Gentherm Inc

Greetings. Welcome to the Gen Therm third quarter 2026 earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Gregory Blanchette, Senior Director in Investor Relations. Thank you, Greg. 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 security 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 JANFIRM'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 gap financial measures that are included in our earnings release and investor presentation. On the call with me today are Bill Presley, President and Chief Executive Officer, and John Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we made available on the investor section of GenThern's website. After the prepared remarks, we'd be pleased to take your questions. Now, I'd like to turn the call over to Bill.

Thank you, Greg. Good morning, everyone. Let's begin on slide three. When John and I joined Gen Therm in January of 2025, we made it an imperative to diversify the business and to capitalize on Gen Therm's capabilities to further expand into new markets. October 1st marked a defining milestone in Gen Therm's evolution. We have emerged as a fundamentally different company, a global leader in innovative thermal and precision flow management technologies with a more diversified portfolio, incremental secular growth drivers, Enhanced margin expansion opportunities and stronger cash generation. There are three key takeaways I want to highlight. First, our expanded end market exposure creates a more resilient business. We retain our leadership position in automotive while adding meaningful exposure to attractive growth markets, including power generation, commercial vehicles, and heavy-duty equipment. The broader exposure provides greater diversification, expands our addressable markets, and creates additional avenues for sustainable, profitable growth. Second, the combination creates complementary thermal and precision flow management platforms. Modine's mission-critical heat exchanger technologies optimize equipment performance across multiple industries by combining heat exchangers, valves, fans, and our complimentary thermal management expertise, we can develop integrated solutions for emerging applications and expand beyond the products we offer today as individual businesses. As an example, in a liquid-cooled energy storage system, the battery coolant loop passes through a plate heat exchanger to transfer heat to the external environment. Fans blow air over the exchangers to dissipate heat, while valves adjust coolant flow to the exchanger and control system pressure. This integrated setup ensures the energy storage system stays within its safe operating temperature window, maximizing lifecycle and efficiency. We are not simply adding products and markets. We are expanding our ability to solve more complex customer problems and capture a broader range of growth opportunities. Third, we have a clear path to delivering a significant strategic and financial value. We have the capabilities, commercial opportunities, and operational improvement levers to build a business generating more than $3.5 billion in revenue and over $500 million in adjustable EBITDA by 2030, with more than $1 billion in adjusted, unlevered free cash flow over the next four years. We remain confident in delivering 25 million in cost energies as previously communicated. However, we are most excited about the significant commercial opportunities ahead of us. As stated in the past, India represents an attractive growth opportunity for Gentherm, with annual production of nearly 5 million light vehicles and more than 20 million two-wheelers. Over the past year, Gentherm has engaged heavily with customers to enter the region, and we have received consistent feedback. Gen Therm needs a footprint in India. Modine's established presence in the country has already unlocked a new Gen Therm business award for air moving devices representing approximately 25 million in lifetime revenue with one of India's major light vehicle manufacturers and shipments are expected to begin in the fourth quarter of 2027. This early proof point reinforces our thesis that establishing a local presence creates greater commercial access in India where demand for climate controlled seating is growing and the addressable market for valves is significant. We are also adopting some of the operating disciplines that have delivered results at Modine. The Modine team has used the 80-20 philosophy to drive meaningful operational and financial improvements. We are in the early stages of deploying that approach across GenTherm with a focus on prioritization and financial returns. I will close by emphasizing one point. GenTherm is proud of its heritage and confident in the future of its automotive business. However, we have proven we are more than automotive with recent launches in home and office and medical. We are not just an automotive seat component supplier looking for adjacent markets. Together with Modine, we are a fundamentally different company with a more diversified business, a stronger platform for growth, and clear opportunities to create significant long-term shareholder value. Please turn to slide four for an update on our business and several key performance highlights. Let me start with the operating environment. Industry light vehicle production volumes were down year over year, but demand for our products remained relatively stable throughout the quarter. At the same time, macroeconomic and geopolitical developments continue to drive increased uncertainty and volatility. We are also managing additional margin pressures from material cost inflation, including freight. Our teams are addressing these headwinds through disciplined commercial actions and focused operational execution. We remain committed to protecting profitability while positioning the business for sustainable growth. Our core automotive business continues to deliver growth over market across all regions and product categories, reinforcing our confidence in the business and the strength of our customer relationships. We secured 555 million in automotive new business awards during the quarter, bringing our year to date total to more than 1.6 billion. We remain on track to secure at least 2 billion in awards for the fourth consecutive year. This continued commercial momentum Thanks for joining us. that expand their access to customers through a differentiated commercial model. This approach allows us to reach additional customers more efficiently and convert opportunities that may not have been previously serviceable. Wins like this reinforce our confidence in the opportunity to build a $100 million home and office business by 2028. Turning to medical, we made important progress on both product innovation and commercial expansion. Following FDA clearance, we successfully launched the Thermafix patient safety system with initial sales beginning in the third quarter. This is another demonstration of our ability to leverage proven automotive technologies and intellectual property and apply them in new markets. We've also completed the strategic acquisition of innovative medical equipment, the provider of the Thermazon thermal therapy device. This acquisition expands our patient thermal management portfolio and extends our commercial reach into the Veterans Administration healthcare system. IME is performing well, and the Gen Therm team is focused on opening channels to cross-sell our complementary thermal management solutions across the combined customer base. Together, the Thermafix launch and the IME acquisition directly advanced two of our key medical priorities, refreshing and expanding our product portfolio, and broadening our commercial channels. Both actions demonstrate how we are translating our strategy into tangible outcomes. Stepping back, the message is straightforward. Our teams are delivering across the priorities that matter most. We are securing profitable new business to grow above market and automotive, expanding into new markets, refreshing our product portfolio, broadening our commercial reach and improving operational execution.