What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-23 compared with 2026-04-23 · 193 added, 109 removed, 249 unchanged (55% of the section changed)

10 unchanged sentences

the sufficiency of our cash balances and cash generated from operating, investing and financing activities for our future liquidity and capital resource needs;

capital allocation strategies;

our ability to finance sufficient working capital;

and significant matters related to the Modine Transaction, including the expected closing timing and structure thereof, the ability of the parties to complete such transaction and planned actions to satisfy the closing conditions, the expected benefits thereof, the tax consequences thereof, the terms and scope of the expected financing in connection with such transaction, and the combined company’s plans, objectives, expectations and intentions, including integration activities.

and significant matters related to the Modine Transaction, including the expected closing timing and structure thereof, the ability of the parties to complete such transaction and planned actions to satisfy the closing conditions, the expected benefits thereof, the tax consequences thereof and the combined company’s plans, objectives, expectations and intentions, including integration activities.

Reference is made in particular to forward-looking statements included in this “Item 2.

21 unchanged sentences

Gentherm is an independent partner that can cooperate with any combination of the vehicle OEMs and seat manufacturers globally, to create innovative and unique configurations that adapt to industry trends.

IME Acquisition

On July 1, 2026, the Company completed its acquisition of Innovative Medical Equipment, LLC (“IME”).

IME, headquartered in Beachwood, Ohio, is a provider of the ThermaZone ® thermal therapy device.

ThermaZone is a non-opioid thermal therapy solution designed to support pain management and recovery through controlled hot-and-cold therapy.

The Company acquired all of the membership interests in IME for $34.0 million, net of cash and debt, and subject to customary adjustments related to IME’s net working capital as of the closing date.

The purchase price may be increased after closing by up to $1.0 million upon the achievement of a specified performance milestone.

The transaction was funded through a combination of the Company’s existing cash balances and borrowings under the Revolving Credit Facility, as defined below.

Modine Transaction

4 unchanged sentences

Prior to and as a condition of, the Distribution, Modine will receive a cash distribution from SpinCo of $210.0 million subject to adjustment for cash, working capital and indebtedness of SpinCo, and subject to decrease if additional shares of Common Stock will be issued to Modine shareholders to support the intended tax-free treatment of the Distribution to Modine shareholders for U.S.

federal income tax purposes.

The transaction is expected to close in the fourth quarter of 2026, subject to various closing conditions, including specified approvals by the Company’s shareholders, completion of financing for SpinCo, a customary IRS tax ruling, receipt of required regulatory approvals and the satisfaction of other customary closing conditions.

The Merger Agreement also contains specified termination rights for the Company and Modine, including a right allowing the Company or Modine to terminate the Merger Agreement if the Merger has not been consummated on or prior to March 31, 2027 (which date may be extended to June 30, 2027 in the event that required regulatory approvals have not been received).

federal income tax purposes (the “SpinCo Cash Distribution”).

The transaction is expected to close by early fourth quarter of 2026, subject to various closing conditions, including specified approvals by the Company’s shareholders, a customary IRS tax ruling and the satisfaction of other customary closing conditions.

The Merger Agreement contains specified termination rights for the Company and Modine, including a right allowing the Company or Modine to terminate the Merger Agreement if the Merger has not been consummated on or prior to March 31, 2027 (which date may be extended to June 30, 2027 in the event that required regulatory approvals have not been received).

Additionally, the Merger Agreement requires the Company to pay Modine a termination fee of $45.0 million if the Merger Agreement is terminated under certain circumstances.

In connection with the Merger Agreement, the Company, SpinCo and a financial institution executed a 364-day bridge loan facility commitment letter, pursuant to which such financial institution committed (i) to provide bridge financing of $290.0 million to fund dividends, fees and expenses related to the transactions contemplated by the Merger Agreement (“Bridge Facility”) and (ii) to the Company a backstop of the Second Amended and Restated Credit Agreement (as defined below) (“Backstop Commitment”).

On February 24, 2026, the Company amended the Second Amended and Restated Credit Agreement to permit the Modine Transaction, which terminated the Backstop Commitment.

The Bridge Facility remains available but is expected to be replaced with permanent financing.

During the three months ended March 31, 2026, the Company incurred $3.0 million of fees associated with the Bridge Financing and Backstop Commitment.

In connection with the Merger Agreement, the Company, SpinCo and a financial institution executed a 364-day bridge loan facility commitment letter, pursuant to which such financial institution committed (i) to provide bridge financing of $290.0 million to fund dividends, fees and expenses related to the transactions contemplated by the Merger Agreement (“Bridge Facility”) and (ii) to the Company a backstop of the Company’s credit agreement (“Backstop Commitment”).

On February 24, 2026, the Company amended its credit agreement to permit the Modine Transaction, which terminated the Backstop Commitment.

On June 29, 2026, SpinCo replaced the Bridge Facility with permanent financing by entering into a credit agreement, providing for a delayed-draw term loan facility with aggregate commitments of up to $250.0 million (the "Senior Credit Facility").

Borrowings under the Senior Credit Facility are expected to be funded on the closing date of the Modine Transaction and used to fund the SpinCo Cash Distribution and to pay certain other amounts required under the Merger Agreement.

During the three and six months ended June 30, 2026, the Company incurred $2.1 million and $5.1 million, respectively, of fees associated with the Bridge Facility, Backstop Commitment and Senior Credit Facility.

Such fees are recorded in Selling, general and administrative expenses.

6 unchanged sentences

In February 2026, the Supreme Court of the U.S.

issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act.

The ultimate availability, timing, and amount of any potential refunds of such tariffs remain uncertain and are subject to further legal, regulatory, and administrative developments.

issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act (“IEEPA”).

During the second quarter of 2026, we submitted claims for refunds of IEEPA tariffs previously paid.

Refunds received through June 30, 2026 were not material.

presidential administration subsequently invoked additional tariffs under other laws resulting in a rapidly changing tariff environment.

At this time we cannot reasonably estimate the total financial impact of this ruling.

Further, it is reasonably possible that

new or additional tariffs will be periodically announced in the future given the current global trade environment.

Further, it is reasonably possible that new or additional tariffs will be periodically announced in the future given the current global trade environment.

We continue to monitor and evaluate the direct and indirect impacts of these tariffs and heightened global trade disputes.

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We are taking and will continue to take additional actions to mitigate any direct and indirect impacts.

For the three months ended March 31, 2026, the additional tariffs did not have a material impact on our results of operations, financial position, and cash flows.

For the six months ended June 30, 2026, the additional tariffs did not have a material impact on our results of operations, financial position, and cash flows.

Global Conditions

11 unchanged sentences

These conflicts have interrupted ocean freight shipping and if prolonged or intensified, could have a substantial adverse effect on our financial results.

Further, it is reasonably possible that certain political pressures, such as changes to international trade agreements, increases in tariffs, import quotas or other trade restrictions or actions, including export controls and other retaliatory responses to such actions, could continue to affect the operations of our OEM customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions.

Further, it is reasonably possible that certain political pressures, such as changes to international trade agreements, increases in tariffs, import quotas or other trade restrictions or actions, including export controls and other retaliatory responses to such actions, could continue to affect the operations of our suppliers and OEM customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions.

See “—Tariffs and Global Trade Environment” above for further information on the impact of tariffs and the global trade environment.

2 unchanged sentences

Our sales are driven by the number of vehicles produced by the automotive manufacturers, which is ultimately dependent on consumer demand for automotive vehicles, our content per vehicle, and other factors that may limit or otherwise impact production by us, our supply chain and our customers.

According to the forecasting firm S&P Global Mobility (April 2026 release), global light vehicle production in the three months ended March 31, 2026, in the Company’s key markets of North America, Europe, China, Japan and South Korea, as compared to the three months ended March 31, 2025, are shown below (in millions of units):

Three Months Ended March 31,

According to the forecasting firm S&P Global Mobility (July 2026 release), global light

vehicle production in the three and six months ended June 30, 2026, in the Company’s key markets of North America, Europe, China, Japan and South Korea, as compared to the three and six months ended June 30, 2025, are shown below (in millions of units):

Three Months Ended June 30,

Six Months Ended June 30,

North America

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Total light vehicle production volume in key markets

The S&P Global Mobility (April 2026 release) forecasted light vehicle production volume in the Company’s key markets for full year 2026 to decrease to 75.9 million units, a 2.1% decrease from full year 2025 light vehicle production volumes.

The S&P Global Mobility (July 2026 release) forecasted light vehicle production volume in the Company’s key markets for full year 2026 to decrease to 75.5 million units, a 2.6% decrease from full year 2025 light vehicle production volumes.

Forecasted light vehicle production volumes are a component of the data we use in forecasting future business.

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We believe that innovation is an important element to gaining market acceptance of our products and strengthening our market position.

During the first quarter of 2026, we secured automotive new business awards totaling $395 million.

During the second quarter of 2026, we secured automotive new business awards totaling $690 million.

Automotive new business awards represent the aggregate projected lifetime revenue of new awards provided by our customers to Gentherm in the applicable period, with the value based on the price and volume projections received from each customer as of the award date.

Although automotive new business awards are not firm customer orders, we believe that automotive new business awards are an indicator of future revenue.

Automotive new business awards are not projections of revenue or future business as of March 31, 2026, the date of this Report or any other date.

Automotive new business awards are not projections of revenue or future business as of June 30, 2026, the date of this Report or any other date.

Customer projections regularly change over time, and we do not update our calculation of any automotive new business award after the date initially communicated.

Automotive new business awards in the first quarter of 2026 also do not reflect, in particular, the impact of macroeconomic and geopolitical challenges on future business.

Automotive new business awards in the second quarter of 2026 also do not reflect, in particular, the impact of macroeconomic and geopolitical challenges on future business.

Revenues resulting from automotive new business awards also are subject to additional risks and uncertainties that are included in this Report or incorporated by reference in “Forward-Looking Statements” above.

Stock Repurchase Program

In June 2024, the Board of Directors authorized a stock repurchase program (the “2024 Stock Repurchase Program”) to commence upon expiration of the Company’s prior stock repurchase program on June 30, 2024.

Under the 2024 Stock Repurchase Program, the Company is authorized to repurchase up to $150.0 million of its issued and outstanding Common Stock over a three-year period, expiring June 30, 2027.

Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations.

During the three months ended March 31, 2026 and 2025, the Company did not repurchase any shares.

The 2024 Stock Repurchase Program had $110.1 million of repurchase authorization remaining as of March 31, 2026.

In June 2024, the Board of Directors (the “Board”) authorized a stock repurchase program (the “2024 Stock Repurchase Program”) to commence upon expiration of the Company’s prior stock repurchase program on June 30, 2024.

Under the 2024 Stock Repurchase Program, the Company was authorized to repurchase up to $150.0 million of its issued and outstanding Common Stock over a three-year period, expiring June 30, 2027.

In July 2026, the Board terminated the 2024 Stock Repurchase Program and authorized a new stock repurchase program (the “2026 Stock Repurchase Program”), pursuant to which the Company is authorized to repurchase up to $400.0 million of its issued and outstanding Common Stock over a three-year period, expiring July 27, 2029.

At the time of termination, the 2024 Stock Repurchase Program had $110.1 million of share repurchase authorization remaining.

During the three and six months ended June 30, 2026, the Company did not repurchase any shares.

During the three and six months ended June 30, 2025, the Company repurchased $10.0 million under the 2024 Stock Repurchase Program with an average price paid per share of $26.24.

Reportable Segments

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Automotive and Medical.

See Note 15, “Segment Reporting,” to the consolidated condensed financial statements included in this Report for a description of our reportable segments as

well as their proportional contribution to the Company’s reported product revenues, significant segment expenses, operating income, and depreciation and amortization.

See Note 15, “Segment Reporting,” to the consolidated condensed financial statements included in this Report for a description of our reportable segments as well as their proportional contribution to the Company’s reported product revenues, significant segment expenses, operating income, and depreciation and amortization.

Consolidated Results of Operations

The results of operations for the three months ended March 31, 2026 and 2025, in thousands, were as follows:

Three Months Ended March 31,

The results of operations for the three and six months ended June 30, 2026 and 2025, in thousands, were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

(Unfavorable)

Product revenues

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Income tax expense

Net income (loss)

Product revenues by product category, in thousands, for the three months ended March 31, 2026 and 2025, were as follows:

Three Months Ended March 31,

Product revenues by product category, in thousands, for the three and six months ended June 30, 2026 and 2025, were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Climate Control Seats

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Product Revenues

Below is a summary of our product revenues, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our product revenues, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

Variance Due To:

1 unchanged sentence

Product revenues

Product revenues for the three months ended March 31, 2026 increased 11.3% as compared to the three months ended March 31, 2025.

Product revenues for the three months ended June 30, 2026 increased 11.0% as compared to the three months ended June 30, 2025.

The increase in product revenues is due to favorable automotive volumes and favorable foreign currency impacts primarily attributable to the Chinese Renminbi and the Euro, partially offset by unfavorable pricing and unfavorable currency impacts primarily attributable to the Korean Won.

Below is a summary of our product revenues, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

Variance Due To:

(Unfavorable)

Product revenues

Product revenues for the six months ended June 30, 2026 increased 11.1% as compared to the six months ended June 30, 2025.

The increase in product revenues is due to favorable automotive volumes and favorable foreign currency impacts primarily attributable to the Euro and the Chinese Renminbi, partially offset by unfavorable pricing and unfavorable currency impacts primarily attributable to the Korean Won.

Cost of Sales

Below is a summary of our cost of sales and gross margin, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our cost of sales and gross margin, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

Variance Due To:

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of product revenues

Cost of sales for the three months ended March 31, 2026 increased 10.9% as compared to the three months ended March 31, 2025.

The increase in cost of sales is primarily due to higher automotive volumes, unfavorable foreign currency impacts primarily attributable to the Euro, Mexican Peso, Czech Koruna and the Chinese Renminbi, higher quality costs and higher labor costs, partially offset by material purchasing savings and lower freight costs.

Cost of sales for the three months ended June 30, 2026 increased 12.1% as compared to the three months ended June 30, 2025.

The increase in cost of sales is primarily due to higher automotive volumes, unfavorable foreign currency impacts primarily attributable to the Chinese Renminbi, Mexican Peso, Czech Koruna and the Euro, specific-cause warranty provisions related to products shipped in prior periods and higher labor costs, partially offset by material purchasing savings.

Below is a summary of our cost of sales and gross margin, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

Variance Due To:

(Unfavorable)

Cost of sales

Gross margin - Percentage

of product revenues

Cost of sales for the six months ended June 30, 2026 increased 11.5% as compared to the six months ended June 30, 2025.

The increase in cost of sales is primarily due to higher automotive volumes, unfavorable foreign currency impacts primarily attributable to the Mexican Peso, Euro, Chinese Renminbi and the Czech Koruna, specific-cause warranty provisions related to products shipped in prior periods and higher labor costs, partially offset by material purchasing savings.

Net Research and Development Expenses

Below is a summary of our net research and development expenses, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our net research and development expenses, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Unfavorable)

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Percentage of product revenues

Net research and development expenses for the three months ended March 31, 2026 decreased 1.1% as compared to the three months ended March 31, 2025.

The decrease in net research and development expenses is primarily related to higher customer reimbursements in the current year, partially offset by higher employee compensation.

Net research and development expenses for the three months ended June 30, 2026 increased 6.7% as compared to the three months ended June 30, 2025.

The increase in net research and development expenses is primarily related to unfavorable foreign currency impacts primarily attributable to the Chinese Renminbi and the Euro and lower customer reimbursements.

Below is a summary of our net research and development expenses, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Research and development expenses

Reimbursed research and development expenses

Net research and development expenses

Percentage of product revenues

Net research and development expenses for the six months ended June 30, 2026 increased 2.7% as compared to the six months ended June 30, 2025.

The increase in net research and development expenses is primarily related to unfavorable foreign currency impacts primarily attributable to the Euro and the Chinese Renminbi.

Selling, General and Administrative Expenses

Below is a summary of our selling, general and administrative expenses, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our selling, general and administrative expenses, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Unfavorable)

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Percentage of product revenues

Selling, general and administrative expenses for the three months ended March 31, 2026 increased 43.7% as compared to the three months ended March 31, 2025.

Merger and acquisition expenses, primarily related to the Modine Transaction, were $14.8 million for the three months ended March 31, 2026.

The remaining increase in selling, general and administrative expenses is primarily related to higher expenses for information technology and utilities and unfavorable foreign currency impacts primarily attributable to the Euro.

Selling, general and administrative expenses for the three months ended June 30, 2026 increased 35.6% as compared to the three months ended June 30, 2025.

Merger and acquisition expenses, primarily related to the Modine Transaction, were $12.9 million for the three months ended June 30, 2026.

The remaining increase in selling, general and administrative expenses is primarily related to higher expenses for information technology and unfavorable foreign currency impacts primarily attributable to the Mexican Peso, Euro and the Chinese Renminbi.

Below is a summary of our selling, general and administrative expenses, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Selling, general and administrative expenses

Percentage of product revenues

Selling, general and administrative expenses for the six months ended June 30, 2026 increased 39.5% as compared to the six months ended June 30, 2025.

Merger and acquisition expenses, primarily related to the Modine Transaction, were $27.7 million for the six months ended June 30, 2026.

Restructuring Expenses, net

Below is a summary of our restructuring expenses, net, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our restructuring expenses, net, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Unfavorable)

Restructuring expenses, net

During the three months ended March 31, 2026, the Company recognized expenses of $5.5 million for employee separation costs and $1.2 million for other costs.

During the three months ended March 31, 2025, the Company recognized expenses of $4.2 million for employee separation costs and $0.3 million for other costs.

During the three months ended June 30, 2026, the Company recognized expenses of $4.4 million for employee separation costs and $1.6 million for other costs.

During the three months ended June 30, 2025, the Company recognized expenses of $1.5 million for employee separation costs and $0.7 million for other costs.

Below is a summary of our restructuring expenses, net, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Restructuring expenses, net

During the six months ended June 30, 2026, the Company recognized expenses of $9.9 million for employee separation costs and $2.8 million for other costs.

During the six months ended June 30, 2025, the Company recognized expenses of $5.7 million for employee separation costs and $1.0 million for other costs.

See Note 3, “Restructuring,” to the consolidated condensed financial statements included in this Report for additional information.

Loss on Sale of Land and Building, net

Below is a summary of our loss on sale of land and building, net, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our loss on sale of land and building, net, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Loss on sale of land and building, net

Loss on sale of land and building, net for the three months ended March 31, 2025 is primarily related to the sale of our former headquarters building in Northville, Michigan in January 2025.

Loss on sale of land and building, net for the six months ended June 30, 2025 is primarily related to the sale of our former headquarters building in Northville, Michigan in January 2025.

Interest Expense, net

Below is a summary of our interest expense, net, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our interest expense, net, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Unfavorable)

Interest expense, net

Interest expense, net for the three months ended March 31, 2026 decreased 25.9% as compared to the three months ended March 31, 2025.

The decrease in interest expense, net is primarily related to a lower balance and lower interest rate on the Revolving Credit Facility.

Interest expense, net for the three months ended June 30, 2026 decreased 18.6% as compared to the three months ended June 30, 2025.

The decrease in interest expense, net is primarily related to a lower interest rate on the Revolving Credit Facility during the three-month period and the impact of a change in fair value of interest rate swap in the prior year period.

Below is a summary of our interest expense, net, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Interest expense, net

Interest expense, net for the six months ended June 30, 2026 decreased 22.0% as compared to the six months ended June 30, 2025.

The decrease in interest expense, net is primarily related to a lower interest rate on the Revolving Credit Facility during the six-month period and the impact of a change in fair value of interest rate swap in the prior year period.

Foreign Currency Loss

Below is a summary of our foreign currency loss, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our foreign currency loss, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Unfavorable)

Foreign currency loss

Foreign currency loss for the three months ended March 31, 2026 included net realized foreign currency loss of $0.3 million and net unrealized foreign currency loss of $0.8 million.

Foreign currency loss for the three months ended March 31, 2025 included net realized foreign currency loss of $0.7 million and net unrealized foreign currency loss of $9.6 million.

Foreign currency loss for the three months ended June 30, 2026 included net realized foreign currency loss of $0.8 million and net unrealized foreign currency gain of $0.6 million.

Foreign currency loss for the three months ended June 30, 2025 included net realized foreign currency gain of $1.4 million and net unrealized foreign currency loss of $18.9 million.

The unrealized foreign currency loss is primarily related to a non-current intercompany U.S.

dollar receivable at one of our foreign subsidiaries.

Below is a summary of our foreign currency loss, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Foreign currency loss

Foreign currency loss for the six months ended June 30, 2026 included net realized foreign currency loss of $1.1 million and net unrealized foreign currency loss of $0.2 million.

Foreign currency loss for the six months ended June 30, 2025 included net realized foreign currency gain of $0.7 million and net unrealized foreign currency loss of $28.5 million.

The unrealized foreign currency loss is primarily related to a non-current intercompany U.S.

dollar receivable at one of our foreign subsidiaries.

Other Income (Loss)

Below is a summary of our other income (loss), in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our other income, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Unfavorable)

Other income for the three months ended June 30, 2026 increased as compared to other income for the three months ended June 30, 2025, due to income from an equity investment.

Below is a summary of our other income (loss), in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Other income (loss)

Other income for the three months ended March 31, 2026 increased as compared to other loss for the three months ended March 31, 2025, primarily due to a write-down of an equity investment in the prior year period.

Other income for the six months ended June 30, 2026 increased as compared to other loss for the six months ended June 30, 2025, primarily due to a fair value adjustment of an equity investment in the prior year period.

Income Tax Expense

Below is a summary of our income tax expense, in thousands, for the three months ended March 31, 2026 and 2025:

Three Months Ended March 31,

Below is a summary of our income tax expense, in thousands, for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Unfavorable)

Income tax expense

Income tax expense was $3.4 million for the three months ended March 31, 2026 on earnings before income tax of $7.6 million, representing an effective tax rate of 44.6%.

Income tax expense was $2.9 million for the three months ended June 30, 2026 on earnings before income tax of $7.3 million, representing an effective tax rate of 39.7%.

The effective tax rate differed from the U.S.

Federal statutory rate of 21.0% primarily due to the impact of income taxes on foreign earnings taxed at rates varying from the U.S.

Federal statutory rate, unfavorable tax effects of the vesting of stock based compensation awards and the unfavorable impact of global intangible low-tax income.

Income tax expense was $2.2 million for the three months ended March 31, 2025 on earnings before income tax of $2.1 million, representing an effective tax rate of 106.1%.

Federal statutory rate and the unfavorable impact of transactions costs incurred in connection with the Modine Transaction.

Income tax expense was $2.1 million for the three months ended June 30, 2025 on earnings before income tax of $2.5 million, representing an effective tax rate of 81.2%.

The effective tax rate differed from the U.S.

Federal statutory rate of 21.0% primarily due to unfavorable tax effects of the vesting of stock based compensation awards and a valuation allowance established in the U.S.

Federal statutory rate of 21.0% primarily due to the impact of income taxes on foreign earnings taxed at rates varying from the U.S.

Federal statutory rate and the unfavorable impact of global intangible low-tax income (“GILTI”).

Below is a summary of our income tax expense, in thousands, for the six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(Unfavorable)

Income tax expense

Income tax expense was $6.3 million for the six months ended June 30, 2026 on earnings before income tax of $14.9 million, representing an effective tax rate of 42.2%.

The effective tax rate differed from the U.S.

Federal statutory rate of 21.0% primarily due to the impact of income taxes on foreign earnings taxed at rates varying from the U.S.

Federal statutory rate and the unfavorable impact of transactions costs incurred in connection with the Modine Transaction.

Income tax expense was $4.3 million for the six months ended June 30, 2025 on earnings before income tax of $4.6 million, representing an effective tax rate of 92.4%.

The effective tax rate differed from the U.S.

Federal statutory rate of 21.0% primarily due to the unfavorable impact of GILTI, unfavorable tax effects of equity vesting and a valuation allowance established in the U.S.

related to a capital loss carryforward.

Liquidity and Capital Resources

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings available under our Second Amended and Restated Credit Agreement (defined below).

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings available under our Credit Agreement (defined below).

Our cash requirements consist principally of working capital, capital expenditures, research and development, operating lease payments, income tax payments and general corporate purposes.

1 unchanged sentence

Further, we continuously evaluate acquisition and investment opportunities that will enhance our business strategies.

As of March 31, 2026, the Company had $177.4 million of cash and cash equivalents and $278.1 million of availability under our Second Amended and Restated Credit Agreement.

As of June 30, 2026, the Company had $213.2 million of cash and cash equivalents and $289.1 million of availability under our Credit Agreement.

We may issue debt or equity securities, which may provide an additional source of liquidity.

However, there can be no assurance equity or debt financing will be available to us when we need it or, if available, the terms will be satisfactory to us and not dilutive to our then-current shareholders.

We continue to expect to be able to move funds between different countries to manage our global liquidity needs without material adverse tax implications, subject to current monetary policies and the terms of the Second Amended and Restated Credit Agreement.

We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan repayments and other distributions and advances to provide the funds necessary to meet our global liquidity needs.

There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Gentherm Incorporated.

As of March 31, 2026, the Company’s cash and cash equivalents held by our non-U.S.

As of June 30, 2026, the Company’s cash and cash equivalents held by our non-U.S.

subsidiaries totaled $165.6 million.

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however, based on our current liquidity needs and strategies, we do not anticipate a need to accrue and pay such additional amounts.

We currently believe that our cash and cash equivalents, borrowings available under the Second Amended and Restated Credit Agreement and cash flows from operations will be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future.

We currently believe that our cash and cash equivalents, borrowings available under the Credit Agreement and cash flows from operations will be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future.

Cash and Cash Flows

The following table represents our cash and cash equivalents, in thousands:

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents at beginning of period

Net cash used in operating activities

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Foreign currency effect on cash and cash equivalents

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Cash Flows From Operating Activities

Net cash used in operating activities totaled $5.0 million during the three months ended March 31, 2026 primarily reflecting $26.3 million related to changes in accounts receivable, net, $10.3 million related to changes in inventory, $5.1 million related to changes in net other assets and liabilities and $5.1 million for non-cash deferred income taxes, partially offset by net income of $4.2 million, $18.9 million for non-cash charges for depreciation, amortization, stock based compensation, loss on disposition of property, provisions for inventory and other non-cash items, including unrealized foreign currency loss, and $18.7 million related to changes in accounts payable.

Net cash provided by operating activities totaled $2.3 million during the six months ended June 30, 2026 primarily reflecting net income of $8.6 million, $40.3 million for non-cash charges for depreciation, amortization, stock based compensation, loss on disposition of property and equipment, provisions for inventory and other non-cash items, including unrealized foreign currency (gain) loss, $16.2 million related to changes in accounts payable, and $8.3 million related to changes in net other assets and liabilities, partially offset by $58.1 million related to changes in accounts receivable, net, $8.6 million for non-cash deferred income taxes, and $4.4 million related to changes in inventory.

Cash Flows From Investing Activities

Net cash used in investing activities was $5.7 million during the three months ended March 31, 2026, primarily reflecting purchases of property and equipment of $5.7 million.

Net cash used in investing activities was $14.4 million during the six months ended June 30, 2026, primarily reflecting purchases of property and equipment of $14.2 million and investments in technology companies of $0.2 million.

Cash Flows From Financing Activities

Net cash provided by financing activities was $28.1 million during the three months ended March 31, 2026, reflecting the borrowing of debt of $65.0 million partially offset by $35.0 million of debt repayments and $1.9 million paid for employee taxes related to the net settlement of restricted stock units that vested during the year.

The following table summarizes the Company’s debt, in thousands, as of March 31, 2026 and December 31, 2025:

March 31, 2026

Net cash provided by financing activities was $65.9 million during the six months ended June 30, 2026, reflecting the borrowing of debt of $142.0 million partially offset by $71.1 million of debt repayments, $2.7 million paid for financing new loans and $2.3 million paid for employee taxes related to the net settlement of restricted stock units that vested during the year.

The following table summarizes the Company’s debt, in thousands, as of June 30, 2026 and December 31, 2025:

June 30, 2026

December 31, 2025

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Credit Agreement

Gentherm, together with certain of its subsidiaries, maintain a revolving credit note (the “Revolving Credit Facility”) under its Second Amended and Restated Credit Agreement with a consortium of lenders and Bank of America, N.A.

as administrative agent (as amended by the First Amendment described below, the “Second Amended and Restated Credit Agreement”).

The Second Amended and Restated Credit Agreement was entered into on June 10, 2022 and amends and restates in its entirety the Amended and Restated Credit Agreement dated June 27, 2019, by and among Gentherm, certain of its direct and indirect subsidiaries, the lenders party thereto and the Agent.

The Second Amended and Restated Credit Agreement has a maximum borrowing capacity of $500 million and matures on June 10, 2027.

The Second Amended and Restated Credit Agreement contains covenants, that, among other things, (i) prohibit or limit the ability of the borrowers and any material subsidiary to incur additional indebtedness, create liens, pay dividends, make certain types of investments (including acquisitions), enter into certain types of transactions with affiliates, prepay other indebtedness, sell assets or enter into certain other transactions outside the ordinary course of business, and (ii) require that Gentherm maintain a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Net Leverage Ratio (based on consolidated EBITDA for the applicable trailing four fiscal quarters) as of the end of any fiscal quarter.

On February 24, 2026, the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement (the “First Amendment”).

The First Amendment amends the Second Amended and Restated Credit Agreement to i) permit the Modine Transaction, ii) permit the incurrence, issuance or assumption of up to $400 million of additional term indebtedness in connection with the Modine Transaction, iii) release and/or remove certain borrower and guarantor entities that no longer exist or will be liquidated and iv) remove the credit spread adjustments related to the SOFR and Sterling Overnight Index Average rates.

As of March 31, 2026, the Company was in compliance with the terms of the Second Amended and Restated Credit Agreement.

Gentherm, together with certain of its subsidiaries, maintain a revolving credit note (the “Revolving Credit Facility”) under its Third Amended and Restated Credit Agreement with a consortium of lenders and Bank of America, N.A.

as administrative agent (as amended by the Second Amendment described below, the “Credit Agreement”).

The Credit Agreement was entered into on June 29, 2026 and amends and restates in its entirety the Second Amended and Restated Credit Agreement dated June 10, 2022, by and among Gentherm, certain of its direct and indirect subsidiaries, the lenders party thereto and the Agent.

The Credit Agreement has a maximum borrowing capacity of $550 million and matures on June 29, 2031.

The Credit Agreement contains covenants, that, among other things, (i) prohibit or limit the ability to incur additional indebtedness, create liens, pay dividends, make certain types of investments, enter into certain types of transactions with affiliates, prepay other indebtedness, sell assets or enter into certain other transactions outside the ordinary course of business, and (ii) require that Gentherm maintain a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Net Leverage Ratio (based on consolidated EBITDA for the applicable trailing four fiscal quarters) as of the end of any fiscal quarter.

The Credit Agreement also contains customary events of default.

As of June 30, 2026, the Company was in compliance with the terms of the Credit Agreement.

Modine Transaction

In connection with the Merger Agreement, Gentherm, SpinCo and a financial institution executed a 364-day bridge loan facility commitment letter, pursuant to which such financial institution committed to provide the Bridge Facility and the Backstop Commitment.

On February 24, 2026, the Company entered into the First Amendment, which terminated the Backstop Commitment.

The Bridge Facility remains available but is expected to be replaced with permanent financing.

If the Modine Transaction is consummated, any indebtedness incurred by SpinCo under the Bridge Facility or the permanent financing will become indebtedness of a wholly owned subsidiary of the Company.

On February 24, 2026, the Company amended its credit agreement to permit the Modine Transaction, which terminated the Backstop Commitment.

If the Modine Transaction is consummated, any indebtedness incurred by SpinCo will become indebtedness of a wholly owned subsidiary of the Company.

Material Cash Requirements

In February 2026, we committed to a restructuring plan to realign our operating model and organizational structure to deliver on

key financial and operational priorities.

We expect to incur cash restructuring costs of between $8.5 million and $9.5 million for employee severance costs.

In February 2026, we committed to a restructuring plan to realign our operating model and organizational structure to deliver on key financial and operational priorities.

We expect to incur cash restructuring costs of between $9.0 million and $9.5 million for employee separation costs.

In July 2025, we committed to a restructuring plan to further optimize our manufacturing footprint by realigning our global manufacturing capacity.

We expect to incur cash restructuring costs of between $3 million and $4 million for employee severance and retention costs and $1 million of other transition costs primarily for machinery and equipment move and set up costs.

We expect to incur cash restructuring costs of between $3 million and $4 million for employee separation and retention costs and $1 million of other transition costs primarily for machinery and equipment move and set up costs.

Additionally, we expect to incur capital expenditures of between $1 million and $2 million.

In February 2025, we committed to a restructuring plan to further optimize our manufacturing footprint by realigning our manufacturing capacity in Europe.

We expect to incur cash restructuring costs of between $4 million and $6 million for employee severance and retention costs and between $2 million and $3 million of other transition costs primarily for machinery and equipment move and set up costs.

We expect to incur cash restructuring costs of between $4 million and $6 million for employee separation and retention costs and between $2 million and $3 million of other transition costs primarily for machinery and equipment move and set up costs.

Additionally, we expect to incur capital expenditures of between $1 million and $2 million.

See Note 3, “Restructuring,” to the consolidated condensed financial statements included in this Report for additional information regarding these plans.

Except as described above and the requirements for the Modine Transaction described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report, there have been no material changes in our cash requirements since December 31, 2025, the end of fiscal year 2025.

Except as described above and the requirements for the Modine Transaction and the acquisition of IME described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report, there have been no material changes in our cash requirements since December 31, 2025, the end of fiscal year 2025.

See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding our material cash requirements.

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For discussion of our significant accounting policies, see Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no significant changes in our critical accounting policies or critical accounting estimates during the three months ended March 31, 2026.

There have been no significant changes in our critical accounting policies or critical accounting estimates during the three months ended June 30, 2026.

We are not presently aware of any events or circumstances that would require us to update our estimates, assumptions or revise the carrying value of our assets or liabilities.

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The Company is exposed to various market risks including, but not limited to, changes in foreign currency exchange rates, changes in interest rates and price fluctuations of certain material commodities.

Market risks for changes in interest rates relate primarily to the Company's debt obligations under the Second Amended and Restated Credit Agreement.

Market risks for changes in interest rates relate primarily to the Company's debt obligations under the Credit Agreement.

Foreign currency exchange risks are attributable to sales to foreign customers and purchases from foreign suppliers not denominated in a location’s functional currency, foreign plant operations, intercompany indebtedness, acquisitions denominated in foreign currencies, intercompany investments and include exposures to the Euro, Mexican Peso, Hungarian Forint, North Macedonian Denar, Ukrainian Hryvnia, Japanese Yen, Chinese Renminbi, Korean Won, Czech Koruna, Vietnamese Dong and Moroccan Dirham.

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For derivative contracts that can be classified as a cash flow hedge, the effective portion of the change in the fair value of the derivative is recorded to accumulated other comprehensive loss in the consolidated condensed balance sheets.

When the underlying hedge transaction is realized, the gain or loss included in accumulated other comprehensive loss is recorded in earnings in the consolidated condensed statements of income (loss) on the same line as the hedged item.

Cash flows associated with derivatives are reported in net cash provided by operating activities in the Company’s consolidated statements of cash flows.

Information related to the fair values of all derivative instruments in the consolidated condensed balance sheet as of March 31, 2026 is set forth in Note 10, “Financial Instruments” in the consolidated condensed financial statements included in this Report.

Information related to the fair values of all derivative instruments in the consolidated condensed balance sheet as of June 30, 2026 is set forth in Note 10, “Financial Instruments” in the consolidated condensed financial statements included in this Report.

Interest Rate Sensitivity

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Variable rate

Variable interest rate as of March 31, 2026

Based on the amounts outstanding as of March 31, 2026, a hypothetical 100 basis point change (increase or decrease) in interest rates would impact annual interest expense by $2.2 million.

Variable interest rate as of June 30, 2026

Based on the amounts outstanding as of June 30, 2026, a hypothetical 100 basis point change (increase or decrease) in interest rates would impact annual interest expense by $2.6 million.

To hedge the Company's exposure to interest payment fluctuations on a portion of these borrowings, we entered into floating-to-fixed interest rate swap agreements with notional amounts totaling $100.0 million.

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The table below presents the potential gain and loss in fair value for the foreign currency derivative contracts from a hypothetical 10% change in quoted currency exchange rates.

March 31, 2026

June 30, 2026

December 31, 2025

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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