Atmus Filtration (ATMU) Q3 2026 Earnings Call Transcript

DATE

Friday, Nov. 6, 2026

CALL PARTICIPANTS

• Executive Director of Investor Relations - Todd Chirillo
• Chief Executive Officer - Stephanie Juanita Disher
• Chief Financial Officer - Jack Kienzler

TAKEAWAYS

• Net Sales -- $510 million, growing 14% year over year driven by the Koch Filter acquisition and 3% organic growth in the Power Solutions segment.
• Power Solutions Revenue -- $468 million, increasing 5% compared to the $448 million reported in the third quarter of 2025.
• Industrial Solutions Revenue -- $42 million, representing the first full quarter of contributions from the Koch Filter acquisition.
• Adjusted EBITDA -- $104 million, resulting in an adjusted EBITDA margin of 20.4%, which is consistent with the margin achieved in the prior year period.
• Adjusted EPS -- $0.77, an increase from $0.69 in the third quarter of last year.
• Adjusted Free Cash Flow -- $88 million, representing a $16 million increase over the $72 million generated in the third quarter of 2025.
• Year-to-Date Revenue Growth -- 15%, with 9 percentage points of growth contributed by expansion into industrial filtration and 3 percentage points from organic Power Solutions growth.
• Share Repurchases -- $20 million, completed under a previous authorization before the Board of Directors approved a new $300 million program on Nov. 4, 2026.
• Debt Reduction -- $100 million, consisting of $50 million repaid during the third quarter and an additional $50 million repaid in early Oct. 2026.
• Net Debt to Adjusted EBITDA -- 1.7 times, for the trailing 12-month period ending Sept. 30, 2026, reaching management's stated target leverage level.
• Full-Year Revenue Guidance -- $2.01 billion to $2.035 billion, an increase from previous estimates representing 15% growth at the midpoint.
• Power Solutions Guidance -- $1.85 billion to $1.87 billion, reflecting expected volume growth of 2% to 3% for the full year.
• Full-Year Adjusted EPS Guidance -- $2.90 to $3.05, raised from previous targets following strong year-to-date performance.
• Net Pricing Impact -- 1% for the full year, as 1.5% in base pricing increases are partially offset by 0.5% in lower tariff pricing and refunds.
• Tariff Refunds -- $9 million, representing IEFA refunds that the company expects to return to customers during the fourth quarter.
• Industrial Solutions Guidance -- $160 million to $165 million, an upward revision reflecting favorable market conditions and Koch Filter integration.
• Gross Margin -- 30.3%, an increase of 140 basis points from 28.9% in the prior year period due to favorable volumes and manufacturing costs.
• Joint Venture Income -- $7 million, compared to $8 million last year, as stronger results in China were offset by higher input costs in India.
• Power Solutions Volume -- 5% year-over-year growth, representing the strongest quarterly volume expansion for the segment in 2026.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Stephanie Juanita Disher stated, "we now expect some pressure on diesel pickup truck demand which will impact volumes for the remainder of the year," noting a shift in the First-Fit business.
• Jack Kienzler stated that joint venture profitability in India "has been impacted by rising input costs driven by the Middle East conflict."
• Stephanie Juanita Disher stated, "There is a lot of uncertainty around the First-Fit markets, particularly with the upcoming 2027 regulation," referring to pending EPA standards.

SUMMARY

Atmus Filtration Technologies Inc. (NYSE:ATMU) reported third quarter results that included a 14% increase in net sales and an upward revision to its full-year revenue and earnings guidance. Management reported that momentum in the Power Solutions segment and the integration of Koch Filter supported the year-over-year growth. The company indicated that its debt reduction efforts reached a target level of 1.7 times net leverage, allowing for an increased focus on share repurchases and potential industrial acquisitions. Management stated that the business transition following its separation from Cummins is complete, resulting in improved free cash flow generation without previous one-time separation costs.

• Disher stated, "We have generated $189 million of adjusted free cash flow through September 30, an increase of $61 million from the same period last year."
• The company opened a new HEPA filter clean room at its Louisville facility to target high-efficiency product growth in markets such as health care.
• Management reported that Fleetguard was named the top preferred filter brand in a recent independent survey of the U.S. and Canadian markets.
• Disher stated, "While our primary focus is industrial air, we remain opportunistic in evaluating industrial water, and liquid filtration assets with the goal of identifying and anchor investment."
• The company plans to open a new manufacturing facility in Florida in 2027 to expand its Koch Filter industrial filtration operations.
• Kienzler stated, "Returning refunded tariffs to customers is consistent with our stated objective to be price cost neutral on tariffs."

INDUSTRY GLOSSARY

• Koch Filter: A subsidiary and brand acquired by Atmus that specializes in industrial air filtration solutions.
• First-Fit: Filtration products sold directly to original equipment manufacturers for installation on new commercial vehicles and heavy equipment.
• Aftermarket: The secondary market focused on the sale of replacement filters and maintenance products for existing equipment.
• IEFA: A specific category of international trade tariffs and associated refunds mentioned by management in relation to price-cost neutrality.
• HEPA: High-Efficiency Particulate Air, a standard for air filters that can remove a high percentage of airborne particles.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Atmos Filtration Technologies Third Quarter 26 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Todd Chirillo, Executive Director of Investor Relations. Please go ahead.

Todd Chirillo: Thank you, Piercy. Good morning, everyone, and welcome. To the Atmos Filtration Technologies Third Quarter 26 Earnings Call. On the call today we have Stephanie Juanita Disher, Chief Executive Officer and Jack Kienzler, Chief Financial Officer. Certain information presented today will be forward looking. And involve risks and uncertainties that could materially affect expected results. Please refer to the slides on our website for the disclosure of the risks that could affect our results and for reconciliation of any non GAAP measures referred to on this call. For additional information, please see our SEC filings and the Investor pages available on our website at atmos.com. Now I will turn the call over to Stephanie.

Stephanie Juanita Disher: Thank you, Todd, and good morning, everyone. Todd, I will review our third quarter results and share details of our progress executing our 4-pillar growth strategy. I will also provide updates to our outlook for 2026, Jack will then speak to our financial results and segment performance. We have consistently delivered strong performance this year, amidst mixed market conditions. Our team has delivered year to date revenue growth of 15%. This is a reflection of our disciplined delivery of our growth. Our expansion into industrial filtration market has contributed 9% and our consistent focus on building a strong growth engine within our Power Solutions segment has resulted in organic growth of 3%. The balance is related to foreign exchange.

I am pleased to see organic growth momentum building. In Power Solutions through the year and into the third quarter, where we delivered our strongest volume growth year over year. We have continued to deliver strong profitability and the cash generation capability of our business is now being realized. We have generated $189 million of adjusted free cash flow through September 30, an increase of $61 million from the same period last year. This strong free cash flow generation enables us to take a balanced and disciplined approach to capital allocation. Our first priority is to invest in growth. Both organically and inorganically.

Next, we focus on strong liquidity to protect against volatility and uncertainty maintaining investment grade debt levels, through the cycle. Lastly, we provide returns to shareholders. Through our dividend program and further utilize share repurchases variably relative to M&A activity. We have been actively executing this strategy. During the third quarter, we returned $25 million of cash to shareholders through share buybacks and dividends. We have paid down £100 million of debt since our last earnings call and have achieved our stated objective of reducing leverage following a significant acquisition. Additionally, our Board of Directors recently approved a new $300 million share repurchase program which replaces our previous authorization.

Given the strength of our balance sheet, and strong cash generation capability of the business, moving forward, we expect to increase share repurchases. We continue to seek M&A opportunities and will balance share repurchases against these opportunities as appropriate. Now let me highlight our third quarter financial results. Sales were $510 million compared to $448 million during the same period last year. An increase of 14%. Driven by the acquisition of Cook Filter, and organic sales performance of 3% in Power Solutions excluding foreign exchange. Sales were reduced by $9 million related to IEFA tariff refunds that we expect to return to customers. Excluding these refunds and foreign exchange benefits, organic sales grew 5%.

Adjusted EBITDA was $104 million or 20.4% compared to £92 million or 20.4% last year. Adjusted earnings per share was $0.77 in the third quarter of 2026 and adjusted free cash flow was $88 million Now let's turn to our 4-pillar growth strategy. Our first pillar is to grow share in First-Fit. With a strong upturn in The US First-Fit markets, and longstanding partnership with market leaders we are growing our installed customer base. This provides us with both near and long term growth opportunity. As the market expands, we continue to grow our long term partnership along with pursuing new opportunities with leading global and regional OEMs across a broad range of applications.

Our second pillar is focused on accelerating growth in the aftermarket. We are prioritizing investments in faster growth regions and markets to broaden the availability of our industry leading Fleetguard and cook filter brands. Our customers recognize the value and advanced filtration capability the Fleetguard brand delivers. A recent independent survey named Fleetguard as the No. 1 preferred brand across all filter types. Including fuel, and, and lube in the United States and Canada. We are proud of this recognition and the faith our customers have in us. To protect what is important. Our third pillar is focused on transforming our supply chain.

We have built a resilient and flexible supply chain that allows us to navigate challenges in an ever changing operating environment. We control our distribution network, and have consistently achieved top quartile performance in delivery. This capability enables global availability of our products when and where our customers need us. Furthermore, we continue to prioritize investments for capacity, and automation to expand our capability and position the business for growth. Our fourth pillar is to expand into new filtration markets. We have completed the integration of Cook Filter, and are now focused on investing for growth. We recently opened a new HEPA filter clean room with test capability at the Louisville manufacturing site.

This investment allows us to unlock growth in the high efficiency product category with applications in fast growing markets such as health care. Additionally, we are investing to expand Cook Filter's capabilities and expect to open a new facility in Florida next year to accelerate growth. In addition to organic growth, we continue to review our robust pipeline of inorganic opportunities. With a focus on industrial air, to build a platform of scale by leveraging Cook Filter, and creating value through targeted bolt on acquisitions.

While our primary focus is industrial air, we remain opportunistic in evaluating industrial water, and liquid filtration assets with the goal of identifying and anchor investment that can serve as the foundation as we build out our industrial platform over time. Now let's turn to our outlook for 2026. Starting with the power solutions segment. In the aftermarket, we continue to see strength in freight rates. Indicating improved economics for freight carriers. However, the overall level of freight activity has yet to reach an inflection point. And we expect the market to remain relatively flat year over year in contrast, The U.S. first-fit heavy and medium duty markets are experiencing a strong cyclical recovery.

We saw the benefits of the recovery begin in the second quarter. This momentum has continued through the third quarter, and we expect these markets to remain strong. We now expect some pressure on diesel pickup truck demand which will impact volumes for the remainder of the year. This is more than offset by the strength in the heavy and medium duty markets. Our investment for growth is expected to deliver market share gains in both aftermarket and First-Fit, as we expand distribution capabilities maintain world class on shelf availability, and win with new and existing customers. For power solutions overall, we expect volume growth in the range of 2% to 3%.

Additionally, net pricing is expected to add approximately 1% growth, with 1.5% of base pricing action to be partially offset by 0.5% of lower tariff pricing and refunds. Foreign exchange is expected to be a tailwind of approximately 2%. In total, we are raising our expectation for power solutions revenue to be in a range of $1.85 to $1.87 billion which represents growth of approximately 5.5% at the midpoint. In our Industrial Solutions segment, we expect favorable market conditions and strong performance to continue. And are raising total revenue to be in a range of $160 million to $165 million Taking this together, we are raising total company revenue expectations to be in a range of $2.01 to $2.035 billion.

An increase of 15% from 2025 at the midpoint. We are maintaining our full year adjusted EBITDA margin guidance which is expected to be in the range of 19.75% to 20.25%. Lastly, we are raising adjusted EPS expectation to be in a range of $2.90 to $3.05. I want to thank Atmusonians around the world for focusing on delivering for our customers, and protecting what is important. Our disciplined execution and strong cash flow generation enables us to continue investing for growth. Through the execution of our 4-pillar growth strategy. Now I will turn the call over to Jack.

Jack Kienzler: Thank you, Steph, and good morning, everyone. The Atmos team delivered strong financial performance by supporting our customers through the upturn in the U.S. first-fit market while also navigating variable market conditions in the rest of the world, Sales in the third quarter were $510 million compared to $448 million during the same period last year. An increase of 14%. Power Solutions delivered sales of $468 million compared to $448 million in the prior year. An increase of 5%. The increase was primarily due to higher volumes of 5%, pricing of 1%, and favorable foreign exchange of 1%.

This was partially offset by 2% of pricing due to IEPA tariff refunds, that we received and expect to refund to customers in the fourth quarter. Returning refunded tariffs to customers is consistent with our stated objective to be price cost neutral on tariffs. We do not expect to receive any additional material refunds. Industrial solutions sales were $42 million resulting from the acquisition of Cook Filter. Gross margin for the third quarter was $154 million or 30.3%, compared to $129 million or 28.9% in the third quarter of 2025. The increase was due to incremental margin from the acquisition of Cook Filter higher volume, and favorable manufacturing costs.

Partially offset by higher material costs selling, administrative, and research expenses for the third quarter were $64 million compared to $56 million in the prior year. The increase was primarily due to incremental costs associated with the acquisition of Cook Filter, higher incentive compensation, and other people related costs. Joint venture income was $7 million in the third quarter, compared to $8 million in the prior year. Strong performance in China offset weaker profitability in India, which has been impacted by rising input costs driven by the Middle East conflict. Other expense was $3 million compared to $2 million in the third quarter of 2025.

The increase in other expense was primarily due to a nonrecurring $3 million settlement with the supplier. Partially offset by higher interest income and lower foreign exchange losses. Excluded from adjusted results, are onetime costs related to the integration of Cook Filter. Which for the full year is expected to be approximately $3 million. We also exclude intangible asset amortization resulting from the Filter acquisition, which is expected to be approximately $12 million for 2026. Total enterprise adjusted EBITDA in the third quarter was $104 million or 20.4%, compared to $92 million or 20.4% in the prior period. Segment adjusted EBITDA for Power Solutions was $96 million or 20.5% compared to $92 million or 20.4% last year.

Industrial Solutions segment adjusted EBITDA was $8 million or 19.6% Adjusted earnings per share was $0.77 compared to $0.69 last year. Adjusted free cash flow was $88 million this quarter. Compared to $72 million in the prior year. Now let's turn to capital deployment. The combination of continued strong cash flow and adjusted EBITDA performance has resulted in an estimated net debt to adjusted EBITDA ratio of 1.7x for the trailing 12 months ended September 30. During the quarter, we returned $25 million to shareholders, consisting of $20 million in share repurchases and $5 million of dividends. Furthermore, we have repaid $50 million of gross debt in the third quarter, and another $50 million in early October.

As Steph highlighted, we have achieved our stated objective of reducing leverage and enhancing flexibility for growth following a significant acquisition. This provides us with flexibility to invest in both organic and inorganic growth opportunities. In closing, I want to thank our global team for their relentless focus on our customers, and I am confident the team will successfully deliver a strong finish to 2026. Now we will take your questions.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. You are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Tami Zakaria with JPMorgan India. Your line is now open.

Tami Zakaria: Hi. Good morning. Thank you so much. Very nice quarter. Question for you on First-Fit. The back half of this year is turning out to be quite strong. How are you thinking about first fit demand into next year? Are you preparing for some sort of slowdown after a very strong finish? Or how are you thinking about or planning for at least the first couple of quarters of next year?

Operator: Good morning, Tami, and thank you for your question.

Stephanie Juanita Disher: Look. Really pleased with the performance this quarter. And as you highlight, we are starting to see momentum through the year. We saw First-Fit start to improve through the second quarter, and we have also seen that during the third quarter, and expecting that to continue. In a strong way through the end of the year of 2026. There is a lot of uncertainty around the First-Fit markets, particularly with the upcoming 2027 regulation. Which is still open, and finalization of that expected inside this year. So many of our customers are working through that Wednesday.

I would say we are well placed, While there has been some discussion about some supply on the top end of First-Fit demand, We do not have any supply constraints. We are able to support our customers through this up upturn And right now, we expect it to continue through the first half of 27 obviously watching this closely as we see the demand response to 2027 regulations, the broader macro environment, But as we look to it now, we kind of see it through the end of the year very strong, and into the first half of 27.

Tami Zakaria: Understood. that is very helpful color. Thank you. And other question is on share repurchases. It seems like that is going to step up. So as we look to the, you know, next year or so, should we expect all of the free cash flow minus the dividend all of it goes to our repo If there is no M&A, or are you going to still try to pay down some debt and then use the rest for repo?

Stephanie Juanita Disher: Yeah. Thanks, Tami. I would really highlight the strong cash performance of the business. If you look at it, we have seen about a $61 million improvement in free cash flow year to date. Over last year, And we are really starting to see the capability of the business in terms of cash flow generation particularly given we do not have the extra cost associated with separation that we were incurring last year in 2025. We also have managed to move our debt levels to a good level, and we have got a strong balance sheet. Jack talked to it being 1.7 times. At the end of the third quarter.

And we believe our debt level is at or around the level. Does not mean we will not repay some debt going forward. But it does free up for the majority of our cash flow to be directed towards share repurchases. That, of course, is contingent on us continuing to pursue our M&A opportunity. We are very clear that investing for growth is our first priority. And we continue to review a robust pipeline of M&A and if and when we have something to communicate there, we will.

Operator: Your next question comes from the line of Andrew Obin with Bank of America. Your line is now open.

David Ridley-Lane: Good morning. This is David Ridley-Lane on for Andrew Obin. Tremendous gross margin performance this quarter, congratulations. I wanted to check-in on how you are thinking about price-cost. It is a more inflationary market. And maybe any early thoughts on sort of your future price actions that you are looking at ahead?

Stephanie Juanita Disher: Thank you. Good morning, David. I will ask Jack to take that 1.

Jack Kienzler: Good morning, David. Thanks for the question. A few moving pieces in there. So I might just highlight a few in pieces so that we can decouple those moving pieces. So the first 1, let me maybe talk to tariffs and kind of isolate the impact of that so that you can understand what is going on beyond the tariffs. So as we noted in our prepared remarks, we did receive the tariffs that we had. The tariff refunds that we had been expecting to receive here in the third quarter. And we have correspondingly booked the impact into our financial statements of the receipts of those refunds.

As you can see, we are expecting to pass those refunds onto our customers. The impact to the top line of that was about $9 million. So that is a reduction in revenue. And then we booked a corresponding reduction in cost of sales. it is worth noting there is an immaterial amount of tariff refund that are sitting in gross margin about $1.5 million. That largely offsets previously incurred administrative expenses. Overall, I think you should think about the tariff impacts Obviously, we will continue to navigate ongoing dynamics that emerge from a tariff perspective, but I expect impact I just walked through to be isolated to the third quarter.

And then, obviously, we will issue those refunds onto our customers. Here in the fourth quarter. We believe the treatment of that is consistent with our strategy of being price cost neutral. And that will continue to be our principle as it relates to tariffs moving forward. If you exclude the impact of tariffs overall, we will be price-cost positive for the year. Certainly, we have seen a rising input cost environment as we move through the year, and that is beginning to step up here in the second half.

And so we are monitoring that closely We did take some modest pricing in the middle of the year, although some of that washed out when you think about the lapping of the tariffs from the prior year. And so relatively muted impact there as you think about the quarter itself. Overall, pricing for the full year, as we have highlighted in our comments, will be about 1%. And, again, we will be price cost positive As we look into next year, you know, we will see what happens in terms of the input cost environment and if those continue to increase.

And, obviously, we will take corresponding pricing actions to make sure that we are price cost positive and preserve our margins as we navigate that environment.

David Ridley-Lane: Thank you very much.

Operator: Your next question comes from the line of Quinn Fredrickson with Baird. Your line is now open.

Quinn Fredrickson: Hey, good morning.

Stephanie Juanita Disher: Good morning, Quinn. Stephanie, I was I was wondering if you could expand on your comments on how you are seeing the market shaping up for the aftermarket, perhaps looking out beyond the fourth quarter and into 2027?

Quinn Fredrickson: Obviously, a lot going on with higher diesel prices, perhaps some capacity coming out at the smaller end of the market. So we would just like to hear your thoughts on the underlying market as well as your share gain performance.

Stephanie Juanita Disher: Good morning, Quinn. Thanks for the question. So, you know, aftermarket is the majority of our business, and we have been talking about it being pretty flat for the last few years. Actually, since we IPO would, it is been those conditions, and, arguably, we have been in a freight recession, and we are looking forward to a brighter market is what I would say. If we still have not seen that inflection point arrive, If we think about the breakdown of our aftermarket the big market is really, first and foremost, North America. And then we come into Latin America. And then, you know, Europe and Asia Pacific after that.

And so if I just kind of take those in order and talk about what we are seeing, In North America, we still see robust aftermarket. We have seen us continuing to gain share and outperform the market. But it is relatively flat year over year. Is how we are viewing it. We are not seeing green shoots or an inflection in North America at this point. I do think we. As I said, we have seen some improvement in freight rates but still not seeing that turning to freight activity or a significant upturn.

I would say throughout the rest of the world, it is more challenging conditions, the impact of the Middle East conflict, you know, flowing onto Europe and even into India, I would say we have seen that. And we are seeing some bright spots in Latin America. Both outperformance, we are outperforming there. And we are also seeing stronger market conditions in a market that is growing faster. So a mixed landscape is the best way to describe it. North America being our biggest market, relatively flat from a market perspective, and we are outperforming. And then the rest of the world is somewhat challenged, impacted in part by the ongoing conflict in the Middle East.

Quinn Fredrickson: Got it. that is helpful. Thanks, Stephanie.

Jack Kienzler: Jack, just wanted to ask about the fourth quarter margin guidance Just based on your full year EBITDA margin guide, seems like there is a fairly widespread for the fourth quarter is implied. I am just wondering if you could talk about any puts and takes for 4Q margin and what factors could push you to the high end versus the low end? Yeah. Absolutely. So first of all, I would just say our year to date margin performance has been quite strong. Year to date, sitting at 20.3 to the high end of our guide on a cumulative basis.

So really proud of the team for what they have been able to deliver there and navigate various puts and takes from a macroeconomic perspective. If you look at then the, you know, the implied Q4, as you know, it is about 19.1%, I think it is. So a few different pieces there, I would say. First of all, I mentioned before from a price cost perspective, you know, we are keeping a close eye on the inflationary backdrop. As a reminder, we price, you know, at the beginning and the middle of the year. And so keeping a close eye on that as input costs continue to rise in response to you know, the macroeconomic landscape.

So that is that is 1 piece. I would say the other piece is you just look at kind of seasonal trends, you know, in our business. Generally, we do see lower hours in the fourth quarter. And so that leads to lower, you know, absorption benefits, in the in the manufacturing environment. So that is been a pretty consistent trend. You know, if you look at 2025, 2024, 2023, usually, see a bit of a step down in margin in the fourth quarter. And really, all that is driven by is that seasonal dynamic as we work through remaining inventory and set our sights towards the next year. So really nothing more than that.

We are excited again about the full year performance of the business. Feel like both top line and margin performance in addition to robust cash flow has been a really great story.

Operator: Your next question comes from the line of Bobby Brooks with Northland Capital Markets. Your line is now open.

Keaton: Hi. Good morning. This is Keaton Chokshi on for Bobby. It seems like you have done a good job navigating the rise in raw material costs. I was just kinda curious if that is a fair assumption and maybe if you could discuss a little bit on how you have been able to achieve that.

Stephanie Juanita Disher: Hey. Good morning, Keaton. Now I will ask Jack to take that 1.

Jack Kienzler: Yeah. Thanks, Keaton. So, yeah, as I mentioned earlier, I think absolutely we will be price cost positive. It is always a, you know, a difficult needle to thread. Right? Obviously, we cannot price necessarily ahead of when input costs impact the business, but we do our best to make sure that we are consistently pushing price into the market to, you know, meet the technology offering that we can bring to the market overall. So we did not, increase prices at the beginning of the year.

In line with normal market practices and then took a modest midyear price increase In addition to that, you know, our third pillar is supply chain transformation, and we continue to do a really good job of finding efficiencies in the business, working with the supplier base to really get more suppliers under contract and find ways to take cost out of our products. So it is kind of a combination of all of the above. And we will continue to stay vigilant on that as we move into 2027.

Keaton: Okay. Thank you. And then on the new cash facility that you are opening up in Florida next year, can you give us a sense of investment size capacity add to that? And then also a second question on cost. The new clean room testing is. Will that be a higher margin product line And what is the opportunity there over the next few years?

Stephanie Juanita Disher: Yeah. We are excited about the growth investment. You know, we have got through the integration at Cook Filter Very pleased with the way the business is continuing to perform. And now focused on growing. And we have identified a number of growth We have highlighted 2 today. 1 is the HEPA clean line investment that you talk about at The HEPA clean room investment that you talk about does allow us to move more into high efficiency products. And we do expect them to be stronger margin products. that is part of our strategy to move into you know, higher technology products that support our customers. And that will be able to support markets like health care in particular.

So in addition, those markets are faster growing. Than some of our exposure to other markets. So we see that as a great growth opportunity for the cook filter business. it is early days. We have just made the investment. We have got our first order, so we are really starting to turn that we will start to see the benefits of that coming through here in fourth quarter and beyond. In terms of the investment in Florida, we have not made it yet. It will be into next year. We have approved the investment, and we will be moving forward with that. Florida is the third largest HVAC market in The United States.

We see great opportunities to further expand the Cook filtration business where we already have great capabilities here in The United States. Beyond that, we will continue to look for growth opportunities in the industrial air filtration segment. Very much in line with our stated growth strategy of expanding into industrial filtration.

Operator: Your next question comes from the line of Kevin Uherek with Wells Fargo. Your line is now open.

Kevin Uherek: Good morning. Congrats on the quarter. Yeah. I just had a question on EPA 2027, just given all the uncertainty around that. What are your expectations for it kind of going into the quarter pre-buy and what are you hearing from customers?

Stephanie Juanita Disher: Good morning, Kevin, and thanks for the question. A lot of uncertainty, as you say, around EPA 27 and the associated action of engine manufacturers and truck OEMs in response to that as we get into 2027 here. I think as we have communicated before, the transitionary approach that has been outlined in EPA 2027 should be good overall in terms of really allowing the industry to make a transition to regulatory standards new regulatory standards in a in an effective manner. So I think that is playing out. We are still a awaiting guidance and outcomes. I think many are saying that is expected in December. In terms of the 2027 regulations into the final outcomes there.

So waiting to see that here inside 2026 We are working closely with all of our customers to support them through this transition, and we feel well equipped to do that. In some cases, some of our customers are running, you know, multiple engine platforms providing customers with choice. Of, you know, previous platforms and the new, and we are on both those platforms and are working with our customers to support them. And in other cases, customers are moving to the new standards and providing only 1 option. So we feel like we are in good shape. To support our customers through all of those outcomes.

And we will we will know more here as we as we get into the final quarter.

Kevin Uherek: Got it. And then just as a follow-up, when we think about 4Q and kind of the implied volume bridge, is there anything that you would call out for 4Q like in 3Q, tougher comp from Stellantis?

Stephanie Juanita Disher: How should we think about that? Yeah. there is a couple of things I would call out. We are continued strong performance through the fourth quarter and to finish the year strong. Year over year growth is very strong. We are expecting the First-Fit market heavy duty and medium duty market to continue to show growth year on year. And aftermarket to be relatively flat. I did note in my script that there is pressure on pickup demand. It is. Our First-Fit business is about 15% of our overall revenues in Power Solutions and a small part of that is associated with pickup demand. And we are expecting some downward pressure in that in the in the fourth quarter.

But that is more than offset, I would say, by the upturn we are seeing in heavy and medium duty. Markets.

Operator: There are no further questions at this time. I will now turn the call back to Stephanie Juanita Disher for closing remarks.

Stephanie Juanita Disher: Thank you, Piercy. So in closing, I want to leave you with 3 key takeaways. First, we are building momentum in our business. As we execute our 4-pillar growth strategy. Secondly, we have demonstrated disciplined execution throughout the year and we expect strong full year performance. And thirdly, our business generates strong and consistent cash flow. Enabling us to invest for growth and return value. To shareholders. I want to thank you all for joining us today. And for your continued interest. Have a great day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.