Garrett Motion (NasdaqGS:GTX) Q3 2025 Earnings Call October 23, 2025 08:30 AM ET Speaker0Hello. My name is Megan, and I will be your operator this morning. I would like to welcome everyone to the Garrett Motion Third Quarter twenty twenty five Financial Results Conference Call. This call is being recorded and a replay will be available later today. After the company's presentation, there will be a Q and A session.I would now like to hand the call over to Cyril Granjean, Garrett's Vice President, Investor Re ...

OCTOBER 23, 2025 Q3 2025 FINANCIAL RESULTS © 2025 Garrett Motion Inc. Forward Looking Statements This communication and related comments by management may include "forward-looking statements" within the meaning of the U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact and can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should ...

Financial Data and Key Metrics Changes - Net sales for Q2 2025 were $913 million, flat at constant currency, with gasoline turbo sales growing by 4%, outperforming the industry [6][13] - Adjusted EBIT was $124 million with a margin of 13.6%, reflecting a 20 basis point decline due to unfavorable sales mix and tariff dilution [7][15] - Adjusted free cash flow was $121 million, representing a conversion rate of 62% for the first half of 2025 [7][18] Business Line Data and Key Metrics Changes - Gasoline turbo sales showed strong growth, while diesel and aftermarket applications experienced softness, particularly in North America [14][28] - The company recovered $14 million in tariffs during the quarter, contributing positively to financial performance [14][15] Market Data and Key Metrics Changes - The company secured over $1 billion in light vehicle program extensions, enhancing future revenue visibility [8][24] - Interest in turbochargers for range-extended electric vehicles is growing, with new wins in China and Europe [9][10] Company Strategy and Development Direction - The company aims to leverage its capabilities to develop differentiated high-speed and highly efficient technologies, focusing on robust returns for shareholders [22][24] - A new R&D center in Wuhan, China, has been integrated to strengthen the company's presence in a fast-moving region [12] Management Comments on Operating Environment and Future Outlook - Management raised the 2025 outlook due to a stronger euro-dollar exchange rate, maintaining prior industry views despite tariff impacts [19][20] - The company remains alert to adapt to slowing demand if necessary, while continuing to allocate capital to deliver shareholder value [7][19] Other Important Information - The company repurchased $22 million of common stock and paid a $12 million quarterly dividend in Q2 2025 [8][18] - The Board of Directors declared a third-quarter dividend payable on September 16, 2025 [8][19] Q&A Session Summary Question: Unfavorable sales mix and business adjustments - Management explained that the unfavorable sales mix is due to strong growth in gasoline sales, which have lower margins, and softness in aftermarket applications in North America [27][28] Question: Cash position and stock buyback strategy - Management indicated that stock buybacks are not linear and emphasized their commitment to returning 75% or more of cash to shareholders over time [30][44] Question: Drivers of stronger operating performance in the second half - Management highlighted cost control and potential volume stabilization as key drivers for improved performance, while remaining conservative in guidance [33][34] Question: Tariff recovery expectations - Management confirmed expectations to fully recover tariff costs this year, having already achieved significant recovery [35][36] Question: Growth potential of large turbos for backup power - Management sees substantial growth potential in the large turbo market, estimating it could reach hundreds of millions in revenue within the next three to five years [40][42] Question: Non-linear stock repurchase strategy - Management reiterated that stock repurchase is not linear and emphasized their commitment to the capital allocation framework [44][45]

Financial Performance - Net sales reached $913 million, a 3% increase compared to Q2 2024, but flat at constant currency[6, 8, 21] - Adjusted EBIT was $124 million, up $1 million from Q2 2024, with a margin of 136%, a decrease of (20) bps[6, 8, 24] - Adjusted Free Cash Flow was $121 million, driven by sequential sales growth and working capital contribution[6, 18] Business Trends - Light vehicle gasoline sales grew 4%, outperforming the industry, driven by share of demand gains[8] - The company repurchased $22 million of common stock in Q2, bringing the total for H1 to $52 million[9] - A Q3 dividend of $006 per share was declared on July 24, 2025[9] Technology and Business Wins - Over $1 billion of light vehicle program extensions were awarded in North America and Europe[13] - The company won a significant E-Turbo program in Europe and 3 additional range extended electric vehicle applications in China[13] - The company won another Fuel Cell Compressor serial production program with a leading Asian OEM[13] Outlook - The company is raising its 2025 outlook, with net sales projected between $34 billion and $36 billion[32] - Adjusted EBITDA is projected between $590 million and $650 million, and Adjusted EBIT between $470 million and $530 million[32] - Adjusted Free Cash Flow is projected between $330 million and $410 million[32]

Core Insights - Garrett Motion is transitioning from a traditional turbo supplier to a cash-flowing entity with opportunities in electric vehicles (EV) and industrial sectors, indicating a strategic shift in its business model [1] - The stock of Garrett Motion is still considered a buy due to the ongoing relevance of turbochargers and internal combustion engines (ICE) in the market [1] Company Overview - Garrett Motion is focusing on enhancing its cash flow while diversifying into emerging markets such as EVs and industrial applications [1] - The company is leveraging its legacy in turbo technology while adapting to new market demands [1] Market Position - The relevance of turbochargers and ICE remains significant, which supports the investment thesis for Garrett Motion's stock [1] - The company is positioned to benefit from both traditional automotive markets and the growing EV sector, providing a balanced growth opportunity [1]