Gentherm(THRM) - 2025 Q1 - Quarterly Report

Part I. Financial Information Financial Statements (Unaudited) For Q1 2025, Gentherm reported a net loss of $0.1 million, a significant decline from $14.8 million net income in Q1 2024, driven by revenue decrease, lower margins, and foreign currency loss, while total assets increased to $1.34 billion and liabilities rose from increased debt Consolidated Condensed Balance Sheets As of March 31, 2025, total assets increased to $1.34 billion from $1.25 billion at year-end 2024, driven by higher cash, receivables, and inventory, while total liabilities rose to $697.7 million due to increased long-term debt, and shareholders' equity also increased to $646.5 million Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $163,142 | $134,134 | | Accounts receivable, net | $284,241 | $258,112 | | Inventory, net | $235,988 | $227,356 | | Total current assets | $764,044 | $684,015 | | Total assets | $1,344,246 | $1,247,556 | | Liabilities & Equity | | | | Accounts payable | $243,224 | $226,815 | | Long-term debt, less current maturities | $262,034 | $220,064 | | Total liabilities | $697,718 | $630,609 | | Total shareholders' equity | $646,528 | $616,947 | Consolidated Condensed Statements of (Loss) Income For Q1 2025, the company reported a net loss of $0.1 million, a significant decline from $14.8 million net income in Q1 2024, primarily due to a $10.3 million foreign currency loss and a $2.2 million loss on asset sale, despite only a slight decrease in product revenues to $353.9 million Q1 2025 vs Q1 2024 Income Statement (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Product revenues | $353,854 | $356,015 | | Gross margin | $86,465 | $88,753 | | Operating income | $17,061 | $18,049 | | Foreign currency (loss) gain | $(10,298) | $2,549 | | Net (loss) income | $(128) | $14,785 | | Diluted (loss) earnings per share | $(0.00) | $0.47 | Consolidated Condensed Statements of Cash Flows In Q1 2025, net cash used in operating activities increased to $13.3 million, investing activities used $10.5 million, while financing activities provided $40.7 million from debt borrowings, resulting in an ending cash balance of $163.1 million Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,344) | $(10,322) | | Net cash used in investing activities | $(10,534) | $(8,831) | | Net cash provided by (used in) financing activities | $40,739 | $(1,534) | | Net increase (decrease) in cash | $29,008 | $(24,566) | | Cash and cash equivalents at end of period | $163,142 | $125,107 | Notes to Unaudited Consolidated Condensed Financial Statements The notes detail significant accounting policies and events, including two new restructuring plans in Europe and Asia, a $2.3 million loss on the former headquarters sale, potential material costs from Volkswagen/Porsche recalls, and segment performance showing slight automotive revenue decline and medical revenue increase - In February 2025, the company initiated the '2025 EMEA Plan' to close its facility in Plzeň, Czech Republic, expecting cash costs of $6-9 million, and the '2025 Asia Plan' to relocate manufacturing in China, expecting cash costs of $3-4 million. In Q1 2025, restructuring expenses of $4.5 million were recognized[34][37][42] - The company is involved in two recent recalls. One by Volkswagen for a fuel pump component from the acquired Alfmeier business, and another by VW and Porsche for a passenger occupant detection system related to a Gentherm seat heating mat. The company cannot reasonably estimate the potential costs but notes they could be material[58][59] - In January 2025, the company sold its former headquarters in Northville, Michigan, for $3.74 million in cash, resulting in a loss on sale of $2.31 million[29] Segment Product Revenues (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Automotive | $341,874 | $344,638 | | Medical | $11,980 | $11,377 | | Total | $353,854 | $356,015 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 0.6% decrease in Q1 2025 product revenues to $353.9 million, leading to a net loss of $0.1 million due to foreign currency losses and restructuring costs, while highlighting $400 million in new automotive business awards and strong liquidity with $163.1 million in cash and $235.2 million credit facility availability Q1 2025 vs Q1 2024 Consolidated Results (in thousands) | Metric | 2025 | 2024 | Favorable / (Unfavorable) | | :--- | :--- | :--- | :--- | | Product revenues | $353,854 | $356,015 | $(2,161) | | Gross margin | $86,465 | $88,753 | $(2,288) | | Operating income | $17,061 | $18,049 | $(988) | | Net (loss) income | $(128) | $14,785 | $(14,913) | - The 0.6% decrease in product revenue was driven by unfavorable foreign currency impacts of $5.4 million and unfavorable pricing/other of $1.9 million, partially offset by a $5.2 million increase from automotive volume[122] - The company secured $400 million in automotive new business awards during the first quarter of 2025, which are an indicator of future revenue[116] - As of March 31, 2025, the company had $163.1 million in cash and cash equivalents and $235.2 million of availability under its revolving credit facility[137] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency and interest rate fluctuations on its variable-rate debt, which it manages with derivative contracts, noting a hypothetical 100 basis point interest rate change would impact annual interest expense by $2.6 million and providing sensitivity analysis for foreign currency derivatives - The company's primary market risks are foreign currency exchange rates and interest rates on its debt under the Second Amended and Restated Credit Agreement[155] - A hypothetical 100 basis point change in interest rates would impact annual interest expense by $2.6 million. The company has a $100 million interest rate swap to hedge a portion of this exposure[160] Foreign Currency Derivative Sensitivity (10% Rate Change) | Exchange Agreement | Potential Loss (in thousands) | Potential Gain (in thousands) | | :--- | :--- | :--- | | Receive MXN / Pay USD | $4,512 | $6,931 | | Receive HUF / Pay EUR | $741 | $905 | Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[165] - No changes in internal control over financial reporting occurred in Q1 2025 that materially affected, or are reasonably likely to materially affect, the company's internal controls[166] Part II. Other Information Legal Proceedings The company reports that it is subject to litigation from time to time in the ordinary course of business, but there was no material pending litigation as of the end of the first quarter of 2025 - There was no material pending litigation to which the company is a party, and no material legal proceedings were resolved during the three months ended March 31, 2025[168] Risk Factors The company's risk factors remain largely unchanged from its 2024 10-K, with an emphasized risk from evolving economic and trade policies, including potential tariffs and restrictions that could increase costs, reduce sales, and disrupt the supply chain - The company's risk factors have not materially changed from the 2024 Annual Report on Form 10-K, except for an update on trade policy risks[169] - The company highlights the risk that changes in trade policy, such as the additional tariffs announced in April 2025, could have a material adverse effect on business, including increased costs, decreased margins, and supply chain disruptions[170] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any equity securities in Q1 2025, with approximately $120.1 million remaining available for future repurchases under the existing program - No shares were repurchased during the first quarter of 2025[172] - As of March 31, 2025, $120,117,332 remained available for repurchase under the existing plan[172] Other Information During the first quarter of 2025, none of the company's directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements - No directors or Section 16 officers adopted or terminated any Rule 10b5-1 trading plans or other trading arrangements during Q1 2025[173] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO and XBRL data files Signatures The report is duly signed by William Presley, President and Chief Executive Officer, and Jonathan Douyard, Executive Vice President, Chief Financial Officer and Treasurer, on April 24, 2025