Q1 2026 Gentherm Inc Earnings Call

April 23, 2026

Operator: Greetings, and welcome to the Gentherm Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gregory Blanchette, Senior Director, Investor Relations. Thank you. You may begin.

Speaker #2: Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Gregory Blanchette, Senior Director, Investor Relations.

Speaker #2: Thank you. You may begin.

Speaker #3: Thank you. And good morning, everyone. 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.

Gregory Blanchette: Thank you, and good morning, everyone. 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.

Speaker #3: 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.

Gregory Blanchette: 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 in 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Gregory Blanchette: During the call, we will also discuss non-GAAP financial measures as defined by SEC Regulation G.

Gregory Blanchette: 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, Chief Executive Officer, and Jon Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we've made available on the Investor section of Gentherm'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.

Gregory Blanchette: 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, Chief Executive Officer, and Jonathan Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we've made available on the investor section of Gentherm'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.

Speaker #3: On the call with me today are Bill Pressley, President and Chief Executive Officer; and John Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we've made available on the Investor section of Gentherm's website.

Speaker #3: After the prepared remarks, we'd be pleased to take your questions. Now, I'd like to turn the call over to Bill.

Speaker #4: Thank you, Greg, and good morning, everyone. Let's begin on slide three. I want to start by saying that the Gentherm team demonstrated strong execution in the first quarter.

Bill Presley: Thank you, Greg, and good morning, everyone. Let's begin on slide three. I want to start by saying that the Gentherm team demonstrated strong execution in Q1. Over the last year, we've spent a lot of time improving our operating system. We've been focused on fundamentals that are core to operating in an efficient, consistent manner in all aspects of the business. I visited Gentherm sites in multiple countries over the last three months and was able to observe changes in how we operate all locations versus last year. The teams are engaged in targeted actions for growth in new markets. Factory floor space occupation and efficiency are increasing, and the teams are adopting tools we've put in place to drive financial rigor. I was pleased to see these efforts starting to produce tangible results in Q1.

Speaker #4: Over the last year, we've spent a lot of time improving our operating system. We've been focused on fundamentals that are core to operating in an efficient, consistent manner in all aspects of the business.

Speaker #4: I visited Gentherm sites in multiple countries over the last three months and was able to observe changes in how we operate all locations versus last year.

Bill Presley: I visited Gentherm sites in multiple countries over the last three months and was able to observe changes in how we operate all locations versus last year. The teams are engaged in targeted actions for growth in new markets. Factory floor space occupation and efficiency are increasing, and the teams are adopting tools we've put in place to drive financial rigor. I was pleased to see these efforts starting to produce tangible results in the quarter.

Speaker #4: The teams are engaged, in targeted actions for growth in new markets, factory floor space occupation and efficiency are increasing, and the teams are adopting tools we've put in place to drive financial rigor.

Speaker #4: I was pleased to see these efforts starting to produce tangible results in the quarter. The first quarter also demonstrated our ability to execute in a dynamic environment, and we are confident in our ability to continually improve our operations.

Bill Presley: Q1 also demonstrated our ability to execute in a dynamic environment, and we are confident in our ability to continually improve our operations. After spending a year with the team, putting tools and processes in place, we concluded that realigning our operating model and structure would drive increased speed and transparency across the organization. Therefore, during the quarter, we initiated an organizational realignment that reduced spans and layers to increase agility and provide a concentrated focus on internal improvements, as well as the ability to accelerate our growth platforms. This realignment positions us well to deliver key financial and operational priorities going forward. Strategically, Q1 marked an inflection point in our journey to transform Gentherm. We took action to position the company for sustainable, profitable growth with our announcement to combine with Modine Performance Technologies.

Speaker #4: After spending a year with the team putting tools and processes in place, we concluded that realigning our operating model and structure would drive increased speed and transparency across the organization; therefore, during the quarter, we initiated an organizational realignment that reduced spans and layers to increase agility, and provides a concentrated focus on internal improvements as well as the ability to accelerate our growth platforms.

Bill Presley: Therefore, during the quarter, we initiated an organizational realignment that reduced spans and layers to increase agility and provide a concentrated focus on internal improvements, as well as the ability to accelerate our growth platforms. This realignment positions us well to deliver key financial and operational priorities going forward. Strategically, Q1 marked an inflection point in our journey to transform Gentherm. We took action to position the company for sustainable, profitable growth with our announcement to combine with Modine Performance Technologies.

Speaker #4: This realignment positions us well to deliver key financial and operational priorities going forward. Strategically, this quarter marked an inflection point in our journey to transform Gentherm.

Speaker #4: We took action to position the company for sustainable, profitable growth with our announcement to combine with Modine Performance Technologies. This transaction transforms the company with an expanded product portfolio and broader end-market exposure.

Bill Presley: This transaction transforms the company with an expanded product portfolio and broader end market exposure. We continue to execute our priorities and strategy even though the environment around us remains dynamic. Since our prior earnings call, the macro and geopolitical environment has changed significantly and is creating an increased level of economic uncertainty. Despite these recent events and other macro issues over the last year, light vehicle production schedules have remained relatively stable, which has allowed us to focus on operational improvements. We continue to assess key data inputs, including dealer inventory levels and customer schedules, as well as collaborating directly with our customers to get real-time insights on future demand. That said, headwinds are beginning to emerge across the globe. These include direct cost increases in logistics due to lane disruptions and fuel surcharges, as well as cost increases of petrochemicals used in raw materials.

Speaker #4: We continue to execute our priorities and strategy even though the environment around us remains dynamic. Since our prior earnings call, the macro and geopolitical environment has changed significantly and is creating an increased level of economic uncertainty.

Speaker #4: Despite these recent events and other macro issues over the last year, light vehicle production schedules have remained relatively stable which has allowed us to focus on operational improvements.

Bill Presley: Despite these recent events and other macro issues over the last year, light vehicle production schedules have remained relatively stable, which has allowed us to focus on operational improvements. We continue to assess key data inputs, including dealer inventory levels and customer schedules, as well as collaborating directly with our customers to get real-time insights on future demand. That said, headwinds are beginning to emerge across the globe. These include direct cost increases in logistics due to lane disruptions and fuel surcharges, as well as cost increases of petrochemicals used in raw materials.

Speaker #4: We continue to assess key data inputs, including dealer inventory levels and customer schedules, as well as collaborating directly with our customers to get real-time insights on future demand.

Speaker #4: That said, headwinds are beginning to emerge across the globe. These include direct cost increases in logistics, due to lane disruptions and fuel surcharges, as well as cost increases of petrochemicals used in raw materials.

Speaker #4: In addition, we are now starting to see cost inflation flow through to other materials which are being indirectly impacted due to increases in processing-related costs.

Bill Presley: In addition, we are now starting to see cost inflation flow through to other materials, which are being indirectly impacted due to increases in processing-related costs. We continue to monitor developments in real time, and we are working closely with our suppliers and customers on a variety of mitigation strategies. We are preparing to implement pass-through or reimbursement mechanisms on applicable costs. We have actions ready to execute both commercially and operationally. We will remain agile, and we are confident in our ability to navigate through volatility and uncertainty. Now please turn to slide four, where I will discuss some of our Q1 highlights. The Q1 financial results were above our expectations. We secured $395 million of automotive new business awards, which were well-balanced across region, customer, and product. The pursuit pipeline looks robust for the remainder of the year.

Speaker #4: We continue to monitor developments in real time, and we are working closely with our suppliers and customers on a variety of mitigation strategies. We are preparing to implement pass-through or reimbursement mechanisms on applicable costs.

Speaker #4: We have actions ready to execute both commercially and operationally. We will remain agile and we are confident in our ability to navigate through volatility and uncertainty.

Bill Presley: We have actions ready to execute both commercially and operationally. We will remain agile, and we are confident in our ability to navigate through volatility and uncertainty. Now please turn to slide four, where I will discuss some of our Q1 highlights. The Q1 financial results were above our expectations. We secured $395 million of automotive new business awards, which were well-balanced across region, customer, and product. The pursuit pipeline looks robust for the remainder of the year.

Speaker #4: Now, please turn to slide four, where I will discuss some of our first quarter highlights. The first quarter financial results were above our expectations.

Speaker #4: We secured $395 million of automotive new business awards which were well-balanced across region, customer, and product. The pursuit pipeline looks robust for the remainder of the year.

Speaker #4: We made significant progress on our organic growth initiatives, including key announcements with KUKA Home and our new medical product, ThermaFix. Both of which I will discuss further in a few moments.

Bill Presley: We made significant progress on our organic growth initiatives, including key announcements with KUKA Home and our new medical product, ThermAffyx, both of which I will discuss further in a few moments. Our product revenues for the quarter were $394 million, a quarterly record for the company, driven by strong Automotive Climate and Comfort Solutions growth over market. We delivered solid Q1 margin performance driven by continued progress on our operational excellence initiatives. The business systems we put in place are beginning to have a meaningful impact, driving improved execution and expanded margins. As we build on this momentum, we remain confident in our ability to deliver sustained performance improvements over time. Turning to slide 5. One of our top priorities over the last year has been scaling our existing products and technologies with new markets, new applications, and non-traditional customers to deliver strategic, profitable growth.

Speaker #4: Our product revenues for the quarter were $394 million, a quarterly record for the company, driven by strong automotive climate and comfort solutions, growth over market.

Speaker #4: We delivered solid first quarter margin performance driven by continued progress on our operational excellence initiatives. The business systems we put in place are beginning to have a meaningful impact, driving improved execution and expanded margins.

Bill Presley: We delivered solid Q1 margin performance driven by continued progress on our operational excellence initiatives. The business systems we put in place are beginning to have a meaningful impact, driving improved execution and expanded margins. As we build on this momentum, we remain confident in our ability to deliver sustained performance improvements over time. Turning to slide 5. One of our top priorities over the last year has been scaling our existing products and technologies with new markets, new applications, and non-traditional customers to deliver strategic, profitable growth.

Speaker #4: As we build on this momentum, we remain confident in our ability to deliver sustained performance improvements over time. Turning to slide five, one of our top priorities over the last year has been scaling our existing products and technologies with new markets, new applications, and non-traditional customers to deliver strategic profitable growth.

Speaker #4: During the first quarter, we continued to prove the broad applicability of our technology beyond automotive through our achievements in home and office, as well as medical.

Bill Presley: During Q1, we continued to prove the broad applicability of our technology beyond automotive through our achievements in home and office, as well as medical. We officially launched and began supplying production parts to KUKA Home, which is a leading global furniture manufacturer. Since mid-2025, Gentherm played an important role as a collaborative innovation partner with KUKA, which led to co-branding of Enhanced Comfort by Gentherm. The launch this quarter also demonstrates our ability to generate revenue quickly in a home and office market by utilizing our core assets and standard kit methodology to maintain the performance, quality, and consumer experiences established in automotive applications. In March, John and I spent time in China at KUKA headquarters with their CEO and senior leadership team discussing our partnership. There is mutual interest in scaling Gentherm products across additional KUKA home platforms.

Speaker #4: We officially launched and began supplying production parts to KUKA Home which is a leading global furniture manufacturer. Since mid-2025, Gentherm played an important role as a collaborative, innovation partner with KUKA which led to co-branding of enhanced comfort by Gentherm.

Speaker #4: The launch this quarter also demonstrates our ability to generate revenue quickly in home and office market by utilizing our core assets and standard kit methodology to maintain the performance, quality, and consumer experiences established in automotive applications.

Bill Presley: The launch this quarter also demonstrates our ability to generate revenue quickly in a home and office market by utilizing our core assets and standard kit methodology to maintain the performance, quality, and consumer experiences established in automotive applications. In March, John and I spent time in China at KUKA headquarters with their CEO and senior leadership team discussing our partnership. There is mutual interest in scaling Gentherm products across additional KUKA home platforms.

Speaker #4: In March, John and I spent time in China at KUKA headquarters with their CEO and senior leadership team, discussing our partnership. There was mutual interest in scaling Gentherm products across additional KUKA Home platforms.

Speaker #4: Beyond KUKA, our momentum in home and office has accelerated. Earlier this month, we were selected by a leading North American furniture brand to supply our climate and comfort products.

Bill Presley: Beyond KUKA, our momentum in home and office is accelerating. Earlier this month, we were selected by a leading North American furniture brand to supply our climate and comfort products. This marks our fourth consecutive quarter securing a new home and office customer. We anticipate starting production with this customer later this year. Separately, in our medical business, we announced our FDA 510(k) submission for a new, innovative product that is expected to redefine the standard of care for robotic surgeries. Our patented ThermAffyx system combines conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement on the inclined surfaces used during robotic procedures. We have been vocal about the importance of refreshing our product portfolio in the medical segment and believe this innovative new solution will be a key contributor to accelerating our annual revenue.

Speaker #4: This marks our fourth consecutive quarter securing a new home and office customer. We anticipate starting production with this customer later this year. Separately, in our medical business, we announced our FDA 5 to 10K submission for a new, innovative product that is expected to redefine the standard of care for robotic surgeries.

Bill Presley: Separately, in our medical business, we announced our FDA 510(k) submission for a new, innovative product that is expected to redefine the standard of care for robotic surgeries. Our patented ThermAffyx system combines conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement on the inclined surfaces used during robotic procedures. We have been vocal about the importance of refreshing our product portfolio in the medical segment and believe this innovative new solution will be a key contributor to accelerating our annual revenue.

Speaker #4: Our patented ThermaFix system combines conductive, air-free patient warming with securement technology to help prevent both hypothermia and patient movement on the inclined surfaces used during robotic procedures.

Speaker #4: We have been vocal about the importance of refreshing our product portfolio in the medical segment, and believe this innovative new solution will be a key contributor to accelerating our annual revenue.

Speaker #4: The regulatory approval process remains on track and we expect the ThermaFix system to begin generating revenue later this year. Overall, we remain committed to repositioning the company for growth by taking our technologies outside of light vehicle markets and we achieved several important milestones during the quarter.

Bill Presley: The regulatory approval process remains on track, and we expect the ThermAffyx system to begin generating revenue later this year. Overall, we remain committed to repositioning the company for growth by taking our technologies outside of light vehicle markets, and we achieved several important milestones during the quarter. Let's turn to Slide 6. In January, we took a major step in transforming Gentherm by announcing our agreement to combine with Modine Performance Technologies, creating a market leader in thermal and precision flow management. The more we work with the Modine team, the more excited I get about bringing this business into the Gentherm family. This is a well-run business with a great team. Through our work together, we are learning techniques and processes that Modine used to transform their business, and we intend to harness those lessons for the good of Gentherm.

Speaker #4: Let's turn to slide six. In January, we took a major step in transforming Gentherm by announcing our agreement to combine with Modine Performance Technologies, creating a market leader in thermal and precision flow management.

Bill Presley: Let's turn to Slide 6. In January, we took a major step in transforming Gentherm by announcing our agreement to combine with Modine Performance Technologies, creating a market leader in thermal and precision flow management. The more we work with the Modine team, the more excited I get about bringing this business into the Gentherm family. This is a well-run business with a great team. Through our work together, we are learning techniques and processes that Modine used to transform their business, and we intend to harness those lessons for the good of Gentherm.

Speaker #4: The more we work with the Modine team, the more excited I get about bringing this business into the Gentherm family. This is a well-run business with a great team.

Speaker #4: Through our work together, we are learning techniques and processes that Modine used to transform their business and we intend to harness those lessons for the good of Gentherm.

Speaker #4: We have emphasized the importance of expanding our business beyond the light vehicle segment, and Modine is accelerating our access to critical growth markets including power generation, commercial vehicles, and heavy-duty equipment.

Bill Presley: We have emphasized the importance of expanding our business beyond the light vehicle segment, and Modine is accelerating our access to critical growth markets, including power generation, commercial vehicles, and heavy-duty equipment. This intentional shift in our end market exposure positions us for increased value creation. We are particularly excited about the new product and market opportunities this partnership unlocks and are more confident than ever in our combined growth trajectory. When we map out the next five years as a combined company, we see a clear path to generating $3.5 billion in revenue and more than a half billion of earnings. I will now hand it over to John to discuss an update on the transaction and highlights for the quarter.

Speaker #4: This intentional shift in our end-market exposure positions us for increased value creation. We are particularly excited about the new product and market opportunities this partnership unlocks, and are more confident than ever in our combined growth trajectory.

Bill Presley: We are particularly excited about the new product and market opportunities this partnership unlocks and are more confident than ever in our combined growth trajectory. When we map out the next five years as a combined company, we see a clear path to generating $3.5 billion in revenue and more than a half billion of earnings. I will now hand it over to John to discuss an update on the transaction and highlights for the quarter.

Speaker #4: When we map out the next five years as a combined company, we see a clear path to generating $3.5 billion in revenue and more than half a billion in earnings.

Speaker #4: I will now hand it over to John to discuss an update on the transaction and highlights for the quarter.

Speaker #3: Thanks, Bill. Now, turning to slide seven. Since the announcement, we have been working diligently with the Modine team to define and execute a project plan that ensures a timely, seamless closing of the merger.

Jonathan Douyard: Thanks, Bill. Now turning to slide 7. Since the announcement, we have been working diligently with the Modine team to define and execute a project plan that ensures a timely, seamless closing of the merger. We have established an integration management office comprised of key stakeholders, and in March, we held a kickoff integration summit with business and functional leadership from both teams at our headquarters here in Michigan. Through the summit and ongoing interactions, the teams are focused on ensuring that the business can operate effectively on day one, and that we are well-positioned to deliver on value creation opportunities post-merger. As we talked about at announcement, we intend to operate Modine Performance Technologies as a standalone division of Gentherm, similar to how the business is managed within Modine today.

Jon Douyard: Thanks, Bill. Now turning to slide 7. Since the announcement, we have been working diligently with the Modine team to define and execute a project plan that ensures a timely, seamless closing of the merger. We have established an integration management office comprised of key stakeholders, and in March, we held a kickoff integration summit with business and functional leadership from both teams at our headquarters here in Michigan.

Speaker #3: We have established an integration management office comprised of key stakeholders and in March, we held a kickoff integration summit with business and functional leadership from both teams at our headquarters here in Michigan.

Speaker #3: Through the summit and ongoing interactions, the teams are focused on ensuring that the business can operate effectively on day one, and that we are well positioned to deliver on value creation opportunities post-merger.

Jon Douyard: Through the summit and ongoing interactions, the teams are focused on ensuring that the business can operate effectively on day one, and that we are well-positioned to deliver on value creation opportunities post-merger. As we talked about at announcement, we intend to operate Modine Performance Technologies as a standalone division of Gentherm, similar to how the business is managed within Modine today.

Speaker #3: As we talked about at announcement, we intend to operate Modine Performance Technologies as a standalone division of Gentherm, similar to how the business is managed within Modine today.

Speaker #3: Given this structure, the primary integration areas relate to corporate systems and functional support, not to highly complex integration of facilities or organizations. In terms of other recent transaction highlights, we were pleased to receive HSR clearance to close from the Federal Trade Commission in March, a key regulatory milestone.

Jonathan Douyard: Given this structure, the primary integration areas relate to corporate systems and functional support, not on highly complex integration of facilities or organizations. In terms of other recent transaction highlights, we were pleased to receive HSR clearance to close from the Federal Trade Commission in March, a key regulatory milestone. Our teams continue to prepare for the S-4 filing, and the inputs into that process remain on track. Overall, we still expect this transaction to close later this year and are excited about the potential for the combined business. We will continue to keep you updated as the year progresses. Please turn to slide eight for a review of the Q1 financials. Overall, Q1 results were above expectations as revenue was higher, driven by stronger automotive volumes and outperformance in China.

Jon Douyard: Given this structure, the primary integration areas relate to corporate systems and functional support, not on highly complex integration of facilities or organizations. In terms of other recent transaction highlights, we were pleased to receive HSR clearance to close from the Federal Trade Commission in March, a key regulatory milestone. Our teams continue to prepare for the S-4 filing, and the inputs into that process remain on track. Overall, we still expect this transaction to close later this year and are excited about the potential for the combined business. We will continue to keep you updated as the year progresses.

Speaker #3: Our teams continue to prepare for the S4 filing and the inputs into that process remain on track. Overall, we still expect this transaction to close later this year and are excited about the potential for the combined business.

Speaker #3: We will continue to keep you updated as the year progresses. Please turn to slide eight for a review of the first quarter financials. Overall, first quarter results were above expectations as revenue was higher driven by stronger automotive volumes and outperformance in China.

Jon Douyard: Please turn to slide eight for a review of the Q1 financials. Overall, Q1 results were above expectations as revenue was higher, driven by stronger automotive volumes and outperformance in China. Revenue of $394 million was up 11.3% compared to the same period last year. Revenues excluding foreign currency translation increased 7.2%.

Speaker #3: Revenue of $394 million was up 11.3% compared to the same period last year. Revenue is excluding foreign currency translation increased 7.2%. Automotive climate and comfort solutions revenue increased 13.6% year over year or 9.8% XFX as we continue to see strong growth over market across all regions and product categories.

Jonathan Douyard: Revenue of $394 million was up 11.3% compared to the same period last year. Revenues excluding foreign currency translation increased 7.2%. Automotive Climate and Comfort Solutions revenue increased 13.6% year-over-year, or 9.8% ex FX, as we continue to see strong growth over market across all regions and product categories. We had particularly strong performance in China during the quarter, driven by the ramp-up of production on new program launches with domestic Chinese OEMs. This comes as a result of our intentional focus to shift revenue mix and better represent the local market. In addition, we saw increased take rates in China from global OEM customers as they look to remain competitive in the market. From an automotive product perspective, it was another strong quarter of revenue growth for our lumbar and massage comfort solutions, which grew 33% year-over-year.

Jon Douyard: Automotive Climate and Comfort Solutions revenue increased 13.6% year-over-year, or 9.8% ex FX, as we continue to see strong growth over market across all regions and product categories. We had particularly strong performance in China during the quarter, driven by the ramp-up of production on new program launches with domestic Chinese OEMs. This comes as a result of our intentional focus to shift revenue mix and better represent the local market. In addition, we saw increased take rates in China from global OEM customers as they look to remain competitive in the market.

Speaker #3: We had particularly strong performance in China during the quarter, driven by the ramp-up of production on new program launches with domestic Chinese OEMs. This comes as a result of our intentional focus to shift revenue mix and better represent the local market.

Speaker #3: In addition, we saw increased take rates in China from global OEM customers as they look to remain competitive in the market. From an automotive product perspective, it was another strong quarter of revenue growth for our lumbar and massage comfort solutions, which grew 33% year over year.

Jon Douyard: From an automotive product perspective, it was another strong quarter of revenue growth for our lumbar and massage comfort solutions, which grew 33% year-over-year. As we have discussed in the past, we expect to see the strong growth trend continue in this product into the future as we continue to launch previously won programs.

Speaker #3: As we have discussed in the past, we expect to see the strong growth trend continue in this product into the future as we continue to launch previously won programs.

Jonathan Douyard: As we have discussed in the past, we expect to see the strong growth trend continue in this product into the future as we continue to launch previously won programs. Turning to profitability, we delivered $49.3 million in adjusted EBITDA, or 12.5% of sales, compared to 11.1% of sales in Q1 of last year. The 140 basis point increase was primarily driven by operating leverage and strong net material performance, partially offset by annual price reductions and higher labor costs. On a reported GAAP basis, diluted earnings per share were $0.14 in Q1. This was impacted by approximately $0.70 per share related to merger and restructuring expenses. Adjusted diluted earnings per share were $0.84, up 65%, compared to $0.51 per share in Q1 of last year.

Speaker #3: Turning to profitability, we delivered $49.3 million of adjusted EBITDA, or 12.5% of sales, compared to 11.1% of sales in the first quarter of last year.

Jon Douyard: Turning to profitability, we delivered $49.3 million in adjusted EBITDA, or 12.5% of sales, compared to 11.1% of sales in Q1 of last year. The 140 basis point increase was primarily driven by operating leverage and strong net material performance, partially offset by annual price reductions and higher labor costs. On a reported GAAP basis, diluted earnings per share were $0.14 in Q1. This was impacted by approximately $0.70 per share related to merger and restructuring expenses. Adjusted diluted earnings per share were $0.84, up 65%, compared to $0.51 per share in Q1 of last year.

Speaker #3: The 140-basis-point increase was primarily driven by operating leverage and strong net material performance, partially offset by annual price reductions and higher labor costs.

Speaker #3: On a reported gap basis, diluted earnings per share were 14 cents in the first quarter. This was impacted by approximately 70 cents per share related to merger and restructuring expenses.

Speaker #3: Adjusted diluted earnings per share were 84 cents, up 65% compared to 51 cents per share in the first quarter of last year. Cash flow continues to be a point of emphasis for the company and while we did have a typical seasonal operational cash outflow, the team delivered an $8 million improvement year over year.

Jonathan Douyard: Cash flow continues to be a point of emphasis for the company, and while we did have a typical seasonal operational cash outflow, the team delivered an $8 million improvement year-over-year. Additionally, CapEx purchases of $5.6 million were down $9.2 million year-over-year, as we continue scrutinizing new investments. From a balance sheet perspective, we ended Q1 with net leverage of 0.2 turns, and we have liquidity of $456 million, giving us ample capacity to support our strategic priorities moving forward. Please turn to slide nine, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies. As Bill mentioned in his opening remarks, the operating environment has been dynamic since we introduced guidance in February. Despite the stronger Q1 performance, given the high level of uncertainty in the macro environment, we are maintaining our full year guidance at this time.

Jon Douyard: Cash flow continues to be a point of emphasis for the company, and while we did have a typical seasonal operational cash outflow, the team delivered an $8 million improvement year-over-year. Additionally, CapEx purchases of $5.6 million were down $9.2 million year-over-year, as we continue scrutinizing new investments. From a balance sheet perspective, we ended Q1 with net leverage of 0.2 turns, and we have liquidity of $456 million, giving us ample capacity to support our strategic priorities moving forward.

Speaker #3: Additionally, CAPEX purchases of $5.6 million were down 9.2 million year over year as we continue scrutinizing new investments. From a balance sheet perspective, we ended Q1 with net leverage of 0.2 turns, and we have liquidity of $456 million.

Speaker #3: Giving us ample capacity to support our strategic priorities moving forward. Please turn to slide nine, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies.

Jon Douyard: Please turn to slide nine, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies. As Bill mentioned in his opening remarks, the operating environment has been dynamic since we introduced guidance in February. Despite the stronger Q1 performance, given the high level of uncertainty in the macro environment, we are maintaining our full year guidance at this time.

Speaker #3: As Bill mentioned in his opening remarks, the operating environment has been dynamic since we introduced guidance in February. Despite the stronger first quarter performance, given the high level of uncertainty in the macro environment, we are maintaining our full-year guidance at this time.

Speaker #3: We expect revenue to be between $1.5 billion and $1.6 billion, representing approximately 3% growth for the year, against the recent industry report where our key markets are expected to decrease approximately 2%.

Jonathan Douyard: We expect revenue to be between $1.5 and $1.6 billion, representing approximately 3% growth for the year against a recent industry report where our key markets are expected to decrease approximately 2%, positioning us to deliver mid-single digit revenue growth over market. For adjusted EBITDA, we expect to be in the range of $175 to $195 million, which implies a midpoint adjusted EBITDA margin of approximately 12%. From a quarterly perspective, we expect the revenue profile to be spread fairly even throughout the year. However, we do expect margins to be depressed in Q2 and Q3, and there are a couple of factors driving this. First, building on Bill's earlier comments, inflationary impacts stemming from the current geopolitical environment are expected to drive approximately $20 million in incremental cost during the year, recognizing that this estimate remains fluid and is evolving real time.

Jon Douyard: We expect revenue to be between $1.5 and $1.6 billion, representing approximately 3% growth for the year against a recent industry report where our key markets are expected to decrease approximately 2%, positioning us to deliver mid-single digit revenue growth over market. For adjusted EBITDA, we expect to be in the range of $175 to $195 million, which implies a midpoint adjusted EBITDA margin of approximately 12%.

Speaker #3: Positioning us to deliver mid-single, digit revenue growth over market. For adjusted EBITDA, we expect to be in the range of $175 to $195 million, which implies a midpoint adjusted EBITDA margin of approximately 12%.

Speaker #3: From a quarterly perspective, we expect the revenue profile to be spread fairly even throughout the year. However, we do expect margins to be depressed in the second and third quarter and there are a couple of factors driving this.

Jon Douyard: From a quarterly perspective, we expect the revenue profile to be spread fairly even throughout the year. However, we do expect margins to be depressed in Q2 and Q3, and there are a couple of factors driving this. First, building on Bill's earlier comments, inflationary impacts stemming from the current geopolitical environment are expected to drive approximately $20 million in incremental cost during the year, recognizing that this estimate remains fluid and is evolving real time.

Speaker #3: First, building on Bill's earlier comments, inflationary impacts stemming from the current geopolitical environment are expected to drive approximately $20 million in incremental costs during the year.

Speaker #3: Recognizing that this estimate remains fluid and is a following real time. Although we expect to mitigate a meaningful portion through commercial and operational initiatives, including benefits from the realignment, timing differences between cost realization and recovery are likely to create additional margin pressure.

Jonathan Douyard: Although we expect to mitigate a meaningful portion through commercial and operational initiatives, including benefits from the realignment, timing differences between cost realization and recovery are likely to create additional margin pressure. Additionally, as we work to finalize our global footprint transitions later this year, we will begin depleting our inventory bank builds in Q2, which will have a negative impact to gross margins. Turning to cash, our estimate of adjusted free cash flow remains between $80 and $100 million, with CapEx in the range of $45 to $55 million, or approximately 3% of sales. Overall, we were pleased with our start to the year and are focused on strategic actions to accelerate profitable growth and reinforce operating discipline to drive long-term value. With that, I will hand it back to Bill for some closing remarks.

Jon Douyard: Although we expect to mitigate a meaningful portion through commercial and operational initiatives, including benefits from the realignment, timing differences between cost realization and recovery are likely to create additional margin pressure. Additionally, as we work to finalize our global footprint transitions later this year, we will begin depleting our inventory bank builds in Q2, which will have a negative impact to gross margins.

Speaker #3: Additionally, as we work to finalize our global footprint transitions later this year, we will begin depleting our inventory bank builds in the second quarter, which will have a negative impact to gross margins.

Speaker #3: Turning to cash, our estimate of adjusted free cash flow remains between $80 and $100 million with CAPEX in the range of $45 to $55 million.

Jon Douyard: Turning to cash, our estimate of adjusted free cash flow remains between $80 and $100 million, with CapEx in the range of $45 to $55 million, or approximately 3% of sales. Overall, we were pleased with our start to the year and are focused on strategic actions to accelerate profitable growth and reinforce operating discipline to drive long-term value. With that, I will hand it back to Bill for some closing remarks.

Speaker #3: Or approximately 3% of sales. Overall, we were pleased with our start to the year and are focused on strategic actions to accelerate profitable growth and reinforce operating discipline to drive long-term value.

Speaker #3: With that, I will hand it back to Bill for some closing remarks.

Speaker #4: Thanks, John. Turning to slide 10. I want to outline what we've accomplished, the key priorities today, and how we will evolve. We are on a multi-year journey to deliver sustainable value creation.

Bill Presley: Thanks, John. Turning to slide 10. I want to outline what we've accomplished, the key priorities today, and how we will evolve. We are on a multi-year journey to deliver sustainable value creation. 2025 was reinforcement of the foundation that we will build on going forward. We established our strategic framework to deliver shareholder value, which focuses on profitable growth, operational excellence, and superior financial performance. This drives everything we do. To drive profitable growth, we've simplified and segmented into four technology platforms to clearly define our core competency and identify attractive markets outside of the light vehicle market where our products are applicable. This product and market alignment was a catalyst for reshaping our M&A funnel. We also saw opportunities in the business to operate more efficiently.

Speaker #4: 2025 was a reinforcement of the foundation that we will build on going forward. We established our strategic framework to deliver shareholder value, which focuses on profitable growth, operational excellence, and superior financial performance.

Speaker #4: This drives everything we do to drive profitable growth. We simplified, we segmented into four technology platforms that clearly define our core competency, and identify attractive markets outside of the light vehicle market where our products are applicable.

Bill Presley: To drive profitable growth, we've simplified and segmented into four technology platforms to clearly define our core competency and identify attractive markets outside of the light vehicle market where our products are applicable. This product and market alignment was a catalyst for reshaping our M&A funnel. We also saw opportunities in the business to operate more efficiently.

Speaker #4: This product and market alignment was the catalyst for reshaping our M&A funnel. We also saw opportunities in the business to operate more efficiently. During 2025, we focused on building core components of an operating system through business process standardization and increased utilization of assets to drive margin and cash generation improvements.

Bill Presley: During 2025, we focused on building core components of an operating system through business process standardization and increased utilization of assets to drive margin and cash generation improvements. We started reaping some of the benefits of that stronger operational rigor during Q1 2026. With this foundation now in place, Gentherm is at an inflection point. The addition of Modine Performance Technologies accelerates our transformation. This action is the first step in establishing a product portfolio of mission-critical components across broad end markets. Our shared core competency of precision thermal and flow management allows us to scale into attractive markets together through cross-selling and integration. In addition, our complementary product expertise allows us to gain broader customer insights and provide more integrated solutions that pursue new high-growth opportunities. Gentherm continues to focus on the core business as we are confident in our ability to scale revenue and expand margins.

Speaker #4: We started reaping some of the benefits of that stronger operational rigor during the first quarter of 2026. With this foundation now in place, Gentherm is at an inflection point.

Speaker #4: The addition of Modine Performance Technologies accelerates our transformation. This action is the first step in establishing a product portfolio of mission-critical components across broad-end markets.

Speaker #4: Our shared core competency of precision thermal and flow management allows us to scale into attractive markets together through cross-selling and integration. In addition, our complementary product expertise allows us to gain broader customer insights and provide more integrated solutions to pursue new high-growth opportunities.

Bill Presley: In addition, our complementary product expertise allows us to gain broader customer insights and provide more integrated solutions that pursue new high-growth opportunities. Gentherm continues to focus on the core business as we are confident in our ability to scale revenue and expand margins. We are actively launching products into new markets to deliver profitable growth while realigning the organization to drive speed, efficiency, and accountability.

Speaker #4: Gentherm continues to focus on the core business as we are confident in our ability to scale revenue and expand margins. We are actively launching products into new markets to deliver profitable growth while realigning the organization to drive speed, efficiency, and accountability.

Bill Presley: We are actively launching products into new markets to deliver profitable growth while realigning the organization to drive speed, efficiency, and accountability. As we move into the future, Gentherm will scale into attractive markets while improving profitability and cash flow. We will leverage best practices from Modine Performance Technologies to outperform our peers. Despite the risk we may have in front of us during the months ahead, we are confident we have the right strategic plan established to drive performance improvements in the long run. We have built the foundation, we have a clear vision, and we are focused on execution. We will continue our relentless pursuit of building a more resilient company. We are at the beginning stages of transforming Gentherm into more than an automotive component supplier, where we will grow sustainably with differentiated and scalable technologies.

Speaker #4: As we move into the future, Gentherm will scale into attractive markets while improving profitability and cash flow. And we will leverage best practices from Modine Performance Technologies to outperform our peers.

Bill Presley: As we move into the future, Gentherm will scale into attractive markets while improving profitability and cash flow. We will leverage best practices from Modine Performance Technologies to outperform our peers. Despite the risk we may have in front of us during the months ahead, we are confident we have the right strategic plan established to drive performance improvements in the long run. We have built the foundation, we have a clear vision, and we are focused on execution.

Speaker #4: Despite the risk we may have in front of us during the months ahead, we are confident we have the right strategic plan established to drive performance improvements in the long run.

Speaker #4: We have built the foundation, we have a clear vision, and we are focused on execution. We will continue our relentless pursuit of building a more resilient company.

Bill Presley: We will continue our relentless pursuit of building a more resilient company. We are at the beginning stages of transforming Gentherm into more than an automotive component supplier, where we will grow sustainably with differentiated and scalable technologies. With that, I'll turn the call back to the operator to begin the Q&A session.

Speaker #4: We are at the beginning stages of transforming Gentherm into more than an automotive component supplier. Where we will grow sustainably with differentiated and scalable technologies.

Speaker #4: With that, I'll turn the call back to the operator to begin the Q&A session.

Bill Presley: With that, I'll turn the call back to the operator to begin the Q&A session.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. The first question is from Nathan Jones from Stifel. Please go ahead.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #1: The first question is from Nathan Jones from Stifel. Please go ahead.

Speaker #5: Good morning, everyone.

Nathan Jones: Morning, everyone.

Speaker #4: Good morning, Nathan.

Bill Presley: Morning, Nathan.

Speaker #5: I guess I'll just start off with a question about the $20 million incremental costs you talked about. Can you just maybe provide us a little more color on how much of that passes through contractually to customers versus what you've got to go out and renegotiate?

Nathan Jones: I guess I'll just start off with a question about the $20 million incremental costs you talked about. Can you just maybe provide us a little more color on how much of that passes through contractually to customers versus what you've got to go out and renegotiate versus potentially methods that you can offset that internally? Just any more details you can give us on that.

Speaker #5: Versus potentially methods that you can offset that internally? Just any more details you can give us on that.

Speaker #4: Yeah. Contractually, we're not on a simulator or escalator with any customers. Just because the scale of what we buy in any one product isn't large enough to be meaningful to them.

Bill Presley: Yeah. Contractually, we're not on a de-escalator or escalator with any customers, just because the scale of what we buy in any one product isn't large enough to be meaningful to them. We'll have to go out, Nathan, and we'll have to work through recovery mechanisms with the customers on all of that.

Speaker #4: So we'll have to go out, Nathan, and we'll have to work through recovery mechanisms with the customers on all of that.

Speaker #5: And so you expect the, sorry, the costs will hit pretty much immediately, and it'll take a couple of quarters to catch up with that pricing?

Nathan Jones: You expect the cost-

Bill Presley: Just some perspective though.

Nathan Jones: Sorry, the cost will hit pretty much immediately, and it'll take a couple of quarters to catch up with that pricing?

Speaker #4: Yeah. Timing-wise, we expect the costs to start hitting in Q2. So we think Q2 is going to be a definition of recovery mechanisms with the customers that we agreed to.

Bill Presley: Yeah. Timing-wise, we expect the cost to start hitting in Q2. We think Q2 is going to be a definition of recovery mechanisms with the customers that we agree to, and then it'll just be that timing disconnect where they'll start flowing in Q3, Q4.

Speaker #4: And then there'll just be that timing disconnect where they'll start flowing in Q3, Q4.

Speaker #5: Okay. I guess my second question then. I'm going to ask one about the internal operating structure changes. I think those are kind of important things to highlight.

Nathan Jones: Okay. I guess my second question, then, I'm going to ask one about the internal operating structure changes. I think those are kind of important things to highlight. You talked about reducing spans and layers to increase focus. Can you maybe just provide a little more color on what you're doing there, how you think that catalyzes either whether it's growth, or it's margin expansion, or it's both? Just more color around those changes and how you think they improve the business, please. Thank you.

Speaker #5: You talked about reducing spans and layers. To increase focus, can you maybe just provide a little more color on what you're doing there? How you think that catalyzes either—whether it's growth, or it's margin expansion, or it's both?

Speaker #5: Just more color around those changes and how you think that improves the business, please. Thank you.

Speaker #4: Yep. Absolutely. So it's intended first of all to do a couple of things as we mentioned, and I'll get into some quick detail for you, Nathan.

Bill Presley: Yep, absolutely. It's intended, first of all, to do a couple of things, as we mentioned, and I'll get into some quick detail for you, Nathan. If you remember, John and I both started at the same day last year, right? We took a year to thoughtfully understand the plumbing of the organization and how things were running. One of the big messages we got from the broad organization was there's too many hoops, there's too many barriers, we're not moving fast enough, we're not making decisions fast enough. We went through an organizational realignment, and we realigned it really based on product. We segmented out valves as a business unit. Now we have climate comfort valves and medicals as a business unit within Gentherm Technologies. Over top of that, we'll have a very lean corporate structure.

Speaker #4: If you remember, John and I both started on the same day last year, right? So, we took a year to thoughtfully understand the plumbing of the organization and how things were running.

Speaker #4: And one of the big messages we got from the broad organization was there's too many hoops there's too many barriers. We're not moving fast enough.

Bill Presley: One of the big messages we got from the broad organization was there's too many hoops, there's too many barriers, we're not moving fast enough, we're not making decisions fast enough. We went through an organizational realignment, and we realigned it really based on product. We segmented out valves as a business unit. Now we have climate comfort valves and medicals as a business unit within Gentherm Technologies. Over top of that, we'll have a very lean corporate structure.

Speaker #4: We're not making decisions fast enough. So we went through an organizational realignment and we realigned it really based on product. So we segmented out valves as a business unit.

Speaker #4: So now we have climate comfort valves and medicals as a business unit within Gentherm Technologies. And over top of that, we'll have a very lean corporate structure.

Speaker #4: So that was intended to put focus on high-growth opportunities. That was intended to drive continual improvement on key initiatives. So we're more aligned functionally now as opposed to a complicated matrix across regions.

Bill Presley: That was intended to put focus on high growth opportunities. That was intended to drive continual improvement on key initiatives. We're more aligned functionally now as opposed to a complicated matrix across regions. We do expect that will have cost benefits. It primarily was to segment the business to focus on high growth opportunities, to continue to push the operational improvements, and the sustainability there. For the year, though, annual run rate will be about $10 million-ish better on the OpEx, and we expect half of that to hit this year.

Speaker #4: And we did we do expect that that will have cost benefits. But it primarily was to segment the business, to focus on high-growth opportunities, to continue to push the operational improvements and the sustainability there.

Speaker #4: For the year, though, it will annual run rate will be about $10 million-ish better on the OPEX. And we expect half of that this year.

Speaker #5: Thanks for taking the question. So I'll get back in the queue.

Nathan Jones: Thanks. Second the questions. I'll get back in the queue.

Speaker #4: Thanks, Nathan.

Bill Presley: Thanks, Nathan.

Speaker #1: The next question is from Ryan Sigdahl from Craig Hallam Capital Group. Please go ahead.

Operator: The next question is from Ryan Sigdahl from Craig-Hallum Capital Group. Please go ahead.

Speaker #4: Hey, good morning, Bill, John. I want to start with the yield performance versus light vehicle production. This is as strong as we've seen in many years here.

Ryan Sigdahl: Hey, good morning, Bill, John. I want to start with the outperformance versus light vehicle production. This is as strong as we've seen in many years here, which was nice. Curious, when I look to guidance, so 14-point outperformance in Q1, you're guiding to five points on the year. It implies a pretty meaningful deceleration kind of throughout the rest of the year versus the industry. Curious if you could elaborate on what the outperformance in Q1 was, why that's going to decelerate, anything from a one-time production orders, et cetera, standpoint.

Speaker #4: Which was nice. Curious when I looked at guidance. So 14.0 performance in Q1, your guiding to five points on the year. It implies a pretty meaningful deceleration kind of throughout the rest of the year versus the industry.

Speaker #4: Curious if you could elaborate on what the outperformance in Q1 was, why that's going to decelerate, anything from a one-time production orders, etc., standpoint.

Speaker #6: Yeah. We wouldn't, excuse me, we wouldn't point to anything from a one-time perspective. And we really did see strength across all products, all regions.

Jonathan Douyard: Yeah, we wouldn't point to anything from a one-time perspective, and we really did see strength across all products, all regions. We pointed to China in particular. There was some outperformance there based on some launches that we did in Q4 for some of the domestic OEMs that continued to show strength through Q1. As we look at the balance of the year, we certainly do not expect to outperform in the teens range. We'd expect it to moderate, I think, at the top end of our guidance. It could push into that high single-digit range. But there's nothing specific to point to in terms of Q1 outperformance other than really just broad growth across regions and products.

Jon Douyard: Yeah, we wouldn't point to anything from a one-time perspective, and we really did see strength across all products, all regions. We pointed to China in particular. There was some outperformance there based on some launches that we did in Q4 for some of the domestic OEMs that continued to show strength through Q1.

Speaker #6: We pointed to China in particular. There was some outperformance there based on some launches that we did in the fourth quarter. For some of the domestic OEMs, that continued to show strength through the first quarter.

Speaker #6: As we look at the balance of the year, we certainly do not expect to outperform in the teams range. We'd expect it to moderate.

Jon Douyard: As we look at the balance of the year, we certainly do not expect to outperform in the teens range. We'd expect it to moderate, I think, at the top end of our guidance. It could push into that high single-digit range. But there's nothing specific to point to in terms of Q1 outperformance other than really just broad growth across regions and products.

Speaker #6: I think at the top end of our guidance, it could push into that high single-digit range. But there's nothing specific to point to in terms of in terms of Q1 outperformance other than really just broad growth across regions and products.

Speaker #4: And then GM yester or earlier this week, I guess, is suspending its next-gen electric truck program. That was set to launch or start in 2028.

Ryan Sigdahl: GM earlier this week, I guess, is suspending its next-gen electric truck program that was set to launch or start in 2028. Curious how much of Gentherm's award backlog was from this program. Do you think you can offset that from a shift with more volume back to the ICE programs? Just curious, kind of net positive, neutral, negative, how you guys think about that.

Speaker #4: Curious how much of Therm's award backlog was from this program. Do you think you can offset that from a shift with more volume back to the ICE programs?

Speaker #4: Just curious kind of net positive neutral negative how you guys think about that.

Speaker #6: Yeah. Overall, we just think it's neutral for us, Ryan. We've also won the ICE content for the platforms, so we just anticipate, and based on everything we're seeing, the ICE volumes will compensate for the EV losses.

Jonathan Douyard: Yeah, overall, we just think it's neutral for us, Ryan. We've also won the ICE content for the platforms. We just anticipate, and based on everything we're seeing, the ICE volumes will compensate for the EV losses.

Bill Presley: Yeah, overall, we just think it's neutral for us, Ryan. We've also won the ICE content for the platforms. We just anticipate, and based on everything we're seeing, the ICE volumes will compensate for the EV losses.

Speaker #4: Very good. Maybe just a quick clarification and then I'll hop back in the queue. But the 20 million of cost increase, is that a gross number or was that net of mitigation?

Ryan Sigdahl: Very good. Maybe just a quick clarification, and then I'll hop back in the queue. The $20 million of cost increase, is that a gross number, or was that net of mitigation?

Jonathan Douyard: That's a gross number and our best view of annualized impact or annual impact based on what we see today.

Jon Douyard: That's a gross number and our best view of annualized impact or annual impact based on what we see today.

Speaker #6: That's a gross number. And our best view of annualized impact or annual impact based on what we see today.

Speaker #4: Thanks, guys. Good luck.

Ryan Sigdahl: Thanks, guys. Good luck.

Speaker #6: Thanks, Ryan.

Jonathan Douyard: Thanks, Ryan.

Jon Douyard: Thanks, Ryan.

Speaker #4: Thank you.

Bill Presley: Thank you.

Operator: The next question is from Matthew Koranda from Roth Capital Partners. Please go ahead.

Speaker #1: The next question is from Matt Caranda from Ross Capital Partners. Please go ahead.

Speaker #7: Hey, guys. Good morning. Not to be the divorce here with the 20 million on incremental cost that you highlighted. But I guess I was curious.

Matthew Koranda: Hey, guys. Good morning. Not to be the devil's advocate here with the $20 million on incremental costs that you highlighted, but I guess I was curious how much of that is incremental shipping versus material cost inflation that you're factoring in? Then on the pricing front, is it all offset via pricing, or are there operating efficiencies that you think you'll offset the $20 million with as well?

Matt Koranda: Hey, guys. Good morning. Not to be the devil's advocate here with the $20 million on incremental costs that you highlighted, but I guess I was curious how much of that is incremental shipping versus material cost inflation that you're factoring in? Then on the pricing front, is it all offset via pricing, or are there operating efficiencies that you think you'll offset the $20 million with as well?

Speaker #7: How much of that is incremental shipping versus material cost inflation that you're factoring in? And then on the pricing front, is it all offset via pricing, or are there operating efficiencies that you think you'll offset the $20 million with as well?

Jonathan Douyard: As you look at it, certainly a big piece of it is freight related. I'd say maybe a third of it, with the rest coming from commodities, and it's commodities that Bill or the product that Bill called out specifically, but it's also incremental processing costs. There's the downstream impact from increased petroleum prices. I think as we look at it, our mechanism from a recovery perspective will primarily be from recovery with the customer. We did point to the fact that the $5 million benefit that Bill talked about from the realignment will likely help offset pieces of that as well, and we'll continue to push operationally. We've got our teams focused on commercial recovery at this point.

Jon Douyard: As you look at it, certainly a big piece of it is freight related. I'd say maybe a third of it, with the rest coming from commodities, and it's commodities that Bill or the product that Bill called out specifically, but it's also incremental processing costs. There's the downstream impact from increased petroleum prices. I think as we look at it, our mechanism from a recovery perspective will primarily be from recovery with the customer. We did point to the fact that the $5 million benefit that Bill talked about from the realignment will likely help offset pieces of that as well, and we'll continue to push operationally. We've got our teams focused on commercial recovery at this point.

Speaker #6: As you look at it, certainly a big piece of it is freight-related. I'd say maybe a third of it, with the rest coming from commodities.

Speaker #6: And it's commodities that Bill or the products that Bill called out specifically. But it's also incremental processing costs. And so there's the downstream impact from increased petroleum prices.

Speaker #6: I think as we look at it, our mechanism from a recovery perspective will primarily be from recovery with the customer. We did point to the fact that the $5 million benefit that Bill talked about from the realignment will likely help offset pieces of that as well.

Speaker #6: And we'll continue to push operationally. But we've got our teams focused on commercial recovery at this point.

Speaker #7: Okay. That makes sense. And then curious to hear a little bit more about the furniture market opportunity and how it's developed this year. I guess just given the announcements around KUKA and the incremental wins that you highlighted.

Matthew Koranda: Okay, that makes sense. Curious to hear a little bit more about the furniture market opportunity and how it's developed this year, I guess, just given the announcements around KUKA and the incremental wins that you highlighted. Have those catalyzed more discussions for you? Any way to characterize the opportunity funnel and how that contributes to 2027 revenue?

Matt Koranda: Okay, that makes sense. Curious to hear a little bit more about the furniture market opportunity and how it's developed this year, I guess, just given the announcements around KUKA and the incremental wins that you highlighted. Have those catalyzed more discussions for you? Any way to characterize the opportunity funnel and how that contributes to 2027 revenue?

Speaker #7: Have those catalyzed more discussions for you anyway to characterize the opportunity funnel and how that contributes to 27 revenue?

Speaker #6: Yeah. I mean, we'll start, and again, we like the furniture business. Much of it is just the super quick time to revenue that the industry has accepted.

Jonathan Douyard: Yeah, I mean, we'll start, and again, we like the furniture business facets of just the super quick time to revenue that the industry has accepted and really bought into our standard methodology, our standard kit methodology. We're getting good scale there on our assets with little to no investment. We expect by 2028 that that's clipping somewhere between $50 and 100 million. You can probably draw a line between now and then to figure out where 2027 is. We expect that to add one or two points of growth at accretive margins in the coming years.

Bill Presley: Yeah, I mean, we'll start, and again, we like the furniture business facets of just the super quick time to revenue that the industry has accepted and really bought into our standard methodology, our standard kit methodology. We're getting good scale there on our assets with little to no investment. We expect by 2028 that that's clipping somewhere between $50 and 100 million. You can probably draw a line between now and then to figure out where 2027 is. We expect that to add one or two points of growth at accretive margins in the coming years.

Speaker #6: And really bought into our standard methodology, our standard kit methodology. So we're getting good scale there on our assets with little to no investment.

Speaker #6: So we expect by 28 that that's clipping somewhere. Between 50 and 100 million. So you can probably draw a line between now and then to figure out where 27 is.

Speaker #6: But we expect that to add one or two points of growth at a creative margins in the coming years.

Matthew Koranda: Okay. Super helpful, guys. I'll leave it there.

Matt Koranda: Okay. Super helpful, guys. I'll leave it there.

Speaker #7: Okay. Super helpful, guys. I'll leave it there.

Jonathan Douyard: Thanks, Matt.

Jon Douyard: Thanks, Matt.

Speaker #6: Thanks, Matt.

Operator: There are no further questions at this time. This concludes the question and answer session, as well as today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker #1: There are no further questions at this time. This concludes the question and answer session as well as today's teleconference. You may disconnect your lines at this time.

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