PHINIA Inc.

Good morning. My name is Audra. I will be your conference operator today. At this time, I would like to welcome everyone to the FANIA third quarter 2025 earnings call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I'd like to turn the conference over to Kellen Sarris, Vice President of Investor Relations.

Thank you. Good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on FINIA's Investor Relations website, including a slide deck that we will be referencing in our remarks. We're also broadcasting this call via webcast. Joining us today are Brady Erickson, CEO, and Chris Croft, CFO. During this call, we will make forward-looking statements which are based on management's current expectations and are subject to risks and uncertainties. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings. We caution listeners not to place undue reliance upon any such forward-looking statements. And with that, it is my pleasure to turn the call over to Brady.

Thank you, Kellen, and thank you, everyone, for joining us this morning. I'll start with some overall comments on the third quarter and then provide some thoughts on the remainder of the year and beyond. Chris will then provide additional details on our third quarter financials and discuss our updated 2025 guidance. We will then open the call for questions. The highlights of the third quarter include the closing of our acquisition of Swedish Electromagnet Invest, or SEM, our first acquisition as a public company. delivering our second quarter in a row of year over year net sales growth with Q3 being over 8% higher than prior year. This led to a record quarter for adjusted sales and adjusted EBITDA dollars as a public company. For the first time, our results are mostly being compared like for like against the prior year quarter as we had substantially exited all TSAs and contract manufacturing from our former parent in the third quarter of 2024 and nearly all of our corporate structure and costs were fully in place. And finally, with our strong adjusted free cash flow, we were able to acquire SEM and return $41 million in shareholders via dividends and share repurchases, while maintaining ample liquidity and our net leverage of 1.4 times EBITDA. Let's start with SEM. In June, we announced plans to acquire the company, and we were able to quickly close the transaction in August. SEM is a 100-year-old leading provider of an advanced natural gas, hydrogen, and other alternative fuel ignition systems, injector stators, and linear position sensors to the commercial vehicle and off-highway sectors. With SEM, we have expanded our ignition and electronic control capabilities, broadening our system offerings. By combining Finia's expertise in engine management systems with SEM's deep knowledge of advanced ignition technologies, we are creating a powerful platform for innovation and efficiency. We're excited to welcome SEM to the Finia family and look forward to growing with them. Moving to our results, our third quarter performance reflects steady progress in executing our strategic priorities and our ongoing commitment to returning value to shareholders in the form of dividends and share buybacks. We are executing several structural initiatives to enhance efficiency and data visibility. We are consolidating four ERP systems into a single global SAP S4 HANA platform, which we will phase in across the globe over the next several years. Additionally, the integration of SEM and our ongoing cost savings initiatives are laying the groundwork for a more agile, efficient organization. Although the macroeconomic and industry outlook remain uncertain, we are focused on what we can control through operational and cost efficiency initiatives, providing value to our customers, and driving sustainable performance across all our markets. Net sales in the quarter were a record $908 million, up 8.2% from the same period of the prior year, as we benefited from the SEM contribution, favorable FX, customer pricing related to tariff recoveries, and increased volume in Asia and the Americas. Excluding SCM and FX, revenue increased 5%. This is the second consecutive quarter where both segments reported higher year-over-year sales. We reported adjusted EBITDA of $133 million with a margin of 14.6%, a 30 basis point year-over-year expansion. The margin expansion was primarily due to lower R&D expenses and strong performance from our fuel system segment. This was partially offset by unfavorable product mix and increased employee costs. 133 million of EBITDA was also a quarterly record as a standalone company. Fuel systems delivered a strong quarter with adjusted operating income up 33% and the margin expanding 190 basis points, which is partially diluted from the SEM acquisition. AOI was driven by research and development savings, overhead cost control measures, and efficiencies. Those are partially offset by unfavorable product mix. Aftermarket margin was down 80 basis points. The decrease was primarily due to unfavorable product mix. Our combined fuel systems and aftermarket segment adjusted operating margin was 14% 80 basis point increase when compared with the third quarter of 2024, and a new record for a quarter as a standalone company. Adjusted earnings per share, excluding non-operating items as detailed in the appendix of our presentation, was $1.59, up from $1.17 in the same period for the prior year. Finally, as we disclosed in an 8K last week, We reached an agreement with our former parent company to equitably resolve our litigation and move forward in a positive manner. We expect that a substantial portion of the settlement payments will be offset by collection of pre-spend VAT refunds, tax credits, and various other tax recoveries. As a result, we do not believe that the settlement will have a material impact to our capital allocation strategies, liquidity, or our net leverage ratio. This quarter marks an important milestone for Finian. It's our first quarter of fully comparable year-over-year results since the spend, with all transitional service agreements and contract manufacturing now complete, and nearly all corporate costs were in place. The third quarter reflects the true underlying performance of our business. As a general overview, and consistent with recent quarters, our results in the third quarter highlight the strength and resiliency of our business in the face of a challenging and unpredictable environment. This is consistent with the benefits of having a truly diversified industrial business with diversity in customers, markets, industries, and regions in which we support. Our innovation strategy remained at the center of our growth story. We continue to invest heavily in R&D, roughly 200 million annually for about 6% of sales, and our customers reimburse us for about half of that through software and calibration services, demonstrating our position as a true development partner. In turn, we are making important investments in our business. They're advancing our competitive position in the key markets and allowing us to capture incremental growth opportunities and support our customers. Our brand is strong in the market, and customer preferences for our products remain high. Our excellent service is supporting our growth with both new and existing customers. Let me highlight a few of the new business wins on pages six and seven. The new next generation canister technology with leak detection devices for a leading North American OEM on two hybrid light commercial vehicle programs. A brushless alternator for industrial applications to a leading off-highway OEM in Asia for mining haul trucks. a conquest gasoline direct injection or GDI fuel rail assembly and controller for a light passenger vehicle applications, securing our first win and new business with a major Chinese OEM. Moving next to our aftermarket business, as shown on slide seven, we're winning both new business and expanding relationships with existing customers. Importantly, these wins are across diverse geographies. expanding our market-leading product coverage, and grew share of wallet with a major Middle Eastern customer, signed an agreement with a new large customer in the United Kingdom for braking and suspension components, new start-up and alternator business with additional distributors in North America. Our value proposition is differentiated and continues to attract new customers, as well as deepen relationships with existing customers. As shown on slide eight, Our business is diverse by end markets and geographies. Most recently, we've expanded into the aerospace and defense industries. As I've mentioned on prior calls, this is an emerging and exciting adjacency for us. We're launching multiple programs with a key aerospace customer that leverages our existing engineers and manufacturing infrastructure. We have started initial shipments on our first aerospace business award and expect our second program to launch in early 2026. These wins validate our strategy to extend core combustion and control technologies into adjacent markets. Now moving on to slide nine for discussion of capital allocation. We have taken a disciplined approach to capital allocation while remaining opportunistic about M&A. We will continue to evaluate selective M&A opportunities that enhance our product offerings in precision machine components and assemblies, electronics and controls, as well as increasing our presence in key markets and industries, such as aerospace, commercial vehicles, a highway, industrial, and the aftermarket. Our approach remains opportunistic and disciplined. Consisting with our capital allocation priorities to invest in our business for long-term profitable growth, we invested $26 million in capital expenditures during the third quarter, with funds expended primarily on new tooling and equipment. Also on the capital allocation front, during the quarter we returned $41 million to our shareholders, including $11 million in quarterly dividends and $30 million in share repurchases. We have $194 million remaining under our current repurchase authorization, and we expect to continue to evaluate the best use of capital on a quarterly basis. Since the spinoff in July of 23, we repurchased approximately 20% of our outstanding shares. Even with the acquisition of SEM, capital investment in our operations, and capital return to shareholders, our balance sheet remains solid with cash and cash equivalents of 349 million, total liquidity of approximately 900 million, and our net leverage ratio remaining at 1.4 times, which is under our target of approximately 1.5 times. This was possible due to our strong adjusted free cash flow of 104 million in the third quarter. As we look to the remainder of the year, we see some marketed tariff risks as CV tariffs are coming into effect on November 1st. Importantly, we will continue to work with our customers on recovery, and similar to the auto tariffs, we expect to substantially recoup the costs from our customers because CV OEMs are also qualifying for the same 3.5% rebate as are the auto OEMs. We have adjusted our 2025 outlook to account for the SEM acquisition and some external factors. On the revenue front, the midpoint of our outlook is up $40 million from our prior guide, driven by approximately $15 million from SEM and the remainder from favorable FX, volumes, and pricing. The midpoint of our adjusted EBITDA guidance is up slightly as it continues to be constrained by tariff-related revenue that carries zero margin. Adjusted free cash flow has been a good story for us, and we're raising the midpoint of our 2025 outlook by 10 million. To wrap up, we've continued to build momentum across our diversified end markets while maintaining discipline, cost, and cash management. Our teams are executing our long-term strategy that is focused on product leadership, stable growth, financial discipline, and total shareholder returns. With that, I'll hand it over to Chris, who will walk us through our Q3 results and discuss our outlook for this year.