as a function of the wins that have taken place over the last several years and growing our business more into mid- and low-end vehicles across different OEM lineups.

Certainly, when I look past 2021, we're seeing a lot more interest in CCS Active from many customers. That's a combination of performance and also the carbon credits.

That's been quite a generator of interest and then of course, as we see hybrids and EVs start to pop up, those become very attractive opportunities for CCS Active.

Okay. Got it.

Got it. Thanks for the color.

And the award activity obviously tracking better than last year by a significant margin; as you look into the fourth quarter and you look into 2019, could you just comment on the pipeline and what the customers – are you seeing adoption ramp up quicker than expected, and what does the pipeline look like, basically?

Well, I think it's – I won't give you any specific numbers on the pipeline. We're still closely watching that, but there's still some good opportunities left in this year, for sure, and as I've mentioned, we've already broken our annual record, which certainly we weren't expecting to do this quickly in the year.

And when I look at the coming couple of years, next year and beyond, more and more platforms are converting to some sort of thermal management technology. So, I think we're looking like it's going to be a strong couple of years.

Okay. Got it.

And then a final from me, on most people's minds, I'm sure, could you get into a little bit of your China exposure, both from a revenue perspective and from a cost input side, and how you're thinking about possible alternative sources on the input side? And again, just to give us an overview on what's going on with China.

Well, I'll talk about the growth side of the equation, and I'll let Barry talk about the cost side. On the revenue side, we're exposed about 10% of our revenue to China right now.

Some of that is domestic OEMs, and a lot of that is European OEMs. Specifically, Volkswagen is a nice chunk of our business in China.

We took a pretty good hit in the quarter with that decline in Volkswagen revenue, both in Europe and in China. Hopefully, we'll see that recover a little bit in the coming quarter.

When I look at a little more mid- and long-term, regardless of those short-term impacts in China, I feel pretty good about the growth in China because a lot of our revenue growth over time is going to happen with incremental wins in the China market.

So on the cost side, the costs in China are fairly similar to our other facilities. You'll notice that each of the regions we're in, we're in low-cost countries, so it's not that much different.

It is a little bit different product mix; we're a little bit more heavy in seat heaters in China and Europe than we are in North America. If you're referring, Chris, to the duty issues, we have a certain amount of product that we bring over from China into our facilities here.

The way we've been able to mitigate the duty issues is to recharacterize how they're inbound from those foreign jurisdictions. We have some opportunities to redirect some things in our supply chain we're still working on, but we feel pretty good about how we've been able to mitigate the overall duty exposure, which is fairly limited to begin with.

Okay. Great.

Thanks again for taking my call.

Sure thing, Chris.

Hi. Good morning, everyone.

Hi, Gary.

Phil, good morning. The climate comfort solutions for BMW, that's not the Climate Sense product; is that just more content that you're going into with BMW when you talk about a climate comfort solution?

No, it's more content, just as you mentioned. It's a lot of content.

It's starting to approach the kind of content that we want to get to on Climate Sense, but no, that is not the Climate Sense system approach. That's just added content.

That's still in the test phase, right? The Climate Sense beta phase?

Yeah. Climate Sense, we've got a few development contracts that we're executing on right now with the European and North America OEMs and so that's still, although making great progress, it's still going down the – we still got some time to go on those development contracts.

Okay. So can you just help me out here?

When you're talking about a comprehensive climate comfort solution, what does that entail just for the total car? What are you adding in there beyond the seats?

Sure. So what we're doing is, it's really much more of a system approach and rather than adding thermal comfort, we're really taking an approach of becoming an integral part of the overall climate solution in the car.

So, it's a system approach with an OEM where we'll make an attempt together with the OEM to reduce the size of the HVAC system. We will provide the well-known thermal comfort features such as heating devices, Active CCS; we'll also add neck conditioning – yeah, on top of that on the cooling side, typically we have some more advanced, likely to be compressor-based cooling mechanisms, and then very importantly, this is all driven by a controller module that has embedded a personalization algorithm solution.

That is a solution that would be integrated pretty tightly to the electronics architecture of the vehicle and the climate software and platform.

Okay. That sounds like a pretty good system.

I mean, it would seem to me that if BMW adopts this, some of the other high-end car companies would as well?

Well BMW hasn't – we haven't announced any OEM to adopt it. What I said with BMW is that we've added a lot of content.

Okay.

That's on the X5, X7 and the 8 Series. But it is a great system.

I just drove our demo car to work this morning and it's a cold day here in Detroit, so I can tell you, within about a block of leaving my driveway, I was comfortable. So it's exciting.

That's good to hear. And then could you maybe just give us your thoughts on this WLTP?

Obviously, it is impacting European production, but how long does this go on or is – I'm not altogether thoroughly familiar with it, so is this a new law now and it's going to continue to clog up production on the European side until it actually annualizes and we get apples-to-apples comps?

Yeah, I think, again, I would let the automakers make most of the comments on this but certainly, it's revised emissions test procedure in Europe and several OEMs are struggling to meet the requirements and thus it's holding them back on producing certain vehicles. And obviously we think some of those restrictions certainly had a pretty strong effect on some of our vehicle systems that we're an option in.

So, hopefully that's going to let up a little bit and the OEMs figure out how to work with that new procedure and we get some recovery.

Okay. Thank you.

Thank you, Gary.

Hey, guys. Good morning.

Nice job on the CCS growth, by the way. Wanted to dig a little bit more into the 2018 outlook that you guys provided the update.

So, I guess CCS is back in a growth trajectory, but we brought down the 2018 organic guide. So, does that suggest that seat heater revenue turns negative in Q4?

Is that sort of what's driving the outlook? And then just help me understanding sort of what we should anticipate for growth in both CCS and seat heater as we kind of head into the first half of 2019 just given that you've got launch schedules firming up there.

So first of all, Matt, the story for Q4 will be a bit different than what we've seen here in Q3 where seat heaters were down. We don't see that as the case going into Q4.

We'll see some improvement there. The main miss in Q4 is in the Industrial businesses that we're selling, both at GPT – if you remember, they had a $12 million fourth quarter last year, so had a very tough comp to go up against and they're still failing to see some of the orders come in and be able to deliver on custom systems.

And we see a little bit of softening on the chamber business as well. So, between those two businesses that's the lion's share of the miss that we see in Q4.

And certainly, we're all expecting a little bit of softening overall on the vehicle production side in the fourth quarter.

Got it, okay, and then 2019, just your thoughts on the launch schedules and how they're firming up for growth for CCS.

I think it's probably a little too early for us to comment on 2019. We're still waiting for things to crystallize on that front.

We certainly know what our launches look like and have a pretty solid base of platforms that we understand and it's really going to come down to production.

Got it. And then on Battery Thermal Management, especially when it comes to some of the development contracts that you guys had mentioned, I think last quarter for the thermal electric Battery Thermal Management solution, how are those development contracts progressing?

Any updates on that front in terms of the pipeline?

Yeah. They were just started.

We announced the awards for those last quarter, so they're in the early phase of development, kind of getting scoped out and some early prototypes being built and tested with the OEMs and going through setting requirements and specifications. So, good start, but too early to get into too much detail.

Hey, Matt, just one thing to point out is that the Battery Thermal Management ramp was still a little bit slow in Q3 as we expected, so we were down a little bit from where we thought we'd be on total revenue there.

Okay. I guess last one from me; just any comment on the status of the sale of the CSZ chambers business or GPT, any updates you can provide there in terms of timing or your sense for when those occur?

Sure. We don't want to give you too much insight as we're in actual marketing efforts right now.

Both businesses are being actively shown to potential buyers. I think we have a pretty strong list of potential buyers, strategic, mainly in both cases.

So, I think we're making excellent progress there. There's some chance of getting something done before the end of the year, but we're running out of the year, so – but I think you'll see at least one transaction very, very soon in the next year.

Okay. I'll join back in queue, guys.

Thank you.

Thank you.

Thanks, good morning, guys.

Morning, Steve.

Is the – the heated business being down year-over-year in the third quarter, is that more a function of slower production schedules or are you seeing people sort of graduate, so to speak, from heated up to the various CCS? In other words, is it cannibalizing that business, which obviously would be a good problem, but what are you seeing more of?

No, it's not really cannibalization. It's almost exclusively the vehicle production impact, and that was European related to the WLTP and China reduction.

Heavyweight business for Volkswagen is seat heat, so that had an outsized effect.

Okay. And then obviously nice outperformance versus global production this quarter, you know, hiked 700, 800 basis points; is that sort of a sustainable number as you look at your wins and the order book going forward?

Well, I wouldn't put a number to it, but yeah, I think that's certainly very consistent to what we expect to happen both from a take rate standpoint in the market, and then also our ability to expand our content in a vehicle. So those two things, you know, we're really excited about, and I think there's nice tailwinds that are going to put us in a position to outperform vehicle production for quite a while.

Okay. Lastly from me, on the expense side, you guys are obviously making very good progress on your Fit-for-Growth plan; how should we – I know you won't say too much about next year, but just I guess directionally, do you feel like next year can sort of be a flat to down OpEx year, or just some of the growth initiatives that are going to push that higher year-over-year on the operating expense side?

So, certainly the benefit that we've seen implemented in this first nine months, totaled $30 million, we'll see that in next year, however, we have normal inflation impact, and we are actually looking to spend a little bit of that on new technologies. For example, just in this quarter alone, Climate Sense, we spent about $500,000 more than we did in the prior year.

So, I think it'll be an improvement clearly for next year, but maybe not the full amount as we still continue to build the savings.

You know, we targeted – our 2021 target is to get to between 15% and 17% OpEx as a percent of revenue. Obviously, we're not going to get there next year, but we expect to make gradual progress year over year.

Got it. That's helpful.

Thanks, guys.

Great. Thank you, everyone, for joining our call today.

We absolutely remain focused on execution, innovation and cost improvement. I'm confident that we will deliver significant shareholder value in the quarters and years ahead, and certainly appreciate your interest and support.

Look forward to keeping you apprised of our progress going forward. Thank you, everyone.

Have a great day.