Gentherm Inc THRM

Gentherm reported a record product revenue of $416 million in Q2 FY26, an 11% increase year-over-year, driven by strong automotive volumes. This performance exceeded expectations, leading the company to raise its full-year 2026 guidance for revenue to $1.6 billion, adjusted EBITDA to $185 million-$200 million, and adjusted free cash flow to $85 million-$100 million. The updated guidance reflects confidence in the company's operational discipline and commercial execution, despite anticipated lower margins in Q3 before a Q4 rebound.

The strategic combination with Modine Performance Technologies is progressing well, with closing expected in early Q4 FY26. This transaction is anticipated to transform Gentherm into a global leader in thermal and precision flow management, significantly diversifying its end market exposure by reducing light vehicle mix from 97% to approximately 63%. The combined entity is projected to exceed $3.5 billion in revenue by 2030 and generate over $1 billion in cumulative unlevered free cash flow through 2030, with confidence in achieving over $100 million in cross-selling synergies by 2030.

Gentherm is successfully leveraging its core technologies beyond automotive. In the home and office market, the company secured two new North American furniture brands, adding to its five new customers in less than a year, with visibility to $50 million-$100 million in revenue by 2028. In the medical market, Gentherm received FDA 510(k) clearance for ThermaFix, an innovative patient warming solution, and completed the strategic acquisition of Innovative Medical Equipment (IME) for $34 million. IME, a provider of non-opioid thermal therapy, is projected to generate $17 million in revenue with 20% EBITDA margins in FY26 and is expected to double its revenue in the next couple of years.

The core automotive business continues to demonstrate strong performance, with automotive climate and comfort solutions revenue increasing 14.1% year-over-year, outpacing underlying light vehicle production. The company secured approximately $690 million in new business awards during the quarter, bringing the year-to-date total to over $1 billion. This outperformance is broad-based across products and regions, with China showing particular strength due to OEM program launches and higher take rates, reinforcing confidence in mid-single-digit growth over market long-term.

Gentherm is focused on operational excellence initiatives, including improving labor efficiency, equipment utilization, and inventory management, which are delivering measurable results and strengthening the foundation for margin expansion and higher cash flow conversion. The company maintains financial flexibility with $502 million in liquidity and a net leverage of 0.3x. A new $400 million stock repurchase authorization over three years was announced, reflecting confidence in cash generation and a commitment to returning capital to shareholders, particularly post-Modine transaction close.