Atmus Filtration Technologies Inc. Q3 FY2025 earnings call

• Completed full operational separation from former parent Cummins, a significant milestone. - Accelerated share repurchase program, repurchasing $30 million in the third quarter with year-to-date total of $61 million, and since the announcement last year, total repurchases are $81 million. Increased quarterly dividend by 10%. - Established Atmus Way incorporating purpose, values, strategy, and mindset shifts, with an example of commitment to safety achieving 2 years without a serious injury. - 4-pillar growth strategy progress:
  • First pillar: Growing share in first-fit by expanding reach to leading regional OEMs and maintaining partnerships with global OEMs.
  • Second pillar: Accelerating profitable growth in aftermarket by expanding market presence in independent and retail channels, partnering with global OEMs, and growing brand awareness with We Protect campaign.
  • Third pillar: Transforming supply chain by transitioning to global Atmus distribution network to optimize and grow aftermarket business and increase on-shelf availability.
  • Fourth pillar: Expanding into industrial filtration markets via inorganic acquisitions, reviewing a robust pipeline of opportunities.

Sales were $448 million in the third quarter of 2025, an increase of 10.9% compared to $404 million in the same period of 2024. Adjusted EBITDA was $92 million or 20.4% compared to $79 million or 19.6% in the prior period. Adjusted earnings per share was $0.69 in the third quarter of 2025, and adjusted free cash flow was $72 million. Gross margin for the third quarter was $129 million compared to $111 million in the third quarter of 2024, with the increase primarily due to higher pricing and volumes, partially offset by higher logistics costs. Selling, administrative and research expenses for the third quarter were $56 million, flat to the same period in the prior year. Joint venture income was $8 million in the third quarter, in line with 2024 performance.

• Raised total company revenue outlook to a range of $1.72 billion to $1.745 billion, an increase of 3% to 4.5% compared to the prior year. - Expect adjusted EBITDA margin to be in a range of 19.5% to 20%. - Adjusted EPS expected to be in a range of $2.50 to $2.65. - Anticipate full year share repurchases will be in a range of approximately 1.5% to 3% of current market capitalization.

• Market uncertainties in various regions, such as uncertain conditions in first-fit markets in North America and flattish aftermarket conditions. - Tariff-related uncertainties, including ongoing developments with Section 232 tariffs and evolving trade landscapes. - Supply chain risks, including elevated costs driven by hyper care in IT until full stabilization. - Intense industry competition in filtration markets.

Q: Was there pull forward from the second quarter in the third quarter's stronger performance and how do share gains layer in?

A: Stephanie Disher said top line is key. Revenue performance breakdown: volumes 6%, pricing 4%, foreign exchange 1%. Volume has 6% performance with share gains of 8% and market headwinds of around 2%. Revised full year guidance upwards from 2% in share gain to 3% due to conviction and team performance, with a major driver in the third quarter being stocking up for the Stellantis Model Year '25 Ram product launch which won't repeat in future quarters.

Q: With Section 232 tariff-related regulations, any intra-quarter pricing and rollover effect?

A: Stephanie Disher said there's still unknowns with Section 232. Anticipates USMCA exemption still applies. Intent on tariffs is to be price/cost neutral through various mechanisms. Full year pricing in guide is set at 3%, and would continue with pricing actions in January as practice but tariffs landscape is evolving.

Q: Positioning to capitalize on capacity expansion for large engines in data centers besides Cummins?

A: Stephanie Disher said has strong position with Cummins. Targeting new business development in aftermarket and first-fit applications with new customers. But aftermarket benefit related to those gen sets is not significant as they are for backup power.

Q: Progress on expansion outside current end markets into industrial filtration?

A: Stephanie Disher said strategy remains to expand into industrial filtration via acquisitions, with a robust pipeline of targets being reviewed. Organic launches into industrial filtration markets have potential to accelerate on the back of acquisitions, but currently a small portion of revenue.