Industry Overview - The Zacks Pollution Control industry is experiencing strong demand for air pollution control products due to increasing greenhouse gas emissions and associated health risks [1] - Stringent regulations and emission standards globally are expected to continue driving demand for industry participants [1][5] Major Trends - Rapid urbanization and rising greenhouse gas emissions from the industrial sector are increasing the demand for air quality control systems [4] - Public awareness of health risks related to air pollution is fueling market growth [4] - The expansion of infrastructure projects in developing countries is boosting demand for pollution abatement equipment [4] - Strict emission standards and laws implemented globally are augmenting demand for pollution-control equipment [5] - The adoption of AI and IoT in industrial processes is enabling real-time monitoring of air pollution sources, driving demand for pollution abatement technologies [5] Challenges - The growing preference for renewable energy sources is restraining demand for industrial emission-abatement products [6] - Supportive government policies for renewable energy and the rapid adoption of electric vehicles are negatively impacting the industry's prospects [6] Industry Performance - The Zacks Pollution Control industry has underperformed the broader Industrial Products sector and the S&P 500 index over the past year, declining 7.3% compared to the sector's increase of 9.6% and the S&P 500's increase of 15.5% [9] Valuation - The industry is currently trading at a forward P/E ratio of 20.20X, compared to the S&P 500's 22.85X and the sector's 19.81X [12] Key Companies - **Atmus Filtration**: A leader in industrial filtration with a Zacks Rank 2 (Buy), has seen a 32.3% share price increase over the past year [17][18] - **Donaldson Company**: Engaged in manufacturing filtration systems, holds a Zacks Rank 2, and has gained 1% in the past year [21][22] - **Fuel Tech**: Develops air pollution control technology, with a Zacks Rank 2 and a 163.9% share price increase over the past year [25][26] - **Tetra Tech**: Provides consulting and engineering services, holds a Zacks Rank 3 (Hold), and has seen a 20.1% increase in shares over the past six months despite a 23.5% decline over the past year [29][30]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ___________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission File Number: 001-41710 Atmus Filtration Technologies Inc. (Exact name of registrant a ...

Financial Data and Key Metrics Changes - Sales reached a record $454 million, up 4.8% from $433 million in the same period last year, driven by higher volumes and pricing despite unfavorable foreign exchange impacts [12][18] - Adjusted EBITDA was $95 million, representing a margin of 21%, compared to $93 million and 21.4% in the prior year [12][19] - Adjusted earnings per share increased to $0.75 from $0.71 year-over-year [13][19] - Adjusted free cash flow was $36 million, up from $34 million in the prior year [20] Business Line Data and Key Metrics Changes - The aftermarket segment showed strong growth, supported by expanded product coverage and distribution partnerships, while first fit business faced challenges due to regulatory uncertainties [9][48] - The company achieved a 4% increase in volume, with aftermarket contributing significantly to this growth [44][64] Market Data and Key Metrics Changes - The U.S. market is expected to decline by 15% to 25% in heavy and medium-duty segments due to regulatory uncertainties and tariff policies [15] - In China, the market showed temporary growth, but challenging conditions are expected to persist [16] - Overall company revenue guidance for 2025 was raised to a range of 1% to 4% growth compared to the prior year [16] Company Strategy and Development Direction - The company is focused on a four-pillar growth strategy: growing share in first fit, accelerating aftermarket growth, transforming the supply chain, and expanding into the industrial filtration market [8][11] - The operational separation from Cummins is on track for completion in the third quarter, which is expected to enhance operational flexibility [6][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating uncertainties and maintaining operational performance, with expectations for continued growth despite market challenges [5][16] - The company anticipates pricing to provide approximately 2.2% revenue growth, with tariffs expected to fluctuate [14][27] Other Important Information - The company has repurchased $20 million of stock in the second quarter, totaling $30 million year-to-date, with plans for further repurchases [7] - The effective tax rate for 2025 was reported at 21.9%, slightly up from 21.8% in the previous year [20] Q&A Session Summary Question: Pricing expectations and tariff impacts - Management clarified that pricing expectations were adjusted due to changes in tariffs, particularly related to China, with a current expectation of 0.8% pricing impact from tariffs [24][26] Question: EBITDA margin guidance - Management explained that the expected EBITDA margin for the second half is below 19%, influenced by seasonality and market conditions [33][35] Question: Volume experience in the second quarter - Management noted strong volume performance, with some pre-buy activity due to midyear price increases and tariff uncertainties [44][47] Question: Industrial filtration market entry - Management confirmed ongoing efforts to enter the industrial filtration market through both organic and inorganic strategies, with modest growth expected [58][59] Question: Drivers of outperformance in the quarter - Management attributed the outperformance to share gains, effective pricing strategies, and successful tariff mitigation efforts [64][66]

Financial Highlights - Second quarter sales reached $454 million[9], while adjusted free cash flow amounted to $36 million[9] - The adjusted EBITDA margin stood at 210%[9], and the adjusted earnings per share was $075[9] - GAAP net income for the quarter was $60 million[10], with diluted earnings per share at $072[10], and cash provided by operating activities was $44 million[10] Q2 2025 Performance vs Q2 2024 - Sales increased from $433 million to $454 million[27] - Gross margin decreased from 305% to 289%[27] - Selling, General & Research (SAR) expenses decreased from $60 million to $57 million[27], representing a decrease from 138% to 125% of sales[27] - Net income increased from $56 million to $60 million[27], with diluted earnings per share increasing from $067 to $072[27], and adjusted earnings per share increasing from $071 to $075[27] Balance Sheet and Capital Allocation - The company has a strong balance sheet with $148 million in trailing twelve months (TTM) adjusted free cash flow[30] - Liquidity stands at $591 million[30], and the net debt to adjusted EBITDA ratio is 12x[30] - $20 million of share repurchases were made in Q2 2025[30], bringing the year-to-date total to $30 million[30], with $100 million remaining under the $150 million program[30] 2025 Outlook - The company anticipates sales between $1685 billion and $1735 billion[32] - The adjusted EBITDA margin is expected to be between 1925% and 200%[32] - Adjusted earnings per share are projected to be between $240 and $260[32]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) This section provides an overview of Atmus Filtration Technologies' strong Q2 2025 financial performance, updated 2025 outlook, and key strategic initiatives [Second Quarter Highlights](index=1&type=section&id=Second%20Quarter%20Highlights) Atmus Filtration Technologies achieved record sales and strong financial results in Q2 2025, with net sales of $454 million, GAAP net income of $60 million, diluted EPS of $0.72, adjusted EPS of $0.75, and adjusted EBITDA of $95 million Second Quarter Highlights Summary | Metric | Q2 2025 (Million USD) | | :----------------------- | :-------------------- | | Net Sales | $454 | | GAAP Net Income | $60 | | Diluted EPS | $0.72 | | Adjusted EPS | $0.75 | | Adjusted EBITDA | $95 | | Adjusted EBITDA Margin | 21.0% | | Cash Flow from Operations| $44 | | Adjusted Free Cash Flow | $36 | [2025 Outlook](index=1&type=section&id=2025%20Outlook) The company raised its full-year 2025 guidance, expecting revenue between $1.685 billion and $1.735 billion, adjusted EBITDA margin of 19.25% to 20.0%, and adjusted EPS of $2.40 to $2.60 2025 Full-Year Guidance | Metric | 2025 Full-Year Guidance | | :----------------- | :---------------------- | | Revenue Range | $1,685 - $1,735 Million | | Adjusted EBITDA Margin | 19.25% - 20.0% | | Adjusted EPS | $2.40 - $2.60 | - The company repurchased **$20 million** of common stock during the quarter, with **$100 million** remaining under its share repurchase authorization[3](index=3&type=chunk) - The company paid a quarterly cash dividend of **$0.05 per share**[3](index=3&type=chunk) [CEO Statement](index=1&type=section&id=CEO%20Statement) CEO Steph Disher noted Atmus achieved record sales and strong financial results by providing industry-leading filtration solutions, praising the team's adaptability and value creation - Atmus team achieved **record sales** and **strong financial results**[4](index=4&type=chunk) - The company serves customers by providing **industry-leading filtration solutions**[4](index=4&type=chunk) - The CEO commended the team's ability to navigate uncertainty, adapt to change, and build long-term shareholder value[4](index=4&type=chunk) [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) This section details Atmus Filtration Technologies' financial performance for Q2 2025, including net sales, gross margin, adjusted EBITDA, net income, EPS, and cash flow [Net Sales](index=1&type=section&id=Net%20Sales) Q2 2025 net sales increased by 4.8% to $454 million from $433 million in Q2 2024, driven by higher volumes and pricing, partially offset by unfavorable foreign currency Net Sales Performance | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Year-over-Year Change | | :------- | :-------------------- | :-------------------- | :-------------------- | | Net Sales | $454 | $433 | +4.8% | - Sales growth was primarily driven by **increased volumes** and **favorable pricing**[4](index=4&type=chunk) - Unfavorable foreign currency impacts partially offset the sales growth[4](index=4&type=chunk) [Gross Margin](index=1&type=section&id=Gross%20Margin) Q2 2025 gross margin decreased to $131 million (28.9% of net sales) from $132 million (30.5%) in Q2 2024, primarily due to unfavorable logistics and separation costs Gross Margin Performance | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Year-over-Year Change | | :------- | :-------------------- | :-------------------- | :-------------------- | | Gross Margin | $131 | $132 | -0.8% | | Gross Margin % | 28.9% | 30.5% | -1.6 pp | - Gross margin decline was primarily due to **unfavorable logistics costs**, **increased one-time separation costs** from Cummins, **unfavorable manufacturing costs**, and **unfavorable foreign currency impacts**[5](index=5&type=chunk)[6](index=6&type=chunk) - Favorable pricing and volumes partially offset the gross margin decline[6](index=6&type=chunk) [Adjusted EBITDA](index=2&type=section&id=Adjusted%20EBITDA) Q2 2025 adjusted EBITDA increased to $95 million from $93 million in Q2 2024, with an adjusted EBITDA margin of 21.0%, slightly down from 21.4% Adjusted EBITDA Performance | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Year-over-Year Change | | :----------- | :-------------------- | :-------------------- | :-------------------- | | Adjusted EBITDA | $95 | $93 | +2.2% | | Adjusted EBITDA% | 21.0% | 21.4% | -0.4 pp | - Q2 2025 adjusted EBITDA excluded **$3 million** in one-time separation costs related to the separation from Cummins Inc[7](index=7&type=chunk) [Net Income & EPS](index=2&type=section&id=Net%20Income%20%26%20EPS) Q2 2025 net income was $60 million, with diluted EPS of $0.72 and adjusted EPS of $0.75, both up from Q2 2024, with an effective tax rate of 21.9% Net Income and EPS Performance | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Year-over-Year Change | | :----------- | :-------------------- | :-------------------- | :-------------------- | | Net Income | $60 | $56 | +7.1% | | Diluted EPS | $0.72 | $0.67 | +7.5% | | Adjusted EPS | $0.75 | $0.71 | +5.6% | - The effective tax rate for Q2 2025 was **21.9%**[9](index=9&type=chunk) [Cash Flow](index=2&type=section&id=Cash%20Flow) Q2 2025 cash flow from operating activities significantly increased to $44 million, and adjusted free cash flow rose to $36 million, excluding separation-related capital expenditures Cash Flow Performance | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Year-over-Year Change | | :--------------- | :-------------------- | :-------------------- | :-------------------- | | Cash Flow from Operations | $44 | $23 | +91.3% | | Adjusted Free Cash Flow | $36 | $34 | +5.9% | - Q2 2025 adjusted free cash flow excluded **$3 million** in one-time capital expenditures related to the separation from Cummins Inc[10](index=10&type=chunk) - Q2 2024 adjusted free cash flow excluded **$18 million** in other one-time separation-related costs, primarily working capital inefficiencies from transitioning from Cummins' intercompany settlement terms to independent practices[10](index=10&type=chunk) [Corporate Information](index=2&type=section&id=Corporate%20Information) This section provides essential corporate details, including investor communication channels, company overview, forward-looking statements, non-GAAP measures, and contact information [Conference Call and Webcast](index=2&type=section&id=Conference%20Call%20and%20Webcast) Atmus will host a conference call and webcast on August 8, 2025, at 10:00 AM CT to discuss Q2 2025 results, accessible via the investor relations website - The conference call and webcast will be held on **Friday, August 8, 2025, at 10:00 AM CT**[11](index=11&type=chunk) - The live webcast and replay can be accessed through the Atmus Investor Relations website at **https://investors.atmus.com**[11](index=11&type=chunk) [About Atmus Filtration Technologies Inc.](index=2&type=section&id=About%20Atmus%20Filtration%20Technologies%20Inc.) Atmus Filtration Technologies Inc. is a global leader in filtration and media solutions with over 65 years of innovation, serving diverse vehicle and equipment markets worldwide - Atmus Filtration Technologies Inc. is a **global leader in filtration and media solutions**[12](index=12&type=chunk) - The company has **over 65 years of innovation** and operates across six continents[12](index=12&type=chunk) - It serves markets including trucks, buses, agriculture, construction, mining, marine, and power generation, offering comprehensive aftermarket support[12](index=12&type=chunk) [Forward-looking disclosure statement](index=2&type=section&id=Forward-looking%20disclosure%20statement) This press release contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from expectations, with no obligation to update - This press release contains forward-looking statements, which are not guarantees of future performance[13](index=13&type=chunk) - Forward-looking statements involve risks, uncertainties, and assumptions that are difficult to predict, and actual results may differ materially from expectations[13](index=13&type=chunk)[14](index=14&type=chunk) - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[14](index=14&type=chunk) [Non-GAAP measures](index=3&type=section&id=Non-GAAP%20measures) The company uses non-GAAP financial measures like Adjusted EBITDA and Adjusted EPS to supplement GAAP statements, aiding investors in performance comparison and trend identification - The company uses non-GAAP financial information (EBITDA, Adjusted EBITDA, Adjusted EPS, Free Cash Flow, and Adjusted Free Cash Flow) to supplement GAAP financial statements[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - Non-GAAP metrics are intended to help investors compare historical performance, identify trends, and assess operating performance and debt service capacity[15](index=15&type=chunk)[17](index=17&type=chunk) - The company emphasizes that non-GAAP metrics are not substitutes for GAAP and may have limitations, such as not reflecting cash expenditures or working capital needs[17](index=17&type=chunk)[18](index=18&type=chunk) [Media Contacts](index=4&type=section&id=Media%20Contacts) This section provides contact information for investor relations and media inquiries - Investor Relations contact: Todd Chirillo, email: investor.relations@atmus.com[19](index=19&type=chunk) - Media Relations contact: Keri Moenssen, email: media.inquiries@atmus.com[19](index=19&type=chunk) [Financial Statements (Unaudited)](index=5&type=section&id=Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements for Atmus Filtration Technologies Inc., including statements of net income, balance sheets, and cash flows [Condensed Consolidated Statements of Net Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Net%20Income) This statement presents the unaudited condensed consolidated net income for Atmus Filtration Technologies Inc. for the three months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Net Income | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | | :---------------------------------- | :-------------------- | :-------------------- | | Net Sales | 453.5 | 432.6 | | Cost of Sales | 322.5 | 300.7 | | Gross Margin | 131.0 | 131.9 | | Selling, General and Administrative Expenses | 46.1 | 49.1 | | Research and Development and Engineering Expenses | 10.7 | 10.4 | | Equity, Royalty and Interest Income | 7.5 | 8.2 | | Other Operating (Income) Expense, Net | — | 0.8 | | Operating Income | 81.7 | 79.8 | | Interest Expense | 8.5 | 10.5 | | Other Income, Net | 3.5 | 2.6 | | Income Before Taxes | 76.7 | 71.9 | | Income Tax Expense | 16.8 | 15.7 | | Net Income | 59.9 | 56.2 | | Basic Earnings Per Share | 0.73 | 0.67 | | Diluted Earnings Per Share | 0.72 | 0.67 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the unaudited condensed consolidated balance sheets for Atmus Filtration Technologies Inc. as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (Million USD) | December 31, 2024 (Million USD) | | :------------------------------------ | :-------------------------- | :-------------------------- | | **Assets** | | | | Cash and Cash Equivalents | 190.8 | 184.3 | | Accounts and Notes Receivable, Net | 332.4 | 254.2 | | Inventories | 285.0 | 266.6 | | Prepaid Expenses and Other Current Assets | 47.8 | 49.9 | | **Total Current Assets** | **856.0** | **755.0** | | Property, Plant and Equipment, Net | 198.9 | 186.2 | | Equity Method Investments and Advances | 93.2 | 84.9 | | Goodwill | 84.7 | 84.7 | | Other Assets | 81.2 | 79.5 | | **Total Assets** | **1,314.0** | **1,190.3** | | **Liabilities** | | | | Accounts Payable | 240.7 | 193.1 | | Accrued Compensation, Benefits and Retirement Costs | 29.5 | 37.2 | | Current Portion of Accrued Product Warranty | 4.9 | 4.9 | | Current Portion of Long-Term Debt | 30.0 | 22.5 | | Other Accrued Expenses | 93.8 | 87.2 | | **Total Current Liabilities** | **398.9** | **344.9** | | Long-Term Debt | 555.0 | 570.0 | | Accrued Product Warranty | 7.3 | 7.3 | | Other Liabilities | 36.5 | 40.7 | | **Total Liabilities** | **997.7** | **962.9** | | **Equity** | | | | Common Stock | — | — | | Additional Paid-in Capital | 67.2 | 61.9 | | Retained Earnings | 360.8 | 264.5 | | Accumulated Other Comprehensive Loss | (61.3) | (79.0) | | Treasury Stock | (50.4) | (20.0) | | **Total Equity** | **316.3** | **227.4** | | **Total Liabilities and Equity** | **1,314.0** | **1,190.3** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement presents the unaudited condensed consolidated cash flows for Atmus Filtration Technologies Inc. for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows | Metric | H1 2025 (Million USD) | H1 2024 (Million USD) | | :------------------------------------ | :-------------------- | :-------------------- | | **Cash Flows from Operating Activities** | | | | Net Income | 104.6 | 101.7 | | Depreciation and Amortization | 14.6 | 11.7 | | Deferred Income Taxes | — | (4.0) | | Equity, Royalty and Interest Income (less dividends) | (7.9) | (5.8) | | Share-Based Compensation Expense | 5.3 | 6.0 | | Foreign Currency Revaluation and Transaction Risk | (3.8) | (2.3) | | Changes in Trade and Other Receivables | (67.8) | (33.8) | | Changes in Inventories | (10.1) | (32.2) | | Changes in Prepaid Expenses and Other Current Assets | 2.7 | (12.0) | | Changes in Accounts Payable | 38.0 | 6.2 | | Changes in Other Accrued Expenses | (4.1) | (19.9) | | Changes in Other Liabilities | (5.8) | 7.7 | | Other, Net | 7.4 | (8.6) | | **Net Cash Provided by Operating Activities** | **73.1** | **14.7** | | **Cash Flows from Investing Activities** | | | | Capital Expenditures | (24.4) | (22.2) | | **Net Cash Used in Investing Activities** | **(24.4)** | **(22.2)** | | **Cash Flows from Financing Activities** | | | | Repayment of Long-Term Debt | (7.5) | — | | Repurchase of Common Stock | (30.1) | — | | Dividends Paid | (8.3) | — | | **Net Cash Used in Financing Activities** | **(45.9)** | **—** | | Effect of Exchange Rate Changes on Cash and Cash Equivalents | 3.7 | — | | Net Increase (Decrease) in Cash and Cash Equivalents | 6.5 | (7.5) | | Cash and Cash Equivalents at Beginning of Period | 184.3 | 168.0 | | **Cash and Cash Equivalents at End of Period** | **190.8** | **160.5** | [Earnings Per Share - Reconciliation](index=8&type=section&id=Earnings%20Per%20Share%20-%20Reconciliation) This table provides the reconciliation of net income to basic and diluted earnings per share for Atmus Filtration Technologies Inc. for the three months ended June 30, 2025 and 2024 Earnings Per Share Reconciliation | Metric | Q2 2025 | Q2 2024 | | :------------------------------------ | :------ | :------ | | Net Income | $59.9 | $56.2 | | Weighted Average Shares Outstanding for Basic EPS | 82.5 | 83.4 | | Shares Added for Assumed Conversion of Long-Term Incentive Plan Shares | 0.5 | 0.3 | | Weighted Average Shares Outstanding for Diluted EPS | 83.0 | 83.7 | | Basic Earnings Per Share | $0.73 | $0.67 | | Diluted Earnings Per Share | $0.72 | $0.67 | [Net Income to EBITDA and Adjusted EBITDA - Reconciliation](index=8&type=section&id=Net%20Income%20to%20EBITDA%20and%20Adjusted%20EBITDA%20-%20Reconciliation) This table reconciles net income to EBITDA and Adjusted EBITDA for Atmus Filtration Technologies Inc. for the three months ended June 30, 2025 and 2024 Net Income to EBITDA and Adjusted EBITDA Reconciliation | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | | :-------------------------- | :-------------------- | :-------------------- | | Net Income | $59.9 | $56.2 | | Add: Interest Expense | 8.5 | 10.5 | | Add: Income Tax Expense | 16.8 | 15.7 | | Add: Depreciation and Amortization | 7.4 | 6.3 | | **EBITDA (Non-GAAP)** | **$92.6** | **$88.7** | | Add: One-Time Separation Costs | $2.5 | $3.8 | | **Adjusted EBITDA (Non-GAAP)** | **$95.1** | **$92.5** | | Net Sales | $453.5 | $432.6 | | Net Income Margin | 13.2 % | 13.0 % | | EBITDA Margin (Non-GAAP) | 20.4 % | 20.5 % | | Adjusted EBITDA Margin (Non-GAAP) | 21.0 % | 21.4 % | - One-time separation costs primarily include expenses related to information technology, warehousing, manufacturing, and human resources separation[30](index=30&type=chunk) [Diluted Earnings Per Share to Adjusted Earnings Per Share - Reconciliation](index=9&type=section&id=Diluted%20Earnings%20Per%20Share%20to%20Adjusted%20Earnings%20Per%20Share%20-%20Reconciliation) This table reconciles diluted earnings per share to adjusted earnings per share for Atmus Filtration Technologies Inc. for the three months ended June 30, 2025 and 2024 Diluted EPS to Adjusted EPS Reconciliation | Metric | Q2 2025 | Q2 2024 | | :-------------------------- | :------ | :------ | | Diluted Earnings Per Share | $0.72 | $0.67 | | Add: One-Time Separation Costs | $0.03 | $0.05 | | Less: Tax Impact of One-Time Separation Costs | $— | $0.01 | | **Adjusted Earnings Per Share** | **$0.75** | **$0.71** | - The tax impact of one-time separation costs was **$0.5 million** in Q2 2025 and **$0.8 million** in Q2 2024[33](index=33&type=chunk) [Cash Flows from Operating Activities to Free Cash Flow and Adjusted Free Cash Flow - Reconciliation](index=9&type=section&id=Cash%20Flows%20from%20Operating%20Activities%20to%20Free%20Cash%20Flow%20and%20Adjusted%20Free%20Cash%20Flow%20-%20Reconciliation) This table reconciles cash flows from operating activities to free cash flow and adjusted free cash flow for Atmus Filtration Technologies Inc. for the three months ended June 30, 2025 and 2024 Cash Flows from Operating Activities to Free Cash Flow and Adjusted Free Cash Flow Reconciliation | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | | :------------------------------------ | :-------------------- | :-------------------- | | Cash Flows from Operating Activities | $44.4 | $22.9 | | Less: Capital Expenditures | $12.0 | $11.6 | | **Free Cash Flow (Non-GAAP)** | **$32.4** | **$11.3** | | Add: One-Time Separation Capital Expenditures | $3.1 | $4.5 | | Add: Other One-Time Separation-Related Costs | $— | $18.3 | | **Adjusted Free Cash Flow (Non-GAAP)** | **$35.5** | **$34.1** | - Other one-time separation-related costs primarily include working capital inefficiencies from transitioning from Cummins' intercompany settlement terms to independent practices[35](index=35&type=chunk)

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Atmus Filtration Technologies (ATMU) despite higher revenues, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is expected to show earnings of $0.66 per share, reflecting a -7% change year-over-year, while revenues are projected at $440.31 million, an increase of 1.8% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has been revised 0.78% higher in the last 30 days, indicating a collective reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive Earnings ESP of +9.64% indicates a likelihood of beating the consensus EPS estimate, supported by a Zacks Rank of 2 [11]. Historical Performance - Atmus Filtration has consistently beaten consensus EPS estimates, achieving this in the last four quarters, including a +6.78% surprise in the most recent quarter [12][13]. Market Reaction Factors - Stock price movement may not solely depend on earnings results; other factors can influence investor sentiment, leading to potential gains or losses regardless of earnings performance [14][16].

Group 1 - Atmus Filtration Technologies (ATMU) has reached a key level of support and crossed above the 200-day moving average, indicating a long-term bullish trend [1] - Shares of ATMU have increased by 7.6% over the past four weeks, and the company holds a Zacks Rank 2 (Buy), suggesting potential for continued growth [2] - Positive earnings estimate revisions for ATMU include one upward revision for the current fiscal year, with no downward revisions, indicating a strengthening bullish case [3]

Summary of Atmus Filtration Technologies Inc (ATMU) 2025 Conference Call Company Overview - **Company**: Atmus Filtration Technologies Inc (ATMU) - **Event**: 2025 Conference Call held on May 13, 2025 Key Industry Insights - **Market Resilience**: Atmus has demonstrated resilience in earnings compared to OEMs and other component providers, maintaining guidance despite a 510% cut to U. Machinery stocks EBITDA estimates [3][4] - **Aftermarket Revenue**: Over 80% of Atmus's revenues are derived from the aftermarket, which provides stability during cyclical market downturns [3][4] - **First Fit Revenue**: First fit revenue is currently down in double digits, with guidance indicating a 12% decline year-on-year at the midpoint [6][11] Financial Performance - **Revenue Mix**: First fit accounted for 14% of revenue in 2024, down from previous years, with expectations of 15% to 20% on an annual basis [5][9] - **Flat Revenue Guidance**: The low end of 2025 guidance calls for flat revenue, with no recession anticipated [10] Geographic Market Trends - **North America**: Medium and heavy-duty markets are expected to decline, with ongoing challenges in Latin America and Europe [20][21][22] - **Asia Pacific**: Continued softness in Asia Pacific markets, with India seen as a potential leader out of the downturn [23][24] Growth Strategies - **Latin America Success**: Atmus has achieved a 14% CAGR in Latin America since 2021 by expanding distribution channels and leveraging brand strength [25][27] - **European Market Potential**: Europe is viewed as an underpenetrated market, with opportunities in off-highway sectors like construction and agriculture [28][30] Pricing and Cost Management - **Pricing Strategy**: Atmus plans to implement a 1.7% annual price increase in 2025, responding to inflationary pressures and tariffs [36] - **Tariff Mitigation**: The company is utilizing exemptions under USMCA to offset tariff impacts and is exploring shipping lane reconfigurations [37][39] Regulatory Environment - **Emissions Regulations**: Ongoing reevaluation of emissions regulations may influence market dynamics, with potential impacts on first fit volumes [78][81] Market Sentiment and Outlook - **Uncertainty in the Market**: The overarching sentiment is one of uncertainty, particularly regarding trade policies and market cyclicality [68][69] - **Potential for Recovery**: There is cautious optimism that clarity in trade policies could lead to a resurgence in economic activity [69][70] Conclusion - Atmus Filtration Technologies Inc is navigating a challenging market landscape with a focus on aftermarket resilience, strategic growth in underpenetrated regions, and proactive pricing strategies to mitigate inflation and tariff impacts. The company remains vigilant in monitoring regulatory changes and market conditions to adapt its strategies accordingly.

Financial Performance - Net sales for the three months ended March 31, 2025, were $416.5 million, a decrease of $10.1 million or 2.4% compared to $426.6 million in the same period of 2024, primarily due to unfavorable currency impacts of $11.4 million and lower volumes of approximately $3.5 million [104]. - Gross margin decreased by $1.3 million to $110.5 million, with a gross margin percentage of 26.5%, an increase of 0.3 percentage points from 26.2% in the prior year [105][103]. - Operating income for the three months ended March 31, 2025, was $64.9 million, down $3.7 million or 5.4% from $68.6 million in the same period of 2024 [102]. - For the three months ended March 31, 2025, net income was $44.7 million, compared to $45.5 million for the same period in 2024 [131]. - EBITDA for Q1 2025 was $72.4 million, with an EBITDA margin of 17.4%, consistent with the 17.4% margin in Q1 2024 [131]. - Adjusted EBITDA for Q1 2025 increased to $81.7 million, with an Adjusted EBITDA margin of 19.6%, up from 18.8% in Q1 2024 [131]. - Diluted earnings per share for Q1 2025 remained at $0.54, while Adjusted earnings per share rose to $0.63 from $0.60 in Q1 2024 [132]. - Free cash flow for Q1 2025 was $16.3 million, a significant improvement from a negative $18.8 million in Q1 2024 [134]. - Adjusted free cash flow for Q1 2025 was $19.8 million, compared to a negative $12.7 million in Q1 2024 [134]. - Cash provided by operating activities for Q1 2025 was $28.7 million, a recovery from a cash outflow of $8.2 million in Q1 2024 [134]. Expenses and Costs - The company incurred approximately $9.3 million in one-time expenses during the three months ended March 31, 2025, with expectations of incurring an additional $10 million to $15 million in 2025 related to becoming a standalone public company [101]. - Selling, general and administrative expenses increased due to higher people-related and consulting expenses during the first three months of 2025 [99]. - Research, development, and engineering expenses were $9.1 million, a decrease of $1.0 million or 9.9% compared to $10.1 million in the prior year, representing 2.2% of net sales [107][103]. - Interest expense decreased to $8.4 million, down $2.1 million or 20.0% from $10.5 million in the same period of 2024, due to lower outstanding borrowings [110]. - The company incurred one-time separation costs of $9.3 million in Q1 2025, up from $6.0 million in Q1 2024 [131]. Market Conditions - Approximately 14% of net sales in 2024 were generated through first-fit sales to OEMs, while 86% were from the aftermarket, indicating a strong recurring revenue base [85]. - Market demand for aftermarket and first-fit products softened in early 2025 due to economic uncertainties related to recent U.S. government tariff announcements [96]. - The U.S. announced a new universal baseline tariff of 10% and a 145% tariff on products of Chinese origin, leading to significant volatility and uncertainty in global demand [86]. Currency and Economic Impact - The appreciation of the U.S. dollar against foreign currencies negatively impacted the company's consolidated results of operations in the first three months of 2025 [100]. - Direct material cost pressures have generally stabilized, although rising costs were observed in the latter portions of the period [98]. - Overall supply chain conditions have stabilized with minimal disruptions and backorders largely recovered [97]. - The company continues to monitor and evaluate factors affecting its business, including economic conditions, commodity prices, and supply chain challenges [95]. Capital Expenditures and Debt - The company expects to incur capital expenditures of approximately $5 million to $10 million in 2025 in connection with the Separation from Cummins [101]. - Capital expenditures for the three months ended March 31, 2025, were $12.4 million, corresponding to approximately 3.0% of net sales, compared to $10.6 million or 2.5% of net sales in the prior year [119]. - Total debt was $588.8 million as of March 31, 2025, down from $600 million at December 31, 2024 [124]. Taxation - The effective tax rate for the three months ended March 31, 2025, was 21.3%, a decrease of 0.7 percentage points from 22.0% in the prior year [111]. Interest Rate Risk - The company is exposed to interest rate risk related to a $600 million term loan facility and a $400 million revolving credit facility, with a potential $0.7 million annual impact from a 0.125% change in SOFR [139].

Financial Data and Key Metrics Changes - Sales for Q1 2025 were $417 million, a decrease of 2.4% compared to $427 million in the same period last year, primarily driven by unfavorable foreign exchange and lower volumes [16][26] - Adjusted EBITDA was $82 million, or 19.6%, compared to $80 million, or 18.8% in the prior period, excluding $9 million of one-time standalone costs [17][28] - Adjusted earnings per share was $0.63 in Q1 2025, up from $0.60 last year [29] - Adjusted free cash flow was $20 million, compared to an outflow of $13 million in the prior year [29] Business Line Data and Key Metrics Changes - The company continues to focus on aftermarket sales, which account for over 80% of revenue, demonstrating resilience despite market challenges [11] - The first fit market is expected to decline, with heavy-duty market projections down 5% to 15% and medium-duty down 10% to 20% [23][24] Market Data and Key Metrics Changes - The overall impact on end markets remains unclear due to economic uncertainty and tariff implications [18] - The company expects total revenue for 2025 to remain flat to up 4% compared to the prior year, with global sales projected between $1.67 billion and $1.735 billion [24][25] Company Strategy and Development Direction - The company is executing a four-pillar growth strategy focusing on first fit growth, aftermarket expansion, supply chain transformation, and industrial filtration market expansion [11][12][15] - The company is actively pursuing inorganic growth opportunities in the industrial filtration sector, although M&A activity is currently soft due to economic uncertainty [15][38] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the evolving tariff environment and adapting quickly, although visibility remains limited [19][20] - The company anticipates pricing actions to offset input costs and expects a revenue increase of approximately 3.2% year-over-year from pricing adjustments [21][22] Other Important Information - The company has repurchased $10 million of stock in Q1 2025, totaling $30 million since the program's announcement [6] - The effective tax rate for Q1 2025 was 21.3%, down from 22% last year due to a change in the mix of earnings among tax jurisdictions [30] Q&A Session Summary Question: Potential manufacturing transitions due to tariffs - Management indicated that while they are monitoring the tariff situation closely, no long-term manufacturing changes are currently planned [34][35] Question: M&A pipeline activity in a challenging environment - Management acknowledged that while the market is fragmented, the degree of difficulty in finding targets has increased due to uncertainty, but they remain focused on building a strong M&A pipeline [38] Question: Revenue outlook amidst currency and market changes - Management confirmed that the revenue outlook remains near the midpoint of their guidance, despite softening market conditions [42][44] Question: Pricing expectations for the year - Management expects pricing to ramp up throughout the year, with a gradual increase leading to the anticipated 3.2% for the full year [49][50] Question: Impact of potential EPA regulation rollbacks - Management is closely monitoring the EPA's review of regulations and believes they are well-positioned to support customers regardless of regulatory changes [73][75] Question: Shipping route reconfigurations to mitigate tariffs - Management confirmed that they have already enacted some shipping route adjustments to mitigate tariff impacts and will continue to explore further options [81][82]