Phinia at Jefferies Conference: Strategic Growth and Market Expansion

On Wednesday, 03 September 2025, Phinia Inc (NYSE:PHIN) presented at the Jefferies Mining and Industrials Conference 2025. CEO Brady Erickson shared insights into the company’s strategic direction, highlighting its diversified business model and expanding market presence. While Phinia’s commitment to research and development and its robust aftermarket segment are positive, the company faces challenges in the softening commercial vehicle market.

Key Takeaways

• Phinia is a $3.4 billion company with a strong focus on precision machining and fluid management.
• Approximately 66% of its revenue comes from the OE market, with 34% from aftermarket services.
• The company is expanding into off-highway and aerospace industries.
• Phinia is consolidating its IT infrastructure, moving to a single ERP system.
• Hydrogen combustion is seen as a future growth area, with significant revenue expected in the 2030s.

Financial Results

• Gross R&D spending is about $200 million, nearly 6% of sales; net R&D spending is around 3% due to customer contributions.
• Aftermarket growth is projected at 4% to 6% annually, driven by price increases and market expansion.
• New product lines are expected to contribute 1% to 2% growth.

Operational Updates

• Phinia is consolidating four ERP systems into one, SAP S4HANA, to streamline operations.
• The recent acquisition of SEM aims to enhance ignition and system integration capabilities.
• The company is launching its first aerospace part with Safran in Q4, with a follow-up in Q1.

Future Outlook

• Phinia plans to grow its presence in propulsion-agnostic aftermarket segments, currently at 25% of revenues.
• New emissions regulations are anticipated to boost demand for Phinia’s technologies.
• The company is expanding its aftermarket product lines, starting with steering and suspension in Europe.

Q&A Highlights

• Erickson emphasized the importance of increasing economic value for shareholders.
• Q3 is expected to provide a clearer financial comparison, following the completion of transitional service agreements.

For further details, please refer to the full transcript below.

Full transcript - Jefferies Mining and Industrials Conference 2025:

Laurence Alexander, Jefferies Analyst, Jefferies: Good morning, and welcome to the first day of the Jefferies Industrials Conference. Laurence Alexander, with the chemical sector. It’s my pleasure to introduce Brady Erickson, who is the CEO of Finia. And without any further ado, we’re going to jump in. Should we just turn this off?

So let’s start with just a very quick high level introduction to Finia. So if you can just frame the company in terms of core technology platforms and particularly what you think differentiates you from the competitive landscape?

Brady Erickson, CEO, Finia: Sure, mean we’re about a $3,400,000,000 company, very diversified as far as the markets and the products. I would say we’re a precision machining fluid management electrical component and system supplier. And so we’re doing obviously some fuel injection, some fluid management, selective catalyst reduction, dosing, starters and alternators. Now with our recent acquisition of SEM, we’re doing ignition along with the ECU or engine control units and complete system integration for customers. That’s kind of the base OE side of the business.

And then we’ve got about 34% of our revenues come from the aftermarket service, components, test equipment, training facilities and the such as well. So we’re very well balanced. I think there’s really no market or region that really makes up more than high single digits percentage of our revenue. And so there’s nothing there’s no North American SAAR or commercial vehicle heavy truck in Europe that’s really going to move the needle because we’re really diversified between light passenger vehicle, light commercial vehicle, heavy duty, on highway, off highway, gensets now getting a lot more into aerospace. And then obviously, having a large aftermarket really gives us some consistent cash flow as well.

And I think what as far as differentiates us is that global footprint and the technology we currently spend gross about $200,000,000 or close to 6% of our sales on R and D. But then what’s even better is our customers pay us about $100,000,000 a year for those services for calibration and software support. And so our net R and D is right around 3%. And that kind of shows you how integrated and what product types of services we can provide our customers.

Laurence Alexander, Jefferies Analyst, Jefferies: And I found over the years when people hear fuel injection, they think it’s a fairly simple process. You’re pumping a liquid or a mist down a pipe into a chamber. Mhmm. Can you talk just a little bit about how difficult it is? Is or how the chain how the difficulty is changing over time?

What drives that? Is it, you know, combustion rates, fuel efficiency, engine design, but also the importance of, bringing in new fuels and the contaminant sensitivity of those fuels Yep. Into engine design?

Brady Erickson, CEO, Finia: Yeah, it’s a great question. I’ve been in automotive and transportation commercial for over thirty years now and I thought turbochargers were pretty complex and engines were pretty complex and then I got into the fuel injection side of the business. And we’re talking about our manufacturing processes are very capital intensive. We’re building most of our fuel injection systems in a clean room environment. We’re seeing tolerances that are plus or minus on the commercial vehicle side, plus or minus zero five micron.

And for folks to kind of give an order of kind of magnitude, that’s slightly larger than the coronavirus. It’s that tight. We’re dealing with pressures on a commercial vehicle application that are approaching 3,000 bar. Just to give people a reference, that’s about 45,000 psi. And so if you can imagine when you pop your tire blows and your tire is about 40 psi, imagine the pressures at 45,000 psi within those fuel injectors.

And we’ve got to have those injectors going up and down and doing pilot about 12 injections per combustion cycle. So it’s moving up and down close to 100 times a second and that’s the type of control that we have to have. Now the challenges that you mentioned with fuel quality, whether it’s adding biofuels, contaminants, deposits, those are all very challenging environments given those pressures and the temperatures that we’re dealing with. And we’ve got a wide variety of solutions. And we’re not just in we have gasoline, we have diesel, we have biodiesel, we do 100% ethanol, methanol.

We do ammonia. We’re doing hydrogen. We’re doing natural gas. And so for us, we’ve also got a wide range of fluids that we can control, including ammonia and for SCR applications

Laurence Alexander, Jefferies Analyst, Jefferies: as well. And so just to kind of tease that out a little bit more, you think about the value capture discussion with an engine manufacturer who wants to move to a new fuel, you talk to the filtration companies, and they’re the holy grail. And you talk to the injection companies, and they’re the holy grail. Then you have the people who say, well, no. It’s the entire kind of it’s the it’s the software.

It’s the system. How do you see kind of the real point of attack to for you to get your slice of the pie?

Brady Erickson, CEO, Finia: Well, I think the one nice thing about our at least the products that we’re serving right now is that the competitive landscape is reducing, which is kind of nice. And so there’s really kind of two major players that I think are going to be in the market between Bosch and ourselves. The other smaller players are already exiting. And I think we see a lot of opportunity in the off highway and aerospace industries where the competition isn’t spending nearly as much as we are on R and D. I agree with you.

I think the big challenge with the fuel systems, the filtration, I think you’ve got them up next that are looking at that as well. But they have to work hand in hand because if the filtration folks are letting a lot of contaminants come through and I have tolerances in my injectors that are one, two micron, if they don’t filter it out that’s kind of a problem for me. So we have to work hand in hand. Probably the most challenging side though is when we’re talking about these pressures and when we start going to 100% ethanol and methanol, they start to get really corrosive. And really as far as our injector tips and the flow into combustion chamber is going to be key.

The filtration guys will help keep us safe. But as far as driving fuel efficiency and power and performance, it’s going be on the fuel injection side. And two of the other holy grail is the electronics and the software. Well, we do the engine control system, we do the software. We have about 400 software and calibration engineers, and that’s where the bulk of our $100,000,000 from customers comes from, is us actually giving them a turnkey solution.

And so that makes us also then very sticky because there’s a lot of individual component suppliers out there, but there’s very few that can bring all the components together and give our customers a turnkey solution. And a lot of our customers out there, they really kind of deemphasize the combustion side of things. And so they don’t they no longer have the calibration and combustion expertise that they had maybe ten years ago. And so we see more and more reliance on us and being that full system supplier for them.

Laurence Alexander, Jefferies Analyst, Jefferies: And so could you talk a little bit about the evolution since the spinout? I find that usually it’s about three to five years in that one really starts to think about culture change, issues with the operating culture, feedback loops, is the divisional alignment working properly for the end market, all those kind of legacy inherited beliefs. So can you just walk through kind of what you’ve seen, what you want to change, where you see opportunities for improvement?

Brady Erickson, CEO, Finia: Yes, we were fortunate in the fact that probably at least a year or so, year and a half, I think I took over the fuel systems and the aftermarket group early in ’twenty two. And so we knew that we were going to get spun out in that time, whether in some form or fashion. And so we actually started that process in ’twenty two. And then we finally spun out in mid ’twenty three. So as far as a culture, the structure that we wanted to have in place, it was already well on its way.

And so I already say we’re already over three years into it. So from a culture and a structural standpoint, really kind of like where we are already. The structure that we have, I think, is right. From a legacy standpoint, if people know, this was a lot of entities in the business that was spun out from Aptiv, Delphi Tech, standalone. BorgWarner bought it, mixed in a few other things and spun us out again.

And needless to say, we got spun out with a structure that maybe wasn’t fit for our size and our businesses, which is why we’ve been working through the tax rates because we had a bunch of legal entities and a tax structure that didn’t make sense for our business. So we’ve been working through that. I think that’s making some good progress. I think the next big one is really on the IT side. And so we have four different ERP systems right now, and so we’re in the process of consolidating that down to one.

And that will as we go down to SAP S4HANA, that’s going to be coming out for everybody. And we’re going to use that upgrade to then consolidate as well. And so I think we’re really in a good position. As I mentioned to a lot of folks, Q3 is going to be a really interesting quarter, I think, for investors as well because it will be the first time that we’re actually comparing clean numbers to clean numbers. Q3 of last year was probably the first quarter that we had all the contract manufacturing was done.

We were out of all the transitional services agreements. Our corporate costs were all fully ramped up and in place. And so we don’t have to explain a lot of things. And so we’re excited to get kind of clean to clean from a quarter perspective. And again, I’ll be honest, Q3 of last year was already when we started to see some of the commercial vehicle markets and OE markets kind of softening.

So it becomes an easier comp for us as well. But I really think that we’re on a good pace right now. And as we’ve announced, we just did the acquisition of SEM. So I think we’re now starting to step into being our own independent company and actually executing our strategies. And I think from a cultural standpoint, when we announced the acquisition, people were super excited in the organization because if you can imagine the transition I just mentioned, probably since the early 2010s was the last time that any acquisition into combustion was done for from BorgWarner to Delphi to Delphi Tech, Aptiv, they weren’t making investments in combustion that was helping this group of individuals.

So when we made the acquisition, people said, wow, you’re actually using some of that funds to actually help us and reinvesting in us versus reinvesting in autonomous or electrification or some other technology.

Laurence Alexander, Jefferies Analyst, Jefferies: And so very quickly, you touched a little bit on kind of end market demand trends. Can you just talk about what you’re seeing near term demand trends around the world and by end market?

Brady Erickson, CEO, Finia: Yeah. I mean, it’s the since we’ve spun, I mean, our commercial vehicle off highway business kind of went from a peak to now we’re in a trough. I think we’re kind of bouncing along the bottom right now from those markets. I think light vehicle has continued to be soft. But again, we’re seeing some positive numbers coming out of both Europe and Asia right now, so they’re starting to see some recovery.

Aftermarket continues to remain strong. And we continue to win a lot of new business and have new launches coming up with some market share wins that we’ve announced over the last few years. And so we’re feeling pretty confident with where the markets are right now. What we always kind of tell folks as well, there’s not any one market. You can’t take a North American SAAR or European CV because any one of those things is only going to add up to maybe high single digits as far as our revenue.

And so from our perspective and our focus to our team is I really don’t care what the markets are doing. We have to increase economic value and deliver value to shareholders on a year over year basis, full stop. And that’s really where we’re kind of focused on delivering for our customers.

Laurence Alexander, Jefferies Analyst, Jefferies: And so on the aftermarket business, can you unpack a little bit what’s driving year over year growth? Is it sort of shifts in the vehicle park years ago that is now flowing through? Is it a maintenance cycle? Is there a regulatory can you just unpack a little bit what’s driving that?

Brady Erickson, CEO, Finia: Yes. I mean, the last few years have been a little bit unique just because the average price increases due to tariffs, inflation costs and whatnot probably juiced it a little bit because we had to pull rather than doing one annual increase, we’ve probably flown through two or three or four in a year. I think in ’twenty two, I think this year we’ll probably do three price increases in North America and generally one kind of globally. But on average, I would say there’s going to be 1% to 2% price. 1% to 2% is going to be just the overall market kind of growing and that’s going to be with the average age of the car park increasing, I think we’re around twelve, thirteen years now.

Combustion engines in the car park are still continuing to grow. And then I think we also have about 1% to 2% growth that’s going to be adding to our portfolio, adding additional product lines, releasing new part numbers into the system, so us kind of picking up a little bit of share. And so that kind of adds you add those together and that gets our 4% to 6% on average for the aftermarket. And that’s where a lot of our growth has been in what I would consider propulsion agnostic, steering, suspension, braking applications that currently makes up right around 25% of our revenues in the aftermarket segment. And we see some good opportunities for that to continue to grow and as we add additional product lines to our portfolio.

Laurence Alexander, Jefferies Analyst, Jefferies: And so when you think about off highway, can you unpack kind of the types of applications you’re winning share in or you’re quoting on?

Brady Erickson, CEO, Finia: Yeah, mean, marine, industrial, gensets, ag, construction, aerospace, those are all areas that if you look at our prior parents, they really didn’t focus on. And so we put a lot of effort and we see there’s the addressable market in those segments is probably as big as our commercial vehicle and light passenger segments. And so it’s a huge opportunity for us to grow. And what makes it even more interesting for us is they’ve got new emissions regulations coming for Tier four and off highway applications and the alternative fuels going to those markets, that we’ve got some great technology. And one of those great technologies that we just announced here recently is what we call GDI for diesel or gasoline direct injection.

So we’re using our high volume gasoline direct injectors, making some tweaks to it and launching it for the diesel market. And that’s actually for a genset and kind of a material handling, ag construction type application. And that’s a huge benefit for them. It gets them a lot better emissions, better control, and actually is going to save them a lot of money by going from a mechanical system to a more electronically controlled system. So their calibration, their proliferation of parts comes down dramatically.

And we’re getting a lot of interest in that. And the reason why it’s also important, it’s a very cost effective solution. Pretty much as you go up, those systems are going to be anywhere from three fifty bar to 500 bar. And generally, as you go up in pressure, the prices go up exponentially. And so when you go to 3,000 bar, even medium duty at 2,000 bar, these off highway applications can’t afford that complex and high pressure of a system.

So they need something more cost effective, and we’re the first to market with that lower cost system, and we’re really seeing a lot of uptake in it.

Laurence Alexander, Jefferies Analyst, Jefferies: And I could spend the entire time on the injection system, but you did mention kind of the non combustion parts of the business. How do you see that evolving in your mix over the next five, ten years?

Brady Erickson, CEO, Finia: Yeah, mean on aftermarket side, the propulsion agnostic, we see that continue to increase. Generally what we do, we’ve got over $1,000,000,000 aftermarket, so we’ve got a large distribution network. We have a good strong customer base. The Delphi brand may not be have a great reputation for investors, but it has a great reputation for workshops and mechanics. And they know it’s a strong brand.

It’s got great quality. We give great service. And so Delphi, probably at some point in its history, has probably made about nearly every part in a vehicle from the powertrain standpoint. And so as we continue to add product lines to our portfolio, there’s a great uptick. And so generally what we’ve done is we started with steering and suspension in Europe.

We grew that. It really grew quite a bit. We’re now bringing that to North America, South America and Asia. As we continue to proliferate that, we’ll then look for additional product lines to kind of bring out. And that’s generally the process that we go through.

We don’t try to do the big bang going globally all at once because that then has the risk if it doesn’t take off. We spend a lot of money ahead of time. So we like to kind of plant seeds and then continue to grow from there.

Laurence Alexander, Jefferies Analyst, Jefferies: And could you characterize your opportunity in nonmobility applications? And I guess I’m curious about stationary power, any other adjacencies like that.

Brady Erickson, CEO, Finia: Yeah. I mean, we do a lot for gensets, off highway applications as well. So Perkins with Caterpillar, John Deere, Kohler. We work with all of them. And so from our standpoint, if they need power, we’re involved.

Our power generation on-site, we have products and can support them. And so I think the other question on the aerospace side is another great example. We’re launching with Safran the first part here in Q4. The second one is going to be in Q1. And guess what?

It uses the same engineers and some of the same manufacturing lines that we use for light vehicle and medium duty applications. And so our strategy is really we’re just taking we’re leveraging our human capital and our manufacturing capital to go into these new markets. And so we don’t have to go and increase R and D or increase CapEx to go into these new markets because it’s using the same core technology that we have as a company.

Laurence Alexander, Jefferies Analyst, Jefferies: And then in hydrogen, I guess there’s been a lot of discussion over the years about hydrogen for trucking. Can you characterize your opportunity there? But then also, are there adjacencies in the hydrogen ecosystem where you can add value?

Brady Erickson, CEO, Finia: Yeah. I think people need to distinguish on the commercial vehicle and on highway side. A lot of time when they talk about hydrogen, talk about fuel cells. We’re seeing people kind of pull back a bit on that because the fuel cells, as far as the how robust it is and the cost of the system is not necessarily there. We supply some parts for fuel cells from a fuel flow standpoint and a fuel control, but we see a lot more opportunity in hydrogen combustion.

With that said, I don’t think it’s going to be a significant revenue contributor to us until sometime in the 2030s. We continue to invest in it. We continue to launch new work with customers on development programs. I think it’s a great technology. It’s going to be, I think, very efficient, transparent to the end user, great range, obviously great emissions.

But I think it’s just going to take a lot longer than people were expecting, and it’s a much more robust solution than fuel cells. Because as far as contaminants in the hydrogen, combustion doesn’t really care so much. Fuel cell is very, very sensitive to it. And guess

Laurence Alexander, Jefferies Analyst, Jefferies: what?

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.