Gentherm Incorporated Stock price
Compare with Peer Group
📊 Peer Group
📈 What is it?
The peer group consists of the companies with the most similar business model. They serve as a benchmark for putting a stock into context.
🧮 How is it selected?
Based on similarity of business model, meaning companies from the same industry with comparable products and a similar customer base. That's the only way to compare apples to apples.
🏛️ Why does it matter?
Whether a stock is cheap or expensive is best judged by comparison. A P/E of 18 or an EV/FCF of 20 can look cheap or expensive depending on the yardstick. The peer group gives you the most accurate one: companies with a similar business model that operate under the same conditions.
🎯 What does it mean for investors?
When a metric sits below the peer average, the stock is valued more cheaply relative to its competitors, and above the average more expensively. A discount to the peer group can be an opportunity, but it can also have a reason (for example lower growth). The comparison is a starting point, not a verdict.
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🧮 Calculation
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🧮 Calculation
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🧮 Calculation
Market Cap = $1.12b | Revenue (TTM) = $1.58b
Market Cap = $1.12b | Estimated Revenue = $1.68b
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🧮 Calculation
Enterprise Value = $1.18b | Revenue (TTM) = $1.58b
Enterprise Value = $1.18b | Forward Revenue = $1.68b
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF)
📈 What is it?
EV/FCF shows how many years it would take for a company to "pay back" its enterprise value using its free cash flow.
🧮 How is it calculated?
🏛️ Why is it important?
It focuses on real cash generation, ignoring accounting noise — ideal for assessing profitability and value based on liquidity, not earnings.
🧮 Calculation
🎯 What does this mean for investors?
- A low EV/FCF may signal undervaluation and strong cash generation.
- A high EV/FCF might reflect weak recent cash flow or aggressive growth expectations.
- Best suited for stable, mature businesses with predictable free cash flows.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🧮 Calculation
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🧮 Calculation
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF)
📈 What is it?
Free Cash Flow shows how much actual cash remains after a company covers its operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
FCF reflects a company’s real financial strength – regardless of accounting profits. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow means the company generates real, usable cash – independent of reported net income.
- It’s often the most reliable base for sustainable dividends and buybacks.
- Declining FCF can be an early warning sign – even when profits appear stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free cash flow margin
📈 What is it?
The free cash flow (FCF) margin shows how much of a company’s revenue remains as actual free cash after covering all operating expenses and capital expenditures.
🧮 How is it calculated?
🏛️ Why is it important?
This margin reflects the true liquidity generated by the business – independent of accounting rules or depreciation. It’s especially relevant for dividends, buybacks, and reinvestment decisions.
🧮 Calculation
🎯 What does this mean for investors?
- A high FCF margin means a company consistently generates strong cash flow.
- It’s a positive signal for financial stability and shareholder returns.
- The long-term trend is key – a declining margin may indicate rising investments or weakening operating efficiency.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Turnover per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
Gentherm Incorporated Stock Analysis
Analyst Opinions
14 Analysts have issued a Gentherm Incorporated forecast:
Analyst Opinions
14 Analysts have issued a Gentherm Incorporated forecast:
Gentherm Incorporated Events
Past Events
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AUG
13
J.P. Morgan Automotive Conference
about one month ago
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JUL
23
Q2 2026 Earnings Call
about 2 months ago
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APR
23
Q1 2026 Earnings Call
5 months ago
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FEB
19
Q4 2025 Earnings Call
7 months ago
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OCT
23
Q3 2025 Earnings Call
11 months ago
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StocksGuide Free
Gentherm Incorporated — J.P. Morgan Automotive Conference
1. Question Answer
Okay. Great. Thanks, everyone. My name is Rajat Gupta, member of the Automotive Equity Research team at JPMorgan. Very pleased to have with us the team from Gentherm, Bill Presley, President and CEO; Jon Douyard, Chief Financial Officer and Treasurer. Bill has a couple of slides that I'd like to run through, and then we'll get into Q&A. So thanks, Bill and Jon.
Great. Thanks. Glad to be here today. So just tell you guys a little bit about Gentherm in case you don't know. We are a $1.5 billion global leader in thermal and precision flow management technologies. Our technology and systems are deployed really through 4 core platforms that would be thermal, fans, which are called air moving devices, pneumatics, which are pillows or baffles where air moves in and out of and valve systems. We have about 14,000 employees worldwide. We operate in just about every region in the world, primarily automotive and medical today, 90% automotive, 10% medical, but we have very definitive plans to diversify into other markets and change our mix to be more favorable than just so in heavy light vehicle.
In automotive, you would know our products as heated cooled seats, heated steering wheels, that's something very typical. We sell to 50 different automotive manufacturers. And we created the market in 1996. And today, we're 50% of the market and tend to hold our position there. Medical, medical is about a $50 million business. We have intentions of growing products that you would know in medical, if you've ever been in surgery would be the warm air blankets that go over you or the heated pads that go underneath you or fluid warming devices that keep temperature of fluids that go into the human body. So all of the core technologies between those 2 businesses are the same.
Look, we're very confident in our growth path, very confident in our growth path for 2 main reasons. Number one is we know the automotive business is going to continue to grow. We're a penetration and take rate story, and we see our market share continuing to grow there in all regions. And number two, we know that our core technology and our 4 core platforms can push into other markets and other products, which we'll talk about in a little bit, but that is proving out to be true in both home and office, where we're gaining market share in home and office and pushing our products into home and office as well as the medical business where we're using core automotive technology to refresh the product line in that business.
We're also very confident in our tangible plans to expand our margin. We have -- at the end of this year, we'll have completed a 2-year footprint consolidation plan where in every region, we're reducing the floor space that we have to maximize revenue and operating income per square foot in our plants. And over the past 18 months, we've been focused on implementing an operating system that's driven by KPIs that maximize utilization of assets. So we're focused on improving direct labor efficiency, overall equipment effectiveness, and we put inventory on what we call a Plan for Every Part model that will lower net working capital.
And the reason that we're doing that is so as the growth that we're confident comes that we can convert that volume at an appropriate conversion rate. So as we were working last year, Jon and I both joined January 1 of last year on putting in the operating system, strengthening the core platforms, we started rebuilding the M&A funnel. And as we were rebuilding the M&A funnel, we had 2 very specific criteria. We wanted companies that were core to what our technology is, which is thermal management or flow management. And we wanted access to attractive markets, which we consider to be commercial vehicle or off-road because we knew we could create a value proposition in those markets.
So in January, we announced a major step in transforming the company. We will be combining with Modine Performance Technologies, who is a large heat exchanger company. And they are primarily in commercial vehicle and off-highway, which is ag, construction as well as power generation, which are large diesel and liquid natural gas generators that provide backup power to critical infrastructure. And that market right now is really being driven by data center expansion. So very excited about what we can do there together.
On day 1, we'll be a $2.6 billion company with a 12% plus EBITDA and a very different market mix. So we will be less than 70% light vehicle at that point and strong cash flow generation. Both of the business units have a very strong line of sight to mid-single-digit growth over market as well as EBITDA expansion plans to 15% plus. So by 2030, we're very confident in our ability to be a $3.5 billion company, generating over $0.5 billion in EBITDA. Once the companies are combined, our leverage will be very manageable. We'll be about one turn levered.
And by 2030, we'll generate $1 billion in cash. And we intend to use that to continue to fund our strategic investment in M&A as well as return some value to the shareholders. So overall, we're at an inflection point. The team is executing the strategy well to diversify our markets and to expand margins. We're excited about where we're going, and we think it's a great time to invest in them.
Great. Thanks, Bill, for that quick overview. Maybe we can just start with Modine directly, and go back to the quarter and the guide. Maybe help us like think through like the strategic rationale. Why was this the right deal at this time? Was it just primarily diversification, cross-sell opportunities, cyclicality? Just curious, help us run through the mechanics and like the timing of the deal.
Yes. So when we started, as I said, rebuilding the M&A funnel, we said thermal management, we said markets that we find attractive. We knew at that time that Modine was planning on divesting of the light vehicle business. So we actually approached Modine and we said we would be interested in the entire Performance Technologies division. And we had a couple of reasons for that. One is we believe that there are substantial cross-selling opportunities. We believe that by us selling into the markets where they are and them selling into the markets where we are and can help them, there's $100 million additional revenue between those synergies to be had by 2030.
Secondarily, we have the opportunity to open up geographic expansion. We've been interested in opening up the India market. We've been pushing on that hard over the last year. And every time we talk to the Indian market, the message is clear. Love your products. We make 20 million 2-wheelers a year here. We can see a market for your valves. We would love to have the cooled seats over here. We see a market for your fans. But if you do not have infrastructure here and you don't have a business development and commercial team here, can't do business with you.
Modine has manufacturing floor space there. Modine has a business development team and a commercial development team there. So on day 1 of close, the Indian market is open to us. So that was another opportunity. And then the third thing was if you look at Modine's heat exchangers and the valve circuits that they play in or how they operate, they need valves and air moving devices to work. So their heat exchangers require 2 of the building blocks that are in Gentherm's portfolio.
So putting those together creates natural synergy. We know that there's valves that they use today that we have in our product catalog. We know that there are opportunities that they don't quote today because they have no valve catalog. And we know that between their heat exchanger technology and our valve technology and air moving devices or fans, we can open up other markets that neither of us are in today. So all the pieces fit, Modine Performance Technologies is a well-run company. The entire division is coming over with leadership intact. So Jon and I felt like now was the right time for all the right reasons. I don't know, Jon, if you want to add anything.
Yes. Just in terms of structure, this is going to be a Reverse Morris Trust. So we announced the transaction in January. We've gotten through all the regulatory approvals. There are a couple of outstanding items in terms of IRS ruling. We announced yesterday that our shareholder vote on this transaction will be on September 10. But we feel like all the building blocks are in place. We've secured committed financing, as Bill talked about in terms of our capital structure, and we have $800 million of secured financing. So we said this is targeted to close early Q4, and we're very much on track for that to happen.
And just to follow up on some of the cross-sell opportunities around the valves, combined with the heat exchangers in power generation. Is the portfolio in good shape today? Do you need to add something to the valve portfolio? Is there any minor M&A required for you to have like a full suite that you can target that market better along with Modine, help us into that?
I mean we'll continue to -- Bill talked about the acquisition being really a platform for growth. I think there are a number of organic opportunities. There's also inorganic. Our products do fit in and drop in today, as Bill talked about, but there's certainly other -- whether it's pressure specifications or composition of valves as examples that we'll look to build out that M&A funnel. And so we will be looking for areas in other markets that are adjacent to where Modine is today and look to invest where it makes sense.
So we do feel the portfolio is in really good shape. There are other things, as Jon said, that we'll look to build out just as we enter the new markets with the specifications that they require.
And so the $100 million number is that -- does that include Power Gen? Or is it more outside of Power Gen at this point?
I wouldn't even talk about it in terms of a market. I'll talk about it in terms of the product line. When we say $100 million, that $100 million will be flowing by 2030, and more than half of it will be in the valve business so that could be a result of opening up India market with 2-wheelers that could be integrating into the Power Gen. So it's broadly applicable.
And one of the other interesting thing was the timing is there's also we were in a cyclical trough on the commercial vehicle side for the last couple of years. Was that like a factor in the decision here as well? Like we're in the cusp of a recovery? Maybe help us talk that aspect.
Yes. So when you look at the portfolio composition of the Modine business, 20% of its light vehicle, 15% of it is power generation. 65% is a split between commercial. Both of those segments, we view it as being at cyclical bottoms or coming close to the bottoms. Based on market indicators, as you listen to other companies talk, the commercial vehicle side, our business, or markets appear to be coming out a little bit sooner. There's been a lot of positive order activity in those types of things that are indicating a recovery from that perspective.
And so as we looked at the transaction, we knew that these markets were soft. We knew there was a recovery. We were happy to not be buying a business at a top, we view it as more of a bottom. And so we see strong growth. As Bill talked about earlier, we've got a clear path for this business to go from $2.6 billion to $3.5 billion plus over the next 4 years and there's potential growth opportunities even beyond that when you think about strength in power generation and how strong the cyclical recovery is in commercial. So I'm very pleased with where the business is in terms of the cycle as we acquire it later this year.
Great. Okay. Going back to like just more near term in the quarter. What stood out for you in the strong results? And just how should we think about the cadence into the back half? What was the most visible -- what are the most visible areas that's expected to drive upside in the more near to medium term?
Yes. I mean we had a fantastic first half when you look at the results, very strong top line, saw improvements from a margin and operational perspective as well. I think a couple of things behind that. We've had very strong award activity over the last 3 or 4 years -- into production launches and driving revenue increases. That's geographically, we saw growth -- very strong growth in China, but also saw growth in North America and Europe. And then from a product perspective, it's really across the board where we've seen strength led by our pneumatic lumbar and massage products that we continue to execute new launches on.
And so I would say the strength is relatively broad-based, but again, a really good first half. We do expect -- we've talked about this year being U-shaped from a margin perspective. And so very strong Q1. That stepped down in the second quarter as we dealt with some of the inflationary issues that are impacting the broader industry as well as inventory adjustments that we're making just given the footprint transitions that we're going through. And so it's a bit of a U-shaped year from a margin perspective, potentially a little bit softer on the top line than what we saw in the first half, just based on timing of OEM production schedules. But we're setting up for a very strong year. We did take up our guidance a couple of weeks back when we announced earnings and so we feel like we're in a position to put together a great year.
Right. And you've also given some initial '27 color. This is also a time of the year when we are starting to look into puts and takes of '27. Anything you would like to highlight there that gives you comfort in that outlook trajectory? Any key regions or products like we should be watching?
Yes. I mean I think when you look at our business, we've had strong awards activity over the last couple of years. The question that we get is how does that translate into revenue? When we announced our guidance for '26 earlier this year, we also put out a '27 revenue number, which was 10% growth off the midpoint at that time. And that's based on very strong visibility that we have today. Again, I would consider it largely broad-based by region and product. Lumbar and Massage will continue to be probably the highest growing product that we have just given where that is in the maturation curve.
But we expect '27 to be set up for a good year. And if you take that forward with mid-single-digit growth, beyond -- above market beyond '27. If you think about some of the adjacent market activity that we've talked about, and it's setting Gentherm up to be a $2-plus billion company here by the -- legacy Gentherm to be $2-plus billion by 2030.
Got it. And maybe since we're on the -- since you mentioned lumbar, massage, there's obviously been like a star of the automotive business. You framed it on a similar adoption curve to climate seats but several years behind. Help us think through like where we are in adoption and penetration today, how do you see the trajectory progressing the next several years? How is the visibility awards even beyond like '28, for example.
Yes. If we -- you talked about the lag and that's spot on Rajat, if you look at climate seats today, heated cooled seats today. They're in about -- we say the take rate is about 50%. About 50% of the seats today have some form of climate control seats. We see that going to 70% by 2030. So there's a very strong push that tailwind that keeps moving there. Our pneumatic solutions are actually displacing the old mechanical -- electromechanical solutions. So if you think about seats in the past, you either had a knob that you turned or you had a button that would move a solenoid, that is being displaced by our pneumatic solutions. Our pneumatic solutions replace all of the mechanical structure with air bladders, and then we have a valve that moves the air in and out of the bladder.
So it's a lighter solution. It's a solution that the OEMs like because the package is easier. And right now, that's at about 15% of a take rate in a vehicle. Lumbar and massage is much bigger, but again, pneumatics is displacing that. So we see the pneumatics doubling by 2030 as well. So the pneumatics adoption curve is probably about 5 years behind the climate-controlled seat adoption curve. So we see that as a tailwind for the next 5 to 7 years.
Got it. I'll just pause there for like a second to see if there are any questions from the audience. None at this time. I'll continue. A persistent like investor perception is that you're mainly like luxury content play. But in the reality, your biggest customers are the high-volume names. How do you reframe that? How much runway there is to move comfort content into more mass market vehicles. Help us like into that.
I mean that mass market adoption is what is pushing the take rates up. If you look at vehicles today, if you've had a heated and cooled seat or heated steering wheel and then you go buy a new car, you don't want a new car that doesn't have it. And just to put it in perspective, I've been traveling back and forth to China for over 15 years. And today in China, you can get a $30,000 car that is loaded with climate comfort features, lumbar and massage features, and that is actually pushing global OEMs like Mercedes-Benz and BMW to improve the take rates on their low trim levels. So it's gone from being kind of a luxury item or a high-end item to being standard cost of entering the market.
And the reason is, is because it provides the consumer with such a direct benefit and experience that the OEMs can price for that. It's tangible. They understand it. OEMs love it, customers demand it. So it's no longer a luxury item. It's becoming mainstream.
Got it. That's helpful. Before we get into Furniture and Medical, I do want to spend some time on that, but I just wanted to go back to China and just the overall growth over market algorithm. I mean, in China, obviously, your growth over market keeps running ahead of your own targets. You stepped up the full year outperformance framing this quarter. What's the normalized growth over market do you want to point investors to? And what's driving that? Is it take rate-driven adoption versus new program launches versus content per vehicle? Just help us think through the pieces there.
Yes. Yes. I mean if you look at our China business, we've had very strong growth certainly through the first half of this year and even prior to that, we expect that -- do expect that to moderate somewhat over time. But we've really seen success in a couple of areas. One, we partnered with local Chinese OEMs and had some significant launches here late Q4 into the first half of this year that are accelerating growth, and we'll continue to do that, particularly as we look for our business to reflect the mix of the China market in terms of whether it's local OEMs or global OEMs.
I'd say the second piece is, Bill gave the example where a $30,000 Chinese OEM vehicles are fully loaded. That's actually driving increased adoption on global OEMs who are selling cars into the country. And so we've seen some great strength coming out of global OEMs from that perspective as well. So I think as you look at those 2 dynamics, they'll certainly normalize over time, but we would expect to be able to continue to grow potentially high single-digit over market in China for the long term.
And the China margins, I believe, are above corporate average levels despite probably lower price points? Like how sustainable is that as domestic OEMs push on price over time?
Yes. I mean we've done a lot of work, and the team has done a great job reacting to the local market, right? We've set China up to operate somewhat independently from the rest of the company, given the industry and market dynamics there, and that's everything from procurement and supply chain into commercial. And so through that, we've been able to work from a pricing perspective and push that through the supply base to manage the margin profile. We are not out there looking to chase every Chinese OEM, right? There's hundreds of OEMs out there. We're looking for the ones where we can have strong partnerships, long-staying power where brand quality, on-time delivery are meaningful, and that's how we've really differentiated ourselves.
And you've also described China for China model, how much of a structural cost and learning advantage just being in that market just give you globally.
Yes. Look, we actually love the Chinese market. We think it's an advantage to compete in the Chinese market. To your point, Rajat, our product line management in China is different from the -- it uses the same core components. We're very sensitive to the Chinese specifications or requirements over there. So what that means is our product is China for China. And why that's important is, one, the Chinese market reiterates their product and refreshes very fast every 18 months. So that gives us our innovations and our technology. Number two, the biggest competition we see are Chinese suppliers. So now we're competing with the Chinese suppliers on their home front. So we're getting a look at them in the most competitive environment before they compete with us in the rest of the world.
And number three, as the Chinese OEMs have moved into other regions like Europe, they're looking for partners that they know and have footprint where they're going, and we're already there. So we view the Chinese market as a great advantage to compete there. We went in saying a lot of Western suppliers make the mistake of thinking if my part is good enough for the West and that's the wrong mindset going in. So we very much have adopted a localization strategy there. We're taking those lessons learned and reading them across the globe as a competitive advantage.
So as these Chinese OEMs like they're exporting more cars, you feel very comfortable that your content will travel with them and you'll have to set up shop in Europe as well?
Yes. I mean we're already in Europe, right? So as we move into Europe, it's just a matter of a BYD or Li Auto calling us saying, "Hey, we're going there, you guys are already there. This is what we're looking at."
Got it. Got it. Just quickly pausing for any questions. Jim?
I just want to get your answer on the -- you've been asked it before, but when we think about Lear and their vertical integration. They've argued, it's translating into being able to move faster in terms of bundling the capability as opposed to you and some of your seat partners. Can you just kind of give us the reality check? No, we're winning business. We're gaining share. Can you just kind of give us kind of a snapshot of that competitive dynamic. Win-win for both of you guys.
I would never speak poorly of a former employer because I did work at Lear for 10 years. But look, this is what I'll tell you. I understand their position for vertical integration. But what I will tell you is it's factually true that we are often sourced before the seat supplier is picked. So we work directly with the OEMs. That's our commercial model. So we're integrating into their product life cycle plan and the reasons the OEM like that is because then they can take our solutions and scale them across multiple platforms and car lines regardless of who the seat supplier is. So that's number one. Number two, we don't run into instances in the market where Lear is not the seat supplier and they're quoting climate or pneumatics. So their vertical integration play is probably absolutely true. The other data points are the other data points.
Got it. That's helpful. I guess moving into some of the adjacent markets, furniture and medical, home and furniture, office furniture scaled remarkably quickly. You added 2 more brands this quarter. You said those wins were more sizable than the initial like KUKA award because they pulled content faster. What does that tell you about the adoption curve? How firm it is in your '28 and 2030 plans?
Yes. So we're very excited about home and office. Home and office was one of the markets where we knew we could -- it was a near adjacent market and create value. And to give you guys an example, we started working on home and office in June of last year, and we were in production by December. So it's 6 months' time to revenue, and they're using the exact product technology and equipment that we supply to automotive. KUKA Home Furnishings was our first award, and it was a relatively small award, but the reason was [indiscernible] product and a single sofa and they said, let's get it out into the market. And if you look at their product, it's actually tagged on their sofa that says Comfort by Gentherm so it's co-branding. Very excited about the market.
Again, I'll use KUKA because we're public with them. They make 5 million sofas a year. And when Jon and I sat down with the CEO earlier this year, he said, Bill, we make 5 million sofas a year. I haven't talked to you about recliners, love seats or mattresses yet, all of which we see an opportunity for your products in. Since then, we've added 4 other OEMs who they'll be announced later this year because they like to go to trade shows and be first to make the public announcement. But -- so we'll have gone from 0 to we're very comfortable with $100 million by 2028. So that's a 24-month ramp up to $100 million from something that was nothing.
The TAM there is quite large, north of $500 million right now from just what we're working on and what we have visibility to, but we expect that to grow. So the products that it's applicable in that we're seeing pull from are our home furnishings, as we've said, sofas, couches, love seats, mattresses has an opportunity and then office furniture, specifically with thermal environments on the desk. You think of how many people have these little space heaters or heaters at their desks, the office companies are saying, Hey, we have power now in our desks to raise and lower them, we can create these micro climates." We're very interested in your technology. So we're so confident that we've actually segregated that business within Gentherm and we put a dedicated commercial and business development team there to go out and continue to grow that.
Is there like extra capital needed?
There's no capital that we've invested. We're filling open capacity, utilizing the same core technology and building blocks.
Yes. And in some cases, we're literally shipping the same part number that we would to auto to a company.
Presumably, these are much better incremental margins than the core?
We like home and office.
That's clear. So on medical, you have cleared the key regulatory milestone for ThermAffyx and expect initial sales shortly. Addressing patient warming and securement during robotic surgery. What does the go-to-market look like across GPOs, distributors, hospitals? How quickly can that consumable model compound into revenue?
Yes. So it will convert into revenue this year. Yes, we're bringing ThermAffyx to market this month. So ThermAffyx actually solves the problem of controlling hypothermia in patients while positioning them on what they would call a Trendelenburg or a robotic surgery table that moves around during surgery to provide the surgeon access or to move organs out of the way. The problem in the past was there was fixation done, but there was no slick way of doing the heat. So what we -- they were cobbling solutions, wrapping blankets around people. So we combined a piece of automotive technology that's used in heat seating with a high-density foam pad that provides fixation and integrated them together with a controller and have taken that to the medical community, and it's been very well received.
We did a product soft launch in April at the Association of Operating Room professionals in New Orleans. And we had 60 people sign up for training in our facility last month on the equipment, 50 have signed up for the trial period already, which we're starting now. And we've already won contracts with GPOs. So that's moving very quickly. But again, it was taking a piece of automotive technology that's that thermal platform, reading it across to an adjacent market and solving a problem that there was no answer for. We've said medical would double in size between 2030 and we expect ThermAffyx to be a big portion of what launches that. Now could the adoption curve be faster? Yes, hard to say, but we will start generating revenue with that product this month. And it will be the first new product in the medical business in over 5 years.
And maybe the IME acquisition, like how does that expand ambitions and opportunity?
Yes. So IME is a leading patient or thermal management system really for post-op or injury type applications. It's a business that is about $17 million, $18 million of revenue this year on a full year basis that delivers EBITDA margins above 20%. So business that we acquired that for us it provides an expansion to the product portfolio that we have across the Gentherm Medical business, a high level of synergy, both they're very focused on the VA, where we don't necessarily have that channel. And so we're opening up access really from a product perspective to both sides. So we view it as an attractive from a return perspective. The business has grown well in the past, and has significant penetration opportunities.
And then the synergy opportunities are certainly an added benefit. But it's very well as we look to continue to build out that medical business and medical portfolio. Bill talked about it being a $50 million business combined today. We expect it to be north of $100 million pushing $150 million by 2030. And so as you look at the mix of the business or the growth opportunities between home and office and medical, you have $150 million, $200 million of better margin growth that's really starting from almost 0 over the next couple of years. And so really excited about the growth in the auto business but also what there is from an adjacency perspective and how it impacts the overall mix and profitability of the company.
Got it. Maybe I just wanted to round out the discussion on margins. Basis points of expansion targeted over the next 5 years. Talk us through the drivers of that, how much is that just footprint consolidation? How much is restructuring-driven? How much is just volume leverage, help us go through the drivers?
Yes. So when you look at -- and I'll break it into the legacy Gentherm business and the Modine business, both have very comparable starting points at about 12%. If you look at legacy, the Gentherm, we're going through footprint consolidation, really in every region across the globe right now. We've done a lot of work on improving pricing as well in our contracts, particularly in the pneumatics business. And as these programs launch, we will see improved margins from that. And then you have the growth lever as the business goes from $1.6 billion this year to north -- by 2030. We think the combination of those 3 gets Gentherm from, call it, 12% to 15% plus. You also have added mix benefits that I just talked about in terms of home and office, medical growing faster than the overall average.
And so we're very confident in the path there. I think as you look at the Modine business, which is call it, $1.1 billion with roughly 12% margins. That is a business where they've done a lot of work, both from a footprint perspective, but also Modine is an 80-20 company. So really focusing on reallocating resources and optimizing business with top customers. And they've done a tremendous job of improving the margin profile while revenue has been down over the last couple of years. And so we feel that business is very well positioned to have accretive margins and grow margins while those markets recover. And so as you look at the combined company, there's a pretty clear path for us to get from where we are today at 12% and north of 15% by the end of the decade.
Got it. Just 1 more quick check for questions. Maybe to end like little more forward-looking. How do you see your product and offering in a world in an autonomous world or robotaxi world? And also, in a world where a lot of these cars, they're just going to have a lot more electronics, sensing, compute. Like how do your products play in there or could benefit from these trends?
Yes. I mean, look, all of that is advantageous to us. I would say the latter half first, where you talked about electronics, where you talk about compute, where you talk about hybrids. All of that will require energy thermal management systems, right? All of the electronics, all of the battery storage systems, all of that needs to maintain an appropriate temperature to operate. And that's right where Modine and Gentherm play perfect together with the heat exchangers and the valves and the air moving devices. So we're very excited about that.
And actually, if you think about robotaxi, if you think about autonomous, the experience for the operator or the experience for the passenger becomes even more critical, right? So we just see that as driving more take more want for the climate and comfort solutions. So we're excited about the future. We think we're well positioned regardless of what it brings, and we're going to stay focused on driving scale on our core technology platform.
Great. That's a great way to end. Just 10 seconds left. So thanks, Bill and Jon.
Great to see you. Appreciate it.
Gentherm Incorporated — J.P. Morgan Automotive Conference
Gentherm Incorporated — Q2 2026 Earnings Call
1. Management Discussion
Greetings, and welcome to Gentherm's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the conference over to Gregory Blanchette, Senior Director of Investor Relations. Thank you. You may begin.
Thank you, and good morning, everyone, and thanks 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 will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance, and actual results may differ materially.
We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other significant assumptions, risks and uncertainties underlying such forward-looking statements. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation.
On the call with me today are Bill Presley, President and Chief Executive Officer; and Jon Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we made available on the Investors section of Gentherm's website. After the prepared remarks, we'll be pleased to take your questions. Now I'd like to turn the call over to Bill.
Thank you, Greg, and good morning, everyone. Let's begin on Slide 3 for an update on our business and the market. Strong commercial execution where we continue to significantly outperform the market, combined with operational discipline, resulted in an excellent first half, positioning Gentherm to deliver a solid year. Based on this performance, we are raising our full year 2026 guidance. We continue to monitor the macroeconomic and geopolitical environment, and at the same time, we are proactively managing inflationary pressures through disciplined commercial actions and operational execution.
As we look ahead, our priorities remain clear. We are focused on executing our strategy, capitalizing on the opportunities within our control and driving sustainable profitable growth for our shareholders. Strategic profitable growth is a cornerstone of our strategy, and we continue to achieve critical milestones that position us for long-term success. We have confidence that Gentherm's automotive business will grow over market, while we continue to build momentum beyond the light vehicle market.
During the quarter, Gentherm products were selected by 2 leading North American-based furniture brands in the home and office market. In less than a year, we have successfully deployed our core technologies with 5 new customers and have visibility to $50 million to $100 million of revenue in this market by 2028. A strong proof point that our technology platforms are readily transferable beyond automotive and that we are moving with speed to capture these opportunities. In the medical market, we remain focused on refreshing the product portfolio and expanding our customer commercial channels. I am pleased to announce that we have received FDA 510(k) clearance for ThermAffyx, an innovative new solution developed by leveraging our proven automotive technology and intellectual property.
This is another powerful example of our ability to transfer differentiated automotive innovations into new markets where they solve meaningful customer challenges. Our patented solutions combine conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement during robotic surgical procedures. We are actively commercializing ThermAffyx and expect initial sales in the third quarter. We are encouraged by the strong market interest and as adoption grows, we believe ThermAffyx has the potential to establish a new standard of care, while further validating the scalability of our technology platforms.
In addition, on July 1, we completed the strategic acquisition of Innovative Medical Equipment. IME is the provider of the ThermaZone therapy device, which is a non-opioid thermal therapy solution designed to support pain management and recovery through controlled hot and cold therapy utilizing thermoelectric devices. It is a great example of a strategic, disciplined bolt-on acquisition that accelerates our strategy. This acquisition builds upon our market-leading capabilities in thermal management, while expanding our patient product portfolio.
IME has a strong growth trajectory and broad reach into Veterans Administration hospitals and clinics, enabling attractive cross-selling opportunities of our combined thermal management portfolio. Please turn to Slide 4, where I will discuss some of our second quarter highlights. The Gentherm team delivered a solid second quarter, reflecting the consistent execution of our strategy and reinforcing our confidence in the path we are on. We secured approximately $690 million in Automotive New Business Awards during the quarter, bringing our year-to-date total to more than $1 billion. These awards were in line with our expectations and reflect continued customer demand for our differentiated technologies.
Just as important, our pursuit pipeline remains healthy, giving us confidence that 2026 will be another robust year for new business awards. Product revenue reached a quarterly record of $416 million, driven by Automotive Climate and Comfort Solutions growth that continued to outpace underlying light vehicle production. This performance exceeded our expectations and demonstrates the value we continue to create through differentiated technologies and disciplined commercial execution. Operationally, we continued to build momentum in the second quarter.
Our initiatives to improve labor efficiency, equipment utilization and inventory management are delivering measurable results, while the operating system we are implementing is driving greater rigor, consistency and accountability across the organization. These improvements are strengthening our foundation to expand margins, positioning us to deliver higher cash flow conversion over time. Overall, we are executing well across the business. We are winning with customers, improving the quality of our operations and investing in the capabilities that will support profitable growth.
Moving to Slide 5. As we approach the close of our combination with Modine Performance Technologies, I am increasingly confident in the strategic value this transaction will create. Together, we are building a fundamentally stronger company, one with greater scale, broader capabilities and a more diversified portfolio positioned to deliver sustainable long-term growth. This combination transforms Gentherm into a global leader in thermal and precision flow management solutions. By bringing together 2 highly complementary businesses, we significantly expand our product portfolio of mission-critical technologies, strengthen our innovation capabilities and create a platform with greater opportunities to serve our customers across a broader range of applications.
Equally important, this transaction meaningfully diversifies our end market exposure. Our light vehicle mix will decrease from approximately 97% today to roughly 63%, while expanding our presence in attractive growing markets such as commercial vehicle, off-highway and power generation. This creates a more balanced business with multiple growth engines. The combined company will have a clear path to exceed $3.5 billion in revenue by 2030 with an attractive financial profile, supported by margin expansion, robust cash flow generation and disciplined capital allocation.
Together, these strengths position us to invest in future growth, realize the benefits of the combination and create long-term value for our shareholders. I am excited about what lies ahead. The strategic rationale for this combination is compelling. Our integration planning is progressing well, and we believe the combined company will be better positioned than ever to deliver differentiated solutions for customers and superior returns for shareholders. I will now hand it over to Jon to discuss an update on our integration activities and highlights for the quarter.
Thanks, Bill. Now turning to Slide 6. Since our last update, we have continued to work closely with the Modine team and have made significant progress towards the closing of the merger. Our primary focus is to ensure Performance Technologies can operate as a stand-alone division of Gentherm on day 1 and that we are positioned to deliver on value creation opportunities. Based on progress to date, we expect closing of the transaction to occur early in the fourth quarter, as we have completed many key sign-to-close deliverables and expect to close out the remaining items in the coming months.
As Bill noted, we remain excited about the combined business, and we'll keep you -- we'll continue to keep you updated as we approach closing. Please turn to Slide 7 for a review of the second quarter financials. Revenue of $416 million was up 11% compared to the same period last year. Revenues, excluding foreign currency translation, increased 9.5%, exceeding our expectations, driven by higher automotive volumes. Automotive Climate and Comfort Solutions revenue increased 14.1% year-over-year or 12.7% ex-FX and included strong outperformance across all regions and product categories.
From a product perspective, Lumbar and Massage Comfort Solutions delivered another strong quarter of revenue growth at 38% year-over-year. Geographically, China performed well once again with trends from recent quarters continuing, including production increases from domestic Chinese OEM program launches and higher take rates from global OEM customers. Turning to profitability. We delivered $48.8 million of adjusted EBITDA or 11.7% of sales compared to 12.2% in the second quarter of last year. Strong operating leverage and benefits from operational excellence initiatives were offset by anticipated headwinds related to inflation recovery timing and planned footprint-related inventory reductions as well as warranty accruals in both our automotive and medical businesses.
On a reported GAAP basis, diluted earnings per share were $0.14 in the quarter. This was impacted by approximately $0.55 per share related to merger and restructuring expenses. Adjusted diluted earnings per share were $0.75, up 39% compared to $0.54 per share in the second quarter of last year. Adjusted free cash flow was approximately $16 million year-to-date, in line with our expectations and historical seasonality, while CapEx was $14 million, down $9.5 million compared to the prior year as we continue to scrutinize spend. Moving to the balance sheet. We ended Q2 with net leverage of 0.3 turns, and we had liquidity of $502 million.
Please turn to Slide 8, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies. Given our strong first half performance and second half revenue visibility, we are raising our 2026 full year guidance for revenue, adjusted EBITDA and adjusted free cash flow. At the midpoint, we expect revenue of $1.6 billion, representing roughly 5% growth for the year compared with a decline in light vehicle production forecast of approximately 3%, positioning us to deliver mid- to high single-digit revenue growth over market.
We expect adjusted EBITDA to be in the range of $185 million to $200 million, implying a midpoint margin of approximately 12%. As previously discussed, we expect margins to remain lower in the third quarter before rebounding in Q4. Turning to cash. We estimate adjusted free cash flow between $85 million and $100 million, with CapEx in the range of $45 million to $55 million or approximately 3% of sales. Overall, we delivered strong first half results and are pleased to raise guidance for the full year. Our recent trends indicate that Gentherm is at an inflection point for growth. We will continue to execute with discipline, while remaining focused on strategic actions to drive long-term value.
Now let's turn to Slide 9. Before turning it back to Bill, I'd like to reinforce our financial flexibility and strength, which supports a disciplined and balanced approach to capital deployment. In the quarter, we secured $800 million of committed financing through the combination of a $550 million 5-year revolving credit facility and a $250 million term loan that supports the Modine transaction. Upon closing, we expect our net leverage ratio to be approximately 1 turn, providing ample liquidity to deliver on our strategy. Our target is to maintain a net leverage ratio of 1x to 1.5x over time.
In addition, we expect that the combined Gentherm and Modine business will generate significant cash flow in the coming years. Based on the forecast supporting our 2030 financial targets, we would expect to generate over $1 billion of cumulative unlevered free cash flow through 2030. We believe we have the necessary capacity to execute the Modine merger, support the combined business and efficiently deploy capital to drive shareholder returns. As we think about priorities, first, we will invest organically with a focus on return-driven investments that will drive profitable growth or expand margins.
We recently demonstrated this capability through our successful entry into the home and office market as well as the upcoming launch of ThermAffyx. Second, we remain committed to returning capital to shareholders through repurchases, particularly in times of value dislocation. Earlier today, we announced a new stock repurchase authorization of up to $400 million over 3 years. This authorization, which is nearly 3x our previous program, reflects our confidence in the cash generation of the combined company and provides additional capacity to opportunistically return capital to shareholders.
It is our current expectation that we will be repurchasing shares upon the closing of the Modine transaction. Lastly, we believe that M&A will serve an important role for the company in achieving our strategic growth priorities. We continue cultivating a wide range of opportunities that are aligned with our core technology platforms and attractive growth markets outside of light vehicle. While at the low end of our targeted range, our recent acquisition of IME is a great example.
From a strategic perspective, IME brings highly complementary products, technology and commercial channels as well as needed scale to Gentherm's medical business. IME also brings an attractive financial profile with projected 2026 full year revenue of approximately $17 million and 20% EBITDA margins. As part of Gentherm, we believe that IME can double its revenue and reach at least high teens ROIC by 2030 with returns covering cost of capital by year 2.
Moving forward, we will continue to target M&A opportunities that are strategically and financially compelling as a lever to accelerate our strategy and enhance returns. In summary, the combination of a strong balance sheet, significant free cash flow generation and a disciplined approach to capital deployment positions Gentherm to simultaneously invest for growth and return capital to shareholders, all while continuing to operate in a comfortable leverage framework. We believe this ultimately results in substantial long-term value creation for our shareholders.
I'll now hand it back to Bill for some closing remarks.
Thanks, Jon. I am pleased with the progress we have made in the first half of the year and even more excited about the opportunities that lie ahead. We are executing our strategic priorities, improving the performance of our operations and continuing to strengthen the foundation of the business. Every quarter, we make tangible progress that reinforces our confidence in the strategy we have in place. Looking forward, we remain focused on disciplined execution, profitable growth and creating long-term value for our shareholders.
With the momentum in our core business, the expansion of our technology into new markets and the transformational combination with Modine Performance Technologies, we are building a fundamentally stronger company, one that is more diversified, more resilient and better positioned to deliver growth, margin expansion and increased cash flow. I am confident that we have the right strategy, the right team and the right capabilities to capitalize on the opportunities ahead and deliver value for our customers, our employees and our shareholders.
With that, I will turn the call back to the operator to begin the Q&A session.
[Operator Instructions] And our first question comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group.
2. Question Answer
Nice job. Good to see the company stacking good quarters and execution on top of each other here. I want to start with the core auto business. Really nice auto awards in the quarter and outperformance. Curious if there are any key programs or product categories to call out within those auto awards and then how you feel about the RFP and kind of active pipeline that you guys are bidding on right now?
Yes. I would say, Ryan, the awards were pretty well distributed. I wouldn't call any specific region, program or customer that really drove it. So I think the commercial team on the auto side did a really nice job of texturing some broad wins there. And actually, it was exactly what we expected. If you remember when we talked, there was some conversation around Q1, was that too light? And we told you, don't worry, we have a good pipeline. And we remain confident in the second half. So it still looks like another robust year for awards.
That's great. Switching to medical IME acquisition. I don't believe I saw or heard what were the -- what was the purchase price of that or terms around that? And then, Jon, just to be clear, the 2026, that's a full year $17 million, 20%, right? So assume half of that for back half?
Yes. So -- the purchase price is $34 million. So as we look at the transaction, it's a $17 million growth business today, obviously, pro forma for the year. We expect significant growth as we talked about the business doubling here over the next couple of years. So we really like the growth profile of the business and how it fits internally. Profitability, 20% EBITDA with opportunity to expand from that perspective as well. So we will contribute in the second half of the year contemplated in what we put out from a guidance perspective, but really think it's a good fit for where the medical business is and what it needs to scale and grow here.
And then as it relates to ThermAffyx, the commercial launch underway, any early demand metrics, indications, anything you can share kind of what you've seen thus far from the market for that product? And then I know you mentioned complementary sales channel distribution, but does IME add anything from a revenue synergy potential just from whether it's sales distribution or customers or anything that kind of accelerates potentially what you're previously expecting from ThermAffyx and your core medical business?
Yes. So on the ThermAffyx side, as said before, the 510(k) clearance, all good. We are now producing. We are in the clinical trial period. So we are in the process of getting ready to ship to hospitals over 50, as we talked about before with the clinical trials. So we're excited. Demand looks strong. Everybody is excited about the product. They like the problems that it solves that they currently have in that space. So we're very optimistic on that one.
I think the great thing about IME to put it in perspective, so IME does hot-cold therapy utilizing thermoelectric devices, which is kind of the core of how our business was born, if you remember. But IME is largely in the Veterans Administration hospitals and clinics. So IME serves over 200 Veterans Administration hospitals and clinics, and they have almost 0 channel access to where we are today. Conversely, we serve hospitals through select partnerships, distributors and GPOs, and we have 0 access to the Veterans Administration today. So there's a very, very strong cross-selling opportunity between those markets.
That's great. Nice work, guys. And it appears like the PT business keeps getting stronger by the day, and that acquisition feels even better as you progress towards close there.
Thank you.
Thanks, Ryan.
And our next question comes from the line of Nathan Jones with Stifel.
I'll start with questions on the auto business. Obviously, you've outperformed your own outperformance targets relative to auto production here with close to double-digit above-market performance in the quarter. And I think you talked about mid- to high-single digit for the full year outperformance, whereas you've been talking about mid-single digits. So just looking for some more color on where in the world that outperformance came from, how sustainable you view that outperformance? And just any other information you can give us on where you're beating your -- even your own targets in those markets?
Yes, Nathan, I think -- I mean, if you look at growth, as we talked about, it's relatively broad-based across both products as well as regions from an outperformance perspective. We point to China being really strong based on launches, based on increased take rates, but it's really, I would say, broad-based. I think as we get to the second half of the year, you do run into some tougher comps that are impacting year-over-year growth rates. But we've consistently said that this business can grow mid-single digit over market over time, and we're very confident in the ability to do that based on the visibility that we have as well as just the industry dynamics in terms of penetration and take rates so -- or adoption.
And so we would expect that mid-single digits. It might not be linear every single year. Some might be a little higher or lower, but very confident in the trajectory of the automotive business and the opportunity to grow there.
Okay. I guess a second question on the home and office business and the new customer wins there. I think you said these ones are in sort of North America. I think previous wins have been at least with manufacturers in China. So it's nice to see it broadening out there. Can you just talk about the materiality of it, how much it might add to revenue and what the trajectory is there? Any changes in targets by 2028 or estimates of what the TAM is here?
Yes, Nathan, I would say that the -- so yes, you're right. The first awards that we announced and we were public with were KUKA, and they're a Chinese-based manufacturer, one of the largest in the world. The other 2 that we've now added in North America are very large. They'll name publicly before we can name. So announcements will come out that they are, but they are quite large. What I would say is the wins with them were more sizable than what we had won with KUKA, but that's a result of them pulling more content quicker.
KUKA's strategy was to be first to market with Gentherm. So we anticipate that, that will continue to expand. Overall, we're excited about the home and office market. Latest data that we have in talking to the manufacturers, as you know, the TAM in that market for us is over $500 million. The TAM is over $500 million. So we're still confident in that number that we put out there, $50 million to $100 million by 2028, but see no possibility of not being at least at $50 million.
And our next question comes from the line of Rajat Gupta with JPMorgan Chase.
Congrats on the good execution here. It looks like the full year guide raise was primarily driven by the second quarter performance. I'm curious -- is there some conservatism baked in, in the second half yet? Or are there any reasons that would suggest a slowdown in the organic growth cadence? Anything you can elaborate on that would be helpful. And then just given the strong start to '26, the strong bookings in the first half, would you be willing to update your original '27 revenue guide at all? And I have a follow-up.
Thanks, Rajat. I think the -- in terms of the '27 number, we're not in a position to update that at this point. I think we feel highly confident that we'll be at the $1.7 billion or higher as we head into 2027. I think as you look at the second half of the year, you probably wouldn't be the first person to call us conservative. But we're looking at -- there's certainly a level of uncertainty that's out there. We do have some of our runoff businesses, which has more of an impact in the second half of the year than the first half in terms of end of program on some of those product lines. So that's a bit of a headwind. But based on the visibility we have, we're comfortable with where the midpoint guidance is at this point.
Understood. That's helpful. And then just on like the -- obviously, the acquisition is due to close pretty soon. I'm curious, as you've done more work and learn more about the business behind the scenes, any update to what the cross-sell opportunities might be, the synergy opportunities might be on the commercial side that you may have learned or has come up in recent months? Just curious if that pipeline has grown as you've learned more about the opportunity.
Yes. I would say we've become very much very confident in our ability to capture the $100 million plus that we talked about by 2030 in cross-selling. It goes back really to the 3 pillars we talked about, right, cross-selling into the other markets, opening up the India region for us, which we currently are not in today as well as product development and integration between the 2 companies. So very confident in the $100 million-plus number. And as you and I have talked before, over half of that will come from the valves business, which is a business that we find very attractive.
And our next question comes from the line of Glenn Chin with Seaport Research Partners.
So yes, congrats on the IME acquisition. Interesting that it's thermoelectric based. And as you mentioned, what the technology that Gentherm was born from. Is that to say it's -- and pardon me for asking because I'm not an engineer, but I guess it's predicated upon the Peltier effect that's basically the use of electric current to create cooling and heating.
That is correct, Glenn. It is based on the Peltier effect and the thermoelectric device either heats or cools the fluid that is flowed through the ThermaZone device. I get my thermos mixed up.
Okay. And so is that to say could this have been developed in-house then, Bill?
I mean, certainly, the core technology is there to develop it in-house. We still have thermoelectric devices that we have, right, and that we use for active heating and cooling. So IME is a super strong fit for our core technology, super strong fit for our patient thermal management, which is based on thermoelectric devices. And we're super excited about the cross-selling and our access now to the Veterans Administration and providing IME with access to our channels.
Yes, it certainly sounds promising. And then I mean just searching for the device. And again, pardon me, I'm not a medical professional either, but it seems like there are a lot of competitor type devices, and I say that somewhat loosely. Are these competitor type devices competitive?
Certainly, they're competitive. Just by the nature of that, they're competitive type devices. I would say that IME has shown a strong growth trajectory and very strong market adoption. So what's really interesting about this technology is it's pain management without opioids, right? And that's really the magic of the device, as it provides that. So we see a lot of potential in the market. We see a strong growth trajectory. And again, we're excited about taking this into our existing channels.
Okay. Very good. And then just a question on the margin performance. You guys cite higher warranty accruals in both automotive and medical. Is that due to higher incident rates? And is it something we need to be baking in going forward?
Yes, I'll run right at that one. And the reason we called that out and put that in there was because we didn't want it to really -- we don't want anything to mask the operational progress that we're making in the discipline. We had an instance on the auto side last year, when we started setting up our key performance indicators to really started tracking things as a percentage of sales and driving numbers into the operations, we observed some trends in our KPIs that made us look at a product and make some mechanical robustness improvements in that product late last year.
It's a very specific product with a specific customer. In the first half, we saw increased claims. And you'll see that this actually goes back to 2020. So we made the decision based on the robustness improvements we've made last year, plus the trends that we saw to get this out in front of us and take the accrual. So we don't view this as something that continues in the run rate.
Thank you. And with that, this does conclude our question-and-answer session as well as today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful rest of your day.
Gentherm Incorporated — Q2 2026 Earnings Call
Gentherm Incorporated — Q1 2026 Earnings Call
1. Management Discussion
Greetings, and welcome to the Gentherm First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gregory Blanchette, Senior Director, Investor Relations. Thank you. You may begin.
Thank you, and good morning, everyone. Thanks 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 will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance and actual results may differ materially. We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other significant assumptions, risks and uncertainties underlying such forward-looking statements.
During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation.
On the call with me today are Bill Presley, President and Chief Executive Officer; and Jon Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we made available in the Investors section of Gentherm's website. After the prepared remarks, we'd be pleased to take your questions. Now I'd like to turn the call over to Bill.
Thank you, Greg, and good morning, everyone. Let's begin on Slide 3. I want to start by saying that the Gentherm team demonstrated strong execution in the first quarter. Over the last year, we spent a lot of time improving our operating system. We've been focused on fundamentals that are core to operating in an efficient, consistent manner in all aspects of the business. I visited Gentherm sites in multiple countries over the last 3 months and was able to observe changes in how we operate in all locations versus last year. The teams are engaged in targeted actions for growth in new markets, factory floor space occupation and efficiency are increasing and the teams are adopting tools we put in place to drive financial rigor. I was pleased to see these efforts starting to produce tangible results in the quarter.
The first quarter also demonstrated our ability to execute in a dynamic environment, and we are confident in our ability to continually improve our operations. After spending the year with the team putting tools and processes in place, we concluded that realigning our operating model and structure will drive increased speed and transparency across the organization. Therefore, during the quarter, we initiated an organizational realignment that reduced spans and layers to increase agility and provides a concentrated focus on internal improvements as well as the ability to accelerate our growth platforms. This realignment positions us well to deliver key financial and operational priorities going forward.
Strategically, this quarter marked an inflection point in our journey to transform Gentherm. We took action to position the company for sustainable, profitable growth with our announcement to combine with Modine Performance Technologies. This transaction transforms the company with an expanded product portfolio and broader end market exposure. We continue to execute our priorities and strategy even though the environment around us remains dynamic. Since our prior earnings call, the macro and geopolitical environment has changed significantly and is creating an increased level of economic uncertainty. Despite these recent events and other macro issues over the last year, light vehicle production schedules have remained relatively stable, which has allowed us to focus on operational improvements.
We continue to assess key data inputs, including dealer inventory levels and customer schedules as well as collaborating directly with our customers to get real-time insights on future demand. That said, headwinds are beginning to emerge across the globe. These include direct cost increases in logistics due to lane disruptions and fuel surcharges as well as cost increases of petrochemicals used in raw materials. In addition, we are now starting to see cost inflation flow through to other materials, which are being indirectly impacted due to increases in processing-related costs.
We continue to monitor developments in real time, and we are working closely with our suppliers and customers on a variety of mitigation strategies. We are preparing to implement pass-through or reimbursement mechanisms on applicable costs. We have actions ready to execute both commercially and operationally. We will remain agile, and we are confident in our ability to navigate through volatility and uncertainty.
Now please turn to Slide 4, where I will discuss some of our first quarter highlights. The first quarter financial results were above our expectations. We secured $395 million of automotive new business awards, which were well balanced across region, customer and product. The pursuit pipeline looks robust for the remainder of the year. We made significant progress on our organic growth initiatives, including key announcements with KUKA Home and our new medical product, ThermAffyx, both of which I will discuss further in a few moments.
Our product revenues for the quarter were $394 million, a quarterly record for the company, driven by strong Automotive Climate and Comfort Solutions growth over market. We delivered solid first quarter margin performance, driven by continued progress on our operational excellence initiatives. The business systems we put in place are beginning to have a meaningful impact, driving improved execution and expanded margins. As we build on this momentum, we remain confident in our ability to deliver sustained performance improvements over time.
Turning to Slide 5. One of our top priorities over the last year has been scaling our existing products and technologies with new markets, new applications and nontraditional customers deliver strategic profitable growth. During the first quarter, we continued to prove the broad applicability of our technology beyond automotive through our achievements in home and office as well as medical. We officially launched and began supplying production parts to KUKA Home, which is a leading global furniture manufacturer. Since mid-2025, Gentherm played an important role as a collaborative innovation partner with KUKA, which led to co-branding of Enhanced Comfort by Gentherm. The launch this quarter also demonstrates our ability to generate revenue quickly in home and office market by utilizing our core assets and standard kit methodology to maintain the performance, quality and consumer experiences established in automotive applications.
In March, Jon and I spent time in China at KUKA headquarters with their CEO and senior leadership team discussing our partnership. There is mutual interest in scaling Gentherm products across additional KUKA Home platforms. Beyond KUKA, our momentum in home and office is accelerating. Earlier this month, we were selected by a leading North American furniture brand to supply our climate and comfort products. This marks our fourth consecutive quarter securing a new home and office customer. We anticipate starting production with this customer later this year.
Separately, in our medical business, we announced our FDA 510(k) submission for a new innovative product that is expected to redefine the standard of care for robotic surgeries. Our patented ThermAffyx system combines conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement on the inclined surfaces used during robotic procedures. We have been vocal about the importance of refreshing our product portfolio in the Medical segment and believe this innovative new solution will be a key contributor to accelerating our annual revenue.
The regulatory approval process remains on track, and we expect the ThermAffyx system to begin generating revenue later this year. Overall, we remain committed to repositioning the company for growth by taking our technologies outside of light vehicle markets, and we achieved several important milestones during the quarter.
Let's turn to Slide 6. In January, we took a major step in transforming Gentherm by announcing our agreement to combine with Modine Performance Technologies, creating a market leader in thermal and precision flow management. The more we work with the Modine team, the more excited I get about bringing this business into the Gentherm family. This is a well-run business with a great team. Through our work together, we are learning techniques and processes that Modine used to transform their business, and we intend to harness those lessons for the good of Gentherm. We have emphasized the importance of expanding our business beyond the light vehicle segment, and Modine is accelerating our access to critical growth markets, including power generation, commercial vehicles and heavy-duty equipment.
This intentional shift in our end market exposure positions us for increased value creation. We are particularly excited about the new product and market opportunities this partnership unlocks and are more confident than ever in our combined growth trajectory. When we map out the next 5 years as a combined company, we see a clear path to generating $3.5 billion in revenue and more than $0.5 billion of earnings. I will now hand it over to Jon to discuss an update on the transaction and highlights for the quarter.
Thanks, Bill. Now turning to Slide 7. Since the announcement, we have been working diligently with the Modine team to define and execute a project plan that ensures a timely, seamless closing of the merger. We have established an integration management office comprised of key stakeholders. And in March, we held a kickoff Integration Summit with business and functional leadership from both teams at our headquarters here in Michigan. Through the summit and ongoing interactions, the teams are focused on ensuring that the business can operate effectively on day 1 and that we are well positioned to deliver on value creation opportunities post merger. As we talked about that announcement, we intend to operate Modine Performance Technologies as a stand-alone division of Gentherm, similar to how the business is managed within Modine today.
Given this structure, the primary integration areas relate to corporate systems and functional support, not on highly complex integration of facilities or organizations. In terms of other recent transaction highlights, we were pleased to receive HSR clearance to close from the Federal Trade Commission in March, a key regulatory milestone. Our teams continue to prepare for the S4 filing and the inputs into that process remain on track. Overall, we still expect this transaction to close later this year and are excited about the potential for the combined business. We will continue to keep you updated as the year progresses.
Please turn to Slide 8 for a review of the first quarter financials. Overall, first quarter results were above expectations as revenue was higher, driven by stronger automotive volumes and outperformance in China. Revenue of $394 million was up 11.3% compared to the same period last year. Revenues, excluding foreign currency translation increased 7.2%. Automotive Climate and Comfort Solutions revenue increased 13.6% year-over-year or 9.8% ex-FX as we continue to see strong growth over market across all regions and product categories. We had particularly strong performance in China during the quarter, driven by the ramp-up of production on new program launches with domestic Chinese OEMs. This comes as a result of our intentional focus to shift revenue mix and better represent the local market.
In addition, we saw increased take rates in China from global OEM customers as they look to remain competitive in the market. From an automotive product perspective, it was another strong quarter of revenue growth for our lumbar and massage comfort solutions, which grew 33% year-over-year. As we have discussed in the past, we expect to see the strong growth trend continue in this product into the future as we continue to launch previously won programs.
Turning to profitability. We delivered $49.3 million of adjusted EBITDA or 12.5% of sales compared to 11.1% of sales in the first quarter of last year. The 140 basis point increase was primarily driven by operating leverage and strong net material performance, partially offset by annual price reductions and higher labor costs. On a reported GAAP basis, diluted earnings per share were $0.14 in the first quarter. This was impacted by approximately $0.70 per share related to merger and restructuring expenses. Adjusted diluted earnings per share were $0.84, up 65% compared to $0.51 per share in the first quarter of last year.
Cash flow continues to be a point of emphasis for the company. And while we did have a typical seasonal operational cash outflow, the team delivered an $8 million improvement year-over-year. Additionally, CapEx purchases of $5.6 million were down $9.2 million year-over-year as we continue scrutinizing new investments. From a balance sheet perspective, we ended Q1 with net leverage of 0.2 turns, and we had liquidity of $456 million, giving us ample capacity to support our strategic priorities moving forward.
Please turn to Slide 9, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies. As Bill mentioned in his opening remarks, the operating environment has been dynamic since we introduced guidance in February. Despite the stronger first quarter performance, given the high level of uncertainty in the macro environment, we are maintaining our full year guidance at this time. We expect revenue to be between $1.5 billion and $1.6 billion, representing approximately 3% growth for the year against the recent industry report where our key markets are expected to decrease approximately 2%, positioning us to deliver mid-single-digit revenue growth over market.
For adjusted EBITDA, we expect to be in the range of $175 million to $195 million, which implies a midpoint adjusted EBITDA margin of approximately 12%. From a quarterly perspective, we expect the revenue profile to be spread fairly even throughout the year. However, we do expect margins to be depressed in the second and third quarter, and there are a couple of factors driving this. First, building on Bill's earlier comments, inflationary impacts stemming from the current geopolitical environment are expected to drive approximately $20 million in incremental costs during the year, recognizing that this estimate remains fluid and is evolving real time.
Although we expect to mitigate a meaningful portion through commercial and operational initiatives, including benefits from the realignment, timing differences between cost realization and recovery are likely to create additional margin pressure. Additionally, as we work to finalize our global footprint transition later this year, we will begin depleting our inventory bank build in the second quarter, which will have a negative impact to gross margins.
Turning to cash. Our estimate of adjusted free cash flow remains between $80 million and $100 million with CapEx in the range of $45 million to $55 million or approximately 3% of sales. Overall, we were pleased with our start to the year and are focused on strategic actions to accelerate profitable growth and reinforce operating discipline to drive long-term value.
With that, I will hand it back to Bill for some closing remarks.
Thanks, Jon. Turning to Slide 10. I want to outline what we've accomplished, the key priorities today and how we will evolve. We are on a multiyear journey to deliver sustainable value creation. 2025 was reinforcement of the foundation that we will build on going forward. We established our strategic framework to deliver shareholder value, which focuses on profitable growth, operational excellence and superior financial performance. This drives everything we do. To drive profitable growth, we simplified and segmented into 4 technology platforms to clearly define our core competency and identify attractive markets outside of the light vehicle market where our products are applicable. This product and market alignment was a catalyst for reshaping our M&A funnel.
We also saw opportunities in the business to operate more efficiently. During 2025, we focused on building core components of an operating system through business process standardization and increased utilization of assets to drive margin and cash generation improvements. We started reaping some of the benefits of that stronger operational rigor during the first quarter of 2026. With this foundation now in place, Gentherm is at an inflection point. The addition of Modine Performance Technologies accelerates our transformation. This action is the first step in establishing a product portfolio of mission-critical components across broad end markets. Our shared core competency of precision thermal and flow management allows us to scale into attractive markets together through cross-selling and integration.
In addition, our complementary product expertise allows us to gain broader customer insights and provide more integrated solutions to pursue new high-growth opportunities. Gentherm continues to focus on the core business as we are confident in our ability to scale revenue and expand margins. We are actively launching products into new markets to deliver profitable growth while realigning the organization to drive speed, efficiency and accountability. As we move into the future, Gentherm will scale into attractive markets while improving profitability and cash flow, and we will leverage best practices from Modine Performance Technologies to outperform our peers.
Despite the risk we may have in front of us during the months ahead, we are confident we have the right strategic plan established to drive performance improvements in the long run. We have built the foundation, we have a clear vision, and we are focused on execution. We will continue our relentless pursuit of building a more resilient company. We are at the beginning stages of transforming Gentherm into more than an automotive component supplier, where we will grow sustainably with differentiated and scalable technologies.
With that, I'll turn the call back to the operator to begin the Q&A session.
The first question is from Nathan Jones from Stifel.
2. Question Answer
I guess I'll just start off with a question about the $20 million incremental costs you talked about. Can you just maybe provide us a little more color on how much of that passes through contractually to customers versus what you've got to go out and renegotiate versus potentially methods that you can offset that internally? Just any more detail you can give us on that.
Yes. Contractually, we're not on a simulator or escalator with any customers just because the scale of what we buy in any one product isn't large enough to be meaningful to them. So we'll have to go out, Nathan, and we'll have to work through recovery mechanisms with the customers on all of that. We will give some perspective...
And so you'll -- sorry, the cost will hit pretty much immediately or it will take a couple of quarters to catch up with that pricing?
Yes. Timing-wise, we expect the costs to start hitting in Q2. So we think Q2 is going to be a definition of recovery mechanisms with the customers that we agreed to. And then there'll just be that timing disconnect that will start flowing in Q3, Q4.
Okay. I guess my second question then I'm going to ask one about the internal operating structure changes. I think those are kind of important things to highlight. You talked about reducing spans and layers to increase focus. Can you maybe just provide a little more color on what you're doing there, how you think that catalyzes either whether it's growth or it's margin expansion or it's both? Just more color around those changes and how you think they improve the business, please?
Yes, absolutely. So it's intended, first of all, to do a couple of things, as we mentioned, and I'll get into some quick detail for you, Nathan. A lot of -- if you remember, Jon and I both started at the same day last year, right? So we took a year to thoughtfully understand the plumbing of the organization and how things were running. And one of the big messages we got from the broad organization was there's too many hoops. There's too many barriers. We're not moving fast enough. We're not making decisions fast enough. So we went through an organizational realignment, and we realigned it really based on product.
So we segmented out valves as a business unit. So now we have Climate Comfort, Valves and Medical as a business unit within Gentherm Technologies. And over top of that, we'll have a very lean corporate structure. So that was intended to put focus on high-growth opportunities that was intended to drive continual improvement on key initiatives. So we're more aligned functionally now as opposed to a complicated matrix across regions. And we did -- we do expect that, that will have cost benefits. But it primarily was to segment the business to focus on high-growth opportunities, to continue to push the operational improvements and the sustainability there. For the year, though, it will -- annual run rate will be about $10 million-ish better on the OpEx, and we expect half of that to hit this year.
The next question is from Ryan Sigdahl from Craig-Hallum Capital Group.
I want to start with the outperformance versus light vehicle production. This is as strong as we've seen in many years here, which was nice. Curious when I look at guidance, so 14-point outperformance in Q1, you're guiding to 5 points on the year. It implies a pretty meaningful deceleration kind of throughout the rest of the year versus the industry. Curious if you could elaborate on what the outperformance in Q1 was, why that's going to decelerate, anything from a onetime production orders, et cetera, standpoint?
Yes. We wouldn't point to anything from a onetime perspective, and we really did see strength across all products, all regions. We pointed to China in particular. There was some outperformance there based on some launches that we did in the fourth quarter for some of the domestic OEMs that continue to show strength through the first quarter. As we look at the balance of the year, we certainly do not expect to outperform in the teens range. We'd expect it to moderate. I think at the top end of our guidance, it could push into that high single-digit range. But there's nothing specific to point to in terms of Q1 outperformance other than really just broad growth across regions and products.
And then GM yesterday or earlier this week, I guess, is suspending its next-gen electric truck program that was set to launch or start in 2028. Curious how much Gentherm's award backlog was from this program? Do you think you can offset that from a shift with more volume back to the ICE programs? Just curious kind of net positive, neutral, negative, how you guys think about that?
Yes. Overall, we just think it's neutral for us, Ryan. We've also won the ICE content for the platforms. So we just anticipate and based on everything we're seeing, the ICE volumes will compensate for the EV losses.
Very good. Maybe just a quick clarification, and then I'll hop back in the queue. But the $20 million of cost increase, is that a gross number? Or was that net of mitigation?
That's a gross number and our best view of annualized impact or annual impact based on what we see today.
The next question is from Matt Koranda from ROTH Capital Partners.
Not to beat the dead horse here with the $20 million on incremental cost that you highlighted. But I guess I was curious, how much of that is incremental shipping versus material cost inflation that you're factoring in? And then on the pricing front, is it all offset via pricing? Or are there operating efficiencies that you think you'll offset the $20 million with as well?
As you look at it, certainly a big piece of it is freight related. I'd say maybe 1/3 of it with the rest coming from commodities, and it's commodities that Bill -- or the product that Bill called out specifically, but it's also incremental processing costs. And so there's a downstream impact from increased petroleum prices. I think as we look at it, our mechanism from a recovery perspective will primarily be from recovery with the customer. We did point to the fact that the $5 million benefit that Bill talked about from the realignment will likely help offset pieces of that as well. I think we'll continue to push operationally, but we've got our teams focused on commercial recovery at this point.
Okay. That makes sense. And then curious to hear a little bit more about the furniture market opportunity and how it's developed this year, I guess, just given the announcements around KUKA and the incremental wins that you highlighted. Have those catalyzed more discussions for you? Any way to characterize the opportunity funnel and how that contributes to '27 revenue?
Yes. I mean we'll start -- and again, we like the furniture business because of just super quick time to revenue that the industry has accepted and really bought into our standard methodology, our standard kit methodology. So we're getting good scale there on our assets with little to no investment. So we expect by '28 that that's clipping somewhere between $50 million and $100 million. So you can probably draw a line between now and then to figure out where '27 is. But we expect that to add 1 or 2 points of growth at accretive margins in the coming years.
There are no further questions at this time. This concludes the question-and-answer session as well as today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Gentherm Incorporated — Q1 2026 Earnings Call
Gentherm Incorporated — Q4 2025 Earnings Call
1. Management Discussion
Greetings, and welcome to the Gentherm Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions].
It's now my pleasure to turn the call over to Gregory Blanchette, Senior Director, Investor Relations. Please go ahead.
Thank you, and good morning, everyone, and thanks 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 will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance, and actual results may differ materially. We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other significant assumptions, risks and uncertainties underlying such forward-looking statements. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation.
On the call with me today are Bill Presley, President and Chief Executive Officer; and John Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we've made available on the Investors section of Gentherm's website. After the prepared remarks, we'd be pleased to take your questions.
Now I'd like to turn the call over to Bill.
Thank you, Greg, and good morning, everyone. Let's begin on Slide 3. During the year, we made significant progress on our long-term strategic initiatives while executing against our 2025 financial and operational priorities. To drive strategic growth, we provided a thesis early last year on the broad applicability of our technology beyond automotive. We purposefully broke out our technologies into 4 platforms: thermal management, air moving devices, pneumatic solutions and valve systems so that our commercial team could go out and conquest business with the technology in other markets. We provided updates and wins throughout the year to validate our hypothesis and continue to believe this will drive growth going forward. Operationally, we continued our work to strategically realign our footprint, which will continue through 2026. And despite the near-term headwinds, these actions will play a significant role in our margin expansion over time.
During the year, we began laying the foundation to drive improved efficiency and performance across the organization through business process standardization and the global rollout of our company operating system. We are starting to gain traction and reap benefits from stronger operational rigor. These improvements will drive better financial performance and cash generation, allowing us to deploy capital aligned with our strategic framework. To be clear, 2025 financial results are not indicative of what Gentherm can deliver as a business. We remain focused on executing our plans to grow and increase margins. As we enter 2026, we are confident that we have the right plan established to drive performance. We are executing our strategic priorities to build a more resilient Gentherm.
Let's turn to Slide 4. I took this role with a strong belief that Gentherm was at an inflection point to enter its next phase of growth by scaling its core technology beyond its existing applications, and we have proven that ability in a short period of time. The team is focused on reigniting a profitable growth trajectory through both organic and inorganic opportunities. In January, we announced a key part of transforming Gentherm into a precision flow management company that serves diverse markets through our planned combination with Modine Performance Technologies, which is expected to close by the end of the year. This combination creates a $2.6 billion market leader positioned to grow to over $3.5 billion with a compelling financial profile and end market diversification. I am confident that this is the right transaction at the right time for Gentherm, and we'll talk more about the benefits later in the deck.
Turning to organic. When I first joined Gentherm, I was impressed by the portability and scalability of our 4 core platforms. We saw great growth potential in scaling our existing products and technologies with new markets, new applications and nontraditional customers. We tested that thesis very quickly in 2025 and validated that Gentherm products have broad applicability. Within months, we generated a commercial funnel totaling over $300 million of lifetime revenue in markets outside of light vehicle. That funnel enabled us to successfully expand into commercial vehicles, powersports and Home & Office. Beyond just winning awards, Gentherm began supplying products in rapid time to revenue markets.
During the fourth quarter, we were selected by another leading global furniture brand to supply our climate and comfort products. Our momentum in this market is accelerating. Our first discussions in this market began in the middle of 2025. We have already started manufacturing and delivering components in January, demonstrating shorter development cycles and rapid time to revenue compared to our automotive business. For our customers, these represent innovative next-generation product offerings centered on wellness, a major and growing trend across these markets. For Gentherm, we are leveraging our existing assets and core technologies to drive this incremental revenue growth with accretive margins.
In Medical, we have prioritized reinvigorating our product life cycle road map. Refreshing the product portfolio remains a key focus, and we are advancing these efforts by leveraging existing automotive intellectual property to accelerate innovation, improve time to market and support sustainable growth within the segment. Earlier this month, we announced our FDA 510(k) submission for a new innovative product. The way surgeries are performed is changing. Robotic positioning, which allows the surgeon to move the patient for better access is becoming more common. Our first-of-its-kind solution, the ThermAffyx system combines conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement during procedures.
Given our strong relationships and deep engineering capabilities, medical professionals came to us to help solve this unmet gap in the markets. The ThermAffyx system will begin generating revenue later this year, and we expect this product to be a key contributor that accelerates Medical's annual revenue growth into the high teens. This is the first new product on our road map, and we will continue to leverage Gentherm's core technologies to develop solutions for the medical market. These are just a few examples of how we are executing against our plans. We said we would reposition the company for growth by taking our technologies outside of light vehicle, and we provided several proof points in 2025. We are just getting started, and the combination with Modine Performance Technologies will play a key role going forward. We are taking bold, decisive actions that will position Gentherm for sustainable, profitable growth.
Turning to Slide 5. I am very confident in our path to improve financial performance. Though revenue has plateaued over the last few years, we have a high level of visibility to growth accelerating, driven by strong automotive launch activity and our pursuits in adjacent medical markets. We have said before that we expect Gentherm's growth trajectory to be mid-single-digit growth over market, and our belief in that has only strengthened. On margins, we consistently shared our views on the major levers driving future margin expansion. We are investing in footprint optimization. We are launching lumbar and massage comfort solutions at improved margins, and we will be able to leverage scale as growth accelerates. Our road map to delivering improved financial performance is clear. We are now well positioned to deliver meaningful revenue growth and margin expansion.
And with that, I will turn the call over to John to review some business highlights and our outlook. John?
Thanks, Bill. Now turning to Slide 6. Our team delivered another strong year of automotive new business awards, finishing 2025 with $2.2 billion, including $485 million in the fourth quarter. For the year, these awards were highlighted by the Ford F-Series, high-volume platforms with Mercedes-Benz and further adoption of our innovative Pulse A solution. These wins demonstrate the strength of our industry-leading technology as we defend existing business, launch innovative new products and create new market opportunities.
We generated record revenue of $1.5 billion in the year, which increased 2.9% compared to prior year or 1.8% when excluding foreign currency translation. Automotive Climate and Comfort Solutions revenue increased 5.8% ex FX, which was offset by declines in other automotive products of $28 million, driven by our previously discussed planned exits. We continue to see strong growth over market as we ended 2025 with fourth quarter Climate and Comfort Solutions revenue outgrowing light vehicle production by 820 basis points, excluding FX, with strong performance globally and across product categories.
Turning to profitability. We delivered $175 million of adjusted EBITDA in 2025 or 11% -- 11.7% of sales compared to 12.6% last year. The decrease was primarily driven by higher material costs, including unfavorable mix as well as expenses related to our footprint realignment, partially offset by operating leverage. We generated $117 million of operating cash flow, an increase of 7% compared to 2025. This was despite the fact that we were building inventory throughout the year to support the ongoing footprint transitions. Capital expenditures for the year were $56 million, down from $73 million in the prior year as our team did a nice job focusing on asset utilization and scrutinizing new capital expenditures.
As a result of our team's efforts, we further strengthened our balance sheet and ended the year with net leverage of 0.2 turns. We continue to emphasize cash flow as a key business priority and believe we are well positioned to generate increased levels going forward. I'm confident that our increased financial rigor will drive improved results into 2026.
Please turn to Slide 7 for a discussion on our guidance for 2026 and a preliminary revenue outlook for 2027. At this time, we have not factored in any impact regarding our planned combination with Modine Performance Technologies, which is expected to close by the end of 2026. We will provide better visibility on timing and impact as the year progresses. For 2026, we expect revenue to be between $1.5 billion and $1.6 billion, which is up approximately 3% at the midpoint when excluding slight year-over-year FX tailwinds. According to S&P Global Mobility's mid-February 2026 report, light vehicle production in our key markets is expected to decrease approximately 1% for the year. This positions us to grow above market by mid-single digits in the year, consistent with our long-term view. We expect the impact of strategically exited businesses to decline approximately $10 million year-over-year.
On margins, we expect adjusted EBITDA for 2026 to be in the range of $175 million to $195 million, which implies a midpoint adjusted EBITDA margin of approximately 12% or 30 basis point expansion year-over-year. The ongoing footprint transitions will continue to be a profit drag, which we expect to be approximately 60 basis points for 2026. As we think about the 2026 cadence, we expect the second half revenue to be slightly stronger than the first half, driven by new program launches. On margins, we expect the first quarter will be similar to prior year with expected improvement throughout the year as the impact of contractual price downs is offset by material savings and productivity actions as the year progresses.
We estimate that adjusted free cash flow will be in the range of $80 million to $100 million, assuming CapEx is in the range of $45 million to $55 million or approximately 3% of sales. This results in an adjusted free cash flow conversion rate of approximately 50%. While this marks an improvement from the last few years, we continue to believe there are opportunities to increase conversion to 60% or higher moving forward. In addition to 2026 guidance, we are also introducing a preliminary 2027 revenue outlook. Based on current visibility, we expect 2027 revenue of $1.7 billion, up approximately 10% versus the 2026 midpoint guidance. This growth is supported by strong launch activities and adjacent market pursuits.
While we continue to believe that our automotive new business awards is a leading indicator of the long-term revenue of the business, we appreciate the challenge in connecting these awards to a near to midterm outlook given the lag in start of production in the varying program lives. In order to provide additional visibility to the revenue trajectory, we believe it is important to communicate revenue projections beyond the current year at this time, and we'll continue to look for other opportunities to increase transparency moving forward. Overall, we believe that the strategic actions we are taking to accelerate profitable growth and drive operating discipline provide us a clear road map for value creation as we move forward.
And with that, I will hand it back to Bill for some further color on our recent announcement to combine with Modine Performance Technologies.
Thanks, John. Moving to Slide 8. Our combination with Modine Performance Technologies accelerates the execution of our strategic framework by expanding our technologies and capabilities in thermal and precision flow management. The combined company will have an attractive financial profile with revenue of approximately $2.6 billion, pro forma synergy adjusted EBITDA of 13% and a strong balance sheet. We believe Gentherm is the ideal home for Performance Technologies and will provide it with a renewed focus to drive growth in attractive markets, including power generation, heavy-duty equipment and commercial vehicles. This is a well-run organization, has a high-performing culture and a strong industrial leadership team in place. We expect continued strong execution upon closing. The team brings a continuous improvement and lean mindset that Gentherm is excited to leverage.
Now let's turn to Slide 9. As we talked about on our January call, there are significant value creation opportunities with this transaction. First, we have identified actionable near-term run rate cost synergies of approximately $25 million through efficiencies in direct materials, indirect purchasing and logistics as well as supported costs related to the overall company operating model. As we work closely with the team, we are looking to introduce additional cost savings initiatives that could increase the run rate over time. That said, we believe the real power of this combination is in the product and end market opportunities that are unlocked. And we have strong conviction that together, we can greatly accelerate our growth path. This is an area where I have personally spent a significant amount of time, and I want to highlight a few specific examples.
First, Modine brings established commercial relationships in industries that Gentherm has not historically participated in, including commercial vehicle and heavy-duty equipment. Based on early discussions, we expect this will accelerate Gentherm's progress as we pursue these markets. Furthermore, Modine has footprint in regions like India, which Gentherm has been evaluating over the past year as an area of potential expansion. As one company, we will now be able to sell directly into these geographies without the need for incremental footprint investment. While we have high levels of confidence in those areas, the most value creation opportunities relate to product integration, particularly where Gentherm's valve technology has applicability.
To be more specific, in markets such as power generation and power generation for data center specifically, Modine Performance Technologies has a leading position supporting the thermal needs of customers as they build out necessary infrastructure. As part of their solution, valves are required to regulate the flow of fluids and air through the thermal management systems of the power generation architecture, which Gentherm as a premier valves manufacturer is able to supply. In addition to supporting power generation needs, Gentherm valves are mission-critical components with applications inside the data center as well. These are tangible and sizable opportunities that we will continue to develop together post closing. Merging Gentherm and Modine Performance Technologies opens key new markets for Gentherm's product, including one experiencing significant growth.
Together, our combined capabilities put us in position to capitalize on this expanding opportunity and rapidly scale our highly attractive valves business. On our January call, I highlighted that in a very short period of time, our collective team identified a commercial synergy funnel of over $100 million. It's important to note that valves made up more than half of that number given their broad applicability, mission-critical nature, close adjacency to and integration with the products that Modine Performance Technologies produces today. These are just a few examples from the initial work we have done, and we expect to significantly increase the funnel size once we close the transaction and are able to work together as one company.
These product integration efforts will strengthen our ability to meet the rising demand for our combined mission-critical offerings. It is important to remember that none of these commercial opportunities were factored into our base assumptions and represent incremental upside to the transaction. Together, we can accelerate each other's growth path and margin improvement beyond what either could accomplish as a stand-alone business.
We summarize the growth of Gentherm and the power of bringing these 2 companies together on Slide 10. We are charting a new course by creating a company that can grow substantially with differentiated and scalable core technologies. We see a clear path to generating $3.5 billion in revenue and more than $0.5 billion of earnings by 2030, driven by our disciplined commercial strategies and continued focus on operational excellence. We are on a relentless pursuit to build a more resilient company.
Wrapping up on Slide 11, I want to reiterate my excitement about Gentherm's future. We remain confident in our growth trajectory and look forward to welcoming Modine Performance Technologies later this year. We are focused on closing the transaction, ensuring we hit the ground running on day 1. We will update you on our progress throughout the year. As we enter 2026, our team is invigorated and operating with a clear focus on strategic priorities. We are acting with a strong sense of urgency to build on the momentum achieved in our adjacent market initiatives and margin expansion efforts. We are taking decisive actions to position Gentherm for sustainable, profitable growth and long-term value creation.
With that, I will turn the call back to the operator to begin the Q&A session.
[Operator Instructions] Our first question today is coming from Ryan Sigdahl from Craig-Hallum Capital Group.
2. Question Answer
I appreciate all the commentary on kind of the current business this year, but also going out to 2030, it's helpful from a pro forma standpoint. I want to start with the adjacent end markets, knowing that there's a lot of synergy potential with the merger combination. But curious kind of how you view the next couple of quarters, if you guys are continuing to lean in there or if there's a better kind of more opportunistic wait and see on certain end markets once you're combined? And then kind of second to that, if you're able to quantify the percentage of revenue in '26 and '27 for the expectations you gave that are representative of those adjacent markets?
Yes. So I'll start. Look, we'll continue to lean into the adjacent markets. I would say Home & Office, which we previously called Motion Furniture, we're not calling Home & Office as we're getting a lot of pull in that market, driven by trends in health and wellness. So we'll continue to lean into that market. And just to put a little color on that, with the pipeline we have, with the engagements we have, we would expect that Home & Office would be contributing somewhere between $50 million and $100 million in revenue by 2028. So very rapid time to revenue and margins are, as we've discussed before, not quite at medical, but above what we have in light vehicle. So accretive there.
We will continue to lean into medical. We announced the new product introduction this quarter and submitted the 510(k). We anticipate that, that product will begin contributing revenue this year. But that product is going to be a leading contributor, we believe, to doubling the size of the medical business before 2030.
And then we continue to see some traction in the other adjacent markets with our climate and comfort solutions for what we would call other mobility, so really around commercial vehicle. So we're not slowing anything down, Ryan. The attractive part for us with the Modine Performance Technologies mergers is it is a true, what I would say, accelerator for our plans to grow our valve business. Our valve business is very attractive to us. It is above company margins, and we want to scale that. And Modine Performance Technologies gives us a really nice runway to scale valves.
John, anything else you would add?
Just we've historically said, I think that the adjacent markets will bring 1 to 2 points of growth year-over-year. I think Bill's comments are consistent with that. And so we're certainly not taking the focus off that as we look to close the Modine transaction.
Helpful. Then on the footprint realignment, last quarter, it was substantially by the end of 2026. Now it's completion in 2027. I guess has there been a shift out from kind of your expectations from a timing standpoint and what you're all doing from an alignment standpoint? And then kind of second point to that, as I look to 2027, you gave revenue but not EBITDA expectations. I get a lot of moving pieces. But are you at least willing to say if margin expansion is expected to accelerate with that revenue growth acceleration as a lot of this alignment and kind of cost efficiencies start to flow through?
Yes, Ryan, I would say no change to the timing of footprint transitions. And so we remain on track to be done in '26 with benefits coming in '27. So as you look at the $1.7 billion number next year, which is 10% growth at the midpoint. We didn't put out an EBITDA number, but we do expect to see the benefits of the footprint transition flow through as well as the benefits of more favorable mix, both from pneumatics pricing as well as the adjacent market becoming a bigger piece. And so we would expect to see a bit of a step function change in '27 from a margin perspective.
Next question is coming from [ Matt Garza ] from ROTH Capital.
This is Joseph on for Matt. Just want to hop back on a previous question asked. Flow-through, I guess, for 2026 on the sales outlook is coming in a little bit lower than expected. Just outside of the realignment on your footprint, is there any other incremental investments we're kind of factoring in for this year?
As we look at 2026, just to walk through it, right, I think the growth from a top line perspective being in the mid-single digit over the automotive industry volumes. I think as you look at it from a productivity and gross margin perspective, we continue to make progress within the plants in terms of driving operational rigor. We continue to make progress in driving material savings to offset pricing. We do have the footprint headwind in the year, which will be relatively consistent with last year, but we did see that start to increase a little bit towards the end of the year and expect that to continue into '26.
I'd say the only other dynamic out there would just be from an FX perspective. We do see some headwinds from the peso in particular, just how that's moved in the last couple of months. But other than that, we're not expecting any sort of incremental investments beyond the footprint piece and our continued focus on the adjacent market, which has really just been reallocating internal spend.
Got it. Okay. And then as you guys provided the 2027 guide, given Gentherm's majority of the core revenues coming from automotive, where is the confidence coming from? If you can just highlight any key line items that you want to highlight for the 2027 guide, excuse me?
Yes. Look, I would say we continue to have strong launch activity. So we are confident in our core automotive business as we have been. So we continue to see adoption and penetration of both our climate solutions and our pneumatic solutions. So we're confident there. And then we're also starting to see just some traction in the adjacent markets, right? We'll start getting contribution, as we said, from new product launches in medical. We'll start getting contribution more from home and office and the other things we've been working on. So we have very strong visibility, and we're very confident in the 2027 revenue number.
Our next question is coming from Luke Junk from Baird.
I wanted to start with maybe backwards looking in terms of China specifically, you cited strength across geographies in the quarter. Just hoping you could double-click on China. Maybe back up and talk about just broadly your China positioning exiting 2025. And then in the near term, just some turbulence from a production standpoint in China, just how you're thinking about it in terms of the setup for Gentherm.
Do you want to take the first part?
Yes. I mean we saw, I'd say, really strong growth from a China perspective and really across Asia in the fourth quarter. I think -- the interesting thing, and I think we talked about this on a prior call, we actually saw strength with the global OEMs in China in the quarter as they increased take rates to expand not just the passenger seat, but the second row as well. And so that changed some of the dynamics there. So we really -- we saw very strong growth above market with both local and global OEMs. And I think we expect that to continue at least through the first half of this year.
Yes, I would agree with that. And we did remain focused on rebalancing our mix to represent more domestic OEMs in China. We finished the year with about a 60%. 60% of our awards in China were domestic. So good progress there. But again, we remain focused on winning with the right business. We're not interested in buying top line growth. So we'll stay focused on shifting the mix. As John said, that we saw a big pickup from the global OEMs in China. That was really driven by the China market having a high level of adoption of our products. So that will slow the mix adjustment down a little bit, but doesn't change anything strategically that we're focused on.
And then just China nearer term, does that contribute at all to your comment that revenue may be a little more back half weighted? Or is that just really launch cadence?
I would say that's more launch cadence.
Okay. Second, Bill, just hoping to dig into the ThermAffyx patient safety system a little bit more. Assuming you do get FDA approval in the first half, just how quickly you can start to build out that business? I don't know to what extent you've kind of got potential awards in hand or now you've got a license to hunt. And then looking over the next few years, your comment that this is the -- for the bridge to medical doubling by 2030, should we assume that there's more launches like this that are coming that kind of build to that expectation?
Yes. So I would say we've already started the voice of customer and clinical work with the ThermAffyx system. So we're already, what I would say, priming the pipeline loop, which is why we anticipate revenue starting this year. So again, this will be a big driver towards us doubling the medical business by 2030. Adoption curves in medical take a little longer, but we're already out there in front of that is my feeling, and we'll push that. You absolutely can expect more new product introductions. We anticipate another significant announcement sometime early 2027, and it will once again leverage technology that we've been utilizing in the automotive industry for 30 years. So again, it will be another minimal investment, leveraging existing technology. But yes, we'll continue to refresh that product line.
Yes. And then lastly, you mentioned opportunities within data center for valves. And yes, just want to expand on that. Would that be liquid cooling? Or just what would the application there be?
Yes. The application would be liquid cooling. That's an area we have to explore. I would just say in our work with Modine Performance Technologies on the power gen side, that was a market that we gained visibility into. So it's not one we've been traditionally in. It's one that we're early in understanding. But Modine Performance Technologies gives us a lens and an avenue in, but there are true liquid cooling applications that require valve technology in data centers.
We reached the end of our question-and-answer session. Ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Gentherm Incorporated — Q4 2025 Earnings Call
Gentherm Incorporated — Q3 2025 Earnings Call
1. Management Discussion
Greetings, and welcome to the Gentherm Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gregory Blanchette, Senior Director, Investor Relations. Thank you, sir. You may begin.
Thank you, and good morning, everyone. Thanks 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 will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance, and actual results may differ materially. We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other significant assumptions, risks and uncertainties underlying such forward-looking statements. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation.
On the call with me today are Bill Presley, President and Chief Executive Officer; and Jon Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we made available on the Investors section of Gentherm's website. After the prepared remarks, we'd be pleased to take your questions.
Now I'd like to turn the call over to Bill.
Thank you, Greg, and good morning, everyone. Our third quarter results showcase improved execution across Gentherm, allowing us to deliver record quarterly revenue and strong operating cash flow. We are committed to the execution of our strategic priorities while focusing on the day-to-day actions required to drive financial results.
Now let's turn to Slide 3 to discuss highlights. Third quarter Automotive new business awards of $745 million puts us at $1.8 billion year-to-date and on track to deliver a full year above $2 billion.
Momentum for lumbar and massage comfort solutions continued as we secured another important strategic conquest win with Mercedes-Benz on one of their highest volume platforms, which includes the S-Class, GLS, GLE and CLS vehicles. It is important to note that this is 100% incremental revenue for us as we were able to displace a competitor for this award. The platform will include a proprietary pulsating massage system, Puls.A, marking the fourth global OEM to adopt our innovative technology since we introduced it to the market last year.
Securing this award demonstrates we have innovative, highly desirable and value-added solutions that customers demand from the OEMs, driving continued market adoption, increasing take rates and revenue growth for our Automotive business.
Additionally, we achieved record quarterly revenue of $387 million, driven by high demand for our products and improved third quarter light vehicle industry production versus our prior expectations.
Automotive Climate and Comfort Solutions outperformed actual light vehicle production in our key markets by 160 basis points, excluding FX. And we were pleased to see improved performance in China during the quarter. In addition, our operational excellence initiatives are gaining traction, which contributed to operating cash generation of $88 million year-to-date.
Before I finish this slide, I want to share my perspective on recent supply chain news. We are keeping a very close eye on the supply chain and the potential impacts across the industry. There will likely be an impact on OEM production, though it is too early to call at this time. Our teams are working with customers and suppliers to mitigate potential exposure and maintain visibility. The situation continues to evolve, and we'll keep you updated as necessary.
Now turning to Slide 4. We continue our relentless focus on our strategic priorities to drive long-term shareholder value. We spoke earlier this year about our strategy of scaling our core technologies across multiple end markets to drive profitable growth. We saw success in the second quarter with wins in powersports and commercial vehicles, and we made further progress on this initiative during the third quarter.
Our efforts in the past 90 days have generated a commercial funnel of over $300 million of lifetime revenue, and we are still early in our efforts. I'm excited to say that we were selected by a large global furniture brand to supply our comfort solutions and are preparing for production to start in Q1 of 2026. The product we will be supplying utilizes existing plant, property, equipment and installed capacity. We are in discussions with several other furniture brands for our thermal and pneumatic solutions and see this as an attractive adjacent market given the annual volumes, margin profile and limited incremental investment.
As mentioned, we are preparing to deliver components in Q1 of 2026, demonstrating that the development cycles and time to revenue in these markets is much faster than our traditional automotive business.
Moving to Medical. Our new product development is progressing, and we are on track for a significant product announcement near year-end. The refresh of the product line in Medical is a priority, and we are accelerating plans by leveraging existing automotive intellectual property. Operationally, we continue the rollout of our standardized company operating system across the globe, and we are starting to see early signs of traction. This is the type of foundational work that will maximize utilization of our existing assets, deliver expanded margins, lower CapEx requirements and generate increased cash flows.
In September, we brought Gentherm's top leadership together for an in-person summit. We used this time to align on strategic initiatives and key priorities, including the standardization of global business processes. We understand that people are Gentherm's most valuable asset and ultimately drive performance of our business. The leaders left with a clear vision of how we will drive value creation and the sense of urgency at which we must move to deliver the required results.
Our global strategic manufacturing footprint realignment plans remain on track to be substantially complete by the end of next year. We have made significant progress relocating and launching manufacturing processes in Tianjin, China and Tangier, Morocco. Customers have been supportive, and we are actively shipping production components from both facilities.
As we think about deploying capital to achieve superior financial performance, we believe that M&A will serve an important role for the company in achieving our strategic priorities. We are cultivating a wide range of opportunities that are aligned with our core technology platforms and provide access to new markets and expand our product portfolio. We will evaluate these opportunities as a lever to accelerate our strategy.
And with that, I will turn the call over to Jon to review third quarter highlights and results. Jon?
Thanks, Bill. Now turning to Slide 5. In the third quarter, we secured $745 million of Automotive new business awards, one of the highest quarters on record for the company.
As Bill discussed earlier, awards were highlighted by a significant win with Mercedes-Benz. Our team did a fantastic job securing this conquest business, which will more than double the annual lumbar and massage revenue with this customer after it goes into production in 2028, and it will also support lumbar and massage growth into the future.
Additionally, we had another strategic win with GM for our ComfortScale solution, which is our patented next-generation integrated thermal and pneumatic hardware system. Last year, we secured our first ComfortScale award on the full-size GM truck platform, including the Chevrolet Silverado and GMC Sierra. And in the third quarter, GM expanded this solution to its midsize truck platform, including the Chevy Colorado and GMC Canyon through a mid-cycle change in 2026.
ComfortScale is a win-win for all involved as we receive more content and value add, OEMs reduce their labor costs and end consumers get an improved in-vehicle experience. This award highlights our close partnership with General Motors and our ability to provide value-added innovative solutions to our customers.
Next, I want to highlight our success in partnering with Japanese OEMs as we look to drive growth and customer diversification across Asia. We secured multiple awards in the quarter, including one for climate control seats on a Honda platform for the Indian market. Although Gentherm has not historically prioritized this market, on our hunt for strategic profitable growth, we are evaluating the broader opportunity India may present for our products, and we'll provide updates as we progress.
Moving on to the third quarter launch activity. We again made progress in China as our solutions were included on several new programs with Chinese domestic OEMs, including our thermal solutions with Xiaopeng and our full suite of thermal and pneumatic solutions with Li Auto on the i6, both of which contributed to improved growth over market performance in China.
Coupled with a focus on winning new business with domestic OEMs, these launches will shift our customer mix and result in our business being more closely aligned to the overall Chinese market over time.
In Europe, we launched thermal and pneumatic solutions on the all-new Jeep Compass. Stellantis first introduced this vehicle to the European market in September, and we will soon launch it with our content in other regions. This vehicle will be offered in a variety of powertrain options, highlighting the powertrain-agnostic nature of our solutions.
Finally, our Climate Controlled Seat solution is included on Subaru's high-volume Forester. This is another great example of the success we have had in expanding our business with Japanese OEMs.
Please turn to Slide 6 for a more detailed review of the financial results. Overall, third quarter results were above expectations as revenue came in higher, driven by increased industry volumes. We also delivered sequential adjusted EBITDA improvement in the quarter.
Overall, revenue of $387 million was up 4.1% compared to the same period last year. Revenues excluding foreign currency translation increased 2.4%. Automotive Climate and Comfort Solutions revenue increased 8.6% year-over-year or 7% ex-FX, which more than offset planned revenue decreases from previously discussed strategic exits. Medical revenue decreased 0.4% year-over-year or 1.6% ex-FX.
Turning to profitability. We delivered $49 million of adjusted EBITDA or 12.7% of sales compared to 12.9% in the third quarter of last year. The 20-basis point decline was primarily driven by higher material costs, including a minor impact from tariffs, expenses related to our footprint realignment and higher operating expenses, partially offset by operating leverage and favorable foreign exchange. Consistent with our prior communication, the impact from tariffs has been minimal, and our team has done a nice job of working with customers to mitigate our exposure.
Adjusted diluted earnings per share was $0.73 per share compared to $0.75 per share in the third quarter of last year.
On cash, we have generated $88 million of operating cash flow year-to-date, further strengthening our balance sheet. Net leverage stands at 0.2x at the end of the quarter, providing us with ample access to capital to deliver on our strategic priorities.
Please turn to Slide 7 for a discussion on our guidance for the remainder of the year. Based on our year-to-date performance and current visibility into OEM production schedules, we are increasing the midpoint of our revenue guidance while narrowing our EBITDA range.
For the full year, we now expect revenue to be in the range of $1.47 billion to $1.49 billion, with the increase driven by improved second half light vehicle industry production versus our prior expectations.
Our outlook for the fourth quarter includes the assumption of seasonally lower revenue versus Q3. This revision does not include the potential impact of supply chain disruptions that Bill discussed earlier.
Year-to-date, we have delivered 12% adjusted EBITDA margin and are narrowing our adjusted EBITDA margin range to 11.9% to 12.3% for the full year. The EBITDA range primarily accounts for the impact of volume as well as the potential timing of year-end initiative spending, including expenses related to footprint transitions and new product introductions.
On CapEx, we are again reducing our expected range of spend from $45 million to $55 million, which reflects an ongoing focus on optimizing current plant and equipment while also scrutinizing new projects.
In closing, we are pleased with the results year-to-date, and our team is focused on finishing the year strong.
With that, I will hand it back to Bill for closing remarks.
Thanks, Jon. Our third quarter results demonstrate improved execution and progress toward our long-term strategic initiatives. We delivered record revenue with strong cash flow and have made notable progress entering into adjacent markets.
With innovative solutions and a strong balance sheet, we are well positioned to deliver profitable growth, margin expansion and increased levels of cash flow. We remain focused on these strategic imperatives that will result in long-term value creation for our shareholders.
With that, I will turn the call back to the operator to begin the Q&A session.
[Operator Instructions] Our first question comes from Matt Koranda from ROTH Capital Partners.
2. Question Answer
Good to see the further conquest award with Mercedes. I'm curious if maybe you can just point to a few of the factors that are giving you momentum in winning that conquest business. Is it technology superiority? Is it sort of having the full suite of comfort and thermal? Maybe just touch base on sort of some of the factors that are at play there.
Yes, Matt, it's Bill Presley. I would start with it's certainly an innovative edge, right? Our solutions provide the OEMs with an experience that they can pass on to their customer and price for us. So there's a true value-added proposition there, and we have an innovative lead there. Our commercial relationships with our customers are very strong. So I would say our commercial model of interacting directly with the OEMs to impact their product plan versus attempting to sell through a Tier 1 gives us a position with the OEMs, I think, that maybe not a lot of our competitors share.
And I think a really interesting one here is, it included Puls.A. So this is the fourth OEM to adopt our Puls.A technology globally since we introduced it to the market last year. So in order, I would say it's the innovative edge, the value proposition it provides to their end users and our customer relationships.
Okay. I appreciate the clarity there. And then just on the adjacent market opportunity, good to see the $300 million funnel that you guys highlighted. Maybe curious how that breaks out between some of the opportunities that you have mentioned in prior calls, powersports, commercial vehicles, furniture, I believe.
And then how do we think about that converting to commercial wins that could impact 2026 or 2027? I know you mentioned there's some shipments on furniture in the first quarter of '26, but I would imagine that it builds into '27. So maybe just level-set us on sort of how to think about that.
Yes. So that $300 million pipeline, as you mentioned, I mean, that was with just 6 months' worth of work, right? So teams moved very fast there, which is very encouraging. I would say in rough numbers, it would be roughly 1/3 what I would call the furniture, 1/3 what I would call specifically commercial vehicle and 1/3 what I would call other mobility.
In order of excitement in that space, the furniture industry seems to be actually growing rapidly. So they're talking exciting adoption rates. Their speed to market is quite impressive. I anticipate further awards in that space that we'll be able to announce, but that revenue will start flowing in '26.
On the commercial vehicle side, they're very interested in our fluid systems. So that's a new market that we're quoting with the valve business that came with Alfmeier. So fluid systems is gaining traction there. And steering wheel technology, specifically like heaters, hands-on detection, which we supply in the light vehicle market. And then other mobility, things that we've talked about, like 2-wheelers, construction vehicles, that's the other 1/3. That one, we'll have to see how it develops. But I would say, motion, furniture -- or sorry, furniture and commercial vehicle are really gaining traction.
Yes, Matt, I would just add in terms of time to revenue, I think we did talk about Q1 production on the furniture award. We think that's a $3 million to $5 million opportunity just that one award as we look at 2026. And so to the extent that the team can continue to stack these up, we think it can be a meaningful growth driver, certainly a couple of points here as we get maybe later into '26 and '27.
And just piling on to that to make sure it wasn't lost in the script, that's capacity that we already have installed equipment we already have installed. So it's incremental dollars on existing assets.
Our next question comes from Ryan Sigdahl with Craig-Hallum Capital Group.
I want to start on kind of the near-term production environment. I know there's some noise out there. You called it out in your prepared remarks, but Jaguar Land Rover, you have an aluminum supplier. I don't know if there are others, but curious if there are others beyond those 2.
And then I guess the question -- second question would be, why you're not including it in guidances. One, are you not expecting it in Q4? Or is there just not visibility on kind of the magnitude to put it in numbers, but curious that decision.
Yes. I would say -- so you touched on the JLR cyber issue. That seems to be behind us now. They're ramping back up. That was more heavy for us in Q3. You touched on the Novelis fire, which impacts aluminum. I can tell you that that's heavy Ford, maybe Stellantis based on what they've said publicly. We talk to them on a daily basis. Right now, they are working to mitigate the issue. So it's difficult for us to see or say what the impact will be. Certainly, we haven't seen any meaningful impact in the schedules yet with regard to that.
And then the third one, which is widely known that we're watching very closely is just the Nexperia issue going on between the Dutch government, the Chinese government and that company and the U.S. trade barriers.
Nexperia for us right now, our supply chain team has done a phenomenal job of mitigating any direct Gentherm impacts. So we don't see any near-term Gentherm impacts. We've done a good job of finding alternative sources for what we need. The bigger question there will be who does it impact in the industry because they're widely used components. It's likely that somebody will be impacted, not sure who. You want to talk about the guidance piece?
Yes. I mean I think to Bill's point, the Jaguar piece certainly impacted us. There was a headwind for us in September. There'll be a little bit of hangover from that in fourth quarter. We've contemplated that in the guidance. I think as you look at the fire as well as the Nexperia piece, we're really looking to our customer ADI schedules to adjust our forecast. So there's been a little bit of movement here, I would say, in the last week or 2 that has been contemplated, but we don't want to speculate more broadly than what we have with communication we have from our customers.
And so it's really the latter of what you said in terms of just visibility that we have today and the impact on the business. So we're trying to be transparent as to what we see, but we haven't seen any significant schedule shifts to this point.
Helpful. Then India, I don't know that I've heard that before. I guess as you think about adjacencies, I always thought of adjacent sectors, adjacent market opportunities. Can you maybe provide a little more? I know you said you'll give more color there in the future. But are there other markets around the world, whether you want to be specific or not, but that could be potential pockets of opportunity as you hunt for profitable adjacent opportunities?
Yes. I mean the Indian market, as you heard Jon say, talk about the conquest win, that was with a Japanese OEM in the Indian market, but that's our first entry into the Indian market. And although we haven't historically looked at the India market, we're actively evaluating that.
Look, it's an attractive market to us for a couple of reasons. One is scale, and we have no presence there. Number 2 is if you look at some of the proof of concepts we're developing on what we call alternative markets, 2-wheelers is a huge market in India. And there's a desire there for cooled seats. So that's a market that we're evaluating, and it looks like a very good market for us with regard to our valve technology.
So it's something that we're exploring and considering, but it could certainly open up alternative streams of revenue for us. Jon, I don't know what else you want to add?
[Operator Instructions] Our next question comes from Ryan Brinkman with JPMorgan.
I thought to ask first on the strategic footprint alignment plan. Now that you are growing near its completion by the end of 2026, what is the latest in terms of how you anticipate the layering on of the incremental savings with the phaseout of the associated spending to drive those savings? How should we expect the cadence of margin to progress throughout and beyond 2026 on account of both of those factors?
Yes. I think a couple of points there. I mean we talked about the impact in the year being about 50 basis points. I think it will come in a little bit higher than that just based on the timing of where we are. And the fact, frankly, that we've seen higher volumes in the year that's impacted some of the ability to build inventory.
I think as you look at 2026, we will start to see some of the legacy costs fall off, but we'll also see the impact of sort of the inventory build that we've had this year. And so the real savings from that is probably late '26, but really more like 2027 in terms of when we see the benefit of the footprint transitions.
That's helpful. And then with regard to the M&A pipeline, given all the traction that you're seeing expanding into nonautomotive end markets in a really capital-light way, should we think about M&A being aimed more at product expansion rather than channel diversification? Or what are the strategic priorities that you're most looking to accelerate through M&A?
Yes. I mean when we think about M&A, we look at it, I would say, through a threefold lens, right? I mean ultimately, we're trying to build a more resilient company, right?
So we're looking for 2 things. We're looking for something that provides access to markets that we're interested in, and we've been very vocal about becoming more than a light vehicle producer alone. So markets are important. Number 2 is it has to fit our core strategy, which means they are products that align with our current mission. So you won't see us take any wild left turns. So product expansion is important as well, right?
So more resilient company. So it has to fit the right margin profiles. It has to create value. Number 2 is access to other markets; and number 3 is broadening the product portfolio.
We have reached the end of our question-and-answer session as there are no further questions, which now concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.
Gentherm Incorporated — Q3 2025 Earnings Call
Financial data from Gentherm Incorporated
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '26 |
+/-
%
|
||
| Revenue | 1,580 1,580 |
9%
9%
100%
|
|
| - Direct Costs | 1,200 1,200 |
9%
9%
76%
|
|
| Gross Profit | 380 380 |
6%
6%
24%
|
|
| - Selling and Administrative Expenses | 201 201 |
30%
30%
13%
|
|
| - Research and Development Expense | 96 96 |
6%
6%
6%
|
|
| EBITDA | 138 138 |
15%
15%
9%
|
|
| - Depreciation and Amortization | 56 56 |
7%
7%
4%
|
|
| EBIT (Operating Income) EBIT | 82 82 |
25%
25%
5%
|
|
| Net Profit | 27 27 |
15%
15%
2%
|
|
In millions USD.
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Gentherm Incorporated Stock News
Company Profile
Gentherm, Inc. engages in the designing, development, manufacturing, and marketing of heating, cooling, and ventilating devices. It operates through the following business segments: Automotive and Industrial. The Automotive segment designs, develops, produces, and sells automotive seat comfort systems, specialized automotive cable systems, and automotive and non-automotive thermal convenience products. The Industrial segment includes global power technologies business, and research and development division. The company was founded by Lon E. Bell in 1991 and is headquartered in Northville, MI.
StocksGuide Premium
| Head office | United States |
| CEO | Mr. Presley |
| Employees | 14,174 |
| Founded | 1991 |
| Website | www.gentherm.com |


