Question · Q3 2025
Joseph Spack from UBS asked for detailed commentary on the organic end market and the implied Q4 guidance, noting it was softer than expected. He specifically questioned the lower Q4 revenue contribution from SEM despite it being a full quarter, asking about seasonality and future run rates. Spack also inquired about the low flow-through to EBIT from fuel systems' volume mix and the growing opportunity in power generation.
Answer
CEO Brady Ericson attributed the softer Q4 guidance to a return to normal seasonality (Q1 and Q4 being lighter) and caution due to market uncertainties. He explained SEM's lower Q4 contribution by its second-half seasonality and current CV market softness, expecting recovery in 2026. CFO Chris Gropp clarified that the low flow-through in fuel systems' EBIT was partly due to zero-margin ECU sales from BorgWarner and strong productivity offsetting lower contribution margins. Ericson confirmed increased business in the industrial sector, including power generation, and indicated future disclosures for CV and other OE segments.