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Item 2. Management’s Discussion and Analysis

2024-07-25 compared with 2024-04-25 · 161 added, 68 removed, 169 unchanged (58% of the section changed)

1 unchanged sentence

The following discussion and analysis of our financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with our Consolidated Interim Financial Statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q as well as the audited annual Consolidated Financial Statements for the year ended December 31, 2023, included in our 2023 Form 10-K.

Some of the information contained in this MD&A or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.

As a result of many important factors, including those set forth in the “Risk Factors” section of our 2023 Form 10-K and this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.

Please refer to the "Special Note Regarding Forward-Looking Statements" below.

The following MD&A is intended to help you understand the results of operations and financial condition of Garrett Motion Inc.

for the three months ended March 31, 2024.

for the three and six months ended June 30, 2024.

Executive Summary

During the first quarter of 2024, the industry continued to experience supply chain challenges where ripple effects from disruptions in the global supply chain have impacted our OEM customers and altered the volume of customer orders received.

During the second quarter of 2024, the industry was impacted by challenging regional dynamics associated with some weak end markets.

In response, we flexed our variable cost structure to successfully achieve efficiencies on productivity and drive operational performance.

Our agility enabled us to achieve Net income of $64 million and Adjusted EBITDA of $150 million for the quarter.

We continue to grow our turbocharging business and build momentum with our zero emission technologies.

In particular, during the quarter, we launched a commercial vehicle application with natural gas for heavy duty trucks in China and won two awards for power generation turbos.

We also won two series production awards for our differentiated fuel cell compressor applications and saw our E-powertrain application installed and undergoing vehicle testing with a global OEM.

For the three months ended March 31, 2024, we repurchased $109 million of Common Stock in connection with our share repurchase program, with $241 million remaining under the share repurchase program.

On April 3, 2024, we divested our equity interest in an unconsolidated joint venture for approximately $58 million, subject to customary debt and working capital adjustments, with cash consideration received on divestiture date of $46 million.

On April 10, 2024, we made an early debt repayment of $100 million on our 2023 Dollar Term Facility.

We continue to have success across our turbocharging, hybrid and zero emission technology applications.

In particular, during the quarter, we had an industrial win in power generation with our large size turbo.

We also had our first awards for commercial vehicles with three proof of concept wins for our E-Powertrain.

Our E-Cooling also had commercial vehicle success with 2 additional proof of concept awards.

For the three months ended June 30, 2024, we repurchased $65 million of Common Stock under our share repurchase program.

As of June 30, 2024, we had $176 million of the authorized amount remaining under our share repurchase program.

As previously disclosed, on April 3, 2024, we divested our equity interest in an unconsolidated joint venture for approximately $58 million, subject to customary debt and working capital adjustments.

We received cash consideration on the divestiture date of $46 million, with an additional $7 million still to be received, and recognized a gain of $27 million related to this divestiture.

During the second quarter, we completed an offering of $800 million in aggregate principal amount of 7.75% 2032 Senior Notes and made early debt repayments totaling $985 million on our Euro Term Facility and 2023 Dollar Term Facility, both of which were fully repaid as of June 30, 2024.

Disaggregated Revenue

The following tables show our revenues by geographic region and product line for the three months ended March 31, 2024 and 2023, respectively.

The following tables show our revenues by geographic region and product line for the three and six months ended June 30, 2024 and 2023, respectively.

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

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263 30% 309 30% 515 29% 591 30%

19 2% 18 2% 35 2% 36 2%

$ 890 $ 1,011 $ 1,805 $ 1,981

By Product Line

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

5 unchanged sentences

Total $ 890 $ 1,011 $ 1,805 $ 1,981

Results of Operations for the Three Months Ended March 31, 2024

Results of Operations for the Three and Six Months Ended June 30, 2024

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

1 unchanged sentence

% change compared with prior period (12.0) % (8.9) %

For the three months ended March 31, 2024, net sales decreased compared to prior year by $55 million or 6%, including an unfavorable impact of $8 million or 1% due to foreign currency translation driven by lower Chinese yuan-to-US dollar exchange rates, partially offset by higher Euro-to-US dollar exchange rates.

Net sales decreased mainly due to lower volumes in gasoline, diesel and commercial vehicle applications, partially offset by demand for replacement parts on aftermarket sales.

Net sales further decreased due to pricing decreases, net of inflation pass-through, driven by commodity deflation.

Gasoline product sales decreased by $15 million or 4% (including an unfavorable impact of $5 million or 2% due to foreign currency translation), primarily driven by soft demand in Asia and North America.

The decrease was partially offset by program ramp-ups in Europe and India.

Diesel product sales decreased by $21 million or 8% (including an unfavorable impact of $21 million or 8% due to foreign currency translation), primarily driven by demand softness by OEMs in Europe and partially offset by resilient sales in light commercial vehicle applications in North America.

Commercial vehicle sales decreased by $22 million or 12% (including an unfavorable impact of $3 million or 1% due to foreign currency translation), primarily driven by soft demand in Europe and Asia in the construction industry, partially offset by higher demand in the heavy duty pick-up segment in North America and sustained demand in China linked to the start of production of compressed natural gas programs.

Aftermarket sales increased by $2 million or 2% (including a favorable impact of $2 million or 2% due to foreign currency translation), primarily due to favorable aftermarket conditions and demand for replacement parts in North America, China and Brazil, partially offset by softer sales in Southeast Asia and Australia.

For the three months ended June 30, 2024, net sales compared to prior year decreased by $121 million or 12%, (including an unfavorable impact of $18 million or 2%) due to foreign currency translation driven by lower Euro-to-US dollar, Chinese yuan-to-US dollar, and Japanese yen-to-US dollar exchange rates.

This decrease was mainly driven by demand softness in gasoline, diesel, and commercial vehicles applications, and commodity deflation impact on pricing net of inflation pass-through, partially offset by increased demand for replacement parts on aftermarket sales.

Gasoline product sales decreased by $80 million or 17% (including an unfavorable impact of $9 million or 2% due to foreign currency translation), primarily driven by soft demand in China and North America.

The decrease was partially offset by program ramp-ups in Europe, Japan, and India.

Diesel product sales decreased by $40 million or 15% (including an unfavorable impact of $4 million or 1% due to foreign currency translation), primarily driven by demand softness for passenger vehicles in Europe, partially offset by sustained demand for light commercial vehicles in China and North America.

Commercial vehicle sales decreased by $7 million or 4% (including an unfavorable impact of $4 million or 2% due to foreign currency translation), primarily driven by soft demand in the construction and agriculture industries due to high interest rates and lower crop prices.

This decrease was partially offset by sustained demand in China, linked to ramp-up of compressed natural gas programs.

Aftermarket sales increased by $7 million or 6% (including a unfavorable impact of $1 million or 1% due to foreign currency translation), primarily due to favorable aftermarket conditions and demand for replacement parts in China, North America, and Europe, partially offset by softer sales in Australia.

For the six months ended June 30, 2024, net sales compared to prior year decreased by $176 million or 9% (including an unfavorable impact of $26 million or 1%), due to foreign currency translation driven by lower Chinese yuan-to-US dollar and lower Japanese yen-to-US dollar exchange rates.

This decrease was mainly driven by demand softness in gasoline, diesel, and commercial vehicle applications, and commodity deflation impact on pricing net of inflation pass-through, partially offset by increased demand for replacement parts on aftermarket sales and favorable product mix.

Gasoline product sales decreased by $95 million or 11% (including an unfavorable impact of $14 million or 2% due to foreign currency translation), primarily driven by soft demand in China and North America partially offset by program ramp-ups in Europe, Japan, and India.

Diesel product sales decreased by $61 million or 12% (including an unfavorable impact of $4 million or 1% due to foreign currency translation), primarily driven by soft demand in Europe for passenger vehicles partially offset by sustained demand for light commercial vehicles in China and North America.

Commercial vehicle sales decreased by $29 million or 8% (including an unfavorable impact of $6 million or 2% due to foreign currency translation), primarily driven by soft demand in the construction and agriculture industries mainly in Europe due to high interest rates and lower crop prices.

This decrease was partially offset by sustained demand in China, linked to the ramp-up of compressed natural gas programs.

Aftermarket sales increased by $9 million or 4% (including a unfavorable impact of $2 million or 1% due to foreign currency translation), primarily due to favorable aftermarket conditions and the continued high demand for replacement parts in Europe, China, and North America, partially offset by softer sales in Australia.

Cost of Goods Sold and Gross Profit

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

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(Dollars in millions)

Cost of Goods Sold / Gross Profit for the three months ended March 31, 2023

Cost of Goods Sold / Gross Profit for the three months ended June 30, 2023

Increase/(decrease) due to:

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Foreign exchange rate impacts (9) (9)

Cost of Goods Sold / Gross Profit for the three months ended March 31, 2024

For the three months ended March 31, 2024, cost of goods sold decreased by $38 million primarily driven by $29 million of lower sales volumes, $17 million of commodity, transportation and energy deflation and $10 million of productivity, net of labor inflation and repositioning costs.

These decreases were partially offset by $16 million from unfavorable product mix and $2 million of higher R&D costs, reflecting Garrett's continued investment in new technologies.

Gross profit decreased by $17 million, primarily driven by $12 million from lower sales, $16 million from lower pricing net of inflation recoveries, $11 million from unfavorable product mix and $2 million from higher R&D costs as discussed above.

These decreases were partially offset by $15 million of higher productivity, net of labor inflation and repositioning costs, and $17 million of commodity, transportation and energy deflation.

Foreign currency impacts also contributed to a $8 million decrease in gross profit.

Cost of Goods Sold / Gross Profit for the three months ended June 30, 2024

For the three months ended June 30, 2024, cost of goods sold decreased by $104 million, primarily driven by $78 million of lower sales volumes, $27 million of commodity, transportation, and energy deflation, $18 million of productivity, net of labor inflation, and $9 million from foreign currency impacts.

These decreases were partially offset by $26 million of unfavorable product mix and $2 million of higher R&D costs, reflecting Garrett's continued investment in new technologies.

For the three months ended June 30, 2024, gross profit decreased by $17 million, primarily driven by $34 million of lower sales volumes, $22 million from commodity deflation impact on pricing, net of inflation pass-through, $2 million of higher R&D costs, and $9 million from foreign currency impacts.

These decreases were partially offset by $27 million of commodity, transportation, and energy deflation, $21 million of productivity, net of labor inflation, and $2 million of favorable product mix.

Cost of Goods Sold Gross Profit

(Dollars in millions)

Cost of Goods Sold / Gross Profit for the six months ended June 30, 2023

$ 1,590 $ 391

Increase/(decrease) due to:

Volume (107) (46)

Product mix 43 (9)

Price, net of inflation pass-through — (38)

Commodity, transportation & energy inflation (44) 44

Productivity, net (29) 36

Research & development 4 (4)

Foreign exchange rate impacts (9) (17)

Cost of Goods Sold / Gross Profit for the six months ended June 30, 2024

$ 1,448 $ 357

For the six months ended June 30, 2024, cost of goods sold decreased by $142 million, primarily driven by lower sales volumes of $107 million, $44 million of commodity, transportation, and energy deflation, and $29 million of productivity, net of labor inflation and repositioning costs, and $9 million from foreign currency impacts.

These decreases were partially offset by $43 million unfavorable product mix and $4 million of higher R&D costs, reflecting Garrett's continued investment in new technologies.

For the six months ended June 30, 2024, gross profit decreased by $34 million, primarily driven by $46 million of lower sales, $38 million from commodity deflation impact on pricing net of inflation pass-through, $17 million favorable foreign currency impact, $9 million of unfavorable product mix, and $4 million of higher R&D costs.

These decreases were partially offset by $44 million of commodity, transportation, and energy deflation and $36 million of higher productivity, net of labor inflation and repositioning costs.

Selling, General and Administrative Expenses

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

1 unchanged sentence

% of sales 6.9 % 6.2 % 6.9 % 6.0 %

Selling, general and administrative (“SG&A”) expenses for the three months ended March 31, 2024 increased by $8 million compared with the prior year primarily driven by $4 million of higher stock-based compensation expenses.

SG&A expenses also increased due to $1 million of labor inflation impacts, $2 million of additional professional services costs and $1 million of unfavorable foreign exchange impacts.

Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2024 decreased by $2 million compared with the prior year, mainly driven by $4 million of lower professional service fees partially offset by $2 million of higher bad debt expense.

SG&A expenses also decreased due to $1 million of favorable foreign exchange impact.

SG&A expenses for the six months ended June 30, 2024 increased by $6 million compared with the prior year, primarily due to $5 million of higher stock-based compensation expense, $2 million of higher bad debt expense, and $1 million of labor inflation impacts.

These increases were partially offset by $2 million of lower professional service fees.

Interest Expense

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

Interest expense $ 62 $ 29 $ 93 $ 56

For the three months ended March 31, 2024, interest expense increased by $4 million compared to the prior year, primarily driven by $18 million of additional interest expense from the 2023 Dollar Term Facility and higher interest rates.

This increase in interest expense was partially offset by $6 million of higher gains on our interest derivatives in the current year.

In addition, there were no marked-to-market remeasurement losses recorded during the three months ended March 31, 2024 on our undesignated interest rate swap contracts, in comparison to $7 million of marked-to-market remeasurement losses in the prior year.

Non-operating income

For the three months ended June 30, 2024, interest expense increased by $33 million compared to the prior year.

This was primarily driven by $27 million of accelerated debt issuance cost amortization and $3 million of higher interest expense due to a different notional amount of debt outstanding during the period and higher variable interest rates, partially offset by the spread reduction on the 2021 Dollar Term Facility.

In addition, there were $25 million of marked-to-market remeasurement losses recorded during the three months ended June 30, 2024 on our undesignated interest rate swap contracts, partially offset by $22 million of gains, including settlements of $18 million, on our interest derivatives in the current year.

For the six months ended June 30, 2024, interest expense increased by $37 million compared to the prior year.

This was primarily driven by $27 million of accelerated debt issuance cost amortization, $12 million of interest expense on our 2023 Dollar Term Facility versus none in the first six months of 2023, as well as $7 million of interest expense related to our 2032 Senior Notes.

These increases in interest expense were partially offset by $28 million of gains, including settlements of $18 million, on our interest derivatives in the current year.

In addition, there were $24 million marked-to-market remeasurement losses recorded during the six months ended June 30, 2024 on our undesignated interest rate swap contracts, in comparison to $5 million of marked-to-market remeasurement losses in the prior year.

Non-operating (income) expense

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

Non-operating income $ (5) $ (3)

For the three months ended March 31, 2024, non-operating income amounted to $5 million versus $3 million in the prior year.

The higher non-operating income was primarily due to an increase in foreign exchange transactional gains.

Non-operating (income) expense $ (1) $ 8 $ (6) $ 5

For the three months ended June 30, 2024, we had non-operating income of $1 million versus non-operating expense of $8 million in the prior year.

The increase in non-operating income was primarily driven by foreign exchange transactional gains, partially offset by $2 million of lower equity income due to sale of an equity interest in an unconsolidated joint venture.

For the six months ended June 30, 2024, we had non-operating income of $6 million versus an expense of $5 million in the prior year.

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

1 unchanged sentence

Effective tax rate 26.4 % 29.7 % 22.6 % 27.3 %

The effective tax rates for the three months ended March 31, 2024 and 2023 were 18.5% and 25.0%, respectively.

The change in the effective tax rate for the three months ended March 31, 2024 compared to the prior period is primarily related to reversal of tax reserves and lower U.S.

taxes on international operations, partially offset by increased withholding taxes.

The effective tax rates for the three months ended June 30, 2024 and 2023 were 26.4% and 29.7% , respectively.

The effective tax rates for the six months ended June 30, 2024 and 2023 were 22.5% and 27.3%, respectively.

The change in the effective tax rate for the three months ended June 30, 2024 compared to the prior period is primarily related to lower U.S.

taxes on international operations and lower non-deductible transaction costs, partially offset by tax related to the sale of an equity interest in an unconsolidated joint venture.

The change in the effective tax rate for the six months ended June 30, 2024 compared to the prior period is primarily related to reversal of tax reserves, lower U.S.

taxes on international operations, and lower non-deductible transaction costs, partially offset by tax related to the sale of an equity interest in an unconsolidated joint venture.

In January 2019, the Organization for Economic Co-operation and Development (“OECD”) announced further work in continuation of its Base Erosion and Profit Shifting project, focusing on two “pillars.” Pillar One provides a framework for the reallocation of certain residual profits of multinational enterprises to market jurisdictions where goods or services are used or consumed.

9 unchanged sentences

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

1 unchanged sentence

Net income margin 7.2 % 7.0 % 7.2 % 7.7 %

Net income for the three months ended March 31, 2024 decreased by $15 million compared with the prior year, primarily due to $17 million of decreased gross profit, $8 million of higher SG&A expenses and $4 million of higher interest expense, partially offset by $12 million of lower tax expense, as discussed above.

Net income for the three months ended June 30, 2024 decreased by $7 million compared with the prior year, primarily due to $17 million of decreased gross profit and $33 million of higher interest expense.

These decreases were partially offset by a $27 million gain on the sale of equity interest in an unconsolidated joint venture, $9 million of higher non-operating income, and $7 million of lower tax expense.

Net income for the six months ended June 30, 2024 decreased by $22 million compared with the prior year, primarily due to $34 million of decreased gross profit, $37 million of higher interest expense, and $6 million of higher SG&A expenses.

These decreases were partially offset by a $27 million gain on the sale of equity interest in an unconsolidated joint venture, $11 million of higher non-operating income, and $19 million of lower tax expense.

Non-GAAP Measures

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The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be comparable to other similarly titled measures used by other companies.

Additionally, the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of the Company’s operating results as reported under GAAP.

Additionally, the non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, an analysis of the Company’s operating results as reported under GAAP.

EBITDA and Adjusted EBITDA

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GAAP, plus the sum of interest expense net of interest income, tax expense and depreciation.

We define “Adjusted EBITDA” as EBITDA, plus the sum of stock compensation expense, repositioning costs, discounting costs on factoring, other non-operating income, capital structure transformation expenses, net reorganization items and loss on extinguishment of debt (if any).

We define “Adjusted EBITDA” as EBITDA, plus the sum of stock compensation expense, repositioning costs, foreign exchange (gain) loss on debt net of related hedging gains, discounting costs on factoring, gain on sale of equity investment, acquisition and divestiture expenses, other non-operating income, capital structure transformation expenses, debt refinancing and redemption costs, net reorganization items and loss on extinguishment of debt (if any).

Adjusted EBITDA now adjusts for acquisition and divestiture expenses, and debt refinancing and redemption costs, but no adjustments were made to the prior period as there were no similar adjustments in the prior periods.

We believe that EBITDA and Adjusted EBITDA are important indicators of operating performance and provide useful information for investors because:

4 unchanged sentences

Three Months Ended

Six Months Ended

2024 2023 2024 2023

(Dollars in millions)

6 unchanged sentences

Repositioning costs (3)

Foreign exchange loss on debt, net of related hedging gains (1) — (1) —

Discounting costs on factoring

Gain on sale of equity investment

(27) — (27) —

Other non-operating income (4)

(2) (2) (3) (3)

Acquisition and divestiture expenses (5)

Capital structure transformation expenses (6)

Debt refinancing and redemption costs (7)

Adjusted EBITDA $ 150 $ 170 $ 301 $ 338

(1) Reflects interest income of $2 million and $0 million for the three months ended March 31, 2024 and 2023, respectively.

(1) Reflects interest income of $1 million and $5 million for the three months ended June 30, 2024 and 2023, respectively, and $3 million and $5 million for the six months ended June 30, 2024 and 2023, respectively.

(2) Stock compensation expense includes only non-cash expenses.

1 unchanged sentence

(4) Reflects the non-service component of net periodic pension income.

(5) Reflects the incremental third-party costs incurred for the sale of an equity interest in an unconsolidated joint venture.

(6) Reflects the third-party incremental costs that were directly attributable to the transformation of the Company's capital structure through the partial repurchase and subsequent conversion of the remaining outstanding Series A Preferred Stock into a single class of common stock in June 2023.

Adjusted EBITDA for the Three Months Ended March 31, 2024

For the three months ended March 31, 2024 , net income decreased by $15 million versus the prior year as discussed above within Results of Operations for Three Months Ended March 31, 2024 .

Adjusted EBITDA decreased by $17 million compared to the prior year, mainly due to lower volumes across product lines, unfavorable product mix, pricing net of inflation pass-through, as well as unfavorable foreign exchange impacts.

These decreases were partially offset by strong operational performance through productivity, net of labor inflation and repositioning costs, and commodity, transportation and energy deflation.

During the three months ended March 31, 2024, we saw demand softness for gasoline, diesel and commercial vehicle applications, partially offset by favorable demand in aftermarket for replacement parts in North America, China and Brazil.

Net sales also decreased due to pricing decreases, net of inflation pass-through, driven by commodity deflation.

The increased productivity from our ability to flex our variable cost structure was partially offset by year-over-year labor inflation.

R&D expenses increased $2 million which reflects our continued investment in new technologies, increased hiring to accelerate growth in the zero emission technologies.

Losses in foreign currency from translational, transactional and hedging effects in the three months ended March 31, 2024, primarily driven by a lower Chinese yuan-to-US dollar exchange rates and partially offset by higher Euro-to-US dollar exchange rates versus the prior year period, also accounted for a $7 million decrease in Adjusted EBITDA.

(7) Reflects the third-party costs directly attributable to the repricing of our 2021 Dollar Term Facility.

Adjusted EBITDA for the Three Months Ended June 30, 2024

For the three months ended June 30, 2024 , net income decreased by $7 million versus the prior year as discussed above within Results of Operations for Three and Six Months Ended June 30, 2024 .

Adjusted EBITDA decreased by $20 million compared to the prior year, mainly due to soft demand across product lines except aftermarket, pricing net of inflation pass-through, and unfavorable foreign exchange impacts.

These decreases were partially offset by strong operational performance through productivity, net of labor inflation, as well as commodity, transportation, and energy deflation, and a slightly favorable product mix.

During the three months ended June 30, 2024, we saw soft demand for gasoline, diesel, and commercial vehicle applications, partially offset by favorable demand in aftermarket for replacement parts in North America, China, and Europe.

Net sales also decreased due to pricing, net of inflation pass-through, driven by commodity deflation.

The increased productivity from our ability to flex our variable cost structure, while driving sustained fixed cost productivity was partially offset by year-over-year labor inflation and lower equity income following the sale of an equity interest in an unconsolidated joint venture on April 3, 2024.

R&D expenses increased $2 million, reflecting our continued investment in new technologies and increased hiring to accelerate growth in the zero emission technologies.

Losses in foreign currency from translational, transactional, and hedging effects in the three months ended June 30, 2024, primarily driven by a lower Euro-to-US dollar, lower Chinese yuan-to-US dollar and lower Japanese yen-to-US dollar exchange rates versus the prior year period, accounted for a $7 million decrease in Adjusted EBITDA.

Adjusted EBITDA for the Six Months Ended June 30, 2024

For the six months ended June 30, 2024 , net income decreased by $22 million versus the prior year as discussed above within Results of Operations for Three and Six Months Ended June 30, 2024 .

Adjusted EBITDA decreased by $37 million c ompared to the prior year, mainly due to soft demand across product lines except aftermarket, pricing net of inflation pass-through, and unfavorable foreign exchange impacts and unfavorable

These decreases were partially offset by strong operational performance through productivity, net of labor inflation, and repositioning costs, as well as commodity, transportation, and energy deflation.

During the six months ended June 30, 2024 , we saw demand softness for gasoline, diesel, and commercial vehicle applications, partially offset by favorable demand in aftermarket for replacement parts in North America, China, and Europe.

Net sales also decreased due to pricing decreases, net of inflation pass-through, driven by commodity price decreases.

The increased productivity from our ability to flex our variable cost structure while driving sustained fixed cost productivity was partially offset by year-over-year labor inflation.

R&D expenses increased $4 million, reflecting our continued investment in new technologies, and increased hiring to accelerate growth in the zero emission technologies.

Losses in foreign currency from translational, transactional, and hedging effects in the six months ended June 30, 2024 , primarily driven by a lower Chinese yuan-to-US dollar and lower Japanese yen-to-US dollar exchange rates and partially offset by higher Euro-to-US dollar exchange rates versus the prior year period, accounted for a $14 million decrease in Adjusted EBITDA.

Liquidity and Capital Resources

6 unchanged sentences

Term Loan Facilities - principal outstanding 695 1,696

Senior Notes - principal outstanding 800 —

Bilateral letter of credit facility - available capacity 3 3

Bilateral letter of credit facility - utilized capacity 12 12

During the three months ended March 31, 2024, we repaid $2 million on our 2021 Dollar Term Facility.

On April 10, 2024, we made an early debt repayment of $100 million on our 2023 Dollar Term Facility.

We employ several means to manage our liquidity, and our sources of financing include cash flows from operations, cash and cash equivalents, our Term Loan Facilities, and Revolving Facility.

On May 21, 2024, our wholly owned subsidiaries, Garrett Motion Holdings Inc.

and Garrett LX I S.a.r.l., completed an offering of $800 million in aggregate principal amount of the 2032 Senior Notes.

The 2032 Senior Notes mature on May 31, 2032 and bear interest at a rate of 7.75% per annum.

We incurred $12 million of debt issuance costs, which have been capitalized and will be amortized on a straight-line basis.

On May 21, 2024, we also entered into the Fourth and Fifth Amendments to the Credit Agreement, which (i) removed the credit spread adjustment with respect to certain US dollar denominated term loan borrowings that are Term Benchmark Loans, (ii) reduced the Applicable Rate on certain US dollar denominated term loans to 2.75% for Term Benchmark Loans and 1.75% for ABR Loans, and (iii) increased the maximum borrowings available under the Revolving Facility by $30 million.

During the six months ended June 30, 2024, we repaid $500 million on our 2023 Dollar Term Facility, $485 million (€450 million) on our Euro Term Facility and $4 million on our 2021 Dollar Term Facility.

We employ several means to manage our liquidity, and our sources of financing include cash flows from operations, cash and cash equivalents, the 2032 Senior Notes, our Term Loan Facilities, and our Revolving Facility.

We expect to continue investing in our facilities as we expand our manufacturing capacity for new product launches and invest in new technologies and strategic growth opportunities, in particular in the electrification of drivetrains.

We believe the combination of expected cash flows, the term loan borrowings, and the Revolving Facility being committed until 2028, will provide us with adequate liquidity to support the Company's operations.

We believe the combination of expected cash flows, the term loan borrowings, the 2032 Senior Notes, and the Revolving Facility being committed until 2028, will provide us with adequate liquidity to support the Company's operations.

Share Repurchase Program

On February 13, 2024, the Board of Directors authorized a $350 million share repurchase program valid until December 31, 2024, providing for the purchase of shares of Common Stock.

As of March 31, 2024, the Company had repurchased $109 million of Common Stock, with $241 million remaining under the share repurchase program.

On February 13, 2024, the Board of Directors authorized a $350 million share repurchase program valid until December 31, 2024.

During the six months ended June 30, 2024, the Company repurchased $174 million of Common

Stock, with $176 million remaining under the share repurchase program as of that date.

The Company may repurchase shares from time to time under the program through various methods, including in open market transactions, block trades, privately negotiated transactions, and otherwise.

3 unchanged sentences

Unregistered Sales of Equity Securities and Use of Proceeds .

Cash Flow Summary for the Three Months Ended March 31, 2024

Three Months Ended

Cash Flow Summary for the Six Months Ended June 30, 2024

Six Months Ended

(Dollars in millions)

5 unchanged sentences

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash provided by operating activities decreased by $8 million for the three months ended March 31, 2024 versus the prior year.

$ (161) $ 231

Cash provided by operating activities decreased by $46 million for the six months ended June 30, 2024 versus the prior year.

The decrease was primarily driven by a decrease of $22 million in net income, excluding the effects of non-cash items, as well as $28 million of unfavorable impacts from changes in other assets and liabilities.

These decreases were partially offset by $4 million of favorable impacts from working capital changes.

Cash used for investing activities increased by $20 million for the three months ended March 31, 2024 versus the prior year, mainly due to $24 million of increased expenditures for property, plant and equipment driven by the timing of the capital expenditures.

This was partially offset by $4 million of proceeds received in the current year on our cross currency swap contracts which have been designated as net investment hedges of our Euro-denominated operations.

Cash used for financing activities increased by $68 million for the three months ended March 31, 2024 compared with the prior year.

The increased use of cash for financing activities was primarily driven by $107 million of cash paid for share repurchases in 2024, partially offset by $42 million of payments made in the prior year related to dividends declared on our Series A Preferred Stock.

Cash flow from investing activities increased by $42 million for the six months ended June 30, 2024 versus t he prior year, mainly due to $46 million of proceeds from the sale of equity interest in an unconsolidated joint venture and a $12 million increase in proceeds on our cross currency swap contracts which have been designated as net investment hedges of our Euro-denominated operations.

This was partially offset by $16 million of increased expenditures for property, plant and equipment.

Cash used for financing activities was $384 million for the six months ended June 30, 2024 compared with $2 million in the prior year.

During 2024, we made an aggregate of $989 million in debt repayments on our term loan facilities.

We also made payments of $173 million for Common Stock repurchases, $7 million for debt issuance costs and $9 million for other financing activities.

These payments were partially offset by proceeds of $794 million, net of deferred financing costs, from the issuance of our 2032 Senior Notes.

In comparison, cash used for financing activities for the six months ended June 30, 2023 was primarily driven by payments of $605 million in aggregate to holders of the Series A Preferred Stock related to the Transaction, including conversion of the Series A Preferred Stock, and $42 million for dividends declared on our Series A Preferred Stock.

We also made payments of $15 million for the repurchase of Common Stock under our share repurchase program and debt repayments of $4 million on our 2021 Dollar Term Facility.

These uses of cash were partially offset by proceeds of $667 million from the 2023 Dollar Term Facility net of debt financing costs.

Off-Balance Sheet Arrangements

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Actual results could differ from our estimates and assumptions, and any such differences could be material to our financial statements.

Our critical accounting policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2023 Form 10-K.

Our critical accounting policies are

summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2023 Form 10-K.

Recent Accounting Pronouncements

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All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including without limitation statements regarding the following, are forward-looking statements:

statements regarding our future results of operations and financial position, expectations regarding the growth of the turbocharger and

electric vehicle markets and other industry trends, the sufficiency of our liquidity and capital resources, anticipated impacts of changes in legislation and government policy relating to taxation or otherwise, anticipated sources and uses of cash, anticipated investments in our business, our business strategy, pending litigation, anticipated interest expense, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements .

statements regarding our future results of operations and financial position, expectations regarding the growth of the turbocharger and electric vehicle markets and other industry trends, the sufficiency of our liquidity and capital resources, anticipated impacts of changes in legislation and government policy relating to taxation or otherwise, anticipated sources and uses of cash, anticipated investments in our business, our business strategy, pending litigation, anticipated interest expense, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements .

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis