THRM

Gentherm is the dominant supplier of Climate Control Seats and adjacent comfort electronics, and the top line is still working: FY2025 revenue grew 2.9% to $1.50B, with Lumbar/Massage up 18.8% and Climate & Comfort Electronics up 70.8% per the MD&A product table. The franchise is real — Climate Control Seats alone is $793M, and the company is reinvesting at 6.3% of sales in R&D ($94.8M) to defend it. Balance sheet is in good shape: $161M cash, long-term debt cut 14% to $189M, equity up 16.8% to $720M, liabilities/equity at 0.94x, and operating cash flow of $117M comfortably covers the $55.7M capex. At 0.7x sales the stock is not expensive on the asset.

The problem is earnings quality. Net income collapsed 71.8% to $18.3M and diluted EPS fell to $0.59, putting the trailing P/E at 61.2x on a $36.13 print. The MD&A makes the cause concrete and largely non-operational: a $28.4M foreign-currency loss (vs. a $9.6M gain in 2024) — a $38M swing — plus $6.6M of M&A expense in SG&A, $12.5M restructuring, a $2.5M impairment and a $2.2M loss on sale of land. Strip those out and the underlying business still degraded: gross margin compressed from 25.2% to 24.2% on 'higher quality costs and higher labor costs,' SG&A ran 11.3% of sales (up from 10.7%), and operating income fell 22.7% to $82.7M. Pricing was a $11.4M headwind, which is what you'd expect from a tier-1 auto supplier negotiating with OEMs in a soft cycle.