Gentherm (THRM) investor relations material

Strategic direction and growth initiatives

• New management is scaling core thermal and pneumatic technologies into adjacent markets like commercial vehicles, agriculture, two-wheelers, and motion furniture, leveraging existing assets for growth.

• Automotive remains the primary market, with awarded business in lumbar massage expected to grow from $175M in 2024 to over $300M by 2027, targeting $2B in revenue.

• First five awards in adjacent markets were secured in Q2, including commercial vehicles and power sports, with further expansion in medical distribution and product development underway.

• M&A is positioned as a key accelerator for growth beyond $2B, focusing on margin-accretive, ROIC-positive opportunities in both automotive and non-automotive sectors.

• The company aims to shift its portfolio to less than 70% light vehicle over five years, increasing exposure to medical and adjacent markets.

Operational excellence and financial performance

• Standardization of operating systems, KPIs, and program management across global sites is underway to drive efficiency and continuous improvement.

• Footprint consolidation is planned in all regions, targeting a 30% reduction while supporting revenue growth to $2B without major new investments.

• Operational excellence and process harmonization are expected to contribute about one-third of the bridge to mid-teens EBITDA margins, with improved cash conversion and reduced working capital.

• The company is focused on growth over market, margin expansion from 12.5% to mid-teens EBITDA, and restoring cash conversion to historical 50–70% of EBITDA levels.

• Return on invested capital remains a key internal metric, especially in evaluating M&A and capital allocation.

Market dynamics and competitive positioning

• Outperformance in North America and Europe is driven by high adoption rates of core products, while China is being rebalanced toward domestic OEMs to match market shifts.

• The company is adapting its product and commercial approach in China to meet local requirements and cost structures, learning from the fast-paced and cost-competitive environment.

• Commercial model allows direct engagement with OEMs, providing control over product integration and market access, as demonstrated by recent major platform wins.

• Electrification trends have minimal impact due to powertrain-agnostic product design, ensuring relevance across ICE, hybrid, and EV platforms.

• No significant competitive impact observed from vertical integration moves by competitors; direct OEM relationships remain a strength.