Garrett Motion Inc. Q3 FY2025 earnings call

• Delivered strong financial results in Q3 with net sales of $902M, up 6% at constant currency. Adjusted EBIT was $133M with a margin of 14.7%, and adjusted free cash flow was $107M. • Accelerated share repurchase activity, buying back $84M of common stock and paid a $12M quarterly dividend, with the Board approving a 33% increase to $0.08 per share for Q4. • Secured additional awards for turbochargers in hybrids and range-extended electric vehicles, and for commercial vehicles and industrial turbochargers. Sales of subunits for backup power generation in data centers expected to exceed $100M in 2025. • Progressed in developing zero-emission products, including securing proof of concepts for high-speed 3-in-1 E-Powertrain and making progress on E-Cooling oil-free centrifugal high-speed compressor technology.

Net sales for the third quarter were $902 million, up 6% at constant currency. Gasoline sales grew by 10% in the quarter, driven by share of demand gains. Diesel had strong performance in Europe and North America but was partially offset by lower demand for aftermarket applications, primarily in North America. Gasoline sales growth reflects outperformance over the industry in light vehicle turbo sales for both gasoline and diesel applications.

• Raised 2025 outlook midpoint: net sales $3.55 billion (flat to plus 1% at constant currency), net income $280 million, adjusted EBIT $510 million, net cash provided by operating activities $415 million, and adjusted free cash flow $385 million. • Target to allocate 75% of adjusted free cash flow to shareholders through dividends and share repurchases, with variability based on macroeconomic and industry conditions.

• Risks related to the automotive industry, competitive landscape, macroeconomic and geopolitical conditions. • Cyclical effects on commercial vehicle aftermarket and off-highway segments, including destocking at customers.

Q: Could you double-click on the mix impact, specifically geographic based or diesel vs gas penetration?

A: Mix impact due to gasoline growth (strong vs industry), commercial vehicle weakness (stabilizing), and aftermarket weakness (commercial vehicle off-highway destocking).

Q: Talk about 0 emission technologies path to $1B revenue by 2030?

A: 0 emission tech includes fuel cell compressors, E-Powertrain (growing in commercial and passenger vehicles), and E-Cooling compressors (gaining interest in industrial applications). Timing for predevelopment to awards varies, and margin profile is about same or accretive to turbo side.

Q: Elaborate on diesel recovery?

A: Year-over-year recovery in Europe and North America, with diesel still strong but trending down slowly, focused on light commercial vehicle applications like delivery vans and pickup trucks.

Q: Capital allocation outlook?

A: Committed to returning 75% of adjusted free cash flow to shareholders via dividends, share repurchases, and debt repayment, with variability based on macroeconomic and industry conditions.