Core Viewpoint - Garrett Motion (GTX) shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise earnings estimates for the company [1][2]. Earnings Estimates - Analysts' optimism regarding Garrett Motion's earnings prospects is leading to higher estimates, which is expected to positively impact the stock price [2]. - The Zacks Rank system indicates a strong correlation between earnings estimate revisions and stock price movements, with Zacks 1 Ranked stocks averaging a +25% annual return since 2008 [3]. Current Quarter and Year Estimates - For the current quarter, Garrett Motion is projected to earn $0.37 per share, reflecting a +54.2% increase from the previous year [5]. - The Zacks Consensus Estimate for the current quarter has risen by 5.71% over the last 30 days, with no negative revisions [5]. - For the full year, the expected earnings are $1.41 per share, representing an +11.9% change from the prior year [6]. - The consensus estimate for the current year has increased by 7.63% during the same timeframe [7]. Zacks Rank and Performance - The positive revisions in earnings estimates have led Garrett Motion to achieve a Zacks Rank 1 (Strong Buy), indicating strong potential for outperformance [8]. - Research shows that stocks with Zacks Rank 1 and 2 significantly outperform the S&P 500 [8]. Recent Stock Performance - Garrett Motion shares have increased by 24.6% over the past four weeks, indicating investor confidence in the company's earnings growth prospects [9].

Group 1 - Battery Electric Vehicles (BEVs) are disrupting Garrett Motion's (NASDAQ: GTX) legacy product portfolio of turbochargers, but this disruption is not indicative of a decline in the company's prospects [1] - The transition from Internal Combustion Engine (ICE) vehicles to BEVs presents both challenges and opportunities for Garrett Motion [1] Group 2 - The article emphasizes the importance of understanding the evolving automotive landscape and its impact on traditional automotive suppliers like Garrett Motion [1]

Core Viewpoint - The company, Garrett Motion, reported a mixed second quarter but achieved a significant earnings beat, leading to a positive stock reaction from investors [1]. Financial Performance - Net sales increased by almost 3% year over year to $913 million, while GAAP net income rose by nearly 36% to $87 million [2]. - On a non-GAAP basis, the per-share earnings grew by 48% to $0.43, surpassing the consensus analyst estimate of $0.42 [4]. Strategic Developments - The CEO highlighted the company's leadership in turbocharging, securing over $1 billion in light vehicle program extensions, and advancing zero-emission technologies [5]. - Garrett raised its guidance for 2025, projecting net sales between $3.4 billion and $3.6 billion, and GAAP net income between $233 million and $278 million [5].

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $913 million, flat at constant currency, with gasoline turbo sales growing by 4%, outperforming the industry [6][13] - Adjusted EBIT was $124 million with a margin of 13.6%, reflecting a 20 basis point decline due to unfavorable sales mix and tariff dilution [7][15] - Adjusted free cash flow was $121 million, representing a conversion rate of 62% for the first half of 2025 [7][18] Business Line Data and Key Metrics Changes - Gasoline turbo sales showed strong growth, while diesel and aftermarket applications experienced softness, particularly in North America [14][28] - The company recovered $14 million in tariffs during the quarter, contributing positively to financial performance [14][15] Market Data and Key Metrics Changes - The company secured over $1 billion in light vehicle program extensions, enhancing future revenue visibility [8][24] - Interest in turbochargers for range-extended electric vehicles is growing, with new wins in China and Europe [9][10] Company Strategy and Development Direction - The company aims to leverage its capabilities to develop differentiated high-speed and highly efficient technologies, focusing on robust returns for shareholders [22][24] - A new R&D center in Wuhan, China, has been integrated to strengthen the company's presence in a fast-moving region [12] Management Comments on Operating Environment and Future Outlook - Management raised the 2025 outlook due to a stronger euro-dollar exchange rate, maintaining prior industry views despite tariff impacts [19][20] - The company remains alert to adapt to slowing demand if necessary, while continuing to allocate capital to deliver shareholder value [7][19] Other Important Information - The company repurchased $22 million of common stock and paid a $12 million quarterly dividend in Q2 2025 [8][18] - The Board of Directors declared a third-quarter dividend payable on September 16, 2025 [8][19] Q&A Session Summary Question: Unfavorable sales mix and business adjustments - Management explained that the unfavorable sales mix is due to strong growth in gasoline sales, which have lower margins, and softness in aftermarket applications in North America [27][28] Question: Cash position and stock buyback strategy - Management indicated that stock buybacks are not linear and emphasized their commitment to returning 75% or more of cash to shareholders over time [30][44] Question: Drivers of stronger operating performance in the second half - Management highlighted cost control and potential volume stabilization as key drivers for improved performance, while remaining conservative in guidance [33][34] Question: Tariff recovery expectations - Management confirmed expectations to fully recover tariff costs this year, having already achieved significant recovery [35][36] Question: Growth potential of large turbos for backup power - Management sees substantial growth potential in the large turbo market, estimating it could reach hundreds of millions in revenue within the next three to five years [40][42] Question: Non-linear stock repurchase strategy - Management reiterated that stock repurchase is not linear and emphasized their commitment to the capital allocation framework [44][45]

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $913 million, flat at constant currency, indicating outperformance in light vehicle turbo sales for both gasoline and diesel applications [6][14] - Adjusted EBIT was $124 million with an adjusted EBIT margin of 13.6%, reflecting a 20 basis point decline due to unfavorable sales mix and tariff impacts [7][16] - Adjusted free cash flow for the quarter was $121 million, resulting in a conversion rate of 62% for the first half of 2025 [7][18] Business Line Data and Key Metrics Changes - Gasoline turbo sales grew by 4% in the quarter, outperforming the industry, while diesel sales experienced softness due to lower production in Europe and reduced aftermarket demand in North America [6][15] - The company recovered $14 million in tariffs during the quarter, contributing positively to financial performance [15] Market Data and Key Metrics Changes - The company secured over $1 billion in light vehicle program extensions, enhancing future revenue visibility [10] - There is growing interest in turbocharger development for range-extended electric vehicles, with new wins in China and Europe [10][12] Company Strategy and Development Direction - The company aims to leverage its capabilities to develop differentiated high-speed and efficient technologies, focusing on robust returns for shareholders [23][25] - A new R&D center has been integrated in Wuhan, China, to strengthen the company's presence in a rapidly evolving market [13] Management Comments on Operating Environment and Future Outlook - Management raised the 2025 outlook to reflect a stronger euro-dollar exchange rate, maintaining prior industry views while accounting for tariff impacts [20][21] - The company anticipates continued gasoline strength and incremental operating performance to offset unfavorable product mix, with expectations of full tariff recovery [21][37] Other Important Information - The company repurchased $22 million of common stock and paid a $12 million quarterly dividend, with a commitment to return at least 75% of adjusted free cash flow to shareholders [8][19] - The company has reduced total outstanding shares by 39% since Q1 2023 through its share repurchase program [19][24] Q&A Session Summary Question: Could you discuss the unfavorable sales mix and adjustments being made? - The unfavorable sales mix is driven by strong growth in gasoline sales, which have lower margins, and softness in aftermarket and off-highway segments primarily in North America [29][30] Question: Why didn't the company buy back more stock despite having more cash? - The buyback strategy is not linear, and the company remains committed to returning 75% or more of cash to shareholders over time [32][32] Question: What are the drivers of stronger operating performance in the second half? - Continued cost control and potential stabilization of volumes are expected to drive performance, with a conservative outlook due to tariff impacts [35][36] Question: Will the company fully recover tariff costs this year? - The company expects to fully recover tariff costs, having achieved this since the beginning [37][38] Question: How substantial could the large turbo business for backup power become? - The large turbo business is expected to grow significantly, potentially reaching hundreds of millions of dollars in revenue within the next three to five years [44] Question: Why was stock repurchase not more aggressive this quarter? - The stock repurchase strategy is non-linear, and the company has dry powder for potential block trades, while remaining committed to its capital allocation framework [47]

Core Viewpoint - Garrett Motion reported quarterly earnings of $0.42 per share, exceeding the Zacks Consensus Estimate of $0.37 per share, and showing an increase from $0.28 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was +13.51%, with the company previously expected to post earnings of $0.29 per share but actually reporting $0.30 per share, resulting in a surprise of +3.45% [2] - Revenues for the quarter were $913 million, slightly missing the Zacks Consensus Estimate by 0.55%, compared to $890 million in the same quarter last year [3] - Over the last four quarters, the company has surpassed consensus EPS estimates three times and topped revenue estimates two times [2][3] Stock Performance - Garrett Motion shares have increased approximately 30.6% since the beginning of the year, outperforming the S&P 500's gain of 8.1% [4] - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations for it to outperform the market in the near future [7] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.35 on revenues of $870 million, and for the current fiscal year, it is $1.31 on revenues of $3.52 billion [8] - The outlook for the automotive industry, where Garrett Motion operates, is favorable, with the industry currently ranking in the top 39% of over 250 Zacks industries [9]

Financial Performance - Net sales reached $913 million, a 3% increase compared to Q2 2024, but flat at constant currency[6, 8, 21] - Adjusted EBIT was $124 million, up $1 million from Q2 2024, with a margin of 136%, a decrease of (20) bps[6, 8, 24] - Adjusted Free Cash Flow was $121 million, driven by sequential sales growth and working capital contribution[6, 18] Business Trends - Light vehicle gasoline sales grew 4%, outperforming the industry, driven by share of demand gains[8] - The company repurchased $22 million of common stock in Q2, bringing the total for H1 to $52 million[9] - A Q3 dividend of $006 per share was declared on July 24, 2025[9] Technology and Business Wins - Over $1 billion of light vehicle program extensions were awarded in North America and Europe[13] - The company won a significant E-Turbo program in Europe and 3 additional range extended electric vehicle applications in China[13] - The company won another Fuel Cell Compressor serial production program with a leading Asian OEM[13] Outlook - The company is raising its 2025 outlook, with net sales projected between $34 billion and $36 billion[32] - Adjusted EBITDA is projected between $590 million and $650 million, and Adjusted EBIT between $470 million and $530 million[32] - Adjusted Free Cash Flow is projected between $330 million and $410 million[32]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part provides Garrett Motion Inc.'s unaudited consolidated interim financial statements and related notes for the periods ended June 30, 2025 [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Garrett Motion Inc.'s unaudited consolidated interim financial statements for the periods ended June 30, 2025, including statements of operations, comprehensive income, balance sheets, cash flows, and equity, along with detailed notes explaining accounting policies, financial instruments, debt, and other key financial aspects [Consolidated Interim Statements of Operations (Unaudited)](index=4&type=section&id=Consolidated%20Interim%20Statements%20of%20Operations%20(Unaudited)) This section presents the unaudited consolidated interim statements of operations for the periods ended June 30, 2025 | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net sales | 913 | 890 | 1,791 | 1,805 | | Gross profit | 181 | 185 | 360 | 357 | | Income before taxes | 102 | 87 | 187 | 168 | | Net income | 87 | 64 | 149 | 130 | | Basic EPS | 0.43 | 0.29 | 0.73 | 0.56 | | Diluted EPS | 0.42 | 0.28 | 0.72 | 0.56 | [Consolidated Interim Statements of Comprehensive Income (Unaudited)](index=5&type=section&id=Consolidated%20Interim%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) This section details the unaudited consolidated interim statements of comprehensive income for the periods ended June 30, 2025 | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income | 87 | 64 | 149 | 130 | | Foreign exchange translation adjustment | (59) | — | (88) | 18 | | Total other comprehensive (loss) income, net of tax | (170) | 8 | (232) | 49 | | Comprehensive (loss) income | (83) | 72 | (83) | 179 | [Consolidated Interim Balance Sheets (Unaudited)](index=6&type=section&id=Consolidated%20Interim%20Balance%20Sheets%20(Unaudited)) This section provides the unaudited consolidated interim balance sheets as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :-------------------------- | :--------------------------- | :------------------------------- | | Total current assets | 1,363 | 1,193 | | Total assets | 2,403 | 2,276 | | Total current liabilities | 1,319 | 1,278 | | Total liabilities | 3,215 | 2,949 | | Total deficit | (812) | (673) | [Consolidated Interim Statements of Cash Flows (Unaudited)](index=7&type=section&id=Consolidated%20Interim%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section outlines the unaudited consolidated interim statements of cash flows for the six months ended June 30, 2025 | Metric | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | 214 | 210 | | Net cash (used for) provided by investing activities | (26) | 18 | | Net cash used for financing activities | (89) | (384) | | Net increase (decrease) in cash, cash equivalents and restricted cash | 107 | (161) | | Cash, cash equivalents and restricted cash at end of the period | 233 | 65 | [Consolidated Interim Statements of Equity (Deficit) (Unaudited)](index=8&type=section&id=Consolidated%20Interim%20Statements%20of%20Equity%20(Deficit)%20(Unaudited)) This section presents the unaudited consolidated interim statements of equity (deficit) for the periods ended June 30, 2025 | Metric | Balance at December 31, 2024 (Millions USD) | Balance at June 30, 2025 (Millions USD) | | :------------------------------------ | :---------------------------------------- | :-------------------------------------- | | Additional Paid-in Capital | 1,213 | 1,226 | | Retained Deficit | (1,653) | (1,517) | | Accumulated Other Comprehensive Income (Loss) | 73 | (159) | | Treasury Stock | (306) | (362) | | Total Deficit | (673) | (812) | - The company reported a net income of **$87 million** for the three months ended June 30, 2025, and **$149 million** for the six months ended June 30, 2025, contributing to a reduction in retained deficit[20](index=20&type=chunk) - Share repurchases amounted to **$52 million** for the six months ended June 30, 2025, increasing treasury stock[20](index=20&type=chunk) [Notes to Consolidated Interim Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Interim%20Financial%20Statements%20(Unaudited)) This section provides detailed notes explaining the accounting policies and key financial aspects of the interim financial statements [Note 1. Background and Basis of Presentation](index=9&type=section&id=Note%201.%20Background%20and%20Basis%20of%20Presentation) This note describes Garrett Motion Inc.'s business, its role as a technology leader, and the basis for its financial statement presentation - Garrett Motion Inc. is a technology leader providing solutions for emission reduction and energy efficiency, specializing in turbocharging, air and fluid compression, and high-speed electric motor technologies for OEMs and distributors in mobility and industrial sectors[22](index=22&type=chunk) - The company operates in a single operating and reportable segment, with the CEO making resource allocation and performance decisions on a consolidated basis[24](index=24&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies and recent accounting pronouncements adopted or under evaluation by the company - The company adopted ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' prospectively as of January 1, 2025, enhancing transparency around income tax information[27](index=27&type=chunk) - The SEC's climate-related disclosure rule (SEC Release No. 33-11275) is being evaluated for its impact on disclosures, though it is currently stayed[28](index=28&type=chunk) - ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,' effective for fiscal years beginning after December 15, 2026, is also under evaluation[29](index=29&type=chunk) [Note 3. Revenue Recognition and Contracts with Customers](index=10&type=section&id=Note%203.%20Revenue%20Recognition%20and%20Contracts%20with%20Customers) This note details the company's revenue recognition policies and contract balances with customers | Contract Balances | June 30, 2025 (Millions USD) | January 1, 2025 (Millions USD) | | :------------------------ | :--------------------------- | :----------------------------- | | Contract assets | 51 | 40 | | Contract liabilities | (15) | (8) | [Note 4. Research, Development and Engineering](index=10&type=section&id=Note%204.%20Research,%20Development%20and%20Engineering) This note provides a breakdown of research, development, and engineering costs, including customer reimbursements | RD&E Costs | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Research and development costs | 47 | 46 | 90 | 89 | | Engineering-related expenses, net of customer reimbursements | (2) | (5) | (5) | (4) | | Total RD&E costs | 45 | 41 | 85 | 85 | - Customer reimbursements for engineering-related expenses were **$13 million** for Q2 2025 and **$25 million** for YTD 2025[34](index=34&type=chunk) - Capitalized contractually reimbursable engineering expenses increased to **$40 million** as of June 30, 2025, from **$29 million** at December 31, 2024[35](index=35&type=chunk) [Note 5. Income Taxes](index=11&type=section&id=Note%205.%20Income%20Taxes) This note presents the company's income tax expense and effective tax rates, explaining key drivers of changes | Tax Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Tax expense (Millions USD) | 15 | 23 | 38 | 38 | | Effective tax rate | 14.7% | 26.4% | 20.3% | 22.6% | - The decrease in the effective tax rate for Q2 2025 was primarily due to a one-time benefit from the revaluation of deferred tax assets in China and the absence of a prior-year gain on equity sale, partially offset by increased U.S. taxes on international operations[37](index=37&type=chunk)[39](index=39&type=chunk) [Note 6. Accounts, Notes and Other Receivables—Net](index=11&type=section&id=Note%206.%20Accounts,%20Notes%20and%20Other%20Receivables%E2%80%94Net) This note details the composition of accounts, notes, and other receivables, net of allowance for credit losses | Receivables (Millions USD) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Trade receivables | 606 | 521 | | Notes receivable | 67 | 96 | | Other receivables | 53 | 74 | | Less—Allowance for expected credit losses | (5) | (4) | | Total receivables | 721 | 687 | [Note 7. Factoring and Notes Receivable](index=12&type=section&id=Note%207.%20Factoring%20and%20Notes%20Receivable) This note describes the company's factoring activities and sales of notes receivable without recourse | Receivables Sold (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Eligible receivables sold without recourse | 190 | 240 | 342 | 402 | | Guaranteed bank notes sold without recourse | 80 | 52 | 96 | 52 | - Expenses related to the sale of trade receivables and guaranteed bank notes were **$1 million** for Q2 2025 and **$2 million** for YTD 2025[46](index=46&type=chunk) [Note 8. Inventories—Net](index=12&type=section&id=Note%208.%20Inventories%E2%80%94Net) This note provides a breakdown of inventories, including raw materials, work in process, finished products, and reserves | Inventories (Millions USD) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Raw materials | 231 | 230 | | Work in process | 22 | 18 | | Finished products | 78 | 79 | | Less—Reserves | (44) | (41) | | Total inventories | 287 | 286 | [Note 9. Other Assets](index=13&type=section&id=Note%209.%20Other%20Assets) This note details the components of other assets, including deferred income taxes and derivatives | Other Assets (Millions USD) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Advanced discounts to customers, non-current | 25 | 29 | | Operating right-of-use assets | 54 | 52 | | Deferred income taxes | 241 | 207 | | Derivatives designated as net investment hedges | 2 | 70 | | Total other assets | 137 | 224 | [Note 10. Supplier Financing](index=13&type=section&id=Note%2010.%20Supplier%20Financing) This note outlines the company's supplier financing obligations and guaranteed bank notes outstanding | Supplier Financing (Millions USD) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Supplier financing obligations outstanding with financial institutions | 76 | 64 | | Guaranteed bank notes outstanding | 154 | 141 | [Note 11. Accrued Liabilities](index=13&type=section&id=Note%2011.%20Accrued%20Liabilities) This note presents the composition of accrued liabilities, including customer pricing reserves and employee-related costs | Accrued Liabilities (Millions USD) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Customer pricing reserve | 85 | 77 | | Compensation, benefit and other employee related | 70 | 74 | | Repositioning | 11 | 12 | | Product warranties and performance guarantees - short-term | 15 | 15 | | Designated and undesignated derivatives | 22 | 8 | | Total accrued liabilities | 307 | 299 | - Repositioning accrual activity for the six months ended June 30, 2025, included **$5 million** in charges and **$6 million** in cash usage, resulting in a balance of **$11 million**[54](index=54&type=chunk) [Note 12. Other Liabilities](index=14&type=section&id=Note%2012.%20Other%20Liabilities) This note details other liabilities, including income taxes, derivatives, and long-term lease obligations | Other Liabilities (Millions USD) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Income taxes | 90 | 79 | | Designated and undesignated derivatives | 189 | 3 | | Pension and other employee related | 18 | 18 | | Long-term lease liability | 43 | 42 | | Total other liabilities | 380 | 182 | [Note 13. Leases](index=14&type=section&id=Note%2013.%20Leases) This note provides information on lease costs, weighted-average remaining lease terms, and discount rates | Lease Expense (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | 5 | 4 | 9 | 7 | | Short-term lease cost | 1 | — | 1 | — | | Total lease cost | 6 | 4 | 10 | 7 | - The weighted-average remaining lease term for operating leases was **6.64 years** as of June 30, 2025, with a weighted-average discount rate of **6.53%**[57](index=57&type=chunk) [Note 14. Long-Term Debt and Credit Agreements](index=16&type=section&id=Note%2014.%20Long-Term%20Debt%20and%20Credit%20Agreements) This note describes the company's long-term debt, including recent refinancing activities and compliance with covenants - The company completed an offering of **$800 million** in 7.75% Senior Unsecured Notes due 2032 on May 21, 2024, using proceeds to repay term loan indebtedness[58](index=58&type=chunk)[59](index=59&type=chunk) - On January 30, 2025, the company refinanced its **$692 million** 2021 Dollar Term Facility with a new **$692 million** 2025 Dollar Term Facility due January 30, 2032, bearing interest at Adjusted Term SOFR Rate plus 2.25%[61](index=61&type=chunk) - The existing **$600 million** revolving commitments were replaced with a new **$630 million** New Revolving Facility maturing on January 30, 2030[62](index=62&type=chunk) | Long-Term Debt (Millions USD) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | 2025 Dollar Term Facility | 690 | — | | 2032 Senior Notes | 800 | 800 | | Total principal outstanding | 1,491 | 1,493 | | Total long-term debt | 1,460 | 1,464 | - The company was in compliance with all covenants under the 2032 Senior Notes indenture and Credit Agreement as of June 30, 2025[65](index=65&type=chunk) [Note 15. Equity](index=17&type=section&id=Note%2015.%20Equity) This note details equity movements, including cash dividends and the share repurchase program - Cash dividends of **$0.06 per share** were declared on December 5, 2024 (**$12 million** paid January 31, 2025) and May 1, 2025 (**$13 million** paid June 16, 2025)[68](index=68&type=chunk)[69](index=69&type=chunk) - A **$250 million** share repurchase program was authorized for 2025. As of June 30, 2025, **$52 million** of Common Stock had been repurchased, with **$198 million** remaining[72](index=72&type=chunk) [Note 16. Financial Instruments and Fair Value Measures](index=18&type=section&id=Note%2016.%20Financial%20Instruments%20and%20Fair%20Value%20Measures) This note provides information on derivative instruments, their notional amounts, and fair value measures | Derivative Instruments (Millions USD) | Notional Amounts (June 30, 2025) | Notional Amounts (December 31, 2024) | Fair Value Assets (June 30, 2025) | Fair Value Liabilities (June 30, 2025) | | :------------------------------------ | :------------------------------- | :----------------------------------- | :-------------------------------- | :----------------------------------- | | Designated forward currency exchange contracts | 520 | 331 | 15 | 13 | | Designated cross-currency swaps | 2,040 | 1,515 | 2 | 173 | | Designated interest-rate swaps | 675 | — | — | 16 | | Undesignated forward currency exchange contracts | 453 | 597 | 1 | 9 | | Total designated and undesignated instruments | 3,688 | 2,913 | 18 | 211 | - The company entered into float-to-fixed interest rate swap contracts with an aggregate notional amount of **$675 million** in 2025, designated as cash flow hedges[76](index=76&type=chunk) - Cross-currency swaps with aggregate notional amounts of **€1,381 million** (**$1,490 million**) were designated as net investment hedges for Euro-denominated operations, resulting in a net liability of **$123 million** as of June 30, 2025[80](index=80&type=chunk) [Note 17. Accumulated Other Comprehensive Income](index=21&type=section&id=Note%2017.%20Accumulated%20Other%20Comprehensive%20Income) This note details the components and changes in accumulated other comprehensive income (loss) | AOCI Component (Millions USD) | Balance at December 31, 2024 | Balance at June 30, 2025 | | :---------------------------- | :--------------------------- | :----------------------- | | Foreign Exchange Translation Adjustment | (27) | (115) | | Pension Adjustments | (15) | (15) | | Changes in Fair Value of Effective Cash Flow Hedges | (10) | 9 | | Changes in Fair Value of Net Investment Hedges | 125 | (38) | | Total AOCI | 73 | (159) | - The significant decrease in AOCI from **$73 million** at December 31, 2024, to **$(159) million** at June 30, 2025, was primarily driven by foreign exchange translation adjustments and changes in the fair value of net investment hedges[90](index=90&type=chunk) [Note 18. Earnings Per Share](index=22&type=section&id=Note%2018.%20Earnings%20Per%20Share) This note presents basic and diluted earnings per share calculations and weighted average shares outstanding | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | 0.43 | 0.29 | 0.73 | 0.56 | | Diluted EPS | 0.42 | 0.28 | 0.72 | 0.56 | | Weighted average common shares outstanding – Basic | 202,672,945 | 224,321,948 | 203,886,530 | 230,493,039 | | Weighted average common shares outstanding – Diluted | 205,255,033 | 225,898,814 | 206,433,975 | 232,455,083 | [Note 19. Commitments and Contingencies](index=23&type=section&id=Note%2019.%20Commitments%20and%20Contingencies) This note discusses the company's legal proceedings, claims, and warranty obligations - The company is involved in various lawsuits and claims but does not currently believe they will have a material adverse effect on its financial position[93](index=93&type=chunk) - An estimated **$25 million** loss contingency related to a Brazilian tax matter is not accrued as the liability is not considered probable[94](index=94&type=chunk) | Warranty and Product Performance Guarantees (Millions USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period | 23 | 27 | | Accruals for warranties/guarantees issued during the period | 6 | 5 | | Settlement of warranty/guarantee claims | (8) | (6) | | Balance at end of period | 23 | 25 | [Note 20. Pension Benefits](index=23&type=section&id=Note%2020.%20Pension%20Benefits) This note provides information on pension plan contributions and net periodic benefit costs - The company expects to contribute approximately **$5 million** to its non-U.S. pension plans in 2025, with **$2 million** already contributed as of June 30, 2025[99](index=99&type=chunk) | Net Periodic Benefit Costs (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | 2 | 2 | 4 | 3 | | Interest cost | 3 | 3 | 6 | 7 | | Expected return on plan assets | (4) | (4) | (8) | (8) | | Total | 1 | 1 | 1 | 1 | [Note 21. Segments and Concentrations](index=24&type=section&id=Note%2021.%20Segments%20and%20Concentrations) This note details net sales by geographic region and product line, and capital expenditures - The company operates as a single operating and reportable segment, with the CEO reviewing consolidated net income for performance assessment and resource allocation[101](index=101&type=chunk) | Net Sales by Region (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | 178 | 174 | 354 | 352 | | Europe | 461 | 434 | 886 | 903 | | Asia | 250 | 263 | 507 | 515 | | Other International | 24 | 19 | 44 | 35 | | Total | 913 | 890 | 1,791 | 1,805 | | Net Sales by Product Line (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diesel | 217 | 220 | 425 | 461 | | Gas | 398 | 375 | 801 | 763 | | Commercial Vehicle | 170 | 161 | 325 | 322 | | Aftermarket | 111 | 121 | 209 | 233 | | Other | 17 | 13 | 31 | 26 | | Total | 913 | 890 | 1,791 | 1,805 | - Capital expenditures were **$15 million** for Q2 2025 and **$41 million** for YTD 2025[105](index=105&type=chunk) [Note 22. Acquisitions and Divestitures](index=25&type=section&id=Note%2022.%20Acquisitions%20and%20Divestitures) This note describes the company's divestiture of an equity interest in an unconsolidated joint venture - On April 3, 2024, the company divested its equity interest in an unconsolidated joint venture for approximately **$58 million**, recognizing a pre-tax gain of **$27 million**[106](index=106&type=chunk) [Note 23. Subsequent Events](index=25&type=section&id=Note%2023.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including tax law changes and dividend declarations - On July 4, 2025, the United States enacted H.R. 1, introducing changes to federal tax law, which the company is currently evaluating for its implications[109](index=109&type=chunk) - On July 24, 2025, the Board of Directors declared a cash dividend of **$0.06 per share** of Common Stock, payable on September 16, 2025[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three and six months ended June 30, 2025, highlighting key drivers of revenue, expenses, profitability, and liquidity, including the impact of macroeconomic challenges, strategic initiatives, and non-GAAP measures [Executive Summary](index=27&type=section&id=Executive%20Summary) This section provides a high-level overview of the company's financial performance, strategic achievements, and key operational highlights for the quarter - For Q2 2025, the company achieved Net income of **$87 million** and Adjusted EBIT of **$124 million**, navigating macroeconomic challenges[112](index=112&type=chunk) - Increased demand in light vehicle gasoline, driven by new program launches in Europe, North America, and India, was partially offset by declines in light vehicle volumes in Europe and decreased aftermarket demand in North America[112](index=112&type=chunk) - Strategic successes include winning a significant E-Turbo program in Europe, securing serial production for a Fuel cell compressor by a leading Asian OEM, and positive testing feedback for the E-Cooling Compressor[113](index=113&type=chunk) - The company repurchased **$22 million** of Common Stock in Q2 2025, with **$198 million** remaining under the share repurchase program[114](index=114&type=chunk) [Disaggregated Revenue](index=27&type=section&id=Disaggregated%20Revenue) This section presents a detailed breakdown of the company's net sales by geographic region and product line | Revenue by Region | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | United States | 178 (20%) | 174 (19%) | 354 (20%) | 352 (19%) | | Europe | 461 (50%) | 434 (49%) | 886 (49%) | 903 (50%) | | Asia | 250 (27%) | 263 (30%) | 507 (28%) | 515 (29%) | | Other | 24 (3%) | 19 (2%) | 44 (3%) | 35 (2%) | | Total | 913 | 890 | 1,791 | 1,805 | | Revenue by Product Line | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :---------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Diesel | 217 (24%) | 220 (25%) | 425 (24%) | 461 (26%) | | Gas | 398 (43%) | 375 (42%) | 801 (45%) | 763 (42%) | | Commercial Vehicle | 170 (19%) | 161 (18%) | 325 (18%) | 322 (18%) | | Aftermarket | 111 (12%) | 121 (14%) | 209 (11%) | 233 (13%) | | Other | 17 (2%) | 13 (1%) | 31 (2%) | 26 (1%) | | Total | 913 | 890 | 1,791 | 1,805 | [Results of Operations for the Three and Six Months Ended June 30, 2025](index=28&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025) This section analyzes the company's financial performance, including revenue, expenses, and profitability, for the three and six months ended June 30, 2025 [Net Sales](index=28&type=section&id=Net%20Sales) This section analyzes the drivers of changes in net sales for the three and six months ended June 30, 2025 | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net sales | 913 | 890 | 1,791 | 1,805 | | % change | 2.6% | | (0.8)% | | - Q2 2025 net sales increased by **$23 million (3%)** year-over-year, primarily due to favorable foreign currency translation (**$23 million** or **3%**) and recoveries on import tariffs, with strong demand in gasoline and commercial vehicle applications partially offset by weaker aftermarket and diesel sales[121](index=121&type=chunk) - YTD 2025 net sales decreased by **$14 million (1%)** year-over-year, mainly due to soft demand in diesel and aftermarket sales, partially offset by higher demand for gasoline and commercial vehicle applications, import tariff recoveries, and favorable foreign exchange impacts[126](index=126&type=chunk) [Cost of Goods Sold and Gross Profit](index=29&type=section&id=Cost%20of%20Goods%20Sold%20and%20Gross%20Profit) This section discusses the factors influencing cost of goods sold and gross profit for the reporting periods | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Cost of goods sold | 732 | 705 | 1,431 | 1,448 | | % change | 3.8% | | (1.2)% | | | Gross profit percentage | 19.8% | 20.8% | 20.1% | 19.8% | - For Q2 2025, gross profit decreased by **$4 million**, primarily due to **$25 million** of unfavorable product mix and **$2 million** of pricing, net of inflation pass-through, partially offset by **$9 million** from foreign currency impacts and **$9 million** of productivity[132](index=132&type=chunk) - For YTD 2025, gross profit increased by **$3 million**, driven by **$25 million** of productivity, **$13 million** of commodity, transportation and energy deflation, and **$2 million** of pricing, partially offset by **$32 million** from unfavorable product mix and **$6 million** of lower sales volumes[134](index=134&type=chunk) [Selling, General and Administrative Expenses](index=30&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section analyzes the changes in selling, general, and administrative expenses and their impact on profitability | SG&A Expenses (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative expense | 59 | 61 | 118 | 125 | | % of sales | 6.5% | 6.9% | 6.6% | 6.9% | - SG&A expenses decreased by **$2 million** for Q2 2025, mainly due to lower personnel costs, and by **$7 million** for YTD 2025, driven by lower personnel costs and legal fees[135](index=135&type=chunk)[136](index=136&type=chunk) [Other Expense, Net](index=30&type=section&id=Other%20Expense,%20Net) This section details the components and changes in other expense, net, for the reporting periods | Other Expense, Net (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Other expense, net | 1 | 3 | 8 | 4 | - Other expense, net decreased by **$2 million** for Q2 2025 due to lower professional fees in the prior year. For YTD 2025, it increased by **$4 million**, primarily due to **$6 million** in professional fees related to the Restatement Agreement[138](index=138&type=chunk)[139](index=139&type=chunk) [Interest Expense](index=31&type=section&id=Interest%20Expense) This section discusses the changes in interest expense, primarily driven by debt refinancing and amortization | Interest Expense (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest expense | 25 | 62 | 54 | 93 | - Interest expense decreased by **$37 million** for Q2 2025 and **$39 million** for YTD 2025, primarily due to a reduction in debt issuance cost amortization and lower interest expense from changes in the notional amount of debt outstanding[140](index=140&type=chunk)[141](index=141&type=chunk) [Non-Operating Income, Net](index=31&type=section&id=Non-Operating%20Income,%20Net) This section analyzes the factors contributing to non-operating income, net, including foreign exchange gains | Non-Operating Income, Net (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-operating income, net | (6) | (1) | (7) | (6) | - Non-operating income increased for both Q2 and YTD 2025, primarily driven by foreign exchange transactional gains[142](index=142&type=chunk)[143](index=143&type=chunk) [Tax Expense](index=31&type=section&id=Tax%20Expense) This section explains the company's tax expense and effective tax rate, including the impact of specific events and new regulations | Tax Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Tax expense (Millions USD) | 15 | 23 | 38 | 38 | | Effective tax rate | 14.7% | 26.4% | 20.3% | 22.6% | - The effective tax rate decreased for Q2 2025 due to a one-time benefit from the revaluation of deferred tax assets in China and the absence of a prior-year gain on equity sale, partially offset by increased U.S. taxes on international operations[146](index=146&type=chunk) - The company is evaluating the impact of the newly enacted H.R. 1 tax law changes and the Pillar Two framework on its future effective tax rate[148](index=148&type=chunk)[149](index=149&type=chunk) [Net Income](index=32&type=section&id=Net%20Income) This section provides an analysis of the drivers behind the changes in net income for the reporting periods | Net Income (Millions USD) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | 87 | 64 | 149 | 130 | | Net income margin | 9.5% | 7.2% | 8.3% | 7.2% | - Net income for Q2 2025 increased by **$23 million**, driven by lower interest, tax, SG&A, and other expenses, and higher non-operating income, partially offset by decreased gross profit and the prior year's gain on equity sale[151](index=151&type=chunk) - Net income for YTD 2025 increased by **$19 million**, primarily due to lower interest and SG&A expenses, higher gross margin, and increased non-operating income, partially offset by higher other expense and the prior year's gain on equity sale[152](index=152&type=chunk) [Non-GAAP Measures](index=32&type=section&id=Non-GAAP%20Measures) This section presents and reconciles non-GAAP financial measures, specifically EBIT and Adjusted EBIT, to GAAP net income [EBIT and Adjusted EBIT](index=33&type=section&id=EBIT%20and%20Adjusted%20EBIT) This section introduces the company's transition to Adjusted EBIT as a key non-GAAP metric and provides its reconciliation - In 2025, the company transitioned its non-GAAP reporting metric from Adjusted EBITDA to Adjusted EBIT to better reflect core operating performance and align with industry practices[154](index=154&type=chunk) | Metric | Three Months Ended June 30, 2025 (Millions USD) | Three Months Ended June 30, 2024 (Millions USD) | Six Months Ended June 30, 2025 (Millions USD) | Six Months Ended June 30, 2024 (Millions USD) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net income | 87 | 64 | 149 | 130 | | Interest expense, net of interest income | 23 | 61 | 52 | 90 | | Tax expense | 15 | 23 | 38 | 38 | | EBIT | 125 | 148 | 239 | 258 | | Adjusted EBIT | 124 | 123 | 255 | 244 | [Adjusted EBIT for the Three Months Ended June 30, 2025](index=34&type=section&id=Adjusted%20EBIT%20for%20the%20Three%20Months%20Ended%20June%2030,%202025) This section analyzes the drivers of changes in Adjusted EBIT for the three months ended June 30, 2025 - Adjusted EBIT increased by **$1 million** year-over-year for Q2 2025, driven by **$11 million** from foreign currency impacts, **$11 million** from productivity, **$4 million** from commodity, transportation, and energy deflation, and **$1 million** from higher volumes[163](index=163&type=chunk) - These increases were partially offset by **$25 million** of unfavorable product mix and **$2 million** of lower pricing net of inflation pass-through[163](index=163&type=chunk) [Adjusted EBIT for the Six Months Ended June 30, 2025](index=34&type=section&id=Adjusted%20EBIT%20for%20the%20Six%20Months%20Ended%20June%2030,%202025) This section analyzes the drivers of changes in Adjusted EBIT for the six months ended June 30, 2025 - Adjusted EBIT increased by **$11 million** year-over-year for YTD 2025, primarily from **$29 million** of operational productivity, **$13 million** of commodity, transportation, and energy deflation, **$4 million** of favorable foreign exchange impacts, and **$2 million** price net of inflation pass-through[168](index=168&type=chunk) - These gains were partially offset by **$32 million** unfavorable product mix and **$6 million** of lower sales volume from diesel and aftermarket products[168](index=168&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity position, capital resources, and cash flow activities [Overview](index=35&type=section&id=Overview) This section provides an overview of the company's cash, credit facilities, and long-term debt | Liquidity Metric (Millions USD) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | 232 | 125 | | Revolving Facility - available borrowing capacity | 630 | 600 | | Term Loan Facilities - principal outstanding | 690 | 692 | | Senior Notes - principal outstanding | 800 | 800 | - The company refinanced its **$692 million** 2021 Dollar Term Facility with a new 2025 Dollar Term Facility and replaced its **$600 million** revolving facility with a new **$630 million** New Revolving Facility, enhancing its financing structure[171](index=171&type=chunk) - Management expects adequate liquidity from cash flows, term loan borrowings, 2032 Senior Notes, and the New Revolving Facility to support operations and investments in new technologies, particularly zero-emission technologies[172](index=172&type=chunk) [Share Repurchase Program](index=35&type=section&id=Share%20Repurchase%20Program) This section details the company's share repurchase program and activity during the period - A **$250 million** share repurchase program was authorized for 2025. As of June 30, 2025, **$52 million** of Common Stock had been repurchased, with **$198 million** remaining[173](index=173&type=chunk) [Cash Flow Summary for the Six Months Ended June 30, 2025](index=36&type=section&id=Cash%20Flow%20Summary%20for%20the%20Six%20Months%20Ended%20June%2030,%202025) This section summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 | Cash Flow Activity (Millions USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | 214 | 210 | | Investing activities | (26) | 18 | | Financing activities | (89) | (384) | | Effect of exchange rate changes | 8 | (5) | | Net increase (decrease) in cash | 107 | (161) | - Cash provided by operating activities increased by **$4 million**, driven by favorable working capital changes and higher net income[174](index=174&type=chunk) - Cash used for investing activities decreased by **$44 million**, primarily due to prior year proceeds from the sale of an unconsolidated joint venture and reduced cross-currency swap proceeds, partially offset by lower capital expenditures[175](index=175&type=chunk) - Cash used for financing activities decreased significantly by **$295 million**, mainly due to lower debt repayments and share repurchases compared to the prior year, partially offset by proceeds from the Credit Facilities[176](index=176&type=chunk)[177](index=177&type=chunk) [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet financial arrangements - The company does not engage in any off-balance sheet financial arrangements that are material to its financial condition or results of operations[178](index=178&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) This section refers to the company's critical accounting policies as disclosed in its annual report - The company's critical accounting policies are consistent with those disclosed in its 2024 Form 10-K[179](index=179&type=chunk) [Recent Accounting Pronouncements](index=36&type=section&id=Recent%20Accounting%20Pronouncements) This section directs readers to Note 2 for information on recent accounting pronouncements - Information on recent accounting pronouncements is provided in Note 2 to the Consolidated Interim Financial Statements[180](index=180&type=chunk) [Special Note Regarding Forward-Looking Statements](index=37&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section cautions readers about forward-looking statements and the inherent risks and uncertainties that could cause actual results to differ - The report contains forward-looking statements regarding future results, market expectations, financial position, and business strategy, which are subject to various risks and uncertainties[181](index=181&type=chunk) - Readers are cautioned that actual results may differ materially from these statements due to factors such as industry evolution, competition, reliance on major customers, economic conditions, and international operations risks[181](index=181&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, particularly currency risk, and assesses the potential impact of hypothetical changes in exchange rates on financial instruments - As of June 30, 2025, the net fair value of financial instruments exposed to currency risk was **$177 million**[183](index=183&type=chunk) - A hypothetical **10%** adverse or favorable change in currency exchange rates could result in a potential loss of **$288 million** or a gain of **$(265) million**, respectively[183](index=183&type=chunk) - There have been no other material changes to the company's quantitative and qualitative disclosures about interest rate or commodity price risks since the 2024 Form 10-K[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[186](index=186&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect these controls[187](index=187&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part provides additional information, including legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses the company's involvement in various legal actions, stating that while outcomes are uncertain, no material adverse effect on financial position, results of operations, or cash flows is currently anticipated - The company is involved in various lawsuits, claims, and proceedings, but does not currently believe they will have a material adverse effect on its financial position, results of operations, or cash flows[189](index=189&type=chunk) - Accruals for potential liabilities are made when a liability is probable and reasonably estimable, consistent with GAAP[189](index=189&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section confirms that there have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - There have been no material changes to the risk factors described in the company's 2024 Form 10-K[191](index=191&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activity under its authorized program for the quarter ended June 30, 2025 - The Board of Directors authorized a **$250 million** share repurchase program valid from January 1, 2025, until December 31, 2025[192](index=192&type=chunk) | Period | Total Number of Common Shares Purchased | Average Price Paid per Share ($) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Program ($) | | :-------------------------- | :------------------------------------ | :------------------------------- | :----------------------------------------------------------------------- | | April 1, 2025 – April 30, 2025 | 1,465,679 | 8.47 | 207,749,711 | | May 1, 2025 – May 31, 2025 | 49,907 | 9.95 | 207,253,171 | | June 1, 2025 – June 30, 2025 | 875,714 | 10.22 | 198,305,673 | | Total | 2,391,300 | 9.14 | 198,305,673 | [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - This item is marked as 'Not applicable,' indicating no defaults upon senior securities[194](index=194&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - This item is marked as 'Not applicable,' indicating no mine safety disclosures[195](index=195&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) This section provides additional information, specifically noting that no Rule 10b5-1 or non-Rule 10b5-1 trading agreements were adopted or terminated by directors or Section 16 officers during the quarter - No director or Section 16 officer adopted or terminated a 'Rule 10b5-1 trading agreement' or 'non-Rule 10b5-1 trading agreement' during the three months ended June 30, 2025[196](index=196&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate governance documents, certifications, and financial data in XBRL format - Exhibits include the Third Amended and Restated Certificate of Incorporation, Fifth Amended and Restated By-Laws, certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and financial information formatted in Inline XBRL[197](index=197&type=chunk) [Signatures](index=41&type=section&id=Signatures) This section contains the official signatures of the company's President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, certifying the report's submission - The report was signed on July 24, 2025, by Olivier Rabi

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Garrett Motion delivered strong Q2 2025 results with increased net sales, net income, and adjusted free cash flow, declared a dividend, raised its full-year outlook, and achieved strategic milestones in program extensions and R&D [Second Quarter 2025 Overview](index=1&type=section&id=Second%20Quarter%202025%20Overview) Garrett Motion reported strong Q2 2025 financial results, outperforming the industry with a 3% increase in net sales and significant growth in net income and adjusted free cash flow. The company also declared a cash dividend of $0.06 per share and raised its full-year 2025 outlook Second Quarter 2025 Financial Highlights | $ millions (unless otherwise noted) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | 913 | 890 | 1,791 | 1,805 | | Gross profit | 181 | 185 | 360 | 357 | | Gross profit % | 19.8% | 20.8% | 20.1% | 19.8% | | Net income | 87 | 64 | 149 | 130 | | Net income margin | 9.5% | 7.2% | 8.3% | 7.2% | | Adjusted EBIT* | 124 | 123 | 255 | 244 | | Adjusted EBIT margin* | 13.6% | 13.8% | 14.2% | 13.5% | | Adjusted EBITDA* | 154 | 150 | 313 | 301 | | Adjusted EBITDA margin* | 16.9% | 16.9% | 17.5% | 16.7% | | Net cash provided by operating activities | 158 | 126 | 214 | 210 | | Adjusted free cash flow* | 121 | 62 | 157 | 130 | - Garrett Motion declared a cash dividend of **$0.06 per share** of common stock, payable on September 16, 2025[1](index=1&type=chunk) - The company raised its full-year 2025 outlook to reflect favorable foreign currency impacts[3](index=3&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Olivier Rabiller highlighted strong operational execution, outperforming the industry with a 13.6% Adjusted EBIT margin and generating $121 million in Adjusted free cash flow. Strategic achievements included securing over $1 billion in light vehicle program extensions, advancing zero-emission technologies, and expanding R&D capabilities with a new innovation center in Wuhan - Garrett delivered a strong quarter with an **Adjusted EBIT margin of 13.6%** and generated **$121 million of Adjusted free cash flow**[2](index=2&type=chunk) - Secured awards for more than **$1 billion in light vehicle program extensions** and advanced zero-emission technologies (E-Powertrain, E-Cooling, Fuel Cell programs)[2](index=2&type=chunk) - Launched a second innovation center in Wuhan to scale R&D capabilities for high-efficiency electrification solutions[2](index=2&type=chunk) [Financial Performance Analysis (Q2 2025)](index=2&type=section&id=Financial%20Performance%20Analysis%20(Q2%202025)) This section analyzes Garrett Motion's Q2 2025 financial performance, detailing changes in net sales, gross profit, expenses, net income, and cash flow, alongside key non-GAAP metrics [Results of Operations](index=2&type=section&id=Results%20of%20Operations) The company's Q2 2025 results showed a 3% increase in net sales, primarily due to foreign currency impacts and tariff recoveries. Gross profit decreased slightly due to unfavorable product mix and pricing, while net income significantly improved due to lower interest and tax expenses [Net Sales](index=2&type=section&id=Net%20Sales) Net sales increased by 3% in Q2 2025, primarily driven by foreign currency impacts and tariff recoveries, despite mixed demand across product categories Net Sales Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $913 million | $890 million | +3% | | Foreign currency impact | $23 million | N/A | +3% | | Constant currency sales change | Flat | N/A | 0% | - Increase driven by foreign currency impacts and recoveries on newly enacted import tariffs[4](index=4&type=chunk) - Strong demand for gasoline and commercial vehicle applications was offset by weaker demand for replacement parts on aftermarket sales and diesel products[4](index=4&type=chunk) [Cost of Goods Sold and Gross Profit](index=2&type=section&id=Cost%20of%20Goods%20Sold%20and%20Gross%20Profit) Cost of goods sold increased due to foreign currency and tariffs, while gross profit decreased by $4 million and 1.0 percentage point, mainly due to unfavorable product mix and pricing Cost of Goods Sold (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Cost of goods sold | $732 million | $705 million | +$27 million | | Primary drivers of increase | Foreign currency impacts ($16M), import tariffs ($15M), unfavorable product mix ($6M), higher sales volumes ($3M) | N/A | N/A | | Offsets to increase | Productivity net of labor inflation ($8M), commodity/transportation/energy deflation ($4M), lower R&D costs ($1M) | N/A | N/A | Gross Profit Performance (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross profit | $181 million | $185 million | -$4 million | | Gross profit percentage | 19.8% | 20.8% | -1.0 pp | | Primary drivers of decrease | Unfavorable product mix ($25M), pricing net of inflation pass-through ($2M) | N/A | N/A | | Offsets to decrease | Foreign currency impacts ($9M), productivity ($9M), commodity/transportation/energy deflation ($4M), higher sales volumes ($1M), lower R&D costs ($1M) | N/A | N/A | [Selling, General and Administrative Expenses](index=2&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) Selling, general and administrative expenses decreased by $2 million in Q2 2025, primarily due to lower personnel costs, partially offset by unfavorable foreign exchange impacts SG&A Expenses (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | SG&A expenses | $59 million | $61 million | -$2 million | | Primary driver of decrease | Lower personnel costs ($3 million) | N/A | N/A | | Partial offset | Unfavorable foreign exchange impacts ($2 million) | N/A | N/A | [Other Expense, Interest Expense, and Non-Operating Income](index=2&type=section&id=Other%20Expense%2C%20Interest%20Expense%2C%20and%20Non-Operating%20Income) Other expense and interest expense decreased significantly in Q2 2025, while non-operating income increased, primarily due to foreign exchange transactional gains Other Expense (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Other expense | $1 million | $3 million | -$2 million | | Primary driver of decrease | Lower professional fees related to 2032 Senior Notes in prior year | N/A | N/A | Interest Expense (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Interest expense | $25 million | $62 million | -$37 million | | Primary drivers of decrease | $29 million reduction in debt issuance cost amortization, $8 million lower interest expense from change in notional debt | N/A | N/A | Non-Operating Income (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Non-operating income | $6 million | $1 million | +$5 million | | Primary driver of increase | Foreign exchange transactional gains | N/A | N/A | [Tax Expense](index=2&type=section&id=Tax%20Expense) Tax expense decreased by $8 million in Q2 2025, mainly due to a prior-year equity sale and a deferred tax asset revaluation benefit in China, partially offset by increased U.S. taxes Tax Expense (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Tax expense | $15 million | $23 million | -$8 million | | Primary drivers of decrease | One-time sale of equity interest in prior year, one-time benefit from revaluation of deferred tax assets in China | N/A | N/A | | Partial offset | Increase in U.S. taxes on international operations | N/A | N/A | [Net Income](index=2&type=section&id=Net%20Income) Net income increased by $23 million in Q2 2025, driven by lower interest and tax expenses, and increased non-operating income, partially offset by decreased gross profit Net Income (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net income | $87 million | $64 million | +$23 million | | Primary drivers of increase | Lower interest expense ($37M), lower tax expense ($8M), lower SG&A expense ($2M), lower other expense ($2M), increase in non-operating income ($5M) | N/A | N/A | | Partial offsets | Decreased gross profit ($4M), prior year gain on sale of equity interest ($27M) | N/A | N/A | [Net Cash Provided by Operating Activities](index=2&type=section&id=Net%20Cash%20Provided%20by%20Operating%20Activities) Net cash provided by operating activities increased by $32 million in Q2 2025, primarily due to favorable working capital changes and higher net income Net Cash Provided by Operating Activities (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $158 million | $126 million | +$32 million | | Primary drivers of increase | Favorable impacts from working capital changes ($76M), higher net income ($23M) | N/A | N/A | | Partial offsets | Decrease in non-cash charges ($37M), unfavorable impacts from changes in other assets and liabilities ($30M) | N/A | N/A | [Non-GAAP Financial Performance (Q2 2025)](index=2&type=section&id=Non-GAAP%20Financial%20Performance%20(Q2%202025)) Garrett Motion reported an increase in Adjusted EBIT and a significant rise in Adjusted free cash flow for Q2 2025, reflecting strong operational performance and effective working capital management [Adjusted EBIT](index=3&type=section&id=Adjusted%20EBIT) Adjusted EBIT increased by $1 million in Q2 2025, driven by foreign currency impacts, productivity, and commodity deflation, partially offset by unfavorable product mix and pricing Adjusted EBIT (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted EBIT | $124 million | $123 million | +$1 million | | Primary drivers of increase | Foreign currency impacts ($11M), productivity ($11M), commodity/transportation/energy deflation ($4M), higher volumes ($1M) | N/A | N/A | | Partial offsets | Unfavorable product mix ($25M), lower pricing net of inflation pass-through ($2M) | N/A | N/A | [Adjusted Free Cash Flow](index=3&type=section&id=Adjusted%20Free%20Cash%20Flow) Adjusted free cash flow significantly increased by $59 million in Q2 2025, primarily due to favorable working capital changes, despite higher cash interest and tax payments Adjusted Free Cash Flow (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted free cash flow | $121 million | $62 million | +$59 million | | Primary driver of increase | Favorable impact from working capital changes (net of factoring) ($92M) | N/A | N/A | | Partial offsets | Higher cash interest paid ($24M), higher cash taxes paid ($8M) | N/A | N/A | [Liquidity and Capital Resources](index=3&type=section&id=Liquidity%20and%20Capital%20Resources) Garrett Motion maintained strong liquidity as of June 30, 2025, with substantial cash and undrawn credit, stable total debt, and ongoing common stock repurchases [Liquidity and Capital Resources](index=3&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, Garrett Motion maintained strong liquidity with $862 million available, including $232 million in cash and $630 million in undrawn credit. Total debt remained stable at $1,491 million, and the company repurchased $22 million of common stock, with $198 million remaining capacity Available Liquidity | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total available liquidity | $862 million | $725 million | | Cash and cash equivalents | $232 million | $125 million | | Undrawn revolving credit facility | $630 million | $600 million | Debt and Share Repurchases | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total principal amount of debt outstanding | $1,491 million | $1,493 million | | Common stock repurchased (Q2 2025) | $22 million | N/A | | Remaining repurchase capacity (June 30, 2025) | $198 million | N/A | [Full Year 2025 Outlook](index=3&type=section&id=Full%20Year%202025%20Outlook) Garrett Motion has revised its full-year 2025 financial outlook upwards, driven by favorable foreign currency impacts, and provided key assumptions for industry production and market conditions [Revised Financial Outlook](index=3&type=section&id=Revised%20Financial%20Outlook) Garrett Motion raised its full-year 2025 outlook for several GAAP and Non-GAAP financial measures, primarily due to favorable foreign currency impacts, indicating increased confidence in future performance Full Year 2025 Outlook (Revised vs. Prior) | Metric | Full Year 2025 Outlook | Prior Outlook | | :--- | :--- | :--- | | Net sales (GAAP) | $3.4 billion to $3.6 billion | $3.3 billion to $3.5 billion | | Net sales growth at constant currency (Non-GAAP)* | -3% to +2% | -3% to +2% | | Net income (GAAP) | $233 million to $278 million | $209 million to $254 million | | Adjusted EBITDA (Non-GAAP)* | $590 million to $650 million | $545 million to $605 million | | Adjusted EBIT (Non-GAAP)* | $470 million to $530 million | $427 million to $487 million | | Net cash provided by operating activities (GAAP) | $370 million to $450 million | $357 million to $447 million | | Adjusted free cash flow (Non-GAAP)* | $330 million to $410 million | $300 million to $390 million | [Key Outlook Assumptions](index=3&type=section&id=Key%20Outlook%20Assumptions) The full-year 2025 outlook is based on assumptions including flat to slightly down light vehicle production, flat to slightly up commercial vehicle production, 16% BEV penetration, and price/productivity offsetting inflation, with a Euro/dollar assumption of 1.13 EUR to 1.00 USD - 2025 light vehicle industry production expected to be **down 3% to flat** versus 2024[22](index=22&type=chunk) - 2025 commercial vehicle industry production (on- and off-highway) expected to be **flat to +2%** versus 2024[22](index=22&type=chunk) - Assumes 2025 average light vehicle battery electric vehicle penetration of **16%**[22](index=22&type=chunk) - Price (net of pass-through) and productivity are expected to offset inflation[22](index=22&type=chunk) - Euro/dollar assumption of **1.13 EUR to 1.00 USD** for 2025[22](index=22&type=chunk) [Company Information & Disclosures](index=4&type=section&id=Company%20Information%20%26%20Disclosures) This section provides an overview of Garrett Motion's business, includes standard forward-looking statements, and defines the non-GAAP financial measures used in the report [About Garrett Motion Inc.](index=4&type=section&id=About%20Garrett%20Motion%20Inc.) Garrett Motion is a leading automotive technology provider with a 70-year history of innovation in turbocharging, enabling reductions in engine size, fuel consumption, and CO2 emissions. The company is expanding into Zero Emission Vehicle solutions, including fuel cell compressors and electric propulsion systems, supported by six R&D centers and over 9,000 employees globally - Garrett Motion is a differentiated technology leader with a **70-year history in automotive turbocharging**, reducing engine size, fuel consumption, and CO2 emissions[26](index=26&type=chunk) - Expanding into Zero Emission Vehicle solutions, such as fuel cell compressors for hydrogen vehicles and electric propulsion/thermal management systems for battery electric vehicles[26](index=26&type=chunk) - Operates **six R&D centers**, 13 manufacturing sites, and employs **over 9,000 people** in more than 20 countries[26](index=26&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section contains a standard disclaimer regarding forward-looking statements, cautioning that actual results may differ materially from projections due to various risks, and the company undertakes no obligation to update these statements - Forward-looking statements represent current judgment about possible future activities, events, or developments, but are not guarantees of future performance[24](index=24&type=chunk) - Actual performance, events, or results may differ materially due to various important factors, including risks related to the automotive industry, competitive landscape, and macroeconomic/geopolitical conditions[24](index=24&type=chunk) - The company undertakes no obligation to update or revise any forward-looking statements, except where expressly required by law[24](index=24&type=chunk) [Non-GAAP Financial Measures (Definitions)](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20(Definitions)) This section defines the non-GAAP financial measures used in the report, such as Constant currency sales growth, Adjusted EBIT, Adjusted EBITDA, and Adjusted free cash flow, explaining their usefulness to investors and management for understanding operational performance by excluding certain non-operating items - Non-GAAP measures (Constant currency sales growth, Adjusted EBIT, Adjusted EBITDA, Adjusted EBIT margin, Adjusted EBITDA margin, Adjusted free cash flow) are used to understand ongoing operations and operating trends[25](index=25&type=chunk) - These measures exclude effects of certain non-operating items to more closely reflect operational performance[25](index=25&type=chunk) - Non-GAAP measures may not be comparable to similarly titled measures of other companies and should not be considered superior to, in isolation from, or as a substitute for, related GAAP measures[25](index=25&type=chunk) [Consolidated Interim Financial Statements](index=6&type=section&id=Consolidated%20Interim%20Financial%20Statements) This section presents Garrett Motion's unaudited consolidated interim financial statements, including statements of operations, comprehensive income, balance sheets, and cash flows for the reported periods [Consolidated Interim Statements of Operations](index=6&type=section&id=Consolidated%20Interim%20Statements%20of%20Operations) The unaudited consolidated interim statement of operations shows net sales of $913 million for Q2 2025 (up from $890 million in Q2 2024) and net income of $87 million (up from $64 million). Basic EPS increased to $0.43 from $0.29 year-over-year CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS | | For the Three Months Ended June 30, | For the Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net sales | $913 | $890 | $1,791 | $1,805 | | Cost of goods sold | 732 | 705 | 1,431 | 1,448 | | Gross profit | 181 | 185 | 360 | 357 | | Selling, general and administrative expenses | 59 | 61 | 118 | 125 | | Other expense, net | 1 | 3 | 8 | 4 | | Interest expense | 25 | 62 | 54 | 93 | | Gain on sale of equity investment | — | (27) | — | (27) | | Non-operating income, net | (6) | (1) | (7) | (6) | | Income before taxes | 102 | 87 | 187 | 168 | | Tax expense | 15 | 23 | 38 | 38 | | Net income | $87 | $64 | $149 | $130 | | Earnings per common share (Basic) | $0.43 | $0.29 | $0.73 | $0.56 | | Earnings per common share (Diluted) | 0.42 | 0.28 | 0.72 | 0.56 | [Consolidated Interim Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Interim%20Statements%20of%20Comprehensive%20Income) The interim statement of comprehensive income reports a comprehensive loss of $(83) million for Q2 2025, a significant change from a comprehensive income of $72 million in Q2 2024, primarily due to a large foreign exchange translation adjustment and changes in fair value of net investment hedges CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net income | $87 | $64 | $149 | $130 | | Foreign exchange translation adjustment | (59) | — | (88) | 18 | | Defined benefit pension plan adjustment, net of tax | — | 2 | — | 3 | | Changes in fair value of effective cash flow hedges, net of tax | 17 | (2) | 19 | 1 | | Changes in fair value of net investment hedges, net of tax | (128) | 8 | (163) | 27 | | Total other comprehensive (loss) income, net of tax | (170) | 8 | (232) | 49 | | Comprehensive (loss) income | $(83) | $72 | $(83) | $179 | [Consolidated Interim Balance Sheets](index=8&type=section&id=Consolidated%20Interim%20Balance%20Sheets) As of June 30, 2025, total assets increased to $2,403 million from $2,276 million at December 31, 2024, driven by higher cash and receivables. Total liabilities also increased to $3,215 million from $2,949 million, leading to an increased total deficit CONSOLIDATED INTERIM BALANCE SHEETS | ASSETS | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $232 | $125 | | Accounts, notes and other receivables – net | 721 | 687 | | Inventories – net | 287 | 286 | | Total current assets | 1,363 | 1,193 | | Total assets | $2,403 | $2,276 | | LIABILITIES | | | | Accounts payable | $1,005 | $972 | | Total current liabilities | 1,319 | 1,278 | | Long-term debt | 1,460 | 1,464 | | Total liabilities | $3,215 | $2,949 | | Total deficit | $(812) | $(673) | | Total liabilities and deficit | $2,403 | $2,276 | [Consolidated Interim Statements of Cash Flows](index=9&type=section&id=Consolidated%20Interim%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the six months ended June 30, 2025, was $214 million, slightly up from $210 million in the prior year. Net cash used for investing activities was $(26) million, and net cash used for financing activities was $(89) million. Cash and cash equivalents at period end increased to $233 million CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | Cash flows from operating activities: | Six Months Ended June 30, | | :--- | :--- | | | 2025 | 2024 | | Net income | $149 | $130 | | Net cash provided by operating activities | $214 | $210 | | Cash flows from investing activities: | | | | Expenditures for property, plant and equipment | (41) | (49) | | Net cash used for investing activities | $(26) | $18 | | Cash flows from financing activities: | | | | Repurchases of Common Stock | (52) | (173) | | Dividend payments | (25) | — | | Net cash used for financing activities | $(89) | $(384) | | Net increase (decrease) in cash, cash equivalents and restricted cash | 107 | (161) | | Cash, cash equivalents and restricted cash at end of the period | $233 | $99 | [Non-GAAP Reconciliations](index=10&type=section&id=Non-GAAP%20Reconciliations) This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including Adjusted EBIT, Adjusted EBITDA, constant currency sales, and Adjusted free cash flow, for both historical periods and the full-year 2025 outlook [Reconciliation of Net Income to Adjusted EBIT and Adjusted EBITDA](index=10&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBIT%20and%20Adjusted%20EBITDA) This section provides a detailed reconciliation of Net Income to Adjusted EBIT and Adjusted EBITDA for the three and six months ended June 30, 2025 and 2024, outlining specific adjustments such as interest expense, tax expense, repositioning costs, and depreciation Reconciliation of Net Income to Adjusted EBIT and Adjusted EBITDA | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net income | $87 | $64 | $149 | $130 | | Interest expense, net of interest income | 23 | 61 | 52 | 90 | | Tax expense | 15 | 23 | 38 | 38 | | EBIT | 125 | 148 | 239 | 258 | | Repositioning costs | (2) | 1 | 5 | 12 | | Gain on sale of equity investment | — | (27) | — | (27) | | Adjusted EBIT | 124 | 123 | 255 | 244 | | Depreciation | 23 | 22 | 45 | 44 | | Stock compensation expense | 7 | 5 | 13 | 13 | | Adjusted EBITDA | $154 | $150 | $313 | $301 | | Adjusted EBIT margin | 13.6 % | 13.8 % | 14.2 % | 13.5 % | | Adjusted EBITDA margin | 16.9 % | 16.9 % | 17.5 % | 16.7 % | - Adjusted EBIT and Adjusted EBITDA are important indicators of operating performance, excluding the effects of income taxes, financing activities, and certain non-operating items[34](index=34&type=chunk) [Reconciliation of Constant Currency Sales % Change](index=11&type=section&id=Reconciliation%20of%20Constant%20Currency%20Sales%20%25%20Change) This section reconciles reported sales percentage change to constant currency sales percentage change for Garrett Motion and its various segments (Gasoline, Diesel, Commercial vehicles, Aftermarket, Other Sales) for the three and six months ended June 30, 2025 and 2024 Reconciliation of Constant Currency Sales % Change (Q2 2025) | Segment | Reported sales % change | Less: Foreign currency translation | Constant currency sales % change | | :--- | :--- | :--- | :--- | | Garrett | 3 % | 3 % | — % | | Gasoline | 6 % | 2 % | 4 % | | Diesel | (1)% | 4 % | (5)% | | Commercial vehicles | 6 % | 2 % | 4 % | | Aftermarket | (8)% | 2 % | (10)% | | Other Sales | 31 % | 5 % | 26 % | - Constant currency sales growth is defined as the year-over-year change in reported sales, excluding the impact from foreign currency translation, useful for understanding ongoing operating trends[35](index=35&type=chunk) [Reconciliation of Cash Flow from Operations to Adjusted Free Cash Flow](index=12&type=section&id=Reconciliation%20of%20Cash%20Flow%20from%20Operations%20to%20Adjusted%20Free%20Cash%20Flow) This section reconciles net cash provided by operating activities to Adjusted free cash flow for the three and six months ended June 30, 2025 and 2024, detailing adjustments for capital expenditures and other discretionary items Reconciliation of Cash Flow from Operations to Adjusted Free Cash Flow | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net cash provided by operating activities | $158 | $126 | $214 | $210 | | Expenditures for property, plant and equipment | (15) | (17) | (41) | (49) | | Net cash provided by operating activities less expenditures for property, plant and equipment | 143 | 109 | 173 | 161 | | Capital structure transformation expenses | — | — | — | 1 | | Acquisition and divestiture expenses | 4 | 1 | 5 | 1 | | Cash payments for repositioning | 3 | 4 | 6 | 13 | | Proceeds from cross currency swap contracts | 11 | 4 | 15 | 8 | | Cash payments for debt refinancing costs | — | — | 6 | — | | Factoring and P-notes | (40) | (56) | (48) | (54) | | Adjusted free cash flow | $121 | $62 | $157 | $130 | - Adjusted free cash flow is a liquidity measure useful for analyzing the Company's ability to service and repay debt, defined as cash flow from operating activities less capital expenditures and adjusted for other discretionary items[36](index=36&type=chunk) [Full Year 2025 Outlook Reconciliations](index=13&type=section&id=Full%20Year%202025%20Outlook%20Reconciliations) This section provides reconciliations for the full-year 2025 outlook figures, detailing how reported net sales, net income, and net cash provided by operating activities are adjusted to derive constant currency sales growth, Adjusted EBIT, Adjusted EBITDA, and Adjusted Free Cash Flow Full Year 2025 Outlook Reconciliation of Reported Net Sales to Net Sales Growth at Constant Currency | | 2025 Full Year | | :--- | :--- | | | Low End | High End | | Reported net sales (% change) | (2)% | 4 % | | Foreign currency translation | 1 % | 2 % | | Full year 2025 Outlook Net sales growth at constant currency | (3)% | 2 % | Full Year 2025 Outlook Reconciliation of Net Income to Adjusted EBITDA | | 2025 Full Year | | :--- | :--- | | | Low End | High End | | Net income | $233 | $278 | | Interest expense, net of interest income * | 123 | 123 | | Tax expense | 76 | 91 | | Factoring and notes receivables discount fees | 2 | 2 | | Acquisition and divestiture expenses | 6 | 6 | | Debt refinancing and redemption costs | 6 | 6 | | Repositioning costs | 24 | 24 | | Full Year 2025 Outlook Adjusted EBIT | $470 | $530 | | Depreciation | 95 | 95 | | Stock compensation expense | 25 | 25 | | Full Year 2025 Outlook Adjusted EBITDA | $590 | $650 | Full Year 2025 Outlook Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow | | 2025 Full Year | | :--- | :--- | | | Low End | High End | | Net cash provided by operating activities | $370 | $450 | | Expenditures for property, plant and equipment | (89) | (89) | | Net cash provided by operating activities less expenditures for property, plant and equipment | 281 | 361 | | Cash payments for repositioning | 25 | 25 | | Proceeds from cross currency swap contracts | 12 | 12 | | Acquisition and divestiture expenses | 6 | 6 | | Cash payments for debt refinancing costs | 6 | 6 | | Full Year 2025 Outlook Adjusted free cash flow | $330 | $410 |

Financial Highlights - Company reported net sales of $913 million for Q2 2025, a 3% increase from $890 million in Q2 2024, driven by favorable foreign currency translation [5][4] - Gross profit for Q2 2025 was $181 million, with a gross profit margin of 19.8%, down from 20.8% in Q2 2024 [8][4] - Net income increased to $87 million in Q2 2025, compared to $64 million in Q2 2024, resulting in a net income margin of 9.5% [14][4] - Adjusted EBIT for Q2 2025 was $124 million, with an adjusted EBIT margin of 13.6% [16][4] - Adjusted free cash flow reached $121 million in Q2 2025, significantly up from $62 million in Q2 2024 [17][4] Business Highlights - The company secured over $1 billion in light vehicle turbo program extensions, reinforcing its leadership in turbocharging [4][5] - The launch of a second innovation center in Wuhan aims to enhance R&D capabilities to meet global demand for high-efficiency electrification solutions [4][5] - The company achieved new milestones in its E-Powertrain, E-Cooling, and Fuel Cell programs, advancing its zero-emission technologies [4][5] Liquidity and Capital Resources - As of June 30, 2025, the company had $862 million in available liquidity, including $232 million in cash and cash equivalents [18][19] - Total principal amount of debt outstanding was $1,491 million, slightly down from $1,493 million at the end of 2024 [19][18] - The company repurchased $22 million of common stock during Q2 2025, with remaining repurchase capacity of $198 million [19][18] Full Year 2025 Outlook - The company revised its full-year 2025 outlook, projecting net sales between $3.4 billion and $3.6 billion, up from the previous range of $3.3 billion to $3.5 billion [21][20] - Adjusted EBITDA is expected to be between $590 million and $650 million, an increase from the prior outlook of $545 million to $605 million [21][20] - The company anticipates net income for 2025 to be between $233 million and $278 million, up from the previous estimate of $209 million to $254 million [21][20]