Atmus Filtration Technologies Inc. Q3 FY2026 earnings call

• Growth Strategy Execution: The company is executing a four-pillar strategy: growing share in first-fit markets, accelerating profitable aftermarket growth via Fleet Guard and Cook Filter brands, transforming the supply chain for resilience, and expanding into industrial filtration.
• Acquisition Integration: The integration of Cook Filter is complete. New investments include a HEPA filter clean room at the Louisville site to target high-growth healthcare markets and a new facility in Florida planned for next year to expand HVAC capabilities.
• Cash Flow & Capital Allocation: Adjusted free cash flow reached $88 million ($189 million YTD). The company has paid down $100 million in debt since the last call, achieving a net debt-to-EBITDA ratio of 1.7x. A new $300 million share repurchase program was approved, with future buybacks balanced against M&A opportunities.
• Market Dynamics: US first-fit heavy and medium-duty markets are experiencing strong cyclical recovery. However, diesel pickup truck demand faces pressure. The global aftermarket remains relatively flat, with North America robust but unchanged YoY, while international markets face challenges from Middle East conflict impacts.

Power Solutions: Generated $468 million in sales, a 5% increase year-over-year. This growth was driven by 5% higher volumes, 1% pricing, and 1% favorable foreign exchange, partially offset by 2% price reductions due to IEPA tariff refunds. Adjusted EBITDA was $96 million (20.5% margin), up from $92 million (20.4%) last year. Industrial Solutions: Generated $42 million in sales, resulting primarily from the acquisition of Cook Filter. Adjusted EBITDA was $8 million (19.6% margin).

• Total Company Revenue: Raised expectations to a range of $2.01 billion to $2.035 billion, representing ~15% growth at the midpoint compared to 2025.
• Power Solutions Revenue: Raised guidance to a range of $1.85 billion to $1.87 billion (~5.5% growth at midpoint). Volume growth expected at 2-3%, with net pricing adding ~1% (base +1.5% offset by -0.5% tariff refunds).
• Industrial Solutions Revenue: Raised guidance to a range of $160 million to $165 million.
• Adjusted EBITDA Margin: Maintained full-year guidance in the range of 19.75% to 20.25%.
• Adjusted EPS: Raised expectations to a range of $2.90 to $3.05.

• Regulatory Uncertainty: Significant uncertainty surrounding EPA 2027 regulations, which may impact engine manufacturers and OEM strategies; final outcomes are expected later in 2026.
• Geopolitical Impact: Rising input costs and weaker profitability in India and Europe due to the ongoing conflict in the Middle East.
• Tariff Refunds: One-time reduction in revenue of $9 million due to IEPA tariff refunds passed back to customers, with no further material refunds expected.
• Demand Volatility: Pressure on diesel pickup truck demand in the US, though offset by strength in heavy/medium-duty sectors.

Q: Analyst asked about FirstFit demand sustainability into 2027 given recent strength and upcoming EPA 2027 regulations. / A: CEO stated momentum is strong through 2026 and likely into H1 2027 despite regulatory uncertainty. The company has no supply constraints and feels well-equipped to support customers transitioning between old and new engine platforms as EPA guidelines finalize.