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PHINIA INC. (PHIN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was a record quarter for adjusted sales and adjusted EBITDA: net sales $908M (+8.2% YoY), adjusted EBITDA $133M (14.6% margin), and adjusted EPS $1.59; GAAP EPS was $0.33 due to a large separation-related charge .
  • PHINIA delivered clear beats versus S&P Global consensus: revenue $908M vs $868.8M* and EPS $1.59 vs $1.18*; this was driven by pricing/tariff recoveries, FX tailwinds, and volume growth in Asia/Americas .
  • FY25 guidance was refined: net sales raised to $3.39–$3.45B, adjusted EBITDA narrowed to $465–$480M (slightly higher midpoint), adjusted FCF raised to $175–$205M, adjusted tax rate improved to 33–37%; GAAP net earnings lowered to $100–$110M reflecting the settlement impact .
  • Capital returns and liquidity remain strong: $41M returned in Q3 ($30M buybacks, $11M dividends), $900M total liquidity, and net leverage of 1.4x EBITDA; SEM acquisition closed ($47M) expanding alternative-fuels ignition capabilities .

What Went Well and What Went Wrong

What Went Well

  • Record profitability and sales: “record quarter for adjusted sales and adjusted EBITDA dollars as a public company,” with adjusted EBITDA $133M and 14.6% margin .
  • Fuel Systems outperformed: segment margin expanded 190 bps YoY to 13.3% and adjusted operating income rose ~33% on R&D savings, supply chain/productivity gains .
  • Strong cash generation and disciplined capital returns: adjusted free cash flow $104M in Q3; $41M returned to shareholders; liquidity ~$900M and net leverage 1.4x .

What Went Wrong

  • GAAP earnings pressure: net earnings fell to $13M (1.4% margin), down $18M YoY, primarily due to a one-time $39M loss associated with settling separation-related claims .
  • Aftermarket margin softness: aftermarket segment margin declined 80 bps YoY due to unfavorable mix, partially offsetting consolidated margin gains .
  • Tariff-related revenue carries near-zero margin, constraining EBITDA despite price pass-throughs; management expects this to persist and is focused on productivity to offset .

Financial Results

Consolidated Performance

MetricQ3 2024Q2 2025Q3 2025
Net Sales ($USD Millions)839 890 908
GAAP Diluted EPS ($USD)0.70 1.14 0.33
Adjusted EPS ($USD)1.17 1.27 1.59
Gross Margin %22.3% 22.1% 22.0%
Adjusted EBITDA ($USD Millions)120 126 133
Adjusted EBITDA Margin %14.3% 14.2% 14.6%
Net Earnings ($USD Millions)31 46 13

Segment Net Sales

SegmentQ3 2024Q2 2025Q3 2025
Fuel Systems ($USD Millions)484 537 549
Aftermarket ($USD Millions)355 353 359

KPIs and Cash

KPIQ3 2024Q2 2025Q3 2025
Cash from Operations ($USD Millions)95 57 119
Adjusted Free Cash Flow ($USD Millions)60 20 104
Capital Expenditure ($USD Millions)25 34 26
Cash and Equivalents ($USD Millions)477 347 349
Total Debt ($USD Millions)—990 992
Net Debt ($USD Millions)—643 643

Actual vs S&P Global Consensus

MetricQ1 2025Q2 2025Q3 2025
Revenue Actual ($USD Millions)796 890 908
Revenue Consensus Mean ($USD Millions)814.114*867.453*868.766*
EPS Actual (Primary/Adjusted) ($USD)0.94 1.27 1.59
Primary EPS Consensus Mean ($USD)0.996*1.029*1.180*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 20253.33–3.43 3.39–3.45 Raised
Adjusted EBITDA ($USD Millions)FY 2025455–485 465–480 Narrowed; midpoint slightly higher
Net Earnings ($USD Millions)FY 2025140–170 100–110 Lowered (settlement impact)
Adjusted Free Cash Flow ($USD Millions)FY 2025160–200 175–205 Raised
Adjusted Tax Rate (%)FY 202536–40% 33–37% Lowered (improved)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1/Q2)Current Period (Q3 2025)Trend
Tariffs & RecoveryQ1: EBITDA headwind from tariff changes . Q2: pricing gains primarily from tariff recoveries .Tariff pass-throughs sticky; near-zero margin revenue constrains EBITDA; pursuing concessions/pricing in aftermarket .Persistent; margin headwind
SEM Acquisition & IntegrationQ2: definitive agreement to acquire SEM (~$47M) .Closed SEM in August; ~$8M Q3 sales; annualized ~$50M sales/$10M AOI expected; initial headwinds, seasonality softer in H2 .Integration underway; near-term soft
ERP Consolidation & Efficiency—Consolidating four ERPs into SAP S/4HANA over several years to enhance efficiency/data visibility .Structural improvement
Aerospace/Defense Adjacency—Initial shipments on first aerospace program; broader RFIs/RFQs and expected awards; second program launch early 2026 .Expanding
Aftermarket Pricing/MixQ1: aftermarket wins; category expansion . Q2: small tariff recovery; European strength .Aftermarket margin down 80 bps on mix; new wins across geographies .Mixed
Legal Settlement with Former Parent—$39M loss tied to settlement; offsets expected from VAT refunds/credits; limited impact on leverage/liquidity .One-time; cash offsets likely
Restructuring Program—~$35M charges to yield ~$25M annual savings; rollout starting 2026; completion by 2028 .Multi-year savings path

Management Commentary

  • “Record quarter for adjusted sales and adjusted EBITDA dollars as a public company… second consecutive quarter where both segments reported higher year-over-year sales.”
  • “We are consolidating four ERP systems into a single global SAP S/4HANA platform… laying the groundwork for a more agile, efficient organization.”
  • “Adjusted free cash flow has been a good story for us… raising the midpoint of our 2025 outlook by $10 million.”
  • “Since the spin-off in July of 2023, we repurchased approximately 20% of our outstanding shares.”
  • “We expect SEM to contribute sales annually of approximately $50 million and adjusted operating income of $10 million… first-year returns may face headwinds.”

Q&A Highlights

  • Tariff pass-throughs: Pricing is sticky as long as tariffs persist; tariff-related revenue carries near-zero margin, constraining EBITDA; aftermarket pricing contributes a few million dollars .
  • SEM seasonality: H2 is lighter than H1 due to shutdowns and CV softness; expect recovery in 2026 guidance context .
  • Fuel Systems flow-through: ECU pass-throughs from former parent carry no margin; productivity and cost reductions are improving standards for next year .
  • Aerospace pipeline: Initial deliveries catalyzing broader interest; engaging major engine manufacturers, expecting additional awards .
  • Recall exposure: No cash impact or changes to warranty accruals related to Ford fuel pump recall .
  • Restructuring timeline: Initial go-lives start 2026; multi-year rollout through 2028; expected ~$25M annual savings .

Estimates Context

  • PHINIA beat Q3 2025 consensus on both revenue ($908M vs $868.8M*) and EPS ($1.59 vs $1.18*), and beat Q2 2025 as well (revenue $890M vs $867.5M*, EPS $1.27 vs $1.03*) .
  • FY25 guidance lowers GAAP net earnings to $100–$110M while slightly raising adjusted EBITDA midpoint and raising adjusted FCF midpoint, implying consensus GAAP EPS likely adjusts down to reflect the settlement while normalized EBITDA/FCF trajectories improve .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Strong operational quarter with broad-based drivers (pricing/tariff recovery, FX, Asia/Americas volumes) produced record adjusted EBITDA and a clear beat on revenue/EPS; near-term trading skew positive on print quality .
  • GAAP optics weighed by the $39M settlement charge; watch for consensus recalibration of FY25 GAAP EPS while normalized EBITDA/FCF profiles improve on raised guidance and tax-rate progress .
  • Tariff pass-throughs are sticky but zero-margin; management is leaning on productivity/R&D savings to sustain margin expansion; focus on mix and aftermarket pricing to offset headwinds .
  • SEM integration adds strategic ignition/electronics capabilities; expect near-term seasonality/headwinds but medium-term contribution of ~$50M sales/$10M AOI as CV markets stabilize .
  • Multi-year ERP consolidation and restructuring should unlock ~$25M annual savings, supporting margin durability into 2026–2028 .
  • Capital allocation remains shareholder-friendly (buybacks, dividends) within a robust liquidity framework (~$900M) and 1.4x net leverage, offering flexibility for selective M&A .
  • Emerging aerospace adjacency is gaining traction; initial shipments and rising RFIs/RFQs could diversify end-market exposure and support growth beyond core combustion .