Q4 2025 PHINIA Inc Earnings Call

February 12, 2026

Speaker #2: Good morning and welcome everyone to the fourth quarter 2025 Earnings Call Today's conference is being recorded . All lines have been placed on mute to prevent any background noise .

Speaker #2: 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 the star key followed by the number one on your telephone keypad.

Speaker #2: If you would like to withdraw your question , press star one again . At this time , I'd like to turn the conference over to Kellen Ferris Vice President of Investor Relations .

Speaker #2: Please go ahead

Speaker #3: Thank you and good morning , everyone . We appreciate you joining us . Our conference call materials were issued this morning and are available on PHINIA INC. Investor Relations website , including a slide deck will be referencing in our remarks .

Kellen Ferris: Thank you and good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on PHINIA's Investor Relations website, including a slide deck we'll be referencing in our remarks. We're also broadcasting this call via webcast. Joining us today are Brady Ericson, CEO, and Chris Gropp, CFO. During this call, we'll 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. With that, it is my pleasure to turn the call over to Brady.

Speaker #3: We're also broadcasting this call via webcast Joining us today are Brady Ericson CEO and Chris Gropp CFO . During this call , we'll 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 is my pleasure to turn the call over to Brady .

Speaker #3: Thank you , and thank you , everyone , for joining us this morning . I'll start with some overall comments on the fourth quarter and full year .

Brady Ericson: Thank you, Callan, and thank you to everyone for joining us this morning. I'll start with some overall comments on the Q4 and full year, discuss financials at a high level, and then provide some thoughts on our outlook for 2026. Chris will then provide additional details on our Q4 2025 full year financials, and discuss our 2026 financial outlook. We will then open the call for questions. We delivered a solid finish to 2025, with full year results in line with our expectations, despite a dynamic and often uncertain macro and industry environment. What stands out to me as I look back on the year, is the resilience of our business. Our diversification across regions, customers, end markets, and products continue to serve us well, with no single end market and region that defines any of them.

Speaker #3: Discuss financials at a high level and then provide some thoughts on our outlook for 2026 . Chris will then provide additional details on our fourth quarter 2025 full year financials , and discuss our 2026 financial outlook .

Speaker #3: We will then open the call for questions . We delivered a solid finish to 2025 with full year results in line with our expectations .

Speaker #3: Despite a dynamic and often uncertain macro and industry environment What stands out to me as I look back on the year , the resilience of our business , our diversification across regions , customers and markets and products continues to serve us well .

Speaker #3: With no single end market and region that defines PHINIA INC., our balance allows us to perform consistently, even as conditions shift around us.

Brady Ericson: Our balance allows us to perform consistently, even as conditions shift around us. Before we get started on numbers, you'll notice some changes as we recast some numbers between the Fuel Systems and Aftermarket segments. As we've been driving operational efficiencies, a significant portion of the Original Equipment Service, or OES, sales will now be distributed from the Fuel Systems segment and not the Aftermarket segment. We have also further enhanced our end-market breakdown and have separated out our off-highway, industrial, and other sales, which includes construction and agricultural machinery, vocational vehicles, marine, industrial applications, power generation, aerospace and defense, and all other. Finally, we've also updated our calculation method for Adjusted Free Cash Flow conversion to be more in line with industry standards. No change in expectations around the strong cash generation of the business. Now let's jump into the Q4 results on slide 4.

Speaker #3: Before we get started on numbers , you'll notice some changes as we recast some numbers between the fuel systems and aftermarket segments . As we've been driving operational efficiencies , a significant portion of the original equipment service or OS sales will now be distributed from the fuel system segment and not the aftermarket segment We have also further enhanced our end market breakdown and have separated out our off highway , industrial and other sales , which includes construction and agricultural machinery , vocational vehicles , marine , industrial applications , power generation , aerospace and defense , and all other .

Speaker #3: Finally , we've also updated our calculation method for adjusted free cash flow conversion to be more in line with industry standards No change in expectations around the strong cash generation of the business .

Speaker #3: Now let's jump into the fourth quarter results on slide four . For the third consecutive quarter , we delivered year over year growth in both the aftermarket and fuel system segments .

Brady Ericson: For the third consecutive quarter, we delivered year-over-year growth in both the aftermarket and fuel system segments. Total net sales in the quarter were $889 million, up 6.7% from the same period of the prior year. Excluding FX impacts on the contribution of SEM, revenue was up 2.3%. We reported adjusted EBITDA of $116 million for the quarter, up $6 million, and a margin of 13%. Total segment adjusted operating income was $112 million and a 12.6% margin. The fuel system segment delivered a strong quarter, with sales of $560 million, up 7.9%, and adjusted operating margin of 10.7%. The aftermarket segment had sales of $329 million, up 4.8%, with adjusted operating margin of 15.8%.

Speaker #3: Total net sales in the quarter were 889 million , up 6.7% from the same period of the prior year . Excluding FX impacts on the contribution of SCM , revenue was up 2.3% .

Speaker #3: We reported adjusted EBITDA of 116 million for the quarter , up 6 million and a margin of 13% . Total segment adjusted operating income was 112 million and a 12.6% margin .

Speaker #3: The fuel system segment delivered a strong quarter with sales of 560 million , up 7.9% , and adjusted operating margin of 10.7% . The aftermarket segment had sales of 329 million , up 4.8% with adjusted operating margin of 15.8% .

Speaker #3: Adjusted earnings per diluted share, excluding non-operating items, was $1.18 for the quarter, compared with $0.71 in the same period of the prior year. Our balance sheet remains solid, with cash and cash equivalents of $359 million and $859 million of total liquidity.

Brady Ericson: Adjusted earnings per diluted share, excluding non-operating items, was $1.18 for the quarter, compared with $0.71 in the same period of the prior year. Our balance sheet remains solid, with cash and cash equivalents of $359 million and $859 million of total liquidity. We've reduced our debt by $24 million, and our net leverage ratio came down from 1.4x to 1.3x, all while returning $40 million to shareholders via dividends and share repurchases. Q4 performance underscores the durability and resilience of our business amid a complex and uncertain operating landscape. It reflects the advantages of being a diversified industrial company by serving a broad mix of regions, customers, end markets, and products. Moving to slide 5. We continued to win new business across our core and adjacent markets.

Speaker #3: We've reduced our debt by 24 million , and our net leverage ratio came down from 1.4 times to 1.3 times . All while returning 40 million to shareholders via dividends and share repurchases The fourth quarter performance underscores the durability and resilience of our business amid a complex and uncertain operating landscape .

Speaker #3: It reflects the advantages of being a diversified industrial company by serving a broad mix of regions , customers and markets and products . Moving to slide five , we continue to win new business across our core and adjacent markets throughout the year .

Brady Ericson: Throughout the year, this included multiple wins in light vehicle, commercial vehicle, off-highway, industrial, aerospace, and alternative fuel applications. A few key fuel system segment wins in Q4 included: securing our third aerospace and defense contract for a post-combustion fuel valve, highlighting our proven capabilities and strengthening our position in the sector. Key truck contract extensions with global commercial vehicle OEMs, reaffirming the strength and longevity of our strategic partnerships. A new business win in India with a leading OEM for port fuel injectors used with compressed natural gas, underscoring our dedication to lower carbon mobility and commitment to alternative fuels. Now to slide 6. The aftermarket segment remained a steady and resilient contributor throughout the year. Demand continued to be supported by an aging global vehicle fleet and expanding portfolio. Our strong brands and service continued to resonate with customers and distributors.

Speaker #3: This included multiple wins in light vehicle , commercial vehicle , off highway industrial , aerospace and alternative fuel applications . A few key fuel system segment wins in the fourth quarter included securing our third aerospace and defense contract for a post fuel valve , highlighting our proven capabilities and strengthening our position in this sector .

Speaker #3: Key truck contract extensions with global commercial vehicle OEMs reaffirming the strength and longevity of our strategic partnerships and a new business win in India with a leading OEM for port fuel injectors used with compressed natural gas Underscoring our dedication to lower carbon mobility and commitment to alternative fuels Now to slide six .

Speaker #3: The aftermarket segment remained a steady and resilient contributor throughout the year Demand continued to be supported by an aging global vehicle fleet and expanding portfolio .

Speaker #3: Our strong brands and service continued to resonate with customers and distributors . We are winning both new business and expanding relationships with existing customers Importantly , these wins were across diverse geographies .

Brady Ericson: We are winning both new business and expanding relationships with existing customers. Importantly, these wins were across diverse geographies, further strengthening our position in the independent aftermarket. We also continued to accelerate the pace of expanding our offerings and coverage by adding approximately 5,800 new SKUs across our portfolio. Slide 7 highlights the diversification of our business across regions, customers, and end markets. This is supported by manufacturing facilities close to our customers in all key regions. We also benefit from the flexibility to redeploy manufacturing and human capital across these opportunities. As noted earlier, we provided additional end-market granularity by splitting out CV and other into medium- and heavy-duty on-highway CV and off-highway, industrial, and other. This shows the progress we've made in expanding our presence in this end market, as it now represents 6% of our sales. Moving next to capital allocation on slide 8.

Speaker #3: Further strengthening our position in the independent aftermarket We also continued to accelerate the pace of expanding our offerings and coverage by adding approximately 5800 new SKUs across our portfolio .

Speaker #3: Slide seven highlights the diversification of our business across regions . Customers , and end markets This is supported by manufacturing facilities close to our customers in all key regions We also benefit from the flexibility to redeploy manufacturing and human capital across these opportunities .

Speaker #3: As noted earlier, we provided additional end market granularity by splitting out CV and Other into Medium and Heavy Duty On-Highway CV and Off-Highway Industrial and Other. This shows the progress we've made in expanding our presence in this end market.

Speaker #3: As it now represents 6% of our sales Moving next to capital allocation on slide eight , we remain disciplined and balanced in our approach to capital allocation while remaining opportunistic about M&A Since the spin , we repurchased 9.8 million shares , which is roughly 21% of our original share count in total since then , we've returned over a half $1 billion to shareholders via share repurchases and dividends We accomplished all this while maintaining net leverage below our target level , sustaining robust liquidity Closing on an opportunistic acquisition and supporting the organic growth needs of the business We also announced a few weeks ago an 11% increase in our dividend and $150 million increase in our share repurchase program Needless to say , our capital allocation decisions will always be based on how we can maximize long term shareholder value .

Brady Ericson: We remain disciplined and balanced in our approach to capital allocation, while remaining opportunistic about M&A. Since the spin, we've repurchased 9.8 million shares, which is roughly 21% of our original share count. In total, since spin, we've returned over a half a billion dollars to shareholders via share repurchases and dividends. We accomplished all this while maintaining net leverage below our target level, sustaining robust liquidity, closing on an opportunistic acquisition, and supporting the organic growth needs of the business. We also announced a few weeks ago an 11% increase in our dividend and a $150 million dollar increase in our share repurchase program. Needless to say, our capital allocation decisions will always be based on how we can maximize long-term shareholder value. Moving to slide 9.

Speaker #3: Moving to slide nine , we had some significant milestones in 2025 , completing our first acquisition , receiving our aerospace quality certification along with our first program launch and delivering strong financial performance in a volatile market Also of note , 2025 is the first full year without the impact of TSA and contract manufacturing with our former parent Investors have been rewarded with a total shareholder return , which includes share price appreciation and dividends over the two year period of 2425 of 140% .

Brady Ericson: We had some significant milestones in 2025: completing our first acquisition, receiving our aerospace quality certification, along with our first program launch, and delivering strong financial performance in a volatile market. Also of note, 2025 is the first full year without the impact of TSAs in contract manufacturing with our former parent. Investors have been rewarded with a total shareholder return, which includes share price appreciation and dividends over the two-year period of 2024, 2025 of 140%. Looking forward to 2026, we expect our journey to continue on the path we set from the beginning, differentiating via product leadership, focusing on markets that will support our goal of sustainable growth, maintaining our financial discipline, and remaining focused on delivering long-term value for our shareholders. Finally, I want to thank our team for their outstanding execution through fiscal 2025.

Speaker #3: Looking forward to 2026 . We expect our journey to continue on the path we set from the beginning . Differentiating the product leadership , focusing on markets that will support our goal of sustainable growth , maintaining our financial discipline and remaining focused on delivering long term value for our shareholders Finally , I want to thank our team for their outstanding execution through fiscal 25 .

Speaker #3: Their hard work and dedication enabled us to successfully navigate dynamic market conditions while driving meaningful growth and operational improvements. I'll now turn the call over to Chris to discuss our financial results in more detail and introduce our 2026 financial outlook.

Brady Ericson: Their hard work and dedication enabled us to successfully navigate dynamic market conditions while driving meaningful growth and operational improvements. I'll now turn the call over to Chris to discuss our financial results in more detail and introduce our 2026 financial outlook. Chris?

Speaker #3: Chris Thanks , Brady , and thanks to all of you 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 Our fourth quarter and full year results met our expectations , even as we navigated a range of challenges from tariffs and macroeconomic instability to geopolitical tensions and a shifting policy landscape Despite these headwinds , we grew our top line and delivered a solid bottom line .

Chris Gropp: Thanks, Brady, and thanks to all of you 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. Our Q4 and full year results met our expectations, even as we navigated a range of challenges, from tariffs and macroeconomic instability to geopolitical tensions and a shifting policy landscape. Despite these headwinds, we grew our top line and delivered a solid bottom line. In addition, as Brady mentioned, we made meaningful progress on the priorities we set at the start of the year: strengthening our core businesses, entering new markets, and positioning PHINIA for long-term profitable growth. Q4 financial results were solid and include a full quarter contribution from SEM. The external environment has not changed dramatically from the prior quarters.

Speaker #3: In addition , as Brady mentioned , we made meaningful progress on the priorities we set at the start of the year . During our core businesses entering new markets and positioning for long term profitable growth Fourth quarter financial results were solid and include a full quarter contribution from FM .

Speaker #3: The external environment has not changed dramatically from the prior quarter . However , we saw some strength in Asia and the Americas , partially offset by lower sales in Europe within fuel systems , aftermarket sales were also higher , primarily driven by aftermarket pricing and tariff recoveries , offset slightly by lower commercial vehicle sales in the Americas .

Chris Gropp: However, we saw some strength in Asia and the Americas, partially offset by lower sales in Europe within fuel systems. Aftermarket sales were also higher, primarily driven by aftermarket pricing and tariff recoveries, offset slightly by lower commercial vehicle sales in the Americas. Let me now bridge our revenue and Adjusted EBITDA for the fourth quarter, which you can find on pages 11 and 12 in the presentation. Specifically, during the quarter, we generated $889 million in net sales, an increase of 6.7% versus a year ago. Compared to Q4 2024, our top line benefited from favorable foreign exchange tailwinds of $25 million, as the dollar weakened, mainly against the British pound and euro. Revenue in the quarter also rose on tariff recovery of $15 million.

Speaker #3: Let me now bridge our revenue and adjusted EBITDA for the fourth quarter , which you can find on pages 11 and 12 . In the presentation Specifically , during the quarter , we generated 889 million in net sales .

Speaker #3: An increase of 6.7% versus a year ago compared to Q4 2020 . For . Our top line benefited from favorable foreign exchange tailwinds of 25 million as the dollar weakened , mainly against the British pound and Euro .

Speaker #3: Revenue in the quarter also rose on tariff recovery of 15 million . Overall volume and mix contributed 8 million . As we saw strength in sales in Asia and the US , with higher lpv sales partially offset by lower sales in Europe as CM contributed 12 million in the quarter Excluding the FX impact in the SEM contribution , sales were up 2.3% in the quarter Moving next to the bridge on slide 12 , adjusted EBITDA was 116 million in the quarter , with a margin of 13% , representing a year over year increase of 6 million and a 20 basis point decline in margin Corporate and other costs , primarily R&D savings , were a $6 million tailwind Net tariff recoveries , supplier savings and other overhead cost savings measures combined were another 5 million .

Chris Gropp: Overall, volume and mix contributed $8 million, as we saw strength in sales in Asia and the US, with higher LPV sales, partially offset by lower sales in Europe. SEM contributed $12 million in the quarter. Excluding the FX impact and the SEM contribution, sales were up 2.3% in the quarter. Moving next to the bridge on slide 12. Adjusted EBITDA was $116 million in the quarter, with a margin of 13%, representing a year-over-year increase of $6 million and a 20 basis points decline in margin. Corporate and other costs, primarily R&D savings, were a $6 million tailwind. Net tariff recoveries, supplier savings, and other overhead cost savings measures combined were another $5 million. These benefits were partially offset by unfavorable product mix in Asia and the Americas. Overall, results were healthy.

Speaker #3: These benefits were partially offset by unfavorable product mix in Asia and the Americas . Overall results were healthy , though margin percentages were diluted as a result of FX inclusion of SCM and negative mix .

Chris Gropp: The margin percentages were diluted as a result of FX, inclusion of SEM, and negative mix. Let me now bridge our adjusted revenue and adjusted EBITDA for the full year, which you can find on pages 13 and 14 in the presentation. Once again, starting with adjusted sales, where the drivers were similar to the fourth quarter. Total revenue was approximately $3.5 billion, an increase of 3%, excluding the final contract manufacturing sales from our former parent in 2024. FX was a tailwind of $45 million, as the dollar weakened, mainly against the British pound and euro. Adjusted sales also benefited from tariff recovery of $38 million. Volumes of base business were flat for the year, but boosted with the inclusion of $20 million in sales from SEM. Excluding the FX benefit and contribution from SEM, revenue was up 1.1% for the year.

Speaker #3: Let me now bridge our adjusted revenue and adjusted EBITDA for the full year , which you can find on pages 13 and 14 .

Speaker #3: In the presentation Once again , starting with adjusted sales , where the drivers were similar to the fourth quarter total revenue was approximately 3.5 billion , an increase of 3% .

Speaker #3: Excluding the final contract manufacturing sales from our former parent in 2024 , FX was a tailwind of 45 million as the dollar weakened , mainly against the British pound and Euro adjusted sales .

Speaker #3: Also benefited from tariff recovery of 38 million volumes of base business were flat for the year , but boosted with the inclusion of 20 million in sales from SM , excluding the FX benefit in contribution from SM , revenue was up 1.1% for the year Moving next to the bridge on slide 14 , adjusted EBITDA was 478 million flat year over year , with a margin of 13.7% , representing a 40 basis point decline in margin supplier savings and other cost saving measures of 26 million were offset by unfavorable product mix , a slight increase in employee costs and net tariff pass through margin was negatively impacted by the dilutive impact of both tariffs and FX .

Chris Gropp: Moving next to the bridge on slide 14. Adjusted EBITDA was $478 million, flat year-over-year, with a margin of 13.7%, representing a 40 basis point decline in margin. Supplier savings and other cost saving measures of $26 million were offset by unfavorable product mix, a slight increase in employee costs, and net tariff pass-through. Margin was negatively impacted by the dilutive impact of both tariff and FX, each of which resulted in an approximately 20 basis point decline in margin. Moving next to discussion of the individual segment's full year performance. Note that in Q4 of 2025, we made a strategic decision to shift a significant portion of our OE service business, previously reported in the aftermarket segment, to the fuel system segment.

Speaker #3: Each of which resulted in an approximately 20 basis point decline in margin . Moving next to discussion of the individual segments , full year performance , note that in Q4 of 2025 , we made a strategic decision to shift a significant portion of our OE service business .

Speaker #3: Previously reported in the aftermarket segment to the fuel system segment . This change is a result of creating a streamlined process for the sale structure and distribution of these sales , thereby reducing the related administrative burden .

Chris Gropp: This change is a result of creating a streamlined process for the sales structure and distribution of these sales, thereby reducing the related administrative burden. Our reporting segment disclosures have been updated accordingly, including recasts of prior periods in all our reported financials. Moving next to fuel systems on page 15, where you can see that revenue for the full year increased 3.3%, with a 40 basis point increase in adjusted operating margin. Segment revenue was impacted materially by changes in FX of $33 million, the addition of SEM of $20 million, and tariff recoveries of $13 million. Full year segment AOI of $244 million is an increase of $16 million, with solid supplier savings, partially offset by negative volume and mix.

Speaker #3: Our reporting segment disclosures have been updated accordingly , including recast of prior periods in all our reported financials Moving next to fuel systems on page 15 , where you can see that revenue for the full year increased 3.3% with a 40 basis point increase in adjusted operating margin , segment revenue was impacted materially by changes in FX of 33 million .

Speaker #3: The addition of SEM of 20 million in tariff recoveries of 13 million full year segment of 244 million is an increase of 16 million , with solid supplier savings , partially offset by negative volume and mix compared to 2020 .

Chris Gropp: Compared to 2024, our aftermarket segment sales were up 2.7% for the full year, primarily due to customer tariff recovery and favorable FX. Aftermarket segment margins of 16.2% were down 30 basis points, primarily due to the dilutive impact of tariff recoveries. Moving on to a discussion of our balance sheet and cash flow. We continue to effectively execute our disciplined capital allocation strategy, successfully balancing significant cash return to shareholders with strategic M&A and other investments. Cash and cash equivalents were $359 million, while available capacity under our credit facilities remained at approximately half a billion dollars, for a resulting liquidity of $859 million.

Speaker #3: Four . Our aftermarket segment sales were up 2.7% for the full year , primarily due to customer tariff recovery and favorable FX aftermarket segment margins of 16.2% were down 30 basis points , primarily due to the dilutive impact of tariff recoveries Moving on to a discussion of our balance sheet and cash flow , we continue to effectively execute our disciplined capital allocation strategy successfully balancing significant cash return to shareholders with strategic M&A and other investments .

Speaker #3: Cash and cash equivalents were 359 million , while available capacity under our credit facilities remained at approximately half $1 billion for a resulting liquidity of 859 million .

Speaker #3: Cash flow from operations was 312 million for the year , and adjusted free cash flow came in above guide at 212 million , enabling us to continue returns of capital to our shareholders through regular dividends and buybacks , share repurchases represented a primary use of capital totaling 30 million in Q4 and 200 million for the full year We paid 10 million in dividends in Q4 , bringing our full year dividend payments to shareholders to 42 million .

Chris Gropp: Cash flow from operations was $312 million for the year, and adjusted free cash flow came in above guide at $212 million, enabling us to continue returns of capital to our shareholders through regular dividends and buybacks. Share repurchases represented a primary use of capital, totaling $30 million in Q4, and $200 million for the full year. We paid $10 million in dividends in Q4, bringing our full year dividend payments to shareholders to $42 million. We remain confident in our ability to generate strong free cash flow to support our future capital allocation priorities. This is evidenced by the strong performance of the business in 2025, enabling dividends back to shareholders, share repurchases, a small bolt-on M&A transaction completed solely with cash, and the settlement of $24 million in debt.

Speaker #3: We remain confident in our ability to generate strong free cash flow to support our future capital allocation priorities . This is evidenced by the strong performance of the business in 2025 , enabling dividends back to shareholders , share repurchases , a small bolt on M&A transaction completed solely with cash , and the settlement of 24 million in debt .

Speaker #3: We made meaningful progress on lowering our tax rate in 2025 . Moving from a full year adjusted effective tax rate of 41.5% in 2024 to 32.5% in 2025 , cash taxes paid also reduced to 61,000,000 in 2025 , from 94,000,000 in 2024 , although it should be noted that there were one off reductions in 2025 cash taxes paid without these one off items , we would have expected a cash tax outlay in the approximately 75 million to 85 million range .

Chris Gropp: We made meaningful progress on lowering our tax rate in 2025, moving from a full year adjusted effective tax rate of 41.5% in 2024, to 32.5% in 2025. Cash taxes paid also reduced to $61 million in 2025, from $94 million in 2024. Although it should be noted that there were one-off reductions in 2025 cash taxes paid. Without these one-off items, we would have expected a cash tax outlay in the approximately $75 million to $85 million range. While we expect improved trends to continue in the coming years, rate of improvement and rate of change is not linear for either ETR or cash taxes paid, and therefore expect rates and cash outlays to change at differing levels each year as various structuring projects are enacted.

Speaker #3: While we expect improved trends to continue in the coming years , rate of improvement and rate of change is not linear for either ETR or cash taxes paid , and therefore expect rates and cash outlays to change at differing levels each year as various structuring projects are enacted before moving to slide 17 and 18 .

Chris Gropp: Before moving to slides 17 and 18 for a discussion of our 2026 outlook, I also want to take a moment and thank and congratulate all our employees for delivering great 2025 results. Despite any market turmoil or chaos that ensues, our teams understand how to calmly assess situations and react appropriately. Let me briefly discuss the drivers behind our outlook for 2026. Industry volumes are expected to be flat to slightly down globally, inclusive of battery and electric vehicle sales. We expect to offset these market changes through continued share gains in aftermarket and increased gasoline direct injection products, off-highway, industrial, and other end markets. Taking these factors into account, and at the midpoint of our net sales outlook of $3.5 to 3.7 billion, we would expect an increase in sales in the mid-single digit range, inclusive of FX.

Speaker #3: For a discussion of our 2026 outlook , I also want to take a moment and thank and congratulate all our employees for delivering great 2025 results .

Speaker #3: Despite any market turmoil or chaos that ensues , our teams understand how to calmly assess situations and appropriately . Let me briefly discuss the drivers behind our outlook for 2026 .

Speaker #3: Industry volumes are expected to be flat to slightly down globally , inclusive of battery electric vehicle sales . We expect to offset these market changes through continued share gains in aftermarket and increased gasoline direct injection products off highway , industrial and other end markets .

Speaker #3: Taking these factors into account , and at the midpoint of our net sales outlook of 3.5 to 3.7 billion , we would expect an increase in sales in the mid single digit range , inclusive of FX , excluding expected FX .

Chris Gropp: Excluding expected FX, our growth is projected to be in the low single digit range. We are therefore guiding adjusted EBITDA to be $485 to 525 million, with an EBITDA margin of 13.7% to 14.3%. We believe the business is well positioned to continue generating meaningful cash flow, and our 2026 outlook for adjusted free cash flow is therefore $200 to 240 million. The adjusted effective tax rate should be in the 30% to 34% range. Overall, we expect to deliver strong results in 2026 as we continue to drive operational efficiencies and search for new areas of growth for both segments. Note that our outlook does not include any possible impacts related to future policy changes by any government, which could affect our operations or technical centers.

Speaker #3: Our growth is projected to be in the low single digit range We are therefore guiding adjusted EBITDA to be 485 to 525 million , with an EBITDA margin of 13.7 to 14.3% .

Speaker #3: We believe the business is well positioned to continue generating meaningful cash flow, and our 2026 outlook for adjusted free cash flow is therefore $200 to $240 million.

Speaker #3: The adjusted effective tax rate should be in the 30% to 34% range . Overall , we expect to deliver strong results in 2026 as we continue to drive operational efficiencies and search for new areas of growth for both segments .

Speaker #3: Note that our outlook does not include any possible impacts related to future policy changes by any government , which could affect our operations or technical centers .

Speaker #3: This includes additional tariffs , tax or any other policy that could inflate or deflate revenue or affect our cost base . Fiscal year 2025 was marked by complexity and resilience .

Chris Gropp: This includes additional tariffs, tax, or any other policy that could inflate or deflate revenue or affect our cost base. Fiscal year 2025 was marked by complexity and resilience, a tale of navigating global headwinds while making strategic progress. We are entering the next chapter of growth and look forward to continued success in fiscal 2026 and beyond, as we continue our focus on revenue growth, product innovation, new markets, business wins, disciplined capital allocation, and delivering shareholder value. We want to thank all of you for joining us on the call today. Operator, please open the lines for questions.

Speaker #3: A tale of navigating global headwinds while making strategic progress. We are entering the next chapter of growth and look forward to continuing success in fiscal '26 and beyond.

Speaker #3: As we continue our focus on revenue growth , product innovation , and new markets . Business wins . Disciplined capital allocation and delivering shareholder value .

Speaker #3: We want to thank all of you for joining us on the call today. Operator, please open the lines for questions.

Speaker #2: 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.

Operator: 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.

Speaker #2: If you would like to withdraw your question , simply press star one again . We'll take our first question from Bobby Brooks at Northland

Speaker #4: Hey , good morning guys . Thank you for taking my question . The first one I had just on Chris , you gave a great breakdown of the guidance and I was just curious on the on that slide 17 .

Bobby Brooks: Hey, good morning, guys. Thank you for taking my question. The first one I had just on, Chris, you gave a great breakdown of the guidance, and I was just curious on the-- on that slide 17, when you're talking about mid to ups, upper single digits for commercial vehicle for, Europe, right? Is that, is that the industry overall, or is that what you're expecting to see?

Speaker #4: When you're talking about mid to upper or single digits for commercial vehicle for Europe , right . Is that is that the industry overall or is that what you're expecting to see

Speaker #5: That the industry overall I think down below you'll see kind of what our expectation is . So I mean , we've seen , you know , I think there's probably probably from the October S&P kind of update .

Brady Ericson: That's the industry overall. I think down below, you'll see kind of what our expectation is. So, I mean, we've seen, you know, I think this part from the, from the October, S&P kind of update. And again, we saw that, commercial vehicle kind of ended last year in Europe, you know, relatively stable, and we're also seeing some positive signs from our customers, in that region as well.

Speaker #5: And again , we're we saw that commercial vehicle kind of ended last year in Europe . You know relatively stable and we're also seeing some some positive signs from our customers in that region as well .

Speaker #4: Thank you for clearing that up for me . And just sticking with the guidance , turning it . Adjusted EBITDA margins , you know , I would have thought if revenues would grow 6% , that you would see a bit more margin expansion .

Bobby Brooks: Thank you for clearing that up for me. And just sticking with the guidance, turning to the adjusted EBITDA margins, you know, I would have thought if revenues would grow 6%, that you would see a bit more margin expansion. So I just wanted to maybe double-click and hear what might be sort of the hurdles preventing more robust margin expansion with better growth.

Speaker #4: So I just wanted to maybe double click in here . What might be sort of the hurdles preventing more robust margin expansion with better growth

Speaker #3: Well , we're showing margin expansions of 20% incremental , which for us is a good rate to go through . And if you it's actually higher than that , if you take out some of the FX and the tariff , we're assuming that we're also going to grow on tariffs and FX , which are basically hollow .

Chris Gropp: Well, we're showing margin expansions of 20% incremental, which for us is a good rate to go through. It's actually higher than that if you take out some of the FX and the tariff. We're assuming that we're also going to grow on tariffs and FX, which are basically hollow. Now, there's not going to be a big increase in the tariffs if they stay stable from last year, but there is a, you know, a reasonable amount of FX in there. But 20% is really a good number, we feel.

Speaker #3: Now , there's not going to be a big increase in the tariffs if they stay stable from last year . But there is a , you know , a reasonable amount of FX in there .

Speaker #3: But 20% is really a good number, we feel.

Speaker #4: Got it . I guess I wasn't I wasn't looking at it like that . And and it was really exciting to hear you guys won your third aerospace and defense supply contract .

Bobby Brooks: Got it. I guess I wasn't looking at it like that. It was really exciting to hear you guys won your third aerospace and defense supply contract. I was just curious to hear, is this with the same customer from the first two, or is this a new customer?

Speaker #4: And I was just curious to hear , is this with the same customer for for the first two , or is this a new customer

Speaker #5: Same customer, but there's momentum in other areas as well.

Brady Ericson: Same customer, but there's momentum in other areas as well.

Speaker #4: Got it. And maybe just the last one is so I know you started production on that first, and the supply contract in the fourth quarter.

Bobby Brooks: Got it. And, maybe just the last one is: so I know you started production on that first A and B supply contract in Q4, right? And isn't that second project slated to start beginning now in Q1? And any insights-

Speaker #4: Right . And isn't that second project slated to start beginning now ? In the first quarter ? And and any in any insights on when that third .

Brady Ericson: Correct.

Bobby Brooks: Okay. And any insights on when that third supply contract might start to kick off?

Speaker #4: Okay . And any insights on when that third supply contract might start to kick off .

Bobby Brooks: Okay. And any insights on when that third supply contract might start to kick off?

Speaker #5: Not start . until .

Chris Gropp: Starting about 20.

Speaker #3: 20 .

Brady Ericson: I think it's 27.

Speaker #5: 2727 .

Chris Gropp: Yeah, twenty-seven.

Brady Ericson: Yeah, twenty-seven.

Speaker #4: Got it . All right . Thank you guys . Congrats on the great quarter I'll turn it to Q .

Bobby Brooks: Got it. All right. Thank you, guys. Congrats on the great quarter. I'll turn to the queue.

Speaker #3: Yeah, thanks, Bob.

Chris Gropp: Yeah. Thanks, Bobby.

Speaker #5: Thank you

Brady Ericson: Thank you.

Speaker #2: We'll move next to Joe Spak at UBS

Operator: We'll move next to Joe Stack at UBS.

Speaker #6: Thanks . Good morning everyone . Chris . Just want to make sure I have it right because I was sort of doing some of the same math on on Incrementals .

Joe Spak: Thanks. Good morning, everyone. Chris, just want to make sure I have it right because I was sort of doing some of the same math on incrementals, and I think there might be some factors that are sort of weighing that a little bit down. So it sounds like, you know, in your revenue guidance, you're assuming about 2 points from FX. Anything there, can you sort of further break down, like, what the contribution from tariffs or if there's any recoveries or other factors in that revenue guidance?

Speaker #6: And I think there might be some factors that are sort of weighing that a little bit down . So it sounds like , you know , in your revenue guidance , you're assuming about two points from FX and anything there .

Speaker #6: Can you sort of further break down , like what the contribution from tariffs or if there's any recoveries or other passthroughs in that , in that revenue guidance ?

Speaker #3: I mean, we're assuming on tariffs that they will come out even. So, that's why it's a bit dilutive on the tariffs.

Chris Gropp: I mean, we're assuming on tariffs that we'll come out even, so that's why it's a bit dilutive on the tariffs. There's not a lot more in tariffs. Remember-

Speaker #3: There's not a lot more in tariffs .

Speaker #5: Remember 1020 .

Brady Ericson: Ten point.

Chris Gropp: -we had three-quarters of tariffs. We're just assuming the carry forward, so you'd have additional tariffs in the Q1 that weren't there last year. So that's additional. But yeah, overall, we just assume that our tariffs are gonna be breakeven... which doesn't give you a lot of room for growth on margins.

Speaker #3: We had three quarters of tariffs. We're just assuming the carry forward. So you'd have additional tariffs in the first quarter that weren't there last year.

Speaker #3: So that's additional . But yeah overall we just assume that our tariffs are going to be breakeven which doesn't give you a lot of room for growth on margins .

Speaker #5: Yeah I mean so the tariffs are in the 10 to 15 million range I think is the one extra quarter at no margin FX is helping .

Brady Ericson: Yeah, I mean, so the tariffs are, what? In the $10 to 15 million range, I think is the 1 extra quarter, at no margin. FX is helping,

Speaker #3: It will. It adds revenue. But most of that's coming in the first quarter, because again, remember that the dollar started weakening at the end of the first quarter last year.

Chris Gropp: It adds, well, it adds revenue, but and most of that's coming in Q1, 'cause again, remember that, the dollar started weakening at the end of the first quarter last year, so a lot of that is coming in Q1.

Speaker #3: So a lot of that coming into first quarter .

Speaker #5: So that FX is not great conversion . Yeah . So it's basically at margin . So again if you take a look at the total number , if you go , you know the 25 to the midpoint of 26 , you're looking at what 130 some million of revenue in 27 million of , of EBITDA , you know , which is a 20% conversion with those with those additional headwinds of of no conversion on , you know , a quarter to a third of it .

Brady Ericson: So that FX is not great conversion?

Chris Gropp: Yeah.

Brady Ericson: So it's basically at margin. So again, if you take a look at the total number, if you go mid, you know, the 2025 to the midpoint of 2026, you're looking at, what? $130-some million of revenue and $27 million of EBITDA, you know, which is a 20% conversion with those additional headwinds of no conversion on, you know, 1/4 to 1/3 of it.

Speaker #6: Okay . Yeah , that's all right . So we can sort of back into what margins would have been otherwise I guess just on another point , I'm just curious if you know , if anything sort of baked in here as well .

Joe Spak: Okay. Yeah, that's... All right, so we can sort of back into what margins would have been otherwise. I guess just on another point, I'm just curious if, you know, if anything's sort of baked in here, here as well. Like we've obviously seen metal and other input prices move higher, and although they've been a little bit volatile late, can you just remind us, you know, again, of the most important inputs and just contractually, how that flows through your financials?

Speaker #6: Like we obviously seen metal and other input prices move higher . And although they've been a little bit volatile of late , can you , can you just remind us , again of the most important inputs and just contractually how that flows through your your financials .

Speaker #5: Yeah , I mean it's we've got mostly it's copper copper and aluminum . I'm probably going to be the two as well as , you know , some stainless steels .

Brady Ericson: Yeah, I mean, we've got mostly it's copper. Copper and aluminum are probably gonna be the two, as well as, you know, some stainless steels. But again, the material content, you know, of our overall revenue is not a significant percentage.

Speaker #5: But again the the material content , you know of our overall revenue is not a significant percentage .

Chris Gropp: No, 'cause we're buying mainly already finished components that have it built in, and where we do have any kind of commodity, we get passed through. It's not a perfect, 'cause, you know, it's usually a, an adjustment at the end of the quarter to-- it could go either positive or negative, but overall.

Speaker #3: Because we're buying mainly already finished components that have it built in. And where we do have any kind of commodity, we get pass through.

Speaker #3: It's not a perfect because , you know , it's usually an adjustment at the end of the quarter to it could go either positive or negative , but overall .

Speaker #5: But there's nothing—nothing meaningful in our guide from commodity pass-through or commodity impacts.

Brady Ericson: But there's nothing, nothing meaningful in our-

Chris Gropp: Yeah

Brady Ericson: ... in our guide from commodity pass-throughs or commodity impacts.

Speaker #2: We'll go next to Jake Skole at BNP Paribas .

Operator: We'll go next to Jake Skull at BNP Paribas.

Speaker #7: You guys congrats quarter within that I appreciate you guys breaking out the 6% industrial mix . Within that . Are there any particularly rapidly growing businesses ?

Jake Scholl: Guys, a great quarter. Within that, you know, I appreciate you guys breaking out the 6% industrial mix. Within that, are there any particularly rapidly growing businesses? Anything you guys really want to call out in there that should be a growth driver over the next few years?

Speaker #7: Anything you guys really want to call out in there that should be a growth driver over the next few years?

Speaker #5: Yeah , I mean it's I think we've seen it in some of the press releases or in our earnings calls . As far as the new business , I think you'll see a lot of marine applications , some off highway , some gensets in there , AG and construction .

Brady Ericson: Yeah, I mean, it's. I think we've seen it in some of the press releases or in our earnings calls as far as the new business. I think you'll see a lot of marine applications, some off highway, some gen sets in there, ag and construction. So I think it's obviously aerospace and defense, and so it's all been growing, you know, really good for us, and we've had a nice uptake and, and, and customers there. Order of magnitude, I think, we'll give, we'll give some more color in it, on the details and those markets in the Investor Day, later on, in a couple of weeks here, too.

Speaker #5: So I think it's obviously aerospace and defense . And so there it's all been growing , you know , really good for us .

Speaker #5: And we've had a nice uptake and and customers there . And order of magnitude I think we'll get we'll give some more color in it .

Speaker #5: On the details in those markets , in the Investor Day later on in a of weeks here to

Speaker #7: Thanks , Brady . And then you guys finished the year comfortably within your within your leverage range . You're generating strong free cash this year .

Jake Scholl: Thanks, Brady. And then, you know, you guys finished the year comfortably within your, you know, within your leverage range. You're generating strong free cash this year. How should we think about your capital allocation priorities? Are there any, areas where you're looking to build out your portfolio through M&A? Or, you know, do you expect to, you know, keep deploying most of that towards buybacks? And then just quickly, can you quantify what-- how, where you expect the transaction costs for the, the adjusted free cash to adjusted free cash bridge to fall out? Thank you.

Speaker #7: How should we think about your capital allocation priorities . Are there any areas where you're looking to build out your portfolio through M&A or do you expect to keep deploying most of that towards buybacks .

Speaker #7: And then just quickly, can you quantify what, how, and where you expect the transaction costs within the free cash to adjusted free cash bridge to fall out?

Speaker #7: Thank you

Speaker #5: I think I'll I guess I'll hit the the first . You know , the cash question .

Brady Ericson: I think I'll, I guess I'll hit the first, you know, was it the cash question?

Speaker #3: No. The first is capital allocation.

Chris Gropp: No, the first was capital allocation.

Speaker #5: The capital . But it's I mean as we as we kind of told you , the we're always going to sit down every quarter and kind of take a look at where we are on cash and where some M&A is and where our share price is , and try to make decisions that we think are in the best interest to to maximize shareholder value .

Brady Ericson: Oh, capital allocation. But I mean, as we kind of told you, we're always going to sit down every quarter and kind of take a look at where we are on cash and where some M&A is, and where our share price is, and try to make decisions that we think are in the best interest to maximize shareholder value. And so obviously, with share price appreciation and our multiple going up, you know, it may make an M&A look better, but again, we're not gonna force ourselves to do M&A. You know, we still think that our business is made up of, and the diversity of our business makes us look very much like a diversified industrial, and we kind of know where some of those comps are.

Speaker #5: And so obviously with with share price appreciation and our multiple going up , you know , it may make an M&A look better .

Speaker #5: But again we're not going to force ourselves to do M&A . You know we still think that you know we our business is made up of and the diversity of our business makes us look very much like a diversified industrial .

Speaker #5: And we kind of know where some of those comps are . So we still think that , you know , share repurchases is still going to be , you know , part of our capital allocation policies , which is why the board also came out and increased our share repurchase program to give us some additional flexibility .

Brady Ericson: So we still think that, you know, share repurchases is still gonna be, you know, part of our cap allocation policies. Which is why the board also came out and increased our share repurchase program to give us some additional flexibility there, and continue to being opportunistic. You know, we like our business, we like the portfolio of our products right now, and we like the trajectory that we have. So, you know, we upped our dividend as well, 11%, because our share count keeps coming down. And so we'll continue to make those decisions to maximize shareholder value. Now, on the cash conversion, I think was your question there?

Speaker #5: There . And continue to being opportunistic . You know , we like our business . We like our portfolio of our products . Right now , and we like the trajectory that we have .

Speaker #5: So , you know , we we upped our dividend as well . 11% because our share count keeps coming down . And so we'll continue to make those those decisions to to maximize shareholder value on the , on the cash conversion I think was your question there .

Chris Gropp: Can you reframe that one again, Jake? Because I didn't even... I think both of us got a little confused over there.

Speaker #3: You reframe that one again , Jake , because I didn't even I think both of us got a little confused . I would .

Speaker #7: Just a quick question on the transaction costs to bridge from, you know, traditional free cash to adjusted free cash.

Jake Scholl: Just a quick question on the transaction costs to bridge from Borg, you know, traditional free cash to adjusted free cash.

Chris Gropp: I mean, it's just, we're just going from doing it from net income, which we felt was a little bit odd and squirrely, and moving it to-

Speaker #3: I mean , it's the it's just we're just going from doing it from net income , which we felt was a little bit odd and squirrely and moving it to adjusted EBITDA .

Chris Gropp: I mean, it's just, we're just going from doing it from net income, which we felt was a little bit odd and squirrely, and moving it to-

Brady Ericson: It says from net.

Chris Gropp: ... Adjusted EBITDA.

Speaker #5: Why did you go from net to adjusted cash flow?

Brady Ericson: Well, how do you go from net to adjusted cash flow?

Speaker #3: To adjust

Chris Gropp: To adjusted-

Speaker #5: We say adjusted cash flow. And net.

Brady Ericson: We say adjusted cash flow in terms of the net.

Drew Estes: ... Yeah, like, Craig-

Jake Scholl: ... Yeah, like, Craig-

Speaker #8: Yeah , like Chris .

Speaker #5: Is that your question, Bob?

Brady Ericson: Is that your question, Brian?

Speaker #8: Yeah . Thanks , Brad . So like on slide 25 in the adjusted free cash bridge , there's the .

Drew Estes: Yes. Thanks, Ray. So like, on slide 25, in the adjusted free cash bridge, there's the separation-related transaction cost. And that's the only difference between what you guys report as adjusted free cash, but other companies. But, you know, what is true, like, kind of a traditional free cash flow number? I'm just trying to bridge that.

Jake Scholl: Yes. Thanks, Ray. So like, on slide 25, in the adjusted free cash bridge, there's the separation-related transaction cost. And that's the only difference between what you guys report as adjusted free cash, but other companies. But, you know, what is true, like, kind of a traditional free cash flow number? I'm just trying to bridge that.

Speaker #7: Separation related transaction costs . And that's the only difference between what you guys report as adjusted free cash and what other companies would you know what is like kind of a traditional free cash flow number ?

Speaker #7: I'm just trying to bridge that

Speaker #5: Effective separation .

Brady Ericson: Effect of separation.

Speaker #3: Are you asking what the separation costs are ? I mean , that still relates back to the original spin transaction . And as those go down .

Chris Gropp: Are you asking what the separation costs are? I mean, that still relates back to the original spin transaction, and as those go down, there's still a little bit of noise coming out of that from the settlement with BorgWarner and the finalization of some of the old transactions as we clear out some of the old statutory and things. So those are the numbers that are there, and you can see it on page 25 in the bridge.

Speaker #3: There's still a little bit of noise coming out of that from the settlement with BorgWarner and the finalization of some of the old transactions as we clear out some of the old statutory and things .

Speaker #3: So those are the numbers that are there , and you can see page 25 in the bridge .

Brady Ericson: Those will continue to come down.

Speaker #5: Those will continue to come down . That'll .

Chris Gropp: That'll come down, yeah.

Speaker #3: Come down . Yeah .

Brady Ericson: As we get through that.

Speaker #5: As we get through that

Speaker #7: Thanks guys

Drew Estes: Thanks, guys.

Jake Scholl: Thanks, guys.

Speaker #2: We'll take our next question from Bobby Brooks at Northland.

Operator: We'll take our next question from Bobby Brooks at Northland.

Speaker #4: Hey , thanks for letting me jump back on . I guess , you know , kind of broad question , but a lot of good things happening in the business , guys are doing a great job expanding outside of just being a , you know , auto supplier .

Bobby Brooks: Hey, thanks for letting me jump back on. I guess, you know, kind of broad question, but a lot of good things happening in the business. You guys are doing a great job expanding outside of just being a, you know, auto supplier. Got your investor day coming up in two weeks. You know, just kind of wanted to give you the floor to... What, what might be the focuses of the investor day, and maybe just any hints of what's to come? Thank you.

Speaker #4: You've got your Investor Day coming up in two weeks . You know , just just kind of wanted to give you the floor to what what might be the focuses of the Investor Day and maybe just any hints of what's to come .

Speaker #4: Thank you

Speaker #5: Sure . I think one of the things we're obviously going to do is we're going to go through a lot of our technology and the products that we think and services that we think differentiates us and gives us a lot of , I guess , strong relationships with our customers .

Brady Ericson: Sure. I think, one of the things we're obviously gonna do is we're gonna go through, a lot of our technology and the products that we think, and services that we think differentiates us, and gives us a lot of, I guess, strong relationships with our customers, that makes us, you know, you know, a good partner for them. You know, from our products to our services, support, software, and calibration. We'll take you through that. We'll go through and deep dive, each of these end markets that we, that we've now highlighted and kind of share with you some of the applications, technologies, and the market opportunities that we see, in each of those markets.

Speaker #5: That makes us , you know , you know , a good partner for them . You know , from our products to our services and support and software and calibration , we'll take you through that .

Speaker #5: We'll go through and deep dive each of these end markets that we that we've now highlighted and kind of share with you some of the applications and technologies and the market opportunities that we see in each of those markets .

Brady Ericson: Finally, we'll kind of give an outlook on where we think we're gonna be in 2030 and beyond, as we continue to shift our business more and more towards, you know, commercial vehicle and off-highway and service applications, and how that's gonna, you know, further support our growth, you know, beyond 2030. So we'll have some nice displays there as well as for other products, some of the unique manufacturing and proprietary processes that we have in our manufacturing facilities. That also helps, you know, put some walls up around our business and protects us from kind of individual players out there. So we think it'll be a nice deep dive, and in some ways it's gonna be, you know, more the same.

Speaker #5: And finally , we'll we'll kind of give an outlook on where we where we think we're going to be in 2030 and beyond .

Speaker #5: As we continue to shift our business more and more towards , you know , commercial vehicle and off highway and service applications and how that's going to , you know , further , further support our growth , you know , beyond 2030 .

Speaker #5: And so we'll have some nice displays there as well as far as our products , some of the unique manufacturing and proprietary processes that we have in our manufacturing facilities that also helps , you know , put put some of to some some walls up around our business and protects us from , from kind of individual players out there .

Speaker #5: So we think it'll be a nice deep dive . And in some ways it's going to be , you know , more the same .

Speaker #5: We're going to continue to be financially disciplined. We're going to continue to lead with product leadership. And we're going to continue to allocate capital in the most efficient way.

Brady Ericson: We're gonna continue to be financially disciplined, we're gonna continue to lead with product leadership, and we're gonna continue to allocate capital in the most efficient way, you know, possible. And so it's just a continuation of the journey for us.

Speaker #5: You possible . And so it's just a continuation of the journey for us .

Speaker #4: Great to hear . Really , really looking forward to it . Our turn of the Q

Bobby Brooks: Great to hear. Really really looking forward to it, our turn to you.

Speaker #2: We'll move next to Drew Estes at Banyan Capital Management

Operator: We'll move next to Drew Estes at Banyan Capital Management.

Speaker #9: Hey there . Good morning . It's my question is about 2026 volume assumptions . We're seeing a what seems to be a refocus on ice and hybrid vehicles among OEMs , especially in the US .

Drew Estes: Hey there. Good morning. So my question is about 2026 volume assumptions. We're seeing a, what seems to be a refocus on ICE and hybrid vehicles among OEMs, especially in the US. And you're, you're still assuming light vehicle volumes to decline low single digits in the Americas. And I'm just curious, what would it take for light vehicle volumes to turn positive in the Americas for y'all? Thank you.

Speaker #9: And you're still assuming light vehicle volumes to decline . Low single digits in the Americas . And I'm just curious , what would it take for light vehicle volumes to turn positive in the Americas for y'all ?

Speaker #9: Thank you

Speaker #5: Well , again , this is the the market numbers is kind of the latest and greatest . Is that North America , the Americas is going to be relatively flat to down a little bit .

Brady Ericson: Well, again, this is the market numbers. It's kind of the latest and greatest is that North America, the Americas, is gonna be relatively flat to down a little bit. Not a whole lot, I mean, from the numbers standpoint. And that includes, you know, EV or battery electric vehicles in that number. And so we do still see some battery electric vehicle penetration, kind of flat to maybe a little bit up. But for us, you know, we've got a good market. You know, we continue to see market share gains in GDI, you know, penetration rates increasing. And again, the GDI goes across both hybrid and plug-in hybrid applications that have combustion engines in them, so that's a good thing for us.

Speaker #5: Not a whole lot . I mean from the number standpoint . And that includes , you know , EV or battery electric vehicles in that number .

Speaker #5: And so we do still see some battery electric vehicle penetration kind of flat to maybe a little bit up . But for us , you know , we've got a we've got a good market .

Speaker #5: You know we continue to see market share gains and GDI you know penetration rates increasing . And again the GDI goes across both hybrid and plug in hybrid applications that have combustion engines in them .

Speaker #5: So that's a good thing for us . You know . So for us in general the market may be flat to down , but we continue to see , you know , good penetration rates for for our business as we kind of highlighted there on slide 17 .

Brady Ericson: You know, so for us, in general, the market may be flat to down, but we continue to see, you know, good penetration rates for our business. As we kind of highlighted there on slide 17, you know, the overall global, you know, internal combustion, which includes hybrids and just standard combustion vehicles, you know, is gonna be flat to down next year for us, but we're still showing growth, and that's because our continued market share gains. And so we're outgrowing the market, what maybe, you know, 400 basis points, 500 basis points, you know, on a year-over-year basis based on our market. And that, I think, is a testament to our technology and a lot of the new business wins that we've been announcing over the last few years.

Speaker #5: You know , the overall global , you know , internal combustion , which includes hybrids and just standard combustion vehicles , you know , is going to be flat to down next year for us .

Speaker #5: But we're still showing growth . And that's because our continued market share gains . And so we're outgrowing the market . But maybe you know , 400 basis points , 500 basis points , you know , in a year over year basis based on our market .

Speaker #5: And I think is a testament to our technology and a lot of the new business wins that we've been announcing for the last few years .

Speaker #5: So , you know , from from our perspective , you know , the the down 1% or 2% is kind of noise . And we'll continue with our market share gains .

Brady Ericson: So, you know, from our perspective, you know, the down 1% or 2% is kind of noise. And we'll continue with our market share gains. We'll continue to see growth.

Speaker #5: We'll continue to see growth

Speaker #9: Okay . Thank you . And just a quick follow up on that . You know , a lot of your competitors had de-emphasized , you know their their GDI platforms and and anything else related .

Drew Estes: Okay. Thank you. And just a quick follow-up on that. You know, a lot of your competitors have de-emphasized, you know, their, their GDI platforms and, and anything ICE related. Are you seeing any change in their behavior, maybe a refocusing on some of those programs, or is it, have they not really changed anything?

Speaker #9: Are you seeing any change in their behavior . Maybe a refocusing on on some of those programs ? Or is it have they not really changed anything

Speaker #5: No . Not really . I mean , there's there's still , you know , there's just two other major players out there other than us .

Brady Ericson: No, not really. I mean, there's still, you know, there's just two other major players out there other than us. We continue to gain share. I think the smaller players have already kind of started to wind down things, so there's not a huge change there. I think you'll continue to see ours, you know, first to market with a 500 bar type system. We're doing a lot with alternative fuels, both natural gas, E100s. That I think puts us in a strong position, and we continue to launch, you know, more hybrid applications with GDI as well. So, again, what's what we benefit from is that, you know, we're truly focused.

Speaker #5: We continue to gain share . I think the smaller players have already kind of started to wind down things . So there's not a not a huge change there .

Speaker #5: I think you'll continue to see ours . You know , first to market with a 500 bar type system . We're doing a lot with alternative fuels , both natural gas , that think puts us in a in a strong position and we continue to launch , you know , more hybrid applications with GDI as well .

Speaker #5: So again , what's what we benefit from is that , you know , we're truly focused . It's our key market for our company where some of our competitors , it's just a small percentage of a very big company .

Brady Ericson: It's our key market for our company, where some of our competitors, it's just a small percentage of a very big company, and they're allocating their capital, and they're focusing on a lot of different things. So, we think there's benefits for us being a little bit smaller and more focused and dedicated to this space.

Speaker #5: And they're allocating their capital and they're focusing on a lot of different things. So we think there's benefits for us being a little bit smaller and more focused and dedicated to this space.

Speaker #9: Okay . Thank you

Drew Estes: Okay, thank you.

Speaker #2: And that concludes our Q&A session. I would like to turn the conference back over to Brady Ericson for closing remarks.

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

Speaker #5: Great . Thank you . You know , we really feel we delivered a solid finish to the year 2025 . Results were in line with our expectations , reflecting the resilience of our diversified portfolio , the progress we made during the year underscores the strength of our strategy and successful execution , and has us well positioned in the coming year with our strong foundation in place .

Brady Ericson: Great, thank you. You know, we really feel we delivered a solid finish to the year. 2025 results were in line with our expectations, reflecting the resilience of our diversified portfolio. The progress we made during the year underscores the strength of our strategy and successful execution, and has us well positioned in the coming year. With our strong foundation in place, we're excited about the opportunities ahead and remain confident in our long-term growth outlook and our ability to create long-term value for our shareholders. As mentioned earlier, you know, we are gonna be hosting our Investor Day on February 25 at the NYSE. Please go to our investor page to sign up to join us, either in person or via live stream. So again, thank you everyone for joining us this morning. Have a great day.

Speaker #5: We're excited about the opportunities ahead , remain confident in our long term growth outlook and our ability to create long term value for our shareholders .

Speaker #5: And as mentioned earlier , you know , we are going to be hosting our Investor Day on February 25th at the NYSE . Please go to our investor page to sign up to join us , either in person or via live stream .

Speaker #5: So again , thank you everyone for joining us this morning . Have a great day .

Speaker #2: This concludes today's conference call . Thank you for your participation . You may now disconnect .

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

Operator: Please wait. The conference will begin shortly.

Q4 2025 PHINIA Inc Earnings Call

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