Executive Summary

Q4 showed resilient execution against a soft top line: net sales $833M (-5.6% YoY; -2.9% YoY ex-contract manufacturing), adjusted EBITDA $110M (13.2% margin, -160 bps YoY), GAAP EPS $0.12 and adjusted EPS $0.71, with healthy adjusted FCF of $72M .
Mix remained favorable: Aftermarket grew while Fuel Systems declined; segment adjusted operating margins held at 12.8%, with Aftermarket margins 14.9% (down 140 bps QoQ) and Fuel Systems 11.4% (up 110 bps YoY) .
2025 outlook guides net sales to $3.23–$3.43B and adjusted EBITDA to $450–$490M (13.7%–14.5%); adjusted ETR set to 38%–42%, and adjusted FCF $160–$200M. Dividend raised 8% to $0.27 and buyback authorization increased by $200M (~$320M remaining) .
Street consensus from S&P Global for Q4 2024 was unavailable at the time of this analysis; estimate comparisons are therefore not included (will update when available).

What Went Well and What Went Wrong

What Went Well
- Aftermarket momentum: sales grew across all regions; company introduced 3,600+ new SKUs in 2024 to expand offering and wallet share, underpinning mix support and cash generation .
- Margin resilience in Fuel Systems: Q4 Fuel Systems adjusted operating margin reached 11.4%, aided by favorable price, supplier savings and customer cost recoveries despite lower volumes .
- Strategic wins and capital returns: second aerospace & defense program (post-combustion injector) and multiple CV/LV/Aftermarket awards; raised dividend to $0.27 (+8%) and expanded buyback capacity by $200M (~$320M available) .
What Went Wrong
- Top-line softness: Q4 net sales fell to $833M (-5.6% YoY) due to lower Fuel Systems sales in Europe/China; adjusted EBITDA margin compressed to 13.2% (-160 bps YoY) .
- Elevated tax rate: Q4 adjusted ETR was 41.5% (above guided 33%–37%), materially weighing on adjusted EPS; management expects structural remediation to take time .
- Higher standalone and employment costs: Standalone company costs and higher employment costs, plus Q4 impairment charges, pressured GAAP results (operating income $51M; asset impairment $21M) .

Financial Results

Quarterly progression (oldest → newest):

Metric	Q2 2024	Q3 2024	Q4 2024
Net Sales ($M)	$868	$839	$833
Gross Margin %	21.7%	22.3%	22.7%
Operating Income ($M)	$71	$66	$51
Operating Margin %	8.2%	7.9%	6.1%
Adjusted Operating Income ($M)	$84	$87	$78
Adjusted Operating Margin %	9.7%	10.4%	9.4%
Adjusted EBITDA ($M)	$117	$120	$110
Adjusted EBITDA Margin %	13.6%	14.3%	13.2%
Net Earnings ($M)	$14	$31	$5
Net Margin %	1.6%	3.7%	0.6%
Diluted EPS (GAAP)	$0.31	$0.70	$0.12
Adjusted Diluted EPS	$0.88	$1.17	$0.71
Cash from Operations ($M)	$109	$95	$73
Adjusted Free Cash Flow ($M)	$108	$60	$72

YoY snapshot (Q4 only):

Metric	Q4 2023	Q4 2024
Net Sales ($M)	$882	$833
Operating Income ($M)	$81	$51
Adjusted Operating Income ($M)	$89	$78
Net Earnings ($M)	$33	$5
Diluted EPS (GAAP)	$0.70	$0.12
Adjusted Diluted EPS	$0.76	$0.71
Adjusted EBITDA ($M)	$127	$110
Adjusted EBITDA Margin %	14.8%	13.2%
Cash from Operations ($M)	$62	$73
Adjusted Free Cash Flow ($M)	$55	$72

Segment sales (oldest → newest):

Segment Net Sales ($M)	Q2 2024	Q3 2024	Q4 2024
Fuel Systems	$518	$484	$491
Aftermarket	$350	$355	$342
Total	$868	$839	$833

Additional KPIs:

KPI	Q2 2024	Q3 2024	Q4 2024
Cash & Equivalents ($M)	$339	$477	$484
Net Debt ($M)	$495	$510	$504
Capex ($M, quarterly)	$17	$25	$20
Share Repurchases ($M, quarterly)	$90	$75	$24
Dividends Paid ($M, quarterly)	$11	$10	$11

Notes on non-GAAP: Q4 adjustments included separation/transaction costs ($7M), intangible amortization ($7M), restructuring ($3M), and a $21M asset impairment, offset by other one-time gains; adjusted EPS excludes $0.59 per share of non-comparable items .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY 2025	N/A (first issuance)	$3.23B–$3.43B	New
Adjusted EBITDA	FY 2025	N/A	$450M–$490M; margin 13.7%–14.5%	New
Net Earnings	FY 2025	N/A	$140M–$170M; margin 4.3%–5.0%	New
Adjusted Free Cash Flow	FY 2025	N/A	$160M–$200M	New
Adjusted Tax Rate	FY 2025	N/A	38%–42%	New
Quarterly Dividend/Share	Q1 2025 pay	$0.25 (same quarter prior year)	$0.27 (8% increase)	Raised
Share Repurchase Authorization	Ongoing	$400M authorized; ~$188M remaining (Q3)	+$200M to plan; ~+$320M remaining	Raised/Refilled

Management also cited ~-$80M FX headwind contemplated in 2025 sales range and expected 1H levels similar to 2H 2024, with modest 2H pickup tied to CV rebound .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2–Q3 2024)	Current Period (Q4 2024)	Trend
Aftermarket resilience	Strength in Europe; mix/pricing supported margins; adjusted FCF strong ($108M in Q2; $60M in Q3)	Volumes expanded across regions; segment margin 14.9% (down 140 bps QoQ on freight/charges); continued SKU expansion	Stable, solid contributor
Fuel Systems softness (Europe/China)	Lower CV in Europe, LV in China; FS sales down QoQ; margin expansion via pricing/cost control in Q3	FS sales down YoY; FS margin 11.4% aided by price/supplier savings/ recoveries; volume headwinds persist	Mixed: margins resilient, volumes pressured
Taxes/ETR	Guided 2024 adjusted ETR to 33%–37%	Q4 adjusted ETR 41.5% (above guide), structural remediation multi-phase; 2025 adjusted ETR guided 38%–42%	Headwind persists
FX headwinds	Not highlighted	~-$80M FX headwind embedded in 2025 sales guidance	New headwind
Aerospace & defense	Not cited	Second product win; quality certification targeted by end Q1/early Q2; first SOP in Q4’25	Emerging growth vector
GDi penetration/500 bar	Not cited	GDi penetration ~60%–65%; PHIN mid-teens share; 500 bar wins support share gains; limited content uplift	Positive share outlook
Supply chain/TSAs/CMAs	Exiting TSAs/CMAs; strong cash conversion in Q2	Exited all CMAs/TSAs; supplier savings contributed to margins	Completed/beneficial
Tariffs/regionalization	Not cited	Customers further regionalizing; USMCA/tariff risks likely to hit consumers/volumes; minimal China tariff exposure	Risk factor elevated
M&A/capital allocation	Repurchases and refinancings; added to Russell 2000	More buybacks; disciplined M&A targeted to CV/industrial/Aftermarket; bias to accretive, reasonably valued assets	Continuing, disciplined
CV cycle	Q3 commentary reflected softness	2025 assumes 2H CV rebound; pre-buy related capacity expansion underway	Potential 2H tailwind

Management Commentary

“We delivered solid results in the fourth quarter despite softened demand in the Light Vehicle and Commercial Vehicle markets, driven by operational execution, improved price-cost performance and strong Aftermarket sales.” – Brady Ericson, CEO .
“Adjusted EBITDA was $110 million and a margin of 13.2%... The positive benefits of supplier savings were more than offset by sales decreases, higher annual incentive compensation and added infrastructure to support the business as a stand-alone entity.” – Brady Ericson .
“We ended 2024 with a disappointing adjusted effective tax rate... 41.5%, above the high end of our guide... This is going to be a long-term project... we’re now finishing Phase 1… start Phase 2 and… Phase 3.” – Chris Gropp, CFO .
“We started 2025 by purchasing over 800,000 shares and… increased our share repurchase program by another $200 million and declared a quarterly dividend of $0.27 per share, an increase of 8%.” – Brady Ericson .
“Second product win in the aerospace and defense industry… we’re on pace to getting our aerospace quality certification end of Q1, early Q2 in support of our first SOP in that aerospace in Q4 of this year.” – Brady Ericson .

Q&A Highlights

Taxes/ETR: Management acknowledged the 41.5% adjusted ETR as a key headwind; multi-phase legal/entity restructuring is underway with no quick fix, implying elevated ETR into 2025 (guide 38%–42%) .
Aerospace & defense expansion: Second award with same customer; leveraging precision fuel competencies and existing equipment; certification timing (end Q1/early Q2) precedes first SOP in Q4’25 .
CV cycle and pre-buy: Capex supports capacity for expected pre-buys; management’s 2025 guide assumes modest 2H CV rebound; upside if rebound is stronger .
M&A and capital deployment: Elevated cash enabled increased buybacks; pipeline for accretive CV/industrial/Aftermarket deals improving; valuation discipline emphasized .
Tariffs and regionalization: Customers continue regionalizing supply chains; proposed tariff changes (incl. USMCA risks) likely to flow through to consumers, affecting volumes; minimal direct China tariff exposure .

Estimates Context

S&P Global consensus for Q4 2024 EPS/Revenue/EBITDA was unavailable at time of analysis; comparisons to Street estimates are not included and will be updated when accessible.
Directionally, adjusted EPS ($0.71) was impacted by a higher-than-expected adjusted ETR (41.5%), while segment margins remained solid; 2025 guidance embeds FX headwinds (~-$80M) and a still-elevated ETR (38%–42%), suggesting potential Street EPS recalibration vs prior tax assumptions .

Key Takeaways for Investors

Quality of earnings held up despite volume pressure: Fuel Systems margin improvement and durable Aftermarket growth mitigated top-line softness; adjusted EBITDA margin 13.2% in Q4 and 14.1% for 2024 .
Taxes are the swing factor: Elevated adjusted ETR weighed on EPS and is guided high again for 2025 as remediation continues—monitor milestones on legal/entity restructuring .
2025 set-up is cautious but balanced: Sales guide contemplates FX headwinds and flattish 1H, with modest 2H pickup on CV; adjusted EBITDA range implies roughly flat-to-up margin vs 2024 on execution .
Capital returns as support: 8% dividend hike to $0.27 and +$200M buyback authorization (≈$320M available) provide downside support and signal confidence in FCF durability .
Optionality from growth vectors: Aerospace & defense wins, GDi 500-bar adoption and Aftermarket expansion add multi-year growth drivers less correlated to near-term OE cycles .
Watch macro/policy: Tariff/USMCA risks and FX strength are external headwinds; management sees minimal direct China tariff exposure but consumer pass-through risk could hit volumes .
Trading lens: Near term, sentiment likely hinges on CV order signals, tax trajectory updates, and any incremental M&A or buyback execution; medium term, sustained Aftermarket strength and mix/price discipline are key to maintaining mid-teens adjusted EBITDA margins .

PHINIA INC. (PHIN)·Q4 2024 Earnings Summary