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PHINIA INC. (PHIN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 net sales were $796M, down 7.8% YoY (down ~4.1% ex-FX and contract manufacturing), with adjusted EBITDA of $103M (12.9% margin) and adjusted diluted EPS of $0.94; GAAP diluted EPS was $0.63 .
  • Results versus consensus: revenue ($796M) missed Wall Street at ~$814.1M*, Primary EPS $0.94 missed ~$1.00*, and adjusted EBITDA $103M was below ~$112.6M*; management flagged OEM volume softness, nonrecurrence of a Q1’24 supplier settlement, stand-alone costs, and new tariff impacts as key drivers .
  • Guidance reaffirmed: FY2025 net sales $3.23B–$3.43B, adjusted EBITDA $450M–$490M (13.7%–14.5%), net earnings $140M–$170M, adjusted FCF $160M–$200M, adjusted tax rate 38%–42% .
  • Capital returns remained a focal point: $111M returned via $100M buybacks and $11M dividends; liquidity ~ $900M (cash $373M plus undrawn revolver), net debt $616M, and net leverage ~1.4x .
  • Near-term stock reaction catalysts: clarity on tariff pass-through (expected 100% recovery in Q2), reaffirmed full-year outlook despite macro and CV softness, and continued share repurchases under remaining $264M authorization .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EPS of $0.94 with segment adjusted operating margin of 12.2% despite softer OEM volumes; Aftermarket margin at 16.1% and Fuel Systems at 9.5% (pre pass-through of tariffs), showing operational resilience .
  • Strong capital allocation execution: $111M returned (buybacks and dividends) and liquidity of ~$900M with net leverage ~1.4x; “we bought back more than 7.5 million shares or roughly 16.5% of outstanding shares since we were spun out” .
  • Strategic wins across geographies/products, including 350bar GDi for E100 in Brazil, Americas FDM wins, China SCR pump, and aftermarket distributor expansions; “We saw sustained momentum in new customer growth... many levers to drive the business” .

What Went Wrong

  • Top line softness (net sales down 7.8% YoY; ~4.1% ex-FX and CMA) driven by lower OEM volumes across regions; adjusted EBITDA margin contracted 260 bps YoY to 12.9% .
  • Nonrecurrence of a Q1’24 supplier settlement and increased stand-alone corporate costs post TSAs pressured profitability; Q1 tariffs added $4M total ($2M per segment), to be passed through in Q2 .
  • Adjusted FCF negative at $(3)M vs $13M in Q1’24, given lower earnings (ex non-cash items) despite lower interest payments .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$839 $833 $796
GAAP Diluted EPS ($USD)$0.70 $0.12 $0.63
Adjusted Diluted EPS ($USD)$1.17 $0.71 $0.94
Gross Margin %22.3% 22.7% 21.6%
Adjusted Operating Margin %10.4% 9.4% 9.2%
Adjusted EBITDA ($USD Millions)$120 $110 $103
Adjusted EBITDA Margin %14.3% 13.2% 12.9%
Segment Net Sales ($USD Millions)Q3 2024Q4 2024Q1 2025
Fuel Systems$484 $491 $473
Aftermarket$355 $342 $323
KPIsQ3 2024Q4 2024Q1 2025
Cash and Cash Equivalents ($USD Millions)$477 $484 $373
Total Debt ($USD Millions)$987 $988 $989
Net Debt ($USD Millions)$510 $504 $616
Net Cash Provided by Operating Activities ($USD Millions)$95 $73 $40
Capital Expenditures ($USD Millions)$25 $20 $35
Adjusted Free Cash Flow ($USD Millions)$60 $72 $(3)
Share Repurchases ($USD Millions)$75 $24 $100
Dividends Paid ($USD Millions)$10 $11 $11
Q1 2025 vs Estimates (S&P Global)ConsensusActualSurprise
Revenue ($USD Millions)$814.1*$796 Miss
Primary EPS ($USD)$1.00*$0.94 Miss
EBITDA ($USD Millions)$112.6*$103 Miss

Values with an asterisk are retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Feb 13, 2025)Current Guidance (Apr 25, 2025)Change
Net Sales ($USD Billions)FY 2025$3.23–$3.43 $3.23–$3.43 Maintained
Adjusted EBITDA ($USD Millions)FY 2025$450–$490 $450–$490 Maintained
Net Earnings ($USD Millions)FY 2025$140–$170 $140–$170 Maintained
Adjusted Free Cash Flow ($USD Millions)FY 2025$160–$200 $160–$200 Maintained
Adjusted Tax Rate (%)FY 202538%–42% 38%–42% Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Oct 31)Q4 2024 (Feb 13)Q1 2025 (Apr 25)Trend
Tariffs/macroCV softness; Aftermarket strength; no tariff specifics Outlook caveats re: new U.S. policy changes not in guide ~$4M tariff hit in Q1; 100% pass-through expected in Q2; majority North America production USMCA compliant Rising impact; mitigated via pass-through
FXCurrency volatility persisted Assumed ~$80M FX headwind in 2025 FX headwind reduced to ~$20M; limited impact beyond Q1 Improving
Segment performanceAftermarket margins expanded; FS pressured by CV FS margins up; Aftermarket margins down modestly Aftermarket 16.1%, FS 9.5% with tariff timing; segment AOI margin 12.2% Aftermarket resilient; FS pressured
Product/technologyOff-highway diesel LPC common rail; GDi wins Aerospace/defense second product win; 3,600 SKUs added 350bar GDi for E100; FDM wins; SCR pump China; wallet expansion with distributors Diversifying into alt-fuels/aerospace
Capital allocation$75M buybacks; $0.25 dividend; authorization raised Dividend raised to $0.27; buyback authorization increased to $600M (~$320M remaining then) $100M buybacks; $11M dividends; $264M buyback capacity remaining Continuing returns
Tax rate/structure—Adjusted ETR 41.5% in 2024; long-term reduction plan underway Adjusted ETR 36% (ongoing ops) in Q1; FY guide 38%–42%; structural fixes continue Gradual improvement

Management Commentary

  • Strategic posture: “Our team’s focus on operating discipline has aided us in navigating through expected market dynamics and economic uncertainties... Our capital allocation strategy continues to be balanced between growth and returning value to shareholders” — Brady Ericson, CEO .
  • Tariff mitigation: “Newly introduced tariff regime... expected to be passed through 100% in the second quarter” — Chris Gropp, CFO .
  • Liquidity and leverage: “Our balance sheet remains strong with cash and cash equivalents of $373 million... total liquidity is approximately $900 million... net leverage ratio was 1.4x” — Brady Ericson, CEO .
  • Growth initiatives: “A 350bar Gasoline Direct Injection... for E100... FDM wins in Americas... SCR pump win for China... increased share of wallet with a major U.S. distributor” — Brady Ericson, CEO .
  • Guidance stance: “We are reaffirming our 2025 guidance... More than 60% of our sales are outside North America... we expect any new tariffs incurred to fully pass through to customers” — Chris Gropp, CFO .

Q&A Highlights

  • Tariff exposure and pass-through: $4M Q1 tariff impact ($2M per segment), with confidence in full pass-through starting Q2; majority of North American products are USMCA compliant; agreements already in place to mitigate, including logistics adjustments .
  • Demand outlook: CV prebuy muted; LV China strengthening; Europe holding; Aftermarket expected to be seasonally stronger in Q2/Q3; Q1 typically weakest quarter .
  • Guidance cadence: Management targets mid-range for FY, with Q2–Q4 margins higher than Q1 as tariffs pass through and volumes seasonally improve; Q1 softness expected .
  • M&A discipline: Focus on tuck-ins in CV/industrial/Aftermarket that are EPS-accretive and valued at or below PHIN’s multiple; share buybacks evaluated quarterly relative to M&A pipeline and price .
  • Tax structure: Ongoing multi-phase restructuring of legacy holding-company and IP structures; Q1 adjusted ETR ~36%; FY 38%–42% with slow, steady progress .

Estimates Context

  • Q1 2025 comparisons to S&P Global consensus: Revenue $796M vs ~$814.1M* (miss), Primary EPS $0.94 vs ~$1.00* (miss), EBITDA $103M vs ~$112.6M* (miss). Drivers: lower OEM volumes across regions, nonrecurrence of a supplier settlement, stand-alone costs post TSAs, and tariff timing (Q1 hit; Q2 pass-through) .
  • Estimate revisions: Management reduced expected FX headwind for FY (from ~$80M to ~$20M), and expects tariff pass-through and seasonal Aftermarket strength to lift margins in Q2–Q4, supporting the reaffirmed FY EBITDA range .
    Values with an asterisk are retrieved from S&P Global.

Key Takeaways for Investors

  • Q1 was seasonally and tactically soft but operationally controlled; margin recovery expected from Q2 as tariffs are fully passed through and Aftermarket seasonality improves .
  • Guidance reaffirmation despite macro/CV softness underscores multi-segment diversification and disciplined cost control; watch for FX tailwind now smaller than initially feared .
  • Capital returns remain robust with substantial authorization remaining; liquidity and leverage provide flexibility for opportunistic buybacks and tuck-in M&A .
  • Strategic wins across alt-fuels GDi, China SCR, and aftermarket distribution deepen growth optionality; aerospace program momentum adds a new vector for medium-term accretion .
  • Tax-rate normalization is a multi-year project; near-term ETR remains elevated (FY 38%–42%), a headwind to EPS that should gradually abate with structural changes .
  • Near-term trading: monitor Q2 confirmation of tariff pass-through and sequential margin lift; medium-term thesis: aftermarket durability + diversified OEM exposure and disciplined capital allocation underpin cash generation and shareholder returns .

Additional Notes

  • No standalone Q1 2025 press releases beyond the 8-K press release were identified during the period search .
  • Prior-period context incorporated from Q3 2024 and Q4 2024 8-Ks and call transcripts .