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Gentherm Inc (THRM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record product revenue of $386.9M (+4.1% YoY; +3.1% vs S&P consensus), with adjusted EPS $0.73 beating consensus ($0.652) while gross margin stepped down YoY to 24.6% due to higher material costs and footprint realignment expenses .
  • Automotive new business awards were robust at $745M, highlighted by a Mercedes-Benz conquest win featuring Gentherm’s Puls.A massage technology; revenue guidance midpoint was raised to $1.48B and capex cut to $45–$55M .
  • Adjusted EBITDA margin of 12.7% was roughly flat YoY (-20 bps), but S&P standardized EBITDA missed consensus as company-reported adjusted EBITDA differs from S&P definitions; YTD operating cash flow reached $87.8M and net leverage fell to ~0.2x .
  • Management flagged potential but uncertain supply-chain risks (Novelis fire, Nexperia export controls) and did not bake broad impacts into guidance, focusing instead on customer schedule visibility .
  • Near-term stock narrative catalysts: raised revenue outlook, strategic conquest win at Mercedes-Benz, accelerating adjacent market entry (furniture production starting Q1 2026), and strengthening cash generation .

What Went Well and What Went Wrong

What Went Well

  • Secured $745M of automotive new business awards, including a Mercedes-Benz conquest across high-volume platforms with proprietary Pulse A massage; management emphasized innovation edge and direct-OEM commercial model as key win factors .
  • Record quarterly revenue of $387M, with Automotive Climate & Comfort Solutions +8.6% YoY (+7.0% ex-FX), outperforming light vehicle production in relevant markets by 160 bps; China demand and take rates improved .
  • Strong cash generation and balance sheet: YTD operating cash flow $87.8M; net leverage ~0.2x; liquidity $462.2M .

What Went Wrong

  • Gross margin declined to 24.6% from 25.5% YoY, pressured by higher material costs, lapping a prior-year favorable adjustment (non-automotive electronics), and footprint realignment expenses .
  • S&P standardized EBITDA appears below consensus (while company adjusted EBITDA was $49.0M, S&P actual was $41.2M), highlighting definitional differences and FX/material cost headwinds .
  • Medical segment revenue was modestly down (-0.4% YoY; -1.6% ex-FX) and Valve Systems declined (-6.1% YoY), with management focusing on product refresh and leveraging automotive IP to accelerate medical launches .

Financial Results

Headline P&L vs prior year and prior quarter

MetricQ3 2024Q2 2025Q3 2025
Product Revenues ($USD Millions)$371.5 $375.1 $386.9
Gross Margin %25.5% 23.9% 24.6%
Adjusted EBITDA ($USD Millions)$48.1 $45.9 $49.0
Adjusted EBITDA Margin %12.9% 12.2% 12.7%
Diluted EPS (GAAP) ($)$0.51 $0.02 $0.49
Adjusted Diluted EPS ($)$0.75 $0.54 $0.73

S&P Global consensus vs actual (Q3 2025)

MetricConsensus# EstimatesActualSurprise
Revenue ($USD Millions)$375.15*5*$386.87 +$11.72 (+3.1%)*
Primary EPS ($)$0.652*5*$0.73 +$0.078 (+12.0%)*
EBITDA ($USD Millions; S&P standardized)$45.53*—$41.23*-$4.30 (-9.4%)*

Values retrieved from S&P Global.*

Segment/Product Category Breakdown (Q3 2025 vs Q3 2024)

CategoryQ3 2024 ($USD Millions)Q3 2025 ($USD Millions)YoY %
Climate Control Seats$189.9 $201.3 +6.0%
Lumbar & Massage Comfort Solutions$49.0 $55.8 +13.9%
Climate Control Interiors$49.3 $52.6 +6.8%
Climate & Comfort Electronics$4.9 $8.6 +76.1%
Automotive Climate & Comfort Solutions (Subtotal)$293.0 $318.3 +8.6%
Valve Systems$26.1 $24.5 -6.1%
Other Automotive$39.7 $31.4 -20.9%
Automotive Segment (Subtotal)$358.8 $374.2 +4.3%
Medical Segment$12.7 $12.7 -0.4%
Total Company$371.5 $386.9 +4.1%

KPIs and Balance Sheet Highlights

KPIQ3 2024Q3 2025
Automotive New Business Awards ($USD Millions)—$745
Operating Cash Flow YTD ($USD Millions)$73.1 $87.8
Liquidity ($USD Millions)$428.6 $462.2
Net Leverage (x)—~0.2x

Guidance Changes

MetricPeriodPrevious Guidance (Jul 24, 2025)Current Guidance (Oct 23, 2025)Change
Product RevenuesFY 2025$1.43B – $1.50B $1.47B – $1.49B Midpoint raised (to $1.48B)
Adjusted EBITDA Margin RateFY 202511.7% – 12.5% 11.9% – 12.3% Narrowed (midpoint slightly higher)
Adjusted Effective Tax RateFY 202526% – 29% 26% – 29% Maintained
Capital ExpendituresFY 2025$55M – $65M $45M – $55M Lowered

Earnings Call Themes & Trends

TopicQ1 2025 (Apr 24)Q2 2025 (Jul 24)Q3 2025 (Oct 23)Trend
New Business Wins$400M awards; first Japanese OEM lumbar/massage; Volvo CCS conquest $620M awards; Ford F-Series next-gen; Puls.A wins $745M awards; Mercedes-Benz conquest with Pulse A; GM Comfort Scale expansion Accelerating wins; broadening OEM footprint
Margin DriversGross margin -50 bps YoY; footprint realignment costs; strong net material performance Gross margin -180 bps YoY; material/labor costs; footprint costs Gross margin -90 bps YoY; material costs; footprint expenses; FX tailwind Stabilizing sequentially with operational initiatives
China/Regional MixOutperformed LV production by >300 bps in relevant markets NA/EU strong; Asia weighed Improved China performance and take rates; launches with Xiaopeng and Li Auto Improving exposure and alignment to China domestic OEMs
Supply Chain RisksTariffs included in guidance; macro uncertainty FX and materials a headwind; guidance narrowed JLR cyber incident (largely resolved), Novelis fire, Nexperia controls; minimal tariff impact; not broadly included in guidance due to low visibility Monitoring; mitigations underway
Adjacent MarketsEvaluating new markets; operational standardization Wins in power sports/commercial vehicles Furniture award; production starts Q1 2026; $300M pipeline across furniture/commercial/other mobility Pipeline building; capital-light expansion
MedicalGrowth ex-FX; segment up 5.9% ex-FX -3.8% YoY; product refresh underway Product refresh leveraging automotive IP; near-term product announcement expected Repositioning; potential catalyst near year-end

Management Commentary

  • “Our third quarter financial and operational performance demonstrated our ability to deliver results, while executing our long-term strategic initiatives… Growth over market in the quarter improved sequentially as we launched several new programs and take rates increased in the China market.” – Bill Presley, President & CEO .
  • “Overall, third quarter results were above expectations as revenue came in higher, driven by increased industry volumes… We are increasing the midpoint of our revenue guidance while narrowing our EBITDA range.” – Jonathan Douyard, CFO .
  • “We were selected by a large global furniture brand to supply our comfort solutions and are preparing for production to start in Q1 of 2026.” – Bill Presley .
  • “Comfort Scale is a win-win… we receive more content and value add, OEMs reduce their labor costs, and end consumers get an improved in-vehicle experience.” – CFO on GM expansion .

Q&A Highlights

  • Mercedes-Benz conquest drivers: innovation edge (Pulse A), strong customer relationships, direct engagement with OEMs vs selling through Tier 1; expected to be 100% incremental revenue .
  • Adjacent markets pipeline (~$300M): roughly one-third furniture (fast time-to-revenue; $3–$5M in 2026 for initial award), one-third commercial vehicle (fluid systems, steering wheel heaters/HOD), one-third other mobility (two-wheelers, construction vehicles); capital-light, leveraging existing capacity .
  • Supply chain: JLR cyber issue largely behind; monitoring Novelis fire (aluminum) and Nexperia export controls; guidance reflects customer schedule visibility, not speculative broader impacts .
  • Footprint realignment cadence: modest 2025 headwind vs plan; savings back-half 2026 and more fully in 2027 as legacy costs roll off and inventory build effects abate .
  • M&A priorities: product expansion aligned to core technologies, access to new end markets, margin profile enhancement; aim to build a more resilient, diversified company .

Estimates Context

  • Q3 2025 delivered a revenue and EPS beat versus S&P Global consensus, while S&P standardized EBITDA was below consensus; note company-reported Adjusted EBITDA ($49.0M) differs from S&P standardized EBITDA ($41.2M). The beat drivers were higher industry volumes and China improvement, partially offset by material costs and footprint expenses .
  • Consensus metrics and counts: Revenue $375.15M (5 estimates); Primary EPS $0.652 (5); EBITDA $45.53M*. Actuals: Revenue $386.87M ; Adjusted EPS $0.73 ; S&P standardized EBITDA $41.23M*. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Revenue momentum is improving into year-end, with the FY 2025 revenue midpoint raised to $1.48B; Q4 assumed seasonally lower vs Q3, and guidance excludes speculative broader supply-chain impacts—watch for updates tied to Novelis/Nexperia .
  • Product mix is skewing favorably toward high-value comfort solutions (Pulse A, Comfort Scale), driving content per vehicle and OEM adoption; the Mercedes-Benz conquest and GM expansion are catalysts for 2026–2028 .
  • Margin trajectory: adjusted EBITDA margin holding ~12–13% despite material and footprint headwinds; structural margin expansion expected from footprint realignment as savings phase in late 2026–2027 .
  • China growth over market and shifting customer mix toward domestic OEMs should support regional alignment and reduce volatility; monitor take-rate trends and program launches .
  • Adjacent markets (furniture, commercial vehicles) are a near/medium-term growth vector with faster cycles and limited capex; initial furniture revenue starts Q1 2026 and could scale meaningfully into 2027 .
  • Cash generation and balance sheet flexibility (YTD CFO $87.8M; net leverage ~0.2x; liquidity $462M) provide optionality for M&A and strategic investments .
  • Trading implications: near-term positive skew from revenue beat and raised outlook; caution on standardized EBITDA miss vs consensus definitions and potential supply-chain headlines; medium-term thesis supported by content expansion, footprint savings, and adjacency scaling .