Sign in
GM

Garrett Motion Inc. (GTX)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered resilient top-line and solid profitability: Net sales $0.913B (+3% reported, flat constant currency), diluted EPS $0.42, Adjusted EBITDA margin 16.9%, Adjusted EBIT $124M (13.6%) .
  • Results beat Wall Street on revenue and EPS; revenue modestly above consensus ($909.9M*) and EPS materially above ($0.36–0.36*), while Adjusted EBITDA was near flat YoY and slightly below EBITDA consensus due to mix and tariffs; FY25 guidance raised across revenue, EPS, EBIT/EBITDA, FCF .
  • Mix headwinds (diesel and aftermarket softness) offset by gasoline strength, FX tailwinds, and tariff recoveries; tariffs diluted margin by ~30 bps and were largely recovered ($14M in Q2) .
  • Capital returns continued: $22M buybacks, $0.06 dividend declared ($13M), liquidity of $862M; Russell 2000® inclusion adds index demand and visibility .

What Went Well and What Went Wrong

What Went Well

  • Strong execution and cash generation: Adjusted free cash flow of $121M; net cash from operations $158M; liquidity $862M; share repurchases of $22M, second quarterly dividend of $13M .
  • Gasoline turbo strength and program wins: gasoline reported sales +6% (constant currency +4%); >$1B in light-vehicle turbo program extensions, plus wins in commercial vehicles and industrial power generation .
  • Management tone and confidence: “Garrett delivered another strong quarter... Adjusted EBIT margin of 13.6%... $121 million of Adjusted free cash flow” — Olivier Rabiller, CEO .

What Went Wrong

  • Mix and margin pressure: Gross margin 19.8% (down 100 bps YoY) from unfavorable mix (diesel/aftermarket softness) and pricing net of inflation pass-through; tariff impact diluted margins by ~30 bps .
  • Diesel and aftermarket softness: diesel reported sales −1% (−5% constant currency); aftermarket reported −8% (−10% constant) as North America remained soft and channels worked through inventory .
  • YoY gross profit decline despite FX tailwind: gross profit fell to $181M (from $185M) even with FX (+$9M) and productivity gains (+$9M), reflecting mix and pricing headwinds .

Financial Results

Headline Metrics vs Prior Quarter and Prior Year

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$0.844 $0.878 $0.913
Diluted EPS ($)$0.47 $0.30 $0.42
Adjusted EBITDA Margin %18.1% 18.1% 16.9%
Net Income Margin %11.8% 7.1% 9.5%

Q2 2025 Actuals vs Wall Street Consensus (S&P Global)

MetricConsensusActualSurprise
Revenue ($USD Millions)909.9*913 +$3.1; modest beat
Primary EPS ($)0.3575*0.4197 +$0.06; strong beat
EBITDA ($USD Millions)158.1*146 (company reports Adjusted EBITDA 154) Slight miss vs EBITDA; near in Adjusted EBITDA

Values marked with * retrieved from S&P Global.

Segment/Category Trends (Q2 2025 YoY)

CategoryReported Sales % ChangeConstant Currency % Change
Gasoline+6% +4%
Diesel−1% −5%
Commercial Vehicles+6% +4%
Aftermarket−8% −10%
Other Sales+31% +26%

KPIs and Cash/Liquidity

KPIQ2 2025
Net Cash from Operating Activities ($M)158
Adjusted Free Cash Flow ($M)121
Liquidity ($M)862 (Cash $232 + RCF undrawn $630)
Total Principal Debt Outstanding ($M)1,491
Share Repurchases ($M)22
Dividend per Share ($)$0.06 declared; $13M paid in Q2
Tariff Recovery in Q2 ($M)14 recovered; $15 COGS impact

Guidance Changes

MetricPeriodPrevious Guidance (May 1)Current Guidance (July 24)Change
Net Sales (GAAP)FY 2025$3.3B–$3.5B $3.4B–$3.6B Raised
Net Income (GAAP)FY 2025$209M–$254M $233M–$278M Raised
Adjusted EBITDAFY 2025$545M–$605M $590M–$650M Raised
Adjusted EBITFY 2025$427M–$487M $470M–$530M Raised
Net Cash from Ops (GAAP)FY 2025$357M–$447M $370M–$450M Raised
Adjusted Free Cash FlowFY 2025$300M–$390M $330M–$410M Raised
FX Assumption (EUR/USD)FY 20251.05 1.13 Updated
RD&E (% of Sales)FY 20254.6% 4.2% Lower
Capex (% of Sales)FY 20252.8% 2.5% Lower
Tariffs AssumptionFY 2025Direct pass-through Assumes full direct recovery Clarified
DividendQ3 2025$0.06 declared in Q2 $0.06 declared payable Sept 16 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Tariffs/macroPassed through tariffs in Q1; ~$60M potential exposure; maintain 2025 outlook amid uncertainty ~30 bps margin dilution; $14M recovered in Q2; expect full recovery Improving recovery; modest dilution
Product mix (gasoline vs diesel/aftermarket)Gasoline ramp in NA; diesel softness EU; aftermarket lower Gasoline strength; diesel/aftermarket softness drives mix headwinds Mixed: gasoline up; diesel/AM soft
Zero-emission tech (E-Powertrain, eCooling, fuel cell)First major series production award with HanDe (HD trucks, 2027) Additional milestones; Wuhan Innovation Center launched Building momentum
Industrial/AI data center genset turbosExpanded industrial wins in Q1; MEG Turbo line highlighted Business could scale to “hundreds of millions” over 3–5 years (not near 10% of rev) Expanding opportunity
Capital allocationNew $250M buyback, $50M annual dividend; 60% FCF conversion target $22M buybacks; $0.06 dividend; 75%+ FCF distribution target over time Ongoing execution
FX tailwinds/headwinds2025 outlook headwinds from FX (USD vs EUR) Raising FY25 midpoint on stronger EUR/USD Favorable FX

Management Commentary

  • CEO: “Garrett delivered another strong quarter… Adjusted EBIT margin of 13.6%… $121 million of Adjusted free cash flow, enabling $22 million in share repurchases and the payment of our second quarterly dividend of $13 million.” — Olivier Rabiller .
  • CFO: “Within the quarter, we delivered $124,000,000 of adjusted EBIT… a margin rate of 13.6%… newly implemented tariffs drove 30 basis points of margin rate dilution… benefited from $11,000,000… from favorable FX.” — Sean Deason .
  • CEO on tariff recovery: “Absolutely… we expect… and this is what we’ve achieved… we have the tools in place… recovering everything since the beginning.” — Olivier Rabiller .
  • CEO on growth vectors: “Awarded over $1,000,000,000 of light vehicle program extensions… leadership in electric boosting… fuel cell compressor award with leading Asian OEM.” — Olivier Rabiller .
  • CFO on buybacks: “Our buyback is not linear… we also recognize that we have some dry powder for block trades… committed to 75% or more of free cash flow to shareholders.” — Sean Deason .

Q&A Highlights

  • Mix headwinds and adjustments: Management reiterated gasoline growth offset by diesel/aftermarket softness; variable cost structure and fixed-cost actions to protect margins .
  • Buybacks cadence: Non-linear approach with flexibility for block trades; long-term goal to return ≥75% of adjusted FCF via buybacks/dividends .
  • Second half operating performance: Cost control and potential volume stabilization could push results toward the upper end of guidance; cautious stance due to tariffs .
  • Tariff recovery: Expect and achieving full recovery; margin dilution acknowledged but manageable .
  • Industrial genset/AI opportunity: Market significant but unlikely to reach 10% of revenue near-term; potential to scale to hundreds of millions within 3–5 years .

Estimates Context

  • Q2 2025 vs consensus: Revenue $913M vs $909.9M* (beat), EPS $0.42 vs $0.36* (beat), EBITDA actual vs consensus slightly below (company-reported Adjusted EBITDA $154M vs EBITDA consensus $158.1M*) .
  • FY25 guidance raised post-Q2 likely to drive upward estimate revisions for revenue, net income, EBIT/EBITDA, and FCF; FX uplift (EUR/USD 1.13) and continued gasoline strength support higher run-rate, while diesel/aftermarket softness and tariffs temper margins .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q2 revenue/EPS beat and broad FY25 guidance raise are positive catalysts; index inclusion (Russell 2000®) adds technical support and potential inflows .
  • Margin resilience amid mix/tariffs underscores operational discipline; watch mix normalization (aftermarket/diesel) and tariff recovery pace for margin trajectory .
  • Gasoline turbo strength and >$1B extensions increase medium-term revenue visibility; industrial genset and zero-emission programs (E-Powertrain/eCooling/fuel cells) enhance optionality by 2027+ .
  • Capital returns remain robust (buybacks + dividend); non-linear buyback creates potential for opportunistic blocks; FCF conversion tracking strong (Q2 98% quarterly; 62% 1H) .
  • Near-term trading: Lean long on guidance momentum and EPS beat; hedge for tariff/mix headlines and diesel/aftermarket softness; FX tailwinds supportive .
  • Medium-term thesis: Asset-light, cash-generative model with structural cost actions should sustain mid-teens adjusted EBIT/EBITDA margins through cycles; watch commercialization milestones for zero-emission platforms and industrial scale-up .

Cross-References and Disclosures

  • Q2 2025 press release and Form 8-K (Item 2.02): full results, guidance, reconciliations .
  • Q2 2025 earnings call: management commentary on tariffs, mix, FX, capital allocation .
  • Prior quarters for trend analysis: Q1 2025 8-K and call ; Q4 2024 8-K and call .
  • Other relevant Q2 press releases: Wuhan Innovation Center; Russell 2000® inclusion .