Atmus Filtration at Bank of America Conference: Navigating Uncertainty with Resilience

On Tuesday, 13 May 2025, Atmus Filtration Technologies Inc. (NYSE:ATMU) presented at the Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025. The company’s CFO, Jack Hinzler, highlighted the resilience of Atmus’s aftermarket business amid challenging market conditions, while also addressing the impacts of regulatory changes and tariffs. Despite facing a freight recession and a downturn in the first-fit market, Atmus remains confident in its ability to deliver value.

Key Takeaways

• Over 80% of Atmus’s revenue comes from the aftermarket, providing stability in cyclical markets.
• The company is maintaining its revenue guidance despite broader market challenges.
• Atmus is actively managing tariffs to ensure margin neutrality and engaging with OEM partners.
• The company is focused on expanding its distribution reach and enhancing its brand.

Financial Results

• First-fit revenue accounted for 14% of total revenue in 2024, a decrease from 2019 and 2023 levels.
• The revenue guidance for 2025 suggests flat growth at the low end.
• An annual pricing increase of 1.7% is embedded in the 2025 guidance.
• The aftermarket business contributes over 80% of Atmus’s total revenue.

Operational Updates

• North America: The medium and heavy-duty markets are expected to decline.
• Latin America: Despite challenges in the first-fit market, aftermarket growth shows promise with a 14% CAGR since 2021, though FX headwinds persist.
• Europe: The market remains depressed, but there are hopes for recovery in construction.
• Asia Pacific (excluding China): The region continues to experience softness.
• China: The market is sluggish, with a focus on first-fit sales.

Future Outlook

• Atmus anticipates a decline in medium and heavy-duty markets in North America.
• Aftermarket volumes remain uncertain, with potential improvement if trade policies stabilize.
• The company is closely monitoring the impact of the EPA Model 27 NOx rule on market dynamics.
• Atmus plans to maintain a margin-neutral pricing strategy, including managing tariff impacts through exemptions and resourcing.
• The company aims to expand its distribution reach and increase market share, particularly in underpenetrated markets like Europe.

Q&A Highlights

• The first-fit market is expected to decline by about 12% at the midpoint.
• OEM partnerships provide market outlooks, but volumes are not guaranteed.
• Atmus is implementing base pricing to offset tariff costs, striving for margin neutrality.
• Market uncertainty is reflected in customer hesitancy and lack of clarity.

Readers interested in a detailed understanding of Atmus’s strategic initiatives and market outlook are encouraged to refer to the full transcript below.

Full transcript - Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025:

Andrew, Analyst: Thanks so much. Have next presentation is Atmos Filtration and we have the company’s CFO, Jack Hinzler. And we also have the IR team here. We have Tad Chirillo. Thanks so much for being there.

Look, I think the way we describe Atmos to people, it’s sort of the little engine that did and will. And, you know, I think the performance since the IPO has been massive upside surprise in a very good way. And, yeah, thank you. And with that, we’re going go to our fireside chat. Thanks so much.

All right. So so, yeah, so maybe we can talk about durability, visibility. So the last few months have really demonstrated, I I think, the durability of Atlas’s earnings versus OEMs and other component providers. You know, you’ve seen a 510% cut to U. Machinery stocks EBITDA estimates, but Atmos maintained guidance.

What areas have been most resilient?

Jack Hinzler, CFO, Atmos Filtration: Yeah. Well, thank you, Andrew, for for having us, first of all, and and for the kind words, and thank you everyone for your interest. Look, I think, you know, what you’re seeing here is is really the resiliency of the aftermarket nature of our business. Over over 80% of our revenues are derived from the aftermarket, and that allows us to weather the inherent cyclical markets that we serve, you know, quite well. And so, you know, it’s enabled us to be to provide a bit of, you know, security in in times of, you know, of turbulent markets.

And, you know, what we’re most pleased about, I would say, is the ability to execute through times when the market is down. You know, we’ve been in a a broader freight recession here for many quarters in a row. And and so being able to execute throughout that, I think, positions the business well to to, you know, really deliver even more as our markets start to start to pick up. So I’m really excited about the the progress we’ve been able to make across all of our four, you know, core growth and strategic platforms and looking forward to continuing to deliver against those as we move forward.

Andrew, Analyst: Excellent. So maybe we can talk about FirstFit. It was 14% of revenue in ’24, down from ’19 and ’23. Maybe could you help us to put some context around that revenue mix? What did it get down to in ’nine?

Like 14% seems low, but how low is low?

Jack Hinzler, CFO, Atmos Filtration: Yeah. So as a reminder for everyone, as I mentioned, you know, we’re over 80% of our revenue is derived from the aftermarket. And then on any annual basis, somewhere around, I would say, kind of 15% to 20% derived from the first fit. And as you’re noting, Andrew, it can ebb and flow a bit each year. I would say that this is about the low that we see, and it’s really pronounced it’s driven by the fact that, as I mentioned, inherently the aftermarket peak to trough is much more muted than the first fit.

And so right now we’re in a period where first fit is down, you know, in double digits. We’ve got in our guidance the market from a first fit perspective down about 12% at the midpoint. And so when that’s down, you see the inherent pull through to that mix at the top line. And then that can be a little more further pronounced if certain geographies are also contributing to that lower market level. And so specifically somewhere like China, for example, which has kind of been bouncing along the bottom, that tends to be more of a first fit centric market for us.

Okay. And so if that’s, you know, if that’s down, that can drag that that portion down.

Andrew, Analyst: So maybe another couple of percentage points?

Jack Hinzler, CFO, Atmos Filtration: Yeah. Think would be the the trough, if you will, from a first fit perspective. You know, we believe quite firmly in the the importance of the first fit markets as a flywheel to bolster our installed base in the aftermarket. And so really important piece of the business. It just inherently is more cyclical than, you know, the aftermarket and the freight dynamics.

Andrew, Analyst: Gotcha. So at the low end of ’25 guidance, it calls for flat revenue. And you were explicit, not calling for a recession. So how much visibility do you have into first fit production volumes in second half? Yeah.

And how do you how do you know what, you know, your customers do? Do they share their internal volume forecasting with you?

Jack Hinzler, CFO, Atmos Filtration: Yeah. So generally speaking, we have, you know, ongoing dialogue with with our OEM customers. And inherently, you know, with all of their supply base, including Atmos, they provide us their outlook on the market so as to ensure that their supply base is ready to serve their needs as and where they need volume. And so there’s an ongoing dialogue between our commercial team and know, the likes of the Cummins, PACCAR Mhmm. Traton as we work through outlook for the market.

It’s important to note that that volume is not guaranteed, and so it’s a continuous dialogue. And as we get closer, you know, to that month or or quarter when we’re supposed to deliver the product, you get a bit more clarity. Based on what we’re seeing right now and the continued discussion with our OEMs, you know, we have lowered our outlook from the initial outlook provided in February, again, to about 12% down year on year at the midpoint. And really what that reflects is sort of an elimination, if you will, of any prebuy activity that could have came in in the on highway markets towards the end of twenty five. That was our initial expectation.

But with some of the reevaluation of the upcoming emissions regulations, I think the broader sentiment in the industry is that that is not likely to happen. Right.

Andrew, Analyst: Well, maybe I can push a little bit further. We had a truck distributor here before and somebody I respect a lot. And I guess he was indicating that one of the OEMs only will give you production slots through July. And there’s another OEM which actually has made production slots available, but you have to commit to non cancelable contracts, Yep. Which in his view is, you know, the same as not having production slots.

So how do you deal? Is it is it ACT? Is it your internal modeling? Is it because you’ve been in business for so long? Right.

Because it really does seem on trucks, right? They’re really, you know, probably I think, and I’m clearly putting words in your mouth. It seems that I think people think third quarter is the bottom, right? But as I said, it’s hard to forecast. I don’t recall.

And I think I’ve been looking at the industry for two decades. I don’t recall a time where you could not get a production slots like three months out.

Jack Hinzler, CFO, Atmos Filtration: Yeah. Yeah. I think it’s a it it, you know, is really a reflection of the broader uncertainty that’s impacting, you know, not only aftermarket, which we can talk about more as you think about global trade activity, but also our first fit markets where

Andrew, Analyst: It’s for it’s a first fit question.

Jack Hinzler, CFO, Atmos Filtration: Yeah. Exactly. Where, you know, I think there’s inherent level of uncertainty and a hesitation on the part of end customers, fleets, you know, what have you to commit to any type of pre buy activity given the uncertainty in the regulation. And then I think, you know, what could further exacerbate that and make the uncertainty even more pronounced is, you know, if you do have significant price increases that the OEMs are trying to pass through as a result of tariffs, that becomes fairly difficult to do as you think about, you know, the residual impact perhaps on demand. And so, you know, keeping a very close eye on all that, I think the uncertainty that you’re referring to there reflects a bit of that hesitation or lack of clarity on the end customer side.

And therefore, I think you see kind of the downstream effect of that as you as you think about the OEMs and their hesitation to to give too much clarity into, you know, specificity as it relates to the end of twenty five or, you know, even into ’26 at this point in time.

Andrew, Analyst: Gotcha. So maybe we can talk a little about geography. Can we go around the regions, maybe Europe, LatAm, China, and Asia ex China?

Jack Hinzler, CFO, Atmos Filtration: Yeah. Sure. So, I think we’ve talked a little bit about North America, but maybe I’ll add that in and start there. Again, keeping with the first fit, if you will, we are expecting medium duty and heavy duty to be down this year and, you know, are are continuing to see that in the market. And then, you know, as I think about working my way around the world, Latin America, you know, from a first fit perspective, still relatively challenged.

We have seen a few green shoots in in aftermarket, but then those have largely been offset by softness related to the uncertainty from a trade perspective.

Andrew, Analyst: And what aftermarket in LatAm? Is it ag or trucks?

Jack Hinzler, CFO, Atmos Filtration: That would largely be on highway Okay. On trucks. But, you know, I and I’ll I’ll make sure I circle back on the end markets to the and then, obviously, FX headwinds in in Latin America as well. Europe, also, you know, fairly depressed. We were hoping to see some green shoots in, you know, construction perhaps, but haven’t quite seen that pull through yet.

And then in Asia Pacific, excluding China, again, continued softness. So I hate to paint a depressing picture there. But if I think about a bell curve of, you know, kind of where our various markets at with respect to, being on the upswing or, you know, in the trough. Most, I would say, are in the trough. Still hopeful that India is probably the first to lead out of that, trough, but haven’t quite seen that yet.

And then obviously hopeful that the aftermarket can continue to gain momentum if we get certainty on broader trade policies as we move throughout the year.

Andrew, Analyst: And maybe we can talk about LatAm growth because, you know, I think since 2021, you’ve grown at a 14% CAGR in Latin America. What is the secret to success in this region? And what can you sort of replicate from your Latin American playbook in other regions?

Jack Hinzler, CFO, Atmos Filtration: Yeah. I think it’s a it’s a good highlight of how we’ve been able to put our strategic growth pillars into action. So, you know, I would say that the Latin America region historically was a bit underpenetrated as it relates to our steady state view of where our share should be. And so we embarked on several growth initiatives there, in particular looking to build out our distribution reach through additional channel points and distributor relationships. Historically, we largely went through our former parents’ distribution channel in isolation and and now have looked to not compete from a channel perspective with that outlet, but just to broaden our exposure and get our products, you know, on the shelf in as many locations that, you know, trucks are being serviced both on highway and off highway commercial vehicles.

I think the other piece that you’re seeing is the ability of the business to price. And really, that’s a reflection of the quality and durability of our brand and the end customer’s desire to have, you know, that strong product, which can really act as a low cost insurance policy for them as they put that into their vehicles and ensure that they have, you know, as as much uptime as as possible. And so that combination of volume with price, even amongst some FX headwinds, has really contributed to a nice growth story in Latin America. To your point, you know, where can we leverage that elsewhere? I think, you know, there’s certainly other markets that were underpenetrated in.

Europe comes to mind, although, you know, the the macro environment there is not quite as as fast growing, and there are some price challenges, I would say, in that market. But, you know, this blueprint of how do we add to our aftermarket distribution outlet and just broadly win share is really the core foundation of our first two growth pillars around first fit and aftermarket and really, you know, spreading our wings, if you will, as we came out of the separation.

Andrew, Analyst: But in theory, Europe could be another market where you could sort of see

Jack Hinzler, CFO, Atmos Filtration: Yeah. Europe, and when our share would be a little, you know, underpenetrated kind of like LatAm would be. And then there’s, I would say, different markets as I look to like the Asia Pacific region where we have lower share relative to what, you know, perhaps an entitlement would be.

Andrew, Analyst: And within Europe, if growth picks up, which markets should we think are more natural for you to sort of go after market share?

Jack Hinzler, CFO, Atmos Filtration: Yeah. So I think, you know, as I think about if I cut it by end market versus know, country per se, you know, where can we lift our share? I think many of the off highway markets come to mind where, you know, like construction, for example, or, you know, maybe perhaps ag.

Andrew, Analyst: Oh, interesting.

Jack Hinzler, CFO, Atmos Filtration: You know, are those some areas where we just historically haven’t had a a massive presence that we could look to to exploit with our product range in hand? And then certainly on highway is always a place where, you know, we sort of lead with technical strength

Andrew, Analyst: Yeah.

Jack Hinzler, CFO, Atmos Filtration: Yeah. Particularly on the fuel filtration side. So, you know, we’ll see.

Andrew, Analyst: Gotcha. Thank you. So maybe we can talk about pricing. So historically, Atmos has realized pricing on a lag basis. With tariffs, you seem to be acting a lot more quickly.

What’s different this time? And just maybe are you doing surcharges or are you doing price increases? Yes. And what what’s your competition doing?

Jack Hinzler, CFO, Atmos Filtration: Yeah. Absolutely. So generally speaking, as you know, historically, our pricing in the aftermarket in particular has gone in at the beginning and in the middle of the year. So January and July, if I kind of speak generally. And we are continuing to do that in response to broader inflationary dynamics, whether it be steel or or other input costs.

And that is embedded into our guidance as 1.7% for our annual pricing in in ’25. And then on top of that, we, in extenuating circumstances, look to take appropriate measures to, you know, make sure we’re whole from a cost and a gross margin perspective. We are, of course, looking to do everything we can to mitigate the impacts of tariffs starting first and foremost with exemptions that we can avail ourselves of. So USMCA is probably the most notable example of that where, you know, historically, the vast majority of our product qualifies for USMCA. And, you know, we’re in the process, the final processes of that qualification for this year.

And that allows us to offset the the tariffs at imports, and then we will look to, you know, recoup any thing that we’ve leaked, if you will, over the course of the end of the first quarter and into the second. The second piece we look at is to mitigate tariff impacts is any resourcing or shipping lane reconfigurations that we utilize to minimize the impact that we ultimately have to pass to the end customer. But at the end of the day, the biggest mitigating lever that we have in this very fluid environment is pricing. And so to be specific, what we’ve done is, for the most part, that pricing is being passed through in the form of base pricing. But obviously, as we engage with our customers, we try to give them a sense of why that is happening.

And I would say that’s, from what I’ve seen from an industry practice perspective, reflective of, you know, what others are are doing with us and what our channel partners, the likes of the OEM dealer networks, for example, are also doing. So, you know, I think it remains to be seen. That’s obviously a pretty fluid dynamic, and, you know, we we had already taken the pricing actions. And then, obviously, this week have received, you know, different news on

Andrew, Analyst: Yeah.

Jack Hinzler, CFO, Atmos Filtration: Yeah. China specifically. So we’ll continue to monitor the situation and react accordingly. But the principle that I would leave everyone with is that we intend to be margin neutral, and we’ll take the right measures to protect the business.

Andrew, Analyst: But maybe, you know, just sort of on the first fit side, right, and this environment may be an opportunity. So is there the possibility on the first fit to use this tariff and supply chain events to get better contractual terms and conditions. And, you know, we recognize that these true partnerships with OEMs that go back decades. But, you know, I guess legacy of locking in price downs with no flexibility has been tough. Yeah.

So does this open more avenues for dialogue with the OEMs? Are they receptive to maybe changing things?

Jack Hinzler, CFO, Atmos Filtration: Yeah. I would say broadly speaking, as you note, you know, there are long term agreements that we have in place with our customers, the OEs on the first fit side. And generally, are kind of program by program, if you will. And so as you can imagine, those have evolved over the years as you see more things that you might not have contemplated a few years ago, most notably as of late tariffs, and look to build in that, you know, into the next round of of LTAs. And I think that’s not, you know, unique to Atmos.

I think it’s unique to, you know, everyone in the industry is is doing it. But at the end of the day, it’s negotiation on the OE side. And we’ve, you know, continued to have constructive dialogue with our OE partners as are they with their, you know, their customers. And I think, you ultimately we’ll reach a constructive outcome there.

Andrew, Analyst: But just maybe as said, if you step back and you’ve looked unprecedented, we haven’t seen inflation like this since the seventies. And I remember from my sort of previous days, I remember when, you know, CAT had to face price increases like twenty years ago, they literally brought bad guys from the seventies when you know how to go to the customer and ask for the price increases. But then they did get the price increases, right? So is there is this has there been evolution if you just go back, not specifically June ago, but the industry has just gone through a massive supply chain inflationary shock. Just ultimately, do we come out with more flexibility or versus OEMs or, you know, it’s just, hey, you have more pricing power to your customers and that’s what you get and take it, which is also good.

Jack Hinzler, CFO, Atmos Filtration: Yeah. I think at the end of the day, you’ve seen LTAs evolve. Yep. You know, historically speaking, you wouldn’t see commodity clauses, FX clauses. Okay.

You know, now the onset of of a tariff clause or or something to mitigate broader trade uncertainty. So we certainly have seen the evolution in in LTAs for that as well as, I would say, constructive dialogue amongst, you know, both parties in those discussions. And, you know, obviously, there’s always timing impacts and ensuring that that those price increases can be passed along. I think what’s adding to, you know, the the uncertainty is just where the market cyclicality is.

Andrew, Analyst: Of course.

Jack Hinzler, CFO, Atmos Filtration: And so, you know, if you think about pretty soft demand environment on FirstFit, some of these price increases when applied to the price of a on highway truck are not insignificant. And so if you have if you don’t have customers lining up to to buy trucks, it becomes all that much

Andrew, Analyst: more difficult pass it get it. So the next couple of questions, it’s sort of we’re asking them every company. These come from the management. So do you expect to shift incrementally more of your own production or supply chain to The U. S?

Do you expect your customers to source more from The U. S? Any anecdotes from your

Jack Hinzler, CFO, Atmos Filtration: actually off highway and trucking guys would be super useful. I think broadly speaking, it’s it’s difficult to make a long term significant choice like, you know, establishing a new manufacturing site amongst such an uncertain time frame. We are, as I mentioned, you know, at this point solely focused on, first of all, what exemptions, you know, can we avail ourselves And then, you know, what other resourcing, not wholesale reshoring of manufacturing, but resourcing activities can we undertake to mitigate the impacts? And then obviously prices is the biggest lever. We do have a, you know, a strong manufacturing base in The US already, a significant facility in Cookeville, Tennessee, as well as one in Neillsville, Wisconsin, which allow us to think about, you know, resourcing and increasing volumes in those plants relative to our global supply chain.

But at this point, you know, no actions in place to, you know, to to close or open any new manufacturing sites. My view is that that’s broadly the same sentiment that everyone in the industry has at the moment. You know, as as you’re no doubt aware, it’s it’s very difficult to make that long term, you know, and multi year decision when, you know, you’re amongst a pretty uncertain backdrop. So that’s kind of where it stands right now, and we’ll continue to monitor the macro environment.

Andrew, Analyst: Thank you. So I think the tax bill is getting attention, you know, things like bonus appreciation, domestic manufacturing incentives. Will any of these be important for you? And if so, why?

Jack Hinzler, CFO, Atmos Filtration: Yes. I would say no real dialogue just yet on how those might influence end users’ decision making. You know, does an end user accelerate or change the timing of their purchase of a vehicle to take advantage of bonus depreciation? For example, I think it’s way too early to say given, you know, how hot off the press, if you will, the the tax bill is and and what, if any, changes that will undertake as it moves its way through congress and the executive branch. So I would say, you know, no no real constructive dialogue as of yet, and we’ll keep a close eye on it.

Andrew, Analyst: Thank you. So maybe on tariffs. So and as I said, it’s the problem is it’s very much a moving target. But, you know, products imported from China less than 2% of US revenue, so, you know, less than 1% of total revenue. How quickly can you change the sourcing there?

Jack Hinzler, CFO, Atmos Filtration: Yeah. So as part of that resource

Andrew, Analyst: And as a company, why would you continue to import from China?

Jack Hinzler, CFO, Atmos Filtration: Yeah. No. It’s a good question. And and, you know, some of it’s based on where we have, you know, certain products and, you know, are they coming out of you know, we have a joint venture in China. We also have a wholly owned business in China.

We derisked, I would say, our sourcing landscape a fair bit when this administration was previously in office. And so as you mentioned, a rather small amount of our cost of sales now, China dependent. We are, of course, in constant evaluation as to where our supply base is and where we manufacture our own product. The challenge at the moment is, you know, do you look to resource that to another low cost country or alternative source when you don’t exactly know what, you know, tariff may come onto that country, it makes it a very difficult dynamic. And you may trade based on a short term dynamic and then overnight regret that decision.

So we are in the process, I would say, of, you know, looking at our supply base to derisk it and looking at, again, our manufacturing environment, including our joint ventures, specifically in India as to what makes sense and where would we set up our long term production. But you kinda need global clarity, would say, to make that a long term.

Andrew, Analyst: So the question, what what’s the internal plan if the section two thirty two investigation into auto and truck component imports results in tariffs in New Mexico facility? And what portion of US revenue comes from imports from Mexico?

Jack Hinzler, CFO, Atmos Filtration: Yeah. So broadly speaking, as as I mentioned, you know, USMCA is probably the biggest mitigation lever that that we’ve been able to utilize and avail ourselves of. And that’s not unique to to Atmos. Again, it’s quite pervasive across the commercial vehicle sector and the auto sector to have quite a commingled supply chain

Andrew, Analyst: Yeah.

Jack Hinzler, CFO, Atmos Filtration: You know, by design on the heels of NAFTA and and USMCA. And so, you know, there is an investigation, for those who aren’t aware, section two thirty two into the importation of trucks and related parts by foreign suppliers and whether or not that represents a national security interest. And perhaps does that become, you know, a lever which leads to the exemption from USMCA no longer being available to us and others in the region. If that happened, you know, I would say that the the primary mitigation then becomes price. Yep.

And I would expect And then everybody would be flow through Yep. In a pretty significant way, not only from our fellow filtration suppliers, but also from the OEMs and any other parts that come through. So that’s essentially how we would mitigate that. We don’t disclose exactly how much, you know, comes from Mexico. But as we’ve noted, you know, our largest facility from a manufacturing standpoint is in Mexico and, you know, is a big aftermarket supplier for us globally, including into The United States.

Andrew, Analyst: So maybe we can talk about aftermarket volumes and, you know, maybe a you know, there’s a narrative that volumes from China are about to collapse. You know, but regardless that, you sort of highlighted we have this trucking recession

Jack Hinzler, CFO, Atmos Filtration: Mhmm.

Andrew, Analyst: That, like, was supposed to end last year and just goes on and on and on. And I I think last year we were talking about Yes. Indeed. Like, end of the trucking recession. So just what are you watching internally, right, as as you look at on highway truck market or vacation truck market?

What are you guys what metrics are you focused internally to try to sort of make heads of tails or what the heck is going on in that market?

Jack Hinzler, CFO, Atmos Filtration: Yeah. So there’s a it’s the aftermarket is tricky. There’s a lot of different indices that you can look at, some of which have flaws in terms of what’s included versus excluded. You know, we we talk about the CAS freight index, for example, but that doesn’t pick up, you know, the this dynamic of the rise of private fleets.

Andrew, Analyst: Yeah. I had somebody to call me on CAS, like, yesterday, and I was like, I don’t look at it.

Jack Hinzler, CFO, Atmos Filtration: Yeah. Exactly.

Andrew, Analyst: So I think the person was very disappointed.

Jack Hinzler, CFO, Atmos Filtration: So that’s been a bit challenging. You know, we we look at you know, ACT puts out some aftermarket activity. We look at, you know, ATA tonnage. We look at the age of fleets and the, you know, the potential dynamics that exist there from a backlog perspective and the rise of maintenance costs for an older truck. But I would say probably most importantly, we triangulate that quantitative data with qualitative sentiment from Yep.

You know, our OE partners as well as our other independent distribution partners. You know, I meant I know you mentioned some of those fellow partners here today, and I think, you know, you probably get a sense of the broad uncertainty that inherently exists in in the aftermarket. We haven’t seen those green shoots just yet of positive inflection, which is one of the reasons why we brought the aftermarket market piece of our guidance down. And I would just say, you know, I’m sure everyone’s tired of hearing it, but the word of the day is still uncertainty. Right.

And that kind of remains pervasive. But I do think if we can get clarity from a broader trade policy perspective, you know, hopefully that can lead to a bit of a resurgence in economic activity and give the market the clarity it needs to pick up. But until we see that, you know, that’s that’s what’s implied in our guidance and we’ll certainly look to keep you all updated with what we hear.

Andrew, Analyst: Yeah. I think the best I got from that meeting is that maybe third quarter is the bottom, maybe. Yeah. Maybe. A capital m.

All counts

Jack Hinzler, CFO, Atmos Filtration: probably. You know, you could say that that maybe that’s the bottom. I think there is a seasonal pattern to that where the third quarter is a little bit softer in any given year. But I think, you know, we largely thought that the summer of last year would be the bottom, and now we’re lapping that as we sit here today. So, yes, hope hopefully, it’s the bottom.

Andrew, Analyst: Yep. Well, and meanwhile, you’re making the numbers. So it’s not a bad place to be. And maybe on off highway, 40% of revenue is off highway end markets like construction, mining and ag. Maybe just walk us through the trends you’re seeing in each one of those verticals.

Jack Hinzler, CFO, Atmos Filtration: Yeah. So just to give people perspective, you know, the business is 40% off highway. Of that 40%, construction’s about 35%, mining’s about 20%, and then ag’s about 12%. And then, you know, you kinda dwindle into some ancillary markets, including power gen. The know, if I had to characterize them, I would say all are are down, unfortunately.

I I was describing that bell curve earlier, and that’s certainly the case here. And I think you can see that in our customer, you know, sentiment as they embark on their own guidance. Construction, you know, of those may be the strongest, but it’s again, it’s down, so it’s relatively speaking. And ag is probably the weakest.

Andrew, Analyst: Okay. And maybe in the remaining time, we could probably spend an hour talking about EPA model 27 NOx rule.

Jack Hinzler, CFO, Atmos Filtration: Yeah.

Andrew, Analyst: What’s your best guess as to what’s gonna happen over the next three months to get visibility into, like, where we’re gonna come out?

Jack Hinzler, CFO, Atmos Filtration: Yeah. It’s a great it’s a great question.

Andrew, Analyst: Can I ask what’s your best guess? I didn’t ask what’s gonna happen.

Jack Hinzler, CFO, Atmos Filtration: And obviously, you know, I would describe us as maybe one level removed in terms of clarity as you compare to the level of visibility maybe that a Cummins or our OE partners have in the space. I would say the broad sentiment, you talk to them, is that you know, there’s currently a reevaluation going on across a broad number of pieces of that regulation. Some of that regulation likely likely gets pushed out or or discontinued, maybe the pieces that have to do with zero emissions vehicles and and some of some of that. Whereas, you know, the the the regulation itself as to more stringent emissions here in The US could perhaps go forward. Does the warranty, requirement, you know, no longer hold, and therefore that offers a break for end users as they think about the cost, that gets passed to them as they embark on that?

Perhaps. Again, I think it’s a little too early to tell. If you think about the impact to Atmos, you know, largely speaking, most of our products don’t have a, you know, a direct emissions Yep. Tie. And so, you know, it will likely influence volume from a first fit perspective and this notion of, you know, what could be a big pre buy in ’26 and then a pretty soft market in ’27.

Does that get smoothed out if the regulation gets pushed out? Perhaps. But I think it’s too early to tell.

Andrew, Analyst: So so the primary I should be thinking, the primary impact of sort of NOx regulations moving around is volume. It’s not content per your content per vehicle will not be that impacted.

Jack Hinzler, CFO, Atmos Filtration: Correct. Yeah. Now generally speaking, would say what we’ve seen in past emissions regulations, if if there are more stringent emissions regulations, the the large players in the industry who have made those investments and have the scale over which to make those investments like a Cummins or a PACCAR, just to name a few, tend to take share in the market. And given our relationships with them, that is inherently a win win, if you will, for us. But again, I think it’s too early to tell.

Andrew, Analyst: Excellent. We are right on time. We’re out of time. This has been great. Thanks so much.

Jack Hinzler, CFO, Atmos Filtration: Very good. Andrew, thanks for your time. And thank you everyone for your interest.

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