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    ATMU
    Earnings call· Jun 2026(Q2 FY26)

    Atmus Filtration Technologies Q2 FY26 earnings call ATMU

    Aug 7, 2026 Source

    Executive summary

    Atmus Filtration Technologies Q2 FY26 — Record Sales and Strong Cash Flow Amidst Market Headwinds

    Atmus Filtration Technologies reported record Q2 FY26 sales and strong adjusted free cash flow, driven by the Cook filter acquisition and a cyclical recovery in first-fit markets. The company is nearing completion of the Cook filter integration and executing its 4-pillar growth strategy. However, flat aftermarket conditions and ongoing impacts from the Middle East conflict on raw material costs and JV income present headwinds.

    Highlights

    4

    • Achieved record sales of $528 million, an increase of 16.4% year-over-year.

    • Delivered strong adjusted EPS of $0.82, up from $0.75 in the prior year.

    • Generated robust adjusted free cash flow of $67 million, significantly up from $36 million year-over-year.

    • Successfully completed over 95% of the Cook filter acquisition integration activities.

    Concerns

    3

    • Aftermarket market conditions remained relatively flat year-over-year, with subdued performance in Europe, Middle East, and Asia Pacific.

    • Middle East conflict continued to impact India joint venture income and contributed to higher raw material costs.

    • Industrial Solutions segment experienced a temporary sequential decline in adjusted EBITDA margin to 18.9% due to one-off operational inefficiencies.

    Guidance & targets

    13
    CategoryTargetConfidence
    Share repurchases
    $20 million to $40 million
    medium materiality
    High
    Power Solutions volume growth
    approximately flat to 2%
    medium materiality
    Medium
    Power Solutions pricing contribution
    approximately 1.5%
    medium materiality
    Medium
    Power Solutions foreign exchange contribution
    approximately 2%
    medium materiality
    Medium
    Power Solutions revenue
    $1.82 billion to $1.865 billion
    high materiality
    High
    Industrial Solutions revenue
    $155 million to $165 million
    medium materiality
    High
    Total company revenue
    $1.975 billion to $2.03 billion
    high materiality
    High
    Full year adjusted EBITDA margin
    19.75% to 20.25%
    high materiality
    High
    Adjusted EPS
    $2.85 to $3
    high materiality
    High
    Cook filter integration costs
    $3 million to $6 million
    low materiality
    High
    Intangible asset amortization (Cook filter)
    $11 million to $13 million
    low materiality
    High
    H2 pricing realization
    just over 0.5%
    medium materiality
    Medium
    Industrial Solutions EBITDA margin
    ~20%
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Power Solutions
    Sales increased primarily due to higher pricing, higher volumes, and favorable foreign exchange. Aftermarket conditions were flat globally, with stronger sentiment in the U.S. and Mexico offset by subdued conditions in Europe, Middle East, and Asia Pacific. First-fit markets saw a cyclical recovery starting late in the quarter.
    Pricing contribution: 3%Volume contribution: 2%FX contribution: 2%Aftermarket revenue: 85% of segment revenueAftermarket revenue in US: 50% of segment aftermarket revenueAftermarket conditions: flatShare gains: 1% to 2%
    		$486 million7%—$101 million or 20.8%
    Industrial Solutions
    Sales resulted from the acquisition of Cook filter. Segment EBITDA margin saw a sequential step down due to one-off operational inefficiencies and redundant expenses during the TSA transition, which are expected to be temporary. The full-year guide for the business remains around 20%.
    		$42 million——$8 million or 18.9%

    Operational metrics

    17
    Adjusted EBITDA
    $109 million
    Q2 FY26

    Compared to $95 million or 21% in Q2 FY25.

    Adjusted EPS
    $0.82
    Q2 FY26

    Compared to $0.75 in Q2 FY25.

    Gross margin
    $154 million
    Q2 FY26

    Compared to $131 million or 28.9% in Q2 FY25. Increase due to favorable pricing, incremental margin from Cook filter acquisition, favorable FX, higher volumes, and cessation of one-time separation costs, partially offset by higher materials and manufacturing costs.

    Selling, administrative and research expenses
    $62 million
    Q2 FY26

    Compared to $57 million in Q2 FY25. Increase primarily due to people-related expenses and information technology consulting.

    Joint venture income
    $8 millionflat YoY
    Q2 FY26

    Strong performance in China offset weaker markets in India due to Middle East conflict.

    Other income expense
    unfavorable $1 million
    Q2 FY26

    Compared to favorable $4 million in Q2 FY25. Primarily due to foreign exchange losses and a non-operating gain that did not repeat.

    Capital expenditures
    $13 million
    Q2 FY26

    Investment for continued growth.

    Share repurchases
    $13 million
    Q2 FY26

    Part of capital returned to shareholders.

    Dividends
    $5 million
    Q2 FY26

    Part of capital returned to shareholders.

    Total cash returned to shareholders
    $18 million
    Q2 FY26

    Consisting of share repurchases and dividends.

    Net debt to adjusted EBITDA ratio
    1.9x
    TTM June 30

    Estimated for the trailing 12 months ended June 30.

    Cook filter integration progress
    95%
    current

    Remaining integration activities expected to be completed during Q3.

    Lean the Atmus Way program
    —
    current

    Lean-based production system launched, with the Mexico site achieving first certification. Aims to improve productivity and support sustainable margin expansion.

    Power Solutions pricing contribution
    3%
    Q2 FY26

    Contribution to Power Solutions sales increase.

    Power Solutions volume contribution
    2%
    Q2 FY26

    Contribution to Power Solutions sales increase.

    Power Solutions FX contribution
    2%
    Q2 FY26

    Contribution to Power Solutions sales increase.

    Tariff refund received
    immaterial amount
    Q2 FY26

    As of the end of Q2 FY26, company has applied for all entitled refunds and will evaluate treatment upon receipt.

    Industry KPIs

    5
    MetricValueDetails
    Tariff cost impactimmaterial amountUSD
    Parts aftermarket businessflat
    Data center prime power demand—
    Incremental margin operating leverage—
    Industry production market size forecasts—

    Deals & partnerships

    1
    Cook filterAcquisition of an Industrial Filtration company

    First Industrial Filtration acquisition, closed earlier this year. Integration is 95% complete, with remaining activities expected to be completed during the third quarter. Focus is on growth initiatives in Industrial Solutions.

    Risks & headwinds

    4
    Middle East conflictOngoing, expected to persist into H2 FY26

    Underperformance in Middle East business expectations; challenges in India JV income; elevation in raw material costs (chemicals, plastics).

    Mitigation: Mitigating impact on costs and ensuring product delivery to customers.

    Moderating price realization environmentH2 FY26

    Price realization expected to moderate to just over 0.5% in H2 FY26, compared to just over 2% in H1.

    Mitigation: Taking a balanced approach to pricing and share gains.

    Higher materials and manufacturing costsQ2 FY26, expected to continue into H2 FY26

    Higher materials and manufacturing costs partially offset gross margin increase; some elevation in commodity cost base.

    Mitigation: Doing best to mitigate the impact of these costs.

    One-off operational inefficiencies in Industrial SolutionsQ2 FY26 (temporary)

    Sequential step down in Industrial Solutions EBITDA margin to 18.9% in Q2 FY26.

    Mitigation: Expected to be one-time and not repeating in nature, related to volume shifts and TSA transition redundant expenses.

    What to watch in Q3 FY26

    5

    Aftermarket market conditions

    next quarter
    Currentstill flattish conditions
    Targetuptick in outcomes and market conditions

    Why it matters

    Aftermarket constitutes 85% of Power Solutions revenue, and an inflection point would signal broader market recovery.

    What we saw in aftermarket, I would say, is still flattish conditions. ... we are not yet seeing that translate in at least the visibility we have at this stage, and we don't have a lot of forward visibility in aftermarket orders, but in the visibility we have at this stage, we're not seeing that translate yet into an uptick in outcomes and market conditions.

    Q&A highlights

    7

    How did aftermarket and first-fit revenues perform in Q2, and what was the contribution from share gains?

    Aftermarket conditions were flat globally, with stronger sentiment in the US/Mexico offset by subdued performance elsewhere. First-fit saw a cyclical recovery starting late Q2, ahead of vehicle OEMs. Share gains contributed 1-2% to volume growth.

    “What we saw in aftermarket, I would say, is still flattish conditions. ... We continue to deliver strong gains with our customers, and I continue to see us within the range of 1% to 2% within -- for our share gains outlook.”

    asked by Quinn Fredrickson · answered by Stephanie Disher

    2 min read6 chapters

    Detailed Narrative

    01

    Record Q2 Performance

    Atmus Filtration Technologies achieved record sales of $528 million in Q2 FY26, a 16.4% increase year-over-year, primarily driven by the Cook filter acquisition and strong performance in Power Solutions. The company also reported robust adjusted EBITDA of $109 million (20.7% margin), adjusted EPS of $0.82, and adjusted free cash flow of $67 million, demonstrating strong operational execution.

    02

    Cook Filter Integration & Industrial Solutions Growth

    The integration of Cook filter is 95% complete, with remaining activities expected to conclude in Q3. Management is now focusing on growth initiatives within the Industrial Solutions segment, leveraging Cook filter's expertise and Atmus's global footprint. The segment is exploring opportunities in industrial air and evaluating anchor investments in industrial water and liquid filtration.

    03

    4-Pillar Growth Strategy Execution

    The company continues to execute its strategic pillars, including growing first-fit share with OEMs, accelerating aftermarket growth through a robust pipeline, transforming the supply chain with "Lean the Atmus Way" (with Mexico achieving first certification), and expanding into industrial filtration markets. These initiatives aim to drive sustainable margin expansion and market share gains.

    04

    Mixed Market Conditions

    While the aftermarket remained relatively flat year-over-year, with subdued conditions in Europe, Middle East, and parts of Asia Pacific, the first-fit market began to show signs of cyclical recovery in Q2, ahead of vehicle OEMs. The U.S. EPA's clarity on 2027 emission standards is expected to ease📎 pre-buy pressure, but customers anticipate a stronger second half.

    05

    Capital Allocation and Balance Sheet Strength

    Atmus maintains a balanced capital allocation strategy, expecting $20 million to $40 million in share repurchases for FY26. The company returned $18 million to shareholders in Q2 through buybacks and dividends. With an estimated net debt to adjusted EBITDA ratio of 1.9x for the trailing twelve months, the focus is on paying down gross debt to enhance balance sheet flexibility for future growth investments.

    06

    Middle East Conflict Impacts

    The ongoing Middle East conflict has created headwinds, impacting joint venture income in India and contributing to elevated raw material costs (chemicals, plastics). These factors are expected to persist into the second half, contributing to a moderating margin outlook compared to the first half of the year.

    AI-generated summary of the company’s earnings call. Not investment advice.