Q2 2026 Gentherm Inc Earnings Call

July 23, 2026

Speaker #1: Greetings, and welcome to Gentherm Q2, 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.

Operator 2: Greetings, welcome to Gentherm's Q2 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 that this conference is being recorded. I will now turn the conference over to Gregory Blanchette, Senior Director of Investor Relations. Thank you. You may begin.

Operator: [IVR/AVR] Greetings, welcome to Gentherm's Q2 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 that this conference is being recorded. I will now turn the conference over to Gregory Blanchette, Senior Director of Investor Relations. Thank you. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star-zero on your telephone keypad. And please note that this conference is being recorded.

Speaker #1: I will now turn the conference over to Gregory Blanchette, Senior Director of Investor Relations. Thank you. You may begin.

Speaker #2: 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.

Gregory Blanchette: Thank you, good morning, everyone, thanks for joining us today. Gentherm's earnings results were released earlier this morning, a copy of the release is available at gentherm.com. Additionally, a webcast replay of today's call will be available later today on the investor relations section of Gentherm's website. During this call, we will make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance, actual results may differ materially. We undertake no obligation to update them except as required by law. Please see Gentherm's earnings release and its SEC filings, including the latest 10-K and subsequent reports for discussions of our risk factors, 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.

Speaker #2: 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.

Speaker #2: 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 #2: Please see Gentherm's earnings release and its SEC findings, 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 #2: 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: Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included in our earnings release and investor presentation. On the call with me today are Bill Presley, President and Chief Executive Officer, Jon Douyard, Chief Financial Officer. During their comments, they will be referring to a presentation deck that we have made available on the investor section of Gentherm's website. After the prepared remarks, we will be pleased to take your questions. Now, I would like to turn the call over to Bill.

Speaker #2: 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.

Speaker #2: ...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.

Speaker #2: Now, I'd like to turn the call over to Bill.

Speaker #3: Thank you, Greg, and good morning, everyone. Let's begin on slide 3 for an update on our business and the market. Strong commercial execution, where we continue to significantly outperform the market, combined with operational discipline resulted in an excellent first half, positioning Gentherm to deliver a solid year.

Bill Presley: Thank you, Greg, and good morning, everyone. Let's begin on slide three for an update on our business and the market. Strong commercial execution, where we continue to significantly outperform the market, combined with operational discipline, resulted in an excellent H1, positioning Gentherm to deliver a solid year. Based on this performance, we are raising our full year 2026 guidance. We continue to monitor the macroeconomic and geopolitical environment. At the same time, we are proactively managing inflationary pressures through disciplined commercial actions and operational execution. As we look ahead, our priorities remain clear. We are focused on executing our strategy, capitalizing on the opportunities within our control, driving sustainable, profitable growth for our shareholders. Strategic profitable growth is a cornerstone of our strategy. We continue to achieve critical milestones that position us for long-term success.

Speaker #3: Based on this performance, we are raising our full-year 2026 guidance. We continue to monitor the macroeconomic and geopolitical environment, and at the same time, we are proactively managing inflationary pressures through disciplined commercial actions and operational execution.

Speaker #3: As we look ahead, our priorities remain clear: we are focused on executing our strategy, capitalizing on the opportunities within our control, and driving sustainable, profitable growth for our shareholders.

Speaker #3: Strategic, profitable growth is a cornerstone of our strategy, and we continue to achieve critical milestones that position us for long-term success. We have confidence that Gentherm's automotive business will grow above the market while we continue to build momentum beyond the light vehicle market.

Bill Presley: We have confidence that Gentherm's automotive business will grow over market while we continue to build momentum beyond the light vehicle market. During the quarter, Gentherm products were selected by two leading North American-based furniture brands in the home and office market. In less than a year, we have successfully deployed our core technologies with five new customers and have visibility to $50 to 100 million of revenue in this market by 2028. A strong proof point that our technology platforms are readily transferable beyond automotive. That we are moving with speed to capture these opportunities. In the medical market, we remain focused on refreshing the product portfolio and expanding our customer commercial channels. I am pleased to announce that we have received FDA 510(k) clearance for ThermAffyx, an innovative new solution developed by leveraging our proven automotive technology and intellectual property.

Speaker #3: During the quarter, Gentherm products were selected by two leading North American-based furniture brands and the home and office market. In less than a year, we have successfully deployed our core technologies with five new customers and have visibility to $50 million to $100 million of revenue in this market by 2028.

Speaker #3: A strong proof point that our technology platforms are readily transferable beyond automotive, and that we are moving with speed to capture these opportunities. In the medical market, we remain focused on refreshing the product portfolio and expanding our customer commercial channels.

Speaker #3: I am pleased to announce that we have received FDA 510(k) clearance for ThermoFix, an innovative new solution developed by leveraging our proven automotive technology and intellectual property.

Speaker #3: This is another powerful example of our ability to transfer differentiated automotive innovations into new markets, where they solve meaningful customer challenges. Our patented solutions combine conductive, air-free patient warming with securement technology to help prevent both hypothermia and patient movement during robotic surgical procedures.

Bill Presley: This is another powerful example of our ability to transfer differentiated automotive innovations into new markets where they solve meaningful customer challenges. Our patented solutions combine conductive air-free patient warming with securement technology to help prevent both hypothermia and patient movement during robotic surgical procedures. We are actively commercializing ThermAffyx and expect initial sales in Q3. We are encouraged by the strong market interest. As adoption grows, we believe ThermAffyx has the potential to establish a new standard of care while further validating the scalability of our technology platforms. In addition, on 1 July, we completed the strategic acquisition of Innovative Medical Equipment. IME is the provider of the ThermaZone thermal therapy device, which is a non-opioid thermal therapy solution designed to support pain management and recovery through controlled hot and cold therapy utilizing thermoelectric devices.

Speaker #3: We are actively commercializing ThermoFix and expect initial sales in the third quarter. We are encouraged by the strong market interest and, as adoption grows, we believe ThermoFix has the potential to establish a new standard of care while further validating the scalability of our technology platforms.

Speaker #3: In addition, on July 1, we completed the strategic acquisition of innovative medical equipment. IME is the provider of the ThermoZone therapy device, which is a non-opioid thermal therapy solution designed to support pain management and recovery through controlled hot-and-cold therapy utilizing thermal electric devices.

Speaker #3: It is a great example of a strategic, disciplined bolt-on acquisition that accelerates our strategy. This acquisition builds upon our market-leading capabilities in thermal management while expanding our patient product portfolio.

Bill Presley: It is a great example of a strategic, disciplined bolt-on acquisition that accelerates our strategy. This acquisition builds upon our market-leading capabilities in thermal management while expanding our patient product portfolio. IME has a strong growth trajectory and broad reach into Department of Veterans Affairs hospitals and clinics, enabling attractive cross-selling opportunities of our combined thermal management portfolio. Please turn to slide four, where I will discuss some of our Q2 highlights. The Gentherm team delivered a solid Q2, reflecting the consistent execution of our strategy and reinforcing our confidence in the path we are on. We secured approximately $690 million in automotive new business awards during the quarter, bringing our year-to-date total to more than $1 billion. These awards were in line with our expectations and reflect continued customer demand for our differentiated technologies.

Speaker #3: IME has a strong growth trajectory, and broad reach into veteran administration hospitals and clinics enabling attractive cross-selling opportunities of our combined thermal management portfolio.

Speaker #3: Please turn to slide 4, where I will discuss some of our second-quarter highlights. The Gentherm team delivered a solid second quarter, reflecting the consistent execution of our strategy and reinforcing our confidence in the path we are on.

Speaker #3: We secured approximately $690 million in automotive new business awards during the quarter, bringing our year-to-date total to more than $1 billion. These awards were in line with our expectations and reflect continued customer demand for a differentiated technology.

Speaker #3: Just as important, our pursuit pipeline remains healthy, giving us confidence that 2026 will be another robust year for new business awards. Product revenue reached a quarterly record of $416 million, driven by automotive climate and comfort solutions growth that continues to outpace underlying light vehicle production.

Bill Presley: Just as important, our pursuit pipeline remains healthy, giving us confidence that 2026 will be another robust year for new business awards. Product revenue reached a quarterly record of $416 million, driven by automotive climate and comfort solutions growth that continued to outpace underlying light vehicle production. This performance exceeded our expectations and demonstrates the value we continue to create through differentiated technologies and disciplined commercial execution. Operationally, we continued to build momentum in Q2. Our initiatives to improve labor efficiency, equipment utilization, and inventory management are delivering measurable results, while the operating system we are implementing is driving greater rigor, consistency, and accountability across the organizations. These improvements are strengthening our foundation to expand margins, positioning us to deliver higher cash flow conversion over time. Overall, we are executing well across the business.

Speaker #3: This performance exceeded our expectations and demonstrates the value we continue to create through differentiated technologies and disciplined commercial execution. Operationally, we continue to build momentum in the second quarter.

Speaker #3: Our initiatives to improve labor efficiency, equipment utilization, and inventory management are delivering measurable results, while the operating system we are implementing is driving greater rigor, consistency, and accountability across the organization.

Speaker #3: These improvements are strengthening our foundation to expand margins and positioning us to deliver higher cash flow conversion over time. Overall, we are executing well across the business.

Speaker #3: We are winning with customers, improving the quality of our operations, and investing in the capabilities that will support profitable growth. Moving to slide 5, as we approach the close of our combination, with Modine performance technologies, I am increasingly confident in the strategic value this transaction will create.

Bill Presley: We are winning with customers, improving the quality of our operations, and investing in the capabilities that will support profitable growth. Moving to slide five. As we approach the close of our combination with Modine Performance Technologies, I am increasingly confident in the strategic value this transaction will create. Together, we are building a fundamentally strong company, one with greater scale, broader capabilities, and a more diversified portfolio positioned to deliver sustainable long-term growth. This combination transforms Gentherm into a global leader in thermal and precision flow management solutions. By bringing together two highly complementary businesses, we significantly expand our product portfolio of mission-critical technologies, strengthen our innovation capabilities, and create a platform with greater opportunities to serve our customers across a broader range of applications. Equally important, this transaction meaningfully diversifies our end market exposure.

Speaker #3: Together, we are building a fundamentally stronger company—one with greater scale, broader capabilities, and a more diversified portfolio positioned to deliver sustainable, long-term growth.

Speaker #3: This combination transforms Gentherm into a global leader in thermal and precision flow management solutions. By bringing together two highly complementary businesses, we've significantly expanded our product portfolio, of mission-critical technologies, strengthened our innovation capabilities, and created a platform with greater opportunities to serve our customers across a broader range of applications.

Speaker #3: Equally important, this transaction meaningfully diversifies our end market exposure. Our light vehicle mix will decrease from approximately 97% today to roughly 63%, while expanding our presence in attractive, growing markets such as commercial vehicle, off-highway, and power generation.

Bill Presley: Our light vehicle mix will decrease from approximately 97% today to roughly 63%, while expanding our presence in attractive, growing markets such as commercial vehicle, off-highway, and power generation. This creates a more balanced business with multiple growth engines. The combined company will have a clear path to exceed $3.5 billion in revenue by 2030 with an attractive financial profile supported by margin expansion, robust cash flow generation, and disciplined capital allocation. Together, these strengths position us to invest in future growth, realize the benefits of the combination, and create long-term value for our shareholders. I am excited about what lies ahead. The strategic rationale for this combination is compelling. Our integration planning is progressing well, and we believe the combined company will be better positioned than ever to deliver differentiated solutions for customers and superior returns for shareholders.

Speaker #3: This creates a more balanced business with multiple growth engines. The combined company will have a clear path to exceed $3.5 billion in revenue by 2030, with an attractive financial profile supported by margin expansion, robust cash flow generation, and disciplined capital allocation.

Speaker #3: Together, these strengths position us to invest in future growth, realize the benefits of the combination, and create long-term value for our shareholders. I am excited about what lies ahead.

Speaker #3: The strategic rationale for this combination is compelling. Our integration planning is progressing well, and we believe the combined company will be better positioned than ever to deliver differentiated solutions for customers and superior returns for shareholders.

Speaker #3: I will now hand it over to John to discuss an update on our integration activities and the highlights for the quarter.

Bill Presley: I will now hand it over to Jon to discuss an update on our integration activities and highlights for the quarter.

Speaker #2: Thanks, Bill. Now turning to slide 6. Since our last update, we have continued to work closely with the Modine team and have made significant progress toward the closing of the merger.

Jon Douyard: Thanks, Bill. Turning to slide six. Since our last update, we have continued to work closely with the Modine team and have made significant progress toward the closing of the merger. Our primary focus is to ensure Performance Technologies can operate as a standalone division of Gentherm on day one, and that we are positioned to deliver on value creation opportunities. Based on progress to date, we expect closing of the transaction to occur early in Q4, as we have completed many key sign-to-close deliverables and expect to close out the remaining items in the coming months. As Bill noted, we remain excited about the combined business, and we will continue to keep you updated as we approach closing. Please turn to slide seven for a review of the Q2 financials. Revenue of $416 million was up 11% compared to the same period last year.

Speaker #2: Our primary focus is to ensure performance technologies can operate as a standalone division of Gentherm on day 1, and that we are positioned to deliver on value creation opportunities.

Speaker #2: Based on progress to date, we expect the closing of the transaction to occur early in the fourth quarter, as we have completed many key sign-to-close deliverables and expect to close out the remaining items in the coming months.

Speaker #2: As Bill noted, we remain excited about the combined business, and we will continue to keep you updated as we approach closing. Please turn to slide 7 for a review of the second-quarter financials.

Speaker #2: Revenue of 416 million was up 11% compared to the same period last year. Revenues excluding foreign currency translation increased 9.5%, exceeding our expectations driven by higher automotive volumes.

Jon Douyard: Revenues excluding foreign currency translation increased 9.5%, exceeding our expectations, driven by higher automotive volumes. Automotive climate and comfort solutions revenue increased 14.1% year-over-year, or 12.7% ex FX, and included strong outperformance across all regions and product categories. From a product perspective, Lumbar and Massage Comfort Solutions delivered another strong quarter of revenue growth at 38% year-over-year. Geographically, China performed well once again with trends from recent quarters continuing, including production increases from domestic Chinese OEM program launches and higher take rates from global OEM customers. Turning to profitability, we delivered $48.8 million of adjusted EBITDA, or 11.7% of sales, compared to 12.2% in the Q2 of last year. Strong operating leverage and benefits from operational excellence initiatives were offset by anticipated headwinds related to inflation recovery timing and planned footprint-related inventory reductions, as well as warranty accruals in both our automotive and medical businesses.

Speaker #2: Automotive Climate and Comfort Solutions revenue increased 14.1% year over year, or 12.7% XFX, and included strong outperformance across all regions and product categories. From a product perspective, lumbar and massage comfort solutions delivered another strong quarter of revenue growth at 38% year over year.

Speaker #2: Geographically, China performed well once again, with trends from recent quarters continuing, including production increases from domestic Chinese OEM program launches and higher take rates from global OEM customers.

Speaker #2: Turning to profitability, we delivered 48.8 million of adjusted EBITDA, or 11.7% of sales, compared to 12.2% in the second quarter of last year. Strong operating leverage and benefits from operational excellence initiatives were offset by anticipated headwinds related to inflation recovery timing and planned footprint-related inventory reductions, as well as warranty accruals in both our automotive and medical businesses.

Speaker #2: On a reported GAAP basis, diluted earnings per share were $0.14 in the quarter. This was impacted by approximately $0.55 per share related to merger and restructuring expenses.

Jon Douyard: On a reported GAAP basis, diluted earnings per share were $0.14 in the quarter. This was impacted by approximately $0.55 per share related to merger and restructuring expenses. Adjusted diluted earnings per share were $0.75, up 39% compared to $0.54 per share in the Q2 of last year. Adjusted free cash flow was approximately $16 million year to date, in line with our expectations and historical seasonality. While CapEx was $14 million, down $9.5 million compared to the prior year as we continue to scrutinize spend. Moving to the balance sheet, we ended Q2 with net leverage of 0.3 turns, and we have liquidity of $502 million. Please turn to slide eight, where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine Performance Technologies.

Speaker #2: Adjusted diluted earnings per share were $0.75, up 39% compared to $0.54 per share in the second quarter of last year. Adjusted free cash flow was approximately $16 million year to date, in line with our expectations and historical seasonality.

Speaker #2: While CapEx was 14 million dollars, now 9.5 million dollars compared to the prior year as we continue to scrutinize spend. Moving to the balance sheet, we ended Q2 with net leverage of 0.3 terms, and we have liquidity of 502 million dollars.

Speaker #2: Please turn to slide 8 where I will discuss our 2026 guidance, which excludes any impact related to our planned combination with Modine performance technologies.

Speaker #2: Given our strong first-half performance and second-half revenue visibility, we are raising our 2026 full-year guidance for revenue, adjusted EBITDA, and adjusted free cash flow.

Jon Douyard: Given our strong H1 performance and H2 revenue visibility, we are raising our 2026 full year guidance for revenue, adjusted EBITDA, and adjusted free cash flow. At the midpoint, we expect revenue of $1.6 billion, representing roughly 5% growth for the year, compared with a decline in light vehicle production forecasts of approximately 3%, positioning us to deliver mid to high single-digit revenue growth over market. We expect adjusted EBITDA to be in the range of $185 to $200 million, implying a midpoint margin of approximately 12%. As previously discussed, we expect margins to remain lower in Q3 before rebounding in Q4. Turning to cash, we estimate adjusted free cash flow between $85 and $100 million, with CapEx in the range of $45 to $55 million, or approximately 3% of sales.

Speaker #2: At the midpoint, we expect revenue of 1.6 billion dollars, representing roughly 5% growth for the year, compared with a decline in light vehicle production forecasts of approximately 3%, positioning us to deliver mid to high single-digit revenue growth over market.

Speaker #2: We expect adjusted EBITDA to be in the range of 185 to 200 million dollars, implying a midpoint margin of approximately 12%. As previously discussed, we expect margins to remain lower in the third quarter before rebounding in Q4.

Speaker #2: Turning to cash, we estimate adjusted free cash flow between 85 and 100 million dollars, with CapEx in the range of 45 to 55 million dollars, or approximately 3% of sales.

Speaker #2: Overall, we delivered strong first-half results and are pleased to raise guidance for the full year. Our recent trends indicate that Gentherm is at an inflection point for growth.

Jon Douyard: Overall, we delivered strong H1 results and are pleased to raise guidance for the full year. Our recent trends indicate that Gentherm is at an inflection point for growth. We will continue to execute with discipline while remaining focused on strategic actions to drive long-term value. Now let's turn to slide nine. Before turning it back to Bill, I'd like to reinforce our financial flexibility and strengths, which supports a disciplined and balanced approach to capital deployment. In the quarter, we secured $800 million of committed financing through the combination of a $550 million five-year revolving credit facility and a $250 million term loan that supports the Modine transaction. Upon closing, we expect our net leverage ratio to be approximately one turn, providing ample liquidity to deliver on our strategy. Our target is to maintain a net leverage ratio of one to one and a half times over time.

Speaker #2: We will continue to execute with discipline, while remaining focused on strategic actions to drive long-term value. Now, let's turn to slide 9. Before turning it back to Bill, I'd like to reinforce our financial flexibility and strengths, which support a disciplined and balanced approach to capital deployment.

Speaker #2: In the quarter, we secured 800 million dollars of committed financing through the combination of a 550 million dollar five-year revolving credit facility and a 250 million dollar term loan that supports the Modine transaction.

Speaker #2: Upon closing, we expect our net leverage ratio to be approximately 1x, providing ample liquidity to deliver on our strategy. Our target is to maintain a net leverage ratio of 1 to 1.5 times over time.

Speaker #2: In addition, we expect that the combined Gentherm and Modine business will generate significant cash flow in the coming years. Based on the forecast supporting our 2030 financial targets, we expect to generate over $1 billion of cumulative unleveraged free cash flow through 2030.

Jon Douyard: In addition, we expect that the combined Gentherm and Modine business will generate significant cash flow in the coming years. Based on the forecast supporting our 2030 financial targets, we would expect to generate over $1 billion of cumulative unlevered free cash flow through 2030. We believe we have the necessary capacity to execute the Modine merger, support the combined business, and efficiently deploy capital to drive shareholder returns. As we think about priorities, first, we will invest organically with a focus on return-driven investments that will drive profitable growth or expand margins. We recently demonstrated this capability through our successful entry into the home and office market, as well as the upcoming launch of ThermAffyx. Second, we remain committed to returning capital to shareholders through repurchases, particularly in times of value dislocation.

Speaker #2: We believe we have a necessary capacity to execute the Modine merger, support the combined business, and efficiently deploy capital to drive shareholder returns. As we think about priorities, first, we will invest organically, with a focus on return-driven investments that will drive profitable growth or expand margins.

Speaker #2: We recently demonstrated this capability through our successful entry into the home and office market, as well as the upcoming launch of ThermoFix. Second, we remain committed to returning capital to shareholders through repurchases, particularly in times of value dislocation.

Speaker #2: Earlier today, we announced a new stock repurchase authorization of up to $400 million over three years. This authorization, which is nearly three times our previous program, reflects our confidence in the cash generation of the combined company and provides additional capacity to opportunistically return capital to shareholders.

Jon Douyard: Earlier today, we announced a new stock repurchase authorization of up to $400 million over three years. This authorization, which is nearly three times our previous program, reflects our confidence in the cash generation of the combined company and provides additional capacity to opportunistically return capital to shareholders. It is our current expectation that we will be repurchasing shares upon the closing of the Modine transaction. Lastly, we believe that M&A will serve an important role for the company in achieving our strategic growth priorities. We continue cultivating a wide range of opportunities that are aligned with our core technology platforms and attractive growth markets outside of light vehicle. While at the low end of our targeted range, our recent acquisition of IME is a great example. From a strategic perspective, IME brings highly complementary products, technology, and commercial channels, as well as needed scale to Gentherm's medical business.

Speaker #2: It is our current expectation that we will be repurchasing shares upon the closing of the Modine transaction. Lastly, we believe that M&A will serve an important role for the company in achieving our strategic growth priorities.

Speaker #2: We continue cultivating a wide range of opportunities that are aligned with our core technology platforms and attractive growth markets outside of light vehicle. While at the low end of our targeted range, our recent acquisition of IME is a great example.

Speaker #2: From a strategic perspective, IME brings highly complementary products, technology, and commercial channels, as well as needed scale to Gentherm's medical business. IME also brings an attractive financial profile, with projected 2026 full-year revenue of approximately $17 million and 20% EBITDA margins.

Jon Douyard: IME also brings an attractive financial profile with projected 2026 full-year revenue of approximately $17 million and 20% EBITDA margins. As part of Gentherm, we believe that IME can double its revenue and reach at least high teens ROIC by 2030, with returns covering cost of capital by year two. Moving forward, we will continue to target M&A opportunities that are strategically and financially compelling as a lever to accelerate our strategy and enhance returns. In summary, the combination of a strong balance sheet, significant free cash flow generation, and a disciplined approach to capital deployment positions Gentherm to simultaneously invest for growth and return capital to shareholders, all while continuing to operate in a comfortable leverage framework. We believe this ultimately results in substantial long-term value creation for our shareholders. I'll now hand it back to Bill for some closing remarks.

Speaker #2: As part of Gentherm, we believe that IME can double its revenue and reach at least high-teens ROIC by 2030, with returns covering cost of capital by year two.

Speaker #2: Moving forward, we will continue to target M&A opportunities that are strategically and financially compelling as a lever to accelerate our strategy and enhance returns.

Speaker #2: In summary, the combination of a strong balance sheet, significant free cash flow generation, and a disciplined approach to capital deployment positions Gentherm to simultaneously invest for growth and return capital to shareholders.

Speaker #2: All while continuing to operate in a comfortable leverage framework. We believe that's ultimately results in substantial long-term value creation for our shareholders. I'll now hand it back to Bill for some closing remarks.

Speaker #3: Thanks, John. I am pleased with the progress we have made in the first half of the year, and I am even more excited about the opportunities that lie ahead.

Bill Presley: Thanks, Jon. I am pleased with the progress we have made in the H1 of the year and even more excited about the opportunities that lie ahead. We are executing our strategic priorities, improving the performance of our operations, and continuing to strengthen the foundation of the business. Every quarter, we make tangible progress that reinforces our confidence in the strategy we have in place. Looking forward, we remain focused on disciplined execution, profitable growth, and creating long-term value for our shareholders. With the momentum in our core business, the expansion of our technology into new markets, and the transformational combination with Modine Performance Technologies, we are building a fundamentally stronger company, one that is more diversified, more resilient, and better positioned to deliver growth, margin expansion, and increased cash flow.

Speaker #3: We are executing our strategic priorities and proving the performance of our operations and continuing to strengthen the foundation of the business. Every quarter, we make tangible progress that reinforces our confidence in the strategy we have in place.

Speaker #3: Looking forward, we remain focused on disciplined execution, profitable growth, and creating long-term value for our shareholders. With the momentum in our core business, the expansion of our technology into new markets, and the transformational combination with Modine Performance Technologies, we are building a fundamentally stronger company.

Speaker #3: One that is more diversified, more resilient, and better positioned to deliver growth, margin expansion, and increased cash flow. I am confident that we have the right strategy, the right team, and the right capabilities to capitalize on the opportunities ahead and deliver value for our customers, our employees, and our shareholders.

Bill Presley: I am confident that we have the right strategy, the right team, and the right capabilities to capitalize on the opportunities ahead and deliver value for our customers, our employees, and our shareholders. With that, I will turn the call back to the operator to begin the Q&A session.

Speaker #3: With that, I will turn the call back to the operator to begin the Q&A session.

Speaker #1: Thank you. And with that, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.

Operator 2: Thank you. With that, we will 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 that your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions

Operator: Thank you. With that, we will 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 that your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions

Speaker #1: You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we pull for questions.

Speaker #1: And our first question comes from the line of Ryan Signal from Craig Howell Capital Group. Please proceed with your question.

Operator 2: Our first question comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group. Please proceed with your question.

Operator: Our first question comes from the line of Ryan Sigdahl from Craig-Hallum Capital Group. Please proceed with your question.

Speaker #3: Hey, good morning, Bill, John. Nice job, good to see the company stacking good quarters and execution on top of each other here. I want to start with the core auto business.

Ryan Sigdahl: Hey, good morning, Bill, John. Nice job.

Bill Presley: Morning, Ryan.

Ryan Sigdahl: Good to see the company stacking good quarters and execution on top of each other here. I want to start with the core auto business. Really nice auto awards in the quarter, all A&L performance. Curious if there are any key programs or product categories to call out within those auto awards, then how you feel about the RFP and kind of active pipeline that you guys are bidding on right now.

Speaker #3: Really nice auto awards in the quarter, both in oil and oil performance. Curious if there are any key programs or product categories to call out within those auto awards, and then how do you feel about the RFP and the kind of active pipeline that you guys are bidding on right now?

Speaker #2: Yeah, I would say, Ryan, the awards were pretty well distributed. I wouldn't call it any specific region program or customer that really drove it, so I think the commercial team on the auto side did a really nice job of texturing some broad wins there.

Bill Presley: Yeah, I would say, Ryan, the awards were pretty well distributed. I wouldn't call out any specific region, program, or customer that really drove it. I think the commercial team on the auto side did a really nice job of texturing some broad wins there. Actually, it was exactly what we expected. If you remember when we talked, there was some conversation around Q1, was that too light? We told you, don't worry, we have a good pipeline. We remain confident in the H2, it still looks like another robust year for awards.

Speaker #2: And actually, it was exactly what we expected. If you remember when we talked, there was some conversation around Q1—was that too light? And we told you, don't worry, we have a good pipeline.

Speaker #2: And we remain confident in the second half, so still looks like another robust year for awards.

Speaker #3: That's great. Switching to medical, IME acquisition, I don't believe I saw or heard but what were the what was the purchase price of that or terms around that?

Ryan Sigdahl: That's great. Switching to medical, IME acquisition. I don't believe I saw or heard, but what was the purchase price of that or terms around that? Jon, just to be clear, the 2026, that's a full year, $17 million, 20%, right? Assume half that for H2?

Speaker #3: And then, John, just to be clear, for 2026, that's a full year—$17 million at 20%, right? So, assume half that for the back half.

Speaker #2: Yeah, so the purchase price is $34 million. So as we look at the transaction, it's a $17 million business today, obviously pro forma for the year.

Bill Presley: Yeah. The purchase price is $34 million. As we look at the transaction, it's a $17 million pro business today, obviously pro forma for the year. We expect significant growth as we talked about the business doubling here over the next couple of years. We really like the growth profile of the business and how it fits internally. Profitability 20% EBITDA with opportunity to expand from that perspective as well. Will contribute in the H2 of the year contemplated and what we put out from a guidance perspective. Really think it's a good fit for where the medical business is and what it needs to scale and grow here.

Speaker #2: We expect significant growth as we talked about the business doubling here over the next couple of years. So we really like the growth profile of the business and how it fits internally.

Speaker #2: Profitability: 20% EBITDA with opportunity expansion from that perspective as well. So, we'll contribute in the second half of the year, as contemplated in what we put out from a guidance perspective.

Speaker #2: But really think it's a good fit for where the medical business is and what it needs to scale and grow here.

Speaker #3: And then, as it relates to ThermoFix, with the commercial launch underway, are there any early demand metrics or indications—anything you can share about what you've seen so far from the market for that product?

Ryan Sigdahl: As it relates to ThermAffyx, the commercial launch underway, any early demand metrics, indications, anything you can share, kind of what you've seen thus far from the market for that product. I know you mentioned complementary sales channel distribution, but does IME add anything from a revenue synergy potential, just from a, whether it's sales distribution or customers or anything that kind of accelerates potentially what you were previously expecting from ThermAffyx and your core medical business?

Speaker #3: And then, I know you mentioned complementary sales channel distribution, but does IME add anything from a revenue synergy potential, just from whether it's sales distribution or customers, or anything that kind of accelerates potentially what you were previously expecting from ThermoFix and your core medical business?

Speaker #2: Yeah, so on the ThermoFix side, as said before, 510(k) clearance, all good. We are now producing we are in the clinical trial period, so we are in the process of getting ready to ship to hospitals.

Bill Presley: Yeah. On the ThermAffyx side, as said before, 510(k) clearance, all good. We are now producing. We are in the clinical trial period. We are in the process of getting ready to ship to hospitals, over 50, as we talked about before with the clinical trials. We're excited. Demand looks strong. Everybody's excited about the product. They like the problems that it solves that they currently have in that space. We're very optimistic on that one. I think the great thing about IME, to put it in perspective, IME does hot-cold therapy utilizing thermoelectric devices, which is kind of the core of how our business was born, if you remember. IME is largely in the Department of Veterans Affairs hospitals and clinics. IME serves over 200 Department of Veterans Affairs hospitals and clinics, and they have almost zero channel access to where we are today.

Speaker #2: Over 50, as we talked about before with the clinical trials. So we're excited. Demand looks strong. Everybody's excited about the product. They like the problems that it solves, that they currently have in that space.

Speaker #2: That one. I think the great thing about IME, to put it in perspective—so IME does hot-cold therapy utilizing thermoelectric devices, which is kind of the core of how our business was born, if you remember.

Speaker #2: But IME is largely in the Veterans Administration hospitals and clinics. So IME serves over 200 Veterans Administration hospitals and clinics, and they have almost zero channel access to where we are today.

Speaker #2: Conversely, we serve hospitals through select partnerships, distributors, and GPOs. And we have zero access to the veterans administration today. So there's a very, very strong cross-selling opportunity between those markets.

Bill Presley: Conversely, we serve hospitals through select partnerships, distributors, and GPOs, and we have zero access to the Veterans Administration today. There's a very strong cross-selling opportunity between those markets.

Speaker #3: That's great. Nice work, guys. And it appears like the PT business keeps getting stronger by the day, and that acquisition feels even better as we progress towards close there.

Ryan Sigdahl: That's great. Nice work, guys. It appears like the PT Business keeps getting stronger by the day, and that acquisition feels even better as you progress towards close there. Nice job, guys. I'll turn it over to the others.

Speaker #3: Nice job, guys. I'll turn it over to the others.

Speaker #2: Thank you. Thanks, Brian.

Jon Douyard: Thank you.

Bill Presley: Thank you.

Jon Douyard: Thanks, Ryan.

Speaker #1: Thank you. And our next question comes from the line of Nathan Jones with C4. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.

Speaker #4: Good morning, everyone.

Nathan Jones: Good morning, everyone.

Bill Presley: Hey, Nathan.

Speaker #2: Hey, Nathan.

Speaker #4: I'll start with questions on the auto business. Obviously, you've outperformed your own outperformance targets relative to auto production here. We're close to double-digit above-market performance in the quarter.

Nathan Jones: I'll start with questions on the auto business. Obviously, you've outperformed your own outperformance targets relative to auto production here, with close to double-digit above-market performance in the quarter. I think you talked about mid to high single digit for the full year outperformance, whereas you've been talking about mid-single digits. Just looking for some more color on where in the world that outperformance came from, how sustainable you view that outperformance, and just any other information you can give us on where you're beating even your own targets in those markets.

Speaker #4: And I think you talked about mid to high single-digit for the full year outperformance, whereas you've been talking about mid-single-digit. So, just looking for some more color on where in the world that outperformance came from, how sustainable you view that outperformance, and just any other information you can give us on where you're beating even your own targets in those markets.

Speaker #2: Yeah, Nathan. I think, I mean, if you look at growth, as we talked about, it's relatively broad-based across both products as well as regions from an outperformance perspective.

Bill Presley: Nathan, if you look at growth, as we talked about, it's relatively broad-based across both products as well as regions from an outperformance perspective. We point to China being really strong, based on launches, based on increased take rates. It's really, I would say, broad-based. I think as we get to the H2 of the year, you do run into some tougher comps that are impacting year-over-year growth rates. We've consistently said that this business can grow mid-single digit over market over time, and we're very confident in the ability to do that based on the visibility that we have, as well as the just the industry dynamics in terms of penetration and take rates or adoption. We would expect that mid-single digits. It might not be linear every single year.

Speaker #2: We point to China being really strong based on launches, based on increased take rates. But it's really, I would say, broad-based. I think as we get to the second half of the year, you do run into some tougher comps that are impacting year-over-year growth rates.

Speaker #2: But we've consistently said that this business can grow mid-single digits over the market over time, and we're very confident in the ability to do that based on the visibility that we have.

Speaker #2: As well as the just the industry dynamics in terms of penetration and take rates. So or adoption. And so we would expect that mid single digits.

Speaker #2: It might not be linear every single year—some years might be a little higher or lower—but we are very confident in the trajectory of the automotive business and the opportunity to grow there.

Bill Presley: Some might be a little higher or lower, very confident in the trajectory of the automotive business and the opportunity to grow there.

Speaker #4: Okay, thanks for that. I guess I'll ask a second question on the Home and Office business and the new customer wins there. I think you said these ones are in North America?

Nathan Jones: Okay, thanks for that. I guess a second question on the home and office business and the new customer wins there. I think you said these ones are in North America. I think previous wins have been at least with manufacturers in China. It's nice to see it broadening out there. Can you just talk about the materiality of it? How much it might add to revenue and what the trajectory is there? Any changes in targets by 2028 or estimates of what the TAM is here?

Speaker #4: I think previous wins have been at least with manufacturers in China, so it's nice to see it broadening out there. Can you just talk about the materiality of it?

Speaker #4: How much it might add to revenue and what the trajectory is there? Any changes in targets by 2028 or estimates of what the TAM is here?

Speaker #2: Yeah, Nathan. I would say that the -- so, yeah, you're right. So, the first awards that we announced and we were public with were Recuca, and they're a China-based manufacturer, one of the largest in the world.

Bill Presley: Nathan, you're right. The first awards that we announced, and we were public with, were KUKA, and they're a Chinese-based manufacturer, one of the largest in the world. The other two that we've now added in North America are very large. They'll name us publicly before we can name. Announcements will come out who they are. They are quite large. What I would say is the wins with them were more sizable than what we had won with KUKA, but that's a result of them pulling more content quicker. KUKA's strategy was to be first to market with Gentherm. We anticipate that that will continue to expand. Overall, we're excited about the home and office market. Latest data that we have in talking to the manufacturers is, the TAM in that market for us is over $500 million. The TAM is over $500 million.

Speaker #2: The other two that we've now added in North America are very large. They'll name publicly before we can name. So announcements will come out who they are.

Speaker #2: But they are quite large. What I would say is the wins with them were more sizable than what we had won with CUCA, but that's a result of them pulling more content quicker.

Speaker #2: CUCA's strategy was to be first to market with Genderm, so we anticipate that will continue to expand. Overall, we're excited about the home and office market.

Speaker #2: Latest data that we have and talking to the manufacturers is the TAM in that market for us is over 500 million. The TAM is over 500 million.

Speaker #2: So we're still confident in that number that we put out there, 50 to 100 million by 2028. But see, no possibility of not being at least at 50.

Bill Presley: We're still confident in that number that we put out there, $50 to 100 million by 2028. See no possibility of not being at least at $50.

Speaker #4: Great, thanks for taking my questions.

Nathan Jones: Great. Thanks for taking my questions.

Speaker #2: Thanks, Nathan.

Bill Presley: Thanks, Nathan.

Speaker #1: Thank you. And our next question comes from the line of Rajat Gupta with JP Morgan Chase. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Rajat Gupta with JPMorgan Chase. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Rajat Gupta with JPMorgan Chase. Please proceed with your question.

Speaker #5: Great. Thanks for taking the questions and congrats on the good execution here. It looks like the full-year guide raise was primarily driven by the second quarter performance.

Rajat Gupta: Great. Thanks for taking the questions and congrats on the good execution here. It looks like the full year guide range was primarily driven by the Q2 performance. I am curious, is there some conservatism baked into the H2 yet? Are there any reasons that would suggest a slowdown in the organic growth cadence? Anything you can elaborate on that would be helpful. Just given the strong start to 2026, the strong bookings in the H1, would you be willing to update your original 2027 revenue guide at all? Thanks. I have a follow-up.

Speaker #5: I'm curious, is there some conservatism baked in in the second half yet, or are there any reasons that would suggest a slowdown in the organic growth cadence?

Speaker #5: Anything you can elaborate on there would be helpful. And then, just given the strong start to '26, the strong bookings in the first half, would you be willing to update your original '27 revenue guide at all?

Speaker #5: Thank you. And I have a follow-up question.

Speaker #2: Yeah, thanks, Brijat. I think in terms of the '27 number, we're not in a position to update that at this point. I think we feel highly confident that we'll be at the $1.7 billion or higher as we head into 2027.

Bill Presley: Yeah, thanks, Rajat. I think in terms of the 2027 number, we are not in a position to update that at this point. I think we feel highly confident that we will be at the $1.7 billion or higher as we head into 2027. I think as you look at the H2, you probably would not be the first person to call us conservative. There is certainly a level of uncertainty that is out there. We do have some of our runoff businesses, which has more of an impact in the H2 than the H1 in terms of end of program on some of those product lines. That is a bit of a headwind. Based on the visibility we have, we are comfortable with where the midpoint guidance is at this point.

Speaker #2: I think as you look at the second half of the year, you probably wouldn’t be the first person to call us conservative. But we’re looking at it—there’s certainly a level of uncertainty that’s out there.

Speaker #2: We do have some of our runoff businesses, which has more of an impact in the second half of the year. Than the first half in terms of end of program on some of those product lines.

Speaker #2: So that's a bit of a headwind. But based on the visibility we have, we're comfortable with where the midpoint guidance is at this point.

Speaker #5: Understood. That's helpful. And then, just on the—obviously, the acquisition is due to close pretty soon. I'm curious, as you've done more work and learned more about the business behind the scenes, any update to what the cross-sell opportunities might be, the synergy opportunities might be, on the commercial side?

Rajat Gupta: Understood. That is helpful. Just on the, obviously the acquisition is due to close pretty soon. I am curious, as you have done more work and learned more about the business behind the scenes, any update to what the cross-sell opportunities might be, the synergies opportunities might be on the commercial side that you may have learned or has come up in recent months? Just curious if that pipeline has grown as you have learned more about the opportunity. Thanks.

Speaker #5: That you may have learned or has come up in recent months? Just curious if that pipeline has grown as you've learned more about the opportunity.

Speaker #5: Thanks.

Speaker #2: Yeah, I would say we've become very confident in our ability to capture the $100 million-plus that we talked about by 2030 and in cross-selling.

Bill Presley: Yeah, I would say we have become very confident in our ability to capture the $100 million plus that we talked about by 2030 in cross-selling. It goes back really to the three pillars we have talked about, right? Cross-selling into the other markets, opening up the India region for us, which we currently are not in today, as well as product development and integration between the two companies. Very confident in the $100 million plus number. As you and I have talked before, over half of that will come up from the valves business, which is a business that we find very attractive.

Jon Douyard: Yeah, I would say we have become very confident in our ability to capture the $100 million plus that we talked about by 2030 in cross-selling. It goes back really to the three pillars we have talked about, right? Cross-selling into the other markets, opening up the India region for us, which we currently are not in today, as well as product development and integration between the two companies. Very confident in the $100 million plus number. As you and I have talked before, over half of that will come up from the valves business, which is a business that we find very attractive.

Speaker #2: It goes back really to the three pillars we've talked about, right? Cross-selling into the other markets. Opening up the India region for us, which we're currently are not in today.

Speaker #2: As well as product development and integration between the two companies. So very confident in the 100 million plus number. And as you and I have talked before, over half of that will come up from the Bell's business, which is a business that we find very attractive.

Speaker #5: Understood. Great. Thanks for all the color. And good luck.

Rajat Gupta: Understood. Great. Thanks for all the color and good luck.

Speaker #2: Thank you. Good talking to you.

Bill Presley: Thank you. Good talking to you.

Speaker #1: Thank you. And our next question comes from the line of Glenn Chin with Seaport Research Partners. Please proceed with your question.

Operator 2: Thank you. Our next question comes from the line of Glenn Chin with Seaport Research Partners. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Glenn Chin with Seaport Research Partners. Please proceed with your question.

Glenn Chin: Good morning, Dean, and thank you and congratulations. Yeah, congrats on the IME acquisition. Interesting that it's thermal electric-based, and as you mentioned, what the technology that Gentherm was born from. Is that to say it's, and pardon me for asking because I'm not an engineer, but I guess it's predicated upon the Peltier effect, and that's basically the use of electric current to create cooling and heating?

Speaker #4: Good morning, team. And thank you. And congratulations so yeah, congrats on the IME acquisition. Interesting that it's thermoelectric based. And as you mentioned, what the technology that Gentherm was born from, is that to say it's pardon me for asking because I'm not an engineer, but I guess it's predicated upon the Pelletier effect.

Speaker #4: And that's basically the use of electric current to create cooling and heating.

Speaker #2: That is correct, Glenn. It's based on the Peltier effect, and the thermoelectric device either heats or cools the fluid that is flowed through the Thermozone device.

Bill Presley: That is correct, Lenny. It's based on the Peltier effect. The thermoelectric device either heats or cools the fluid that is flowed through the ThermaZone device. I get my thermos mixed up.

Jon Douyard: That is correct, Lenny. It's based on the Peltier effect. The thermoelectric device either heats or cools the fluid that is flowed through the ThermaZone device. I get my thermos mixed up.

Speaker #2: I get my thermos mixed up.

Speaker #4: Okay. And so is that to say could this have been developed in-house then though?

Glenn Chin: Okay. Is that to say, could this have been developed in-house then, Bill?

Speaker #2: I mean, certainly the core technology is there to develop it in-house. We still have thermoelectric devices that we use, right? And that we use for active heating and cooling.

Bill Presley: Certainly the core technology is there to develop it in-house. We still have thermoelectric devices that we have, right, that we use for active heating and cooling. IME is a super strong fit for our core technology, super strong fit for our patient thermal management, which is based on thermoelectric devices. We're super excited about the cross-selling and our access now to the Veterans Administration and providing IME with access to our channels.

Speaker #2: So, IME is a super strong fit for our core technology—a super strong fit for our patient thermal management, which is based on thermoelectric devices.

Speaker #2: And we're super excited about the cross-selling and our access now to the veterans administration. And providing IME with access to our channels.

Glenn Chin: Mm-hmm. Yeah, certainly sounds promising. Just searching for the device, and again, pardon me, I'm not a medical professional either. It seems like there are a lot of competitor-type devices, and I say that somewhat loosely. Are these competitor-type devices competitive?

Speaker #4: Yeah, it certainly sounds promising. And then, I mean, just searching for the device—and again, pardon me, I'm not a medical professional either—but it seems like there are a lot of competitor-type devices.

Glenn Chin: Yeah, certainly sounds promising. Just searching for the device, and again, pardon me, I'm not a medical professional either. It seems like there are a lot of competitor-type devices, and I say that somewhat loosely. Are these competitor-type devices competitive?

Speaker #4: And I say that somewhat loosely. Are these competitor-type devices competitive?

Speaker #2: Certainly they're competitive just by the nature of that they're competitive-type devices. I would say that IME is shown a strong growth trajectory and very strong market adoption.

Bill Presley: Certainly they're competitive, just by the nature of that they're competitive-type devices. I would say that IME has shown a strong growth trajectory and very strong market adoption. What's really interesting about this technology is it's pain management without opioids, right? That's really the magic of the device is it provides that. We see a lot of potential in the market. We see a strong growth trajectory. Again, we're excited about taking this into our existing channels.

Speaker #2: So what's really interesting about this technology is it's pain management without opioids, right? And that's really the magic of the device is it provides that.

Speaker #2: So we see a lot of potential in the market. We see a strong growth trajectory. And again, we're excited about taking this into our existing channels.

Speaker #4: Okay, very good. And then just a question on the margin performance. You guys cite higher warranty accruals in both automotive and medical. Is that due to higher incident rates?

Glenn Chin: Okay. Very good. Then just a question on the margin performance. You guys cite higher warranty accruals in both automotive and medical. Is that due to higher incident rates, and is it something we need to be baking in going forward?

Speaker #4: And is it something we need to be baking in going forward?

Speaker #2: Yeah, I'll run right at that one. And the reason we called that out and put that in there was because we didn't want it to—we don't want anything to match the operational progress that we're making in the discipline.

Bill Presley: Yeah, I'll run right at that one. The reason we called that out and put that in there was because we don't want anything to mask the operational progress that we're making in the discipline. We had an instance on the auto side last year when we started setting up our key performance indicators and really started tracking things as a percentage of sales and driving numbers into the operations. We observed some trends in our KPIs that made us look at a product and make some mechanical robustness improvements in that product late last year. It's a very specific product with a specific customer. In H1, we saw increased claims. You'll see that this actually goes back to 2020.

Speaker #2: We had an instance on the auto side last year when we started setting up our key performance indicators and really started tracking things as a percentage of sales.

Speaker #2: And driving numbers into the operations, we observed some trends in our KPIs—KPIs that made us look at a product and make some mechanical robustness improvements in that product late last year.

Speaker #2: It's a very specific product with specific customer. And the first half, we saw increased claims and you'll see that this actually goes back to 2020.

Speaker #2: So we made the decision based on the robustness improvements we've made last year, plus the trends that we saw to get this out in front of us and take the accrual.

Bill Presley: We made the decision based on the robustness improvements we made last year, plus the trends that we saw, to get this out in front of us and take the accrual. We don't view this as something that continues in the run rate.

Speaker #2: So we don't view this as something that continues in the run rate.

Speaker #4: Okay, very good. Thanks for the detail, Bill. That's it for me. Thanks.

Glenn Chin: Okay. Very good. Thanks for the detail, Bill. That's it for me. Thanks.

Speaker #1: Thank you. And with that, this does conclude our question and answer session as well as today's teleconference. We thank you for your participation and you may disconnect your lines at this time and have a wonderful rest of your day.

Operator 2: Thank you. With that, this does conclude our question and answer session, as well as today's teleconference. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful rest of your day.

Operator: Thank you. With that, this does conclude our question and answer session, as well as today's teleconference. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful rest of your day.

Q2 2026 Gentherm Inc Earnings Call

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