管理層發言
Greetings, and welcome to Gentherm's Second Quarter 2026 Earnings Conference Call. Operator instructions were provided. Please note this conference is being recorded. I'll now turn the conference over to Gregory Blanchette, Senior Director of Investor Relations. Thank you. You may begin.
Thank you, and good morning, everyone, and thanks for joining us today. Gentherm's earnings results were released earlier this morning, and a copy of the release is available at gentherm.com. Additionally, a webcast replay of today's call will be available later today on the Investor Relations section of Gentherm's website. During this call, we will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance, and actual results may differ materially. We undertake no obligation to update them, except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors and other significant assumptions, risks and uncertainties underlying such forward-looking statements. During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation. On the call with me today are Bill Presley, President and Chief Executive Officer; and Jon Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we made available on the Investors section of Gentherm's website. After the prepared remarks, we'll be pleased to take your questions. Now I'd like to turn the call over to Bill.
Thank you, Greg, and good morning, everyone. Let's begin on Slide 3 for an update on our business and the market. Strong commercial execution where we continue to significantly outperform the market, combined with operational discipline, resulted in an excellent first half, positioning Gentherm to deliver a solid year. Based on this performance, we are raising our full year 2026 guidance. We continue to monitor the macroeconomic and geopolitical environment, and at the same time, we are proactively managing inflationary pressures through disciplined commercial actions and operational execution. As we look ahead, our priorities remain clear. We are focused on executing our strategy, capitalizing on the opportunities within our control and driving sustainable profitable growth for our shareholders. Strategic profitable growth is a cornerstone of our strategy, and we continue to achieve critical milestones that position us for long-term success. We have confidence that Gentherm's automotive business will grow over market, while we continue to build momentum beyond the light vehicle market. During the quarter, Gentherm products were selected by two leading North America-based furniture brands in the home and office market. In less than a year, we have successfully deployed our core technologies with five new customers and have visibility to $50 million to $100 million of revenue in this market by 2028. A strong proof point that our technology platforms are readily transferable beyond automotive and that we are moving with speed to capture these opportunities. In the medical market, we remain focused on refreshing the product portfolio and expanding our customer commercial channels. I am pleased to announce that we have received FDA 510(k) clearance for ThermAffyx, an innovative new solution developed by leveraging our proven automotive technology and intellectual property. This is another powerful example of our ability to transfer differentiated automotive innovations into new markets where they solve meaningful customer challenges. Our patented solutions combine conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement during robotic surgical procedures. We are actively commercializing ThermAffyx and expect initial sales in the third quarter. We are encouraged by the strong market interest, and as adoption grows, we believe ThermAffyx has the potential to establish a new standard of care, while further validating the scalability of our technology platforms. In addition, on July 1, we completed the strategic acquisition of Innovative Medical Equipment. IME is the provider of the ThermaZone therapy device, which is a non-opioid thermal therapy solution designed to support pain management and recovery through controlled hot and cold therapy utilizing thermoelectric devices. It is a great example of a strategic, disciplined bolt-on acquisition that accelerates our strategy. This acquisition builds upon our market-leading capabilities in thermal management, while expanding our patient product portfolio. IME has a strong growth trajectory and broad reach into Veterans Administration hospitals and clinics, enabling attractive cross-selling opportunities of our combined thermal management portfolio. Please turn to Slide 4, where I will discuss some of our second quarter highlights. The Gentherm team delivered a solid second quarter, reflecting the consistent execution of our strategy and reinforcing our confidence in the path we are on. We secured approximately $690 million in Automotive New Business Awards during the quarter, bringing our year-to-date total to more than $1 billion. These awards were in line with our expectations and reflect continued customer demand for our differentiated technologies. Just as important, our pursuit pipeline remains healthy, giving us confidence that 2026 will be another robust year for new business awards. Product revenue reached a quarterly record of $416 million, driven by Automotive Climate and Comfort Solutions growth that continued to outpace underlying light vehicle production. This performance exceeded our expectations and demonstrates the value we continue to create through differentiated technologies and disciplined commercial execution. Operationally, we continued to build momentum in the second quarter. Our initiatives to improve labor efficiency, equipment utilization and inventory management are delivering measurable results, while the operating system we are implementing is driving greater rigor, consistency and accountability across the organization. These improvements are strengthening our foundation to expand margins, positioning us to deliver higher cash flow conversion over time. Overall, we are executing well across the business. We are winning with customers, improving the quality of our operations and investing in the capabilities that will support profitable growth. Moving to Slide 5. As we approach the close of our combination with Modine Performance Technologies, I am increasingly confident in the strategic value this transaction will create. Together, we are building a fundamentally stronger company, one with greater scale, broader capabilities and a more diversified portfolio positioned to deliver sustainable long-term growth. This combination transforms Gentherm into a global leader in thermal and precision flow management solutions. By bringing together two highly complementary businesses, we significantly expand our product portfolio of mission-critical technologies, strengthen our innovation capabilities and create a platform with greater opportunities to serve our customers across a broader range of applications. Equally important, this transaction meaningfully diversifies our end market exposure. Our light vehicle mix will decrease from approximately 97% today to roughly 63%, while expanding our presence in attractive growing markets such as commercial vehicle, off-highway and power generation. This creates a more balanced business with multiple growth engines. The combined company will have a clear path to exceed $3.5 billion in revenue by 2030 with an attractive financial profile, supported by margin expansion, robust cash flow generation and disciplined capital allocation. Together, these strengths position us to invest in future growth, realize the benefits of the combination and create long-term value for our shareholders. I am excited about what lies ahead. The strategic rationale for this combination is compelling. Our integration planning is progressing well, and we believe the combined company will be better positioned than ever to deliver differentiated solutions for customers and superior returns for shareholders. I will now hand it over to Jon to discuss an update on our integration activities and highlights for the quarter.
Thanks, Bill. Now turning to Slide 6. Since our last update, we have continued to work closely with the Modine team and have made significant progress towards the closing of the merger. Our primary focus is to ensure Performance Technologies can operate as a stand-alone division of Gentherm on day one and that we are positioned to deliver on value creation opportunities. Based on progress to date, we expect closing of the transaction to occur early in the fourth quarter, as we have completed many key sign-to-close deliverables and expect to close out the remaining items in the coming months. As Bill noted, we remain excited about the combined business, and we'll continue to keep you updated as we approach closing. Please turn to Slide 7 for a review of the second quarter financials. Revenue of $416 million was up 11% compared to the same period last year. Revenues, excluding foreign currency translation, increased 9.5%, exceeding our expectations, driven by higher automotive volumes. Automotive Climate and Comfort Solutions revenue increased 14.1% year-over-year or 12.7% ex-FX and included strong outperformance across all regions and product categories. From a product perspective, Lumbar and Massage Comfort Solutions delivered another strong quarter of revenue growth at 38% year-over-year. Geographically, China performed well once again with trends from recent quarters continuing, including production increases from domestic Chinese OEM program launches and higher take rates from global OEM customers. Turning to profitability. We delivered $48.8 million of adjusted EBITDA or 11.7% of sales compared to 12.2% in the second quarter of last year. Strong operating leverage and benefits from operational excellence initiatives were offset by anticipated headwinds related to inflation recovery timing and planned footprint-related inventory reductions as well as warranty accruals in both our automotive and medical businesses. On a reported GAAP basis, diluted earnings per share were $0.14 in the quarter. This was impacted by approximately $0.55 per share related to merger and restructuring expenses. Adjusted diluted earnings per share were $0.75, up 39% compared to $0.54 per share in the second quarter of last year. Adjusted free cash flow was approximately $16 million year-to-date, in line with our expectations and historical seasonality, while CapEx was $14 million, down $9.5 million compared to the prior year as we continue to scrutinize spend. Moving to the balance sheet. We ended Q2 with net leverage of 0.3 turns, and we had liquidity of $502 million. Please turn to Slide 8, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies. Given our strong first half performance and second half revenue visibility, we are raising our 2026 full year guidance for revenue, adjusted EBITDA and adjusted free cash flow. At the midpoint, we expect revenue of $1.6 billion, representing roughly 5% growth for the year compared with a decline in light vehicle production forecast of approximately 3%, positioning us to deliver mid- to high single-digit revenue growth over market. We expect adjusted EBITDA to be in the range of $185 million to $200 million, implying a midpoint margin of approximately 12%. As previously discussed, we expect margins to remain lower in the third quarter before rebounding in Q4. Turning to cash. We estimate adjusted free cash flow between $85 million and $100 million, with CapEx in the range of $45 million to $55 million or approximately 3% of sales. Overall, we delivered strong first half results and are pleased to raise guidance for the full year. Our recent trends indicate that Gentherm is at an inflection point for growth. We will continue to execute with discipline, while remaining focused on strategic actions to drive long-term value. Now let's turn to Slide 9. Before turning it back to Bill, I'd like to reinforce our financial flexibility and strength, which supports a disciplined and balanced approach to capital deployment. In the quarter, we secured $800 million of committed financing through the combination of a $550 million five-year revolving credit facility and a $250 million term loan that supports the Modine transaction. Upon closing, we expect our net leverage ratio to be approximately one turn, providing ample liquidity to deliver on our strategy. Our target is to maintain a net leverage ratio of 1x to 1.5x over time. In addition, we expect that the combined Gentherm and Modine business will generate significant cash flow in the coming years. Based on the forecast supporting our 2030 financial targets, we would expect to generate over $1 billion of cumulative unlevered free cash flow through 2030. We believe we have the necessary capacity to execute the Modine merger, support the combined business and efficiently deploy capital to drive shareholder returns. As we think about priorities, first, we will invest organically with a focus on return-driven investments that will drive profitable growth or expand margins. We recently demonstrated this capability through our successful entry into the home and office market as well as the upcoming launch of ThermAffyx. Second, we remain committed to returning capital to shareholders through repurchases, particularly in times of value dislocation. Earlier today, we announced a new stock repurchase authorization of up to $400 million over three years. This authorization, which is nearly three times our previous program, reflects our confidence in the cash generation of the combined company and provides additional capacity to opportunistically return capital to shareholders. It is our current expectation that we will be repurchasing shares upon the closing of the Modine transaction. Lastly, we believe that M&A will serve an important role for the company in achieving our strategic growth priorities. We continue cultivating a wide range of opportunities that are aligned with our core technology platforms and attractive growth markets outside of light vehicle. While at the low end of our targeted range, our recent acquisition of IME is a great example. From a strategic perspective, IME brings highly complementary products, technology and commercial channels as well as needed scale to Gentherm's medical business. IME also brings an attractive financial profile with projected 2026 full year revenue of approximately $17 million and 20% EBITDA margins. As part of Gentherm, we believe that IME can double its revenue and reach at least high teens ROIC by 2030 with returns covering cost of capital by year two. Moving forward, we will continue to target M&A opportunities that are strategically and financially compelling as a lever to accelerate our strategy and enhance returns. In summary, the combination of a strong balance sheet, significant free cash flow generation and a disciplined approach to capital deployment positions Gentherm to simultaneously invest for growth and return capital to shareholders, all while continuing to operate in a comfortable leverage framework. We believe this ultimately results in substantial long-term value creation for our shareholders. I'll now hand it back to Bill for some closing remarks.
Thanks, Jon. I am pleased with the progress we have made in the first half of the year and even more excited about the opportunities that lie ahead. We are executing our strategic priorities, improving the performance of our operations and continuing to strengthen the foundation of the business. Every quarter, we make tangible progress that reinforces our confidence in the strategy we have in place. Looking forward, we remain focused on disciplined execution, profitable growth and creating long-term value for our shareholders. With the momentum in our core business, the expansion of our technology into new markets and the transformational combination with Modine Performance Technologies, we are building a fundamentally stronger company, one that is more diversified, more resilient and better positioned to deliver growth, margin expansion and increased cash flow. I am confident that we have the right strategy, the right team and the right capabilities to capitalize on the opportunities ahead and deliver value for our customers, our employees and our shareholders. With that, I will turn the call back to the operator to begin the Q&A session.
分析師問答
Operator instructions were provided. And our first question comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group.
Nice job. Good to see the company stacking good quarters and execution on top of each other here. I want to start with the core auto business. Really nice auto awards in the quarter and outperformance. Curious if there are any key programs or product categories to call out within those auto awards and then how you feel about the RFP and kind of active pipeline that you guys are bidding on right now?
Yes. I would say, Ryan, the awards were pretty well distributed. I wouldn't call any specific region, program or customer that really drove it. So I think the commercial team on the auto side did a really nice job of securing broad wins there. And actually, it was exactly what we expected. If you remember when we talked, there was some conversation around Q1, was that too light? We told you not to worry, we have a good pipeline, and we remain confident in the second half. So it still looks like another robust year for awards.
That's great. Switching to the medical IME acquisition. I don't believe I saw or heard what the purchase price of that was or terms around that. And then, Jon, just to be clear, the 2026, that's a full year $17 million, 20%, right? So assume half of that for the back half?
Yes. The purchase price is $34 million. As we look at the transaction, it's a $17 million revenue business today, pro forma for the year. We expect significant growth as we discussed, the business doubling over the next couple of years. So we really like the growth profile of the business and how it fits internally. Profitability is 20% EBITDA with opportunity to expand from that perspective as well. It will contribute in the second half of the year as contemplated in our guidance, and we think it's a good fit for where the medical business is and what it needs to scale and grow.
And then as it relates to ThermAffyx, the commercial launch underway, any early demand metrics, indications, anything you can share about what you've seen thus far from the market for that product? And then I know you mentioned complementary sales channel distribution, but does IME add anything from a revenue synergy potential whether it's sales distribution or customers or anything that could accelerate what you previously expected from ThermAffyx and your core medical business?
On the ThermAffyx side, as I said before, the 510(k) clearance is secured. We are now producing and are in the clinical trial period. We are getting ready to ship to over 50 hospitals as part of those clinical trials. Demand looks strong. Customers are excited about the product and the problems it solves. So we're very optimistic. Regarding IME, it does hot-cold therapy utilizing thermoelectric devices, which is core to how our business was born and aligns closely with our capabilities. IME serves over 200 Veterans Administration hospitals and clinics, and they have almost no channel access to where we are today. Conversely, we serve hospitals through select partnerships, distributors and GPOs, and we have no access to the Veterans Administration today. So there's a very strong cross-selling opportunity between those markets.
That's great. Nice work, guys. And it appears like the Performance Technologies business keeps getting stronger by the day, and that acquisition feels even better as you progress towards close there.
Thank you.
Thanks, Ryan.
And our next question comes from the line of Nathan Jones with Stifel.
I'll start with questions on the auto business. Obviously, you've outperformed your own outperformance targets relative to auto production here with close to double-digit above-market performance in the quarter. And I think you talked about mid- to high-single digit for the full year outperformance, whereas you've been talking about mid-single digits. So just looking for some more color on where in the world that outperformance came from, how sustainable you view that outperformance? And any other information you can give us on where you're beating your own targets in those markets?
If you look at growth, it's relatively broad-based across both products as well as regions from an outperformance perspective. We point to China being really strong based on launches and increased take rates, but it's really broad-based. As we get to the second half of the year, you do run into some tougher comps that are impacting year-over-year growth rates. But we've consistently said that this business can grow mid-single digit over market over time, and we're very confident in the ability to do that based on the visibility that we have as well as industry dynamics in terms of penetration and adoption. We would expect mid-single digits over time. It might not be linear every single year — some years may be higher or lower — but we are confident in the trajectory of the automotive business.
Okay. A second question on the home and office business and the new customer wins there. I think you said these are in North America. I think previous wins have been with manufacturers in China. So it's nice to see it broadening out. Can you talk about the materiality of it, how much it might add to revenue and what the trajectory is there? Any changes in targets by 2028 or estimates of what the TAM is here?
Yes. You're right. The first awards we announced were with KUKA, a China-based manufacturer. The other two that we've now added in North America are very large; they will name publicly before we can name them, but those announcements will come out and they are quite large. The wins with them were more sizable than what we had won with KUKA, which is a result of them pulling more content quicker. KUKA's strategy was to be first to market with Gentherm, and we anticipate that will continue to expand. Overall, we're excited about the home and office market. Latest data from discussions with manufacturers indicate the TAM for us in that market is over $500 million. We're still confident in the $50 million to $100 million by 2028 number, and we see no possibility of not being at least at $50 million.
And our next question comes from the line of Rajat Gupta with JPMorgan Chase.
Congrats on the good execution here. It looks like the full year guide raise was primarily driven by the second quarter performance. I'm curious — is there some conservatism baked into the second half yet? Or are there any reasons that would suggest a slowdown in the organic growth cadence? Anything you can elaborate on would be helpful. And then given the strong start to 2026 and the strong bookings in the first half, would you be willing to update your original 2027 revenue guide at all? I have a follow-up.
In terms of the 2027 number, we're not in a position to update that at this point. We feel highly confident that we'll be at the $1.7 billion or higher as we head into 2027. Regarding the second half of 2026, you might consider us conservative. There is certainly a level of uncertainty out there. We do have some runoff businesses that have more of an impact in the second half of the year than the first half in terms of end of program on some product lines. So that's a bit of a headwind. But based on the visibility we have, we're comfortable with where the midpoint guidance is at this point.
Understood. That's helpful. And then on the acquisition due to close soon, as you've done more work and learned more about the business behind the scenes, any update on what the cross-sell opportunities or synergy opportunities might be on the commercial side that you may have learned or that has come up in recent months? Has that pipeline grown as you've learned more about the opportunity?
We've become increasingly confident in our ability to capture the $100 million-plus that we discussed by 2030 in cross-selling. It goes back to the three pillars we discussed: cross-selling into other markets, opening up the India region where we currently have limited presence, and product development and integration between the two companies. Very confident in the $100 million-plus number. As we've discussed before, over half of that will come from the valves business, which we find very attractive.
And our next question comes from the line of Glenn Chin with Seaport Research Partners.
Congrats on the IME acquisition. Interesting that it's thermoelectric based. As you mentioned, that's the technology Gentherm was born from. Is that to say it's predicated upon the Peltier effect, basically the use of electric current to create cooling and heating?
That is correct. It is based on the Peltier effect, and the thermoelectric device either heats or cools the fluid that is flowed through the ThermaZone device.
Okay. Is that to say this could have been developed in-house then?
Certainly the core technology exists in-house. We still have thermoelectric devices that we use for active heating and cooling. IME is a very strong fit for our core technology and patient thermal management and we're excited about the cross-selling and providing IME with access to our channels.
It seems like there are a lot of competitor devices. Are these competitor devices competitive?
Certainly they are competitive. IME has shown a strong growth trajectory and very strong market adoption. What's really interesting about this technology is it offers pain management without opioids. That's the key benefit of the device, and it provides a real advantage in the market. We see a lot of potential and a strong growth trajectory, and we're excited to bring this into our existing channels.
Okay. Very good. And then just a question on the margin performance. You cited higher warranty accruals in both automotive and medical. Is that due to higher incident rates? Is it something we need to be baking in going forward?
We called that out because we did not want it to mask the operational progress we are making. On the auto side, when we started setting up our key performance indicators and tracking things as a percentage of sales, we observed trends in one product line that led us to make mechanical robustness improvements late last year. In the first half, we saw increased claims related to that product with a specific customer. We made the decision, based on the robustness improvements and the observed trends, to take the accrual to get in front of it. This is a specific product issue tied to a specific customer, and we do not view this as a continuing run rate.
Thank you. This concludes our question-and-answer session as well as today's teleconference. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful rest of your day.