Earnings call transcript: Atmus Filtration Q2 2025 beats forecasts, stock rises

Atmus Filtration Technologies Inc. reported stronger-than-expected financial results for the second quarter of 2025, posting earnings per share (EPS) of $0.75, a significant increase over the anticipated $0.52, representing a 44.23% earnings surprise. The company also reported revenues of $454 million, surpassing the forecasted $419.4 million. In response to the positive earnings report, Atmus’ stock rose by 5.95% in pre-market trading, reaching $39.64. According to InvestingPro data, the company, currently valued at $3.19 billion, is trading above its Fair Value, with analysts maintaining a strong buy consensus and setting price targets between $39 and $43.

Key Takeaways

• Atmus Filtration reported a 44.23% surprise in EPS, exceeding expectations.
• Revenue for Q2 2025 reached $454 million, up 4.8% year-over-year.
• Stock price increased by 5.95% in pre-market trading.
• The company completed its operational separation from Cummins.
• Full-year revenue growth projected between 1% and 4%.

Company Performance

Atmus Filtration Technologies demonstrated robust performance in Q2 2025, marked by record sales and a successful operational separation from Cummins. The company’s strategic focus on expanding its industrial filtration market and multichannel distribution has positioned it well against competitors, contributing to a 4.8% increase in revenue compared to the same quarter last year. InvestingPro analysis reveals the company maintains a healthy financial position with a current ratio of 2.23, indicating strong liquidity, while operating with a moderate level of debt. These metrics are among dozens available in the comprehensive Pro Research Report, which provides deep-dive analysis of 1,400+ US stocks.

Financial Highlights

• Revenue: $454 million, up 4.8% year-over-year.
• Earnings per share: $0.75, a 44.23% surprise over the forecast.
• Adjusted EBITDA: $95 million with a 21% margin.
• Adjusted free cash flow: $36 million.
• Cash on hand: $191 million.

Earnings vs. Forecast

Atmus Filtration’s actual EPS of $0.75 significantly outperformed the forecasted $0.52, resulting in a 44.23% surprise. Additionally, the company exceeded revenue expectations by 8.25%, with actual revenue of $454 million compared to the forecast of $419.4 million. This strong performance marks a positive trend for the company, reflecting its strategic initiatives and market expansion efforts.

Market Reaction

The company’s stock experienced a notable increase of 5.95% in pre-market trading, reaching a price of $39.64. This rise reflects investor confidence in Atmus Filtration’s ability to deliver strong financial results and navigate challenging market conditions. The stock’s performance is particularly significant given its proximity to the 52-week high of $45.43. InvestingPro identifies the stock’s relatively high P/E ratio of 17.26x and notes its price movements are quite volatile, with a beta of 1.65. Two of eight additional ProTips are available to subscribers, offering deeper insights into the company’s valuation and growth prospects.

Outlook & Guidance

Atmus Filtration has set a full-year revenue growth target of 1% to 4% and an adjusted EPS range of $2.40 to $2.60. The company remains focused on expanding its product coverage and leveraging advanced data analytics to enhance its competitive position in the market. Despite challenging market conditions, Atmus expects to maintain a price-cost neutral stance with tariffs.

Executive Commentary

"We continue to deploy capital to create long-term shareholder value," stated Steph Fisher, CEO of Atmus Filtration. Fisher also emphasized the company’s commitment to growth, both organic and inorganic, and highlighted ongoing efforts to review a robust pipeline of targets.

Risks and Challenges

• Potential supply chain disruptions could impact production and delivery schedules.
• Market saturation in key regions may limit growth opportunities.
• Macroeconomic pressures, including tariff adjustments, could affect cost structures.
• The US first fit market is expected to decline by 15-25%, posing a challenge.
• Flat to declining markets in India and China could affect sales volumes.

Q&A

During the earnings call, analysts inquired about tariff pricing adjustments and volume performance drivers. The company provided insights into its capital allocation strategy and shared details about its entry into the industrial market, highlighting the potential for modest growth in this sector.

Full transcript - Atmus Filtration Technologies Inc (ATMU) Q2 2025:

Kate, Conference Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Atmos Filtration Technologies Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would now like to turn the call over to Tad Sciarello, Executive Director, Investor Relations. Please go ahead.

Tad Sciarello, Executive Director, Investor Relations, Atmos Filtration Technologies: Thank you, Kate. Good morning, everyone, and welcome to the Atmos Filtration Technologies second quarter twenty twenty five earnings call. On the call today, we have Steph Fisher, Chief Executive Officer and Jack Kinzler, Chief Financial Officer. Certain information presented today will be forward looking and involve risks and uncertainties that could materially affect expected results. Please refer to the slides on our website for the disclosure of the risks that could affect our results and for a reconciliation of any non GAAP measures referred to on the call.

For additional information, please see our SEC filings and the Investor Relations pages available on our website at atmos.com. Now I’ll turn the call over to Steph.

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Thank you, Todd, and good morning, everyone. On the call today, Jack and I will update you on our second quarter results and progress executing our four pillar growth strategy. We will also provide an update on our global market and our outlook for the remainder of 2025. I continue to be impressed with the ability of the Atmos team to navigate uncertainty and continuously provide our customers with industry leading filtration solutions. Our team delivered record sales and strong financial results in the second quarter.

We mitigated the impact of tariffs in the quarter and will continue to take appropriate operational actions to be price cost neutral in relation to tariffs. We continue to make progress on our operational separation from our former parent, Cummins. I am pleased to report we are on track for full completion of separation in the third quarter. Now let’s turn to our capital allocation strategy. We continue to deploy capital to create long term shareholder value.

We accelerated our share repurchase program in the second quarter, repurchasing $20,000,000 of stock, bringing our year to date total to $30,000,000 Since the announcement of our share repurchase program last July, we have repurchased a total of $50,000,000 of stock. We remain committed to investing for organic growth and executing our inorganic industrial filtration strategy. However, the timing of these opportunities can vary, and we will continue to deploy capital in a manner that creates value for our shareholders. We expect share repurchases to remain an important component of our capital allocation strategy and anticipate our full year repurchases will be in a range of approximately one to 3% of our current market capitalization. Now let’s turn to the four pillars of our growth strategy and our progress in the second quarter.

Our first pillar is to grow share in first fit. We continue to win with the winners by building on our long term partnership with industry leading OEMs. We are delivering increased content with global OEMs as we work collaboratively on a train of development opportunities. These partnerships allow us to grow our share and provide our customers with industry leading filtration products to solve their filtration challenges. While we continue to increase our bid rate for new business opportunities, the speed of decision making by our customers has been impacted by ongoing uncertainty in the trade and regulatory environment.

We expect continued growth from our from new first fit business. However, the timing of awards may be elongated as our customers adjust to current market condition. Our second pillar is focused on accelerating profitable growth in the aftermarket. We are winning share in the aftermarket as our distribution partners continue to grow their businesses, and we expand our product coverage through a multichannel path to market. This growth is supported with our expanded use of advanced data analytic tools, which increases our ability to provide industry leading fleet guide products for our customers when and where they need them.

Our third pillar is focused on transforming our supply chain. We are now fully on the Atmos distribution network as we recently completed the transition of our final distribution location from Cummins in South Africa. Additionally, our Belgium distribution location is now operating at a normalized level and providing our customers with the product and service levels we expect. This location was our most complex distribution transition, and I am proud of our team for their focus on our customers. With 100% of our distribution network now under our direct control, we are focused on continuing to improve on shelf availability and ensure we have the right products for our customers when and where they need our filtration solution.

Our fourth pillar is to expand into industrial filtration market. Our strategy is unchanged and remains focused on growth into industrial filtration, primarily through inorganic acquisition. As a reminder, we are broadly looking at three verticals, industrial air, industrial liquids, excluding water, and industrial water. We are reviewing a robust pipeline of opportunities for inorganic expansion. We will continue to take a disciplined approach and focus on transactions that will build long term shareholder value.

Now let’s discuss our second quarter results. Sales were a record $454,000,000 compared to $433,000,000 during the same period last year, an increase of 4.8%. Our performance drove higher sales along with benefits of increased pricing despite challenging conditions in most of our global markets. Unfavorable foreign exchange partially offset these increases. Adjusted EBITDA was $95,000,000 or 21% compared to $93,000,000 or 21.4% in the prior period.

Adjusted earnings per share was $0.75 in the 2025, and adjusted free cash flow was $36,000,000 Now let’s turn to our market outlook for 2025. Our guidance reflects tariff impacts as of July 31. We expect tariffs to continue to fluctuate, and we will adjust future guidance as the tariff and regulatory environment evolve. Starting with market guidance for aftermarket. We expect freight activity to generally continue at current levels and the midpoint of our guidance to be slightly positive year over year and be within a range of down 0.5% to up 1.5%.

We continue to execute our growth strategy, which will enable us to outperform the underlying market. Our outlook remains unchanged, and we expect share gains to add 2% of revenue growth. Overall pricing is expected to provide approximately 2.2% revenue growth. Pricing is inclusive of both our base pricing actions to offset certain input costs, including steel and tariff pricing. The US dollar continues to weaken from the strength we saw early in the year.

We anticipate the full year impact of a strong US dollar to now be an approximate half percent revenue headwind. Let’s now turn to our first step market. In The US, a lack of clarity surrounding regulatory emissions requirements, the continued evolution of tariff policies, along with an uncertain economic backdrop, is leading to weak market. This is driving our expectations that both the heavy and medium duty markets in The US will be down 15% to 25%. We continue to expect demand for trucks in India to be flat to down as we’ve yet to see the ramp up in government infrastructure spending.

In China, the market has reflected some growth in the second quarter. However, we view this as temporary and expect continued challenging conditions. Overall, we have raised our expectations for total company revenue in 2025 to be in a range of up 1% to up 4% compared to the prior year with global sales in an expected range of 1,685,000,000.000 to $1,735,000,000 Our demonstrated ability to quickly adapt to changing market conditions and the expected continuation of strong operational performance results in us raising our expectations for adjusted EBITDA margin to be in a range of 19.25% to 20%. Lastly, adjusted EPS is expected to be in a range of $2.4 to $2.6 I would like to take a moment to thank our Adverse team for delivering record performance in the second quarter and their sustained commitment to building a great company. I am looking forward to the completion of the operational separation from Cummins later this quarter.

This is a significant multiyear accomplishment, one which was made possible by the entire Atmos team. Now I will turn the call over to Jack, who will discuss our financial results in more detail.

Tad Sciarello, Executive Director, Investor Relations, Atmos Filtration Technologies: Thank you, Steph, and good morning, everyone. Our team delivered another quarter of strong financial performance despite uncertain market conditions. Sales were a record of $454,000,000 compared to $433,000,000 during the same period last year, an increase of 4.8%. The increase in sales was primarily driven by higher volumes of 4% and pricing of 2%, partially offset by unfavorable foreign exchange of one Gross margin for the second quarter was $131,000,000 compared to $132,000,000 in the 2024. The decrease was primarily due to increased logistics costs, partially offset by increased pricing and higher volume.

Selling, administrative and research expenses for the second quarter were $57,000,000 an improvement of $3,000,000 over the same period in the prior year. Joint venture income was $8,000,000 in the second quarter, in line with our 2024 performance. This resulted in adjusted EBITDA in the second quarter of $95,000,000 or twenty one percent compared to $93,000,000 or 21.4% in the prior period. Adjusted EBITDA for the quarter excludes $3,000,000 of one time stand alone costs. Adjusted earnings per share was $0.75 in the 2025 compared to $0.71 last year.

Adjusted free cash flow was $36,000,000 this quarter compared to $34,000,000 in the prior year. Free cash flow has been adjusted by $3,000,000 for capital expenditures related to our separation from As Seth mentioned earlier in the call, we expect to complete our separation activities from Cummins in the third quarter. We continue to expect onetime costs will be in the range of 10,000,000 to $15,000,000 and we now expect onetime capital expenditures to be in the range of 10,000,000 to $15,000,000 in 2025. The effective tax rate for the 2025 was 21.9% compared to 21.8% last year. Now let’s turn to our balance sheet and the operational flexibility it provides us to execute our growth and capital allocation strategy.

We ended the quarter with $191,000,000 of cash on hand. Combined with the full availability of our $400,000,000 revolving credit facility, we now have $591,000,000 of available liquidity. Our strong liquidity position provides us with operational flexibility in the current dynamic market to effectively manage our business and execute on growth opportunities. Our cash position and continued strong performance in 2025 has resulted in a net debt to adjusted EBITDA ratio of 1.2x for the trailing twelve months ended June 30. In closing, I want to thank the Global Atmos team for their continued dedication and flexibility to deliver another strong performance in the quarter.

Now we will take your questions.

Kate, Conference Operator: Your first question comes from the line of Rob Mason with Baird. Your line is open.

Rob Mason, Analyst, Baird: Yes. Good morning, Steph, Jack. As I listened to your updated outlook, some of the commentary, it sounds like your pricing expectations came down a little bit. Curious if you could just walk through how that’s going to play out through the balance of the year, just your realization. And I’m assuming that’s related to adjustments around tariff, but I’m curious if maybe you can clarify if that played into your base price expectations too.

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Great. Good morning, Rob, and thanks for the question. I’ll just start talking around tariffs. You’re right. I think most of that movement on price has been related to tariff.

In our last guide, we had guided tariff in pricing of about 1.5%, and I think this guide incorporates point 8%. So the movement there on our expectations around tariffs, primarily related to the change in tariffs on China, I would say, is where that movement is. As I noted in my opening remarks, the way we have developed our guide in relation to pricing for tariffs is that it’s as at thirty one July. So I think what you can know is this will move around a little bit. We’ve obviously seen some changes since then with the August 1 announcements and and some of the, additional announcements related to India.

But right now, our outlook and guide incorporates a point eight pricing on on tariffs. Our overall expectation on tariffs is to be price cost neutral for the year and through the quarters is how I would guide you on it. And and so, hopefully, that gives you a bit of a sense of the evolving landscape in tariff. Joc, I might just ask you to talk through the sequential of pricing, if there’s anything else you would add.

Tad Sciarello, Executive Director, Investor Relations, Atmos Filtration Technologies: Yeah. Thanks for the question, Rob, and good morning. So if you think about the, you know, the cadence on pricing, it’s it’s been about, from a tariff perspective, in particular, about 1,000,000 in the first quarter, 5,000,000 in the second quarter. And again, as Seth highlighted, based on the facts in hand as of July 31, we would expect an additional approximate 4% in the second half. But we’ll, of course, keep you updated as that situation and the broader tariff environment continues to evolve.

Rob Mason, Analyst, Baird: Very good. Just as a follow-up as well, certainly hear your consistent message, Steph, around capital allocation, particularly on the inorganic side and working the pipeline there. We have seen it seems maybe there’s a little more vibrancy in the industrial M and A space. Some of that leans towards larger deals. But I’m just curious if intra quarter, if you saw anything in that environment that gives you any more encouragement as you go through the back half of the year?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Thanks, Rob. Exactly right to say a consistent message. We are very committed to the strategy of continuing to expand into industrial filtration market and still see the primary path to do so through m and a. We are reviewing a robust pipeline of targets and and continue to do so. I feel really good about the team we’ve got in place, the targets that are coming to our desk that we’re reviewing.

I think that there is a spectrum of those, but, you know, we have said that we wanted to target a revenue of 50 to a 100,000,000. And, broadly, we’ve been looking to target that, but we’re not making that an early pipeline filter is what I would say. So we are looking at all of the opportunities available to us. And, really, you know, it it’s a disciplined approach we’re taking. We’ve got a very clear view of the strategic rationale and the financial criteria, for the deals that we want to make, and but we’d stay absolutely committed to the strategy and executing on that strategy.

Kate, Conference Operator: Your next question comes from the line of Tammy Zakaria with JPMorgan. Your line is open.

Tammy Zakaria, Analyst, JPMorgan: Hey. Good morning. Thank you so much. Very nice quarter. My question is on the EBITDA margin guide.

If you look at if we look at the full year guide and what we know what you did in the first half, it seems like what’s implied for the back half is somewhere below 19% EBITDA margin in the back half versus above 20% in the first half. So just wanted to get some thoughts on how we should think about the sequential drivers behind that expected step down?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Good morning, Tammy. Thanks for the comments on the quarter, and good to talk to you. Jack, do you wanna take the EBITDA for sure?

Tad Sciarello, Executive Director, Investor Relations, Atmos Filtration Technologies: Absolutely. So maybe I’ll walk you a little bit, Tammy, from first half to second half. So I’ll if I start first on the top line, you know, typically, we do see some seasonality where the first half of our revenue base based on selling days is about on average, on a long term average, 5% higher than the second half. And so if you think about that normal seasonality, that would contribute about a, you know, approximate 50,000,000 top line headwind. We do expect the markets to be, particularly the first set markets, to be, you know, more down in the second half than, again, our original guidance.

So that will contribute to a little more, you know, headwinds if I think about the second half dynamics than that typical seasonality. We do also expect some leveling out of share. If you think about our first half, we were about 2.5% of share demonstration. Some of that’s driven by some timing, some pull forward and pre buy that we saw in our customer base ahead of midyear pricing. And so we do expect that to level out and get back on a full year basis to 2%.

We then have pricing. So and I apologize. I missed a little bit to Rob’s question earlier, so let me correct that. So the incremental pricing second half, we would expect $4,000,000 in second half incremental to the first half on base and then incremental of approximately 3 to 4 on tariffs. And so that way, take your full year or full second half pricing actually to $8,000,000 FX has improved as we move through the year, and so we expect that to be a tailwind in the second half relative to the first half.

And then if I think about, you know, relative to normal decremental, what what’s on top of that? First of all, we do expect the run rate of SAR that we realized in the second quarter to essentially be maintained as we move into the third and fourth quarter. That’s reflective of some of the increases in people costs that we typically see in the second quarter of merit kicking in. And then we do expect to, you know, to operate at a little bit worse decrementals in the second half just driven by that pronounced volume decline. You know, there’s always an equation of do you take out, you know, fixed cost to accommodate that new level of volume or do you operate a little bit, you know, more pronounced decrementals, which allows us to be positioned for growth.

So that’s kind of how we’re thinking about it. Overall, still really pleased with where the implied guide puts us for the full year of FY 2025.

Tammy Zakaria, Analyst, JPMorgan: Understood. That’s very helpful. And one follow-up on the prior answer about repurchases. I think you said 1% to 3% of market cap you expect to buy back this year. Would that leave you with enough firepower?

Should there be an acquisition opportunity later this year? I guess what I’m trying to understand is if you do the buyback, how big of a deal could you still do if an opportunity came up?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Thanks, Tammy, for the question. I you know, we’re looking at that. It’s it’s a it’s a very dynamic equation. We do see, I guess, the trade off between share repurchases and m and a investment. Our first priority, to be clear, is to invest the growth, organic growth and inorganic growth, and and then we will also look to return to shareholders.

And so the range is pretty wide. As you highlight, we wanted to give some range to both about we’re actively thinking about share repurchases and the 1% to 3%. The one to 3% reflects, really a the flexibility for us should we proceed with a with an m and a target. I do wanna highlight the cash generation capability of our business. We’ve talked about the separation activity coming to a close here in the third quarter.

We have had to sustain, you know, expenses associated onetime expenses and also capital spend associated with separation costs. As that now comes to a close, coupled with the strong cash generation capability of the business through the cycle, we feel very confident in our ability to execute on our m and a strategy, and continue to return, to shareholders.

Kate, Conference Operator: Your next question comes from the line of Joe O’Dea with Wells Fargo. Your line is open.

Joe O’Dea, Analyst, Wells Fargo: Hi, good morning. Thanks for taking my questions. Can you just expand a little bit on the volume experience in the second quarter that plus 4%, which I imagine is a little bit bigger number on the aftermarket side of things. And just how you parse the underlying base demand versus some demand that would have been brought forward, just to understand the magnitude of that pull forward. And and was that mostly just what you think was, like, q three to q two kind of event?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Right. Thanks, Joe, and good morning. The the way I would characterize the volume performance in in the second quarter, let me start there with your question. It was very strong performance in the second quarter, and we were very pleased with it. I I’m going to three elements, really, in in explaining in explaining that bridge, broadly speaking.

We did see underperformance to our share performance in the first quarter. That was around timing of additional content gains that we had seen and and and seeing those those being delayed into implementation with some of our customers. And so we were able to realize those, those share gains in the second quarter and really catch that up for the first half of the year. So really pleased to see that performance coming in where we expected is is the first thing I would highlight. The second question the second point I would highlight in the share gains, and people depart that exactly what the value of this is, but there will be some pre buy activity inside that second quarter.

We certainly had our midyear price increases in July. There’s also a lot of uncertainty around the tariff environment with the they announced that what were pending announcements for August 1. And so we certainly, you know, believe there’s some pre buy activity in that second quarter, and, you know, we’ll see that even out over the the third quarter here is is the is the second piece that I would highlight. The way we’ve reflected our share in our full year guide is is how we see it, is really we see 2% share gain performance through the full year, and we see that solid performance continuing through the third and fourth quarters. If I just comment on the market side of that that volume equation, as you will note, we we lowered our guidance on first fit.

First fit is a lower portion of our business, so we’re running at about 86% aftermarket, fourteen percent first fit. And and so, obviously, it has a lower impact on us overall relative to the aftermarket. But that was just we did we decreased our guidance on first fit market conditions significantly, 10% down at the midpoint relative to our our previous guide. And that’s really based on the activity that we’ve seen, the orders in The US market in the second quarter, and what we believe will be still a tough third quarter in particular, driven by uncertainty in the regulatory environment with EPA 2027 and somewhat ongoing tariffs. So really hoping to see some certainty emerging there, and and and that will, you know, allow us to review that as we move forward.

Aftermarket, we expect continued challenging freight conditions really in line with what we’ve seen for a year. We’re not we’re not including any rebound, if you like, in in aftermarket in our second half.

Joe O’Dea, Analyst, Wells Fargo: That’s a lot of great detail. I guess just your last point would really be as we think about the the aftermarket underlying market demand trends, just think about stable activity over the course of the year. Is this something that is still challenged but kind of stable throughout the year?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: That’s right.

Joe O’Dea, Analyst, Wells Fargo: Okay. And then also just wanted to ask on the, kind of the distribution and go to market and what you’re doing there and one of the comments around expanding product coverage through the multichannel path. If you can just expand a little bit on some of the recent successes, and then also just give us a sense of of where you are in that initiative, for kinda how how much still kinda lies ahead.

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Yeah. So there’s a number of factors that really falls under this second pillar of our strategy of us wanting to accelerate profitable growth in the aftermarket. And number of factors in that, I think first was really getting this distribution network set up and and fully inside our control. We’ve effectively, over the last three years, transitioned eight distribution locations. And as I mentioned mentioned in in my my comments, comments, we’ve actually finalized the South Africa location just here in the in the second quarter, and and and now we have a 100% control of our distribution network.

That’s really setting us up to be able to support, new partnerships, new distribution agreements through a multichannel path. So I really feel like we’ve got that base foundation of support in our warehousing and distribution capability to support the globe global landscape. And that was an important foundational piece for us to get into to get to, and we wanna continue to optimize our availability performance to be able to support our aftermarket aspirations. The second piece of it I would say, and this is very regionally focused. So we have regional leaders across our business who are very focused on developing their strategies in region to partner with new distribution networks, so we signed up new distribution capabilities.

We see continued growth opportunity in The US and Latin America, for example, and so we’re certainly investing to to unlock the potential in those pockets and and continuing to make sure we understand the product needs across the broader distribution network and developing product with greater speed is another key focus in in our team so that we can support our customers more effectively.

Kate, Conference Operator: Your next question comes from the line of Bobby Brooks with Northland Capital Markets. Your line is open.

Tad Sciarello, Executive Director, Investor Relations, Atmos Filtration Technologies: Hey, good morning, guys. Thanks for taking the question. On the 3Q print last year, you guys announced an organic entry to the industrial space with, I believe, was a new filter product. I just wanted to check back in there and hear how the reception has gone so far or any specific lessons learned on that launch that you’ll apply on future industrial solutions.

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Yeah. Good morning, Bobby, and thanks for the question. You’ve got a good memory as it turns out. We we certainly are, determined to enter into industrial filtration market, and we’re doing that through a multi faceted approach. Our primary approach, will continue to be through inorganic expansion and m and a, and I think we’ve highlighted that previously.

We, we are also looking to take steps organically, and that has included new distribution agreements and, the launch of new products, and we’ve continued to do that. I think our outlook for growth in that area is modest over the course of this year. I would say it’s sort of in that sort of 5,000,000 range. So I I I think I indicated at the time it’s it’s not yet something to get excited about, but it’s really more about starting that engine of us understanding that market more, growing growing where we can organically, and that will continue to be enhanced, obviously, as and when we support that with an acquisition.

Tad Sciarello, Executive Director, Investor Relations, Atmos Filtration Technologies: Got it. And then just any specifics, like, lessons that you’ve learned as, as you’re kinda understanding the market? Anything that’s kinda stuck out to you as from what you’ve learned through that initial rollout?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Look. Nothing that I would say that is revolutionary. I I think just working out how do we set up our, organizational capability to support that market. That’s an ongoing approach. We have a strength in working with distributors and channel management, and so leveraging that strength across an additional set of end markets is something we’ve demonstrated some capability in, really trying to, I talked about speed of product to market in our in our core market, really trying to, you know, do that here in the industrial filtration markets as well, so the importance of speed to market.

Nothing revolutionary in there, I would say, but just reinforcing good business.

Kate, Conference Operator: Your next question comes from the line of Andrew Obin with Bank of America. Your line is open.

David Ridley Lane, Analyst, Bank of America: This is David Ridley Lane on for Andrew. I just want to dive into the drivers of the outperformance in the quarter, right? So if you go back for a decade, the average sequential growth in the second quarter is about 2%. You grew 9% this quarter. What went right?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: Hi, David. Good morning, and and thank you. Well, lots of things, I would say, and it’s the cumulative effect of of a lot of hard work. And so let me just break down the block if you like. Last year, quarter two twenty four to quarter two twenty five.

And the way we think about this is we think about what’s happening in the market, what did we do on pricing, what were the FX impacts, and then what were our share gains. And so I’ll start with the biggest contributor of this, and, you know, over 4% in share gain was a significant contributor to our outperformance here in the quarter. What’s driving that is what I spoke to in my earlier comments, really the the three things. One of those was catch up from q one. We knew we had opportunities in share gain with content.

It had been delayed in terms of implementation, and we saw that come through as expected into into quarter two. The second, I would say there is some pre buy activity, in there, which is difficult to pass out. And the third is really the great work of our team to continue to grow content and win share and to continue to win with our partners as they continue to grow their businesses. So really strong performance on share in the quarter. Very pleased to see that.

We also saw pricing impacts, of course, as we as we responded very well to the tariff environment. You know, I’ve been really impressed with our team’s ability to build the capability to sense quickly what’s going on in the market, to synthesize that, to understand it. We’ve had a position on tariffs that we will be price cost neutral. And our first step in all of our understanding of tariffs have been to work hard to mitigate the cost of those tariffs. Our team did an excellent job in the quarter of securing USMCA exemption for, substantially all of our products coming out of Mexico, which made a significant difference for our customers.

And and then we obviously where we cannot mitigate that cost of tariff impact, we took appropriate action to work in partnership with our customers to pass those on through price. So and then there are the usual pricing pieces that that we have in there. All of those were offset by some headwinds. Tough market that we’re in, I think I’ve talked to that sufficiently, and still headwinds on FX. So we do expect that to turn positively in the second half here.

Hopefully, that gives you a bit of a flavor of of the things that that went right.

David Ridley Lane, Analyst, Bank of America: Got it. And then in the quarter so I know your expectation is to be price cost positive for the full year. But in the quarter, were you price cost positive or was this a a drag? And, you know, I guess, importantly, does that imply that you’re gonna get some catch up and some really good favorability in the second half?

Steph Fisher, Chief Executive Officer, Atmos Filtration Technologies: So our our objective is to be price cost neutral, we were about top price cost neutral in support. That’s what we’re working to. It’s it’s difficult to balance that exactly over the quarters here, but we’ve got a team, not not me necessarily, but a team that’s working on this daily and weekly and have have got a really good way of working through it right now. And so that’s price cost neutral for the year and in the quarter.

Kate, Conference Operator: I will now turn the call back to Todd Sciarello for closing remarks.

Tad Sciarello, Executive Director, Investor Relations, Atmos Filtration Technologies: Thank you. That concludes our teleconference for the day. Thank you all for participating and for your continued interest. Have a great day.

Kate, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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