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Atmus Filtration Technologies Inc. (ATMU)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record net sales of $454M (+4.8% YoY) and solid profitability with adjusted EPS of $0.75 and adjusted EBITDA margin of 21.0% .
  • Results beat S&P Global consensus on revenue ($453.5M vs $433.4M*) and normalized Primary EPS ($0.75 vs $0.65*); EBITDA was modestly above consensus ($95.1M vs ~$86.9M* on an adjusted basis) .
  • Full-year guidance was raised: revenue to $1.685B–$1.735B (from $1.670B–$1.735B), adjusted EBITDA margin to 19.25%–20.0% (from 19.0%–20.0%), and adjusted EPS to $2.40–$2.60 (from $2.35–$2.60) .
  • Capital allocation and execution catalysts: $20M repurchase in Q2 (YTD $30M) and ongoing separation completion from Cummins (expected in Q3), plus strong liquidity of ~$591M (cash plus revolver) supporting M&A optionality .

What Went Well and What Went Wrong

What Went Well

  • Record quarterly sales driven by higher volume and pricing; adjusted EPS up to $0.75 and adjusted EBITDA at $95M (21.0% margin) .
  • Tariff impact mitigation and pricing execution: management targeted price-cost neutrality; secured USMCA exemption on substantially all products from Mexico, supporting customers and margins .
  • Distribution network transformation completed (including South Africa and normalization in Belgium), improving service levels; “With 100% of our distribution network now under our direct control, we are focused on continuing to improve on shelf availability” — Steph Disher .

What Went Wrong

  • Gross margin rate compressed to 28.9% from 30.5% YoY due to unfavorable logistics, one-time separation costs, manufacturing and FX headwinds .
  • First-fit markets weakened: U.S. heavy/medium duty demand expected down 15%–25% amid regulatory and tariff uncertainty; China growth seen as temporary; India flat-to-down on slow infrastructure ramp .
  • Sequential back-half margin step-down implied by guidance due to seasonality (~$50M top-line headwind), first-fit market declines, leveling of share gains, and operating at more pronounced decrementals to stay positioned for growth .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Millions)$406.7 $416.5 $453.5
Gross Margin ($USD Millions)$107.1 $110.5 $131.0
Gross Margin %26.3% 26.5% 28.9%
Adjusted EBITDA ($USD Millions)$77.7 $81.7 $95.1
Adjusted EBITDA Margin %19.1% 19.6% 21.0%
Net Income ($USD Millions)$40.1 $44.7 $59.9
Diluted EPS ($USD)$0.48 $0.54 $0.72
Adjusted EPS ($USD)$0.58 $0.63 $0.75
Cash from Operations ($USD Millions)$20.0 $28.7 $44.4
Adjusted Free Cash Flow ($USD Millions)$28.4 $19.8 $35.5
Effective Tax Rate %21.2% 21.3% 21.9%

Q2 YoY snapshot:

MetricQ2 2024Q2 2025
Net Sales ($USD Millions)$432.6 $453.5
Gross Margin ($USD Millions)$131.9 $131.0
Adjusted EBITDA ($USD Millions)$92.5 $95.1
Diluted EPS ($USD)$0.67 $0.72
Adjusted EPS ($USD)$0.71 $0.75

Consensus comparison (S&P Global):

MetricQ4 2024Q1 2025Q2 2025
Consensus Revenue ($USD Millions)*399.2421.4433.4
Actual Revenue ($USD Millions)406.7 416.5 453.5
Consensus Primary EPS ($USD)*0.5250.5890.653
Actual Primary EPS ($USD)0.58 0.63 0.75

Values with asterisk (*) retrieved from S&P Global.

Segment breakdown: Not disclosed in the Q2 press release/8-K; management reiterated mix of ~86% aftermarket and ~14% first-fit in Q2 commentary .

KPIs and Balance Sheet Highlights:

KPIQ4 2024Q1 2025Q2 2025
Liquidity (Cash + Undrawn Revolver) ($USD Millions)——~$591 (Cash $191 + RCF $400)
Net Debt to Adjusted EBITDA (TTM) (x)——1.2x
Share Repurchases ($USD Millions)$10 in Q4 $10 $20
Dividend per Share ($USD)$0.05 $0.05 $0.05

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025$1.670–$1.735 $1.685–$1.735 Raised at low end
Adjusted EBITDA Margin %FY 202519.0%–20.0% 19.25%–20.0% Raised midpoint
Adjusted EPS ($USD)FY 2025$2.35–$2.60 $2.40–$2.60 Raised at low end
Share Repurchases (% of Market Cap)FY 2025—~1%–3% (commentary) New disclosure

Drivers and clarifications:

  • Pricing assumptions reflect tariff-related pricing of ~0.8% vs ~1.5% in the prior guide; management targets price-cost neutrality through the year .
  • Back-half margin outlook incorporates seasonality, first-fit weakness, leveling of share gains, and operating at slightly worse decrementals to stay positioned for growth .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Tariffs & PricingPricing actions and FX were key drivers; 2025 guide initiated with 19–20% adj EBITDA margin Tariff pricing lowered to ~0.8% in the guide; price-cost neutrality targeted; USMCA exemption for Mexico shipments secured Stable to improving execution
Supply Chain & SeparationOngoing one-time separation and restructuring costs impacting margins and FCF Final distribution transition completed; Belgium normalized; separation completion expected in Q3 Improving
Market Conditions (Aftermarket, First-Fit)Resilient aftermarket; mixed demand trends Aftermarket stable but challenged; first-fit U.S. down 15–25%; China uptick seen as temporary; India flat-to-down Aftermarket stable, first-fit weaker
Capital Allocation (Buybacks/M&A)Buybacks initiated; dividend $0.05/quarter YTD repurchases $30M; plan to buy back ~1–3% of market cap while preserving M&A capacity Balanced, active
Industrial Filtration ExpansionStrategy highlighted; modest early steps expected Pipeline robust; organic product launches continue; ~$5M 2025 revenue target from industrial initiatives Early-stage, building
FXFX headwind noted in Q1 FX turning to tailwind in H2 vs H1 Improving

Management Commentary

  • “Our Atmus team delivered record sales and a strong quarter of financial results by continuously providing our customers with industry leading filtration solutions.” — Steph Disher, CEO .
  • “We mitigated the impact of tariffs in the quarter and will continue to take appropriate operational actions to be price cost neutral.” — Steph Disher .
  • “We ended the quarter with $191,000,000 of cash on hand… now have $591,000,000 of available liquidity… net debt to adjusted EBITDA ratio of 1.2x.” — Jack Kienzler, CFO .
  • “With 100% of our distribution network now under our direct control, we are focused on continuing to improve on shelf availability.” — Steph Disher .

Q&A Highlights

  • Pricing and tariffs: Consensus pricing expectations reduced largely due to tariff changes (China, India); guide reflects assumptions as of July 31; aim is price-cost neutrality through 2025 .
  • Back-half margin shape: Seasonality (~$50M revenue headwind), weaker first-fit markets, leveling of share gains, and more pronounced decrementals expected in H2, offset by FX tailwind vs H1 .
  • Buybacks vs M&A: Plan to repurchase ~1–3% of market cap while preserving capacity for inorganic industrial filtration acquisitions; strong cash generation after separation costs subside supports both .
  • Volume dynamics: Q2 volume strength included catch-up from delayed content wins and some pre-buy ahead of midyear pricing and tariff changes; mix remains ~86% aftermarket/14% first-fit .
  • Industrial filtration: Continued organic product launch and distribution build; modest ~$5M 2025 contribution as pipeline for inorganic expansion remains robust .

Estimates Context

  • Q2 beats vs S&P Global consensus: Revenue $453.5M vs $433.4M*; Primary EPS $0.75 vs $0.65*; both represent meaningful upside. EBITDA modestly above consensus on an adjusted basis ($95.1M vs ~$86.9M*) .
  • Prior quarters show mixed results vs consensus: Q4 revenue/EPS slightly above; Q1 revenue slightly below with EPS above; supports narrative of resilient aftermarket and pricing offsetting FX and first-fit softness .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Strong execution with record Q2 sales, adjusted EPS/EBITDA margin upside, and raised FY guide; supports near-term sentiment and potential estimate revisions higher .
  • Aftermarket resilience plus tariff mitigation (USMCA exemptions, pricing) underpin margins despite logistics and first-fit headwinds; watch FX tailwind in H2 .
  • Near-term trading: Guidance raise and beat may be catalysts; monitor tariff/regulatory headlines (EPA 2027) and first-fit order trends for volatility .
  • Medium-term thesis: Industrial filtration M&A optionality supported by $591M liquidity and 1.2x net debt/adj EBITDA; completed distribution transformation should improve service/availability .
  • Capital returns: YTD $30M buybacks and $0.05 quarterly dividend provide support; management targets ~1–3% of market cap repurchases while pursuing disciplined M&A .
  • Margin trajectory: Expect H2 margin moderation due to seasonality and first-fit declines, with FX tailwinds and pricing actions partially offsetting .
  • Risks: Logistics costs, tariff fluctuations, regulatory uncertainty, and FX; management targeting price-cost neutrality and preserving flexibility with a robust liquidity position .