Gentherm at Baird Conference: Strategic Shift and Growth Plans

On Wednesday, 04 June 2025, Gentherm (NASDAQ:THRM) shared its strategic vision at the Baird Global Consumer, Technology & Services Conference 2025. The company, led by CEO Bill Presley and CFO John Deweyard, emphasized its focus on scaling core technologies across various industries while maintaining a strong presence in the automotive sector. Gentherm aims to enhance growth and margins, leveraging its thermal management expertise. However, challenges remain in achieving mid- to high-teens EBITDA margins.

Key Takeaways

• Gentherm is expanding its core technologies beyond automotive and medical to include commercial vehicles, agriculture, and home goods.
• The company targets mid- to high-teens EBITDA margins, up from 12.5% in 2023.
• Strong growth is anticipated in the pneumatic business, expected to exceed $300 million by 2027.
• Focus on the China market with increased engagement with domestic OEMs.
• Continued investment in R&D at approximately 6% of sales.

Financial Results

• 2023 Revenue: $1.5 billion
• EBITDA in 2023: 12.5%
• Awarded Business in 2023: $2.4 billion
• Target EBITDA Margin: Mid- to high-teens

Operational Updates

• Implementation of a standardized manufacturing operating system to manage net working capital
• Realignment of product line management around four core technology platforms
• Focus on improving direct labor efficiency and overall equipment effectiveness
• Planned footprint transitions to reduce fixed costs and redundant capacity within 18 months

Future Outlook

• Automotive Sector: Climate-controlled seats projected to reach 70% adoption by 2030; heated steering wheels to approach 40% by the decade’s end
• Medical Sector: Anticipated announcements regarding new medical applications of core technologies
• Growth Opportunities: Emphasis on commercial vehicles and agriculture markets, with a strong focus on China

Q&A Highlights

• Strategy: Gentherm plans to scale its core technologies across various markets using existing plant property and equipment
• China Market: By next year, Gentherm aims for a 60% global JV and 40% Chinese OEM mix, with plans to adjust this to better reflect the market mix in China

Readers are invited to refer to the full transcript for a detailed understanding of Gentherm’s strategic initiatives and future plans.

Full transcript - Baird Global Consumer, Technology & Services Conference 2025:

Luke Young, Baird Analyst, Baird: Okay. We’ll go ahead and kick it off here. Welcome to day two of Baird’s Global Consumer Technology and Services Conference. I’m Luke Young. I cover vehicle technology and mobility for Baird, and we’re very pleased to have Gentherm with us here this morning to kick off the day.

As you may know, Gentherm is the auto market leader in seat heaters, heated and cooled seats, steering wheel heaters as well as a newer player in pneumatic comfort and massage that was through a 2022 acquisition and company also looking to take all those products and push them into different applications as well, which we’ll talk about today. Joining us, we have seated directly to my right, Deweyard, CFO and Bill Presley, CEO of the company as well. Can also work in questions, you can send those to Session4@rwbear.com and to kick us off. Bill, if you want to have a few comments to start the day.

Bill Presley, CEO, Gentherm: Thanks, Luke. I think you framed it up well. Just a couple of slides so that we’re all aligned on who Gentherm is and what the possibility of Gentherm is. As Luke said, we are a global market leader in the thermal management and pneumatic comfort technologies. To put that in layman’s terms and what it means is if you sit in a seat in your car and it has heated cooled seats or pneumatic lumbar, chances are that’s our technology.

If you’ve ever been in a hospital and you’re on a heated surgical pad or one of the blankets that controls temperature by blowing air through it, chances are that’s our technology. So we have a very strong product portfolio that’s really built off of four core technology platforms. It’s thermal management, it’s air moving devices, which are a fancy name for fans, its pneumatic solutions, and its valve systems. All of those go together to create the system solutions that we talk about when it comes to climate and controlled interiors, seats, or medical solutions. Those technologies have broad market application.

Today, we primarily sell through automotive and medical channels, but those have targeted markets in near adjacencies like commercial vehicles, agriculture, two wheelers as well as industrial applications and home goods. So our intention is to take that technology to scale it and to push it into these adjacent markets because we’ve proven that the technology is scalable. We’ve proven it in the vehicle and we’ve proven it between automotive and medical. Our commercial solution or our commercial approach is key for us. We sell directly to the original equipment manufacturers.

That means we control our own commercial destiny. So our sales team is engaging with the OEs. So even though we might integrate through a Tier one, we’re in control of our own commercial destiny. We have great global reach, over 14,000 employees present in 13 different countries. Today, we engage with over 50 different original equipment manufacturers.

That puts our products in over 1,500 different makes and models in 100 different countries. So we have global scale. We’re not a small player. As it said, we are a market leader. And because of our global scale, because of our technology platforms, because of our commercial approach, we’ve aligned our strategic framework to ensure that we can scale the company profitably while expanding margins and driving total shareholder return.

Our product line management has been aligned across the four core technologies that I’ve talked about. That is now giving our sales team the opportunity to look for opportunities to scale that core technologies into the other markets I mentioned earlier. Gentherm is a young company, 30 years old. So we’re in the early days of building out our operating system, but the core one of the core monuments of that is we’re building operational excellence through business process standardization. We’ve standardized in the past few months our factory floor KPIs.

We’re starting to build out our operating systems to ensure that we can benchmark ourselves against ourselves internally, figure out which of our sites and locations are doing things best in class and which of our sites can learn from that. That’s going to allow us to continually expand margin. And the way we’re building our operating system will allow us to reduce net working capital and improve the free cash flow, but we’re also focused on taking out fixed costs and optimizing our overhead structure and our variable cost structure with some of the footprint relocation activities and consolidations that we’ve talked about on our earnings calls. So overall, given our product portfolio, given our commercial model, given the application of our technology in broad markets, we fully intend to scale our technologies in other markets. We’re an innovative leader, as I’ve said.

We’ve already taken the steps and started building out the continuous improvement mindset that will expand our margins. And look, we have a very strong financial position, right? We’re $1,500,000,000 today, 12.5% EBITDA, less than a half like a half a turn levered. So we have the opportunity to deploy our capital strategically and opportunistically to grow the business. So in a nutshell, very confident in the technology, very confident in the ability to scale, very happy with the financial position of the company and the flexibility that provides us.

And we will scale this business. We will grow this business profitably. So with that, I’ll turn it back to Luke.

Luke Young, Baird Analyst, Baird: Sounds good. Thanks for that, Bill. I want to start with a high level question that I think is apt in that you’re both new to the company as of January 1. So I’d be interested in both of your perspectives here. Just what attracted you to Gentherm fundamentally?

What does the company do well? What are the bones of the company that made this an interesting opportunity? John, want go first?

John Deweyard, CFO, Gentherm: Yeah. I think Bill hit on a lot of it in the last slide here, but I think a very uniquely positioned company in the space, maybe to add on to Luke’s comments, both Bill and I started January one of this year. But uniquely positioned company in the space, certainly a market leading position, fantastic financial profile with both margin as well as the balance sheet, as Bill talked about. And as we look at the attractive pieces in terms of what the growth profile of the company is as well as the opportunities to drive margin improvement, these are very tangible things that we can work together execute on. And so great opportunity to take this company to the next level and and put your fingerprint on on the internal operations of it as well.

Bill Presley, CEO, Gentherm: Yeah. And like I said, I knew the company. I’ve been in the industry almost thirty years. Chrysler, Lear Corporation, Aptiv, most recently left Aptiv as the Chief Operating Officer. So I’ve been part of large companies with established systems, established history.

Given the product, given the opportunity in Gentherm, I was just excited about the opportunity to come in and be part of writing the history of a company. Team is strong, technology is strong, application is strong. So I was just very excited about the opportunity to drive some scale.

Luke Young, Baird Analyst, Baird: So getting into the nuts and bolts, you referenced some of this in your introductory comments in terms of putting systems and standardization into place, taking what, I think in the grand scheme of things, I’d agree, as a young company, thirty year thirty years in the automotive market relatively young. That’s less than me, Luke. Less than me too. But within this, maybe if we could put a finer point on the fact that you are authoring a pivot in strategy for the company overall. And maybe it would be helpful to compare and contrast for folks who’ve had familiarity with Gentherm in the past, some of those key areas that you’re pivoting and maybe leaning into new direction incrementally.

Bill Presley, CEO, Gentherm: So I think if you I think Gentherm has gone through two phases. In the first phase, when it first started, there was talk about diversification, but it was almost everything for everybody. So there were a lot of bespoke unique solutions. There was not really an opportunity to drive scale. In the second iteration, the previous CEO before me, Phil Eiler, I think he did a really nice job of saying, hey, we’re going to focus in on some core technology platforms and the industry for us to do that as automotive because we can get quick scale.

It’s a good incubator for our technologies. And he did a good job of doing that. When I came in, there was always discussion around the seat system, around the vehicle system, almost to the point where it felt like we were a seating company. So we purposely took instead of talking about climate controlled seats, we purposely broke out the technology platforms into the four platforms I talked about, which gives us opportunity to actually read those individual solutions across the other markets. So as an example, a valve is the heart of a pneumatic seat system.

It is also a valve that is the heart of an industrial HVAC system that sits on top of this building. That’s just an example of the scalability. Our intention and our reauthoring the strategy, as Luke said, is not to be something for everybody but to take the same plant, property, equipment and technology we have today and scale that across various industries. That’s why the product line management was realigned across platforms that I talked about. And just in the very early days, we’ve broken down some walls between our medical business and automotive business where they’ve looked at application of that core technology.

And they found things in the medical business that automotive uses today that can solve a problem that we see evolving in the medical business. So I want to be very clear. Our strategy is not to be bespoke solutions to be something for everyone everywhere. It’s very specifically to scale the core technology utilizing the same plant property and equipment into other markets. And John?

John Deweyard, CFO, Gentherm: Yes. I would just add that it is a pivot in terms of application of technology and applicability of technology elsewhere, But it doesn’t mean that we can’t grow in the auto business, right? We still have a lot of runway in that business. You saw on the first slide that last year we did $2,400,000,000 of awards. We’re a 1,500,000,000 revenue company.

Those things will align And so we are confident in the growth path of the auto business. We are excited about the growth opportunities within the medical business as well, which is a small portion of the portfolio. And then we think we’ve got additive capability leveraging the capacity across the business to really expand and be incremental.

Luke Young, Baird Analyst, Baird: And then maybe a more discrete sense. In your introductory remarks, Bill, you said that you’re going to scale and grow the company profitably. If we zoom out and think of that in the shorter term to the medium term and kind of look at the eightytwenty, like what are the key things that shareholders should expect you to deliver on to drive that value ultimately?

John Deweyard, CFO, Gentherm: I think a couple of things. I mean we will have proof points this year from a growth perspective outside of the automotive industry. So from a growth perspective, we’ll see that. I think as we look at profitability, this company has been mid teens EBITDA previously, where we delivered 12.5% last year. We see a path back to be that mid to high teens EBITDA company really through three things.

One, leveraging the growth that we have from a company perspective. Two, we have a number of footprint transitions going on right now to eliminate fixed cost capacity across the company. And so we have some duplicate costs that we will eliminate here over the next eighteen months. And the third is we did buy an Aelfmeyer business in 2022 that which got us into pneumatic and lumbar and massage, which is below company average margins. The team has done a nice job positioning that to be more profitable.

We expect that not to be headwind for us going forward, but more of an opportunity to get it back to company average margins and above. And so really, we’ve got three key focus areas from a profitability perspective. We’re confident not just on the profitability side that we’ll be able to do that, but also on the growth side as well.

Luke Young, Baird Analyst, Baird: And I’d be curious just in a real time sense, you’ve had a long career in automotive building, like you mentioned, Chrysler, Lear coming over from Aptiv have had a knowledge and known about Gentherm, actually getting under the hood, what would you say are some of the key incremental learnings in the first five months of being in the CEO chair, just about the bones of this company?

Bill Presley, CEO, Gentherm: So I would say two things. One, I would say it’s very much an innovative entrepreneurial company, right? And I’ve been quite impressed with the speed at which the team’s able to move to identify problems, solve problems. Number two, I come back to as a positive, positive, it’s a very young company. So there’s opportunity to put those operating systems in place, put those KPIs in place and really drive some value by optimizing our cost structure, optimizing our efficiencies.

So there’s fruit to be harvested there. And the third thing is really the transferability of the technology, right? My initial impression of Gentherm was, hey, it centers around the automotive industry, it’s automotive tech. And then as I got deeper into the product line and the product portfolio, I was actually very pleasantly surprised at the scalability and the adaptability into other markets of the technology.

Luke Young, Baird Analyst, Baird: Okay. Well, let’s pivot into some of the stuff that you’re doing right now. And I guess I’d like to start with the opportunity to implement business process standardization. It’s been referenced a few times here. But can we talk about first steps that you’re taking right now?

And just philosophically, this is something that I don’t want to say it sounds easy, but there’s a lot that goes into implementing it. And can we talk about maybe some of the things that you’re able to get at in the near term versus things that maybe are in the out years?

Bill Presley, CEO, Gentherm: Yes, I’ll give you a couple. So the first one is, you know, Gentherm has had acquisitions. It’s had divestitures, right? It’s been built a little bit through acquisition of like Elfmeyer, WET, other companies. So the operating systems even between locations aren’t the same.

So one of the first things that we did is we’ve established what we call the manufacturing operating system. And that is so that our manufacturing locations are developing a production control plan exactly the same way in every location. But the fundamental of that is plan for every part, which is we know how many days on hand of raw material and finished goods we should have for a specific part number. So production plans are being developed to manage net working capital. That’s a kind of a fundamental change in the company.

In the past, production plans centered more around customer schedules, but customer schedules fluctuate, right? So again, the focus was on disciplined manufacturing operating system to minimize net working capital and balance the use of inventory. That was step one. Step two was very early on, we realigned the product line management, as I said. Originally, it was around product line management talked about things like climate and comfort scale, but that was a seat mindset.

We specifically broke that out into the four technology platforms so that the commercial team could go out and hunt conquest wins with the technology in other markets. And then the third thing is, again, because of the acquisitions, program management gate reviews were a little different. And that was a little bit problematic because we read platforms across from region to region. So we had to make sure that program management was executing the same, they were talking the same language so that handoffs were seamless, clean and efficient. So those are really the three areas that we honed in on very early in the first five months of the company.

Luke Young, Baird Analyst, Baird: Yes. As part of this, you also, I would say, inherited some things that were already in motion in terms of what the company had called Fit for Growth initiatives. I think it’s fair to say some of those things are still in place right now that it’s maybe evolved and your approach is a little different. But can you talk about some of those Fit for Growth things that folks may be aware of that are still going on under the hood at the company?

Bill Presley, CEO, Gentherm: Yeah. So Fit for Growth was its own thing in Gentherm when John and I first showed up. And what it was is it was really things like optimizing or taking cost out, optimizing overhead structure. So fit for growth hasn’t gone away, but it’s been ingrained into the culture in the cadence of the business. So instead of talking about saving money, say, for on direct labor, the question is what should your direct labor efficiency be on the shop floor?

What is your direct labor efficiency running at? And what is your gap plan to close the gap through continuous improvement to get to where you should be running at, to take the direct labor out, to make sure that your variable cost structure is right? In the past, that would have all been managed by the Fit for Growth team. That fundamental activity is now managed by the daily production team. Now that’s just an example of like direct labor efficiency becoming fit for growth, But it’s the same discussion in overall equipment effectiveness.

How effectively are we utilizing our capacity? It’s the same conversation with regard to OpEx. So instead of it being its own thing, we’ve ingrained it into the business with the people that touch it every day aligned to very clear key performance indicators.

Luke Young, Baird Analyst, Baird: Maybe if we could touch on the sales and R and D side of this. This is a company, as you mentioned, that has been through a couple phases in terms of its life cycle. And as we’re moving into this new phase, certainly, Gentherm has been known as a company with a track record around innovation. How do you think about innovation relative to the future direction in the company and kind of

Bill Presley, CEO, Gentherm: what you inherited as well? So I’ll start. Innovation is our core. We’ll stay focused on it. We have a saying inside of Gentherm is we’re going to continue to innovate the products we have and the markets we have while we take the products we have then push them into new markets, right?

So innovation can never stop. And we’re going to innovate I’m going just call it on two levels. One is we need constant innovation to remain competitive in the markets that we play, right? And that innovation comes through new material sciences, it comes through new processes that allow us to make the product more cost competitive. That’s extremely important in markets like China.

But we’re also always looking for enhancements to the application. How can we take the system that we have and create the next best customer experience? So innovation is one of the key pillars in the product line management. It’s our core. We’ll stay focused on it.

We don’t intend to ever walk away from it. You want to add something?

John Deweyard, CFO, Gentherm: I think you hit it well. I would say you look at areas of the business where the company has done it well in the past. I mean, we, we launched or announced last year some sizable awards on pulsating massage. We call it Pulse A, which is sort of the next generation technology, one of a kind, incredible experience for the user. As you look at that lumbar and massage business, we’ve been able since acquisition, we’ve grown at 20% the last year.

We expect that to continue as we move forward through innovation. That’s a business that 2027 could be north of $300,000,000 It did $175,000,000 last year. And so innovation really is the foundation for us as we look to grow here going forward And also why we’re confident in growing in that automotive market is because there are some significant opportunities and awards that we’ve already achieved that are in there on the foundation of innovation.

Luke Young, Baird Analyst, Baird: What about the R and D investment that goes along with that? Is the level of investment appropriate right now? Do you think there’s areas that can maybe be redirected and reinvested within the

John Deweyard, CFO, Gentherm: Yes. As we I mean we spend about 6% roughly on R and D as a percentage of sales. We don’t view that we don’t view that we need to change that significantly. I think potentially refocusing some of the efforts more hardware and targeted customer or where there is a proven customer use case or market, but that is about the appropriate level we feel for the company at this point.

Bill Presley, CEO, Gentherm: What

Luke Young, Baird Analyst, Baird: about just the portfolio broadly? I mean should we be thinking there could be future product rationalization or just any cleanup around the portfolio right now?

Bill Presley, CEO, Gentherm: I think the company did a nice job of really rationalizing it and pruning what they said needed to be prudent. So last year, I think it was made public that the battery performance solutions that we were divesting from that. So that’s going to hit a steady state here in the next twelve months and run its course. And then the other one that the company pruned was really contract electronics manufacturing, which isn’t really a great business for us. We’re not a contract manufacturer.

We’re an innovator. We’re a product creator. So other than that, everything else is aligned around the four core platforms. So I feel very, very good about the product positioning.

Luke Young, Baird Analyst, Baird: Okay. Well, let’s talk about the current year, 2025, and want to kind of look across the key drivers within the automotive piece. And maybe if you could just talk about relative expectations or just the general line of sight that you have across some of the key technologies in terms of seat heat, in terms of the ventilation technology, and steering wheel heat is one of those applications as well.

Bill Presley, CEO, Gentherm: Yeah. I mean, so with regard to, I would say, heating technology, let’s call it climate because, like, heated cooled seats, heated cooled steering wheel sorry, heated steering wheels. Look, the adoption of that continues to grow. By 2,030, our projection is climate controlled seats will be in almost 70% of the vehicles worldwide. So that’s a continued growth path.

As John said, the lumbar and massage, we see very strong adoption of that and we expect that business, as he said, to be over $300,000,000 by 2027. The other thing is steering wheels. Steering wheels are heated steering wheels are a relatively low take rate today. I mean less than 20%. We see that approaching 40% by the end of the decade.

So that’s why John said we’re very confident with regard to the product line growth in automotive. We see the tailwind coming there from the wins that we’ve see, the wins that we’ve mapped out. But again, I’ll just go back to all of that technology, we believe, is transferable in its core to the other markets. And the first place you’ll see proof points of that in my view is medical. We expect some announcements regarding medical before the end of the year adopting that technology in the medical.

And I think you’ll see some words and some wins around near markets like commercial vehicle and agriculture where the commercial team is out there now already working the channels and we’re starting to see kind of a strong pull. John, anything else you’d like to add?

Luke Young, Baird Analyst, Baird: No. Okay. Pneumatic, maybe if we can double click on that piece specifically. So like you said, growth very strong last year. Bookings have been a superstar in this business as well.

Can you just help us conceive of where we are in that launch cycle? So this is a business that was acquired in 2022. There are organic bookings that you’ve pushed as a company since then? Like just how much of that book of business are we seeing in the P and L right now and kind of the path to that $300,000,000 number in 2027? Kind of what underpins that?

John Deweyard, CFO, Gentherm: I think it’s still early stages. I think to Bill’s point, both take rate in the industry is in its early phases. And then in terms of the award activity we’ve had over the last couple of years, we won’t see that really trickle in here until 2026, ’20 ’20 ’7. And so very early from that perspective, but excited about what that business can bring to us overall as we think about leveraging the scale across the company.

Luke Young, Baird Analyst, Baird: How do you think about the China market? Certainly, you’re going to be in automotive, it is now easily the biggest market in the world, a lot of change in that market in the past five years. Just what are your ambitions in that market and maybe your guardrails as well?

Bill Presley, CEO, Gentherm: So we’re actually very excited about the China market, right? It’s, as you said, largest market. We know it’s an opportunity for us. In the past, if you looked at our customer mix in the China market, we’re about 80% global joint ventures, 20% China domestic OEMs. The team has made a very conscious effort even before we got here to start shifting that mix to a more market representative mix.

So by next year, we should be running about 60% global JV, 40% Chinese OEM, And we intend to continue to change that mix to be more representative of the market mix in China. China is important to us for three reasons. One, biggest market, so obviously important. Number two, we gain a lot of competitive intelligence from the Chinese market. There are innovations that happen faster in China than anywhere else in the world, and the market is very cost conscious.

So a lot of our best material engineering ideas, value engineering ideas come out of the China market. And the third thing is the Chinese OEMs have an edict to expand. They’re going to push across the rest of the globe. So they’re going to look for partners that have a global footprint that can support them as they expand. We have that global footprint.

We have the technology, and we’re building the relationships in China with Chinese OEMs.

Luke Young, Baird Analyst, Baird: In terms of the company’s positioning in China, China speed is one of the things that we hear a lot about as well. What does that mean in terms of Gentherm’s view on the China market?

Bill Presley, CEO, Gentherm: Yes. So I go back to that’s why it’s so important, right? China speed. If you look at the development cycle of a Western equipment manufacturer, it’s sometimes thirty six months up to sixty months. China is refreshing their product line every twelve to eighteen months.

So we can have a concept for technology. We can prove it out. We can bring it to a Chinese OEM and we can expect to start seeing revenue from those Chinese OEMs in twelve to eighteen months. So we then take what we’ve learned from there and we put it into our best practices and we look for opportunities to proliferate that globally. So they move at double the speed of the rest of the world when it comes to product innovation and development.

Luke Young, Baird Analyst, Baird: Yes. Near term, a couple of minutes left here. The award environment, just kind of what you’re seeing coming into the pipeline, understand you’re moving into newer areas. We look forward to seeing what that produces. But in terms of automotive specifically, if you could just comment and maybe also in terms of OEM purchasing behavior, you mentioned engaging directly with OEMs.

Any changes in that front?

Bill Presley, CEO, Gentherm: No, I would say the purchasing environment and program award environment’s been pretty normal. I would say, you know, you think about the EV meltdown when programs were pushed off, programs were delayed, programs were canceled. We’re not seeing that now. So we’ve kind of hit what I would consider a very normal level of award activity with ebbs and flows. We track our conquests very closely.

If you look at first quarter, we came in at $400,000,000 which is right about where we expected to be. So we expect another strong year. I would say the bulk of the bookings comes in the second half of the year based on what we see. But we’re not seeing any wild delays, any random cancellations. Purchasing behavior at the OEM has gone back to what I would consider the traditional business model where they want to award, they want to talk volume, they want a long term agreement with annual price reductions.

That actually helps us in our business because we can then go back to our supply base and say with confidence, These are the awards. This is what we can offer you, what are the material savings that you’re providing us. So I would say we’ve gone very much looped back to what I

Luke Young, Baird Analyst, Baird: would consider a standard business model. Okay. Well, got a last question, but I think we’ll leave it just so we don’t run out of time here. So please join me in thanking Bill and John for the presentation this morning. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.