Adjusted Sales: $878 million, slightly down year over year. Adjusted EBIT: $131 million, with a margin of 14.9%, up 170 basis points from Q1 2024. Adjusted Free Cash Flow: $36 million, in line with expectations. Net Sales: Decreased by $37 million year-over-year, down 4% on a reported basis and 2% on a constant currency basis. Liquidity Position: $760 million, including $630 million of revolving credit facility capacity and $130 million of unrestricted cash. Stock Repurchase: $30 million of common stock repurchased. Quarterly Dividend: $12 million paid, with a second quarterly dividend declared. 2025 Outlook: Net sales of $3.4 billion, net income of $232 million, adjusted EBIT of $457 million, and adjusted free cash flow of $345 million.

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Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Garrett Motion Inc (NASDAQ:GTX) achieved an adjusted EBIT margin of 14.9%, up 170 basis points compared to Q1 2024, driven by cost actions implemented in 2024. The company reported strong growth in gasoline turbo sales, with a 6% increase in the quarter, particularly benefiting from new launches and ramp-ups in North America. Garrett Motion Inc (NASDAQ:GTX) secured three new wins in China and North America for turbocharged range-extended electric vehicles and plug-in hybrids. The company reached a significant milestone by securing its first series production award for high-speed E-motor and inverter technology with Hyundai. Garrett Motion Inc (NASDAQ:GTX) maintained a strong liquidity position with $760 million, including a refinanced term loan with better pricing and extended maturity.

Negative Points

Net sales decreased by $37 million year-over-year, down 4% on a reported basis and 2% on a constant currency basis, primarily due to diesel softness and lower industry production in Europe. The company experienced lower demand for commercial vehicles and aftermarket applications. Foreign exchange fluctuations resulted in a $21 million or 2% sales decline. There is uncertainty around the impact of new and future tariffs on the global economy, which could adversely affect the demand for turbos. Adjusted free cash flow was sequentially lower, reflecting timing issues with certain working capital elements.

Q & A Highlights

Q: Can you elaborate on the dynamics of new launches and ramps in North America, as they didn't significantly impact Q1 sales? A: Sean Deason, CFO: The mix in North America requires caution when analyzing segment revenue. Gasoline sales are ramping up, driven by North America and shared demand gains in Europe. However, there are offsets in North America, particularly in commercial vehicles and aftermarket, which were slightly down.

Story Continues

Q: What opportunities do you see for gasoline applications in North America and Europe for 2026 and 2027? A: Olivier Rabiller, CEO: Significant opportunities exist, especially in North America, as carmakers pivot to more hybrids and range-extended electric vehicles, which require turbochargers. This trend is expected to grow by the end of the decade.

Q: How is Garrett positioned in the Chinese market, especially with the shift towards EVs? A: Olivier Rabiller, CEO: We have a strong presence in both passenger and commercial vehicles in China. Our differentiated technology is in demand, and we have made progress with innovative local brands like BYD and Geely, which are integrating turbochargers into hybrids and range-extended electric vehicles.

Q: What impact would a Euro exchange rate above 1.10 have on your financials? A: Sean Deason, CFO: A higher Euro would favorably impact revenue and EBITDA. However, due to the current macro environment's volatility, we have maintained our guidance. The recent Euro strength was not reflected in Q1 results but could benefit future quarters if sustained.

Q: How exposed is Garrett to North American tariffs, and how do you plan to manage this? A: Sean Deason, CFO: We estimate around $60 million in tariffs, which we plan to pass through entirely. Our exposure is limited as 20% of sales are in North America, with a significant portion to Mexican carmakers exporting to the U.S. We manufacture regionally, minimizing exposure to European tariffs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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