Core Insights - Modine Manufacturing Company (MOD) and Gentherm Incorporated (THRM) are both involved in thermal management technologies for the automotive sector, with Modine also serving other markets such as HVAC and construction equipment [1][2] - The analysis aims to compare the fundamentals of both companies to determine which is better positioned to meet investor expectations amid tariff-related uncertainties [2] Modine Manufacturing Company (MOD) - Modine has consistently exceeded earnings expectations for the last four quarters, reporting net sales of $682.8 million in Q1 fiscal 2026, a 3% increase from $661.5 million the previous year, driven by strong performance in the Climate Solutions segment [3][9] - The company anticipates a significant volume ramp-up in the second half of the year, projecting full-year fiscal 2026 net sales growth of 10-15% year over year and adjusted EBITDA growth of 12-20% [3][21] - Modine has implemented the 80/20 principle, leading to transformative operational and financial improvements during fiscal 2025 [4] - Recent acquisitions, including AbsolutAire, L.B. White, and Climate by Design International, are aimed at addressing thermal management challenges and expanding into high-growth adjacent markets [5] - Modine announced a $100 million investment over 12-18 months to enhance U.S. manufacturing of data center cooling products, expecting data center revenues to approach $2 billion by fiscal 2028 [6] - The company boasts a high return on equity (ROE) of 24%, significantly above the industry average of 7.2%, indicating strong profitability relative to shareholder equity [7] Gentherm Incorporated (THRM) - Gentherm reported stable revenues of $375 million in Q2 2025, with a 3.8% year-over-year growth in Automotive Climate and Comfort Solutions, outperforming S&P Global's light vehicle production report by 10 basis points [8][11] - The company secured $620 million in new automotive business awards in Q2, raising its 2025 revenue outlook to between $1.43 billion and $1.5 billion [11] - Gentherm is focusing on narrowing the gap in Asia, with 70% of year-to-date awards going to domestic OEMs in China, compared to 50% in the previous two years [10] - The company is diversifying into the medical sector, enhancing its European distribution through a partnership with DUOMED [12] - However, tariffs have posed a challenge, resulting in a narrowed EBITDA margin guidance range of 11.7-12.5% [13] - Gentherm's ROE stands at 9.9%, which, while respectable, is lower than Modine's [13][22] Price Performance and Valuation - Year-to-date, Modine shares have increased by approximately 31.5%, while Gentherm's stock has decreased by 11% [14] - Modine is trading at a forward sales multiple of 2.62X, close to its five-year mean of 2.72X, whereas Gentherm's forward sales multiple is at 0.73X, significantly below its median of 2.85X [16] Earnings Estimates - The Zacks Consensus Estimate for Modine's fiscal 2026 EPS indicates a year-over-year growth of 14.3%, with estimates trending upward [18] - Conversely, the Zacks Consensus Estimate for Gentherm's 2025 EPS suggests a year-over-year decline of 4.3%, although estimates have also been trending upward [19] Conclusion - Modine is positioned for solid top-line growth with projected double-digit revenue and EBITDA gains for fiscal 2026, supported by strategic acquisitions and investments [21] - Gentherm shows resilience with steady revenues and strong automotive business wins, but its lower ROE and margin pressures from tariffs present challenges [22] - Overall, Modine's stronger financial performance and clearer growth strategy make it a more attractive investment option compared to Gentherm [23]

Core Insights - The focus is on identifying undervalued companies through traditional analysis of key valuation metrics, particularly in value investing [2] - The Zacks Rank system emphasizes earnings estimates and revisions to find strong stock picks, complemented by the Style Scores system that highlights stocks with specific traits [1][3] Company Analysis: Gentherm (THRM) - Gentherm currently has a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential as a value stock [4] - The stock has a P/E ratio of 14.29, significantly lower than the industry average P/E of 20.49, suggesting it may be undervalued [4] - THRM's Forward P/E has fluctuated between 8.71 and 15.96 over the past 12 months, with a median of 12.42, indicating variability in market perception [4] - The P/B ratio for THRM is 1.54, which is favorable compared to the industry average P/B of 3.05, further supporting the undervaluation thesis [5] - Over the past year, THRM's P/B has ranged from 1.11 to 2.51, with a median of 1.80, reflecting its market value relative to book value [5] - Overall, Gentherm appears to be undervalued based on these metrics, combined with a strong earnings outlook, making it an attractive investment opportunity [6]

Gentherm Conference Call Summary Company Overview - Gentherm is a $1.5 billion global leader in thermal and pneumatic comfort solutions, primarily serving the automotive industry (97% of revenue) and a small portion in medical (3%) [6][8][21] - The company focuses on four core technology platforms: thermal devices, pneumatics, air moving devices, and valves [7][8] Strategic Growth Initiatives - Gentherm aims to scale its technology into adjacent markets such as construction vehicles, agricultural vehicles, two-wheelers, and motion furniture [9][10] - The company plans to leverage existing plant property and equipment for growth, avoiding bespoke solutions for unique markets [9][19] - Gentherm has engaged with approximately 30 different manufacturers in adjacent markets and won its first five awards in these areas [14][15] Financial Performance and Projections - The lumbar massage business is projected to grow from $175 million in 2024 to over $300 million by 2027, indicating a clear growth path in the light vehicle market [13] - Gentherm is confident in reaching $2 billion in revenue without significant new investments, as it plans to consolidate its footprint by 30% [18][19] - The company reported a 12.5% EBITDA margin and is focused on improving this to the mid-teens range [21][63] Market Dynamics - In North America and Europe, Gentherm has outperformed the market, with an eight-point growth advantage over the industry [27] - The company faces challenges in China, where the market has shifted towards domestic OEMs, but is actively working to realign its customer base [29][30] - Gentherm's strategy includes adapting products to meet local market demands in China, which has a fast development cycle [31][35] Competitive Landscape - Gentherm's commercial model allows it to engage directly with OEMs, which has helped maintain its market share despite competitors like Lear acquiring Kongsberg Automotive [73] Operational Excellence - The company is standardizing operating systems and key performance indicators across its global operations to drive efficiency and reduce working capital [17][60][62] - Gentherm is focused on cash conversion and aims to improve from a historical 30% of EBITDA to 50-70% [75] M&A Strategy - M&A is a key part of Gentherm's capital allocation strategy, with a focus on expanding into non-automotive markets and enhancing product offerings [51][55] - The company has a strong balance sheet, allowing for strategic acquisitions that are margin accretive [52][55] Future Outlook - Gentherm is optimistic about its growth trajectory, with aspirations to reduce its reliance on the automotive sector to less than 70% over the next five years [46][49] - The medical business is expected to grow significantly, with potential revenues exceeding $100 million [49][50] Key Takeaways - Gentherm is well-positioned for growth in both automotive and adjacent markets, leveraging existing technologies and operational efficiencies - The company is actively addressing challenges in the Chinese market while maintaining strong performance in North America and Europe - Strategic M&A and operational excellence initiatives are central to Gentherm's long-term growth strategy and financial performance improvement

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Core Viewpoint - Gentherm, a leader in thermal management and comfort technologies, is actively engaging with investors through upcoming events in Q3 2025, highlighting its commitment to transparency and investor relations [1][2][3]. Company Overview - Gentherm (NASDAQ: THRM) specializes in innovative thermal management and pneumatic comfort technologies, with a diverse product range including Climate Control Seats (CCS®), Climate Control Interiors (CCI™), and medical temperature management systems [4]. - The company employs over 14,000 individuals across 13 countries and reported annual sales of approximately $1.5 billion in 2024, alongside securing $2.4 billion in new automotive business awards [4]. Upcoming Events - Gentherm will participate in the J.P. Morgan Auto Conference in New York City on August 12, 2025, featuring a fireside chat with key executives [2]. - A live audio webcast of the fireside chat will be available, with a replay accessible for 30 days on Gentherm's Investor Relations website [3]. - Additionally, Gentherm management will host investors at the Seaport Research Partners Annual Summer Investor Conference on August 19, 2025 [3].

Core Viewpoint - Gentherm (THRM) shows potential for further upside, with a mean price target of $40.6 indicating a 26.7% upside from its last trading price of $32.04 [1] Price Targets and Analyst Estimates - The mean estimate consists of five short-term price targets with a standard deviation of $6.91, suggesting variability in analyst predictions [2] - The lowest estimate of $35.00 indicates a 9.2% increase, while the highest estimate of $52.00 suggests a 62.3% increase [2] - A low standard deviation indicates a higher agreement among analysts regarding price movement [9] Earnings Estimates and Analyst Sentiment - Analysts have shown increasing optimism about THRM's earnings prospects, with a strong consensus in revising EPS estimates higher [11] - The Zacks Consensus Estimate for the current year has increased by 2.9% over the past month, with two estimates going higher and no negative revisions [12] - THRM holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] Caution on Price Targets - While price targets are often sought after, they can mislead investors, as empirical research shows they rarely indicate actual price movements [7][10] - Analysts may set overly optimistic price targets due to business incentives, which can inflate expectations [8]

We should also highlight that THRM has a P/B ratio of 1.5. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 3.70. Over the past year, THRM's P/B has been as high as 2.70 and as low as 1.11, with a median of 1.85. These are only a few of the key metrics included in Gentherm's strong Value grade, but they help show that the stock is likely un ...

In my previous post on Gentherm Incorporated ( THRM ) , I recommended a hold rating for the company when it was trading around $48.6. There was modest upside potential and a lack of sufficient margin of safety Analyst's Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ...

Core Insights - Gentherm reported Q2 FY2025 GAAP revenue of $375.1 million, exceeding analyst expectations by 3.2%, but adjusted EPS of $0.54 fell short of the $0.58 consensus [1][5][10] - The company experienced a significant decline in net income, dropping to $0.5 million, primarily due to unfavorable currency movements and increased input costs [1][6] Financial Performance - GAAP revenue for Q2 2025 was $375.1 million, a slight decrease of 0.2% year-over-year from $375.7 million in Q2 2024 [2][5] - Non-GAAP EPS decreased by 18.2% year-over-year from $0.66 in Q2 2024 to $0.54 in Q2 2025 [2] - Adjusted EBITDA was $45.9 million, down 8.0% from $49.9 million in the previous year, with an adjusted EBITDA margin of 12.2%, a decline from 13.3% [2][6] Business Segments - The automotive segment generated GAAP revenue of $308.0 million, reflecting a 3.8% year-over-year increase, driven by strong demand for lumbar and massage comfort solutions, which rose by 14.5%, and electronics, which increased by 42.1% [5][6] - The medical segment saw a revenue decline of 3.8% to $11.238 million, but the company aims to grow this segment by adapting core technologies for healthcare applications [8][9] Strategic Focus - Gentherm is focused on innovation and developing proprietary products, such as ClimateSense® and ComfortScale™, to enhance passenger comfort and energy efficiency in vehicles [4] - The company secured $620 million in new automotive business awards, contributing to a year-to-date total of over $1.0 billion in new business [7] Outlook - Full-year 2025 revenue guidance is now projected between $1.43 billion and $1.5 billion, with an adjusted EBITDA margin target of 11.7% to 12.5% [10] - Capital expenditures have been revised downward to $55–65 million from a previous estimate of $70–80 million [10]

Part I. [Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) This section presents Gentherm's financial statements, management's discussion, and market risk disclosures [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents Gentherm's unaudited consolidated financial statements for the period ended June 30, 2025, with detailed notes [Consolidated Condensed Balance Sheets](index=3&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) Provides a snapshot of Gentherm's financial position at June 30, 2025, and December 31, 2024 Consolidated Condensed Balance Sheets (in thousands) | ASSETS | | | | | :------------------------------------ | :------------ | :---------------- | :----- | | **June 30, 2025** | **December 31, 2024** | **Change** | | Total current assets | $758,815 | $684,015 | +$74,800 | | Total assets | $1,361,401 | $1,247,556 | +$113,845 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | Total current liabilities | $376,925 | $340,293 | +$36,632 | | Total liabilities | $661,656 | $630,609 | +$31,047 | | Total shareholders' equity | $699,745 | $616,947 | +$82,798 | | Total liabilities and shareholders' equity | $1,361,401 | $1,247,556 | +$113,845 | [Consolidated Condensed Statements of Income](index=4&type=section&id=Consolidated%20Condensed%20Statements%20of%20Income) Presents Gentherm's consolidated income statement for the three and six months ended June 30, 2025 and 2024 Consolidated Condensed Statements of Income (in thousands, except per share data) | 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 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenues | $375,090 | $375,683 | $728,944 | $731,698 | | Gross margin | $89,762 | $96,701 | $176,227 | $185,454 | | Operating income | $24,009 | $32,988 | $41,070 | $51,037 | | Net income | $477 | $18,876 | $349 | $33,661 | | Basic earnings per share | $0.02 | $0.60 | $0.01 | $1.07 | | Diluted earnings per share | $0.02 | $0.60 | $0.01 | $1.06 | [Consolidated Condensed Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Comprehensive%20Income) Details Gentherm's consolidated comprehensive income for the three and six months ended June 30, 2025 and 2024 Consolidated Condensed Statements of Comprehensive Income (in thousands) | 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 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $477 | $18,876 | $349 | $33,661 | | Other comprehensive income (loss), net of tax | $58,886 | $(10,504) | $87,198 | $(25,539) | | Comprehensive income | $59,363 | $8,372 | $87,547 | $8,122 | [Consolidated Condensed Statements of Cash Flows](index=6&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) Summarizes Gentherm's cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Condensed Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $31,701 | $26,824 | | Net cash used in investing activities | $(19,829) | $(24,680) | | Net cash used in financing activities | $(22,329) | $(21,777) | | Net decrease in cash and cash equivalents | $(5,837) | $(26,207) | | Cash and cash equivalents at end of period | $128,297 | $123,466 | [Consolidated Condensed Statements of Changes in Shareholders' Equity](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Outlines changes in Gentherm's shareholders' equity from December 31, 2024, to June 30, 2025 Consolidated Condensed Statements of Changes in Shareholders' Equity (in thousands) | Metric | Balance at Dec 31, 2024 | Net Income/Loss | Other Comprehensive Income | Stock Based Compensation, net | Stock Repurchase | Balance at Jun 30, 2025 | | :------------------------- | :---------------------- | :-------------- | :------------------------- | :---------------------------- | :--------------- | :---------------------- | | Total Shareholders' Equity | $616,947 | $349 | $87,198 | $5,266 | $(10,015) | $699,745 | [Note 1 - Overview](index=8&type=section&id=Note%201%20-%20Overview) Provides an overview of Gentherm's business, including its automotive and medical product lines - Gentherm is a global market leader in innovative thermal management and pneumatic comfort technologies for automotive and medical sectors[22](index=22&type=chunk)[109](index=109&type=chunk) - Automotive products include Climate Control Seats (CCS®), Climate Control Interiors (CCI™), Lumbar and Massage Comfort Solutions, Valve Systems, and electronic solutions, supplied to major OEMs in North America, Europe, and Asia[22](index=22&type=chunk)[109](index=109&type=chunk) - Medical products comprise patient temperature management systems used in hospitals worldwide, primarily in the U.S., China, Germany, and Brazil[22](index=22&type=chunk)[109](index=109&type=chunk) Capitalized Payments to Customers (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total Capitalized Payments to Customers | $16,750 | $14,276 | Reductions of Revenue from Capitalized Payments (in thousands) | Period | 2025 | 2024 | | :------------------------- | :---- | :---- | | Three Months Ended June 30 | $208 | $113 | | Six Months Ended June 30 | $1,044 | $186 | [Note 2 - New Accounting Pronouncements](index=9&type=section&id=Note%202%20-%20New%20Accounting%20Pronouncements) Details new accounting pronouncements and their expected impact on Gentherm's financial reporting - ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' **effective** for fiscal years beginning after December 15, 2024, will enhance income tax disclosures but is not **expected** to **impact** results of operations, cash flow, or financial condition[32](index=32&type=chunk) - ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40),' **effective** for annual periods beginning after December 15, 2026, requires retrospective adoption and will enhance disclosures around certain costs and expenses. The company is currently determining its **impact**[33](index=33&type=chunk) [Note 3 - Restructuring](index=9&type=section&id=Note%203%20-%20Restructuring) Describes Gentherm's restructuring plans in EMEA and Asia, including associated costs and liabilities - The 2025 EMEA Plan involves closing the Plzeň, Czech Republic facility and relocating manufacturing activities to other existing facilities in the region, with **expected** cash restructuring costs of **$4M-$6M** for severance and **$2M-$3M** for transition costs, plus **$1M-$2M** in capital expenditures, to be completed by end of 2026[36](index=36&type=chunk)[37](index=37&type=chunk) - The 2025 Asia Plan involves relocating manufacturing activities from Shanghai, China to a new facility in Tianjin, China, with **expected** cash restructuring costs of **$2M-$3M** for severance and **$1M** for transition costs, plus **$2M-$3M** in capital expenditures, to be substantially completed in the first half of 2026[39](index=39&type=chunk)[40](index=40&type=chunk) Restructuring Expenses, Net by Reporting Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Automotive | $1,924 | $1,694 | $6,438 | $8,808 | | Medical | $156 | $— | $156 | $20 | | Corporate | $28 | $748 | $28 | $852 | | Total | $2,108 | $2,442 | $6,622 | $9,680 | Restructuring Liability (in thousands) | Metric | Balance at Dec 31, 2024 | Additions (charged to expenses) | Cash Payments | Change in Estimate | Currency Translation | Balance at Jun 30, 2025 | | :------------------------ | :---------------------- | :------------------------------ | :------------ | :----------------- | :------------------- | :---------------------- | | Employee Separation Costs | $3,288 | $5,945 | $(3,397) | $(266) | $463 | $6,033 | | Other Related Costs, Net | $— | $943 | $(943) | $— | $— | $— | | Total | $3,288 | $6,888 | $(4,340) | $(266) | $463 | $6,033 | [Note 4 - Details of Certain Balance Sheet Components](index=11&type=section&id=Note%204%20-%20Details%20of%20Certain%20Balance%20Sheet%20Components) Provides detailed breakdowns of selected current assets and liabilities on Gentherm's balance sheet Other Current Assets (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Billable tooling | $24,085 | $19,740 | | Income tax and other tax receivable | $23,320 | $20,611 | | Prepaid expenses | $12,708 | $6,305 | | Notes receivable | $12,414 | $11,190 | | Short-term derivative financial instruments | $5,884 | $719 | | Other | $9,004 | $5,848 | | Total other current assets | $87,415 | $64,413 | Other Current Liabilities (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Accrued employee liabilities | $38,644 | $42,277 | | Income tax and other taxes payable | $28,560 | $26,385 | | Liabilities from discounts and rebates | $23,978 | $20,501 | | Restructuring | $6,033 | $3,288 | | Accrued warranty | $5,475 | $3,507 | | Short-term derivative financial instruments | $699 | $2,037 | | Other | $9,344 | $7,829 | | Total other current liabilities | $112,733 | $105,824 | [Note 5 - Goodwill and Other Intangibles](index=11&type=section&id=Note%205%20-%20Goodwill%20and%20Other%20Intangibles) Details Gentherm's goodwill by segment and other intangible assets, net, as of June 30, 2025 Goodwill by Segment (in thousands) | Segment | Balance as of Dec 31, 2024 | Currency Translation | Balance as of Jun 30, 2025 | | :--------- | :------------------------- | :------------------- | :------------------------- | | Automotive | $72,754 | $8,456 | $81,210 | | Medical | $26,849 | $832 | $27,681 | | Total | $99,603 | $9,288 | $108,891 | Other Intangible Assets, Net (in thousands) | Asset Type | June 30, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | | :------------------------ | :------------------------------- | :----------------------------------- | | Customer relationships | $35,265 | $36,344 | | Technology | $13,447 | $13,458 | | Product development costs | $168 | $170 | | Software development | $705 | $806 | | Tradenames | $6,491 | $6,473 | | Total | $56,076 | $57,251 | [Note 6 - Debt](index=12&type=section&id=Note%206%20-%20Debt) Summarizes Gentherm's debt, including its revolving credit facility and scheduled principal maturities Summary of Debt (in thousands) | Debt Type | June 30, 2025 Principal Balance | December 31, 2024 Principal Balance | | :-------------------------- | :------------------------------ | :---------------------------------- | | Revolving Credit Facility | $209,000 | $220,000 | | Finance leases | $146 | $201 | | Total debt | $209,146 | $220,201 | - The Second Amended and Restated Credit Agreement provides a **$500 million** secured revolving credit facility, maturing on June 10, 2027[52](index=52&type=chunk)[51](index=51&type=chunk) - As of June 30, 2025, **$287.970 million** remained **available** for additional borrowings under the Revolving Credit Facility, and the Company was in compliance with all material terms of the agreement[54](index=54&type=chunk)[57](index=57&type=chunk) Scheduled Principal Maturities of Debt (in thousands) | Year | U.S. Revolving Note | Other Debt | Total | | :--- | :------------------ | :--------- | :---- | | 2025 | $— | $73 | $73 | | 2026 | $— | $73 | $73 | | 2027 | $209,000 | $— | $209,000 | | Total | $209,000 | $146 | $209,146 | [Note 7 - Commitments and Contingencies](index=13&type=section&id=Note%207%20-%20Commitments%20and%20Contingencies) Outlines Gentherm's legal actions, claims, and warranty accruals, including recent product recalls - The company is subject to various legal actions and claims in the ordinary course of business, establishing accruals for probable and estimable losses[58](index=58&type=chunk) - NHTSA announced a recall of **261,257** VW vehicles (model years 2015-2020) in February 2024 due to a suction jet pump seal issue, a product originally designed by Alfmeier (acquired by Gentherm). No litigation has been filed, and Gentherm has not accepted financial responsibility, but potential costs could be material, with insurance and indemnification provisions from the Alfmeier acquisition **expected** to apply[62](index=62&type=chunk) - NHTSA announced a recall of **13,508** VW and Porsche vehicles (model years 2022-2023) in April 2025 due to a passenger occupant detection system issue related to Gentherm-produced seat cushion heating mats. No litigation has been filed, and potential costs could be material, with insurance policies **expected** to apply[63](index=63&type=chunk) Accrued Warranty Costs Reconciliation (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Balance at beginning of period | $3,507 | $3,945 | | Warranty claims paid | $(3,620) | $(3,324) | | Warranty expense for current period products | $3,965 | $2,520 | | Adjustments to prior period estimates | $1,462 | $362 | | Adjustments due to currency translation | $161 | $(63) | | Balance at end of period | $5,475 | $3,440 | [Note 8 - Supplier Finance Program](index=14&type=section&id=Note%208%20-%20Supplier%20Finance%20Program) Describes Gentherm's supplier finance program and related obligations recorded in accounts payable - Gentherm has a supplier finance program where suppliers can voluntarily discount invoices for earlier payment from a third-party service provider, without affecting contractual payment terms with Gentherm[65](index=65&type=chunk)[66](index=66&type=chunk) - As of June 30, 2025, supplier obligations confirmed under these arrangements **totaled $24,769 thousand**, recorded in accounts payable[67](index=67&type=chunk) [Note 9 - Earnings Per Share](index=15&type=section&id=Note%209%20-%20Earnings%20Per%20Share) Presents Gentherm's basic and diluted earnings per share and weighted average shares outstanding Earnings Per Share and Weighted Average Shares Outstanding | 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 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $477 | $18,876 | $349 | $33,661 | | Basic earnings per share | $0.02 | $0.60 | $0.01 | $1.07 | | Diluted earnings per share | $0.02 | $0.60 | $0.01 | $1.06 | | Basic weighted average shares outstanding | 30,600,168 | 31,534,382 | 30,687,384 | 31,538,802 | | Diluted weighted average shares outstanding | 30,651,728 | 31,709,501 | 30,781,468 | 31,714,425 | [Note 10 - Financial Instruments](index=15&type=section&id=Note%2010%20-%20Financial%20Instruments) Details Gentherm's use of derivative contracts to manage market risks and their fair value measurements - Gentherm uses derivative contracts to manage market risks from foreign currency exchange rates, interest rates, and commodity price fluctuations, not for speculative trading[70](index=70&type=chunk)[71](index=71&type=chunk) Fair Value Measurement of Derivative Instruments (in thousands) - June 30, 2025 | Derivative Type | Notional Amount | Fair Value (Asset) | Fair Value (Liability) | Net Assets/(Liabilities) | | :------------------------------------ | :-------------- | :----------------- | :--------------------- | :----------------------- | | Foreign currency derivatives (Cash Flow Hedges) | $82,362 | $5,768 | $— | $5,768 | | Interest rate contracts (Cash Flow Hedges) | $100,000 | $— | $699 | $(699) | | Interest rate contracts (Not Designated) | $100,000 | $104 | $— | $104 | Effect of Derivative Instruments on Income and Comprehensive Income (in thousands) - Three Months Ended June 30, 2025 | Derivative Type | Location (Income/(Loss)) | 2025 | 2024 | | :------------------------------------ | :----------------------- | :--- | :--- | | Foreign currency derivatives (Cash Flow Hedges) | Cost of sales – (loss) income | $(766) | $2,896 | | | Other comprehensive income (loss) | $5,427 | $(7,560) | | Interest rate contracts (Cash Flow Hedges) | Other comprehensive income (loss) | $(699) | $— | | Interest rate contracts (Not Designated) | Interest expense, net | $(313) | $(308) | - The company's factoring agreements for accounts receivable expired or were terminated during the year ended December 31, 2024[75](index=75&type=chunk) [Note 11 - Fair Value Measurements](index=18&type=section&id=Note%2011%20-%20Fair%20Value%20Measurements) Explains Gentherm's fair value measurement classifications and valuation techniques for financial instruments - Fair value measurements are classified into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[77](index=77&type=chunk)[78](index=78&type=chunk) - Derivative instruments are valued using an income approach, analyzing quoted market prices and discounting forward values, classified as Level 2 inputs[79](index=79&type=chunk) - During the six months ended June 30, 2025, there was a **$1.294 million decrease** in the fair value of an equity investment (Level 2), recorded in other (**loss**) income[80](index=80&type=chunk) - The carrying values of the company's debt instruments are not materially different from their estimated fair values because interest rates on variable rate debt approximate current market rates[81](index=81&type=chunk) [Note 12 - Equity](index=19&type=section&id=Note%2012%20-%20Equity) Details Gentherm's stock repurchase program and related share repurchase activity - In June 2024, the Board authorized a new stock repurchase program (2024 Stock Repurchase Program) for up to **$150 million** of common stock over three years, expiring June 30, 2027[82](index=82&type=chunk) Share Repurchases and Related Activity (in thousands, except per share data) | 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 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total number of shares repurchased | 381,600 | 379,844 | 381,600 | 379,844 | | Average price paid per share | $26.24 | $52.65 | $26.24 | $52.65 | | Total repurchases | $10,015 | $20,000 | $10,015 | $20,000 | | Excise tax charged | $100 | $200 | $100 | $200 | - As of June 30, 2025, **$110.103 million** of share repurchase authorization **remained** under the 2024 Stock Repurchase Program[83](index=83&type=chunk) [Note 13 - Reclassifications Out of Accumulated Other Comprehensive Income (Loss)](index=19&type=section&id=Note%2013%20-%20Reclassifications%20Out%20of%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)) Summarizes reclassification adjustments and activity within accumulated other comprehensive income (loss) Reclassification Adjustments and AOCI Activity (in thousands) - Six Months Ended June 30, 2025 | Component | Defined Benefit Pension Plans | Foreign Currency Translation Adjustments | Cash Flow Hedge Derivatives | Total | | :------------------------------------ | :---------------------------- | :--------------------------------------- | :-------------------------- | :---- | | Balance at Dec 31, 2024 | $(1,851) | $(80,096) | $(3,246) | $(85,193) | | Net current period other comprehensive income | $28 | $80,051 | $7,119 | $87,198 | | Balance at Jun 30, 2025 | $(1,823) | $(45) | $3,873 | $2,005 | - Amounts reclassified from accumulated other comprehensive income (**loss**) into **net income** were primarily included in cost of sales[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - Substantially all existing gains and losses related to foreign currency derivatives reported in AOCI as of June 30, 2025, are **expected** to be reclassified into earnings within the next twelve months[88](index=88&type=chunk) [Note 14 - Income Taxes](index=20&type=section&id=Note%2014%20-%20Income%20Taxes) Presents Gentherm's income tax expense, effective tax rate, and factors influencing tax variations Income Tax Expense and Effective Tax Rate (in thousands) | 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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $2,057 | $9,544 | $4,269 | $13,086 | | Earnings before income tax | $2,534 | $28,420 | $4,618 | $46,747 | | Effective tax rate | 81.2% | 33.6% | 92.4% | 28.0% | - The **effective** tax rate for Q2 2025 (**81.2%**) and H1 2025 (**92.4%**) significantly **increased** from the prior year, primarily due to the **unfavorable impact** of GILTI, foreign earnings taxed at varying rates, **unfavorable** tax **effects** of equity vesting, and a U.S. capital **loss** carryforward valuation allowance[91](index=91&type=chunk)[93](index=93&type=chunk) - The company is evaluating the **impact** of the recently enacted One Big Beautiful Bill Act (OBBBA) in the U.S. and the Act for an Immediate Tax Investment Programme to Strengthen Germany's Business Location (German Tax Package) on its financial results[95](index=95&type=chunk)[97](index=97&type=chunk) [Note 15 - Segment Reporting](index=21&type=section&id=Note%2015%20-%20Segment%20Reporting) Provides financial information by Gentherm's Automotive and Medical reportable segments, including revenues - Gentherm has two reportable segments: Automotive and Medical. The Automotive segment includes climate and comfort solutions, valve systems, and other automotive products. The Medical segment focuses on patient temperature management[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) Product Revenues by Segment (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Automotive | $363,852 | $364,002 | $705,726 | $708,640 | | Medical | $11,238 | $11,681 | $23,218 | $23,058 | | Total | $375,090 | $375,683 | $728,944 | $731,698 | Automotive Product Revenues by Category (in thousands) | Product Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Climate Control Seats | $200,020 | $199,766 | $391,173 | $391,815 | | Lumbar and Massage Comfort Solutions | $52,530 | $45,869 | $97,843 | $84,120 | | Climate Control Interiors | $49,585 | $47,031 | $94,926 | $91,429 | | Climate and Comfort Electronics | $5,906 | $4,157 | $13,621 | $8,383 | | Valve Systems | $25,143 | $29,267 | $48,316 | $55,892 | | Other Automotive | $30,668 | $37,912 | $59,847 | $77,001 | Revenue by Geographic Area (in thousands) | Geographic Area | 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 | $126,745 | $127,359 | $251,671 | $252,812 | | China | $54,600 | $53,209 | $103,535 | $107,685 | | Germany | $29,181 | $31,628 | $55,738 | $55,241 | | South Korea | $24,082 | $27,670 | $47,866 | $55,854 | | Czech Republic | $23,692 | $20,106 | $44,676 | $39,690 | | Mexico | $17,760 | $11,823 | $33,432 | $21,838 | | Slovakia | $14,571 | $14,722 | $28,293 | $27,900 | | Romania | $14,566 | $13,008 | $27,523 | $27,230 | | Japan | $11,679 | $14,737 | $23,778 | $27,192 | | United Kingdom | $9,775 | $10,482 | $19,151 | $21,806 | | Other | $48,439 | $50,939 | $93,281 | $94,450 | | Total Company | $375,090 | $375,683 | $728,944 | $731,698 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of Gentherm's financial condition, operational results, and critical accounting estimates [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) Highlights forward-looking statements in the report, emphasizing inherent risks and uncertainties - The report contains forward-looking statements about future goals, beliefs, plans, and expectations, including light vehicle production, macroeconomic conditions, strategic plans, and liquidity[107](index=107&type=chunk) - These statements are based on management's reasonable expectations and beliefs but are subject to assumptions, risks, uncertainties, and other factors detailed in 'Item 1A. Risk Factors' of the Annual Report on Form 10-K[107](index=107&type=chunk) - The company disclaims any obligation to update forward-looking statements to reflect changes in expectations or events, except as required by law[107](index=107&type=chunk) [Overview](index=26&type=section&id=Overview) Provides a general overview of Gentherm's business as a global leader in thermal management technologies - Gentherm is a global market leader in innovative thermal management and pneumatic comfort technologies for automotive and medical applications[109](index=109&type=chunk) - Automotive sales are driven by light vehicle production, product content per vehicle, and macroeconomic factors such as interest rates, consumer confidence, and fuel prices[110](index=110&type=chunk) - The company's diversified OEM customer base, geographic revenue base, and flexible cost structure are intended to help withstand industry downturns and benefit from upturns[110](index=110&type=chunk) - Gentherm's products offer energy efficiency advantages for hybrid and electric vehicles, positioning the company well for the industry's shift towards human comfort, health, and wellness[111](index=111&type=chunk) [Recent Trends - Tariffs and Global Conditions](index=27&type=section&id=Recent%20Trends%20-%20Tariffs%20and%20Global%20Conditions) Discusses the impact of tariffs, global volatility, and supply chain disruptions on Gentherm's operations - The U.S. government has periodically announced additional significant tariffs on imported goods, with reciprocal tariffs from other countries, creating uncertainty in the global trade environment[112](index=112&type=chunk) - Gentherm's regional manufacturing model and ability to pass additional costs to customers help mitigate the direct **impact** of tariffs[112](index=112&type=chunk) - The global automotive industry faces significant volatility, inflationary pressures, and supply chain disruptions, leading to **increased** costs for materials, labor, equipment, and logistics[114](index=114&type=chunk) - Gentherm is exposed to foreign currency risk and geopolitical conflicts (e.g., Russia-Ukraine, Middle East, Red Sea), which could disrupt shipping and shift production, substantially affecting financial results due to high fixed structural costs[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [Recent Trends - Light Vehicle Production Volumes](index=28&type=section&id=Recent%20Trends%20-%20Light%20Vehicle%20Production%20Volumes) Presents global light vehicle production volumes in key markets and future forecasts Global Light Vehicle Production Volumes in Key Markets (in millions of units) | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change (QoQ) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change (YoY) | | :------------------ | :------------------------------- | :------------------------------- | :------------- | :----------------------------- | :----------------------------- | :------------- | | North America | 4.0 | 4.1 | (3.0)% | 7.7 | 8.1 | (4.1)% | | Europe | 4.4 | 4.5 | (1.7)% | 8.8 | 9.1 | (3.3)% | | Greater China | 7.6 | 7.0 | 9.0% | 14.8 | 13.3 | 11.7% | | Japan / South Korea | 3.0 | 3.0 | 0.0% | 6.1 | 5.9 | 3.4% | | Total | 19.0 | 18.6 | 2.3% | 37.4 | 36.3 | 3.1% | - S&P Global Mobility forecasts global light vehicle production volume in key markets for full year 2025 to remain consistent at **74.7 million units**, in line with full year 2024 volumes[118](index=118&type=chunk) [Recent Trends - Automotive New Business Awards](index=28&type=section&id=Recent%20Trends%20-%20Automotive%20New%20Business%20Awards) Details Gentherm's automotive new business awards, representing projected lifetime revenue - Gentherm secured **$620 million** in automotive new business awards during the second quarter of 2025[119](index=119&type=chunk) - These awards represent aggregate projected lifetime revenue based on customer price and volume projections at the award date, serving as an indicator of future revenue, but are not firm orders and are subject to change and risks[119](index=119&type=chunk) [Recent Trends - Stock Repurchase Program](index=28&type=section&id=Recent%20Trends%20-%20Stock%20Repurchase%20Program) Summarizes Gentherm's stock repurchase program and recent repurchase activity - In June 2024, the Board of Directors authorized a **$150 million** stock repurchase program, expiring June 30, 2027[120](index=120&type=chunk) Stock Repurchase Activity (in millions, except per share data) | Period | Total Repurchased | Average Price Per Share | Remaining Authorization | | :------------------------------- | :---------------- | :---------------------- | :---------------------- | | Three Months Ended June 30, 2025 | $10.0 | $26.24 | N/A | | Six Months Ended June 30, 2025 | $10.0 | $26.24 | $110.1 | [Reportable Segments](index=29&type=section&id=Reportable%20Segments) Identifies Gentherm's two reportable segments: Automotive and Medical - Gentherm has two reportable segments: Automotive and Medical[122](index=122&type=chunk) - The Automotive segment includes design, development, manufacturing, and sales of automotive climate and comfort solutions, valve systems, and other automotive products[99](index=99&type=chunk) - The Medical segment comprises patient temperature management business, addressing hyper-hypothermia therapy and normothermia in various care settings[100](index=100&type=chunk) [Consolidated Results of Operations - Product Revenues](index=29&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Product%20Revenues) Analyzes Gentherm's product revenues, including factors contributing to changes in revenue Consolidated Results of Operations (in thousands) | 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 | | :------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenues | $375,090 | $375,683 | $728,944 | $731,698 | | Cost of sales | $285,328 | $278,982 | $552,717 | $546,244 | | Gross margin | $89,762 | $96,701 | $176,227 | $185,454 | | Total operating expenses | $65,753 | $63,713 | $135,157 | $134,417 | | Operating income | $24,009 | $32,988 | $41,070 | $51,037 | | Net income | $477 | $18,876 | $349 | $33,661 | Product Revenues (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :------------------------- | :--- | :--- | :------- | :------- | | Three Months Ended June 30 | $375,090 | $375,683 | $(593) | (0.2)% | | Six Months Ended June 30 | $728,944 | $731,698 | $(2,754) | (0.4)% | - The **decrease** in product revenues for Q2 2025 was due to **unfavorable** pricing, **unfavorable** automotive volumes, and **unfavorable** foreign currency **impacts** (Chinese Renminbi, Korean Won), partially offset by **favorable** Euro **impacts**[125](index=125&type=chunk) - The **decrease** in product revenues for H1 2025 was due to **unfavorable** pricing and **unfavorable** foreign currency **impacts** (Korean Won, Chinese Renminbi), partially offset by **favorable** automotive volumes and **favorable** Euro **impacts**[126](index=126&type=chunk) [Consolidated Results of Operations - Cost of Sales](index=31&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Cost%20of%20Sales) Examines Gentherm's cost of sales and gross margin, detailing factors influencing changes Cost of Sales and Gross Margin (in thousands) | 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 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of sales | $285,328 | $278,982 | $552,717 | $546,244 | | Gross margin | $89,762 | $96,701 | $176,227 | $185,454 | | Gross margin - Percentage of product revenues | 23.9% | 25.7% | 24.2% | 25.3% | - The **increase** in cost of sales for Q2 2025 was primarily due to higher labor costs, **unfavorable** foreign currency **impacts** (Euro), and higher quality costs, partially offset by lower automotive volumes, material purchasing savings, and **favorable** foreign currency **impacts** (Mexican Peso)[127](index=127&type=chunk) - The **increase** in cost of sales for H1 2025 was primarily due to higher labor costs, higher automotive volumes, **unfavorable** foreign currency **impacts** (Euro), and higher quality costs, partially offset by material purchasing savings and **favorable** foreign currency **impacts** (Mexican Peso)[129](index=129&type=chunk) [Consolidated Results of Operations - Net Research and Development Expenses](index=32&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Net%20Research%20and%20Development%20Expenses) Reviews Gentherm's net research and development expenses and their percentage of product revenues Net Research and Development Expenses (in thousands) | 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 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net research and development expenses | $22,558 | $21,861 | $46,774 | $44,606 | | Percentage of product revenues | 6.0% | 5.8% | 6.4% | 6.1% | - The **increase** in **net** R&D expenses for both periods was primarily related to higher employee compensation expenses[130](index=130&type=chunk)[131](index=131&type=chunk) [Consolidated Results of Operations - Selling, General and Administrative Expenses](index=32&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Selling,%20General%20and%20Administrative%20Expenses) Analyzes Gentherm's selling, general and administrative expenses and their drivers Selling, General and Administrative Expenses (in thousands) | 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 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Selling, general and administrative expenses | $41,087 | $39,410 | $79,565 | $80,131 | | Percentage of product revenues | 11.0% | 10.5% | 10.9% | 11.0% | - The Q2 2025 **increase** in SG&A was primarily due to higher expenses for leadership transition, leases, and information technology, partially offset by lower employee compensation[132](index=132&type=chunk) - The H1 2025 **decrease** in SG&A was primarily due to lower employee compensation expenses and **favorable** foreign currency **impacts**, partially offset by higher expenses for leadership transition, leases, and information technology[133](index=133&type=chunk) [Consolidated Results of Operations - Restructuring Expenses, net](index=33&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Restructuring%20Expenses,%20net) Details Gentherm's restructuring expenses, net, for the periods presented Restructuring Expenses, Net (in thousands) | 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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Restructuring expenses, net | $2,108 | $2,442 | $6,622 | $9,680 | - For the three months ended June 30, 2025, expenses included **$1.5 million** for employee separation costs and **$0.7 million** for other costs[134](index=134&type=chunk) - For the six months ended June 30, 2025, expenses included **$5.7 million** for employee separation costs and **$1.0 million** for other costs[135](index=135&type=chunk) [Consolidated Results of Operations - Loss on Sale of Land and Building, net](index=33&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Loss%20on%20Sale%20of%20Land%20and%20Building,%20net) Reports the net loss incurred from the sale of land and building, primarily the former headquarters Loss on Sale of Land and Building, net (in thousands) | Period | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Loss on sale of land and building, net | $2,196 | $— | - The **loss** is primarily related to the sale of the former headquarters building in Northville, Michigan, in January 2025[138](index=138&type=chunk) [Consolidated Results of Operations - Interest Expense, net](index=34&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Interest%20Expense,%20net) Analyzes Gentherm's net interest expense and factors contributing to its changes Interest Expense, net (in thousands) | Period | 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, net | $(4,043) | $(4,002) | $(7,598) | $(7,246) | - The **increase** in interest expense, **net** for the six months ended June 30, 2025, was primarily related to the change in fair value of an interest rate swap derivative[140](index=140&type=chunk) [Consolidated Results of Operations - Foreign Currency (Loss) Gain](index=34&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Foreign%20Currency%20(Loss)%20Gain) Examines Gentherm's foreign currency loss or gain, primarily from unrealized foreign currency losses Foreign Currency (Loss) Gain (in thousands) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Foreign currency (loss) gain | $(17,432) | $(282) | $(27,730) | $2,267 | - The foreign currency **loss** for both periods in 2025 was primarily due to **net** unrealized foreign currency losses, mainly related to a non-current intercompany U.S. dollar receivable at a foreign subsidiary[141](index=141&type=chunk)[142](index=142&type=chunk) [Consolidated Results of Operations - Other (Loss) Income](index=35&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Other%20(Loss)%20Income) Details Gentherm's other (loss) income, including changes in fair value of equity investments Other (Loss) Income (in thousands) | Period | 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 (loss) income | $— | $(284) | $(1,124) | $689 | - The **unfavorable change** in other (**loss**) income for the six months ended June 30, 2025, was primarily due to a **$1.3 million decrease** in the fair value of an equity investment in the current year, compared to a **$1.1 million increase** in the prior year[145](index=145&type=chunk) [Consolidated Results of Operations - Income Tax Expense](index=35&type=section&id=Consolidated%20Results%20of%20Operations%20-%20Income%20Tax%20Expense) Analyzes Gentherm's income tax expense and effective tax rate, highlighting key influencing factors Income Tax Expense and Effective Tax Rate (in thousands) | 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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $2,057 | $9,544 | $4,269 | $13,086 | | Earnings before income tax | $2,534 | $28,420 | $4,618 | $46,747 | | Effective tax rate | 81.2% | 33.6% | 92.4% | 28.0% | - The **effective** tax rates for Q2 2025 (**81.2%**) and H1 2025 (**92.4%**) were significantly higher than the U.S. Federal statutory rate of **21.0%**, primarily due to the **unfavorable impact** of GILTI, foreign earnings taxed at varying rates, **unfavorable** tax **effects** of equity vesting, and a U.S. capital **loss** carryforward valuation allowance[146](index=146&type=chunk)[148](index=148&type=chunk) [Liquidity and Capital Resources - Overview](index=36&type=section&id=Liquidity%20and%20Capital%20Resources%20-%20Overview) Provides an overview of Gentherm's liquidity sources and ability to meet future cash requirements - Primary liquidity sources are cash flows from operations and borrowings **available** under the Second Amended and Restated Credit Agreement[150](index=150&type=chunk) - As of June 30, 2025, the company had **$128.3 million** in cash and cash equivalents and **$288.0 million** of availability under its credit facility[151](index=151&type=chunk) - The company believes its current liquidity sources will be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future[153](index=153&type=chunk) - The company **expects** to move funds globally without material adverse tax **implications** and does not anticipate needing to accrue withholding taxes for non-U.S. cash distributions to the U.S[152](index=152&type=chunk) [Liquidity and Capital Resources - Cash and Cash Flows](index=36&type=section&id=Liquidity%20and%20Capital%20Resources%20-%20Cash%20and%20Cash%20Flows) Summarizes Gentherm's cash and cash equivalents and cash flows from operating, investing, and financing activities Cash and Cash Equivalents (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Cash and cash equivalents at beginning of period | $134,134 | $149,673 | | Net cash provided by operating activities | $31,701 | $26,824 | | Net cash used in investing activities | $(19,829) | $(24,680) | | Net cash used in financing activities | $(22,329) | $(21,777) | | Foreign currency effect on cash and cash equivalents | $4,620 | $(6,574) | | Cash and cash equivalents at end of period | $128,297 | $123,466 | - **Net** cash provided by operating activities **totaled $31.7 million** for H1 2025, reflecting **net income**, non-cash charges (depreciation, amortization, stock-based compensation, unrealized foreign currency **loss**), and changes in accounts payable, partially offset by changes in accounts receivable, inventory, and deferred **income** taxes[155](index=155&type=chunk) - **Net** cash used in investing activities was **$19.8 million** for H1 2025, primarily for purchases of property and equipment (**$23.7 million**) and technology investments (**$0.6 million**), partially offset by proceeds from asset sales (**$3.7 million**)[156](index=156&type=chunk) - **Net** cash used in financing activities was **$22.3 million** for H1 2025, reflecting debt repayments (**$63.1 million**), stock repurchases (**$10.0 million**), and taxes on stock-based compensation (**$1.2 million**), partially offset by debt borrowings (**$52.0 million**)[157](index=157&type=chunk) [Liquidity and Capital Resources - Debt](index=37&type=section&id=Liquidity%20and%20Capital%20Resources%20-%20Debt) Details Gentherm's debt, including its revolving credit facility and compliance with terms Summary of Debt (in thousands) | Debt Type | June 30, 2025 Principal Balance | December 31, 2024 Principal Balance | | :-------------------------- | :------------------------------ | :---------------------------------- | | Revolving Credit Facility | $209,000 | $220,000 | | Finance leases | $146 | $201 | | Total debt | $209,146 | $220,201 | - The company maintains a **$500 million** Revolving Credit Facility under its Second Amended and Restated Credit Agreement, maturing on June 10, 2027[159](index=159&type=chunk) - As of June 30, 2025, Gentherm was in compliance, in all material respects, with the terms of the Second Amended and Restated Credit Agreement[159](index=159&type=chunk) [Liquidity and Capital Resources - Material Cash Requirements](index=37&type=section&id=Liquidity%20and%20Capital%20Resources%20-%20Material%20Cash%20Requirements) Outlines Gentherm's material cash requirements, primarily related to restructuring plans - The 2025 EMEA Plan is **expected** to incur cash restructuring costs of **$4-6 million** for employee severance and retention, **$2-3 million** for other transition costs, and **$1-2 million** in capital expenditures[161](index=161&type=chunk) - The 2025 Asia Plan is **expected** to incur cash restructuring costs of **$2-3 million** for employee severance and retention, **$1 million** for other transition costs, and **$2-3 million** in capital expenditures[162](index=162&type=chunk) [Liquidity and Capital Resources - Effects of Inflation](index=38&type=section&id=Liquidity%20and%20Capital%20Resources%20-%20Effects%20of%20Inflation) Discusses the impact of inflationary pressures on Gentherm's operating costs and financial results - The automotive component supply industry is subject to inflationary pressures on materials, labor, and transportation costs, which have adversely **impacted** Gentherm's operating costs and results[165](index=165&type=chunk) - Despite mitigation strategies like sourcing efficiencies and commercial negotiations, the company has not fully offset these cost **increases**, which may require a material amount of additional cash to fund operations[165](index=165&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) Confirms no significant changes in critical accounting policies or estimates for the period - No significant changes occurred in critical accounting policies or estimates during the three months ended June 30, 2025[166](index=166&type=chunk) - The company is not aware of any events or circumstances requiring an update to estimates or revision of asset/liability carrying values, but actual results may differ significantly from estimates[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details Gentherm's exposure to market risks, including foreign currency and interest rates, and its hedging strategies - Gentherm is exposed to market risks from changes in foreign currency exchange rates (Euro, Mexican Peso, Chinese Renminbi, etc.), interest rates, and commodity prices (e.g., copper)[167](index=167&type=chunk) - The company uses derivative contracts (foreign currency exchange agreements, interest rate swaps) to manage these financial and operational exposures, not for speculative or trading purposes[168](index=168&type=chunk) - Hedge relationships are formally documented and must be highly **effective**; the **effective** portion of fair value changes for cash flow hedges is recorded in accumulated other comprehensive **income** (**loss**)[169](index=169&type=chunk) [Interest Rate Sensitivity](index=39&type=section&id=Interest%20Rate%20Sensitivity) Analyzes Gentherm's interest rate sensitivity and its use of interest rate swap agreements Long-Term Debt by Expected Maturity Date (in thousands) | Liabilities | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | Total | Fair Value | | :------------------------------------ | :--- | :--- | :--- | :--- | :--- | :--- | :---- | :--------- | | Variable rate | $— | $— | $209,000 | $— | $— | $— | $209,000 | $209,000 | | Variable interest rate as of June 30, 2025 | N/A | N/A | 5.80% | N/A | N/A | N/A | 5.80% | N/A | - A hypothetical **100 basis point change** (**increase** or **decrease**) in interest rates would **impact** annual interest expense by **$2.1 million**[172](index=172&type=chunk) - The company uses floating-to-fixed interest rate swap agreements with notional amounts **totaling $100.0 million** to hedge interest payment fluctuations[172](index=172&type=chunk) [Exchange Rate Sensitivity](index=40&type=section&id=Exchange%20Rate%20Sensitivity) Examines Gentherm's exposure to foreign currency exchange rate fluctuations and hedging strategies Foreign Currency Exchange Agreements (Notional Amounts in thousands) | Agreement Type | 2025 | 2026 | Total Contract Amount | Average Contract Rate | Fair Value | | :-------------------------- | :--- | :--- | :-------------------- | :-------------------- | :--------- | | Receive MXN / Pay USD | $40,493 | $35,122 | $75,615 | 20.43 | $5,514 | | Receive HUF / Pay EUR | $6,747 | $— | $6,747 | 418.89 | $254 | Exchange Rate Sensitivity (Potential Gain/Loss from 10% Change, in thousands) | Exchange Agreement | June 30, 2025 Potential Loss | June 30, 2025 Potential Gain | | :----------------- | :--------------------------- | :--------------------------- | | Receive MXN / Pay USD | $5,040 | $7,807 | | Receive HUF / Pay EUR | $637 | $779 | [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management's evaluation of disclosure controls and internal control over financial reporting effectiveness - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[177](index=177&type=chunk) - There were **no material changes** in internal control over financial reporting during the three months ended June 30, 2025[178](index=178&type=chunk) Part II. [Other Information](index=41&type=section&id=Part%20II.%20Other%20Information) This section provides other information not included in the financial statements, such as legal proceedings and equity sales [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) Gentherm is subject to routine litigation, with no material pending or resolved legal proceedings in Q2 2025 - No material pending litigation or resolved legal proceedings occurred during the three months ended June 30, 2025[181](index=181&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Refers to risk factors from prior reports, with no new material risks identified for the current period - Readers should consider risk factors disclosed in the Annual Report on Form 10-K for December 31, 2024, and the Quarterly Report on Form 10-Q for March 31, 2025[182](index=182&type=chunk) - No additional material risks or uncertainties have been identified by the company[182](index=182&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details common stock repurchases during Q2 2025 and remaining authorization under the stock repurchase program Issuer Purchases of Equity Securities During Second Quarter 2025 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | | :------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | April 1, 2025 to April 30, 2025 | 156,000 | $26.00 | 156,000 | $116,061,894 | | May 1, 2025 to May 31, 2025 | 225,600 | $26.42 | 225,600 | $110,102,528 | | June 1, 2025 to June 30, 2025 | — | $— | — | $110,102,528 | [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading plans in Q2 2025 - No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[184](index=184&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the report, including corporate documents and CEO/CFO certifications Exhibits to the Report | Exhibit Number | Exhibit Description | Filed/Furnished Herewith | | :------------- | :------------------------------------------------------------------------------- | :----------------------- | | 3.1 | Second Amended and Restated Articles of Incorporation of Gentherm Incorporated | No | | 3.2 | Amended and Restated Bylaws of Gentherm Incorporated | No | | 31.1 | Section 302 Certification – CEO | Yes | | 31.2 | Section 302 Certification – CFO | Yes | | 32.1* | Section 906 Certification – CEO | Yes | | 32.2* | Section 906 Certification – CFO | Yes | | 101.INS | Inline XBRL Instance Document – The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | Yes | | 101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents | Yes | | 104 | Cover Page Interactive Date File – the cover page XBRL tags are embedded within the Inline XBRL document | Yes | [Signatures](index=43&type=section&id=Signatures) The report was duly signed by Gentherm's President and CEO, and EVP, CFO, and Treasurer on July 24, 2025 - The report was signed by William Presley, President and CEO, and Jonathan Douyard, EVP, CFO, and Treasurer, on July 24, 2025[188](index=188&type=chunk)