Atmus Filtration Technologies Inc. Q4 FY2024 earnings call

• In March 2024, the common share exchange was completed, making Atmus a fully independent company for the first time in over 65 years. • A capital allocation program was initiated, with $20 million worth of stock repurchased in the third and fourth quarters of 2024, and $130 million remaining under board authorization. • The We Protect campaign was launched in 2025, focusing on science safeguarding, championing a cleaner world, and securing a better future. • Four pillars of the growth strategy: - First fit: The organization was realigned, and resources were added to the account management team. A new business win with a major European OEM was announced, and the next-generation NanoNet N3 media was launched. - Aftermarket: Outperformed the market by approximately 2 percentage points in 2024, expanded product coverage, and utilized advanced data analytic tools. - Supply chain: The transition of the Belgian warehouse was completed, with 95% of the distribution network shifted from Cummins. Adjusted EBITDA margin expanded by 410 basis points since 2022. - Industrial filtration: Focused on inorganic expansion in industrial air, industrial liquids (excluding water), and industrial water, with a robust pipeline of opportunities. • In the fourth quarter, $4 million of one-time restructuring costs were incurred in the US and China. For the full year, adjusted EBITDA increased from $302 million in 2023 to $330 million, and adjusted EPS was $2.50.

In the fourth quarter of 2024, sales amounted to $407 million, marking a 1.8% increase compared to the same period the previous year. For the full year 2024, sales reached $1.67 billion, showing a 2.5% growth from 2023. The adjusted EBITDA in the fourth quarter was $78 million, representing a 19.1% margin. For the full year, adjusted EBITDA stood at $330 million, with a margin of 19.7%.

• For the aftermarket in 2025, a recovery in freight activity is expected, but the timing is unclear. Overall, global markets for the aftermarket are anticipated to be flat to up 3%, with a 2% contribution from growth strategy execution and a 1% increase from pricing, while a ~2% revenue headwind is expected due to the strong US Dollar. • In the first fit markets: The US heavy-duty market is projected to be flat to down 10%, US medium duty production is expected to decline by 5%-15%, India truck demand is flat to down, and weak market conditions are likely to continue in China. • Overall, total company revenue for 2025 is expected to be flat to up 4%, ranging from $1.67 to $1.735 billion. Adjusted EBITDA margin is expected to fall in the range of 19%-20%, and adjusted EPS is forecasted to be between $2.35 and $2.60.

• Uncertainty in global economic conditions affecting the timing of aftermarket recovery. • The strong US Dollar posing a revenue headwind. • Policy uncertainties such as tariffs impacting manufacturing and pricing. • Low visibility into the Chinese market and continued weak market conditions there.

Q: Good morning. Thanks for taking my questions. Can we just start on EBITDA margin, the 19.7% in 2024, was clearly very good. It was above the high end of the initial guidance range. Just to sort of put in perspective, any kind of non-repeats that you saw in 2024 to rebaseline that number and help us think about 2025? And then just from a quarterly cadence perspective, Q2 of last year was obviously strong. Should every other quarter in 2025 be up year over year, you know, just any color there on the quarters.

A: Jack Kienzler discussed that factors like foreign exchange headwinds, input costs, and pricing lag will impact 2025. The first quarter is likely to be similar to last year, with sequential improvement as volume and price realization pick up later.

Q: Good morning, Steph and Jack. Maybe I'll revisit a prior question, asking it a little bit different way just around the cadence and seasonality. You may have different numbers, but my math is, you know, based on historical seasonality, if I run kind of run that out at historical seasonal, I'd kind of land at the midpoint of your revenue guidance, but I guess, Jack, you're saying you know, we should wait, we should shift though that weighting more towards the second half, and I'm just curious, you know, if you have any more granularity on how maybe the first half should how much it should be underweighted versus history.

A: Steph Disher and Jack Kienzler explained that aftermarket recovery and first fit rebound are weighted more towards the second half due to current market conditions.

Q: Good morning, Steph and Jack. Maybe I'll revisit a prior question, asking it a little bit different way just around the cadence and seasonality. You may have different numbers, but my math is, you know, based on historical seasonality, if I run kind of run that out at historical seasonal, I'd kind of land at the midpoint of your revenue guidance, but I guess, Jack, you're saying you know, we should wait, we should shift though that weighting more towards the second half, and I'm just curious, you know, if you have any more granularity on how maybe the first half should how much it should be underweighted versus history.

A: Steph Disher and Jack Kienzler explained that aftermarket recovery and first fit rebound are weighted more towards the second half due to current market conditions.

Q: Good morning, Steph and Jack. Maybe I'll revisit a prior question, asking it a little bit different way just around the cadence and seasonality. You may have different numbers, but my math is, you know, based on historical seasonality, if I run kind of run that out at historical seasonal, I'd kind of land at the midpoint of your revenue guidance, but I guess, Jack, you're saying you know, we should wait, we should shift though that weighting more towards the second half, and I'm just curious, you know, if you have any more granularity on how maybe the first half should how much it should be underweighted versus history.

A: Steph Disher and Jack Kienzler explained that aftermarket recovery and first fit rebound are weighted more towards the second half due to current market conditions.

Q: Hi. Good morning. Thank you so much. First question is on pricing. I think I heard you say about 1% for the year, and also pricing is lagged. So are we expecting pricing 1% throughout the year, or is it expectation that pricing would actually accelerate in the back half? Especially if steel prices go up because of all this tariff noise.

A: Steph Disher stated that the 1% price guide does not incorporate a second half price increase at this point, but will monitor foreign exchange, tariffs, and input costs.

Q: Hey. Good morning, guys. Thank you for taking my question. First, just want to start, could you maybe help us understand what actions you could take to limit exposure to tariffs that would impact your manufacturing footprints in both China and Mexico? And maybe just remind us what markets those products that are made there ultimately are then sold into?

A: Steph Disher discussed pricing as an immediate lever for tariffs and the flexibility in adapting to policy changes.

Q: Yes. Hi. Good morning, everyone. So you folks have hit your, I think, aspirational margin targets a couple of years ahead of plan. Can we just talk about do you see incremental margin improvement opportunities from here or are we at the point that we were targeting that pre-IPO? Is this essentially the cruising altitude?

A: Steph Disher said that while margin performance is strong, focus is shifting to underpinning top-line growth through supply chain transformation and growth strategy.