Luxury items don't become less luxurious just because they are
made available on the mass market. They just become less
That's true whether you are talking about handbags, liquor or
the kinds of temperature control products sold byGentherm (
Gentherm, which was formerly called Amerigon, is best known
for its climate-control seat technology used in the automotive
industry. The technology lets drivers heat their seats on cold
days and cool them on hot ones.
There was a time when this kind of gear was only available in
high-end cars, but no more.
"This product was originally designed for luxury vehicles, but
it is now being sold in midlevel cars," said Bill Selesky, an
analyst at Argus Research. "They are appealing to a wider
population. If that continues, Gentherm should have a good
revenue stream for the next few years."
Automakers Boost Options
Gentherm CEO Dan Coker echoed that view on a third-quarter
conference call with analysts, saying that a wider range of
carmakers is selling heated and ventilated seats for the midrange
"That's a very significant future potential growth area for
us," Coker said.
During the quarter, Gentherm launched or expanded
climate-control seat programs in midpriced vehicles such as the
Hyundai Sonata and theNissan (
) Pathfinder as well as luxury vehicles such as theGeneral
) Cadillac CTX, Infiniti JX andTata Motors ' (
) Land Rover Range Rover.
In many cases Gentherm doesn't even need to market its
technology to midmarket auto manufacturers, analyst Selesky
"The product is selling so well that some of the midlevel guys
are coming to Gentherm saying we want to put your products in our
cars," he said. "Drivers want a better experience, and this is
one way to get it."
Luxury car brands account for about 10% to 15% of the overall
automobile market, Selesky says. In contrast, midrange vehicles
account for about 50%.
"That's a big addressable market," he said.
The market extends beyond the U.S., where Gentherm got about
42% of its revenue last year.
CCS technology has "started to get a lot of attention"
overseas, Selesky said, especially in emerging markets. "About
70% to 75% of the addressable market right now is in the U.S.,
but Gentherm is looking at a 50/50 mix over time."
Gentherm bulked up its overseas business in 2013 when it
acquired the remainder of the outstanding shares of W.E.T.
Automotive Systems, a German maker of heated car seats and other
thermal comfort products.
Gentherm initially acquired a majority interest in W.E.T. in
May 2011 to create a larger and more global company.
"W.E.T. had been Gentherm's biggest competitor in Germany,"
Selesky said. "Now that Gentherm has taken over 100% control,
they are basically the dominant player on the domestic level and
also the international level in this segment of the
Germany ranked second in overall revenue for Gentherm last
year, at 12% of the total. China came in next at 10%, followed by
Korea at 8%, Japan at 6%, Canada at 3% and other countries at
19%. However, no geographic sales data are available for
Out From Under Car Seats
Gentherm's climate-control products extend beyond just car
seats. The company also makes and sells heated and cooled cup
holders, thermal storage bins, and heated steering wheel and
Meanwhile, Gentherm looks to expand its reach beyond the
The company also sells thermal heating and bedding
technologies that allow consumers to control the temperature of
their mattresses. Clients in this area includeMattress Firm (
), a Houston-based bedding manufacturer and retailer; and
Intercoil International, a Dubai-based sleep products
manufacturer and retailer.
In addition, Gentherm is working on thermal technologies for
the medical and health care industries.
One solution would help prevent the formation of ubiquitous
ulcers, or pressure sores, in patients confined to wheelchairs
and medical bedding. Another would give health care providers the
ability to control the temperature of fluids and devices during
surgical procedures to help improve outcomes and decrease the
"Their technology is in high demand, and they are very
proficient at what they do," Selesky said.
That proficiency is evident in Gentherm's financial
performance. The company regularly trots out double-digit or
better sales growth. Earnings-per-share growth follows much the
same pattern, with only the occasional hiccup.
Through the first nine months of 2013, Gentherm's earnings
have more than doubled year-over-year, while sales have risen
Third-quarter earnings came in at 24 cents a share, up from 8
cents a year earlier. Sales gained 21% to $171.2 million -- the
biggest top-line gain since the June 2012 quarter.
Revenue in Gentherm's W.E.T. business climbed 25% last
quarter. The gain was driven by strong automotive volumes in
North America and Asia, as well as continued market penetration
in the automotive cable business.
Analysts polled by Thomson Reuters expect fourth-quarter EPS
at 25 cents, up from 9 cents a year earlier. And they anticipate
89 cents EPS this year with a 33% rise in 2014, alongside revenue
of $648.2 million this year with an 11% gain in 2014.
Gentherm shares touched a multi-year high of 26.52 on Dec. 26
and have roughly doubled since the beginning of the year.