Atmus Filtration Technologies Inc. (ATMU) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance with increased sales, EBITDA, and EPS, alongside optimistic guidance. However, the cautious outlook in certain markets and flat EBITDA guidance tempers enthusiasm. The Q&A reveals growth opportunities in data centers and strategic investments, boosting sentiment. Despite some uncertainties, the company's proactive approach to tariffs and cost management is positive. With a market cap of $2.39 billion, the stock is likely to see a positive reaction, within the 2% to 8% range, driven by strong financials and strategic initiatives.
Key Financial Performance
Fourth Quarter Sales $447 million, an increase of 9.8% year-over-year. Growth driven by higher pricing (5%), higher volumes (4%), and favorable foreign exchange (1%).
Fourth Quarter Adjusted EBITDA $85 million or 19.1%, compared to $78 million or 19.1% in the prior period. Growth attributed to higher sales and pricing.
Fourth Quarter Adjusted Earnings Per Share (EPS) $0.66, compared to $0.58 last year. Increase due to higher sales and operational performance.
Fourth Quarter Adjusted Free Cash Flow $31 million, compared to $28 million in the prior year. Improvement driven by better working capital management.
Full Year Sales $1.764 billion, an increase of 5.7% from 2024. Growth driven by higher volumes, favorable pricing, and partially offset by foreign exchange headwinds.
Full Year Adjusted EBITDA $354 million or 20%, compared to $330 million or 19.7% in 2024. Growth driven by higher volumes, pricing actions, and lower manufacturing costs.
Full Year Adjusted Earnings Per Share (EPS) $2.73, compared to $2.50 in 2024. Increase due to improved operational performance and pricing.
Full Year Adjusted Free Cash Flow $158 million, compared to $115 million in 2024. Improvement driven by better working capital management and timing of VAT recoveries.
Fourth Quarter Gross Margin $127 million, compared to $107 million in 2024. Increase due to higher pricing and volumes, partially offset by higher logistics and duties costs.
Full Year Gross Margin $498 million, an increase of $36 million from 2024. Growth driven by favorable pricing, volume, and lower manufacturing costs, partially offset by higher logistics and duties.
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Operating Highlights
NanoNet N3 Media: Launched the next generation NanoNet N3 media, enabling compact filter designs with superior service life in harsh environments. Recognized as Product of the Year by the World Filtration Institute.
Aftermarket Expansion: Expanded market presence in independent and retail channels with new distributors. Partnered with global OEMs to grow aftermarket businesses and market share.
Supply Chain Transformation: Completed transition to the global Atmus distribution network, optimizing customer experience and increasing product availability.
Acquisition of Koch Filter: Acquired Koch Filter, establishing the Industrial Solutions segment and expanding into industrial air filtration markets. Focused on integrating Koch Filter business for growth.
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Risk or Challenges
Global Market Challenges: The company faced challenging global market conditions throughout 2025, which could continue to impact performance.
Tariff Pricing and Trade Agreements: Some tariff pricing implemented in 2025 will not carry into 2026 due to changes in global trade agreements, potentially impacting revenue growth.
Freight Activity: The aftermarket segment has not seen sustained improvement in overall freight activity, which is expected to remain flat year-over-year in 2026.
Heavy-Duty Market Weakness: Customers have indicated a weaker first half of 2026 in the heavy-duty market, with recovery expected only in the back half of the year.
Foreign Exchange Impact: Unfavorable foreign exchange translation negatively impacted other income in 2025 and could continue to pose risks.
Asset Impairment Costs: A one-time charge of $8 million related to asset impairment costs on idled equipment was recorded, though it is not expected to have a material adverse effect.
Logistics and Duties Costs: Higher logistics and duties costs partially offset the benefits of higher pricing and volumes in 2025.
Integration of Koch Filter Acquisition: The integration of the Koch Filter business may pose operational challenges in the near term as the company focuses on aligning it with its strategy.
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Guidance & Outlook
Power Solutions Segment Outlook: In the aftermarket, the market is expected to remain relatively flat year-over-year due to no sustained improvement in overall freight activity. For the first-fit market, heavy-duty markets are anticipated to experience a weaker first half of the year with recovery in the back half. Heavy and medium-duty markets in the U.S. are projected to range from flat to up 10% compared to 2025.
Industrial Solutions Segment Outlook: Favorable market conditions are expected to contribute 1% to 4% of 2026 growth. Revenue for this segment is projected to be in the range of $155 million to $165 million, including contributions from the Koch Filter acquisition.
Total Company Revenue Outlook: Total company revenue is expected to range from $1.945 billion to $2.015 billion, representing an increase of 10% to 14% compared to 2025.
Adjusted EBITDA Margin: The adjusted EBITDA margin is projected to be in the range of 19.5% to 20.5% for 2026.
Adjusted EPS: Adjusted EPS is expected to range from $2.75 to $3 for 2026.
Revenue Growth Drivers: Revenue growth is expected to be driven by a combination of factors: 1% from favorable pricing, 1% from a weaker U.S. dollar, and 1% to 2% from share growth. Tariff pricing implemented in 2025 will not carry into 2026, and the company expects to remain price cost neutral on tariffs.
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Shareholder Return Plan
Dividends Paid in 2025: $17 million
Future Dividend Plans: No specific future dividend plans mentioned
Share Buybacks in 2025: $61 million
Remaining Share Repurchase Authorization: $69 million
Expected Share Repurchases in 2026: $20 million to $40 million
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Key Q&A
Q:What kind of growth is being seen in the data center market for Koch Filters, and what types of filters are being serviced?
A:The data center market for Koch Filters is growing at a high teens rate. Most of the business is in commercial and industrial HVAC, which is expected to pulse around GDP (2.5%-3%). The company is investing in product development to support growth in the data center market, which constitutes 8% of the business.
Q:If existing tariffs are rolled back, will pricing turn negative this year?
A:The 1% pricing is core pricing and not related to tariffs. If tariffs are reduced, the company will not pass on those costs to customers. The company aims to be price cost-neutral regarding tariffs and has implemented cost reduction strategies to mitigate tariff impacts.
Q:What is the opportunity to in-source filtration media at Koch Filters?
A:The company is focused on integrating Koch Filters in the first 6 months of 2026. Procurement synergies have been identified, and innovation workshops are being conducted to combine in-house media design with Koch's customer market and product ranges. This integration aims to create new products and support end markets.
Q:Is there any rebound or signs of life in the off-highway markets?
A:The off-highway markets are expected to remain flat year-over-year. Most of the first-fit business is driven by on-highway markets, with off-highway impacts being more significant in aftermarket businesses.
Q:Why does the Industrial Solutions sales guide for 2026 seem conservative?
A:The guide for Industrial Solutions sales in 2026 is $158 million to $168 million, excluding a $3 million stub period. The midpoint assumes 1% pricing, 1%-2% share growth, and market growth pulsing around GDP (2.5%). The range accounts for potential stronger market positions or quicker pivots into higher growth markets.
Q:What are the implications of the rollback of significant emissions regulations?
A:The rollback eliminates the legal foundation for federal vehicle greenhouse gas standards but does not repeal criteria pollutant standards like NOx. Near-term impacts include the 2027 engine launch with NOx standards at 35 milligrams and a potential prebuy in 2026 due to cost increases. Long-term implications may include changes in the trajectory of electrification.
Q:Why is the adjusted EBITDA guidance flat year-over-year, and are there any self-help levers planned?
A:The flat adjusted EBITDA guidance reflects strong incrementals and planned investments for top-line growth. Sequential movement will depend on manufacturing plant volumes. The company is continuously evaluating cost reduction opportunities and is pleased with its supply chain transformation over the past 3 years.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the types of filters being serviced in the data center market, stating only that they are investing in product development and have strong customer relationships. Additionally, they did not provide explicit confirmation on the 2027 NOx standards, stating that it is based on customer feedback and not officially announced.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Atmus Filtration
Atmus closing
Atmus customer
Atmus filtration
Atmus momentum
Atmus segment
Atmus strength
Atmusonians world
Conference Instructions
Filtration Institute
Full Conference
Full today
Industrial Solutions
Institute Prestigious
Instructions conference
NanoNet medium
Power Solutions
President
Regina
Solutions segment
Technologies Full
air filtration
channel
combination
culture Atmus
employee
expectation
filtration challenge
highway
increase outperformance
market Industrial
market share
mindset shift
platform
transaction
ATMU Transcript
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Atmus Filtration Technologies Inc. (ATMU) Q4 2025 Earnings Call Transcript
Positive2-13
The earnings call highlights strong financial performance with increased sales, EBITDA, and EPS, alongside optimistic guidance. However, the cautious outlook in certain markets and flat EBITDA guidance tempers enthusiasm. The Q&A reveals growth opportunities in data centers and strategic investments, boosting sentiment. Despite some uncertainties, the company's proactive approach to tariffs and cost management is positive. With a market cap of $2.39 billion, the stock is likely to see a positive reaction, within the 2% to 8% range, driven by strong financials and strategic initiatives.
Atmus Filtration Technologies Inc. (ATMU) Presents at Goldman Sachs Industrials and Materials Conference 2025 Transcript
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The earnings call reveals a mix of positive and negative factors. Strong share gains and revenue growth are offset by uncertainties in market conditions and regulatory impacts. The Q&A highlights concerns about future volume growth, regulatory challenges, and unclear guidance, which dampen the positive sentiment from financial performance. The stock's market cap suggests a moderate reaction, resulting in a neutral sentiment for the stock price over the next two weeks.
ATMU Slides
ATMU Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
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Why do some answers appear as “Unclear” or “Inaudible”?
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Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
