Gentherm(THRM) - 2025 Q2 - Quarterly Report

Part I. Financial Information This section presents Gentherm's financial statements, management's discussion, and market risk disclosures Item 1. Financial Statements (Unaudited) Presents Gentherm's unaudited consolidated financial statements for the period ended June 30, 2025, with detailed notes Consolidated Condensed Balance Sheets 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 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 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 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 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 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][109] - 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][109] - Medical products comprise patient temperature management systems used in hospitals worldwide, primarily in the U.S., China, Germany, and Brazil[22][109] 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 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] - 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] Note 3 - Restructuring 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][37] - 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][40] 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 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 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 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][51] - 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][57] 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 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] - 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] - 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] 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 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][66] - As of June 30, 2025, supplier obligations confirmed under these arrangements totaled $24,769 thousand, recorded in accounts payable[67] Note 9 - Earnings Per Share 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 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][71] 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] Note 11 - Fair Value Measurements 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][78] - Derivative instruments are valued using an income approach, analyzing quoted market prices and discounting forward values, classified as Level 2 inputs[79] - 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] - 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] Note 12 - Equity 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] 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] Note 13 - Reclassifications Out of Accumulated Other Comprehensive Income (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][85][86] - 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] Note 14 - Income Taxes 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][93] - 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][97] Note 15 - Segment Reporting 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][99][100] 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 Management's discussion and analysis of Gentherm's financial condition, operational results, and critical accounting estimates Forward-Looking Statements 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] - 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] - The company disclaims any obligation to update forward-looking statements to reflect changes in expectations or events, except as required by law[107] 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] - 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] - 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] - 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] Recent Trends - Tariffs and Global Conditions 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] - Gentherm's regional manufacturing model and ability to pass additional costs to customers help mitigate the direct impact of tariffs[112] - The global automotive industry faces significant volatility, inflationary pressures, and supply chain disruptions, leading to increased costs for materials, labor, equipment, and logistics[114] - 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][116][117] Recent Trends - Light Vehicle Production Volumes 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] Recent Trends - Automotive New Business Awards 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] - 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] Recent Trends - Stock Repurchase Program 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] 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 Identifies Gentherm's two reportable segments: Automotive and Medical - Gentherm has two reportable segments: Automotive and Medical[122] - The Automotive segment includes design, development, manufacturing, and sales of automotive climate and comfort solutions, valve systems, and other automotive products[99] - The Medical segment comprises patient temperature management business, addressing hyper-hypothermia therapy and normothermia in various care settings[100] Consolidated Results of Operations - Product Revenues 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] - 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] Consolidated Results of Operations - Cost of Sales 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] - 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] Consolidated Results of Operations - Net Research and Development Expenses 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][131] Consolidated Results of Operations - Selling, General and Administrative Expenses 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] - 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] Consolidated Results of Operations - Restructuring Expenses, net 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] - 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] Consolidated Results of Operations - Loss on Sale of Land and Building, net 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] Consolidated Results of Operations - Interest Expense, net 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] Consolidated Results of Operations - Foreign Currency (Loss) Gain 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][142] Consolidated Results of Operations - Other (Loss) Income 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] Consolidated Results of Operations - Income Tax Expense 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][148] Liquidity and Capital Resources - Overview 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] - 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] - 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] - 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] Liquidity and Capital Resources - Cash and Cash Flows 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] - 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] - 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] Liquidity and Capital Resources - Debt 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] - 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] Liquidity and Capital Resources - Material Cash Requirements 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] - 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] Liquidity and Capital Resources - Effects of Inflation 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] - 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] Critical Accounting Estimates 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] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - 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] Interest Rate Sensitivity 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] - The company uses floating-to-fixed interest rate swap agreements with notional amounts totaling $100.0 million to hedge interest payment fluctuations[172] Exchange Rate Sensitivity 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 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] - There were no material changes in internal control over financial reporting during the three months ended June 30, 2025[178] Part II. Other Information This section provides other information not included in the financial statements, such as legal proceedings and equity sales Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - No additional material risks or uncertainties have been identified by the company[182] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 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] Item 6. Exhibits 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 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]