Gentherm (NASDAQ:THRM) raised its full-year 2026 outlook after reporting record quarterly product revenue and stronger-than-expected automotive demand in the second quarter, executives said on the company’s earnings call.
President and Chief Executive Officer Bill Presley said the thermal management technology company delivered “an excellent first half” through commercial execution and operational discipline. He said the company continued to outperform light vehicle production while expanding its technology into markets beyond automotive, including furniture and medical products.
Automotive Growth Outpaces Market
Presley said Gentherm secured approximately $690 million in automotive new business awards during the second quarter, bringing year-to-date awards to more than $1 billion. He said the awards were in line with company expectations and reflected customer demand for Gentherm’s technologies.
During the question-and-answer session, Presley said the awards were “pretty well distributed” and were not driven by a single region, program or customer. He said the company remains confident that 2026 will be another strong year for new business awards.
Douyard said automotive growth was broad-based across regions and product categories. He highlighted strong performance in China, where the company benefited from domestic Chinese OEM program launches and higher take rates from global OEM customers. Lumbar and Massage Comfort Solutions revenue grew 38% year over year.
Responding to a question from Stifel analyst Nathan Jones, Douyard said Gentherm remains confident that its automotive business can grow at a mid-single-digit rate above the market over time, though he noted that performance may not be linear each year.
Margins Affected by Timing, Inventory and Warranty Accruals
Gentherm reported adjusted EBITDA of $48.8 million, equal to 11.7% of sales, compared with 12.2% in the prior-year quarter. Douyard said operating leverage and operational excellence initiatives were offset by expected headwinds from inflation recovery timing, planned footprint-related inventory reductions and warranty accruals in both the automotive and medical businesses.
On a GAAP basis, diluted earnings per share were $0.14. Douyard said that figure was affected by approximately $0.55 per share of merger and restructuring expenses. Adjusted diluted earnings per share were $0.75, up from $0.54 a year earlier.
In response to a question from Seaport Research Partners analyst Glenn Chin, Presley said the warranty accruals were tied in part to a specific automotive product with a specific customer. He said the company made mechanical robustness improvements late last year and decided to take an accrual after seeing increased claims in the first half. Presley said the company does not view the issue as part of the ongoing run rate.
Company Raises 2026 Guidance
Gentherm raised its 2026 full-year guidance for revenue, adjusted EBITDA and adjusted free cash flow. Douyard said the updated guidance excludes any impact from the planned combination with Modine Performance Technologies.
At the midpoint, Gentherm now expects 2026 revenue of $1.6 billion, representing roughly 5% growth for the year. Douyard said that compares with a forecasted decline in light vehicle production of approximately 3%, positioning the company for mid- to high-single-digit revenue growth over market.
The company expects adjusted EBITDA of $185 million to $200 million, implying a midpoint margin of approximately 12%. Douyard said margins are expected to remain lower in the third quarter before rebounding in the fourth quarter. Gentherm also projected adjusted free cash flow of $85 million to $100 million, with capital expenditures of $45 million to $55 million.
Douyard said adjusted free cash flow was approximately $16 million year to date, in line with expectations and historical seasonality, while capital expenditures were $14 million, down $9.5 million from the prior year. The company ended the quarter with net leverage of 0.3 times and liquidity of $502 million.
Expansion Beyond Light Vehicles
Presley said Gentherm is making progress in applying its core technologies outside the light vehicle market. During the quarter, the company’s products were selected by two North American-based furniture brands in the home and office market. Presley said Gentherm has deployed its core technologies with five new customers in less than a year and has visibility to $50 million to $100 million of revenue in that market by 2028.
In the Q&A session, Presley said the latest data and discussions with manufacturers indicate the total addressable market for Gentherm in home and office is more than $500 million. He said the company remains confident in its 2028 revenue target for that market.
In medical products, Presley said Gentherm received FDA 510(k) clearance for ThermAffyx, a solution that combines conductive air-free patient warming with securement technology for robotic surgical procedures. He said the company is actively commercializing ThermAffyx and expects initial sales in the third quarter.
Gentherm also completed the acquisition of Innovative Medical Equipment on July 1. Douyard said the purchase price was $34 million. IME provides the ThermaZone Therapy device, a non-opioid thermal therapy solution for pain management and recovery using controlled hot and cold therapy. Douyard said IME is projected to generate approximately $17 million of full-year 2026 revenue with 20% EBITDA margins.
Presley said IME serves more than 200 Veterans Health Administration hospitals and clinics, while Gentherm has access to hospital channels through partnerships, distributors and group purchasing organizations. He said the two businesses create “a very, very strong cross-selling opportunity.”
Modine Deal and Capital Allocation
Gentherm continues to work toward completing its planned combination with Modine Performance Technologies. Douyard said the company expects the transaction to close early in the fourth quarter after completing many key sign-to-close deliverables.
Presley said the combination would create a global leader in thermal and precision flow management solutions and diversify Gentherm’s end-market exposure. He said the company’s light vehicle mix would decline from approximately 97% today to roughly 63%, while expanding exposure to commercial vehicle, off-highway and power generation markets.
Douyard said Gentherm secured $800 million of committed financing through a $550 million five-year revolving credit facility and a $250 million term loan to support the Modine transaction. Upon closing, the company expects net leverage of approximately one turn.
The company also announced a new stock repurchase authorization of up to $400 million over three years. Douyard said Gentherm expects to repurchase shares after the Modine transaction closes and will continue to prioritize organic investment, share repurchases and strategic acquisitions aligned with its core technology platforms.
About Gentherm (NASDAQ:THRM)
Gentherm Incorporated (NASDAQ: THRM) is a global developer and supplier of advanced thermal management technologies for automotive, specialty vehicle, medical, consumer and industrial markets. The company’s core focus lies in delivering integrated heating and cooling systems designed to enhance energy efficiency, comfort and safety across a wide range of applications. Gentherm’s product portfolio includes seat thermal systems, heated and ventilated seating surfaces, steering wheel heaters, battery thermal management solutions, and climate systems for electric vehicles.
In the automotive sector, Gentherm partners with leading original equipment manufacturers to engineer and manufacture high-performance thermal solutions that meet stringent industry demands for reduced weight, lower energy consumption and improved passenger comfort.
