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 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'll make forward-looking statements 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. With that, it is my pleasure to turn the call over to Brady.
Thank you, Kellen, and thank you everyone for joining us this morning. I'll start with some overall comments on the fourth quarter and full year, discuss financials at a high level, and then provide some thoughts on our outlook for 2026. Chris will then provide additional details on our fourth quarter, 2025 full year financials, and discuss our 2026 financial outlook. We will then open the call for questions. We delivered a solid finish to 2025, with full year results in line with our expectations, despite a dynamic and often uncertain macro and industry environment. What stands out to me as I look back on the year is the resilience of our business, where diversification across regions, customers, end markets, and products continue to serve us well, with no single end market and region that defines PHINIA.
Our balance allows us to perform consistently, even as conditions shift around us. Before we get started on numbers, you'll notice some changes as we recast some numbers between the Fuel Systems and Aftermarket segments. As we've been driving operational efficiencies, a significant portion of the original equipment service, or OES sales, will now be distributed from the fuel system segment and not the Aftermarket segment. We have also further enhanced our end market breakdown and have separated out our Off-Highway, Industrial, and Other sales, which includes construction and agricultural machinery, vocational vehicles, marine, industrial applications, power generation, aerospace and defense, and all other. Finally, we've also updated our calculation method for adjusted free cash flow conversion to be more in line with industry standards. No change in expectations around the strong cash generation of the business. Now let's jump into the fourth quarter results on Slide 4.
For the third consecutive quarter, we delivered year-over-year growth in both the Aftermarket and fuel system segments. Total net sales in the quarter were $889 million, up 6.7% from the same period of the prior year. Excluding FX impacts on the contribution of SEM, revenue was up 2.3%. We reported Adjusted EBITDA of $116 million for the quarter, up $6 million, and a margin of 13%. Total segment adjusted operating income was $112 million and a 12.6% margin. The fuel system segment delivered a strong quarter, with sales of $560 million, up 7.9% and adjusted operating margin of 10.7%.
The Aftermarket segment had sales of $329 million, up 4.8%, with adjusted operating margin of 15.8%. Adjusted earnings per diluted share, excluding non-operating items, was $1.18 for the quarter, compared with $0.71 in the same period of the prior year. Our balance sheet remained solid, with cash and cash equivalents of $359 million and $859 million of total liquidity. We reduced our debt by $24 million, and our net leverage ratio came down from 1.4x to 1.3x, all while returning $40 million to shareholders via dividends and share repurchases. The fourth quarter performance underscores the durability and resilience of our business amid a complex and uncertain operating landscape.
It reflects the advantages of being a diversified industrial company by serving a broad mix of regions, customers, end markets, and products. Moving to Slide 5. We continued to win new business across our core and adjacent markets. Throughout the year, this included multiple wins in light vehicle, commercial vehicle, Off-Highway, Industrial, aerospace, and alternative fuel applications. A few key fuel system segment wins in the fourth quarter included: securing our third aerospace and defense contract for a post-combustion fuel valve, highlighting our proven capabilities and strengthening our position in the sector. Key truck contract extensions with global commercial vehicle OEMs, reaffirming the strength and longevity of our strategic partnerships, and a new business win in India with a leading OEM for port fuel injectors used with compressed natural gas, underscoring our dedication to lower carbon mobility and commitment to alternative fuels. Now to Slide 6.
The Aftermarket segment remained a steady and resilient contributor throughout the year. Demand continued to be supported by an aging global vehicle fleet and expanding portfolio.... Our strong brands and service continue to resonate with customers and distributors. We are winning both new business and expanding relationships with existing customers. Importantly, these wins were across diverse geographies, further strengthening our position in the independent Aftermarket. We also continued to accelerate the pace of expanding our offerings and coverage by adding approximately 5,800 new SKUs across our portfolio. Slide 7 highlights the diversification of our business across regions, customers, and end markets. This is supported by manufacturing facilities close to our customers in all key regions. We also benefit from the flexibility to redeploy manufacturing and human capital across these opportunities.
As noted earlier, we provided additional end market granularity by splitting out CV and other into medium- and heavy-duty on-highway CV and Off-Highway, Industrial, and Other. This shows the progress we've made in expanding our presence in this end market, as it now represents 6% of our sales. Moving next to capital allocation on Slide 8. We remain disciplined and balanced in our approach to capital allocation while remaining opportunistic about M&A. Since the spin, we've repurchased 9.8 million shares, which is roughly 21% of our original share count. In total, since the spin, we returned over $500 million to shareholders via share repurchases and dividends. We accomplished all this while maintaining net leverage below our target level, sustaining robust liquidity, closing on an opportunistic acquisition, and supporting the organic growth needs of the business.
We also announced a few weeks ago an 11% increase in our dividend and a $150 million increase in our share repurchase program. Needless to say, our capital allocation decisions will always be based on how we can maximize long-term shareholder value. Moving to Slide 9. We had some significant milestones in 2025, completing our first acquisition, receiving our aerospace quality certification, along with our first program launch, and delivering strong financial performance in a volatile market. Also of note, 2025 is the first full year without the impact of PSAs in contract manufacturing with our former parent. Investors have been rewarded with a total shareholder return, which includes share price appreciation and dividends over the two-year period of 2024-2025 of 140%.
Looking forward to 2026, we expect our journey to continue on the path we set from the beginning, differentiating via product leadership, focusing on markets that will support our goal of sustainable growth, maintaining our financial discipline, and remaining focused on delivering long-term value for our shareholders. Finally, I want to thank our team for their outstanding execution through fiscal 2025. Their hard work and dedication enabled us to successfully navigate dynamic market conditions while driving meaningful growth and operational improvements. I'll now turn the call over to Chris to discuss our financial results in more detail and introduce our 2026 financial outlook. Chris?
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. Our fourth quarter and full year results met our expectations, even as we navigated a range of challenges, from tariffs and macroeconomic instability to geopolitical tensions and a shifting policy landscape. Despite these headwinds, we grew our top line and delivered a solid bottom line. In addition, as Brady mentioned, we made meaningful progress on the priorities we set at the start of the year, strengthening our core businesses, entering new markets, and positioning PHINIA for long-term profitable growth. Fourth quarter financial results were solid and include a full quarter contribution from SEM. The external environment has not changed dramatically from the prior quarters.
However, we saw some strength in Asia and the Americas, partially offset by lower sales in Europe within Fuel Systems. Aftermarket sales were also higher, primarily driven by Aftermarket pricing and tariff recoveries, offset slightly by lower commercial vehicle sales in the Americas. Let me now bridge our revenue and adjusted EBITDA for the fourth quarter, which you can find on pages 11 and 12 in the presentation. Specifically, during the quarter, we generated $889 million in net sales, an increase of 6.7% versus a year ago. Compared to Q4 2024, our top line benefited from favorable foreign exchange tailwinds of $25 million, as the dollar weakened, mainly against the British pound and euro. Revenue in the quarter also rose on tariff recovery of $15 million.
Overall, volume and mix contributed $8 million, as we saw strength in sales in Asia and the U.S., with higher LPV sales, partially offset by lower sales in Europe. SEM contributed $12 million in the quarter, excluding the FX impact and the SEM contribution, sales were up 2.3% in the quarter. Moving next to the bridge on Slide 12. Adjusted EBITDA was $116 million in the quarter, with a margin of 13%, representing a year-over-year increase of $6 million and a 20 basis point decline in margin. Corporate and other costs, primarily R&D savings, were a $6 million tailwind. Net tariff recovery, supplier savings, and other overhead cost savings measures combined were another $5 million. These benefits were partially offset by unfavorable product mix in Asia and the Americas. Overall results were healthy.
The margin percentages were diluted as a result of FX, inclusion of SEM, and negative mix. Let me now bridge our adjusted revenue and adjusted EBITDA for the full year, which you can find on pages 13 and 14 in the presentation. Once again, starting with adjusted sales, where the drivers were similar to the fourth quarter. Total revenue was approximately $3.5 billion, an increase of 3%, excluding the final contract manufacturing sales from our former parent in 2024. FX was a tailwind of $45 million, as the dollar weakened, mainly against the British pound and euro. Adjusted sales also benefited from tariff recovery of $38 million. Volumes of base business were flat for the year, but boosted with the inclusion of $20 million in sales from SEM. Excluding the FX benefit and contribution from SEM, revenue was up 1.1% for the year.
Moving next to the bridge on Slide 14. Adjusted EBITDA was $478 million, flat year-over-year, with a margin of 13.7%, representing a 40 basis point decline in margin. Supplier savings and other cost-saving measures of $26 million were offset by unfavorable product mix, a slight increase in employee costs, and net tariff pass-through. Margin was negatively impacted by the dilutive impact of both tariff and FX, each of which resulted in an approximately 20 basis point decline in margin. Moving next to discussion of the individual segment's full year performance. Note that in Q4 of 2025, we made a strategic decision to shift a significant portion of our OE service business, previously reported in the Aftermarket segment, to the fuel system segment.
This change is a result of creating a streamlined process for the sales structure and distribution of these sales, thereby reducing the related administrative burden. Our reporting segment disclosures have been updated accordingly, including recast of prior periods in all our reported financials. Moving next to Fuel Systems on page 15, where you can see that revenue for the full year increased 3.3% with a 40 basis point increase in adjusted operating margin. Segment revenue was impacted materially by changes in FX of $33 million. The addition of SEM of $20 million and tariff recoveries of $13 million. Full year segment AOI of $244 million is an increase of $16 million, with solid supplier savings, partially offset by negative volume and mix.
Compared to 2024, our Aftermarket segment sales were up 2.7% for the full year, primarily due to customer tariff recovery and favorable FX. Aftermarket segment margins of 16.2% were down 30 basis points, primarily due to the dilutive impact of tariff recoveries. Moving on to a discussion of our balance sheet and cash flow. We continue to effectively execute our disciplined capital allocation strategy, successfully balancing significant cash return to shareholders with strategic M&A and other investments. Cash and cash equivalents were $359 million, while available capacity under our credit facilities remained at approximately $500 million, for a resulting liquidity of $859 million.
Cash flow from operations was $312 million for the year, and adjusted free cash flow came in above guide at $212 million, enabling us to continue returns of capital to our shareholders through regular dividends and buybacks. Share repurchases represented a primary use of capital, totaling $30 million in Q4 and $200 million for the full year. We paid $10 million in dividends in Q4, bringing our full-year dividend payments to shareholders to $42 million. We remain confident in our ability to generate strong free cash flow to support our future capital allocation priorities. This is evidenced by the strong performance of the business in 2025, enabling dividends back to shareholders, share repurchases, a small bolt-on M&A transaction completed solely with cash, and the settlement of $24 million in debt.
We made meaningful progress on lowering our tax rate in 2025, moving from a full-year adjusted effective tax rate of 41.5% in 2024 to 32.5% in 2025. Cash taxes paid also reduced to $61 million in 2025 from $94 million in 2024. Although it should be noted that there were one-off reductions in 2025 cash taxes paid. Without these one-off items, we would have expected a cash tax outlay in the approximately $75 million-$85 million range. While we expect improved trends to continue in the coming years, rate of improvement and rate of change is not linear for either ETR or cash taxes paid, and therefore expect rates and cash outflows to change at differing levels each year as various structuring projects are enacted.
Before moving to slides 17 and 18 for a discussion of our 2026 outlook. I also want to take a moment and thank and congratulate all our employees for delivering great 2025 results. Despite any market turmoil or chaos that ensues, our teams understand how to calmly assess situations and react appropriately. Let me briefly discuss the drivers behind our outlook for 2026. Industry volumes are expected to be flat to slightly down globally, inclusive of battery electric vehicle sales. We expect to offset these market changes through continued share gains in Aftermarket and increased gasoline direct injection products, Off-Highway, Industrial, and Other end markets. Taking these factors into account, and at the midpoint of our net sales outlook of $3.5 billion-$3.7 billion, we'd, we would expect an increase in sales in the mid-single digit range, inclusive of FX.
Excluding expected FX, our growth is projected to be in the low single-digit range. We are therefore guiding adjusted EBITDA to be $485 million-$525 million, with an EBITDA margin of 13.7%-14.3%. We believe the business is well positioned to continue generating meaningful cash flow, and our 2026 outlook for adjusted free cash flow is therefore $200 million-$240 million. The adjusted effective tax rate should be in the 30%-34% range. Overall, we expect to deliver strong results in 2026 as we continue to drive operational efficiencies and search for new areas of growth for both segments. Note that our outlook does not include any possible impacts related to future policy changes by any government, which could affect our operations or technical centers.
This includes additional tariffs, tax, or any other policy that could inflate or deflate revenue or affect our cost base. Fiscal year 2025 was marked by complexity and resilience, a tale of navigating global headwinds while making strategic progress. We are entering the next chapter of growth and look forward to continued success in fiscal 2026 and beyond, as we continue our focus on revenue growth, product innovation, and new markets, business wins, disciplined capital allocation, and delivering shareholder value. We want to thank all of you for joining us on the call today. Operator, please open the lines for questions.