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]

Core Insights - Garrett Motion Inc. achieved strong operational performance in 2025, with net sales of $3.58 billion and adjusted EBIT of $510 million, reflecting a 14.2% margin [1][4][11] - The company repaid $50 million of its term loan, repurchased $208 million in common stock, and paid $52 million in dividends, demonstrating a disciplined capital allocation strategy [1][9][10] - The outlook for 2026 anticipates net sales of $3.7 billion, adjusted EBIT of $545 million (14.7% margin), and continued focus on zero-emission technologies and industrial cooling [11][12] Financial Performance - Q4 2025 net sales were $891 million, with adjusted EBIT of $122 million and a margin of 13.7% [5][6] - Full-year adjusted free cash flow was $403 million, with a conversion rate of nearly 80% [8][9] - The company experienced a 6% increase in Q4 net sales compared to the previous year, driven by gasoline demand and a recovery in commercial vehicles [6][7] Business Segments - Garrett Motion secured numerous awards in light vehicle turbo applications, increasing its share of demand in gasoline and diesel markets [1][3] - The company is expanding into zero-emission technologies, including a strategic collaboration with Trane Technologies for oil-free high-speed centrifugal compressors [1][2][3] - Industrial cooling is projected to become a significant growth vector, expected to account for over 5% of revenue by the end of the decade [2][3] Market Trends - The global light vehicle industry is expected to decline by 2%, while commercial vehicle markets are anticipated to recover by 1.5% [11] - The company is positioned to gain market share through its technology-driven approach, particularly in hybrid and electric vehicle applications [31][32] - Garrett Motion's differentiated technologies are central to efficiency and emissions reduction, appealing to customers in both automotive and industrial sectors [1][3][31] Strategic Initiatives - The company aims to leverage its capabilities to develop high-speed, efficient technologies that meet customer needs and generate robust returns for shareholders [13][14] - A $250 million share repurchase program has been authorized for 2026, with a target to distribute approximately 75% of adjusted free cash flow to shareholders [10][11] - The partnership with Trane is expected to provide significant opportunities, with the potential for additional revenue streams beyond the initial collaboration [37][39]

Financial Data and Key Metrics Changes - In Q4 2025, net sales were $891 million, with adjusted EBIT of $122 million and a margin of 13.7% [4][13] - For the full year 2025, net sales reached $3.58 billion, with adjusted EBIT of $510 million and a margin of 14.2% [4][5] - Adjusted free cash flow for the year was $403 million, demonstrating disciplined execution [4][17] Business Line Data and Key Metrics Changes - The company secured new light vehicle turbo awards, increasing share in gasoline VNT applications and hybrid platforms [6][8] - Diesel applications for light commercial vehicles and trucks remained resilient, contributing to over 23% of sales [8] - Commercial vehicle sales expanded across regions, while aftermarket sales declined due to lower demand in North America [15][16] Market Data and Key Metrics Changes - Gasoline accounted for over 44% of sales, while diesel represented more than 23% [8] - The company experienced growth in commercial vehicle and diesel segments, but gasoline volumes declined outside of Europe, particularly in Asia [15][16] - The company recovered $10 million and $40 million in tariffs during Q4 and the full year, respectively [15] Company Strategy and Development Direction - The company aims to strengthen its core business while accelerating zero-emission technologies [5][12] - A strategic collaboration with Trane Technologies was announced to integrate next-generation oil-free compressors into commercial HVAC applications [9][22] - The company is targeting to achieve over 5% of revenue from industrial cooling by the end of the decade [11][12] Management's Comments on Operating Environment and Future Outlook - Management anticipates further share of demand gains, margin expansion, and strong free cash flow for 2026 [5][20] - The outlook for 2026 includes net sales of $3.7 billion and adjusted EBIT of $545 million, implying a 14.7% margin [20][21] - The company expects to direct approximately 50% of R&D expenses towards zero-emission technologies and industrial cooling [20] Other Important Information - The company repaid $50 million of its term loan and repurchased $208 million of common stock in 2025 [5][18] - A $250 million share repurchase program was authorized for 2026, with a target distribution of approximately 75% of adjusted free cash flow to shareholders [18][19] Q&A Session Summary Question: Economic opportunity from the Trane partnership - Management indicated that the first application will be delivered in 2026, with a significant ramp-up expected in 2027, but specific numbers for 2027 were not provided [26][28] Question: Comparison of power generation and cooling opportunities - Management noted both markets are growing rapidly, with significant demand for energy and cooling solutions, but did not favor one over the other [40][44] Question: New light vehicle turbo awards and market share - Management confirmed a consistent win rate above 60% in the turbocharger market, indicating an increase in share of demand [46][49] Question: Trane partnership exclusivity and addressable market - Management confirmed that while Trane is a key partner, there will be opportunities to develop relationships with other players in the cooling industry [59][62] Question: Progress on zero-emission products and revenue targets - Management reported accelerated progress on pre-development programs and confirmed that the $1 billion revenue target for 2030 remains intact [63][66]

Financial Data and Key Metrics Changes - In Q4 2025, net sales were $891 million, with adjusted EBIT of $122 million and a margin of 13.7% [4][13] - For the full year 2025, net sales reached $3.58 billion, with adjusted EBIT of $510 million and a margin of 14.2% [4][5] - Adjusted free cash flow for the year was $403 million, demonstrating strong operational performance [4][17] Business Line Data and Key Metrics Changes - The company secured new light vehicle turbo awards, increasing its share of demand in gasoline VNT applications and hybrid electric vehicle platforms [6][7] - Gasoline accounted for over 44% of sales, while diesel remained resilient at more than 23% [7] - Commercial vehicle sales expanded across on-highway and off-highway applications, contributing to overall growth [14][16] Market Data and Key Metrics Changes - In Q4, net sales increased by $47 million year-over-year, reflecting a 6% growth on a reported basis [14] - Growth in commercial vehicle and diesel sales was noted, while gasoline volumes declined outside of Europe, particularly in Asia [14] - The company recovered $10 million in tariffs during Q4 and $40 million for the full year [14] Company Strategy and Development Direction - The company aims to leverage its technology to develop differentiated, high-speed, and efficient technologies, focusing on turbo and zero-emission technologies [22] - A strategic collaboration with Trane Technologies was announced to integrate next-generation oil-free compressors into commercial HVAC applications, indicating a diversification strategy [9][22] - The company anticipates that industrial cooling will become a significant growth vector, expected to scale to more than 5% of revenue by the end of the decade [11][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform in 2026 and beyond, with expectations for further share of demand gains and margin expansion [22][23] - The outlook for 2026 includes net sales of $3.7 billion and adjusted EBIT of $545 million, implying a 14.7% margin [20][21] - Management highlighted the importance of maintaining a disciplined capital allocation strategy while investing in growth opportunities [5][22] Other Important Information - The company repaid $50 million of its term loan in 2025, reducing its net leverage ratio to approximately 1.9 times [18] - A $250 million share repurchase program was authorized for 2026, with a target to distribute approximately 75% of adjusted free cash flow to shareholders [18][19] Q&A Session Summary Question: Economic opportunity from the Trane partnership - Management indicated that the first application will be delivered in 2026, with a significant ramp-up expected in 2027, but specific numbers for 2027 were not provided [26][28] Question: Comparison of power generation and cooling markets - Management noted that both markets are growing rapidly, with significant demand for energy and cooling solutions, and emphasized the company's competitive position in both areas [40][44] Question: Trane partnership exclusivity and addressable market - Management confirmed that while the partnership with Trane is significant, there will be opportunities to develop relationships with other players in the cooling industry [58][60] Question: Progress on zero-emission products and revenue targets - Management reported accelerated progress on pre-development programs and confirmed that the $1 billion revenue target from zero-emission products remains intact for 2030 [62][64]