Overview of Gentherm’s Financial Performance

Gentherm, a leading global provider of innovative thermal management technologies, has reported its financial results for the three and nine months ended September 30, 2025. The company’s product revenues increased 4.1% and 1.1% for the three and nine month periods respectively, compared to the same periods in 2024. This growth was driven by favorable automotive volumes and foreign currency impacts, partially offset by unfavorable pricing and currency headwinds.

Gross margin for the three months ended September 30, 2025 was 24.6%, compared to 25.5% in the prior year period. For the nine months, gross margin was 24.3% compared to 25.4% in the prior year. The decrease in gross margin was primarily due to higher automotive volumes, unfavorable foreign currency impacts, higher quality costs and labor expenses, partially offset by material purchasing savings.

Operating income for the three months ended September 30, 2025 was $23.9 million, down from $32.3 million in the prior year period. For the nine months, operating income was $64.9 million compared to $83.4 million in the prior year. The decline in operating income was driven by higher operating expenses, including increased selling, general and administrative costs and restructuring expenses.

Net income for the three months ended September 30, 2025 was $14.9 million, compared to $16.0 million in the prior year period. For the nine months, net income was $15.3 million compared to $49.6 million in the prior year. The decrease in net income was primarily due to the lower operating income, higher income tax expense, and unfavorable foreign currency impacts.

Revenue and Profit Trends

Gentherm’s product revenues increased 4.1% in the third quarter of 2025 compared to the same period in 2024, driven by a 5.4% increase in light vehicle production volumes in the company’s key markets. For the nine month period, product revenues increased 1.1% year-over-year.

The company’s Automotive segment, which accounts for the majority of revenues, saw a 4.3% increase in the third quarter and a 1.2% increase for the nine months. This was led by strong performance in Climate Control Seats, Lumbar and Massage Comfort Solutions, and Climate and Comfort Electronics. However, the Valve Systems and Other Automotive product categories declined.

The Medical segment, which represents a smaller portion of Gentherm’s business, was relatively flat year-over-year for both the three and nine month periods.

Gross margin declined from 25.5% to 24.6% in the third quarter, and from 25.4% to 24.3% for the nine months. This was primarily due to higher automotive volumes, unfavorable foreign currency impacts, and increased quality and labor costs, only partially offset by material purchasing savings.

Operating expenses increased as a percentage of revenues, rising from 16.8% to 18.4% in the third quarter, and from 17.8% to 18.5% for the nine months. This was driven by higher selling, general and administrative costs related to leadership transition, leases, IT, and employee compensation, as well as increased restructuring expenses.

The combination of lower gross margin and higher operating expenses resulted in operating income declining 26.3% in the third quarter and 22.1% for the nine months. Net income decreased 6.4% in the third quarter and 69.2% for the nine months, also impacted by unfavorable foreign currency movements and higher income tax expense.

Strengths and Weaknesses

Strengths:

• Diverse product portfolio spanning climate control, comfort, and electronics solutions for the automotive industry
• Global manufacturing footprint enabling regional production and flexibility
• Strong innovation capabilities and new business awards, indicating continued demand for Gentherm’s technologies
• Solid liquidity position with $154 million in cash and $308 million in available credit

Weaknesses:

• Declining gross margins and operating income due to higher costs, including materials, labor, and foreign exchange impacts
• Increasing operating expenses as a percentage of revenues, particularly in selling, general and administrative areas
• Exposure to macroeconomic and geopolitical risks impacting the automotive industry, such as supply chain disruptions and trade tensions
• Reliance on the automotive industry, which can be cyclical, for the majority of the company’s revenues

Outlook and Future Prospects

Looking ahead, Gentherm faces a mixed outlook. On the positive side, the company secured $745 million in new business awards during the third quarter, indicating continued strong demand for its innovative thermal management solutions. The company also believes it is well-positioned to adapt to industry trends towards increased electrification and a focus on human comfort, health and wellness.

However, Gentherm continues to navigate a challenging macroeconomic and geopolitical environment. Global light vehicle production in the company’s key markets is forecasted to increase only 1.9% in 2025, and the company remains exposed to risks such as supply chain disruptions, trade tensions, and volatile foreign exchange rates.

Additionally, Gentherm has undertaken several restructuring initiatives to optimize its manufacturing footprint, which will result in near-term cash costs and capital expenditures. The company estimates it will incur between $10-13 million in cash restructuring costs and $4-7 million in related capital expenditures over the next 12-18 months.

Despite these headwinds, Gentherm believes its strong liquidity position, global manufacturing capabilities, and innovative product portfolio position it well to navigate the current environment. The company remains focused on driving operational efficiencies, managing costs, and capitalizing on emerging industry trends to deliver long-term value for shareholders.

In summary, Gentherm delivered mixed financial results in the first nine months of 2025, with revenue growth offset by margin pressures and higher expenses. The company faces a challenging macroeconomic backdrop but is taking actions to optimize its operations and position itself for future success. Investors will be watching closely to see if Gentherm can leverage its strengths to overcome the current headwinds and deliver improved profitability going forward.