What Gentherm (THRM) Said on Its Q3 Earnings Call

Key Points

• Third-quarter revenue rose 4.7% to $405 million, led by strong automotive climate and comfort sales and more than 25% growth in lumbar and massage products. Adjusted EBITDA margin declined to 11.1% due to material and freight inflation, foreign-exchange effects and a higher tax rate.
• Gentherm secured $555 million in automotive awards during the quarter, pushing year-to-date awards above $1.6 billion and keeping the company on track for at least $2 billion for a fourth consecutive year. It also advanced growth initiatives in home and office, medical and India.
• Following the Modine combination, Gentherm expects the combined company to reach more than $3.5 billion in revenue and $500 million in adjusted EBITDA by 2030. For 2026, it forecasts midpoint revenue of $1.875 billion, adjusted EBITDA of $220 million and approximately $110 million in free cash flow, including Modine’s expected fourth-quarter contribution.

Gentherm NASDAQ: THRM reported third-quarter revenue growth and continued automotive commercial momentum while outlining its strategy following the October 1 closing of its combination with Modine Performance Technologies.

President and Chief Executive Officer Bill Presley said the transaction broadens Gentherm’s end-market exposure beyond automotive into power generation, commercial vehicles and heavy-duty equipment. The company aims to combine Modine’s heat exchangers, valves and fans with Gentherm’s thermal-management technologies to address applications including energy-storage systems.

“We have emerged as a fundamentally different company,” Presley said, describing a more diversified portfolio, additional secular growth drivers, margin-expansion opportunities and stronger cash generation.

Third-Quarter Results

Gentherm reported third-quarter revenue of $405 million, up 4.7% from a year earlier, or 4.4% excluding foreign-exchange translation. Automotive climate and comfort solutions revenue rose 8.8%, or 8.5% excluding currency effects, outperforming light-vehicle production in the company’s key markets by 12 percentage points.

Chief Financial Officer Jon Douyard said China was a notable contributor, as sales to domestic Chinese original equipment manufacturers exceeded sales to global OEMs in the country for the first time. Lumbar and massage comfort solutions revenue grew more than 25% year over year, including initial revenue from the company’s Puls.A Massage system.

Third-quarter adjusted EBITDA was $45 million, or 11.1% of sales, compared with 12.7% of sales in the prior-year period. Gentherm said operating leverage was offset by net material-cost inflation, freight costs and foreign-exchange effects, particularly movements in the Mexican peso.

• GAAP diluted loss per share was $0.08, including about $0.37 per share of merger and restructuring expenses.
• Adjusted diluted earnings per share were $0.33, compared with $0.73 a year earlier. The company attributed the decline primarily to a higher tax rate associated with the timing and treatment of M&A expenses.
• Year-to-date adjusted diluted EPS was $1.90, compared with $1.78 in the prior-year period.
• Adjusted free cash flow was about $59 million, compared with $72 million a year earlier.
• Gentherm ended the quarter with net leverage of 0.4 turns and liquidity of $494 million.

Douyard said roughly one-third of the year-over-year gross-margin decline was tied to material inflation that the company had not yet recovered from customers. Gentherm does not have formal cost-recovery mechanisms with its customers, meaning price adjustments are negotiated individually, he said. Freight inflation accelerated during the third quarter and can take longer to address commercially.

Automotive Awards and Expansion Efforts

The company secured $555 million in automotive new-business awards during the quarter, bringing its year-to-date total above $1.6 billion. Gentherm said it remains on track to achieve at least $2 billion in awards for the fourth consecutive year.

Presley said industry light-vehicle production declined year over year, but demand for Gentherm products remained relatively stable. The company said it continued to grow above market across regions and product categories.

In India, Modine’s existing local presence helped Gentherm win an air-moving-device program with a major Indian light-vehicle manufacturer. The award represents about $25 million in lifetime revenue, with shipments expected to begin in the fourth quarter of 2027. Presley said the award supports the company’s view that a local footprint can expand commercial access in India.

Gentherm also said it is pursuing non-automotive growth. In home and office, the company signed an agreement with a furniture-component distributor intended to broaden access to customers through a different commercial model. The company said it has visibility to $30 million of annualized home-and-office revenue by 2028 based on OEM awards, with a pipeline supporting its $100 million target for that business.

In medical, Gentherm began initial third-quarter sales of its ThermAffyx Patient Safety System following FDA clearance. The company also completed its acquisition of Innovative Medical Equipment, which provides the ThermaZone thermal therapy device and expands Gentherm’s access to the Veterans Administration Healthcare System.

Modine Combination and Outlook

Gentherm said the combination with Modine creates a path toward more than $3.5 billion in revenue and over $500 million in adjusted EBITDA by 2030, along with more than $1 billion in adjusted unlevered free cash flow over the next four years. The company reaffirmed its target of $25 million in cost synergies.

On a trailing-12-month pro forma basis through June 30, 2026, the combined company had revenue of $2.7 billion and adjusted EBITDA of $346 million, an increase of $40 million from the prior pro forma period, according to Gentherm.

For 2026, the company updated its guidance to include an expected fourth-quarter contribution from Modine of about $275 million in revenue, $28 million in adjusted EBITDA and $15 million to $20 million in free cash flow. Gentherm now expects full-year midpoint revenue of $1.875 billion, adjusted EBITDA of $220 million and free cash flow of about $110 million, assuming $55 million in capital expenditures.

Management said legacy Gentherm revenue is expected to grow at a mid- to high-single-digit rate for the year, toward the higher end of its prior range, while EBITDA is expected near the midpoint due to increased inflation. The company expects fourth-quarter margins to improve sequentially from the third quarter.

Looking ahead, Douyard said Gentherm remains confident in its previously stated $1.7 billion 2027 revenue outlook for the legacy business. He cited automotive product launches, continued strength in lumbar and massage products, medical activity, potential power-generation growth at Modine and early signs of a commercial-vehicle recovery.

Gentherm also repurchased approximately 2 million shares for $60 million after the Modine transaction closed. With $340 million remaining under its authorization, Douyard said the company expects to remain active in the fourth quarter, subject to share-price conditions.

About Gentherm (NASDAQ:THRM)

Gentherm Incorporated NASDAQ: THRM develops and manufactures thermal management and comfort technologies for the automotive and medical industries. The company's automotive products include heated and cooled seating systems, climate-controlled seats, heated steering wheels, seat ventilation, and other technologies designed to improve passenger comfort and manage temperature.

Gentherm also provides battery thermal management systems and related technologies that support the performance, efficiency, and safety of electrified vehicles.

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