PHINIA INC.
For the period ended Jun 30, 2025. Filed Jul 24, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Jul 24, 2025
PHIN$68.94-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-04-25.
0001968915-25-000030
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-07-24.
0001968915-25-000053
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 57 previous paragraphs and 90 current paragraphs.
38 unchanged; 18 reworded; 16 added; 1 removed; 0 previous and 18 current paragraphs rearranged.
Tables are not compared: 7 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Proposed Acquisition of Swedish Electromagnet Invest AB (SEM)
Current report
On June 10, 2025, the Company announced that it entered into a definitive agreement to acquire all of the issued and outstanding shares of Swedish Electromagnet Invest AB (SEM), a prominent provider of advanced natural gas, hydrogen and other alternative fuel ignition systems, injector stators and linear position sensors for approximately $47 million. The acquisition is expected to generate approximately $50 million of annual revenue and approximately $10 million of annual adjusted EBITDA. The transaction is expected to close in the third quarter of 2025.
Current report
Net sales for the three months ended June 30, 2025 totaled $890 million, an increase of $22 million, or 3%, compared to the three months ended June 30, 2024. Cost of sales and cost of sales as a percentage of net sales were $693 million and 78%, respectively, during the three months ended June 30, 2025, compared to $680 million and 78%, respectively, during the three months ended June 30, 2024. The change in net sales and cost of sales for the three months ended June 30, 2025 was primarily driven by positive impacts of foreign currency primarily due to the strengthening of the Euro and British Pound relative to the U.S. Dollar and supplier savings, partially offset by the end of the contract manufacturing agreements with the Former Parent in the second quarter of 2024. Gross profit was negatively impacted by unfavorable impacts from recent tariff changes, for which the Company continues to negotiate with customers to achieve full recovery.
Current report
SG&A for the three months ended June 30, 2025 and 2024 was $112 million, or 13% as a percentage of net sales. SG&A expenses remained flat period-over-period, attributable to favorable foreign currency impacts, offset primarily by increased employee costs, including stock-based compensation.
Current report
Other operating (income) expense, net
Current report
The Fuel Systems segment’s Segment Adjusted Operating margin was 11.5% for the three months ended June 30, 2025, compared to 10.0% for the three months ended June 30, 2024. The Segment Adjusted Operating margin increase was primarily due to supply chain savings, other cost of sales improvements and favorable foreign currency impacts.
Current report
The Aftermarket segment’s Segment Adjusted Operating margin was 16.1% for the three months ended June 30, 2025, compared to 15.1% for the three months ended June 30, 2024. The Segment Adjusted Operating margin increased primarily due to favorable product mix, supply chain efficiencies and favorable foreign currency impacts.
Current report
RESULTS OF OPERATIONS
Current report
Six Months Ended June 30, 2025 vs. Six Months Ended June 30, 2024
Current report
Other operating (income) expense, net
Current report
Other operating (income) expense, net was $1 million of income and $22 million of expense for the six months ended June 30, 2025 and 2024, respectively. The change in other operating expense, net was mainly driven by a decrease in transaction-related costs, primarily related to adjustments under the Tax Matters Agreement. Other operating (income) expense, net was comprised of the following:
Current report
Interest income
Current report
Interest income was $8 million in the six months ended June 30, 2025 and 2024. The interest income is primarily related to interest earned on funds held in money market, local overnight deposits, and short term investments.
Current report
Interest expense
Current report
Provision for income taxes
Current report
Provision for income taxeswas $53 million for the six months ended June 30, 2025, resulting in an effective tax rate of 42%, compared to $50 million, or 54%, for the six months ended June 30, 2024. The effective tax rate for the six months ended June 30, 2025 decreased as compared to the prior year as a result of a change in the jurisdictional mix of pre-tax earnings, most notably a decrease in pre-tax losses where no benefit is recognized, partially offset by an increase in pre-spin uncertain tax position reserves of $18 million.
Removed paragraphs (1)
Previous report
Other operating expense, net
Reworded paragraphs (18)
Previous wording
Commodities and Other Inflationary Impacts. Prices for commodities remain volatile, and since the beginning of 2021, the Company’s business has experienced price increases for base metals (e.g., steel, aluminum and copper) but have mostly stabilized in Q1 2025 compared to 2024. New trade restrictions and/or increases in tariffs could have a material impact on our business, financial condition, or results of operations by increasing our input costs and decreasing demand in the commercial vehicle (CV) and light vehicle (LV) markets, although the nature of those trade restrictions and tariffs remains unclear. Additionally, these tariffs increase the risk for elevated inflation more generally, which may be driving an increase in other input costs. As a result, the Company may experience higher costs, especially with respect to products imported from certain regions subject to significant tariff increases, including, but not limited to, Mexico and China.
Current wording
Commodities and Other Inflationary Impacts. Prices for commodities remain volatile, and since the beginning of 2021, the Company’s business has experienced price increases for base metals (e.g., steel, aluminum and copper) but have mostly stabilized in 2025 compared to 2024. New trade restrictions, including export controls, and/or increases in tariffs could have a material impact on our business, financial condition, or results of operations by increasing our input costs and decreasing demand in the commercial vehicle (CV) and light vehicle (LV) markets, although the nature of those trade restrictions and tariffs remains unclear. Additionally, these tariffs increase the risk for elevated inflation more generally, which may be driving an increase in other input costs. As a result, the Company may experience higher costs, especially with respect to products imported from certain regions subject to significant tariff increases, including, but not limited to, Mexico and China.
Previous wording
We expect earnings and cash generation in 2025 to be challenged as we expect foreign currency and a softening of the original equipment markets to outpace our ability to drive operational efficiencies and grow our Aftermarket sales. Continued economic and political uncertainty has caused the CV and LV markets to soften. LV volumes in our key markets for 2025 are expected to decline by mid-single digit percentages. CV volumes in our key markets are expected to be consistent with 2024 levels, however lighter at the start of the year with recovery in the latter part of the year. Assuming constant foreign exchange rates, we expect flat to a modest increase in sales. Additionally, we may be impacted by other macroeconomic challenges in 2025, including but not limited to inflation, supply chain constraints, market volatility, higher tariffs relevant to our operations (particularly in Mexico and China) and changes in international trade relations.
Current wording
We expect earnings and cash generation in 2025 to be challenged as we expect a softening of the original equipment markets to outpace our ability to drive operational efficiencies and grow our Aftermarket sales. Continued economic and political uncertainty has caused the CV and LV markets to soften. LV volumes in our key markets for 2025 are expected to decline by mid-single digit percentages. CV volumes in our key markets are expected to decline by low-single digit percentages. Assuming constant foreign exchange rates and excluding sales from acquisitions, we expect flat to a modest increase in sales. Additionally, we may be impacted by other macroeconomic challenges in 2025, including but not limited to inflation, supply chain constraints, market volatility, higher tariffs relevant to our operations (particularly in Mexico and China) and changes in international trade relations.
Previous wording
Other operating expense, net was $3 million and $17 million for the three months ended March 31, 2025 and 2024, respectively. The decrease in other operating expense, net was primarily driven by a decrease in transaction-related costs, primarily professional fees and other costs associated with the Spin-Off. Other operating expense, net was comprised of the following:
Current wording
Other operating (income) expense, net was $4 million of income and $5 million of expense for the three months ended June 30, 2025 and 2024, respectively. The change in other operating (income) expense, net was primarily driven by a decrease in transaction-related costs, primarily related to adjustments under the Tax Matters Agreement. Other operating (income) expense, net was comprised of the following:
Previous wording
Equity in affiliates’ earnings, net of tax was $4 million and $3 million in the three months ended March 31, 2025 and 2024, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture.
Current wording
Equity in affiliates’ earnings, net of tax was $4 million and $2 million in the three months ended June 30, 2025 and 2024, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture.
Previous wording
Interest income was $4 million in the three months ended March 31, 2025 and 2024.
Current wording
Interest income was $4 million in the three months ended June 30, 2025 and 2024. The interest income is primarily related to interest earned on funds held in money market, local overnight deposits, and short term investments.
Previous wording
Interest expense was $19 million and $22 million in the three months ended March 31, 2025 and 2024, respectively. The decrease was primarily related to reduced interest rates as a result of the restructuring of the Company’s debt positions. See Note 11, “Notes Payable and Debt”, for further discussion.
Current wording
Interest expense was $21 million and $39 million in the three months ended June 30, 2025 and 2024, respectively. The decrease was primarily due to the loss on extinguishment as a result of the restructuring of the Company’s debt positions in the prior period. See Note 11, “Notes Payable and Debt”, for further discussion.
Previous wording
Provision for income taxes for the three months ended March 31, 2025 and 2024 was $24 million and $27 million, respectively, resulting in an effective tax rate of 48% in both periods. The effective tax rate period-over-period consisted of an increase in a pre-spin uncertain tax position reserve of $7 million fully offset by a decrease resulting from a change in the jurisdictional mix of pre-tax earnings. Excluding the impact of items not related to the Company’s ongoing operations, the Company’s effective tax rate associated with ongoing operations was 36% for the quarter ended March 31, 2025 compared to 38% for the quarter ended March 31, 2024. The Company continues to expect its 2025 full year effective tax rate to be between 38% and 42%.
Current wording
Provision for income taxes was $29 million for the three months ended June 30, 2025, resulting in an effective tax rate of 39%, compared to $23 million, or 62%, for the three months ended June 30, 2024. The effective tax rate for the three months ended June 30, 2025 deceased as compared to the prior year as result of a change in the jurisdictional mix of pre-tax earnings, partially offset by an increase in uncertain tax position reserves of $11 million related to periods prior to the Spin-Off.
Previous wording
The Company’s net earnings per diluted share was $0.63 and $0.62 for the three months ended March 31, 2025 and 2024, respectively. The Company’s adjusted net earnings per diluted share was $0.94 and $1.08 for the three months ended March 31, 2025 and 2024, respectively. The Company defines adjusted net earnings per diluted share, a non-GAAP measure, as net earnings per diluted share adjusted to exclude: (i) the impact of restructuring expense, transaction-related costs, impairment charges and other gains, losses and tax effects and adjustments not reflective of the Company’s ongoing operations; and (ii) acquisition-related intangibles amortization expense because it pertains to non-cash expenses that the Company does not use to evaluate core operating performance. Management believes that adjusted net earnings per diluted share is useful to investors in assessing the Company’s ongoing financial performance, as it provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company’s core operating performance.
Current wording
The Company’s net earnings per diluted share was $1.14 and $0.31 for the three months ended June 30, 2025 and 2024, respectively. The Company’s adjusted net earnings per diluted share was $1.27 and $0.88 for the three months ended June 30, 2025 and 2024, respectively. The Company defines adjusted net earnings per diluted share, a non-GAAP measure, as net earnings per diluted share adjusted to exclude: (i) the impact of restructuring expense, transaction-related costs, impairment charges and other gains, losses and tax effects and adjustments not reflective of the Company’s ongoing operations; and (ii) acquisition-related intangibles amortization expense because it pertains to non-cash expenses that the Company does not use to evaluate core operating performance. Management believes that adjusted net earnings per diluted share is useful to investors in assessing the Company’s ongoing financial performance, as it provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company’s core operating performance.
Previous wording
Net sales for the three months ended March 31, 2025 totaled $796 million, a decrease of $67 million, or 8%, compared to the three months ended March 31, 2024. Cost of sales and cost of sales as a percentage of net sales were $624 million and 78%, respectively, during the three months ended March 31, 2025, compared to $671 million and 78%, respectively, during the three months ended March 31, 2024. The change in net sales and cost of sales for the three months ended March 31, 2025 was primarily driven by unfavorable volume and mix driven by lower OEM sales across all regions, the end of the contract manufacturing agreements with the Former Parent, and negative impacts of foreign currency primarily due to the weakening of the Brazilian Real and Euro relative to the U.S. Dollar. Cost of sales was also negatively impacted by a $7 million nonrecurrence of a supplier settlement and $4 million of unfavorable impacts from recent tariff changes.
Current wording
Net sales for the six months ended June 30, 2025 totaled $1,686 million, a decrease of $45 million, or 3%, compared to the six months ended June 30, 2024. Cost of sales and cost of sales as a percentage of net sales were $1,317 million and 78%, respectively, during the six months ended June 30, 2025, compared to $1,351 million and 78%, respectively, during the six months ended June 30, 2024. The change in net sales and cost of sales for the six months ended June 30, 2025 was primarily driven by unfavorable volume and mix driven by lower OEM sales across all regions, and the end of the contract manufacturing agreements with the Former Parent in the second quarter of 2024. Cost of sales was also negatively impacted by a $7 million nonrecurrence of a supplier settlement and unfavorable impacts from recent tariff changes, for which the Company continues to negotiate with customers to achieve full recovery.
Previous wording
SG&A for the three months ended March 31, 2025 was $107 million as compared to $104 million for the three months ended March 31, 2024. SG&A as a percentage of net sales was 13% and 12% for the three months ended March 31, 2025 and 2024, respectively. The change in SG&A expenses was primarily attributable to increased employee costs, partially offset by other administrative cost savings resulting from moving to a fully staffed standalone company and exiting transition service agreements with the Former Parent and other outside services.
Current wording
SG&A for the six months ended June 30, 2025 was $219 million as compared to $216 million for the six months ended June 30, 2024. SG&A as a percentage of net sales was 13% for the six months ended June 30, 2025 and 2024. The change in SG&A expenses was primarily attributable to increased employee costs, including stock-based compensation, offset by favorable foreign currency impacts.
Previous wording
Segment AOI excludes certain corporate costs, which primarily represent corporate expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment AOI were $24 million and $18 million for the three months ended March 31, 2025 and 2024, respectively. The increase in corporate expenses in 2025 was primarily related to additional costs resulting from moving to a fully staffed standalone company and exiting transition service agreements with the Former Parent and other outside services.
Current wording
Segment AOI excludes certain corporate costs, which primarily represent corporate expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment AOI were $49 million and $39 million for the six months ended June 30, 2025 and 2024, respectively. The increase in corporate expenses was primarily related to additional costs resulting from moving to a fully staffed standalone company and exiting the transition service agreements with the Former Parent, foreign exchange losses and the addition of a second tranche of performance stock units under the Company's stock incentive plan.
Previous wording
The Fuel Systems segment’s Segment Adjusted Operating margin was 9.5% for the three months ended March 31, 2025, compared to 10.4% for the three months ended March 31, 2024. The Segment Adjusted Operating margin decrease was primarily due to unfavorable mix, the nonrecurrence of a supplier settlement and impacts of recent tariff changes.
Current wording
The Fuel Systems segment’s Segment Adjusted Operating margin was 10.6% for the six months ended June 30, 2025, compared to 10.2% for the six months ended June 30, 2024. The Segment Adjusted Operating margin increase was primarily due to favorable foreign exchange impact and supply chain savings, partially offset by unfavorable mix, the nonrecurrence of a supplier settlement and the impacts of recent tariff changes.
Previous wording
The Aftermarket segment’s Segment Adjusted Operating margin was 16.1% for the three months ended March 31, 2025, compared to 17.9% for the three months ended March 31, 2024. The Segment Adjusted Operating margin decreased primarily due to unfavorable mix and impacts of recent tariff changes on the segment’s OEM sales.
Current wording
The Aftermarket segment’s Segment Adjusted Operating margin was 16.1% for the six months ended June 30, 2025, compared to 16.5% for the six months ended June 30, 2024. The Segment Adjusted Operating margin decreased primarily due to impacts of recent tariff changes on the segment’s OEM sales and unfavorable mix, partially offset by favorable foreign exchange impacts and supply chain efficiencies.
Previous wording
The Company maintains various liquidity sources, including cash and cash equivalents and the unused portion of its $500 million revolving credit facility maturing in July 2028 (the Revolving Facility). As of March 31, 2025, the Company had liquidity of $872 million, comprised of cash and cash equivalent balances of $373 million and availability on the Revolving Facility of $499 million. Given the Company’s strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants through at least the next 12 months.
Current wording
The Company maintains various liquidity sources, including cash and cash equivalents and the unused portion of its $500 million revolving credit facility maturing in July 2028 (the Revolving Facility). As of June 30, 2025, the Company had liquidity of $846 million, comprised of cash and cash equivalent balances of $347 million and availability on the Revolving Facility of $499 million. Given the Company’s strong liquidity position, management believes that it will have sufficient liquidity and will maintain compliance with all covenants through at least the next 12 months.
Previous wording
At March 31, 2025 and December 31, 2024, the Company had $373 million and $484 million of cash and cash equivalents, respectively, of which $298 million and $409 million, respectively, was held by our subsidiaries outside of the United States. We believe our existing cash and cash flows generated from operations and indebtedness incurred in conjunction with the Spin-Off discussed below will be responsive to the needs of our current and planned operations for at least the next 12 months and the foreseeable future thereafter.
Current wording
At June 30, 2025 and December 31, 2024, the Company had $347 million and $484 million of cash and cash equivalents, respectively, of which $290 million and $409 million, respectively, was held by our subsidiaries outside of the United States. We believe our existing cash and cash flows generated from operations and indebtedness incurred in conjunction with the Spin-Off discussed below will be responsive to the needs of our current and planned operations for at least the next 12 months and the foreseeable future thereafter.
Previous wording
Net cash provided by operating activities was $40 million and $31 million in the three months ended March 31, 2025 and 2024, respectively. The increase in cash from operating activities for the three months ended March 31, 2025 compared with the three months ended March 31, 2024 was primarily due to lower interest payments and the nonrecurrence of separation-related impacts on accounts receivable, partially offset by lower net earnings adjusted for non-cash charges.
Current wording
Net cash provided by operating activities was $97 million and $140 million in the six months ended June 30, 2025 and 2024, respectively. The decrease in cash from operating activities for the six months ended June 30, 2025 compared with the six months ended June 30, 2024 was primarily due to increased working capital demands as the Company navigates fluctuating volumes and other shifting industry conditions.
Previous wording
Net cash used in investing activities was $35 million and $42 million in the three months ended March 31, 2025 and 2024, respectively, primarily related to capital expenditures. As a percentage of sales, capital expenditures were 4.4% and 5.0% for the three months ended March 31, 2025 and 2024, respectively.
Current wording
Net cash used in investing activities was $68 million and $59 million in the six months ended June 30, 2025 and 2024, respectively, primarily related to capital expenditures. As a percentage of sales, capital expenditures were 4.1% and 3.5% for the six months ended June 30, 2025 and 2024, respectively.
Previous wording
Net cash used in financing activities was $117 million and $41 million in the three months ended March 31, 2025 and 2024, respectively, primarily related to the increase of stock repurchases.
Current wording
Net cash used in financing activities was $169 million and $126 million in the six months ended June 30, 2025 and 2024, respectively, primarily related to stock repurchases.
Rearranged current paragraphs (18)
Current report — wording carried from elsewhere
Excluding the impact of items not related to the Company’s ongoing operations, the Company’s effective tax rate associated with ongoing operations was 36% for the three months ended June 30, 2025 compared to 42% for the three months ended June 30, 2024.
Current report — wording carried from elsewhere
Segment AOI excludes certain corporate costs, which primarily represent corporate expenses not directly attributable to the individual segments. Corporate expenses not allocated to Segment AOI were $25 million and $21 million for the three months ended June 30, 2025 and 2024, respectively. The increase in corporate expenses was primarily related to foreign exchange losses and the addition of a second tranche of performance stock units under the Company's stock incentive plan.
Current report — wording carried from elsewhere
The following table presents a summary of the Company’s operating results:
Current report — wording carried from elsewhere
Net sales and Cost of sales
Current report — wording carried from elsewhere
Selling, general and administrative expenses(SG&A)
Current report — wording carried from elsewhere
Equity in affiliates’ earnings, net of tax
Current report — wording carried from elsewhere
Equity in affiliates’ earnings, net of tax was $8 million and $5 million in the six months ended June 30, 2025 and 2024, respectively. This line item is driven by the results of the Company’s unconsolidated joint venture.
Current report — wording carried from elsewhere
Interest expense was $40 million and $61 million in the six months ended June 30, 2025 and 2024, respectively. The decrease was primarily due to the loss on extinguishment as a result of the restructuring of the Company’s debt positions in the prior period. See Note 11, “Notes Payable and Debt”, for further discussion.
Current report — wording carried from elsewhere
Excluding the impact of items not related to the Company’s ongoing operations, the Company’s effective tax rate associated with ongoing operations was 36% for the six months ended June 30, 2025 compared to 40% for the six months ended June 30, 2024.
Current report — wording carried from elsewhere
For further details, see Note 5, “Income Taxes,” to the Condensed Consolidated Financial Statements for the six months ended June 30, 2025 and 2024.
Current report — wording carried from elsewhere
Net earnings per diluted share and adjusted net earnings per diluted share
Current report — wording carried from elsewhere
The Company’s net earnings per diluted share was $1.76 and $0.93 for the six months ended June 30, 2025 and 2024, respectively. The Company’s adjusted net earnings per diluted share was $2.21 and $1.98 for the six months ended June 30, 2025 and 2024, respectively. The Company defines adjusted net earnings per diluted share, a non-GAAP measure, as net earnings per diluted share adjusted to exclude: (i) the impact of restructuring expense, transaction-related costs, impairment charges and other gains, losses and tax effects and adjustments not reflective of the Company’s ongoing operations; and (ii) acquisition-related intangibles amortization expense because it pertains to non-cash expenses that the Company does not use to evaluate core operating performance. Management believes that adjusted net earnings per diluted share is useful to investors in assessing the Company’s ongoing financial performance, as it provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the Company’s core operating performance.
Current report — wording carried from elsewhere
Results by Reportable Segment for the six months ended June 30, 2025 and 2024
Current report — wording carried from elsewhere
The Company’s business is aggregated into two reportable segments: Fuel Systems and Aftermarket.
Current report — wording carried from elsewhere
Segment Adjusted Operating Income (AOI) is the measure of segment income or loss used by the Company. Segment AOI is comprised of segment operating income adjusted for restructuring, transaction-related costs, acquisition-related intangible asset amortization expense, impairment charges and other items not reflective of ongoing operating income or loss. The Company believes Segment AOI is most reflective of the operational profitability or loss of its reportable segments.
Current report — wording carried from elsewhere
Refer to Note 19, “Reportable Segments and Related Information” to the Condensed Consolidated Financial Statements, for more information.
Current report — wording carried from elsewhere
The following table presents Net sales and Segment AOI for the Company’s reportable segments:
Current report — wording carried from elsewhere
The following table presents the year-over-year change in net sales and Segment AOI for the Company’s reportable segments for the six months ended: