Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report") contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our goals, beliefs, plans and expectations about our prospects for the future and other future events, such as: the expected light vehicle production in the Company's key markets; the impact of macroeconomic and geopolitical conditions, the components of and our execution of our strategic plan, product and technology development and manufacturing footprint optimization restructuring plans; our operating performance; long-term consumer and technological trends in the automotive industry and our related market opportunity for our existing and new products and technologies; the competitive landscape; the impact of global tax reform legislation and other regulatory matters; the sufficiency of our cash balances and cash generated from operating, investing and financing activities for our future liquidity and capital resource needs; our ability to finance sufficient working capital; and significant matters related to the Modine Transaction, including the expected closing timing and structure thereof, the ability of the parties to complete such transaction and planned actions to satisfy the closing conditions, the expected benefits thereof, the tax consequences thereof, the terms and scope of the expected financing in connection with such transaction, and the combined company's plans, objectives, expectations and intentions, including integration activities. Reference is made in particular to forward-looking statements included in this "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations". Such statements may be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "estimate", "anticipate", "intend", "continue", or similar terms, variations of such terms or the negative of such terms.

The forward-looking statements included in this Report are made as of the date hereof or as of the date specified herein and are based on management's reasonable expectations and beliefs. In making these statements we rely on assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, third-party information and projections from sources that management believes to be reputable, as well as other factors we consider appropriate under the circumstances. Such statements are subject to a number of assumptions, risks, uncertainties and other factors, which are set forth in "Item 1A. Risk Factors" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent reports filed with the Securities and Exchange Commission, and which could cause actual results to differ materially from that described in the forward-looking statements.

In addition, with reasonable frequency, we have entered into business combinations, acquisitions, divestitures, strategic investments and other significant transactions. Except as specifically noted for the Modine Transaction, such forward-looking statements do not include the potential impact of any such transactions that may be completed after the date hereof, each of which may present material risks to the Company's future business and financial results. Except as required by law, we expressly disclaim any obligation or undertaking to update any forward-looking statements to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, the consolidated condensed financial statements and related notes thereto included elsewhere in this Report and our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Overview

Gentherm Incorporated is a global market leader of innovative thermal management and pneumatic comfort technologies. Our automotive products include Climate Control Seats (CCS®), Climate Control Interiors (CCI™), Lumbar and Massage Comfort Solutions, Valve Systems, and Climate and Comfort Electronics. We operate in locations aligned with our major customers' product strategies to provide locally enhanced design, integration and production capabilities. Our medical products include patient temperature management systems that can be found in hospitals throughout the world.

Our Automotive sales are driven by the number of light vehicles produced by the OEMs primarily in our key markets of North America, Europe, China, Japan and South Korea, which is ultimately dependent on consumer demand for automotive light vehicles, our product content per vehicle, and other factors that may limit or otherwise impact production by us, our supply chain and our customers. Historically, new vehicle demand and product content (i.e. vehicle features) have been driven by macroeconomic and other factors, such as interest rates, automotive manufacturer and dealer sales incentives, fuel prices, consumer confidence, employment levels, income growth trends and government incentives. Vehicle content has also been driven by trends in consumer preferences. We believe our diversified OEM customer base and geographic revenue base, along with our flexible cost structure, have well positioned us to withstand the impact of industry downturns and benefit from industry upturns in the ordinary course. Our industry is increasingly

progressing towards a focus on human comfort, health and wellness, which is evidenced by increasing adoption rates for comfort products. Gentherm is an independent partner that can cooperate with any combination of the vehicle OEMs and seat manufacturers globally, to create innovative and unique configurations that adapt to industry trends.

Modine Transaction

On January 29, 2026, the Company, entered into definitive agreements to combine the Performance Technologies business ("Performance Technologies") of Modine Manufacturing Company, a Wisconsin corporation ("Modine"), with Gentherm (the "Modine Transaction"). The Modine Transaction is structured as a Reverse Morris Trust transaction, where a wholly owned subsidiary of Modine ("SpinCo"), owning Performance Technologies, will be spun off to Modine shareholders (the "Distribution") and simultaneously merged with a wholly owned subsidiary of the Company (the "Merger"). The transaction was valued at approximately $1,000.0 million as of the date of signing, based on specified assumptions. Shareholders of the Company immediately prior to the Merger are expected to own approximately 60.0% of the combined company and Modine shareholders are expected to own approximately 40.0% of the combined company, on a fully diluted basis, without taking into account any overlapping shareholder ownership and subject to adjustment.

Prior to and as a condition of, the Distribution, Modine will receive a cash distribution from SpinCo of $210.0 million subject to adjustment for cash, working capital and indebtedness of SpinCo, and subject to decrease if additional shares of Common Stock will be issued to Modine shareholders to support the intended tax-free treatment of the Distribution to Modine shareholders for U.S. federal income tax purposes.

The transaction is expected to close in the fourth quarter of 2026, subject to various closing conditions, including specified approvals by the Company's shareholders, completion of financing for SpinCo, a customary IRS tax ruling, receipt of required regulatory approvals and the satisfaction of other customary closing conditions.

The Merger Agreement also contains specified termination rights for the Company and Modine, including a right allowing the Company or Modine to terminate the Merger Agreement if the Merger has not been consummated on or prior to March 31, 2027 (which date may be extended to June 30, 2027 in the event that required regulatory approvals have not been received). Additionally, the Merger Agreement requires the Company to pay Modine a termination fee of $45.0 million if the Merger Agreement is terminated under certain circumstances.

In connection with the Merger Agreement, the Company, SpinCo and a financial institution executed a 364-day bridge loan facility commitment letter, pursuant to which such financial institution committed (i) to provide bridge financing of $290.0 million to fund dividends, fees and expenses related to the transactions contemplated by the Merger Agreement ("Bridge Facility") and (ii) to the Company a backstop of the Second Amended and Restated Credit Agreement (as defined below) ("Backstop Commitment").

On February 24, 2026, the Company amended the Second Amended and Restated Credit Agreement to permit the Modine Transaction, which terminated the Backstop Commitment. The Bridge Facility remains available but is expected to be replaced with permanent financing.

During the three months ended March 31, 2026, the Company incurred $3.0 million of fees associated with the Bridge Financing and Backstop Commitment. Such fees are recorded in Selling, general and administrative expenses.

Recent Trends

Tariffs and Global Trade Environment

Since March 2025, the U.S. government has periodically announced additional significant tariffs on various goods imported to the U.S. and other countries have periodically announced reciprocal tariffs on goods imported to such countries, including goods used by or manufactured by us. There has been significant uncertainty resulting from the implementation, termination and/or conditional pause of these additional tariffs. In February 2026, the Supreme Court of the U.S. issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act. The ultimate availability, timing, and amount of any potential refunds of such tariffs remain uncertain and are subject to further legal, regulatory, and administrative developments. The U.S. presidential administration subsequently invoked additional tariffs under other laws resulting in a rapidly changing tariff environment. At this time we cannot reasonably estimate the total financial impact of this ruling. Further, it is reasonably possible that

new or additional tariffs will be periodically announced in the future given the current global trade environment. We continue to monitor and evaluate the direct and indirect impacts of these tariffs and heightened global trade disputes. Our business model of manufacturing by regions for the regions limit the global impact of certain trade restrictions and tariffs. Further, the majority of our supply components are not currently subject to the additional tariffs or are compliant with exceptions, and we believe that we can generally mitigate the direct impact of any such tariffs currently in effect by directly or indirectly passing the additional costs through to customers. We are taking and will continue to take additional actions to mitigate any direct and indirect impacts.

For the three months ended March 31, 2026, the additional tariffs did not have a material impact on our results of operations, financial position, and cash flows.

Global Conditions

The global automotive light vehicle industry is impacted by a number of factors, including global and regional economic conditions. At times in recent years, the global economy has experienced significant volatility, inflationary pressures and supply chain disruptions, which have a widespread adverse effect on the global automotive industry. These macroeconomic conditions have resulted in fluctuating demand and production disruptions, facility closures, labor shortages, work stoppages, and increased prices of inputs to our products. Rising costs of materials, labor, equipment and other inputs used to manufacture and sell our products, including freight and logistics costs, have adversely impacted, and may in the future adversely impact, operating costs and operating results. We continue to employ measures to mitigate the impact of cost increases through identification of sourcing and manufacturing efficiencies where possible, and commercial negotiations with our customers. However, we have been unable to fully mitigate or pass through the increases in our operating costs, which may continue in the future.

We are exposed to foreign currency risk due to the translation and remeasurement of the results of certain international operations into U.S. Dollars as part of the consolidation process. Therefore, fluctuations in foreign currency exchange rates can create volatility in the results of operations and may adversely affect our financial condition.

We have a global manufacturing footprint that enables us to serve our customers in the regions they operate and shift production between regions to remain competitive. There have been various ongoing geopolitical conflicts, such as the current conflicts between Russia and Ukraine and in the Middle East and heightened tensions in the Red Sea and in the South China Sea. These conflicts have interrupted ocean freight shipping and if prolonged or intensified, could have a substantial adverse effect on our financial results. Further, it is reasonably possible that certain political pressures, such as changes to international trade agreements, increases in tariffs, import quotas or other trade restrictions or actions, including export controls and other retaliatory responses to such actions, could continue to affect the operations of our OEM customers, resulting in reduced automotive production in certain regions or shifts in the mix of production to higher cost regions. See "-Tariffs and Global Trade Environment" above for further information on the impact of tariffs and the global trade environment. We, like other manufacturers, have a high proportion of fixed structural costs, and therefore relatively small changes in industry vehicle production can have a substantial effect on our financial results.

Light Vehicle Production Volumes

Our sales are driven by the number of vehicles produced by the automotive manufacturers, which is ultimately dependent on consumer demand for automotive vehicles, our content per vehicle, and other factors that may limit or otherwise impact production by us, our supply chain and our customers. According to the forecasting firm S&P Global Mobility (April 2026 release), global light vehicle production in the three months ended March 31, 2026, in the Company's key markets of North America, Europe, China, Japan and South Korea, as compared to the three months ended March 31, 2025, are shown below (in millions of units):

The S&P Global Mobility (April 2026 release) forecasted light vehicle production volume in the Company's key markets for full year 2026 to decrease to 75.9 million units, a 2.1% decrease from full year 2025 light vehicle production volumes. Forecasted light vehicle production volumes are a component of the data we use in forecasting future business. However, these forecasts generally are updated monthly, and future forecasts have been and may continue to be significantly different from period to period due to changes in macroeconomic and geopolitical conditions or matters specific to the automotive industry. Further, due to differences in regional product mix at our manufacturing facilities, as well as material production schedules from our customers for our products on specific vehicle programs, our future forecasted results do not directly correlate with the global and/or regional light vehicle production forecasts of S&P Global Mobility or other third-party sources.

New Business Awards

We believe that innovation is an important element to gaining market acceptance of our products and strengthening our market position. During the first quarter of 2026, we secured automotive new business awards totaling $395 million. Automotive new business awards represent the aggregate projected lifetime revenue of new awards provided by our customers to Gentherm in the applicable period, with the value based on the price and volume projections received from each customer as of the award date. Although automotive new business awards are not firm customer orders, we believe that automotive new business awards are an indicator of future revenue. Automotive new business awards are not projections of revenue or future business as of March 31, 2026, the date of this Report or any other date. Customer projections regularly change over time, and we do not update our calculation of any automotive new business award after the date initially communicated. Automotive new business awards in the first quarter of 2026 also do not reflect, in particular, the impact of macroeconomic and geopolitical challenges on future business. Revenues resulting from automotive new business awards also are subject to additional risks and uncertainties that are included in this Report or incorporated by reference in "Forward-Looking Statements" above.

Stock Repurchase Program

In June 2024, the Board of Directors authorized a stock repurchase program (the "2024 Stock Repurchase Program") to commence upon expiration of the Company's prior stock repurchase program on June 30, 2024. Under the 2024 Stock Repurchase Program, the Company is authorized to repurchase up to $150.0 million of its issued and outstanding Common Stock over a three-year period, expiring June 30, 2027. Repurchases may be made, from time to time, in amounts and at prices the Company deems appropriate, subject to market conditions, applicable legal requirements, debt covenants and other considerations.

During the three months ended March 31, 2026 and 2025, the Company did not repurchase any shares. The 2024 Stock Repurchase Program had $110.1 million of repurchase authorization remaining as of March 31, 2026.

Reportable Segments

The Company has two reportable segments for financial reporting purposes: Automotive and Medical. See Note 15, "Segment Reporting," to the consolidated condensed financial statements included in this Report for a description of our reportable segments as

well as their proportional contribution to the Company's reported product revenues, significant segment expenses, operating income, and depreciation and amortization.

Consolidated Results of Operations

The results of operations for the three months ended March 31, 2026 and 2025, in thousands, were as follows:

Product revenues by product category, in thousands, for the three months ended March 31, 2026 and 2025, were as follows:

Product Revenues

Below is a summary of our product revenues, in thousands, for the three months ended March 31, 2026 and 2025:

Product revenues for the three months ended March 31, 2026 increased 11.3% as compared to the three months ended March 31, 2025. The increase in product revenues is due to favorable automotive volumes and favorable foreign currency impacts primarily attributable to the Euro and the Chinese Renminbi, partially offset by unfavorable pricing and unfavorable currency impacts primarily attributable to the Korean Won.

Cost of Sales

Below is a summary of our cost of sales and gross margin, in thousands, for the three months ended March 31, 2026 and 2025:

Cost of sales for the three months ended March 31, 2026 increased 10.9% as compared to the three months ended March 31, 2025. The increase in cost of sales is primarily due to higher automotive volumes, unfavorable foreign currency impacts primarily attributable to the Euro, Mexican Peso, Czech Koruna and the Chinese Renminbi, higher quality costs and higher labor costs, partially offset by material purchasing savings and lower freight costs.

Net Research and Development Expenses

Below is a summary of our net research and development expenses, in thousands, for the three months ended March 31, 2026 and 2025:

Net research and development expenses for the three months ended March 31, 2026 decreased 1.1% as compared to the three months ended March 31, 2025. The decrease in net research and development expenses is primarily related to higher customer reimbursements in the current year, partially offset by higher employee compensation.

Selling, General and Administrative Expenses

Below is a summary of our selling, general and administrative expenses, in thousands, for the three months ended March 31, 2026 and 2025:

Selling, general and administrative expenses for the three months ended March 31, 2026 increased 43.7% as compared to the three months ended March 31, 2025. Merger and acquisition expenses, primarily related to the Modine Transaction, were $14.8 million for the three months ended March 31, 2026. The remaining increase in selling, general and administrative expenses is primarily related to higher expenses for information technology and utilities and unfavorable foreign currency impacts primarily attributable to the Euro.

Restructuring Expenses, net

Below is a summary of our restructuring expenses, net, in thousands, for the three months ended March 31, 2026 and 2025:

During the three months ended March 31, 2026, the Company recognized expenses of $5.5 million for employee separation costs and $1.2 million for other costs.

During the three months ended March 31, 2025, the Company recognized expenses of $4.2 million for employee separation costs and $0.3 million for other costs.

See Note 3, "Restructuring," to the consolidated condensed financial statements included in this Report for additional information.

Loss on Sale of Land and Building, net

Below is a summary of our loss on sale of land and building, net, in thousands, for the three months ended March 31, 2026 and 2025:

Loss on sale of land and building, net for the three months ended March 31, 2025 is primarily related to the sale of our former headquarters building in Northville, Michigan in January 2025.

Interest Expense, net

Below is a summary of our interest expense, net, in thousands, for the three months ended March 31, 2026 and 2025:

Interest expense, net for the three months ended March 31, 2026 decreased 25.9% as compared to the three months ended March 31, 2025. The decrease in interest expense, net is primarily related to a lower balance and lower interest rate on the Revolving Credit Facility.

Foreign Currency Loss

Below is a summary of our foreign currency loss, in thousands, for the three months ended March 31, 2026 and 2025:

Foreign currency loss for the three months ended March 31, 2026 included net realized foreign currency loss of $0.3 million and net unrealized foreign currency loss of $0.8 million.

Foreign currency loss for the three months ended March 31, 2025 included net realized foreign currency loss of $0.7 million and net unrealized foreign currency loss of $9.6 million.

Other Income (Loss)

Below is a summary of our other income (loss), in thousands, for the three months ended March 31, 2026 and 2025:

Other income for the three months ended March 31, 2026 increased as compared to other loss for the three months ended March 31, 2025, primarily due to a write-down of an equity investment in the prior year period.

Income Tax Expense

Below is a summary of our income tax expense, in thousands, for the three months ended March 31, 2026 and 2025:

Income tax expense was $3.4 million for the three months ended March 31, 2026 on earnings before income tax of $7.6 million, representing an effective tax rate of 44.6%. The effective tax rate differed from the U.S. Federal statutory rate of 21.0% primarily due to the impact of income taxes on foreign earnings taxed at rates varying from the U.S. Federal statutory rate, unfavorable tax effects of the vesting of stock based compensation awards and the unfavorable impact of global intangible low-tax income.

Income tax expense was $2.2 million for the three months ended March 31, 2025 on earnings before income tax of $2.1 million, representing an effective tax rate of 106.1%. The effective tax rate differed from the U.S. Federal statutory rate of 21.0% primarily due to unfavorable tax effects of the vesting of stock based compensation awards and a valuation allowance established in the U.S. related to a capital loss carryforward.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity and capital resources are cash flows from operations and borrowings available under our Second Amended and Restated Credit Agreement (defined below). Our cash requirements consist principally of working capital, capital expenditures, research and development, operating lease payments, income tax payments and general corporate purposes. We generally reinvest available cash flows from operations into our business, while opportunistically utilizing our authorized stock repurchase program. Further, we continuously evaluate acquisition and investment opportunities that will enhance our business strategies.

As of March 31, 2026, the Company had $177.4 million of cash and cash equivalents and $278.1 million of availability under our Second Amended and Restated Credit Agreement. We may issue debt or equity securities, which may provide an additional source of liquidity. However, there can be no assurance equity or debt financing will be available to us when we need it or, if available, the terms will be satisfactory to us and not dilutive to our then-current shareholders.

We continue to expect to be able to move funds between different countries to manage our global liquidity needs without material adverse tax implications, subject to current monetary policies and the terms of the Second Amended and Restated Credit Agreement. We utilize a combination of strategies, including dividends, cash pooling arrangements, intercompany loan repayments and other distributions and advances to provide the funds necessary to meet our global liquidity needs. There are no significant restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Gentherm Incorporated. As of March 31, 2026, the Company's cash and cash equivalents held by our non-U.S. subsidiaries totaled $118.3 million. If additional non-U.S. cash was needed for our U.S. operations, we may be required to accrue and pay withholding if we were to distribute such funds from non-U.S. subsidiaries to the U.S.; however, based on our current liquidity needs and strategies, we do not anticipate a need to accrue and pay such additional amounts.

We currently believe that our cash and cash equivalents, borrowings available under the Second Amended and Restated Credit Agreement and cash flows from operations will be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future.

Cash and Cash Flows

The following table represents our cash and cash equivalents, in thousands:

Cash Flows From Operating Activities

Net cash used in operating activities totaled $5.0 million during the three months ended March 31, 2026 primarily reflecting $26.3 million related to changes in accounts receivable, net, $10.3 million related to changes in inventory, $5.1 million related to changes in net other assets and liabilities and $5.1 million for non-cash deferred income taxes, partially offset by net income of $4.2 million, $18.9 million for non-cash charges for depreciation, amortization, stock based compensation, loss on disposition of property, provisions for inventory and other non-cash items, including unrealized foreign currency loss, and $18.7 million related to changes in accounts payable.

Cash Flows From Investing Activities

Net cash used in investing activities was $5.7 million during the three months ended March 31, 2026, primarily reflecting purchases of property and equipment of $5.7 million.

Cash Flows From Financing Activities

Net cash provided by financing activities was $28.1 million during the three months ended March 31, 2026, reflecting the borrowing of debt of $65.0 million partially offset by $35.0 million of debt repayments and $1.9 million paid for employee taxes related to the net settlement of restricted stock units that vested during the year.

Debt

The following table summarizes the Company's debt, in thousands, as of March 31, 2026 and December 31, 2025:

Credit Agreement

Gentherm, together with certain of its subsidiaries, maintain a revolving credit note (the "Revolving Credit Facility") under its Second Amended and Restated Credit Agreement with a consortium of lenders and Bank of America, N.A. as administrative agent (as amended by the First Amendment described below, the "Second Amended and Restated Credit Agreement"). The Second Amended and Restated Credit Agreement was entered into on June 10, 2022 and amends and restates in its entirety the Amended and Restated Credit Agreement dated June 27, 2019, by and among Gentherm, certain of its direct and indirect subsidiaries, the lenders party thereto and the Agent. The Second Amended and Restated Credit Agreement has a maximum borrowing capacity of $500 million and matures on June 10, 2027. The Second Amended and Restated Credit Agreement contains covenants, that, among other things, (i) prohibit or limit the ability of the borrowers and any material subsidiary to incur additional indebtedness, create liens, pay dividends, make certain types of investments (including acquisitions), enter into certain types of transactions with affiliates, prepay other indebtedness, sell assets or enter into certain other transactions outside the ordinary course of business, and (ii) require that Gentherm maintain a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Net Leverage Ratio (based on consolidated EBITDA for the applicable trailing four fiscal quarters) as of the end of any fiscal quarter.

On February 24, 2026, the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement (the "First Amendment"). The First Amendment amends the Second Amended and Restated Credit Agreement to i) permit the Modine Transaction, ii) permit the incurrence, issuance or assumption of up to $400 million of additional term indebtedness in connection with the Modine Transaction, iii) release and/or remove certain borrower and guarantor entities that no longer exist or will be liquidated and iv) remove the credit spread adjustments related to the SOFR and Sterling Overnight Index Average rates.

As of March 31, 2026, the Company was in compliance with the terms of the Second Amended and Restated Credit Agreement.

Modine Transaction

In connection with the Merger Agreement, Gentherm, SpinCo and a financial institution executed a 364-day bridge loan facility commitment letter, pursuant to which such financial institution committed to provide the Bridge Facility and the Backstop Commitment.

On February 24, 2026, the Company entered into the First Amendment, which terminated the Backstop Commitment. The Bridge Facility remains available but is expected to be replaced with permanent financing. If the Modine Transaction is consummated, any indebtedness incurred by SpinCo under the Bridge Facility or the permanent financing will become indebtedness of a wholly owned subsidiary of the Company.

Material Cash Requirements

In February 2026, we committed to a restructuring plan to realign our operating model and organizational structure to deliver on

key financial and operational priorities. We expect to incur cash restructuring costs of between $8.5 million and $9.5 million for employee severance costs.

In July 2025, we committed to a restructuring plan to further optimize our manufacturing footprint by realigning our global manufacturing capacity. We expect to incur cash restructuring costs of between $3 million and $4 million for employee severance and retention costs and $1 million of other transition costs primarily for machinery and equipment move and set up costs. Additionally, we expect to incur capital expenditures of between $1 million and $2 million.

In February 2025, we committed to a restructuring plan to further optimize our manufacturing footprint by realigning our manufacturing capacity in Europe. We expect to incur cash restructuring costs of between $4 million and $6 million for employee severance and retention costs and between $2 million and $3 million of other transition costs primarily for machinery and equipment move and set up costs. Additionally, we expect to incur capital expenditures of between $1 million and $2 million.

See Note 3, "Restructuring," to the consolidated condensed financial statements included in this Report for additional information regarding these plans.

Except as described above and the requirements for the Modine Transaction described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Report, there have been no material changes in our cash requirements since December 31, 2025, the end of fiscal year 2025. See Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information regarding our material cash requirements.

Effects of Inflation

The automotive component supply industry has historically been subject to inflationary pressures with respect to materials and labor. At times in recent years, the automotive industry has experienced significant volatility in the costs of certain materials and components, labor and transportation. Rising costs of materials, labor, equipment and other inputs used to manufacture and sell our products, including freight and logistics costs, have adversely impacted, and may in the future adversely impact, operating costs and operating results. The impact of tariffs and geopolitical conflicts could add to these inflationary pressures. Although the Company has developed and implemented strategies to mitigate the impact of higher material component costs and transportation costs through sourcing and manufacturing efficiencies where possible, these strategies together with commercial negotiations with Gentherm's customers and suppliers have not fully offset to date and may not fully offset our future cost increases. Such inflationary cost increase may increase the cash required to fund our operations by a material amount.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. For discussion of our significant accounting policies, see Note 2, "Summary of Significant Accounting Policies," to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no significant changes in our critical accounting policies or critical accounting estimates during the three months ended March 31, 2026. We are not presently aware of any events or circumstances that would require us to update our estimates, assumptions or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur and additional information is obtained. As a result, actual results may differ significantly from our estimates, and any such differences may be material to our financial statements.