PI
PHINIA INC. (PHIN)·Q2 2025 Earnings Summary
Executive Summary
- Q2 2025 delivered resilient growth and margin expansion: net sales $890M (+2.5% YoY), adjusted EBITDA $126M (14.2% margin, +60 bps YoY), and adjusted EPS $1.27; GAAP diluted EPS $1.14 .
- Results beat S&P Global consensus: revenue $890M vs $867.5M*, EPS $1.27 vs $1.03*; drivers were FX tailwinds (+$18M), supplier savings (+$6M), tariff recoveries ($9M) and favorable mix, offset by net tariff headwinds (-$2M) and higher corporate costs .
- Guidance tightened: FY25 net sales range raised at the low end to $3.33–$3.43B; adjusted EBITDA range refined to $455–$485M with margin 13.7–14.1% due to zero-margin tariff revenue; tax rate lowered to 36–40%; FCF maintained at $160–$200M .
- Strategic actions: announced acquisition of SEM (~$47M;
$50M revenue/$10M EBITDA expected), continued buybacks ($40M) and dividends ($10M) with ~$850M liquidity and net leverage ~1.4x . - Near-term stock catalysts: continued tariff pass-through progress in Q3, SEM closing/integration, and aerospace program launches (first in Q4, second in Q1’26) .
What Went Well and What Went Wrong
What Went Well
- Adjusted EPS beat driven by operational improvements: “Adjusted earnings per diluted share…was $1.27, up from $0.88… our EBITDA margin expansion highlights the success of actions…pricing, supplier cost savings, productivity improvements” .
- Tariff mitigation progress with recoveries and regional sourcing: “We believe we have substantially mitigated the current tariffs with customer price increases, tariff recoveries… We still had a net headwind in Q2, but substantial progress has been made and we expect further progress in Q3” .
- Strategic M&A and growth vectors: “We announced our first acquisition… SEM… expected to generate ~$50M revenue and ~$10M adjusted EBITDA… opens up adjacent market opportunities… wider range of turnkey solutions” .
What Went Wrong
- Working capital and timing reduced cash conversion: net cash from operations $57M (vs $109M prior year) and adjusted FCF $20M (vs $108M prior year) due to strategic inventory builds in Aftermarket and capex timing .
- Net tariff headwind persisted: Q2 tariff recoveries $9M vs $11M outflows, net -$2M; combined with Q1, lag remained though expected to be recovered full-year .
- CV market softness and heavier corporate costs: “Commercial and heavy duty vehicle sales remained flat to down in all regions” and corporate costs were higher on employee compensation plans .
Financial Results
Segment net sales
Segment margins
KPIs
Guidance Changes
Earnings Call Themes & Trends
Management Commentary
- “We reported adjusted EBITDA of $126 million with a margin of 14.2%, a 60 basis point year over year expansion… increased focus on pricing, supplier cost savings efforts and productivity improvements” — Brady Ericson, CEO .
- “We believe we have substantially mitigated the current tariffs… We still had a net headwind in Q2, but substantial progress has been made and we expect further progress in Q3” — Brady Ericson, CEO .
- “We will pay approximately $47 million for SEM… expected to generate approximately $50 million in annual revenue and approximately $10 million of annual adjusted EBITDA” — Chris Gropp, CFO .
- “Adjusted operating income was $94 million or 10.6%, up 90 basis points… Aftermarket margin 16.1%; Fuel Systems margin 11.5%” — Chris Gropp, CFO .
Q&A Highlights
- Demand cadence: Q2 rebound from Q1 driven by FX/tariff recovery and normalization after slower post-holiday ramp; confidence in H2 order boards .
- Aerospace certifications: first launch in Q4’25; second in Q1’26; Safran engagement; audits progressing toward full certification .
- SEM acquisition rationale: system solution cross-sell (ignition + injection + ECU); leverage global footprint; alternative fuels growth in CV/industrial .
- Tariffs detail: Q2 tariff recovery $9M vs $11M outflow (net -$2M); supplier savings separate (+$6M); recovery expected full-year .
- Ford recall: no changes to disclosures or accruals; ongoing discussions; refer to Ford/NHTSA for specifics .
- Capital allocation: continued opportunistic buybacks despite SEM; net leverage
1.4x; robust liquidity ($850M) .
Estimates Context
Values retrieved from S&P Global.*
Interpretation: Q2 was a clean beat on both revenue and EPS; Q1 and Q4 were below consensus amid softer volumes and transitional items (tariffs, corporate cost build-out) .
Key Takeaways for Investors
- Q2 beat and margin expansion suggest effective pricing/supply chain actions; watch for continuation as tariff pass-through completes in Q3 .
- Guidance tightening (higher low-end sales, lower margin high-end) reflects zero-margin tariff revenue; underlying EBITDA targets remain achievable per segment performance .
- Aftermarket resilience and China LV strength offset CV softness; portfolio diversity continues to stabilize results .
- SEM acquisition broadens alt-fuel capabilities and system solution offering; integration and cross-sell should be incremental in 2026 .
- Cash conversion was temporarily constrained by inventory/capex timing; full-year FCF guide intact—monitor working capital normalization in H2 .
- Capital returns remain active with ample liquidity and modest leverage; buybacks are a continuing lever alongside tuck-in M&A .
- Watch regulatory headlines (Ford recall) but current disclosures/accruals unchanged; risk appears contained near term .