Q3 2025 PHINIA Inc Earnings Call

October 28, 2025

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All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed.

Led by the number one on your telephone keypad, if you would like to withdraw your question Press Star one again.

At this time I would like to turn the conference over to Kelly <unk>, Vice President of Investor Relations.

Thank you good morning, everyone. We appreciate you joining us.

The conference call materials were issued this morning and are available on.

Faster relations website.

A slide deck that we will be referencing in our remarks.

Also broadcasting this call via webcast.

Joining us today are Brady ericsson's, CEO and Chris <unk> CFO.

During this call we will make forward looking statements, which are based on management's current expectations and are subject to risks and uncertainties.

Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings, we caution listeners not to place undue reliance upon any such forward looking statements and with that it's my pleasure to turn the call over to Brady.

Thank you Kevin and thank you everyone for joining us this morning, I'll start with some overall comments on the third quarter, then provide some thoughts on the remainder of the year and beyond Chris.

Chris will then provide additional details on our third quarter financials and discuss our updated 2025 guidance.

We will then open the call for questions.

The highlights of the third quarter include the closing of our acquisition of Swedish electromagnet invest or SCM, our first acquisition as a public company.

Delivering our second quarter in a row of year over year net sales growth with Q3 being over 8% higher than prior year.

This led to a record quarter for adjusted sales and adjusted EBITDA dollars as a public company.

For the first time, our results are mostly being compared like for like against the prior year quarter. As we had substantially exited all TSA and contract manufacturing from our former parent and the third quarter of 2024, and nearly all of our corporate structure and cost per fully in place.

And finally with our strong adjusted free cash flow, we were able to acquire SCM and returned $41 million to shareholders via dividends and share repurchases, while maintaining ample liquidity and our net leverage of one four times EBITDA.

Let's start with <unk> CEO.

In June we announced plans to acquire the company and we were able to quickly close the transaction in August.

<unk> is a 100 year old leading provider of advanced natural gas hydrogen another alternative fuel ignition systems injector standards and linear position sensors to the commercial vehicle and off highway sectors.

With SDN, we have expanded our ignition and electronic control capabilities broadening our system offerings.

By combining finance expertise in engine management systems with <unk> deep knowledge of advanced ignition technologies, we are creating a powerful platform for innovation and efficiency.

We're excited to welcome SCM to the <unk> family and look forward to growing with them.

Yeah.

Moving to our results our third quarter performance reflects steady progress in executing our strategic priorities and our ongoing commitment to returning value to shareholders in the form of dividends and share buybacks.

We are executing several structural initiatives to enhance efficiency and data visibility.

We are consolidating four ERP systems into a single global SAP <unk> Hana platform, which we will phase in across the globe over the next several years.

Additionally, the integration of SCM and our ongoing cost savings initiatives are laying the groundwork for a more agile efficient organization.

Although the macroeconomic and industry outlook remain uncertain. We are focused on what we can control through operational and cost efficiency initiatives.

Biding value to our customers and driving sustainable performance across all our markets.

Net sales in the quarter were a record $908 million up eight 2% from the same period of the prior year as we benefited from the SCM contribution favorable FX customer pricing related to tariff recoveries and increased volume in Asia and the Americas.

Excluding SCM and FX revenue increased 5%.

This is the second consecutive quarter, where both segments reported higher year over year sales.

We reported adjusted EBITDA of $133 million with a margin of 14, 6% a.

30 basis point year over year expansion the.

The margin expansion was primarily due to lower R&D expenses and strong performance from our fuel systems segment.

Brady Ericson: Closing the quarter were a record $908 million, up 8.2% from the same period of the prior year, as we benefited from the SCM contribution, favorable FX, customer pricing related to tariff recoveries, and increased volume in Asia and the Americas. Excluding SCM and FX, revenue increased 5%. This is the second consecutive quarter where both segments reported higher year-over-year sales. We reported adjusted EBITDA of $133 million with a margin of 14.6%, a 30 basis point year-over-year expansion. The margin expansion was primarily due to lower R&D expenses and strong performance from our fuel systems segment. This was partially offset by unfavorable product mix and increased employee costs. The $133 million of EBITDA was also a quarterly record as a standalone company. Fuel systems delivered a strong quarter with adjusted operating income up 33% and the margin expanding 190 basis points, which is partially diluted from the SCM acquisition.

This was partially offset by unfavorable product mix and increased employee costs.

<unk> are up eight 2% from the same period of the prior year.

$133 million of EBITDA was also a quarterly record as a Standalone company.

We benefited from the SPM contribution favorable FX.

Customer pricing related to tariff recoveries and increased volume in Asia and the Americas.

Fuel systems delivered a strong quarter with adjusted operating income up 33%.

Excluding SCM and FX revenue increased 5%.

And the margin expanding 190 basis points, which was partially diluted from the <unk> acquisition.

This is the second consecutive quarter, where both segments reported higher year over year sales.

AOI was driven by research and development savings overhead cost control measures and efficiencies.

We reported adjusted EBITDA of $133 million with a margin of 14, 6%.

Those were partially offset by unfavorable product mix.

Aftermarket margin was down 80 basis points. The decrease was primarily due to unfavorable product mix.

30 basis point year over year expansion the.

The margin expansion was primarily due to lower R&D expenses and strong performance from our fuel system segment.

Our combined fuel systems and aftermarket segment adjusted operating margin was 14% and.

This was partially offset by unfavorable product mix and increased employee costs.

80 basis point increase when compared with the third quarter of 2024, and a new record for a quarter as a standalone company.

$133 million of EBITDA was also a quarterly record as a Standalone company.

Fuel systems delivered a strong quarter with adjusted operating income up 33%.

Adjusted earnings per share excluding non operating items are detailed in the appendix of our presentation was $1 59 up from $1 17 in the same period of the prior year.

The margin expanding 190 basis points, which was partially diluted from the <unk> acquisition.

Brady Ericson: AOI was driven by research and development savings, overhead cost control measures, and efficiencies. Those are partially offset by unfavorable product mix. Aftermarket margin was down 80 basis points. The decrease was primarily due to unfavorable product mix. Our combined fuel systems and aftermarket segment adjusted operating margin was 14%, an 80 basis point increase when compared with the third quarter of 2024, and a new record for a quarter as a standalone company. Adjusted earnings per share, excluding non-operating items as detailed in the appendix of our presentation, was $1.59, up from $1.17 in the same period for the prior year. Finally, as we disclosed in an AK last week, we reached an agreement with our former parent company to equitably resolve our litigation and move forward in a positive manner.

AOI was driven by research and development savings overhead cost control measures and efficiencies.

Finally, as we disclosed in an 8-K last week, we reached an agreement with our former parent company to equitably resolve our litigation and move forward in a positive manner.

Those are partially offset by unfavorable product mix.

Aftermarket margin was down 80 basis points. The decrease was primarily due to unfavorable product mix.

We expect that a substantial portion of the settlement payments will be offset by collection of pre spin VAT.

Refunds tax credits and various other tax recoveries.

Our combined fuel systems and aftermarket segment adjusted operating margin was 14% and.

As a result, we do not believe that the settlement will have a material impact to our capital allocation strategies liquidity or our net leverage ratio.

80 basis point increase when compared with the third quarter of 2024, and a new record for a quarter as a standalone company.

This quarter marks an important milestone for <unk>.

Adjusted earnings per share excluding non operating items are detailed in the appendix of our presentation was $1 59 up from $1 17 in the same period of the prior year.

Our first quarter of fully comparable year over year results since the spin.

With all transitional service agreements and contract manufacturing now complete.

All corporate costs were in place.

Finally, as we disclosed in an 8-K last week, we reached an agreement with our former parent company to equitably resolve our litigation and move forward in a positive manner.

The third quarter reflects the true underlying performance of our business.

As a general overview and a consistent with recent quarters.

Results for the third quarter highlight the strength and resiliency of our business in the face of a challenging and unpredictable environment.

Brady Ericson: We expect that a substantial portion of the settlement payments will be offset by a collection of pre-spend VAT refunds, tax credits, and various other tax recoveries. As a result, we do not believe that the settlement will have a material impact to our capital allocation strategies, liquidity, or our net leverage ratio. This quarter marks an important milestone for PHINIA Inc. It's our first quarter of fully comparable year-over-year results since the spin, with all transitional service agreements and contract manufacturing now complete, and nearly all corporate costs were in place. The third quarter reflects the true underlying performance of our business. As a general overview, and consistent with recent quarters, our results for the third quarter highlight the strength and resiliency of our business in the face of a challenging and unpredictable environment.

We expect that a substantial portion of the settlement payments will be offset by collection of pre spin VAT refunds tax preference and various other tax recoveries.

This is consistent with the benefits of having a truly diversified industrial business with diversity and customers.

As a result, we do not believe that the settlement will have a material impact to our capital allocation strategies liquidity or our net leverage ratio.

Markets industries and regions in which we support.

Our innovation strategy remains at the center of our growth story, we continue to invest heavily in R&D, roughly $200 million annually or about 6% of sales and our customers reimburse us for about half of that through software and calibration services.

This quarter marks an important milestone infineon.

Since our first quarter of fully comparable year over year results since the spin.

With all transitional service agreements and contract manufacturing now complete.

All corporate costs were in place.

Inventory our position as a true development partner.

The third quarter reflects the true underlying performance of our business.

In turn we are making important investments in our business there are advancing our competitive position in the key markets and allowing us to capture incremental growth opportunities and support our customers.

As a general overview and a consistent with recent quarters.

Our results for the third quarter highlights the strength and resiliency of our business in the face of a challenging and unpredictable environment.

Our brand is strong in the market and customer preferences for our products remain high.

Brady Ericson: This is consistent with the benefits of having a truly diversified industrial business with diversity in customers, markets, industries, and regions in which we support. Our innovation strategy remained at the center of our growth story. We continue to invest heavily in R&D, roughly $200 million annually for about 6% of sales, and our customers reimburse us for about half of that through software and calibration services, demonstrating our position as a true development partner. In turn, we are making important investments in our business that are advancing our competitive position in the key markets and allowing us to capture incremental growth opportunities and support our customers. Our brand is strong in the market, and customer preferences for our products remain high. Our excellent service is supporting our growth with both new and existing customers. Let me highlight a few of the new business wins on pages six and seven.

This is consistent with the benefits of having a truly diversified industrial business with diversity and customers.

Excellent service is supporting our growth with both new and existing customers.

Markets industries and regions in which we support.

Let me highlight a few of the new business wins on pages six and seven.

The new next generation canister technology with leak detection devices for a leading north American OEM on to hybrid light commercial vehicle programs.

A breakfast <unk> for industrial applications to a leading off highway Oems in Asia for mining haul trucks.

Demonstrating our position as a true development partner.

In turn we are making important investments in our business there are advancing our competitive position in the key markets, allowing us to capture incremental growth opportunities and support our customers.

Our conquest gasoline direct injection or DDI fuel rail assembly and controller for a light passenger vehicle applications, securing our first win in new business with a major Chinese OEM.

Our brand is strong in the market and customer preferences for our products remain high.

Moving next to our aftermarket business as shown on slide seven we are winning both new business and expanding relationships with existing customers.

Excellent service is supporting our growth with both new and existing customers.

Let me highlight a few of the new business wins on pages six and seven.

Importantly, these wins are across diverse geographies.

Brady Ericson: The new next-generation canister technology with leak detection devices for a leading North American OEM on two hybrid light commercial vehicle programs. A brushless alternator for industrial applications to a leading off-highway OEM in Asia for mining haul trucks. A conquest Gas Direct Injection (GDi) Fuel Rail Assembly and controller for light passenger vehicle applications, securing our first win and new business with a major Chinese OEM. Moving next to our aftermarket business, as shown on slide seven, we're winning both new business and expanding relationships with existing customers. Importantly, these wins are across diverse geographies. Expanding our market-leading product coverage in Groosh Air Wallet with a major Middle Eastern customer, signed an agreement with a new large customer in the United Kingdom for braking and suspension components, new starter and alternator business with additional distributors in North America.

The new next generation canister technology with leak detection devices for a leading north American OEM on to hybrid light commercial vehicle programs.

Expanding our market, leading product coverage and grew share of wallet with a major middle eastern customer signing.

Signed an agreement with a new large customer in the United Kingdom for breaking in suspension components.

A brushless alternator for industrial applications to leading off highway Oems in Asia for mining haul trucks.

Starter and alternator business with additional distributors in North America.

Our value proposition is differentiated and continues to attract new customers as well as deepen relationships with existing customers.

Our conquest gasoline direct injection or GTI fuel rail assembly and controller for a light passenger vehicle applications, securing our first win in new business with a major Chinese OEM.

As shown on slide eight are.

Our business is diverse by end markets and geographies.

Moving next to our aftermarket business as shown on slide seven we are winning both new business and expanding relationships with existing customers.

Most recently, we've expanded into the aerospace and defense industries as I've mentioned on prior calls this is an emerging and exciting adjacency for us.

Importantly, these wins are across diverse geographies.

We're launching multiple programs with the key aerospace customer that leverages, our existing engineers and manufacturing infrastructure.

Expanding our market, leading product coverage and grew share of wallet with a major middle eastern customer.

We have started initial shipments on our first aerospace business Awards and expect our second program to launch in early 2026.

Signed an agreement with a new large customer in the United Kingdom for breaking in suspension components.

New starter and alternator business with additional distributors in North America.

These wins validate our strategy to extend or combustion and control technologies into adjacent markets.

Brady Ericson: Our value proposition is differentiated and continues to attract new customers, as well as deepen relationships with existing customers. As shown on slide eight, our business is diverse by end markets and geographies. Most recently, we've expanded into the aerospace and defense industries. As I've mentioned on prior calls, this is an emerging and exciting adjacency for us. We're launching multiple programs with a key aerospace customer that leverages our existing engineers and manufacturing infrastructure. We have started initial shipments on our first aerospace business award and expect our second program to launch in early 2026. These wins validate our strategy to extend core combustion and control technologies into adjacent markets. Now moving on to slide nine for a discussion of capital allocation. We have taken a disciplined approach to capital allocation while remaining opportunistic about M&A.

Our value proposition is differentiated and continues to attract new customers as well as deepen relationships with existing customers.

Now moving on to slide nine for a discussion of capital allocation.

As shown on slide eight.

We have taken a disciplined approach to capital allocation, while remaining opportunistic about M&A.

Our business is diverse by end markets and geographies.

We will continue to evaluate selective M&A opportunities that enhance our product offerings in precision machining components and assemblies electronics and controls as well as increasing our presence in key markets and industries, such as aerospace commercial vehicles off highway industrial and the aftermarket.

Most recently, we've expanded into the aerospace and defense industries as I've mentioned on prior calls this is an emerging and exciting adjacency for us.

We're launching multiple programs with key aerospace customers that leverages, our existing engineers and manufacturing infrastructure.

Our approach remains opportunistic and disciplined.

We have started initial shipments on our first aerospace business Awards and expect our second program to launch in early 2026.

With our capital allocation priorities to invest in our business for long term profitable growth, we invested $26 million in capital expenditures during.

These wins validate our strategy to extend or combustion and control technologies into adjacent markets.

During the third quarter with funds expended primarily on new tooling and equipment.

Now moving on to slide nine for a discussion of capital allocation.

Yeah.

Also on the capital allocation front during the quarter, we returned $41 million to our shareholders, including $11 million in quarterly dividends and $30 million in share repurchases.

We have taken a disciplined approach to capital allocation, while remaining opportunistic about M&A.

Brady Ericson: We will continue to evaluate selective M&A opportunities that enhance our product offerings in precision machine components and assemblies, electronics and controls, as well as increasing our presence in key markets and industries such as aerospace, commercial vehicles, off-highway, industrial, and the aftermarket. Our approach remains opportunistic and disciplined. Consistent with our capital allocation priorities to invest in our business for long-term profitable growth, we invested $26 million in capital expenditures during the third quarter, with funds expended primarily on new tooling and equipment. Also, on the capital allocation front, during the quarter, we returned $41 million to our shareholders, including $11 million in quarterly dividends and $30 million in share repurchases. We have $194 million remaining under our current repurchase authorization, and we expect to continue to evaluate the best use of capital on a quarterly basis.

We will continue to evaluate selective M&A opportunities that enhance our product offerings in precision machining components and assemblies.

We have $194 million remaining under our current repurchase authorization and we expect to continue to evaluate the best use of capital on a quarterly basis.

<unk> and controls as well as increasing our presence in key markets and industries, such as aerospace commercial vehicles off highway industrial and the aftermarket.

Since the spinoff in July 23, we repurchased approximately 20% of our outstanding shares.

Our approach remains opportunistic and disciplined.

Even with the acquisition of SCM capital investment in our operations and capital returned to shareholders. Our balance sheet remains solid with cash and cash equivalents of $349 million.

<unk> with our capital allocation priorities to invest in our business for long term profitable growth.

<unk> at $26 million in capital expenditures.

During the third quarter with funds expended primarily on new tooling and equipment.

Total liquidity of approximately $900 million and our net leverage ratio remaining at one four times, which is under our target of approximately one five times.

Yeah.

Also on the capital allocation front during the quarter, we returned $41 million to our shareholders, including $11 million in quarterly dividends and $30 million in share repurchases.

This was possible due to our strong adjusted free cash flow of $104 million in the third quarter.

We have $194 million remaining under our current repurchase authorization and we expect to continue to evaluate the best use of capital on a quarterly basis.

As we look to the remainder of the year, we see some marketed tariff risk of CV tariffs are coming into effect on November one.

Importantly, we will continue to work with our customers on recovery and similar to the auto tariffs, we expect to substantially recoup the costs from our customers because CV Oems are also qualifying for the same three 5% rebate.

Brady Ericson: Since the spin-off in July of 2023, we repurchased approximately 20% of our outstanding shares. Even with the acquisition of SCM, capital investment in our operations, and capital return to shareholders, our balance sheet remains solid with cash and cash equivalents of $349 million, total liquidity of approximately $900 million, and our net leverage ratio remaining at 1.4 times, which is under our target of approximately 1.5 times. This was possible due to our strong adjusted free cash flow of $104 million in the third quarter. As we look to the remainder of the year, we see some market and tariff risks as CV tariffs are coming into effect on November 1.

Since the spinoff in July 23, we repurchased approximately 20% of our outstanding shares.

Even with the acquisition of SCM capital investment in our operations and capital returned to shareholders. Our balance sheet remains solid with cash and cash equivalents of $349 million.

And on the auto Oems.

We have adjusted our 2025 outlook to account for the <unk> acquisition and some external factors on.

Total liquidity of approximately $900 million and our net leverage ratio remaining at one four times, which is under our target of approximately one five times.

On the revenue front, the midpoint of our outlook is up $40 million from our prior guidance driven by approximately $15 million from RCM and the remainder from favorable FX volumes and pricing.

This was possible due to our strong adjusted free cash flow of $104 million in the third quarter.

As we look to the remainder of the year, we see some marketed tariff risk of CV tariffs are coming into effect on November one.

The midpoint of our adjusted EBITDA guidance is up slightly as it continues to be constrained by tariff related revenue that carries zero margin.

Brady Ericson: Importantly, we will continue to work with our customers on recovery, and similar to the auto tariffs, we expect to substantially recoup the costs from our customers because CV OEMs are also qualifying for the same 3.5% rebate, as are the auto OEMs. We've adjusted our 2025 outlook to account for the SCM acquisition and some external factors. On the revenue front, the midpoint of our outlook is up $40 million from our prior guide, driven by approximately $15 million from SCM and the remainder from favorable FX, volumes, and pricing. The midpoint of our adjusted EBITDA guidance is up slightly as it continues to be constrained by tariff-related revenue that carries zero margin. Adjusted free cash flow has been a good story for us, and we're raising the midpoint of our 2025 outlook by $10 million.

Adjusted free cash flow has been a good story for us and we are raising the midpoint of our 2025 outlook by $10 million.

To wrap up we are continuing to build momentum across our diversified end markets, while maintaining disciplined cost and cash management.

And on the auto Oems.

Our teams are executing our long term strategy that is focused on product leadership stable growth.

We have adjusted our 2025 outlook to account for the <unk> acquisition and some external factors on.

<unk> discipline and total shareholder returns.

On the revenue front, the midpoint of our outlook is up $40 million from our prior guidance driven by approximately $15 million from RCM and the remainder from favorable FX volumes and pricing.

With that I'll hand, it over to Chris who will walk us through our Q3 results and discuss our outlook for this year.

Yes.

Thanks, Brady and thank you all for joining us this morning.

The midpoint of our adjusted EBITDA guidance is up slightly as it continues to be constrained by tariff related revenue that carries zero margin.

As a reminder, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release and in the presentation, both of which are on our website.

Adjusted free cash flow has been a good story for us and we are raising the midpoint of our 2025 outlook by $10 million.

Beginning on slide 11.

Our financial results for the quarter were solid and included the contribution from SCM, which closed in August at the Brady mentioned.

Brady Ericson: To wrap up, we've continued to build momentum across our diversified end markets while maintaining disciplined cost and cash management. Our teams are executing our long-term strategy that is focused on product leadership, stable growth, financial discipline, and total shareholder returns. With that, I'll hand it over to Chris, who will walk us through our Q3 results and discuss our outlook for this year. Chris?

To wrap up we are continuing to build momentum across our diversified end markets, while maintaining disciplined cost and cash management.

The external environment has not changed dramatically from the prior quarters. However, we continue to see strength in our OE sales across the globe enhanced by strength in aftermarket sales in select markets. We are pleased that the teams have responded appropriately and delivered strong revenue and EBITDA in the quarter.

Our teams are executing our long term strategy that is focused on product leadership stable growth financial discipline and total shareholder returns.

With that I'll hand, it over to Chris who will walk us through our Q3 results and discuss our outlook for this year.

Yes.

Chris Gropp: Thanks, Brady, and thank you all for joining us this morning. As a reminder, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release and in the presentation, both of which are on our website. Beginning on slide 11, our financial results in the quarter were solid and include the contribution from SCM, which closed in August, as Brady mentioned. The external environment has not changed dramatically from the prior quarters. However, we continue to see strength in our OE sales across the globe, enhanced by strength in aftermarket sales in select markets. We are pleased that the teams have responded appropriately and delivered strong revenue and EBITDA in the quarter. Specifically, we generated $908 million in net sales, an increase of 8.2% versus a year ago.

Thanks, <unk> and thank you all for joining us this morning.

Specifically, we generated $908 million in net sales an increase of eight 2% versus a year ago.

As a reminder, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release and in the presentation, both of which are on our website.

Our top line benefited from favorable foreign exchange tailwind of $19 million and an $8 million contribution from SCM.

Beginning on slide 11.

Excluding this impact net sales increased 5% a result of better pricing.

Our financial results in the quarter were solid and included the contribution from S M, which closed in August at the Brady mentioned.

Tariff recovery and increased volumes in Asia and the Americas.

Let me now bridge, our adjusted revenue and adjusted EBITDA for the third quarter, which you can find on pages 11 through 13 in the presentation.

Fuel systems segment sales were up 13, 4%, including prior year contract manufacturing sales or 13, 7%, excluding the effect of contract manufacturing, which ended in Q3 of 2024.

Specifically, we generated $908 million in net sales an increase of eight 2% versus a year ago.

The increase in fuel systems revenue was also attributable to foreign exchange customer tariff recoveries and the contribution from <unk> of $8 million.

Chris Gropp: Our top line benefited from favorable foreign exchange tailwinds of $19 million and an $8 million contribution from SCM. Excluding these impacts, net sales increased 5%, a result of better pricing, tariff recovery, and increased volumes in Asia and the Americas. Let me now bridge our adjusted revenue and adjusted EBITDA for the third quarter, which you can find on pages 11 through 13 in the presentation. Fuel systems segment sales were up 13.4%, including prior year contract manufacturing sales, or 13.7%, excluding the effect of contract manufacturing, which ended in Q3 of 2024. The increase in fuel systems revenue was also attributable to foreign exchange, customer tariff recoveries, and the contribution from SCM of $8 million. Segment margin was 13.3%, up 190 basis points year over year, primarily due to supply chain savings, productivity improvements, and reduced engineering costs.

Our top line benefited from favorable foreign exchange tailwind of $19 million and an 8 million contribution from SCM.

Excluding these impacts net sales increased 5% a result of better pricing.

Segment margin was 13, 3% up 190 basis points year over year, primarily due to supply chain savings productivity improvement and reduced engineering cost.

Tariff recovery and increased volumes in Asia and the Americas.

Let me now bridge, our adjusted revenue and adjusted EBITDA for the third quarter, which you can find on pages 11 through 13 in the presentation.

Yeah.

Our aftermarket segment sales were up slightly year over year on positive European results combined with a small amount of tariff recovery.

Fuel systems segment sales were up 13, 4%, including prior year contract manufacturing sales or 13, 7%, excluding the effect of contract manufacturing, which ended in Q3 of 2024.

This revenue was partially offset by lower volumes in North America and Asia.

With respect to profitability the aftermarket segment margin of 15% was down 80 basis points from the prior year and impacted by unfavorable product mix.

The increase in fuel systems revenue was also attributable to foreign exchange customer tariff recoveries and the contribution from <unk> of $8 million.

On a consolidated basis, our Q3 segment adjusted operating margin and adjusted operating income were healthy at 14% were up 80 basis points, and 11, 1% or up 70 basis points year over year, respectively.

Segment margin was 13, 3% up 190 basis points year over year, primarily due to supply chain savings productivity improvement and reduced engineering cost.

Our teams worked hard to cut cost and improve productivity, despite some volatile market conditions.

Chris Gropp: Our aftermarket segment sales were up slightly year over year on positive European results, combined with a small amount of tariff recovery. This revenue was partially offset by lower volumes in North America and Asia. With respect to profitability, the aftermarket segment margin of 15% was down 80 basis points from the prior year and impacted by unfavorable product mix. On a consolidated basis, our Q3 segment adjusted operating margin and adjusted operating income were healthy at 14%, or up 80 basis points, and 11.1%, or up 70 basis points year over year, respectively. Our teams worked hard to cut costs and improve productivity despite some volatile market conditions. Our adjusted net earnings per diluted share in the third quarter were $1.59, an increase of $0.42 per share for the quarter.

Our aftermarket segment sales were up slightly year over year on positive European results combined with a small amount of tariff recovery.

Our adjusted net earnings per diluted share in the third quarter.

Scott and increased <unk> 42 per share for the quarter.

This revenue was partially offset by lower volumes in North America and Asia.

Amounts exclude nonoperating items, which are described in the appendix of our presentation and influenced by lower share count and we continued share repurchases.

With respect to profitability the aftermarket segment margin of 15% was down 80 basis points from the prior year and impacted by unfavorable product mix.

Yeah.

On August 1st our team was excited to welcome new colleagues to the Affinia family with the close of the <unk> acquisition.

On a consolidated basis, our Q3 segment adjusted operating margin and adjusted operating income were healthy at 14% or up 80 basis points, and 11, 1% up 70 basis points year over year, respectively.

Total paid was $47 million comprised of $15 million cash proceeds to the seller and $32 million used to extinguish debt assumed through the acquisition.

While we expect SCM to contribute south annually of approximately $50 million and adjusted operating income of $10 million. We anticipate the first year sales and resulting returns may face. Some initial headwinds given some reliance on a challenge CV market and potential distractions from ongoing integration.

Our teams worked hard to cut cost and improve productivity, despite some volatile market conditions.

Our adjusted net earnings per diluted share in the third quarter were $1 59, an increase of 42 per share for the quarter.

Chris Gropp: These amounts exclude non-operating items, which are described in the appendix of our presentation and are influenced by lower share count as we continued share repurchases. On August 1, our team was excited to welcome new colleagues to the PHINIA family with the close of the SCM acquisition. Total paid was $47 million, comprised of $15 million cash proceeds to seller and $32 million used to extinguish debt assumed through the acquisition. While we expect SCM to contribute sales annually of approximately $50 million and adjusted operating income of $10 million, we anticipate the first-year sales and resulting returns may face some initial headwinds, given some reliance on a challenged CV market and potential distractions from ongoing integration efforts. In addition to SCM, we settled a claim regarding the tax matters agreement with our former parent following the close of the quarter.

These amounts exclude nonoperating items, which are described in the appendix of our presentation and influenced by lower share count and we continued share repurchases.

<unk> efforts.

In addition to <unk>, we settled the claim regarding the tax matters agreement with our former parent following the close of the quarter.

Yeah.

On August 1st our team was excited to welcome new colleagues to the Affinia family with the close of the <unk> acquisition.

Our full year 2025 guidance, which we will discuss has incorporated the impact of this settlement appropriately.

Total paid was $47 million comprised of $15 million in cash proceeds to the seller and 32 million used to extinguish debt assumed through the acquisition.

We expect that a substantial portion of the settlement payments will be funded through refund payments. We received from various tax authorities related to certain indirect tax payments made prior to the spin off with.

While we expect <unk> to contribute sales annually of approximately $50 million and adjusted operating income of $10 million. We anticipate the first year sales and resulting returns may face. Some initial headwinds given some reliance on a challenge CV market and potential distractions from ongoing integrate.

With the remaining portion funded with available liquidity.

As described in last week's 8-K, the settlement with our former parent also provides clarification on the companys ability to obtain and use the benefit of certain tax attributes.

<unk> efforts.

This has the potential of providing us with additional flexibility as we continue to optimize our tax structure.

In addition to <unk>, we settled the claim regarding the tax matters agreement with our former parent following the close of the quarter.

Intense focus by our teams delivered a strong balance sheet, providing substantial current liquidity.

Chris Gropp: Our full year 2025 guidance, which we will discuss, has incorporated the impacts of this settlement appropriately. We expect that a substantial portion of the settlement payments will be funded through refund payments we receive from various tax authorities related to certain indirect tax payments made prior to the spin-off, with the remaining portion funded with available liquidity. As described in last week's AK, the settlement with our former parent also provides clarification on the company's ability to obtain and use the benefit of certain tax attributes. This has the potential of providing us with additional flexibility as we continue to optimize our tax structure. Intense focus by our teams delivered a strong balance sheet, providing substantial current liquidity despite all the extra activities in the quarter.

Our full year 2025 guidance, which we will discuss has incorporated the impact of this settlement appropriately.

By all the extra activities in the quarter.

Cash and cash equivalents were $349 million.

We expect that a substantial portion of the settlement payments will be funded through refund payments. When you receive from various tax authorities related to certain indirect tax payments made prior to the spin off.

Available capacity under our credit facility remained approximately half a billion dollars for our resulting liquidity of approximately $900 million.

With the remaining portion funded with available liquidity.

Cash flow from operations was $119 million in the quarter and adjusted free cash flow was 104 million a significant increase from $60 million in the same period of the prior year.

As described in last week's 8-K, the settlement with our former parent also provides clarification on the companys ability to obtain and use the benefit of certain tax attributes. This has the potential of providing us with additional flexibility as we continue to optimize our tax structure.

We continue to remain confident in our ability to generate free cash flow to support our capital allocation priorities.

As such we paid $11 million in dividends and repurchased $30 million in our stock in Q3, bringing our year to date returns to shareholders to $202 million. This balance consists of $32 million in dividends and $170 million in share repurchases.

Intense focus by our teams delivered a strong balance sheet, providing substantial current liquidity. Despite all the extra activities in the quarter.

Chris Gropp: Cash and cash equivalents were $349 million, while available capacity under our credit facility remained at approximately half a billion dollars for a resulting liquidity of approximately $900 million. Cash flow from operations was $119 million in the quarter, and adjusted free cash flow was $104 million, a significant increase from $60 million in the same period of the prior year. We continue to remain confident in our ability to generate free cash flow to support our capital allocation priorities. As such, we paid $11 million in dividends and repurchased $30 million in our stock in Q3, bringing our year-to-date returns to shareholders to $202 million. This balance consists of $32 million in dividends and $170 million in share repurchases. Now moving to slide 14 for a discussion of our refined full year 2025 outlook.

Cash and cash equivalents were $349 million, while available capacity under our credit facility remained at approximately half a billion dollars.

Now moving to slide 14 for a discussion of our refined full year 2025 outlook.

For our resulting liquidity of approximately $900 million.

As Randy indicated we have adjusted our outlook slightly to account for the acquisition of SCM Monro tariff changes and other macroeconomic factors.

Cash flow from operations was $119 million in the quarter and adjusted free cash flow was $104 million a significant increase from $60 million in the same period of the prior year.

We are adjusting our 2025 sales guide increasing the high end of the guide to 345 billion and bringing up the low end of guide to $3 39 billion for an increase in midpoint of $3 42 billion.

We continue to remain confident in our ability to generate free cash flow to support our capital allocation priorities.

We are narrowing our adjusted EBITDA range at the high end of $480 million and low end of $465 million for slightly higher midpoint of $473 million.

In addition, we are taking the midpoint of our adjusted free cash flow.

Now moving to slide 14 for a discussion of our refined full year 2025 outlook.

Tim.

$290 million and improving our tax rate for the second quarter in a row.

Chris Gropp: As Brady indicated, we have adjusted our outlook slightly to account for the acquisition of SCM, minor tariff changes, and other macroeconomic factors. We are adjusting our 2025 sales guide, increasing the high end of the guide to $3.45 billion and bringing up the low end of guide to $3.39 billion for an increased midpoint of $3.42 billion. We are narrowing our adjusted EBITDA range with a high end of $480 million and low end of $465 million for a slightly higher midpoint of $473 million. In addition, we are taking the midpoint of our adjusted free cash flow up by $10 million to $190 million and improving our tax rate for the second quarter in a row.

As Brian indicated we have adjusted our outlook slightly to account for the acquisition of SCM Monro tariff changes and other macroeconomic factors.

Our expected adjusted tax rate is now projected to be in it.

Improved 33% to 37% range from the prior projection of 36% to 40% as ongoing tax structuring projects gained traction and progressed well.

We are adjusting our 2025 sales guide increasing the high end of the guide to 345 billion and bringing up the low end of guide to $3 39 billion for an increase in midpoint of $3 42 billion.

We do not expect this change to have a material impact on cash taxes in 2025.

We are narrowing our adjusted EBITDA range at the high end of $480 million and low end of $465 million for slightly higher midpoint of $473 million.

Overall, we continue to be confident in delivery of solid returns as we deal with zero or low margin tariff recoveries choppy markets and foreign exchange movements.

In addition, we are taking the midpoint of our adjusted free cash flow up by $10 million to $190 million and improving our tax rate for the second quarter in a row.

Yeah.

As Brady mentioned as we look forward. We are also disclosing implementation of our strategic effort to align our legacy structure to more effectively match the business as it develops globally.

Chris Gropp: Our expected adjusted tax rate is now projected to be in an improved 33% to 37% range from the prior projection of 36% to 40% as ongoing tax structuring projects gain traction and progress. We do not expect this change to have a material impact on cash taxes in 2025. Overall, we continue to be confident in delivery of solid returns as we deal with zero or low margin tariff recoveries, choppy markets, and foreign exchange movements. As Brady mentioned, as we look forward, we are also disclosing implementation of a strategic effort to align our legacy structure to more effectively match the business as it develops globally. As such, we anticipate a step up in restructuring charges, approximating $35 million in infrastructure rightsizing, professional fees, and other costs to yield an estimated $25 million in annual savings, a less than two-year payback once all projects are fully implemented.

Our expected adjusted tax rate is now projected to be in an improved 33% to 37% range from the prior projection of 36% to 40% as ongoing tax structuring projects gained traction and progress.

As such we intend to paint a step up in restructuring charges approximating $35 million in infrastructure right sizing professional fees and other cost to yield an estimated $25 million in annual savings are less than two year payback. Once all projects are fully implemented.

We do not expect this change to have a material impact on cash taxes in 2025.

This is complementary to our normal ongoing work to ensure our operations and corporate functions are agile and meet the future needs of our invested constituencies.

Overall, we continue to be confident in delivery of solid returns as we deal with zero or low margin tariff recoveries choppy markets and foreign exchange movements.

We are operating from a strong financial foundation and executing unclear strategic priorities in closing we remain firmly committed to building sustainable value for all our stakeholders.

As Brady mentioned as we look forward. We are also disclosing implementation of our strategic effort to align our legacy structure to more effectively match the business as it develops globally.

Thank you all for your attention today, and we will now move to the Q&A portion of our call operator, Please open the lines for questions.

As such we anticipate a step up in restructuring charges approximating $35 million in infrastructure right sizing professional fees and other cost to yield an estimated $25 million in annual savings are less than two year payback. Once all projects are fully implemented.

Thank you we will now begin the question and answer session. If you have dialed in I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again.

Chris Gropp: This is complementary to our normal ongoing work to ensure our operations and corporate functions are agile and meet the future needs of our invested constituencies. We are operating from a strong financial foundation and executing on clear strategic priorities. In closing, we remain firmly committed to building sustainable value for all our stakeholders. Thank you all for your attention today, and we will now move to the Q&A portion of our call. Operator, please open the lines for questions.

This is complementary to our normal ongoing work to ensure our operations and corporate functions are agile and meet the future needs of our invested constituencies.

We'll take our first question from Bobby Brexit Northland capital market.

Hey, good morning, guys. Thank you for taking my question. So excluding the acquisition and currency impacts sales were up five 1% year over year, a really really healthy number I was just curious if we could dive a little bit deeper into that five 1% like how much of that was pricing and tariff recoveries versus increased volume.

We are operating from a strong financial foundation and executing unclear strategic priorities in closing we remain firmly committed to building sustainable value for all our stakeholders.

Thank you all for your attention today, and we will now move to the Q&A portion of our call operator, Please open the lines for questions.

<unk> or even <unk>.

Just new products being shipped out.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We'll take our first question from Bobby Brooks at Northland Capital Markets.

Thank you we will now begin the question and answer session.

Yes, it's a balance between kind of all three of them I mean pricing in tariffs is going to be about the same as volume is the same it's a little bit of FX headwind. So.

Dan I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

To withdraw your question simply press Star one again.

Not not a lot of difference between the three it's kind of equally balanced.

Take our first question from Bobby Brexit Northland capital markets.

Got it got it and then just with the pricing is pricing like you said pricing them in tariff recoveries. So it seems like those are two separate silos on the pricing is it reasonable to think that that's.

[Analyst 1]: Good morning, guys. Thank you for taking my question. Excluding the acquisition and currency impact, sales were up 5.1% year over year, a really, really healthy number. I was just curious if we could dive a little bit deeper into that 5.1%. How much of that was pricing and tariff recoveries versus increased volumes or even just new products being shipped out?

Going to be sticky moving forward or or how should we think about that.

Yes, I mean, they're obviously, they're linked directly because as we have tariffs, we're passing on price and so that's the bulk of it.

<unk> or even Pos.

Or even just new products being shipped out.

And thats going to be sticky because unless the tariffs are going away.

Brady Ericson: Yeah, I mean, it's a balance between kind of all three of them. I mean, pricing and tariffs is going to be about the same as volume, is the same as a little bit of FX kind of headwind. Not a lot of difference between the three. It's kind of equally balanced.

Yes, it's a balance between kind of all three of them.

It's going to stay there and again thats one of the reasons.

Pricing and tariffs is going to be about the same as volume is the same as a little bit of FX headwind. So.

Why are our EBITDA is not going up as much is because those are basically at breakeven EBITDA or margin.

Not not a lot of difference between industry, it's kind of equally balanced.

And the little bit of headwind in that but.

[Analyst 1]: Got it. Is that pricing, like you said, pricing and then tariff recovery? It seems like those are two separate silos. On the pricing, is it reasonable to think that that's going to be sticky moving forward, or how should we think about that?

We don't see it going away.

It's going to be there and we just got to continue to drive productivity and other efficiency improvements to get our margin back to where we are where we expected.

Bobby on the tear us what some of the things that we have been doing is an lou.

Going to be sticky moving forward or or how should we think about that.

Brady Ericson: Yeah, I mean, they're obviously linked directly because as we have tariffs, we're passing on price, and so that's the bulk of it. That's going to be sticky because unless the tariffs are going away, you know, it's going to stay there. That's one of the reasons why our EBITDA is not going up as much is because those are basically at break-even EBITDA or margin, and a little bit of headwind in that. We don't see it going away. We think it's going to be there, and we just got to continue to drive productivity and other efficiency improvements to get our margin back to where we expect it.

After we've actually gotten concessions on some other areas I mean, we've gotten pricing obviously on aftermarket. It is more of a price increase game, but it is not huge it's not material. It's just a couple of million dollars. When you look at the pricing and strip out just the tariffs going through.

Yes, I mean, they're obviously, they're linked directly because as we had tariffs we're passing on price and so that's the bulk of it.

And thats going to be sticky because unless the tariffs are going away.

It's going to stay there and again thats one of the reasons.

Why are our EBITDA is not going up as much is because those are basically at breakeven EBITDA or margin.

Trying to make sure we get recovery on all of that is.

Yeah.

And the little bit of headwind in that but.

Got it that's very helpful color and then last one for me is great to hear you began shipping components for your first Aerospace program. That's really exciting news do you think achieving this milestone will sort of service a cow bell to alert other aerospace companies are legit and certified.

We don't see it going away.

It's going to be there and we just got to continue to drive productivity and other efficiency purpose to get our margin back to where we are where we expected.

Chris Gropp: On the tariffs, one of some of the things that we have been doing is in lieu of tariff pass-through, we've actually gotten concessions on some other areas. I mean, we've gotten pricing, obviously, on the aftermarket. It is more of a price increase game, but it's not huge. It's not material. It's just a couple of million dollars when you look at the pricing and strip out just the tariff going through, just trying to make sure we get recovery on all of those.

Bobby on the tear us what some of the things that we have been doing is an lou.

<unk> supplier and maybe asked a different way do you feel there are potential customers waiting in the wings to see successfully deliver those components for the first couple of projects before stepping in and placing an order.

Yes, absolutely.

Absolutely true I think ever since we've announced them and then at the Paris Air show is that in June.

The level of interest the RFID and RF skus coming to US has gone up substantially and as I mentioned I think in the last call. We fully expect to get additional awards here.

Just trying to make sure we get recovery on all of that is.

[Analyst 1]: Got it. That's very helpful, Colin. The last one for me is, it's great to hear you begin shipping components for your first aerospace program. That's really exciting news. Do you think achieving this milestone will sort of serve as a cowbell to alert other aerospace companies you're a legit and certified potential supplier? Maybe ask a different way. Do you feel there are potential customers waiting in the wings to see you successfully deliver those components for the first couple of projects before stepping in and placing an order? Thanks.

Got it that's very helpful color and then last one for me is great to hear you began shipping components for your first Aerospace program. That's really exciting news do you think achieving this milestone will sort of serve as a cow bell to alert other aerospace companies are legit and certified.

Here and there coming in coming quarters that will continue to support that expansion and so we're having.

Having conversation with pretty much every every other major engine manufacturers out there.

And see some good opportunities for us to continue to grow in that space.

Youll supplier and maybe ask a different way do you feel there are potential customers waiting in the wings to see successfully deliver those components for the first couple of projects before stepping in and placing an order.

Really appreciate that color Brady.

Congrats.

Ill return to the queue.

Great. Thank you.

We'll move next to Joseph Spak at UBS.

Yeah.

Brady Ericson: Yeah, that absolutely is true. I think ever since we've announced them and then at the Paris Air Show I was at in June, the level of interest, the RFIs and RFQs coming to us has gone up substantially. As I mentioned, I think in the last call, we fully expect to get additional awards here in the coming quarters that will continue to support that expansion. We're having conversations with pretty much every major engine manufacturer out there and see some good opportunities for us to continue to grow in that space.

Yes, absolutely.

Absolutely, it's true I think ever since we've announced them and then at the Paris Air show is that in June.

Thanks, Good morning, everyone.

Wanted to I had a couple of questions I guess one.

The level of interest the RFID and RF skus coming to US has gone up substantially and as I mentioned I think in the last call. We fully expect to get additional awards here.

Maybe just on the implied guidance in the fourth quarter.

Maybe a little bit softer than expectations I was wondering if you could give us a little bit more detailed commentary on the organic end market and then related.

Here in the coming coming quarters that will continue to support that expansion and so we're.

The conversation with pretty much every every other major engine manufacturers out there.

To the guidance, but also just want to understand the business going forward.

And see some good opportunities for us to continue to grow in that space.

It implies the guidance about 7 million in the fourth quarter.

[Analyst 1]: Really appreciate that, Colin, Brady. All good and congrats on the great quarter. I'll return to the queue.

Really appreciate that color Brady our Canadian.

Our CRM, which is I guess $1 million below the third quarter. Despite it being a full quarter in the fourth quarter. So is that is there some seasonality to that or is that some of that that's sort of softer demand you talked about and and.

Congrats on the great quarter I'll return to the queue.

Brady Ericson: Great. Thank you.

Great. Thank you.

Operator: We'll move next to Joseph Spack at UBS.

We'll move next to Joseph Spak at UBS.

[Analyst 2]: Thanks. Good morning, everyone. I wanted to, I had a couple of questions. I guess one, maybe just on the implied guidance in the fourth quarter, you know, maybe a little bit softer than expectations. I was wondering if you could give us a little bit more detailed commentary on the organic end market. Then related to the guidance, but also just want to understand the business going forward. You know, it implies the guidance about $7 million in the fourth quarter from SCM, which is, I guess, $1 million below the third quarter despite, you know, it being a full quarter in the fourth quarter. Is there some seasonality to that, or is that some of that sort of softer demand you talked about?

Thanks, Good morning, everyone.

For that first year of owning the business and if so is seven to 8 million a good sort of run rate to start to think about for 26.

Wanted to I had a couple of questions I guess one.

Maybe just on the implied guidance in the fourth quarter.

Sure on <unk>.

Maybe a little bit softer than expectations I was wondering if you could give us a little bit more detailed commentary on the organic end market and then related.

Q4, I think we're we always talk about seasonality in general we haven't had a normal season for awhile, but I think this is looking to be more.

So the guidance, but also just want to understand the business going forward.

Normal seasonality, where Q1 and Q4 are lighter I think our Q1 this year is probably lighter than normal.

It implies the guidance about $7 million in the fourth quarter.

I think Q4.

Cm, which is I guess $1 million below the third quarter. Despite it being a full quarter in the fourth quarter. So is that is there some seasonality to that or is that some of that that's sort of softer demand you talked about an and.

Typically is anywhere from 5% or so lighter than Q2 and Q3.

And so I think we're kind of getting back to that normal seasonality.

Obviously still a little bit of noise here in Q4 on on volumes on what people are going to do around shutdowns. So so we're kind of taking that into a into account as well.

[Analyst 2]: For that first year of owning the business, and if so, is $7 million, $8 million a good sort of run rate to start to think about for 2026?

For that first year of owning the business and if so is $7 million to $8 million a good sort of run rate to start to think about for 'twenty six.

Making sure that.

Brady Ericson: Sure. On Q4, I think we always talk about seasonality in general. We haven't had a normal season for a while, but I think this is looking to be more a normal seasonality where Q1 and Q4 are lighter. I think our Q1 this year was probably lighter than normal. I think Q4 typically is anywhere from 5% or so lighter than Q2 and Q3, and I think we're kind of getting back to that normal seasonality. Obviously, still a little bit of noise here in Q4 on volumes on what people are going to do around shutdowns. We're kind of taking that into account as well and making sure that we're in a good position on Q4 in general. SCM, we're still kind of learning their seasonality.

Sure on <unk>.

We're in a good position on Q4 in general.

Q4, I think we're we always talk about seasonality in general we haven't had a normal season for awhile, but I think this is looking to be more.

STM, we're still kind of learning their seasonality. We are we are finding that there.

Normal seasonality, where Q1 and Q4 are lighter I think our Q1 this year.

Half of the year is a lot lighter than their first half of the year, along with little of CV softness.

The lighter than normal.

They tend to they shutdown in the summer and don't come back until later in August.

I think Q4.

Typically is anywhere from 5% or so lighter than Q2 and Q3.

And the expectation they are probably going to shutdown earlier in December.

So there are windows in the second half tends to be a little bit lighter.

And so I think we're kind of getting back to that normal seasonality.

We're still confident that theyre going to.

Obviously still a little bit of noise here in Q4 on on volumes on what people are going to do around shutdowns. So so.

As we mentioned earlier around that $50 million, we're confident they're going to kind of get back there when the market recovers a bit.

We're kind of taking that into a into account as well and making sure that.

And see them.

<unk> on our expectations, we just have the initial.

We're in a good position on Q4 in general.

Kind of it right now we've got a number of folks kind of going in there we can get into get into their systems and processes up to speed.

STM, we're still kind of learning their seasonality we are.

Brady Ericson: We are finding that their second half of the year is a lot lighter than their first half of the year, along with a little CV softness. They tend to shut down in the summer and don't come back until later in August, and the expectation is they're probably going to shut down earlier in December. Their windows in the second half tend to be a little bit lighter. We're still confident that they're going to, as we mentioned earlier, around that $50 million. We're confident they're going to kind of get back there when the market recovers a bit, and see them delivering on our expectations. We just have the initial kind of hit right now.

We are finding that their second half of the year is a lot lighter than their first half of the year.

And probably adding more cost to.

So their cost structure in the beginning to kind of ramp them up to what our expectations are so.

Along with little CV softness.

They tend to they shutdown in the summer and don't come back until later in August.

Not a lot of material difference to the overall company.

And the expectation they are probably going to shut down earlier in December.

But we do see them coming back.

Stronger next year as the market recovers.

So there are windows in the second half tends to be a little bit lighter.

And we'll provide more oriented site in our Investor day meeting next year.

We're still confident that theyre going to.

As we've mentioned earlier around that $50 million, we're confident they're going to kind of get back there with the market recovers a bit.

We give guidance for 2026, and we will get that Adil.

Additional clarity on SCM, as well and so I'll ask a little bit too because.

And see them <unk>.

Delivering.

I think that with so much going on in the markets. Our units are just being very very cautious on what they are putting out there because.

On our expectations, we just have the initial.

Kind of it right now we've got a number of folks kind of going in there we can get it to get in their systems and processes up to speed.

Brady Ericson: We've got a number of folks going in there, getting their systems and processes up to speed, and probably adding more cost to their cost structure in the beginning to kind of ramp them up to what our expectations are. Not a lot of material difference to the overall company, but we do see them coming back stronger next year as the market recovers, and will provide more insight in our investor day meeting next year as we give guide for 2026. We'll give that additional clarity on SCM as well.

He was named the issues there I mean, we are not eating being hit materially by any like that.

And it's like adding more cost.

J L. R issues, that's not a big issue for us, but <unk> yet to see the tariffs coming in.

To their cost structure in the beginning to kind of ramp them up to what our expectations are so.

Not a lot of material difference to the overall company.

Yeah.

There is a lot of things out there none of them he doesn't materially, but our units get a little cautious.

But we do see them coming back.

Stronger next year as the market recovers.

Just trying to be a little conservative in Q4, when you have the other one is the aluminum supply issue for four of them.

And we will provide more insight in our Investor day meeting next year.

As we give guidance for 2026, and we will get that.

That's very fair fair enough.

Clarity on SCM, as well and so I'll ask a little bit too because.

I guess just in the quarter.

Chris Gropp: Joe, I'll add a little bit to it because I think that with so much going on in the markets, our units are just being very, very cautious on what they're putting out there because, you know, you've named the issue. I mean, we are not being hit materially by any, like the JLR issues. That's not a big issue for us, but it makes CV tariffs coming in. The TXPERIA, you know, there's a lot of things out there. None of them hit us materially, but our units get a little cautious. We're just trying to be a little conservative in Q4 with everything.

Chris.

I think that with so much going on in the markets or units are just being very very cautious on what they're putting out there because.

You sort of talked about some of the.

The factors driving driving the results specifically in fuel systems I just want to understand.

He was named the issues there I mean, we are not eating being hit materially by any like that.

Plus $37 million volume mix, only a million flowed through to EBIT and I know you sort of talked about negative mix, but it feels like there has to be something more than that in there or is there anything else, we should be thinking about that sort of really weighed on the flow through there.

J L. R issues, that's not a big issue for us but tariffs.

The tariffs coming in the kind of experience that.

There's a lot of things out there none of them he doesn't materially, but our units get a little cautious.

No a lot of it has to do with if you say, we actually specifically callout acu because as a part of the separation for Borgwarner, we sell acu from them and that literally has no margin on it.

Just trying to be a little conservative in Q4, when you have the other one that the aluminum supply issue for four of them.

Brady Ericson: The other one is the aluminum supply issue for Ford.

[Analyst 2]: Very fair. Fair enough. I guess just in the quarter, Chris, I just want to understand, you sort of talked about some of the factors driving the results. Specifically in fuel systems, I just want to understand, you had plus $37 million volume mix, only $1 million flowed through to EBIT. I know you sort of talked about negative mix, but it feels like there has to be something more than that in there. Is there anything else we should be thinking about that really weighed on the flow-through there?

They're very fair fair enough.

I guess just in the quarter.

Chris.

<unk> contracts are coming up in the next.

Sort of talked about some of the.

A couple of years are those restrictions come out and work and we're really looking at that but at the end of the day ease of use that as components are very expensive and they just.

The factors driving driving the results specifically in fuel systems I just want to understand.

Yeah.

If we're going to pass them three or we're looking for other ways such as did they sell directly.

That's part of it but if you also look yes. The contribution margin is low but the units. The contribution is based on standard. If you look at the other two lines, where you see really good productivity and other cost those are coming in much better which means my standard is going to get better next year. So it'll shift as long as my units are covering it whether if my car.

Chris Gropp: No, a lot of it, Joe, has to do with if you see, we actually specifically call out ECU because as a part of the separation from former parent company, we sell ECU from them, and that literally has no margin on it. Now those contracts are coming up in the next couple of years or those restrictions come out, and we're relooking at that. At the end of the day, ECUs, those components are very expensive, and they just, you know, if we're going to pass them through or we're looking for other ways of do they sell directly. That's part of it. If you also look, yeah, the contribution margin is low, but the unit, the contribution is based on standard.

No a lot of it has to do with if you say, we actually specifically call out acu because as a part of the separation from Borgwarner, we sell acu from them and that literally has no margin on it.

<unk> margin is low and they're covering it with productivity and other cost reduction I'm, okay with that because it just means that I'm getting better my products are getting cheaper because they're doing what they should be doing.

<unk> contracts are coming up in the next.

Couple of years are those restrictions come out and work and we're really looking at that but at the end of the day ease of use that as components are very expensive and they just.

That's helpful color on issue if I could sneak one more in just on.

On slide eight.

If we're going to pass them three or we're looking for other ways of did they sell directly.

I noticed you put in.

Power generation and maybe Thats been there all along but there's definitely been a little bit more focus on.

Turbo Chargers into power generators and on.

Chris Gropp: If you look at the other two lines where you see really good productivity and other costs, those are coming in much better, which means my standard is going to get better next year. It'll shift as long as my units are covering it. Whether my contribution margin is low and they're covering it with productivity and other cost reductions, I'm okay with that because it just means that I'm getting better. My products are getting cheaper because the units are doing what they should be doing.

Most all modern turbos I've direct injection is there has there been any incur.

Increased inquiries into into that business or is that a growing opportunity and pipeline for you.

Eastern margin is low and they're covering it with productivity and other cost reduction I'm, okay with that because it just means that I'm getting better at my products are getting cheaper because they know that they are doing what they should be doing.

Yes.

We kind of we throw that in the industrial side as well whether that's the power.

The linear generator that we are working on for hydrogen to gen sets.

Both small medium and large.

[Analyst 2]: That's helpful, Colin. If I could sneak one more in, just on slide eight, I noticed you put in, you know, power generation, and maybe that's been in there all along, but there's definitely been a little bit more focus on turbo chargers into power generators and, you know, almost all modern turbos of direct injection. Has there been any increased inquiries into that business, or is that a growing opportunity in pipeline for you?

That's helpful color on issue if I could sneak one more in just on.

Plug in our range extending EV power generation units.

On slide eight.

That's an area, we're starting to pick up more business and again I think we'll as we may have highlighted where private kind of split out our CV and other OE next year as well, but that's starting to become.

I noticed you put in.

Power generation and maybe that's been in there all along but there's definitely been a little bit more focus on.

Turbo Chargers into power generators and <unk>.

Most all modern turbos I've direct injection is there has there been any.

A meaningful.

<unk> of our revenue so we'll probably add some more disclosure on that as we head into next year.

Increased inquiries into into that business or is that a growing opportunity and pipeline for you.

Thank you.

Yeah.

Brady Ericson: Yeah, I mean, we throw that in the industrial side as well, whether that's the power generation, the linear generator that we were working on for hydrogen to gen sets, both small and even large plug-in or range extending EV power generation units. That's an area we're starting to pick up more business. I think we'll, as we may have highlighted, we're probably going to split out our CV and other OE next year as well because that's starting to become a meaningful portion of our revenue. We'll probably add some more disclosure on that as we head into next year.

Yes.

And as a reminder, if you would like to ask a question. Please press star one at this time, we will go next to Jay sole at BNP.

Kind of we throw that in the industrial side as well, whether that's the power generation. The linear generator that we are working on for hydrogen to gen sets.

Hey, guys congrats on the strong quarter.

Both small medium and large.

I just wanted to circle back to the board a fuel pump recall from a few months ago, you guys had a chance to work through that.

Plug in our range extending EV power generation units.

That's an area, we're starting to pick up more business and again I think we'll as we may have highlighted we're probably going to split out our CV and other OE next year as well because thats starting to become.

Can you talk about what impact you're seeing on the business, especially on the cash side. Thank you.

No cash impacts.

A meaningful.

No update no.

<unk> of our revenue so we will probably add some more disclosure on that as we head into next year.

Still no concerns on our side, we haven't adjusted our warranty accruals and no cash impact at this point.

[Analyst 2]: Thank you.

Thank you.

Yeah.

Operator: As a reminder, if you would like to ask a question, please press star one at this time. We'll go next to Jake Scholl at BNP.

Alright. Thank you and then can you just provide some color on the time and go to the structural program you announced when do you expect.

And as a reminder, if you would like to ask a question. Please press star one at this time, we will go next to Jay sole at BNP.

To come out and then when do you expect to fully realize the 25 billion.

[Analyst 3]: Hey, guys. Congrats on the strong quarter. I just wanted to circle back to the Ford fuel pump recall from a few months ago. Now that you guys have had a chance to work through that, can you talk about kind of what impacts you're seeing on the business, especially on the cash side? Thank you.

Hey, guys congrats on the strong quarter.

I just wanted to circle back to the board a fuel pump recall from a few months ago now that you guys had a chance to work through that.

Thank you.

Yes, I mean, we see that it's starting to rollout now.

They are starting to get I think there'll be initial initial go live I think starting in 2026, and that's going to take US a few years. There is a number of different sites that are at different stages of Av.

Can you talk about what impact you're seeing on the business, especially on the cash side. Thank you.

Oh, I guess their system capabilities that will be kind of rolling out, but I think it fully then Chris and fully completed by 2028.

Brady Ericson: No cash impacts. No update. No, still no concerns on our side. We haven't adjusted our warranty accruals and no cash impact at this point.

No cash impacts.

No update no.

Still no concerns on our side, we haven't adjusted our warranty accruals and no cash impact at this point.

Over that time period so.

We see it's going to be a multi year. It was just it was a bigger number than normal and so we thought it was prudent to go ahead and kind of call. It out given the multiyear nature of it and the benefits that we expect to see and this is also just the I would say the next stage of US just continuing to drive efficiency and right sizing.

[Analyst 3]: All right. Thank you. Can you just provide some color on the timing of the restructuring program you announced? When do you expect that to come out? When do you expect to fully realize the $25 million savings? Thank you.

Alright. Thank you and then can you just provide some color on the timing of restructuring program you announced when do you expect.

That should come out and then when do you expect to fully realize the 25 billion.

Thank you.

Brady Ericson: Yeah, I mean, we see that it's starting to roll out now. They're starting to get, I think, the initial go live. I think it's starting in 2026, and it's going to take us a few years. There's a number of different sites that are at different stages of, I guess, their system capabilities that will be kind of rolling out. I think, Chris, fully completed by 2028 over that time period. We see it's going to be a multi-year. It was just a bigger number than normal, and we thought it was prudent to go ahead and kind of call it out given the multi-year nature of it and the benefits that we expect to see.

Yes, I mean, we see that it's starting to rollout now.

The number of data centers the number of complexity, we have in software and systems.

We're starting to get I think we'd be initial initial go live I think starting in 2026, that's going to take US a few years. There is a number of different sites that are at different stages of.

And really just consolidating that consolidating them into one.

One instance, one reducing the number of redundant software systems that we have in licenses.

Sure.

I guess their system capabilities that will be kind of rolling out, but I think it fully then Chris and fully completed by 2028.

And really driving a lot of ifs.

The efficiency in our operations that in the system that we're using so.

Over that time period so.

When we got spun out obviously was <unk> revenue or Delphi automotive parts of Borgwarner.

And now SCM.

We're all kind of different and so we're going to establish a.

Brady Ericson: This is also just, I would say, the next stage of us just continuing to drive efficiency and rightsizing, you know, the number of data centers, the number of complexity we have in software and systems, and really just consolidating that, consolidating them into one instance, reducing the number of redundant software systems that we have and licenses, and really driving a lot of efficiency in our operations and in the systems that we're using. When we got spun out, obviously, it was, you know, DELCO REMY®, DELPHI®, parts of BorgWarner, and now SCM. They're all kind of different. We're going to establish a kind of a core standard that then is going to be the standard template that we'll roll out for future acquisitions and future locations as well and make it a lot simpler for us.

Kind of a core standard that then is going to be the standard template that will rollout for future acquisitions and future locations as well and make it a lot simpler for us.

The number of data centers the number of complexity, we have in software and systems.

Yeah.

Got it thank you.

And really just consolidating that consolidating them into.

And that concludes our Q&A session I will now turn the conference back over to Brady for closing remarks.

One instance, one reducing the number of redundant software systems that we have in licenses.

Great. Thanks, everybody for joining and again, a shout out to all of our Affinia employees.

And really driving a lot of.

Efficiency in our operations that in the system that we're using so.

Really great quarter.

As we mentioned with them record sales from great cash flow first acquisition continuing to give.

When we got spun out obviously was <unk> revenue or Delphi automotive parts of Borgwarner.

Cash back to our shareholders through dividends and repurchases and still maintaining a very robust balance sheet and actually I think our cash balances are up from the prior quarter.

And now SCM.

We're all kind of different and so we're going to establish a.

Kind of a core standard that then is going to be the standard template that will rollout for future acquisitions and future locations as well and make it a lot simpler for us.

After the acquisition and the share repurchases and the dividend. So really proud of the team are looking forward to closing out the year in a very positive manner and continuing the momentum that we have so thank you very much for joining.

[Analyst 2]: Got it. Thank you.

Got it thank you.

Operator: That concludes our Q&A session. I will now turn the conference back over to Brady for closing remarks.

And that concludes our Q&A session I will now turn the conference back over to Brady for closing remarks.

And this concludes today's conference call. Thank you for your participation you may now disconnect.

Brady Ericson: Great. Thanks, everybody, for joining. Just again, a shout out to all of our PHINIA employees. A really great quarter. As we mentioned, with some record sales, some great cash flow, first acquisition, continuing to give cash back to our shareholders through dividends and repurchases, and still maintaining a very robust balance sheet. Actually, I think our cash balances are up from the prior quarter after the acquisition and the share repurchases and the dividends. Really proud of the team. Looking forward to closing out the year in a very positive manner and continuing the momentum that we have. Thank you very much for joining.

Great. Thanks, everybody for joining and again, a shout out to all of our Affinia employees.

Really great quarter.

As we mentioned with them record sales from great cash flow first acquisition continuing to give.

Cash back to our shareholders through dividends and repurchases and still maintaining a very robust balance sheet and actually I think our cash balances are up from the prior quarter.

After the acquisition and the share repurchases and the dividend so really proud of the team.

Looking forward to closing out the year in a very positive manner and continuing the momentum that we have so thank you very much for joining.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

And this concludes today's conference call. Thank you for your participation you may now disconnect.

Thank you.

Okay.

Yeah.

Q3 2025 PHINIA Inc Earnings Call

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