Atmus Filtration Technologies Inc. (ATMU) Earnings

Management highlights

- Cook Filter Integration Progress * Over 95% of transition services agreements have been exited, with all remaining integration activities expected to be completed in Q3 2026 * Management sees clear value creation opportunities from combining Cook Filter's industry expertise with Atmos' existing capabilities and global footprint - Four Pillar Growth Strategy Execution * Pillar 1 (Grow first fit market share): Continues to expand partnerships with leading global and regional OEMs, leveraging proprietary Nanonet N3 filtration media and global advanced testing capabilities to increase reach * Pillar 2 (Accelerate profitable aftermarket growth): Maintains dedicated local customer teams and a robust opportunity pipeline to expand penetration of existing Fleet Guard and new Cook Filter products * Pillar 3 (Transform supply chain): Has launched the lean-based "Lean the Atmos Way" production system; the Mexico facility became the first certified site, and delivery and on-shelf availability have reached all-time highs through the Atmos Control Distribution Network * Pillar 4 (Expand into industrial filtration): Following the Cook Filter acquisition, management is evaluating a robust pipeline of targeted bolt-on acquisitions focused on industrial air filtration to build a scaled platform, while remaining opportunistic for anchor investments in industrial water and liquid filtration - Capital Allocation Strategy * Strong cash generation provides balance sheet flexibility for both growth investments and shareholder returns * Full-year 2026 share repurchases are expected to total $20 to $40 million, in line with prior guidance * Going forward, surplus cash will be prioritized for paying down gross debt to position the firm for future growth opportunities * Ended Q2 with a net debt to adjusted EBITDA ratio of 1.9x for the trailing twelve months

Guidance

- Full year 2026 Power Solutions revenue is expected to be between $1.82 billion and $1.865 billion, representing ~4.5% growth at the midpoint; volume is projected to be flat to +2% (including share gains of 1-2%), pricing will add ~1.5%, and foreign exchange will add a ~2% tailwind - Full year 2026 Industrial Solutions revenue is expected to be between $155 million and $165 million - Total full year 2026 company revenue is expected to be between $1.975 billion and $2.03 billion, representing ~13.5% growth at the midpoint - Full year adjusted EBITDA margin guidance has been narrowed to 19.75% to 20.25% (the top end of the prior range was lowered by 25 bps) - Full year adjusted EPS guidance is expected to be between $2.85 and $3.00 - 2026 one-time Cook Filter integration costs are expected to total $3 to $6 million, while intangible asset amortization from the acquisition is expected to be $11 to $13 million - Aftermarket for Power Solutions is expected to be flat year-over-year, with ongoing 1-2% annual share gains

Segment performance

Power Solutions: Q2 2026 sales were $486 million, an increase of 7% year-over-year, accounting for 92% of total Q2 company revenue. Segment adjusted EBITDA was $101 million, representing a 20.8% margin, compared to 21% year-over-year. Industrial Solutions: Q2 2026 sales were $42 million, entirely from the recently acquired Cook Filter, accounting for 8% of total Q2 company revenue. Segment adjusted EBITDA was $8 million, representing an 18.9% margin. Total company Q2 2026 sales were a record $528 million, up 16.4% year-over-year. Gross margin was $154 million (29.2%), up from 28.9% year-over-year. Adjusted EBITDA totaled $109 million (20.7%), compared to $95 million (21%) year-over-year.

Risks & headwinds

- The ongoing conflict in the Middle East has created sustained inflationary pressure on key raw materials (chemicals, plastics), and has contributed to subdued market conditions in the Middle East and broader Europe that have resulted in underperformance relative to original expectations - The Middle East conflict has also driven weaker-than-anticipated performance in the firm's India joint venture, leading to lower full year joint venture income than originally forecast - Commodity cost headwinds are expected to be concentrated in the second half of 2026, creating margin pressure relative to the first half - Aftermarket demand has not yet seen a material inflection despite improving freight market sentiment, and conditions outside of North America remain subdued

Analyst Q&A

• Q: How did aftermarket and first-fit revenues perform in Q2, how much did share gains contribute to Power Solutions growth, and have full-year share gain assumptions changed? /

  A: Aftermarket, which makes up 85% of Power Solutions revenue, was flat in Q2, with stronger conditions in North America offset by subdued demand in Europe, Middle East, and most of Asia Pacific. Full-year share gains for Power Solutions remain guided at 1% to 2% unchanged from prior outlooks. First fit markets saw the anticipated early cyclical recovery in the second quarter, with growth split evenly between market improvement and ongoing share gains from the "winning with winners" strategy. Atmos' supply chain cycle means it sees this uptick 4-6 weeks ahead of published OEM vehicle production data.

• Q: What is the updated full-year price/cost outlook, and is 2% full year pricing still the correct expectation? /

  A: Price realization hit just over 2% in the first half of 2026, but full-year guidance remains 1.5% as price realization is expected to moderate in the second half due to year-over-year comparison effects and the rollback of legacy tariff-related pricing from 2025. The primary second half cost headwind is elevated commodity prices driven by the ongoing Middle East conflict, which has also pushed down joint venture income expectations from original full-year forecasts. The margin guidance narrowing reflects this first half/second half dynamic.

• Q: Why was the top end of the full-year adjusted EBITDA margin guide lowered by 25 basis points, and what drove the sequential EBITDA margin decline in the Industrial Solutions segment? /

  A: The lower top end of the margin range reflects moderating pricing and FX tailwinds in the second half compared to the first half, plus prolonged Middle East conflict-driven raw material inflation and lower-than-expected India joint venture income. The 200 bps sequential Q2 margin decline for Industrial Solutions is due to temporary one-time inefficiencies from the Cook Filter TSA transition and redundant expenses, not seasonality. Full-year Industrial Solutions margin is still expected to average ~20%, which is the baseline for the second half of 2026.

• Q: What are your current expectations for the North America heavy truck aftermarket, and have they changed since the start of the year? /

  A: Full-year expectations for the North America truck aftermarket remain unchanged from the start of 2026, with demand still projected to be flat year-over-year. While industry sentiment and spot rates have improved, this has not yet translated to a material uptick in actual aftermarket demand in Atmos' order book. Atmos continues to expect to deliver 1-2% share gains in the segment this year, offsetting the flat underlying market.