Gentherm Inc Q1 FY2025 earnings call

• Tariffs create economic uncertainty, but Gentherm is monitoring and working to pass costs to customers, with most components either not subject to tariffs or USMCA compliant.
• Focus on scaling core technology platforms (Thermal Management, Air Moving Devices, Pneumatic Solutions, Valve Systems) into new markets, including medical where proof of concepts for patient and physician thermal management have been completed.
• Strategic footprint realignment underway, including consolidating sites in North America, Europe, and Asia to optimize capacity.
• Commercial success with new business awards, such as first Pneumatic Comfort Solutions Award with a Japanese OEM and climate controlled seat award with Volvo.

Automotive climate and comfort solutions saw revenues increase 3.8% year-over-year (5.3% ex-FX). Medical revenues increased 6% ex-FX compared to the same period last year, driven by growth in Europe. North America, where Gentherm has about 40% of total revenue, is impacted by industry volume declines.

• Maintaining prior revenue range but adjusting the low end of adjusted EBITDA margin range due to lower volumes and tariff impacts.
• Expecting lower revenue from vehicle volume decline, offset by tariff pass through and foreign exchange favorability.
• Strong balance sheet allows focus on growth and financial performance while closely monitoring market dynamics.

• Economic uncertainty from tariffs, with potential incremental costs if tariffs expand beyond current levels.
• Impact of lower vehicle production volumes on revenue and margins.

Q: How much pass through revenue is incorporated in the guidance and how much is core operating performance impact?

A: Jonathan Douyard said the impact is relatively limited, with tariffs in place as of today being a smaller portion, and most impact on dilution is a couple of tenths of a percent, with uncertainty around industry volumes being the bigger factor.

Q: Why is the medical expansion different from past attempts?

A: Bill Presley explained it's about scaling existing core technologies into medical without significant new investments, using same technology in different markets.

Q: Just in regards to your new program awards, it looks like it's one of the lower quarterly award figures since 2022, could you just discuss booking dynamics in 1Q?

A: Bill Presley said it's been in line with expectations, with first quarter coming in right about where they expected based on roadmaps of OEMs quoting.

Q: In regards to your 2025 guide, revenue guide remains unchanged despite weaker industry forecast, could you speak on what's enabling you guys to hold up sales?

A: Jonathan Douyard said North American volume contributes 40% to the business, with FX favorability and tariff pass through offsetting some of the volume decline.

Q: Curious if you might have seen any benefit during the quarter from automaker orders for parts exceeding what they would ordinarily purchase to support concurrent production as they sought to maybe atypically stockpile components ahead of production in an effort to mitigate tariff impact?

A: Jonathan Douyard said he hasn't really seen anything meaningful on the production side, with variances in production orders falling within standard variances.

Q: Relative to the comment that many or most of your products are not subject to tariffs because they are either not included in the categories of tariff components or because they are USMCA compliant, are you able to say how much is because they are not in the tariff categories versus how much is because they are USMCA compliant? And relatedly, does the guide incorporate the temporary exemption on USMCA compliant parks that last through May 3rd?

A: Bill Presley said they can't predict direction of tariffs, but have mechanisms to pass on costs, and the guide incorporates tariffs in effect as of today, with dilution impact on margin being a bit higher if exemptions end, but still within the adjusted EBITDA range.