Gentherm(US:THRM)2025-10-23 20:48Business Performance - For the nine months ended September 30, 2025, Gentherm secured automotive new business awards totaling $745 million, indicating potential future revenue growth [119] - Global light vehicle production in key markets increased by 5.4% to 18.7 million units for the three months ended September 30, 2025, compared to the same period in 2024 [118] - Forecasted light vehicle production volume for full year 2025 is expected to reach 76.1 million units, a 1.9% increase from 2024 [118] - Automotive sales are influenced by consumer demand, with production in North America and Europe showing slight declines of 1.4% and 1.7% respectively for the nine months ended September 30, 2025 [118] - Product revenues for the three months ended September 30, 2025, increased by 4.1% to $386,870, compared to $371,512 in the same period of 2024 [125] - For the nine months ended September 30, 2025, product revenues rose by 1.1% to $1,115,814, up from $1,103,210 in 2024 [126] - The automotive segment's product revenues for the three months ended September 30, 2025, increased by 4.3% to $374,211, compared to $358,804 in 2024 [125] Financial Results - Gross margin for the three months ended September 30, 2025, was $95,148, representing a margin percentage of 25.5%, compared to $94,873 and 24.6% in 2024 [127] - Cost of sales for the three months ended September 30, 2025, increased by 5.5% to $291,722, compared to $276,639 in 2024 [127] - Operating income for the three months ended September 30, 2025, was $23,858, down from $32,337 in 2024, reflecting a decrease of $8,479 [127] - Net income for the three months ended September 30, 2025, was $14,949, compared to $15,965 in 2024, a decrease of $1,016 [123] - Selling, general and administrative expenses for the three months ended September 30, 2025 increased by 16.3% to $42,875,000 compared to $36,861,000 in 2024, representing 11.1% of product revenues [132] - For the nine months ended September 30, 2025, selling, general and administrative expenses rose by 4.7% to $122,440,000 from $116,992,000 in 2024, accounting for 11.0% of product revenues [133] - Interest expense, net for the three months ended September 30, 2025 decreased by 29.7% to $(3,313,000) from $(4,710,000) in 2024 [138] - Income tax expense for the three months ended September 30, 2025 was $5,935,000, with an effective tax rate of 28.4%, compared to $3,445,000 and 17.7% in 2024 [145] Cash Flow and Debt - As of September 30, 2025, the company had $154.3 million in cash and cash equivalents and $307.9 million available under its credit agreement [150] - The company expects its cash and cash equivalents, available borrowings, and cash flows from operations to meet anticipated cash requirements for at least the next twelve months [152] - Net cash provided by operating activities for the nine months ended September 30, 2025, was $87.82 million, up from $73.09 million in 2024, representing an increase of 20.1% [154] - Net cash used in investing activities was $29.78 million in 2025, compared to $33.14 million in 2024, indicating a decrease of 10.6% [155] - Net cash used in financing activities totaled $42.43 million in 2025, slightly higher than $40.61 million in 2024, reflecting an increase of 4.5% [156] - Total debt as of September 30, 2025, was $189.11 million, down from $220.20 million as of December 31, 2024, a reduction of 14.1% [157] Market and Operational Challenges - The global automotive industry faces challenges from inflationary pressures and supply chain disruptions, impacting operating costs and results [115] - Tariffs and global trade disputes have created uncertainty, but the company has managed to mitigate their impact on operations thus far [114] - Gentherm's diversified OEM customer base and geographic revenue base position the company to withstand industry downturns and benefit from upturns [111] - The company operates in a competitive landscape, focusing on human comfort, health, and wellness trends in the automotive industry [112] Research and Development - The company is developing new technologies aimed at improving health, wellness, and patient outcomes, expanding its product applications [110] - Net research and development expenses for the three months ended September 30, 2025, were $24,429, an increase of 6.2% from $23,013 in 2024 [130] - The percentage of net research and development expenses to product revenues for the three months ended September 30, 2025, was 6.3% [130] Restructuring and Other Expenses - Restructuring expenses, net for the three months ended September 30, 2025 were $3,986,000, an increase of $1,324,000 compared to $2,662,000 in 2024 [134] - Loss on sale of land and building for the nine months ended September 30, 2025 was $2,196,000, related to the sale of the former headquarters building [137] - Other (loss) income for the nine months ended September 30, 2025 was $(1,124,000), a decline from $952,000 in 2024, primarily due to changes in the fair value of equity investments [144] Foreign Currency and Interest Rate Exposure - The Company is exposed to various market risks including foreign currency exchange rates, interest rates, and commodity price fluctuations, particularly copper [168] - A hypothetical 100 basis point change in interest rates would impact annual interest expense by $1.9 million based on the amounts outstanding as of September 30, 2025 [173] - The Company has entered into floating-to-fixed interest rate swap agreements with notional amounts totaling $100 million to hedge interest payment fluctuations [173] - The potential loss in fair value for the foreign currency derivative contracts (Receive MXN / Pay USD) is estimated at $4.44 million with a potential gain of $6.22 million as of September 30, 2025 [177] - The average contract rate for the foreign currency exchange agreements (Receive HUF / Pay EUR) was 420.62 as of September 30, 2025 [175] - A hypothetical 10% change in quoted currency exchange rates could result in a potential loss of $4.439 million for the MXN/USD exchange agreement [177] - The potential gain in fair value for the MXN/USD exchange agreement is $6.217 million as of September 30, 2025 [177] - The Company does not enter into derivative financial instruments for speculative purposes, focusing instead on managing financial and operational exposure [169] - The effective portion of cash flow hedges is recorded in accumulated other comprehensive income until the underlying transaction is realized [170] - The Company regularly monitors the effectiveness of its hedging relationships to ensure they offset changes in future cash flows [170]