During this call, we will make forward-looking statements, including comments related to our 2026 guidance, which are based on management's current expectations and are subject to risks and uncertainties. Chris will then provide additional details on our second quarter results and discuss our 2026 financial outlook. The second quarter developed largely as we expected, with highlights including continued revenue growth from both fuel systems and aftermarket, leading us to a refinement of our full-year guidance. As slides six and seven detail, stoba has operations in four countries, expected run rate third-party revenue of approximately $80 million, and accretive EBITDA of approximately $25 million.
Excitingly, these assets support the global semiconductor industry with high-performance equipment components, opening another avenue of growth and diversification. Returning capital to shareholders is a key component of our capital allocation strategy. We are confident of our operational and financial performance that allows us ongoing run rate capital returns to our shareholders. Our diversification across regions, customers, end markets, and products helped offset variability in any single region or segment.
Demand conditions across key end markets remained steady, supported by durable replacement cycle fundamentals and ongoing positive results in the commercial vehicle industry. We continued our streak of year-over-year growth in both aftermarket and fuel system segments. Excluding FX impacts, the impact of tariff recoveries, and the contribution of SEM, revenue was up 2%. We've reported adjusted EBITDA of $130 million for the quarter, up $4 million, representing a margin of 13.8%.
| Metric | Period | Current guidance |
|---|---|---|
| Net sales | FY2026 | $3.57B-$3.67B (mid-single-digit growth incl. FX; low-single-digit ex-FX); range tightened, midpoint held |
| Adjusted EBITDA | FY2026 | $485M-$515M (13.5%-14.1% margin) |
| Adjusted free cash flow | FY2026 | $210M-$250M (raised) |
| Adjusted tax rate | FY2026 | 30%-33% as legacy tax-structure headwinds are addressed |
| stoba Group acquisition | close Q4 2026 | ~$80M third-party revenue, ~$25M adjusted EBITDA, ~6x EBITDA, ~+40 bps margin accretive; not yet in guidance |
| Capital returns | ongoing | Buybacks and dividends to continue unchanged despite the stoba deal; $216M left on repurchase authorization |
| Metric | YoY | Note |
|---|---|---|
| Net sales | +5.6% to $940M | Growth in both fuel systems and aftermarket, plus SEM contribution and tariff pass-throughs; underlying growth 2% ex-FX/SEM/tariffs. |
| GAAP diluted EPS | $1.05 | Reported EPS below the $1.53 adjusted figure, reflecting non-operating items, restructuring/spin-related and incentive-compensation costs. |
| Adjusted EPS (ex non-operating) | +20.5% to $1.53 | Higher segment operating income and lower share count from buybacks (~24% of original shares repurchased since spin). |
| Adjusted EBITDA | +$4M to $130M (13.8% margin) | Net tariff/refund contribution of $11M and SEM offset by ~$9M higher incentive comp and mix; margin down 40 bps. |
| Operating margin (GAAP) | 8.5% | GAAP operating income of ~$80M; total segment adjusted operating income was $125M (13.3% margin). |
| Fuel systems segment | +5% to $584M (11% AOI margin) | New OE programs across heavy-duty, agricultural and alternative-fuel applications. |
| Aftermarket segment | +6.6% to $356M (17.1% AOI margin) | Aging fleet, growing vehicle park, brand strength and distribution expansion across EMEA and emerging markets. |
| Adjusted free cash flow | $74M | Operating cash flow up $34M to $91M, low capex (2.3% of sales) and efficient working capital. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| stoba Group acquisition | SEM tuck-in earlier | A vertical-integration tuck-in of a longtime key supplier (seven sites across UK, China, Czech Republic, Germany) that solidifies PHINIA's supply base, adds a second aerospace-and-defense-qualified location in Germany, opens new customers (Liebherr, Zeiss, ZF, Dyson) and semiconductor-equipment exposure, and drives ~40 bps of margin accretion via ~$10M external EBIT plus ~$15M of vertical-integration savings. | — |
| Portfolio diversification | Reducing light-vehicle dependence | Growth strategy focused on expanding commercial vehicle, off-highway, industrial, aerospace/defense and 'other' as a share of revenue, using existing human and manufacturing capital; diversification across regions, customers, end markets and products cushioned China light-vehicle weakness. | — |
| Tariff management | Passing through tariff costs | IEEPA tariff refunds (unclear until the Supreme Court decision) contributed $11 million to Q2 earnings ($7M revenue benefit), with about half of booked refunds owed back to customers; no additional IEEPA benefit expected in the back half, offset by supply-chain savings and productivity. | — |
| Capital allocation | Disciplined, balanced | Unchanged despite stoba — $665 million returned since the July 2023 spin ($534M buybacks / ~24% of original shares, $131M dividends), $216 million remaining on the authorization, net leverage 1.3x and funded from liquidity. | — |
| Aftermarket durability | Steady contributor | Consistent demand from an aging fleet and growing vehicle park, with distribution wins across North Africa, Eastern Europe, the Americas, China, Southeast Asia and Oceania, plus 2,650+ new SKUs and 150,000+ cross-references added in H1. | — |
| Underlying margin/productivity | Operational discipline | Excluding the $11M tariff gain, margins step up roughly 100 basis points half over half on flat sales, driven by supplier savings and productivity, with back-half global supply-chain savings offsetting additional incentive comp. | — |
| M&A pipeline | Active | After SEM and stoba, management sees no lull — a robust pipeline of tuck-ins remains under evaluation (deals typically take ~a year from first talks to close), all screened for commercial-vehicle/off-highway/industrial/aftermarket fit at sensible valuations. | — |