Atmus Filtration Techs (NYSE:ATMU) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/817861101
Summary
Atmus Filtration Techs reported a 14.6% increase in sales for Q1 2026, largely due to the acquisition of Cook Filter, with total sales reaching $478 million.
The company completed the acquisition of Cook Filter, marking its entry into industrial filtration markets and expects full integration by early Q3 2026.
Adjusted EBITDA for the quarter was $95 million, or 19.8% of sales, compared to $82 million, or 19.6%, in the same quarter last year.
Atmus Filtration Techs returned $12 million to shareholders in Q1 through share buybacks and dividends, with plans for $20 to $40 million in share repurchases for 2026.
The company's future outlook includes revenue guidance of $1.945 to $2.015 billion for 2026, representing a 10-14% increase over 2025, with an adjusted EPS range of $2.75 to $3.00.
Management noted potential risks from the Middle East conflict, which could impact input costs and sales, but these have not yet been factored into the 2026 guidance.
Operational highlights include the opening of a new laboratory facility and ongoing investments in leadership development through the ATMOS Way program.
Full Transcript
Krista (Operator)
Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator today. At this time I would like to welcome you to the Atmus Filtration Techs First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, simply press Star, then the number one on your telephone keypad. And if you'd like to withdraw that question again, press star one. Thank you. I would now like to turn the conference over to Todd Cirillo, Executive Director of Investor Relations. Todd, please go ahead.
Todd Cirillo
Thank you, Krista. Good morning everyone and welcome to the Atmus Filtration Techs First Quarter 2026 Earnings Call. On the call today we have Steph Disher, Chief Executive Officer and Jack Kinsler, Chief Financial Officer. Certain information presented today will be forward looking and involve risks and uncertainties that could materially affect expected results. Please refer to the slides on our website for the disclosure of the risks that could affect our results and for a reconciliation of any non GAAP measures referred to on this call. For additional information, please see our SEC filings and the investor relations pages available on our [email protected] now I'll turn the call over to Steph.
Steph Disher (Chief Executive Officer)
Thank you Todd and good morning everyone. Today I will provide an update on our first quarter results and share details of our progress executing our four pillar growth strategy. I will also provide updates to our outlook for 2026. Jack will then speak to our financial results and segment performance. I want to begin by recognizing Amazonians for their ability to navigate continued challenging market conditions all while delivering strong financial results. To start the year, our global team remains focused on solving our customers filtration challenges and delivering on our four pillar growth strategy. During the first quarter we completed the acquisition of Cook Filter which represents our first step toward advancing our strategy to expand into industrial filtration. This establishes our industrial air filtration platform and expands our portfolio into commercial, industrial, H VAC and high growth end markets including data centers and healthcare. We have made significant progress integrating CookFilter into the Atmos organisation. We have exited over 50% of the transition services agreement and expect all remaining integration activities to be completed early in the third quarter. The combination of CookFilter's deep industry experience with our filtration expertise and footprint, along with a strong cultural alignment will provide benefits for all stakeholders. With the acquisition, we will report on two business segments in 2026 Power Solutions which serves global on highway and off highway equipment market power and industrial solutions where the Cook Filter acquisition will be reported. Now let me provide an update on our capital allocation Strategy. During the first quarter we returned $12 million of cash to shareholders consisting of 7 million of share buybacks and 5 million of dividends. We have 62 million remaining on our share repurchase authorization and expect share repurchases to be 20 to 40 million in 2026. Behind our strong performance is our people and I want to take a moment to provide some insight into how the culture at Atmus is driving momentum in the overall business. As I have shared previously, we have developed and embedded the Atmus Way as a way of working with which incorporates our purpose, our values, our behaviours and our strategy. As part of the Atmus Way, we are committed to being learning oriented. Embracing a learning mindset will enable our growth strategy and support the scaling of our operations during the first quarter of 2026. We continue to invest in building future generations of leadership for ATLAS at an executive level. We launched our second cohort of our Executive Development Program. This program is focused on building executive leadership capability over two years. Additionally, we launched our Leadership Foundations Program focused on developing frontline leaders with foundational leadership skills grounded in our Atmus values. We have 200 managers and supervisors currently in the program and anticipate all frontline leaders to complete this by the end of 2027. I am inspired as our leaders around the world participate in these programs and develop both personal and professional skills to lead our organisation. Now let's turn to our four pillar growth strategy. Our first pillar is to grow share in FirstFit. We continue to win with the winners by growing our long term partnerships with leading global and regional OEMs across a broad range of applications. Recently we announced the opening of a new state of the art laboratory facility at our Compare Frames location, reinforcing our commitment to advancing filtration technology and reducing testing lead times for our customers. This modernized testing facility strengthens our global laboratory network which allows us to work collaboratively with our customers. Our second pillar is focused on accelerating profitable growth in the aftermarket. We have partnered with leading global and regional OEMs who continue to grow their aftermarket business and expand market share. These OEMs trust our industry leading products to solve their filtration challenges and protect what is important. Additionally, we are expanding our product coverage in independent channels with new distributors. This allows us to provide our industry leading fleetguard and Cook Filter branded products to our customers in their desired service channel. Our third pillar is focused on transforming our supply chain. We have established a strong distribution network which has enabled us to enhance the customer experience. We have raised our delivery and on shelf availability metrics to all time highs, ensuring our customers have the right products when and where they need them. Our fourth pillar is to expand into industrial filtration markets. The execution of our first acquisition with CookFilter enables us to unlock operational, commercial and growth synergies through the alignment of CookFilter's leading industrial air filtration brands and our advanced technology capabilities in filtration media. As we continue to review a robust pipeline of opportunities, we will focus on industrial air to build a platform of scale by leveraging Cook filter and creating value through targeted bolt on acquisitions. While our primary focus is industrial air, we will remain opportunistic in evaluating industrial water and liquid filtration assets with the goal of identifying an anchor investment that can serve as the foundation as we build out our broader industrial platform over time. As demonstrated by the CookFilter acquisition, we remain focused on executing a disciplined approach to develop opportunities which deliver long term shareholder value. Now let's discuss our first quarter financial results. Sales were 478 million compared to 417 million during the same period last year, an increase of 14.6% largely driven by the acquisition of CookFilter. Adjusted EBITDA was 95 million or 19.8% compared to 82 million or 19.6% last year. Adjusted earnings per share was $0.69 in the first quarter of 2026 and adjusted free cash flow was 33 million. Now I will discuss our market outlook for 2026. The conflict in the Middle east introduces uncertainties to the outlook for the year. This includes uncertainties regarding impact on input costs, our ability to sell products in the Middle east and broader macroeconomic impact. At this stage, we have not incorporated adverse impacts into our guidance associated with the Middle east conflict, but it is an ongoing risk factor that we will continue to monitor. Now let's turn to our outlook for the Power Solutions segment. In the aftermarket, overall freight activity remains muted and we expect the market to continue at current levels and be relatively flat year over year. In our first fit markets, customers have indicated strengthening activity as the year progresses related to cyclical market recovery and pre buy activity. Ahead of 2027. US regulatory changes Our outlook for heavy and medium duty markets in the US is now expected to be in a range of up 5% to up 15% compared to 2025. In our industrial Solutions segment, we continue to expect favorable market conditions and we anticipate the market to contribute 1 to 4% of growth. We expect share gains to deliver an additional 1 to 2% of share growth and overall pricing is expected to provide approximately 1% of revenue growth. As we noted last quarter, some tariff pricing implemented in 2025 will not carry into 2026 due to changes in status of global trade agreements, implementation of offset and the actions we have taken to mitigate tariff impacts based on tariffs. In effect as of April 30, we expect the impact of tariff pricing to be flat relative to 2025 on a full year basis. We will continue to be nimble and adjust pricing as necessary should the tariff environment change and we expect to remain price cross neutral. The US Dollar is expected to weaken year over year and provide an approximate 1% revenue tailwind. In summary, our expectations for Power Solutions total revenue will be in a range of 1.79 billion to to 1.85 billion, an increase of approximately 3% at the midpoint from the prior year. In Industrial Solutions, we expect revenue to be in the range of 155 million to 165 million, which includes revenue from the Cook Filter closing date of January 7th. Taken together, we expect total company revenue to be in a range of 1.945 to 2.015 billion, an increase of 10 to 14% compared to 2025. We are maintaining our full year adjusted EBITDA guidance of 19.5% to 20.5%. As noted, the conflict in the Middle east is expected to put pressure on commodity prices throughout our supply chain, most notably in petroleum based components such as plastics. Should this occur, we would expect to recover these inflationary costs. However, there may be a timing lag for recovery. Lastly, Adjusted EPS is expected to be in a range of $2.75 to $3.00. Before I turn the call over to Jack, I want to thank our team members around the world for delivering a strong quarter and for your continued focus on our customers. Now I will turn the call over to Jack.
Tess
Thank you Tess and good morning everyone. Our team delivered strong financial performance in the first quarter of 2026, even though we continued to experience uncertain global market conditions. Sales in the first quarter were 478 million compared to 417 million during the same period last year and increased at 14.6%. Power Solutions delivered sales of 439 million compared to 417 million in the prior year, an increase of 5.4%. The increase was primarily due to favorable foreign exchange of 4% and higher pricing of 2% volume was down slightly year over year. Industrial solutions sales were 38 million resulting from the acquisition of Cook Filter. Gross margin for the first quarter was 137 million compared to 111 million in the first quarter of 2025. The increase was primarily due to increment incremental margin from the acquisition of CookFilter. Increases in pricing, the cessation of one time separation costs and the favorable impacts of currency partially offset by higher logistics and duties costs. Higher manufacturing costs along with lower volumes selling, administrative and research expenses for the first quarter were 59 million compared to 55 million in the prior year. The increase was primarily due to people related expenses and information technology consulting. Joint venture income was 8 million in the first quarter compared to 9 million in the prior year quarter. The decrease was primarily due to a 3 million expense in our India joint venture related to a benefit obligation remeasurement driven by recent labor law changes. Other income was an expense of 7 million compared to income of 1 million in the first quarter of 2025. The increased expense was primarily due to the CookFilter acquisition consisting of 6 million in transaction costs. Excluded from adjusted results are one time costs related to the integration of CookFilter which for the full year 2026 is expected to be in the range of 3 to 8 million along with approximately 6 million of transaction costs. Additionally, we will exclude intangible asset amortization resulting from the CookFilter acquisition which is expected to be in a range of 10 to 15 million. Adjusted EBITDA in the first quarter was 95 million or 19.8% compared to 82 million or 19.6% in the prior period. Adjusted EBITDA for Power Solutions was 86 million or 19.6% compared to 82 million or 19.6% last year. Industrial Solutions adjusted EBITDA with 8 million or 21.9%. Adjusted Earnings per Share was $0.69 compared to $0.63 last year. Adjusted Free Cash Flow was 33 million this quarter compared to 20 million in the prior year. Now let's turn to our balance sheet and the operational flexibility it provides to execute on our growth and capital allocation strategy. We ended the quarter with 210 million of cash on hand. Combined with the full availability of our 500 million revolving credit facility, we have 710 million in available liquidity. Our strong liquidity provides us with operational flexibility to effectively manage our business and to execute growth opportunities. Our cash position and continued strong performance along with inorganic growth from the acquisition of CookFilter has resulted in an estimated net debt to adjusted ebitda ratio of 2 times for the last 12 months ended March 31st. I want to echo Steph and thank Amazonians around the world for all of their hard work and dedication to deliver a strong start to 2026. Our disciplined execution of our four pillar growth strategy, underpinned with a strong balance sheet will allow us to continue to drive growth and create long term value for all of our stakeholders. Now we will take your questions.
OPERATOR
Thank you. If you would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question again, press Star one. We do ask that you limit yourself to one question and one follow up for any additional questions. Please re queue and your first question comes from Quinn, Fredericton Frederickson with Baird. Please go ahead.
Quinn Fredericton
Yes, thank you. Just wanted to start off with a question about pricing. Seemed to come in a bit stronger than you were expecting in 1Q, but sounds like you haven't changed your expectation for the full year at 1%. First, just can you confirm that's accurate and if so, can you impact why that would be the case? Given it sounds like input costs are moving up,
Jack Kinsler (Chief Financial Officer)
do you want to take a little Absolutely. Thanks Quinn for the question. So overall I would say our pricing expectations for the full year you remain 1%. As we highlighted as we initiated our guide on our last call, part of what you're seeing there is the evolution of tariff dynamics. And so we talk about that pricing figure of 1%. It is holistic, including both base pricing actions that we took in January, for example, as well as tariff pricing. And so as we move through the year that tariff pricing will reflect the evolution of the tariff dynamics. And as you compare year on year you have different puts and takes as tariffs went up and down relative to specific countries. And so as we had highlighted, we do expect the first quarter from a year over year comparison to be our strongest pricing quarter. And then as tariffs change and as Steph alluded in her comments, we expect the full year impact from tariffs to be essentially flat year over year in terms of the input costs, you know, and whether or not we will taking be taking price actions for that, you know, as we stand here right now, we're keeping a vigilant eye on those costs. As we noted, we will certainly look to recover those costs either through different things we can do in our supply chain or through pricing. As you know, base pricing is generally done at the beginning and the middle of the year we would not expect necessarily similar dynamics to what we employed for tariffs to counter those input cost headwinds. And so that's that inherent timing lag that may exist should input costs become a dynamic this year.
Quinn Fredericton
Thank you, that was helpful. And then second question would just be on share gains, any estimate on what that contributed in the quarter and then any Update to the 150 basis points that you're guiding to for the year.
Steph Disher (Chief Executive Officer)
Great, thanks, Quinn. Let me get started on that one. Let me just step back and look at the quarter and the performance overall. Overall we're really pleased with the performance in the quarter. It was strong growth. We saw 14.6% growth in the quarter. And if I just talk specifically, I'll dive a bit more deeply into Power Solutions. We were very happy with industrial solutions, about 6% growth in the quarter. So a very good start to the acquisition of Cook Filter and a shout out to that team who performed very well. If I look at power solutions, 5.4% growth year on year, quarter on quarter, that was made up of, as Jack discussed, 4% in FX and 2% in price with volume overall slightly down. And there's a mix in there of market conditions and share and some other one time impacts that we experienced in the quarter also. So we saw the market was down year on year. Overall we'd say that was about a percent down. First bit was 8% down in our numbers and aftermarket slightly down. And then if you start to unpack some of the specific one time impacts, we saw the Middle east, we had impacts on our ability to deliver to our customers in the Middle East. In the month of March that impacted us by about 4 million in sales, about 1%. That was because we couldn't deliver to our customers for a period of time because of restrictions in the supply chain. We have mitigated those impacts and are now able to overcome that. Obviously the Middle east conflict is an ongoing challenge and we continue to monitor it and seek to mitigate those impacts. But in the quarter it was a 1.1% impact that we are not expecting to continue. We also saw some stocking dynamics across the world, some within Latin America and Southeast Asia that we expect sort of timing. So overall share was about in the middle of that 1.3% level, right on top of the guide. And where we're seeing it gives us confidence to continue to maintain our guide through the year. And in addition, we're seeing positive inflection in the first BIP market. We've already seen that coming through in Our build rates and orders from customers. That gives us confidence in the second half guide underpinned by a recovery in first bit markets.
Quinn Fredericton
Appreciate all those details, thank you.
OPERATOR
Your next question comes from the line of Joe o' Day with Wells Fargo. Please go ahead.
Joe o' Day
Hi, good morning. Can you unpack Middle east uncertainty a little bit more? Just from both kind of a revenue and cost consideration perspective and based what you see on current market prices, how you think about the potential cost headwinds there and then also you talked about a little bit of supply chain disruption in the quarter. But, but stepping back, what you see is a potential demand response to ongoing conflict and a revenue impact that you consider.
Steph Disher (Chief Executive Officer)
Yeah, good morning, Jo, and thanks for the question. The Middle east is an ongoing uncertainty for all of us. I guess we've been just over 60 days in the conflict now and I'm certainly in no position to predict how long that continues. The way I'm thinking about the impact of the Middle east on our business really is in three key areas. The first of those is cost pressures and input cost pressures. It would be increases in costs related to inflationary pressures or supply shortages. We see the biggest impact for us there in plastics or petroleum based products. Right now we are not seeing a lot that is already impacting or is baked into our forecast. We're really monitoring this as a risk at this point. But an expected, you know, we'll expect to see some pressure on costs as the year plays out. Jack spoke to that. We'll obviously look to mitigate those. But there may be some lag here in the second half on pricing depending on how the conflict continues. The second dimension that may have an impact on our business is our sales in the Middle East. For context, our sales in the Middle east were 38 million in 2025, so about 2% of our overall revenue. We did see a 4 million impact in the first quarter. We are not expecting that to continue through the remainder of the year. But obviously we're watching to see how the conflict continues to evolve. And then the third piece which you rightly pointed out is the broader business confidence impact on global demand. And it's very difficult to predict that. Obviously our aftermarket is heavily weighted towards economic activity, freight activity around the world and particularly in North America. At this stage we do not see the conflict having an impact on that, but we continue to monitor business confidence and the projection that we're getting from our customers as to the outlook. But at this stage we think that the view of a flat outlook on aftermarket markets year over Year still holds.
Joe o' Day
Those are helpful details. Thank you. And then my other question is on the Coke Filter and with respect to your pillar of accelerating profitable growth in the aftermarket and just any color on how different the distribution network is there and some of the work that's underway or opportunities that you've identified in the near term to go after some of that aftermarket opportunity.
Steph Disher (Chief Executive Officer)
Great question. As I alluded to, I'm really pleased with the start of the acquisition of the Cook Filter business. They had a strong quarter, 6% revenue growth in the quarter and really we're progressing very well with the integration. So the integration we expect to sort of wrap up here in early in the third quarter and so very pleased with how that's beginning. And the team are very focused on share gains in their markets and orienting the focus of their growth towards higher growth end market. There are some similarities between the distribution channel and obviously that overall broad coverage of our products across a very broad distribution network. That strategy holds across both our Power Solutions business and our industrial solutions business and some of our industrial broad based distributors that we've signed up in recent times do have coverage across both our segments. So we'll look to leverage the synergies across those distribution channels. Right now I would say we see plenty of opportunity with the filtration with the Cook Filter business continuing to target its growth strategy and orienting towards higher end growth market and you know, doing the integration well.
Joe o' Day
Got it, thank you.
OPERATOR
Your next question comes from the line of Tammy Zakaria with JP Morgan. Please go ahead.
Tammy Zakaria (Equity Analyst)
Hi, good morning. Thank you so much. I wanted to revisit the volume comments you made. So for Power Solutions, volume was slightly down against a down number last year. Do you expect volumes to turn positive later in the year in any quarter maybe driven by aftermarket or force fit due to pre buy? So how are you thinking about volume in Power Solutions through the rest of the year? Good morning Tammy and thanks for the question. So yes, we do expect volume to continue to grow quarter over quarter through this year. Obviously second quarter is a stronger, is a stronger quarter for us. And then we see the first fit dynamics in the third and fourth quarter starting to come in. So we talked about the heavy duty and medium duty market adjustment to being 5 to 15% up year over year. We expect that to be all second half loaded. We're starting to see that progress through the second quarter. We've also already seen increases in build rates and so we'll start to see that trend up through the second through the second quarter. And through the second half. And then from a share perspective, we see the 1 to 2% share as being about the right balance for us throughout this year. We still see a path to how we'll deliver that and we see aftermarket. Aftermarket was challenged here in the first quarter. We continue to see it operating pretty flat year over year is the assumption underpinning our guide. But overall that leads you to sort of a volume growth environment through 2Q and second half. Understood. That's very helpful. Color and question on cook filters. I think I just heard you say 6% revenue growth. Is that all organic? And if it grew 6% you're seeing the market would grow 1 to 4. So was share gain over 300 basis points in the quarter and do you expect sort of 6% type ish growth year over year for the rest of the quarters in the year? Yeah. So we've given you a pretty wide range on industrial and I appreciate that it is a smaller number. So as we, as we find our way here, you'll give us some grace. So our full year guide is a growth of 1 to 8% with a midpoint of 4. If I look at the first quarter performance, it's right where I would expect it to be at about 1% price, 2% share and about 3% market growth is, is what we're seeing. We expect that market growth to be around that level. So I'd still position it for now around the midpoint of that 4%. But the range we're suggesting is 1 to 8 for industrial. Understood, thank you. Thanks Tammy.
OPERATOR
Your next question comes from the line of Bobby Brooks with Northland Capital Markets. Please go ahead.
Bobby Brooks (Equity Analyst)
Hey, good morning team and thank you for taking my question. Now that you've had Coke under the, under the hood for a little longer than three months, I'd be curious to hear what are the most compelling cross seller growth opportunities you see that are directly arising from your ownership and then secondly opportunities on the cost and manufacturing side.
Steph Disher (Chief Executive Officer)
Great, thanks Bobbi. So let me just give them an outline of how I'm seeing the opportunity of cookfilter and then I'll ask Jack to talk through the integration activity and the supply chain costs. So look, firstly, as I said, really happy with the first quarter performance and how you know when you do due diligence of an acquisition. Obviously we were very thorough in our due diligence. But you then get to work out exactly, you know exactly what is under the, you described it and here's what I would say is the opportunity to. This was really an adjacent market step for us and about expanding into new markets. And we really want to support fully the Cook Filter business to do what they do well and they have a very clear plan to continue to expand their share in this 2% range with their customers. They've got a strong favorable market condition and we expect continued growth at assets at a higher rate than our power solutions business into the future. In terms of where strategically I want to direct the opportunities of the team. It really is around products, customer and channels to higher growth end markets and that includes data centers and healthcare. But it's also a very strong and robust set of opportunities we have across the broader industrial and commercial H Vac. So that's how I would describe the growth strategy. Very pleased with how it started and I'll ask Jack to comment on how we see the opportunities from a cost and synergy perspective.
Jack Kinsler (Chief Financial Officer)
Thanks Steph and thanks Bobbi for the question. So first of all, I would just echo Steph's comments. You know we continue to be very excited about the acquisition of CookFilter. Really pleased to see a strong cultural fit between the two organizations which really makes collaboration all that more possible. First quarter performance also demonstrates the margin accretion that the business can deliver to our overall portfolio and overall potential for the business. I'll start first on integration. You know we've made significant progress on the integration activities. Fortunately we gained a lot of experience through our separation for Cummins and that has really served us well I would say as we now integrate this business and they go through their own separation from their priority prior parent. We've completed, you know, about half of the TSAs and are on track to complete the integration by early in the third quarter. As I shift then to synergies, you know it's been really great to see the teams come together share learnings between the two organizations about not only the cost synergies that we outlined when we highlighted the 4 million of potential things like supply chain and procurement, savings etc. But also other potential growth areas that Steph was alluding to where we can use our media expertise or some of our product know how or vice versa use their products know how and products to, you know, complement failed upside into each other's end markets. So excited about the future as you know, early days just yet. We're you know they were closed in January. So excited about the potential and we'll certainly update you all as those opportunities come into fruition.
Bobby Brooks (Equity Analyst)
Absolutely. Really appreciate the color. And then maybe for Jack, just curious to talk about are you guys, any outlook on tariff recoveries or just how to be thinking of that playing out this year? If so,
Jack Kinsler (Chief Financial Officer)
yeah, thanks Bobby, for the question. I would say first, just to reiterate, our overall approach to tariffs remain unchanged. We will continue to pursue all of our available avenues to mitigate tariff exposure, importantly minimize the impact on our customers, and our overall objective remains unchanged, to be price cost neutral. There has been of course some evolution from a tariff perspective, so let me just give some color to that. As you all know, effective in early April, the Section 232 Steel and Aluminum tariffs went into effect. I would just say that, you know, there's an immaterial number of our products that qualify under that category. Really because the most of our products are already qualified under the Section 232 tariffs around heavy duty medium duty products. So not really an incremental change there for us. And because they qualify under the prior heavy duty and medium duty section 232, the USMCA exemption that we've been availing ourselves of, it's still valid and something we can take advantage of. You know, overall from a refund standpoint, as you all know, a refund mechanism has been established using the CAEP system as of mid to late April of this year. Like other companies, we expect refund requests will be fulfilled once the mechanism is, is fully operational. These refunds, you know, to our understanding, will be provided in phases and we're following the normal steps with respect to filing our claims based upon their classification and the status of the entries. I would just say that the timing of those refunds and corresponding treatment in the market in terms of how those ultimately flow through is still highly uncertain. But we'll certainly keep you updated as we gain more clarity there.
Bobby Brooks (Equity Analyst)
Appreciate the caller.
OPERATOR
Your next question comes from the line of Andrew Oban with Bank of America. Please go ahead. Andrew. I'm sorry, we are having a hard time hearing you.
David Ridley Lane
Sorry about that. This is David Ridley Lane on for Andrew Oban. Question on the potential impact for you from higher diesel prices as you're thinking about your commodity freight. If you snap the line today and assume that diesel prices remained constant, what kind of drag or year of year headwind would you be facing?
Jack Kinsler (Chief Financial Officer)
Yeah, yeah. So overall I would say, David, again from an input cost perspective, we're, you know, we're monitoring it. That's, you know, one of many, I would say, dynamics that flow through not only directly to, I guess us, but in terms of freight costs, et cetera, but also to end users in our space. Right. Who are navigating, you know, higher input costs and a challenging freight dynamic overall right now in terms of, you know, the impact of those costs. Again, as Seth said, we're more in the monitor phase and would expect to react to those in terms of pricing or other supply chain maneuvering to offset. So our guide, as stated, really is in more of a watch and see mode on those just now and we'll continue to update that as we move through the year.
David Ridley Lane
Got it. And the other question I had just real quickly was on the aftermarket performance this quarter. I know you quantified the Middle east headwinds, so that was a point overall. You also mentioned some destocking and latam and Southeast Asia. I just want to better understand, was this a surprisingly light quarter for aftermarket and any thoughts you have on reasons why or what you've seen? Maybe in April, was there a little bit of recovery? Thank you.
Jack Kinsler (Chief Financial Officer)
Yeah, thanks, David. Look, I think the first quarter is always a little challenging for us. There are some dynamics between fourth quarter and first quarter and we see this in North America a little bit. If you look at our published results of our customers, you see this reflected as well. But where there is some, you know, stocking up at the end of fourth quarter and then you see some timing impacts of that into the first quarter. So I think there is some impact there in the first quarter. We do see improved volume performance throughout the year. Second quarter is in aftermarket. Second quarter is the strongest quarter for us. And then obviously we see the tailwinds on the first in the second half. So hopefully that gives you some additional insight.
David Ridley Lane
Thank you very much. Appreciate it.
OPERATOR
And we have no further questions in our queue at this time. I'd now like to turn the conference back over to Todd Cirillo for closing comments.
Todd Cirillo
Thank you, Krista. That concludes our teleconference for the day. Thank you for participating and for your continued interest. Have a great day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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