Good afternoon, everyone. Welcome to the fireside chat with Atmus Filtration. I'm Clay Williams from Goldman Sachs, and with us today from Atmus are, Jack Kienzler, Chief Financial Officer. Jack, thank you for joining us. Thank you for having me. Appreciate it. All right. As a starting point for our conversation, in the third quarter, you completed the full operational separation from Cummins. How would you judge the separation versus your initial expectations? With the work now complete, what would the strategic priorities be next? Yeah, absolutely. F irst of all, thank you, everyone for your interest, and thanks to you for having us, Clay. Look, I think the separation itself, anytime you embark on something so significant, you don't quite know what to expect. I n hindsight, I think it was probably a lot more effort, resource, et c, that was needed to pull it off. All that being said though, I would say that we as a team and an organization are extremely proud of what we were able to accomplish via that separation. I f I think ab out the teams that delivered that, it really took a broad collective effort across functions to pull that off. Really, if I could have said, "Hey, at the outset of this separation, will we be able to execute in a seamless fashion that limits disruption to the business?" I think that was a big question. I would say looking back now, we've certainly been able to do that, all while establishing new functions, new presences, new physical footprint from a distribution center perspective. A big thank you to our global team for all their efforts to make that a reality. What excites me moving forward is how we can now reallocate and repurpose the organization for growth moving forward. I f you think about the IT organization as one example of that, really the whole focus of that 65-person-strong organization was to complete the separation. We had approximately 300 projects that we undertook across the IT spectrum in and of itself, and then you could use a similar analogy across a lot of the other functions. T hat's been their sole focus over the last three, four years, right? N ow as we emerge from the completion of the separation at the end of the third quarter, we can repurpose the collective efforts of that team to really accomplish what we want to from a growth perspective. How do we focus on enhancing our customer experience in things like our Fleetguard portal, equipping our sales personnel with digital tools to make their jobs easier to accomplish, as well as our internal people and improve the ways with which they do their own work? R eally excited about our collective momentum that we have behind us, and again just really proud of the organization with what they've been able to pull off. All right. Now, a good transition point. You spoke more about opportunities for share growth as a fully independent company. Can you update us on how those efforts have been progressing? Absolutely. W e've been asked a fair bit over the course of today, what [inning], if you want to use a baseball analogy, we are in in terms of share growth and the first two strategic pillars of growth that we've outlined. A s a reminder, we have two areas of focus. The first is to win new business in our core, our first-fit markets. Th at includes winning with the winners, as we call it, continuing to cultivate relationships with customers that we've been serving for a long period of time, and enhancing and allowing them to accomplish their strategic priorities alongside Atmus with our Fleetguard product. The second is approaching new customers who we didn't do business with historically for a number of reasons. All of that in the first-fit, I would say we're in the early innings of. Really pleased with the momentum we've been able to achieve in terms of establishing connections with those new customers, and from here, it's all about continuing to educate them on our products, our technical capabilities, our delivery capabilities, and work with them to understand their needs and how we can best equip them for growth. In the aftermarket, I would say we're a little bit more advanced in our progression down that journey. Really pleased with what the team's been able to accomplish there, and really what we've been focused on is a multi-pronged effort to unlock those growth opportunities. First, it's establishing new distribution outlets and channel outlets, to allow us to get our product into our end users' hands whenever and wherever they need it. A few examples of that would be in Latin America, establishing over 100 new channel outlets with independent distributors. That's allowed us to get our product into more customers' hands, who inherently have a very high opinion of Fleetguard product and would like to incorporate it into their vehicles. Another example would be, recently announced a partnership with Traction in Canada, a very large heavy-duty parts distributor. T hat allows us to again, just reach a part of the market that historically we didn't target or go after, largely because of resource allocation. Really pleased with the efforts of the team. I think as I look at where we're at in our journey, still plenty of white space. What we're laser-focused on now is, how do we continue to invest in the business? W hether that's in the form of resources, digital tools, what have you, to enable our sales personnel and our engineering personnel to continue to engage with existing and new customers, and go on their growth journey together. All right. A couple of follow-ups there, particularly on the first-fit. When you have taken share, can you talk about the nature of the wins? Is it a new engine platform, new suite of products? Anything to give us kind of a flavor of what you're able to go after? Absolutely. I n the first-fit, I would say it tends to be technology-first conversation. A gain, the first piece that we engage with our customers on is educating them on our media technology, our technical prowess, what we can bring to the table in terms of filtration product to meet their needs. It's also obviously a two-way conversation to understand what they are looking for, and how we can best tailor our existing products to meet their needs. After that, we continue to engage with them. I would describe the sales cycle on-highway certainly, but also in off-highway, is usually driven by an upcoming emissions regulation change. W e are approaching here in North America, for example, the 2027 emissions regulations. The decision for new first-fit content on those engine programs was largely decided two, three years ago. W hat we're looking at now is, what is that next catalyst for us to engage with new and existing customers on the next emissions regulation and how do we again meet their needs? In the meantime, we are looking to cultivate those relationships by winning with them in the aftermarket as well. W e talk a lot about aftermarket wins from a pure-play independent distributor standpoint, but there's also growing our presence in the OE service networks. That tends to have a shorter sales cycle, if you will and also allows us to have a bit of an area to prove ourselves to new customers in particular who haven't done business with us in the past. All right. Now, moving on to another growth pillar. Last week, you announced your first M&A transaction, industrial filtration Koch Filters. Can you give us just an overview of the transaction? What was the valuation? Absolutely. A s you mentioned, we announced the acquisition of Koch Filter. We're really excited about what that can bring to the business. R eally, that allows us to advance our fourth growth pillar, which is expansion into industrial markets. The purchase price on that was $450 million, which represents a 13.9x trailing multiple pre-synergy. We also announced a headline price net of tax of $395 million, which when you include the synergies that we're expecting from a run rate perspective of $4 million, represents a 10.9x trailing 12-month multiple. R eally, we're excited about the business. I think it really ticks a lot of the strategic imperatives that we're looking for. Those include exposure to higher growth end markets than the ones that we inherently serve in our core, a high aftermarket content business, very similar to our existing core, which is an attribute that we know how to cooperate with them and partner with them to further enhance moving forward. M ulti-channel path to market, which is really exciting and allows you to reach many different end users no matter where they procure their product. W e think it's a great strategic fit overall. It's also a high consumable product, with many of their products having changeovers within three, six, nine, 12 months, which allows for again, a very high content or high aftermarket content, which is very similar to our core markets. In addition to the strategic things that it hits, I would say that it also ticked many of our financial metrics that we were after. Again, the ability to lift the overall growth of the company into new higher growth end markets than we currently serve, EBITDA margin accretion from a percentage standpoint in year one, EPS accretion in year one and high single-digit return on invested capital by year three. R eally excited about what we can bring. Probably most of all, I would say excited about the team that we're bringing into the broader Atmus family. I think there's a very significant culture fit there. They've been part of a much larger organization historically, and maybe haven't had the same resource allocation that they would have done if they were a standalone organization. I think that's very similar to what we experienced in our life before becoming Atmus. I think what we can bring is some investment for growth, and really partnership on how we can collectively grow our businesses together, s o excited about the team and what we can do together. Yeah, s o what are some of the key end markets that Koch Filtration serves? Yeah. I t's in the industrial air space. We've been talking about three broad industrial pillars that we're after, s o industrial air, industrial water, and industrial liquid, excluding water. T his fits in that first one of industrial air. About 60% of the business is in the HVAC space, both in the industrial and commercial HVAC space. T he rest of it is across, I would say a variety of different end markets, including data centers, power generation, so things like gas turbines, healthcare, and even some e-commerce business. I like not only the diversity that the air platform brings to our top line as Atmus, but also the diversity that they have from an end market exposure in their business alone. Yeah, a nd what type of synergies do you expect to get with this transaction? Yes. We've highlighted that we expect to realize $4 million of run- rate synergies. I would describe those as largely supply chain and cost synergies. We often talk about ourselves being rather small compared to our former parents, but I think we can, as we think about bringing businesses like Koch Filtration into the Atmus family, we are able to leverage our broad scale for things like purchasing synergies and potentially freight synergies. R eally excited about what we can bring there. I don't think there'll be a lot in the form of revenue synergies, but I do think this does potentially open the door for future bolt-on acquisitions that can be part of a broader industrial air platform. Along those lines, longer term, is there potential to either leverage internal IP for them or vice versa? Yeah. O bviously, one of the key differentiators in our core business and core markets is our media capability. We've recently won an award for our NanoNet N3 media. R eally, I think obviously that's a key differentiator for us, particularly in the applications in our core, which require significant separation science and the removal of harmful particles. W e'll continue to evaluate what technologies that we possess, that we can leverage into the Koch Filtration business, as well as to evaluate what technologies that they have that we could potentially leverage back into our business. I do think in the air filtration space, packaging of the product becomes quite important, a nd so you have to be able to produce an air filter that can fit many different applications. T hat'll be something that we'll look to harness their expertise on moving forward. I think it remains to be seen what other technology or engineering synergies we can bring to the table. All right. J ust on the finance side of it, how do you expect to finance the transaction? What type of leverage at closing, and a s you move forward, expectations around more programmatic M&A, capital returns? Yeah. O bviously, one of the hallmarks of our business is a very strong cash-generative business and a very healthy balance sheet. We do have the liquidity to fund the transaction with our existing cash on hand and revolver, which is currently undrawn. We're also evaluating upsizing our current credit facility. H aven't landed on that just yet, but we'll be looking at all of those different forms in terms of financing the transaction. I think if you do the math on the purchase price, I think that'll put us around two times net debt to EBITDA. We would look to couple that with a plan to bring that leverage down over the next couple of quarters, back into kind of that one and a half times range, which I think is about right for this business. C ertainly, I think that even with this acquisition, we have plenty of dry powder to continue to fuel a programmatic acquisition strategy. R eally excited about the other air filtration assets that we could potentially pursue on the heels of this, as well as continuing to look in the industrial water space and the industrial liquid space. Yeah, and I hate to ask about the pipeline after you've just announced the first one, but you brought it up. A s we think about the pipeline, you've just announced one. How has that changed over the last 12 to six months, and how do you think about it? Yeah. F irst and foremost, we had to establish M&A capability as a standalone company. R eally pleased with the team that we've been able to build, very strong capabilities, both for people like Rakesh Gangwani who leads that team for us, our broader strategy umbrella, but has spent many, many years in our core markets and in the M&A arena, but also the team underneath Rakesh, comprised of people from our core markets, people from adjacent markets. T hat team is in place, and I feel really, really good about the work that they've been able to do, not only on this particular acquisition, but also building the pipeline. T hat's been comprised of a lot of phone calls, a lot of trade shows and whatnot, as they build the pipeline and identify potential opportunities for us. Certainly, one of the things that we hypothesized about, and have found to be true in these industrial markets is a fairly fragmented market. W e certainly have some really strong players at the higher end of the market, and then a lot of fragmentation at the lower end of the market. W hat we're really hoping to do is, can we continue to use something like a Koch Filtration as an anchor, if you will, platform acquisition and then look to do some bolt-on M&A, while we also look at other assets? Y eah, really excited about the future here. Obviously, we'll be very diligent as we look to first and foremost close on this transaction, and then integrate it thereafter and then continue down our industrial expansion journey. O ne last one on capital allocation. In Q3, you increased share repurchases and dividends. How do you see capital returns in the light of the recent announcement? Yeah. I think again, with the cash generation that we bring through our core business, our power solutions business, coupled with our strong balance sheet, one of the things that affords us to do is to be flexible and balanced in how we allocate capital. W e've always talked about growth being our number one priority, a nd certainly I think an investment like this is very much in line with that growth imperative, coupled with organic investments, whether in the form of operating expense or capital expense back into our core. All that being said, from a CapEx perspective, we still think 2%-3% is about right for our core business, including the industrial space. F rom there, after growth investments, certainly again, I would think about being prudent and continuing to focus on having a strong balance sheet. Hence my comments about moving back towards kind of that 1.5x net debt to EBITDA, a nd all the while looking to continue to return cash to shareholders. We have announced and continued to raise our dividend as we've been a public company, and deployed cash returns via share repurchases. We will look to continue to do so. O ne of the good things about share repurchases is, it allows us a little bit of flexibility as and where we have a transaction like this to pivot back and forth. All right. M oving on to in- demand, U.S. heavy-duty and medium-duty outlook. You expect both markets to be down 20%-25% in 2025. Are you seeing signs that demand is stabilizing, or does some of the opacity around the different regulatory impacting the market still make it unclear? Yeah. I would say certainly our expectations were for a pullback in our first-fit markets here, in particular in North America, but also demand remains fairly tepid around the world in our first-fit markets. W e've certainly seen that play out in the third quarter. O ur expectation is that it continues to play out in the fourth quarter. As we talk to OE customers, I think there's still a lot of uncertainty as it relates to the upcoming 2027 emissions regulations. We have had some clarity, and our expectation remains that the NOx regulations will hold. I think it remains to be seen exactly what the final regulation comes into play. O bviously, what that impacts is, end users' desire and timing of the purchase of new vehicles, right? When any time there's uncertainty, which affects the price of the new vehicle, then that leads to some tepid volume, if you will. I think it remains to be seen. I would say that as we look towards 2026, certainly expect to get clarity, final clarity on 2027 emissions regulations. T hat could affect some potential pre-buy into 2026, and then uncertain demand when the regulation kicks in in 2027. Similarly, moving to the aftermarket, current expectations for freight activity to be flattish year- over- year in 2026. We've been talking about freight recession for quite some time now. As we move into 2026, you would expect it be flattish for 2025, excuse me. As we move into 2026, are we expecting more of the same or improvement? Yeah. l ook, we've been calling and hoping, I would say for a positive inflection in the overall aftermarket activity. Feels like for many quarters now. Our original expectation coming into 2025 was for that positive inflection point to happen as we moved into the second half. I would just say that we haven't quite seen that yet. We continue to experience a very depressed freight market. If you think about what drives filtration activity, it's really miles driven in our on-highway markets and hours in use, if you will, in our off-highway markets. R eally, both the on-highway and off-highway remain fairly depressed. I think some of that's obviously driven by some of the uncertain trade policy that's out there, and people waiting for a bit of clarity there before freight activity picks up. W e'll continue to look at all the different metrics. It's always a little bit difficult, unlike in the first-fit markets, particularly here in North America where you have pretty good market data and consensus around new truck builds. The aftermarket can be a bit more murky in terms of, what are the exact signs that you can point to? W e tend to look at many different indices, whether it's ATA or the Cass Freight Index. Obviously, important to triangulate that with feedback from customers. I would say the sentiment, whether quantitative in the form of the indexes or just the sentiment from the aftermarket channels remains fairly depressed. Moving to pricing, you've guided the three percentage points of price in 2025. How is this balance between tariffs and base price increases? Yeah. M aybe I'll just start with, how does pricing work in our business and then can cover the specifics for 2025. W e are an aftermarket-centric business. A bout 85% of our revenues are generated in the aftermarket compared to 15% in the first-fit markets. In the aftermarket, we tend to price on an annual basis, and push that price through to the market. We have been taking more increases in that pricing, certainly on the back of COVID and to combat some of the inflationary cost dynamics that we were operating in, and to combat FX dynamics and whatnot. C ertainly, in response to the ever-changing tariff environment that we're operating in, have been looking to combat that first and foremost with, how do we avail ourselves of any exemptions that are out there? Things like USMCA, things like establishment of free trade zones. All of that is stuff that we're looking to avail ourselves of, to insulate our customers from the impact of tariffs. Secondly, looking at different supply chain reconfigurations or activities that we can take on, again to mitigate the cost impact of tariffs. L astly, looking at pricing as a way to ensure that we remain price-cost neutral. That is our principle, if you will, and our stated strategy in response to tariffs. T hus far, we've been able to achieve that. H ow does that 3% for 2025 break down? We are expecting about 1.2% of that to be tariff-related pricing, which is the net effect, I would say, of many different movements as tariffs have gone up and down with respect to certain jurisdictions around the world. Th e balance of that, about 1.7% would be base pricing. All right. Can you update us, given the slower first-fit markets, plant efficiency rates, what levers you can pull to protect margins in an environment like this? On the other hand, are you comfortable from a capacity standpoint for when the market eventually turns? Yeah. It's a great question, and one that we're continuously evaluating. I do think from a capacity standpoint, if I think about four-wall capacity, certainly we feel good about where we're at in terms of our ability to accommodate and facilitate demand even in an upswing. That being said, we are continuously looking at our lines within our footprint. How do we optimize them? H ow do we think about generating more efficiency in our environment? That can really come in the form of many different things. Certainly, automation is an area that we'll continue to look at. We've done a little bit of that, certainly through things like cobots in our manufacturing environment or even our green cartridge line in our facility in Quimper, France. We'll also look at, how do we drive more efficiency through better planning, through customer orders, through our distribution centers, then back through our manufacturing environment? I think the supply chain team, coupled with our commercial team, have done a really nice job in identifying that opportunity. I still think there's plenty of runway that we can go after from an efficiency standpoint, b ut f eel good about where we're at from a capacity standpoint. Certainly anxious for some positive inflection from an overall market standpoint, a nd we're excited about growing with our customers as markets turn up. Yeah. Along those lines, you've laid out aspirations to expand margins over time. Can you update us on what initiatives you're working on and unpack the opportunity for us? Yeah, absolutely. F irst and foremost, I would just say we're really pleased and proud of the margin expansion that we've been able to deliver. Over 400 basis points of margin expansion over the last few years, and really what's driving that? I would say, it's a number of different things. C ertainly, we've been embarking on, and one of our four pillars is supply chain transformation. Maybe you could refer to that as the first generation of it, so 1.0. T hat's been really focused on certainly looking at procurement initiatives, and trying to be more disciplined in that space, and drive some cost benefits on the material cost side. I've mentioned some of the automation initiatives, and efficiency gains that we've been going after as well in that space. I think the other piece is, as we've been able to outperform markets, we've been able to add some volume. O f course, we've been able to recover a bit of the cost that we leaked out during the inflation time in the form of price. I think it's been a really good journey, and we feel good about where the margin profile of the business is now. N ow, as we set our sights towards the next horizon, what does supply chain transformation 2.0 look like? That could be targeted cost reductions to enable our sales team to meet our customers' needs in a more cost- advantageous way. It could also be in the form of efficiency gains moving forward. T he team is working hard on identifying those opportunities, and I'm really excited about what the future holds. Yeah, a nd then circle back on some of the regulations we talked about outside the U.S. What are the near-term opportunities for Atmus and regulations beyond the U.S., in Brazil, Europe, India.? Yeah. A s we've talked about, certainly in the first-fit markets, we generally view emissions regulation changes, and the move to more stringent emissions regulations as an opportunity for our business. We bring advanced filtration content to the market. A nytime there's a hard problem to solve, if you will, tends to be where we shine with our customers. A s different emissions regulations roll out, the timing of those can always be a bit uncertain. W e will look to use that as an opportunity to cultivate new customer relationships, but also increase our share of wallet with existing customers. M oving to view on demand outside the U.S., China, India, j ust curious, any color on current trends? Yeah, absolutely. M aybe I'll start with India. Again, our presence in India is largely, from a commercial standpoint, is only through our joint venture there, which has a really strong market position and is a very well-run operation. A s I look at different growth rates, whether you're looking at GDP or other industrial growth rates, certainly India is a market that stands out as a really important place to be in one of the highest-growing regions in the world. We have seen a little bit of a slowdown in terms of just infrastructure spend there, which led to not quite hitting the growth rates that we initially thought for 2025, but continue to remain bullish on that market overall. China has been an interesting market. Certainly saw significant peaks in demand really on the heels of COVID. I think you've seen over the last year or two, maybe a reset in terms of, what is the right normal level of production? R ight now, demand remains at that flattish, I would say, year- over- year. What I would point out is, we've seen very significant growth in zero-emissions vehicle demand in the Chinese market. T hat's been where a lot of the overall growth has been as you look at just overall new truck production in China. I would say, to work round out the rest of the world, we continue to remain bullish on Latin America overall. There's been some challenging trends as of late, but overall, we're excited about how we're positioned in that market and where we can go. Europe, I would say kind of remains flattish. Overall, we're excited about our market position. Unfortunately, the market growth rates, really on a global basis on- highway and off-highway are flat, and in the first-fit are down. E ventually, those markets will turn, just like they have in all the past cycles. F or us, it's really important to be positioned to support our customers as and when they [return]. Yeah. A s a quick follow-up on your comment on zero-emissions vehicles, how do you think about the content opportunity on the sets of those versus the ICE engine? Yeah, so I would say it really depends on a couple of things. First and foremost, it depends on the region that you're talking about. I do think that the technology that will be adopted will vary fairly significantly by region, whether or not that's driven by what energy availability there is by region, but also government intervention, infrastructure spend, what have you. If I think about the filtration opportunity, broadly speaking, if it's a combustion engine, just maybe powered by an alternative fuel source, whether that's hydrogen, whether that's renewable natural gas, I think about the content from a filtration perspective as largely the same as what it is today. If we're talking about something like a fuel cell, which could be a bit more of a complicated powertrain, if you will, than what we have today, I think it remains to be seen. That's probably the furthest out in terms of adoption. I f I think about battery electric, from a content expansion standpoint, it's probably the least amount of filtration content, certainly as you compare to a combustion engine. All that being said, we continue to work with our existing customers to really understand their needs, understand how they're thinking about the market. I think it's no secret that we've seen a pretty significant decrease in demand and overall activity in this space, as people evaluate the price of vehicles, infrastructure readiness, and whatnot. W e remain here and ready, and willing to support our customers no matter where the market goes. I think it's really important that everyone remembers that one of the hallmarks of our business is a significant aftermarket sale. The useful lives of the vehicles that our customers are putting into the market are quite significant, 15 years-20 years. F or us, that represents a really long and recurring revenue stream, so excited about that. All right. I think we're out of time, Jack. Thanks for joining us. Thank you, Craig and thank you, everyone for your interest. Have a good day. All right. Thank you. Thank you.