Gentherm Posts Record Revenue as Margins and Cash Flow Slip
Gentherm reported record quarterly revenue of $416 million even as gross margin and operating cash flow both weakened from a year earlier.
Gentherm (THRM), the automotive climate and comfort technology maker, reported record quarterly revenue of $416 million in the second quarter of 2026, up 9.5% ex-FX from a year earlier and ahead of the $394 million recorded in the first quarter.
The top-line strength came alongside margin compression that has now reappeared for the second time in three quarters. Gross margin fell to 23.2% from 23.9% a year earlier, reversing the expansion Gentherm posted in the first quarter, when margin rose to 24.7% from 24.4%. The pattern echoes the compression seen in the fourth quarter of 2025 (23.7% versus 24.4%) and the third quarter of 2025 (24.6% versus 25.5%). Adjusted EBITDA margin followed the same path, slipping to 11.7% from 12.2%.
SG&A expenses rose to $55.7 million from $41.1 million a year earlier, a roughly 36% increase that outpaced the growth in research and development spending, which rose to $24.1 million from $22.6 million. Operating cash flow fell to $2.3 million from $31.7 million in the prior-year quarter, a result Gentherm attributed to restructuring and M&A expenses. That marks a reversal from the first quarter, when operating cash flow improved to a $5.0 million outflow from a $13.3 million outflow a year earlier. Net income nonetheless more than doubled to $4.4 million from $0.5 million, building on the first quarter's swing to $4.2 million in net income from a $0.1 million loss.
The Automotive Climate and Comfort Solutions segment drove the revenue gains, with ex-FX growth accelerating to 12.7% from 9.8% in the first quarter. The segment outperformed light vehicle production by 14 percentage points in both quarters, up from an 8.6-point gap in the fourth quarter of 2025 and 160 basis points in the third quarter. The Medical segment remained a drag, with revenue down 0.2% ex-FX, its fifth consecutive quarterly decline, though the pace of contraction eased from a 6.3% drop in the first quarter. Automotive new business awards totaled $690 million in the quarter, down from $395 million in the first quarter but roughly in line with the $745 million secured in the third quarter of 2025.
Gentherm raised its full-year 2026 guidance across all three headline metrics: product revenue to $1.55 billion to $1.65 billion from $1.5 billion to $1.6 billion, adjusted EBITDA to $185 million to $200 million from $175 million to $195 million, and adjusted free cash flow to $85 million to $100 million from $80 million to $100 million. The increase follows two prior quarters in which guidance was reiterated unchanged from the figures set at the end of 2025.
Net leverage rose to roughly 0.3x at quarter-end from about 0.2x at the end of the first quarter, while liquidity increased to $502.3 million from $455.5 million. The board authorized a new $400 million stock repurchase program to replace the prior authorization, which had about $110 million remaining as of June 30. Gentherm also completed its acquisition of Innovative Medical Equipment, maker of the ThermaZone thermal therapy device, to expand its Medical product line.
On the pending Modine Performance Technologies combination, Gentherm tightened its timeline, stating the deal is on track to close by early in the fourth quarter of 2026 after completion of key sign-to-close deliverables, a narrower window than the year-end target cited in the two preceding quarters.