PHINIA (PHIN) 2026年第3季電話會議：EBITDA 創新高與更高的銷售展望

重點提要

• PHINIA 公布 2026 年第三季淨銷售額為 9.12 億美元，年增 0.4%，儘管受到關稅回收時程帶來的 2,100 萬美元負面影響。
• 經調整 EBITDA 達到創紀錄的 1.35 億美元，增加 200 萬美元，經調整 EBITDA 利潤率提升 20 個基點至 14.8%。
• 受惠於營運表現、較低的稅率及庫藏股買回，經調整稀釋後每股盈餘 (EPS) 成長 15.1% 至創紀錄的 1.83 美元。
• 動力系統部門 (Power Systems) 經調整營業利潤率為 12.1%。售後市場解決方案部門 (Aftermarket Solutions) 利潤率達 17.1%，銷售額年增超過 4%。
• 管理層將 2026 年銷售展望的中位數上調至 36.5 億美元，目前預計經調整 EBITDA 為 5 億美元至 5.2 億美元。
• PHINIA 在本季向股東回饋了 7,600 萬美元，同時將淨槓桿率維持在 1.3 倍，低於其 1.5 倍的長期目標。

核心財務數據

業務與營運表現

動力系統部門在銷售額微幅下滑的情況下，達成 12.1% 的經調整營業利潤率。歐洲和北美商用車需求彌補了中國輕型車及商用車市場的疲軟。

動力系統部門最近贏得的新專案包括 PHINIA 首個用於中國工業及非道路應用的甲醇引擎專案、印度的壓縮天然氣 (CNG) 噴油嘴專案，以及延長北美增程式應用之缸內直噴高壓油泵的專案合約。

售後市場解決方案部門仍為較高利潤率的部門，在銷售額成長超過 4% 的推動下，利潤率達到 17.1%。管理層歸因於車齡老化、保有車輛數成長，以及在北美、西班牙、東南亞、沙烏地阿拉伯和葡萄牙贏得新客戶。公司亦表示，往年第四季售後市場銷售下滑的現象並未出現，為更優質的銷售產品組合提供支撐。

PHINIA 在本季啟動了多個專案，包括用於巴西雙燃料 SUV 的加熱式噴油嘴、用於北美中型卡車與公車的供油模組、用於中國混合動力車輛的第二個 500 bar 缸內直噴專案，以及用於北美主要柴油皮卡平台的多產品系統。

stoba Group 的收購案已於 2026 年 10 月 1 日完成交割，資金來自可用流動資金。管理層預期該交易將擴大 PHINIA 在工業及非道路市場的布局，增加客戶及具資格認證的航太與國防據點，並創造供應鏈和成本協同效應。

管理層財務預測

管理層表示，不論在營收或經調整 EBITDA 方面，財務預測調升中來自 stoba 的貢獻不到一半。大部分的修訂來自基礎業務，包括北美和歐洲商用車需求更為強勁，以及新專案量產升速快於預期。

根據展望的中位數，管理層預計第四季營收將超越第三季，這是一種反常的季節性模式，受到專案啟動、商用車表現強勁及售後市場需求持續的支撐。

風險與關注焦點

PHINIA 繼續面臨地緣政治與貿易不確定性、運輸挑戰、大宗商品通膨及定價壓力。中國的輕型車和商用車市場在本季也依然疲軟。

該公司尚未完全回收年初至今所有的商品與運費通膨成本。管理層估計剩餘未回收的金額在低至中單數百萬美元，但預計合約補償將在 2026 年第四季及 2027 年帶來微幅的正面助益。

PHINIA 的展望排除近期或未來政府政策變化的潛在影響，包括可能改變營收假設或成本結構的附加關稅、稅制改革及其他措施。

分析師問答重點

• 航太與國防：PHINIA 正跨足 8 家客戶爭取 13 個潛在專案，採購決策預計將在 2026 年底至 2027 年陸續出爐。管理層澄清目前擁有 3 個航太專案和 1 個地面專案；其中 2 個已進入量產，另 1 個預計於 2026 年底前啟動，第 4 個則預定於 2027 年初至年中展開。
• 關稅：第三季銷售額包含 2,100 萬美元與關稅相關的時間差影響，其中 700 萬美元被描述為非經常性影響。管理層預期在沒有進一步政策改變的前提下，隨著回收機制正常化，關稅影響將大致趨於中性。
• 2027 年布局：管理層預期北美與歐洲的商用車業務活絡趨勢將延續至 2027 年。2026 年底啟動的新專案也應能帶來更好的基期比較條件。
• 資本配置：PHINIA 將繼續逐季評估併購與庫藏股買回。管理層表示，鑑於公司的流動資金與槓桿狀況，收購 stoba 不會限制上述任何選項。
• 股東回饋：年初至今庫藏股買回總額為 1.63 億美元，股利總額為 3,300 萬美元。自 2023 年 7 月拆分上市以來，PHINIA 已透過 5.99 億美元庫藏股買回及 1.42 億美元股利，向股東回饋共計 7.41 億美元。

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管理層陳述

Operator

Hello, everyone. Thank you for joining us, and welcome to the PHINIA 3Q '26 Earnings Call. [Operator Instructions]

I will now hand the conference over to Gordon Muir, Vice President and Treasurer.

Gordon Muir

Thank you, and good morning, everyone. We appreciate you joining us. Our conference call materials were issued this morning and are available on PHINIA's Investor Relations website, including a slide deck that we'll be referencing in our remarks. We're also broadcasting this call via webcast. Joining us today are Brady Ericson, CEO; and Chris Gropp, CFO.

During this call, we will make forward-looking statements, including comments related to our 2026 guidance, which are based on management's current expectations and are subject to risks and uncertainties. Actual results may differ materially from these statements due to a variety of factors, including those described in our SEC filings. We caution listeners not to place undue reliance upon any such forward-looking statements.

And with that, it's my pleasure to turn the call over to Brady.

Brady Ericson

Thank you, Gordon, and thank you, everyone, for joining us this morning. I will start with some overall highlights and some key developments in the quarter that support our strategy. Chris will then provide additional details on our third quarter results and discuss our 2026 financial outlook. We will then open the call for questions.

Overall, we delivered another quarter of solid operational and financial performance despite an uncertain macroeconomic backdrop. Our third quarter results were in line with expectations and keep us firmly on track to achieve our full year objectives. We continue to make meaningful progress on our strategic priorities as reflected in the strong momentum we are seeing in new business awards.

As I will discuss in more detail, I am particularly encouraged by recent wins across our diversified end markets and emerging growth sectors. These successes position us well for a solid fourth quarter and provide a strong foundation for sustained profitable growth in 2027. Not only did we deliver strong financials in the quarter, we also continued to execute on initiatives that will strengthen the foundation of our business and support long-term value creation. These efforts enhance our operational capabilities and further position PHINIA to capitalize on future growth opportunities.

We made significant progress on simplifying and consolidating our IT systems with approximately 40% of our sales transitioning on to S/4HANA, the next generation of SAP ERP without major disruption to the organization. The next wave is planned in 2027, and I fully expect the team to perform as superbly as they did with this first launch.

We issued our third sustainability report, highlighting the progress we've made over the last few years towards our target of reducing our absolute Scope 1 and Scope 2 greenhouse gas emissions by 50% by 2030 when compared to our 2020 baseline. We were also proud to publish the 2026, 2027 heavy-duty and off-highway emission standards with greenhouse gas coverage.

Supported by our deep engineering and regulatory expertise in fuel systems, combustion, system integration and calibration, we continue a practice that began over 30 years ago to aid OEMs, engineers, policymakers and other industry professionals navigate the emissions regulatory landscape with supporting data and interpretations of different requirements.

Next, we made leadership changes to our segments, naming 2 division presidents to increase operational agility and better support the growing business while also changing the names of our segments to better reflect the products and services they provide. Effective September 1, the Fuel Systems segment was renamed Power Systems and will be led by Pedro Abreu, while aftermarket was renamed Aftermarket Solutions and will be led by Dan Griffith.

Finally, we announced the closing of the stoba Group acquisition as of October 1, 2026, I want to give a warm welcome to the newest members of the PHINIA family. The purchase is entirely funded through available liquidity as a result of our strong cash flow position.

As previously noted, we expect the integration of the stoba Group to expand our exposure in off-highway industrial end markets, add new customers and drive synergistic profit expansion through supply chain ownership, integration of key capabilities and cost efficiencies. This will also add additional AS9100 aerospace and defense qualified locations.

Now let's get into some of the specifics by turning to Slide 6. India continued to demonstrate resilience in a mixed macroeconomic environment. Customer demand across key end markets remained as expected, supported by durable replacement fundamentals and ongoing positive results in the commercial vehicle industry in Europe and North America.

We continue to navigate ongoing geopolitical and trade-related uncertainty, mainly in the form of shipping challenges and costs, commodity inflation and pricing pressures in some markets. Through strong operational execution and disciplined cost management, we managed those challenges effectively. Our net sales in the quarter were $912 million, up $4 million over prior year, but this was negatively impacted by $21 million due to the timing of tariff impacts.

All in, our year-to-date net sales have increased 5.2%. Despite some of the headwinds from inflationary costs and pricing pressures, we reported a record adjusted EBITDA of $135 million for the quarter, up $2 million over prior year, representing a margin of 14.8%, although R&D costs as a percent of net sales were a headwind on a year-over-year basis, they were lower than Q1 and Q2. This lower percentage of net sales should continue into Q4.

For context, our net R&D cost as a percentage of net sales ran in the mid-3s in the first half of 2026 and see this in the mid-2s in the second half of 2026. This will result in us coming in around our stated 3% of net sales annual target for net R&D.

Both segments performed well with total segment adjusted operating income achieving a record level of $128 million or 14% margin.

The Power Systems segment delivered a strong 12.1% margin on slightly lower sales and the Aftermarket Solutions segment delivered 17.1% margins with sales up over 4% compared to prior year.

Our finance and tax teams continue to make great progress on better aligning our structure with our operational footprint and bringing us closer to an industry standard tax rate. As a result, our adjusted effective tax rate came in at 23% for the quarter and it benefited from a lower estimated full year effective tax rate for 2026 that Chris will provide an update on.

Adjusted earnings per diluted share, excluding nonoperating items, were a record $1.83 for the quarter compared with $1.59 in the same period for the prior year, a 15.1% increase year-over-year, reflecting a solid operational result, lower tax rate and the benefits of our share repurchase program.

From a balance sheet perspective, PHINIA continues to demonstrate financial stability and consistency. Our net leverage ratio was 1.3x, below our long-term target of 1.5x. We returned $76 million to shareholders in the form of $65 million of share repurchases and $11 million of dividends.

We remain committed to maintaining a strong and flexible balance sheet, supported by healthy credit market access and long-standing banking relationships. We continue to evaluate and enhance our capital structure. And despite a volatile rate environment, we still see opportunities to improve our debt maturity profile and lower our average borrowing costs in the coming year.

Our third quarter performance underscores the durability and resilience of our business in a rapidly changing global environment by serving a broad mix of regions, customers, end markets and products.

Moving to Slide 7. I'm pleased with the success we are having with respect to gaining new business. The third quarter was another good quarter for us with strong interactions with new and potential customers at a number of industry events, including Farnborough Air Show, Automechanika Frankfurt, IAA Transportation and AUTOP 26 in Brazil. For example, we increased the number of active pursuits in the aerospace market to eight customers across 13 potential programs with sourcing decisions expected later this year and into 2027.

Our team continues working closely with their counterparts to develop and test parts that will provide effective solutions to their needs. This quarter included notable wins across OE and aftermarket channels, reinforcing customer trust, technology differentiation and PHINIA's ability to deliver premium solutions to our customers.

Key Power Systems wins in the quarter include our first methanol engine program. This will extend our technology into alternative fuels and industrial off-highway applications for the Chinese market, a CNG injector program for the Indian light vehicle market. This business strengthens our position across diverse fuels, applications and regions. Extension of a GDi pump award for a new range extender application in North America. This award demonstrates the continued relevance of our technologies across evolving powertrain architectures.

Turning to Slide 8. Aftermarket Solutions continues to be a steady and reliable contributor to our results. Demand remains consistent, driven by an aging fleet and a growing vehicle park. As vehicles stay on the road longer, customers around the world rely on our quality parts and service more than ever. Our strong and recognizable brands, broad and consistently expanding product offerings and focus on customer service are helping us build deeper relationships and win new opportunities.

Recent wins were across diverse geographies, further strengthening our position in the independent aftermarket. A few notable wins during the quarter include new customer win for the North American fuel injector remanufacturing business, expanding the diesel customer base. Won a competitive conquest aftermarket braking business in Spain and expanded Southeast Asian distribution, including increased penetration of steering and suspension products. Secured new business across diesel, vehicle electronics and engine management systems in Saudi Arabia, Portugal and Spain, expanding customer and product penetration.

Now moving to Slide 9. We've had several significant launches this quarter, including launch of a heated tip injector for our Flex fuel SUV application in Brazil. These products expand our presence in a key flex fuel market and demonstrate our differentiated patented fuel injection technology. Expansion and launch of a fuel delivery module for a medium-duty truck and bus application in North America. This product expands our presence across commercial vehicle platforms.

Launch of our second 500bar program, supplying a GDi pump and fuel rail assembly for hybrid vehicle applications in China and extending deployment of advanced gasoline fuel system technology, a multiproduct system launch for a major North American diesel pickup platform for a high-volume light commercial vehicle application. Components include supply of a fuel pump, rails, starter motor and SCR doser.

Moving next to capital allocation on Slide 10. Our approach remains unchanged. We are staying disciplined and balanced as we continue to invest in our business to support long-term growth, both organically and through strategic opportunities. That strengthen our competitive position and increase our long-term opportunities. At the same time, we are committed to maintaining a healthy balance sheet and returning cash to shareholders through dividends and share repurchases, which did not change despite preparing to execute the deal for the acquisition of stoba.

This approach reflects our strong financial position, our confidence in the cash generation of the business and our focus on long-term value creation. During the quarter, we returned $76 million to our shareholders in the form of dividends and repurchases with year-to-date repurchases of $163 million and dividends of $33 million. $151 million remains available under our current share repurchase authorization.

Since the spin-off in July 2023 through the third quarter of this year, we have repurchased $599 million worth of shares, representing approximately 26% of our original share count and paid $142 million in dividends. In total, we returned $741 million to shareholders through share repurchases and dividends. We've achieved all this while keeping net leverage below our target, preserving strong liquidity and continuing to fund the growth of the business.

Finally, I want to thank all of our team members who participated in our stoba Day 1 celebration and new work to make it happen. It was a great day, and we're thrilled to integrate the stoba products and associates into the PHINIA family.

I will now turn the call over to Chris to discuss our financial results in more detail and discuss our 2026 outlook.

Chris Gropp

Thanks, Brady, and thanks to all of you for joining us this morning. As a reminder, reconciliations of all non-GAAP financial measures that I will discuss can be found in today's press release and in the presentation, both of which are on our website.

In the third quarter, as Brady noted, we delivered results in line with our expectations and that reflect both the strength of our diversified portfolio and the benefits of our operational discipline. Diving into the details, which you can find in Slides 11 and 12 of the presentation, I will bridge our revenue and adjusted EBITDA for the quarter.

Specifically, during the quarter, we generated $912 million in net sales, an increase of 0.4% versus a year ago. Compared to Q3 2025, our top line rose 2.3% on positive volume and mix offset by pricing for a total change of $21 million. Sales in Europe and the Americas related to CV growth were offset by weakness in China LV and CV sales. We saw a negative contribution from the timing of tariff recovery mechanisms with customers of $21 million or down 2.3%.

Third quarter 2025 benefited from revenue associated with tariff cost recoveries, while third quarter 2026 reflected reductions in revenue related to tariff cost refunds and offsets. FX impact was mildly positive in the quarter by $4 million for an increase in sales of 0.4% FX movements were primarily a result of changes to rates for Chinese renminbi, Brazilian real, euro and Indian rupee against the U.S. dollar.

Moving next to the bridge on Slide 12. Adjusted EBITDA was $135 million in the quarter with a margin of 14.8%, representing a year-over-year increase of $2 million and a 20 basis point increase in margin. Positive product mix and tariff impacts were partially offset by customer pricing and timing of R&D costs. In addition, we continue to see elevated commodity and freight costs, most of which were covered by customer recoveries. On a year-to-date basis, these added costs have not yet fully been compensated. Corporate costs were flat year-over-year.

We continue to effectively execute our disciplined capital allocation strategy, successfully balancing significant cash return to shareholders with the potential for strategic accretive M&A. Cash and cash equivalents at quarter end were $436 million, while available capacity under our credit facilities was approximately $377 million for a resulting liquidity of $813 million.

Cash flow from operations was $87 million, a decrease of $32 million over third quarter 2025 due to withholding tax payments related to cash repatriation and the timing of working capital. Year-to-date, cash flow from operations was $231 million, an increase of $15 million over the same period of 2025. Adjusted free cash flow was $73 million in the quarter and $189 million year-to-date.

Share repurchases and dividends represented our primary use of capital with value back to our shareholders of $65 million and $11 million, respectively, in the quarter for year-to-date totals of $163 million and $33 million, respectively.

I also want to highlight continued improvements in our adjusted effective tax rate, or ETR, which was 23% for the quarter. Q3 adjusted ETR benefited from a lower estimated full year effective tax rate, as Brady noted, a result of ongoing tax structuring work the teams focus on and that lead to ongoing permanent positive rate reductions. These advances will result in improvement in our full year ETR projections, we will discuss shortly. But before I do, I want to give a big shout out to the tax, treasury and other functional teams, both internal and external PHINIA who support these initiatives and get the heavy lifting done.

We continue to generate strong free cash flow, improve our structures and organization to enable support of our near and long-term capital allocation priorities. Our broadening portfolio of products, solutions and services, coupled with our healthy balance sheet will enable us to continue to deploy capital with discipline, focused on delivering long-term sustainable profitable growth and ultimately creating value for our shareholders.

Moving next to Slide 13 to comment on our 2026 outlook. As we move to the back half of the year, we are further refining the full year guidance. Specifically, we're tightening the range of revenue by raising the low end of the range to $3.625 billion, up by $60 million and increasing the high end of our previous projection by $10 million to $3.675 billion. This increases the midpoint of our range of sales by $35 million to $3.65 billion or low- to mid-single digits, inclusive of FX and the addition of 1 quarter of stoba results.

Excluding expected FX, our growth is projected to be in the low single-digit area. We are now guiding adjusted EBITDA to be $500 million to $520 million with an EBITDA margin of 13.7% to 14.1%, raising our midpoint by 10 basis points. We believe the business is well positioned to continue generating meaningful free cash flow, and we've updated our 2026 outlook for adjusted free cash flow to $220 million to $250 million. We expect the adjusted tax rate to be in the 28% to 30% range as progress continues in addressing legacy tax structure headwinds.

Overall, we expect to continue to deliver strong results in 2026 as we drive operational efficiencies and search for new areas of growth for both segments.

As a reminder, our outlook does not account for recent or future government policy changes or other risks described in our filings with the SEC that could influence our operations or technical centers. This includes measures such as additional tariffs, tax reforms or any other policies that may either increase or decrease our revenue assumptions and/or alter our cost structure.

With that said, we believe PHINIA is well positioned to navigate global market conditions and changes, and we are confident in our operations and our ability to generate sufficient cash for our needs while also continuing to invest in the future.

As we look forward to the rest of the year, we look forward to managing the business as demand, risks and opportunities develop while providing solid returns to our shareholders. We want to thank all of you for joining us today on the call, and we are ready to open the call to questions.

Operator, please open the lines for questions.

Operator

[Operator Instructions] Your first question comes from the line of Bobby Brooks with Northland Capital Markets.

分析師問答

Robert Brooks

First one for me is just curious to hear an update on how the diversification efforts, specifically within the A&D space have went. First, just wanted to hear how the -- I believe 2 programs are going on right now that you're supplying. And then just how those have went and then the timing of the next 2 programs of those going into production?

And secondly, curious to hear about the pipeline of opportunities there over the next year or so. And if you could just give context to how that's evolved after winning your first few.

Brady Ericson

Sure. Thanks, Bobby, and thanks for the question. As we kind of mentioned in some of the -- in the remarks, the engagement on the A&D side continue to increase. We're now quoting and working with customers on 13 different programs. I think it was 8 different customers or 10 different customers that we're working with, and we think more of those will be decided here in Q4 and in the beginning of 2027.

We are at the Farnborough Air Show this summer, and that's really kind of picked things up. And so we're really confident. I think the stoba acquisition also adds another 2 locations that are A&D certified and adds more customers there as well. So I think that will give us a little bit of a boost as well as they bring different products than we were offering. So I think it starts to increase the portfolio of products we can offer to that -- those end markets.

Chris Gropp

And Bobby, just a clarification. You said 2 programs. We've won 3 programs.

Brady Ericson

We won 2 . Two different customers, 2 are in production. I think the third launches end of this year and the fourth goes into production early to mid next year.

Chris Gropp

I said 3 because 3 on the aerospace and one ground.

Brady Ericson

One ground, yes. And so again, I think things are continuing to evolve, and we're getting a lot of customer interaction. And now it's a little bit longer in their development time as they're doing a lot of validation testing across a number of different customers. So still very happy with our progress there.

Robert Brooks

Got it. That's great to hear. And then I'm sorry if I missed this, it was on the other call, but just could you break down the guidance lift between the stoba impact and then just the general like base business? Just wanted to get a little more clarity there.

Brady Ericson

Sure. Less than half of the adjustment is related to stoba on both the revenue and the EBITDA side. So the bulk of the increase was organic. A lot of that is driven, as we kind of mentioned, CV, North America and Europe continues to kind of have a strong order board and both is going quite well. And then also the ramp-up of some of the new launches that we had in Q3 is coming in stronger than expected. So those are kind of the 2 portions of it that's really kind of driving the organic side, slightly offset by continued China softness but we saw benefits on organic side as well as a little bit from stoba as well.

Robert Brooks

Got it. And then just piggybacking on that. I know last quarter, the guidance also had a guidance change and kind of the color you gave there was like didn't necessarily have the orders visibility to like keep the high end of the guide initially. And so is it right to think that kind of orders pretty notably picked up through third quarter and like into the start of the fourth quarter relatively to where they were at the end of July when we last spoke?

Brady Ericson

Correct. I think they really kind of filled in. And as I mentioned, I think the ramp of some new programs is coming in a lot stronger. So that's giving us a little bit more support. And our aftermarket team continues to just show strong numbers. And so they're continuing to show good penetration, good wins and filling in the revenue there as well. So I think the seasonality of our business is not going to be as normal because if you take the numbers from the midpoint of our guide, you're actually going to show our Q4 is going to have higher revenues than Q3 because of some of those launches and the CV strength that we're seeing.

Robert Brooks

Got it. And then just last one for me is, as you start to think of 2027, are there any specific growth opportunities or internal initiatives you've begun or plan to start in next year that the team is excited about? Or maybe it's just simply like, hey, like this pick up in orders we've seen in the last couple of months, we expect that to continue. Just wanted to hear thoughts there.

Brady Ericson

Yes. I mean we see the CV business in North America and Europe continuing to stay strong into next year. Again, from a comp standpoint, CV in the first half was much lighter than the second half of 2026. So that will be from a year-over-year perspective, we should be better there. A lot of the launches that we talked about in Q4, that's going to continue to help us into '27, and we think we're well positioned with these Q4 numbers going into 2027.

Operator

Your next question comes from the line of Jake Scholl with BNP.

Thomas Scholl

So can you just quantify the impact of tariffs and recoveries, both in the third quarter and on the guide. And then as we start to think about the '27 bridge, what were the total tariff recoveries in '26 that won't repeat in '27?

Chris Gropp

So in the quarter, I mean, you can see on the sales side, it was $21 million. And out of that, $7 million of it is nonrepeat. So it was a onetime one-off. The rest of it will continue to carry forward or it's just normal run rate. On a net basis, on the $3 million profit, $1 million of that is also nonrecurring or it is a onetime and done. The rest of it is ongoing.

On a year-to-date basis, I mean, we're running a little bit ahead. We're running total year-to-date, $16 million in terms of changes on sales with about half of that being one-off and the rest is run rate. And we're ahead on -- we did a catch-up from last year. Last year, we ended the year missing mid-single-digit millions on recoveries. That is baked into this year. We've recovered those. And so going into Q4, it's going to be a nonevent. We finally get to the point where it's just baked in. You're not going to see a lot of changes. It's not going to affect or down the results at all. And then going into '27, I mean, other than the one-off issues that we've had this year, I think you'll see very little effect into the numbers at all.

Brady Ericson

Provided they don't change anything again.

Chris Gropp

Yes.

Thomas Scholl

That was very helpful. And then now that you guys have closed the stoba acquisition, how are you thinking about capital allocation going forward? Are you looking to pursue additional M&A or take advantage of the stock's recent pullback to lean into share repurchases?

Brady Ericson

Yes. I mean we're going to continue to take a look at it on a quarterly basis. We've always got a pipeline of M&A that we're looking at. But again, we're going to be cautious and making sure that it makes sense to our -- from a strategic standpoint, it makes sense and the valuation that we're paying makes sense compared to our share price. As you saw in the quarter, I agree, I think we kind of upped things probably higher than folks thought on the repurchases. And I think our stock is very attractive as far as an investment.

And so as we stated in the call, we don't see the stoba acquisition affecting our decision-making on buying back stock or any acquisitions kind of going forward, we're down at 1.3x net leverage at the end of the quarter. We'll go up a little bit with the purchase of stoba, but so does EBITDA also goes up. And so we're still in a very strong liquidity and net leverage position, and we continue to execute our capital allocation strategies without concern.

Operator

Your next question comes from the line of Joe Spak with UBS.

Gabriel Gonzales

This is Gabriel Gonzales on for Joe Spak. On commodity and freight, you mentioned earlier that you haven't yet been fully compensated year-to-date. I guess of that remaining unrecovered cost, how much has already been set in stone in customer agreements or contractual recovery mechanisms are set in place versus how much still needs to be negotiated through? And should we think about that unrecovered piece as a potential headwind also into 2027?

Chris Gropp

No, it will actually be a tailwind going into 2027, Gabriel. We've recovered the majority of it, but you're talking mid- to low single-digit millions in terms of what we haven't yet recovered and that are still ongoing. And it's just the fact that the recovery mechanism is on a longer basis than some of our other normal ones. The majority of what we have on commodity is recovered already just by contract. There's just going to be some tailwind in Q4 and going into next year that the rest of that recovery will be coming in. It's not massively material numbers at all.

Brady Ericson

Yes. In many ways, I think a little bit of tariff tailwind that we had was offset by the headwind we had on commodities and other things. And so it's...

Chris Gropp

It was even in the quarter. It will be a tailwind going into Q4 and a little bit of a tailwind going into next year, but you're not talking numbers that would make a lot of difference to most people. For the most I will sum it up that.

Gabriel Gonzales

Yes. And just looking at the implied 4Q guidance, so the tariff -- the net tariff benefit obviously helps somewhat. And when I look at the incrementals year-over-year, I'm getting to roughly 30%, kind of above the sort of 20%, 25% we typically expect. You also mentioned talking about R&D stepping down from that mid-3s range to -- in the first half to that mid-2s range. So how much of that stronger 4Q conversion is kind of being driven by the lower R&D versus price cost, productivity mix or some of the other factors?

Brady Ericson

Yes. I mean R&D is helping. R&D fluctuates, say, between 2% and 4%, and it averages at 3%. Last year, we just had a different cadence. It's when we get the recoveries. And so that's always going to cause a little bit of noise in our numbers. And we expect based on the work that we're doing, we see a lot of recoveries from customers in Q4 that's going to keep our R&D percentage in the mid-2s type area. So that's obviously helping a bit. It was -- last year, I think we were what, 13% EBITDA or so. And this year, the midpoint of our guide has us at a little over 14%. And so half of that or a portion of that is going to be R&D. But I think in general, the teams are executing well. We're seeing some good tailwinds from higher sales with some of those customer launches and a stronger CV business in North America and Europe. So I think it's putting us in a good position for 2027.

Chris Gropp

Gabriel, the other thing that's going on in Q4 is normally, we would see some trail-off of aftermarket sales in the fourth quarter. This year, we are not seeing that. So the implication is that we're seeing a richer amount of mix -- volume and mix in the aftermarket sort of similar to Q3 going into Q4. So that's the other thing that's driving the conversion on an upward because as long as our conversions -- as long as we have a stronger mix of aftermarket, it's always going to drive a richer conversion.

Operator

There are no further questions at this time. I will now turn the call back to Brady Ericson, CEO, for closing remarks. Please go ahead.

Brady Ericson

Thanks, everybody. We delivered three strong quarters so far this year and expect this momentum to continue. It showcases the benefits of our diversified portfolio, our disciplined execution and the strength of the markets we serve. I want to thank our teams for their continued commitment and execution. We remain focused on delivering consistent growth, expanding profitability and building a strong PHINIA for the long-term. Thank you for joining us this morning, and have a nice day.

Operator

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