Garrett Motion Inc. Q4 2025 Earnings Call Summary

Strategic Performance and Operational Drivers - The company achieved a 14.2% adjusted EBIT margin in 2025 by leveraging technology leadership to navigate a complex industry environment and shifting product mix [5] - Revenue base transitioned from 41% light vehicle diesel in 2018 to over 44% gasoline today while maintaining resilient margins [5] - Significant share of demand gains secured in gasoline VNT and hybrid platforms, reinforcing the core turbo business as a central driver for emissions reduction [5] - Expanded industrial footprint through initial series production awards for the MEG turbo frame size and entry into the aftermarket retrofit space [5] - Leveraged automotive-scale turbomachinery and oil-free foil bearing technology to enter high-growth industrial cooling and data center markets [5] - Maintained a disciplined capital allocation framework, returning $260 million to shareholders through repurchases and dividends in 2025 [5] - Achieved an 80% free cash flow conversion rate, demonstrating operational rigor in converting earnings into liquidity despite macroeconomic headwinds [5] 2026 Outlook and Strategic Trajectory - 2026 guidance assumes a 2% decline in global light vehicle production, offset by continued share of demand gains and a 1.5% recovery in commercial vehicles [5] - Anticipates adjusted EBIT margin expansion to 14.7% driven by volume growth and productivity improvements offsetting pricing and inflation pressures [5] - Approximately 50% of RD&E budget allocated toward zero-emission technologies and industrial cooling to drive long-term portfolio diversification [5] - Industrial cooling expected to scale rapidly, projected to exceed 5% of total company revenue by the end of the decade [5] - Series production for next-generation centrifugal compressors with Trane Technologies scheduled to begin in 2027 following initial customer units in 2026 [5] - Landmark collaboration with Trane Technologies announced to integrate Garrett's oil-free compressors into commercial HVAC and chiller applications [5] Risk Factors and Financial Recovery - Recovered $40 million in tariffs during 2025, though Q4 margins absorbed a 20 basis point dilution from ongoing tariff impacts [5] - Authorized a new $250 million share repurchase program for 2026, targeting a 75% distribution of adjusted free cash flow over time [5] Industry Insights - Data center expansion identified as a primary driver for the power generation segment, with sales in this vertical expected to grow double-digits [6]