PHINIA — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net sales increased 0.4% year-over-year to $912 million; excluding foreign currency impact of $4 million, sales remained flat.
• Net earnings were $67 million ($1.80 per diluted share), compared to $13 million ($0.33 per diluted share) in the prior-year period.
• Adjusted net earnings were $68 million ($1.83 per adjusted diluted share), an increase from $63 million ($1.59 per adjusted diluted share) in the prior-year period.
• Adjusted EBITDA increased $2 million to $135 million, with an adjusted EBITDA margin of 14.8%, up 20 basis points year-over-year.
• Net cash provided by operating activities was $87 million, a decrease of $32 million from the prior-year quarter.
• Adjusted free cash flow was $73 million, a decrease of $31 million compared to the prior-year quarter.
• Total debt was $1.1 billion, resulting in a net leverage ratio of 1.3x.
• Gross margin was 22.4%, up from 22.0% in the prior-year period.

Guidance and Future Outlook:

• Revised full-year 2026 net sales guidance increased to $3,625–$3,675 million from the prior range of $3,565–$3,665 million.
• Revised full-year 2026 net earnings guidance increased to $160–$182 million from the prior range of $155–$180 million.
• Revised full-year 2026 Adjusted EBITDA guidance increased to $500–$520 million from the prior range of $485–$515 million.
• Revised full-year 2026 Adjusted EBITDA margin guidance increased to 13.7%–14.1% from the prior range of 13.5%–14.1%.
• Revised full-year 2026 Adjusted free cash flow guidance increased to $220–$250 million from the prior range of $210–$250 million.
• Revised full-year 2026 Adjusted tax rate guidance decreased to 28%–30% from the prior range of 30%–33%.
• The updated guidance includes the expected fourth-quarter contribution from the acquisition of the stoba Group, which closed on October 1, 2026.

Business Segments and Product Lines:

• Power Systems net sales declined 1.8% to $561 million, primarily due to the non-recurrence of favorable customer pricing actions in 2025 and timing of tariff recovery mechanisms.
• Aftermarket Solutions net sales increased 4.2% to $351 million, driven by higher sales in the Americas, partially offset by timing of tariff recovery mechanisms.
• New business awards included a first methanol engine program for alternative fuels in China.
• Secured a new compressed natural gas (CNG) injector program for the Indian light passenger vehicle market.
• Won a GDI pump award for a new range-extender application in North America.
• Secured a new customer win for the North American fuel injector remanufacturing business.
• Won a competitive-conquest Aftermarket braking business in Spain and expanded Southeast Asian distribution.
• Secured new business across diesel, vehicle electronics, and engine management systems in Saudi Arabia, Portugal, and Spain.

Market and Competitive Landscape:

• Results were impacted by tariff-related customer recovery mechanisms; 2025 benefited from recoveries while 2026 reflected refunds to customers.
• Excluding tariff-related volatility, core business sales increased $21 million year-over-year.
• The company reported strong new award activity focused on emerging growth industries and diverse fuels/applications.
• Management cited stable end market demand and continued aftermarket momentum.

Risks and Challenges:

• Net cash from operating activities decreased due to withholding tax payments related to cash repatriation and unfavorable working capital impacts from increased accounts receivable.
• Adjusted free cash flow decreased due to the aforementioned working capital impacts and timing of collections.
• Future results are subject to risks including geopolitical tensions, trade restrictions, supply chain disruptions, and changes in tax laws or tariffs.

Management Commentary and Tone:

• CEO Brady Ericson stated results were consistent with expectations, reflecting stable demand and strong financial discipline.
• Management highlighted the resilience of the business, noting Adjusted EBITDA growth despite higher R&D spending and investments in customer relationships.
• Ericson expressed confidence in the company's strategy and ability to execute on key priorities to deliver shareholder value.
• The company returned $76 million of capital to shareholders during the quarter, representing 104% of adjusted free cash flow.

Other Key Points:

• Repurchased $65 million of common equity under the existing share repurchase authorization.
• Paid $11 million in cash dividends.
• Total available liquidity was $813 million, consisting of $436 million in cash and cash equivalents and $377 million of availability under the Revolving Credit Facility.
• The acquisition of the stoba Group closed on October 1, 2026.
• The company has approximately 13,500 employees and over 40 locations in 21 countries.