Atmus Filtration Technologies (US:ATMU)2025-05-02 17:28Financial Performance - Net sales for the three months ended March 31, 2025, were $416.5 million, a decrease of $10.1 million or 2.4% compared to $426.6 million in the same period of 2024, primarily due to unfavorable currency impacts of $11.4 million and lower volumes of approximately $3.5 million [104]. - Gross margin decreased by $1.3 million to $110.5 million, with a gross margin percentage of 26.5%, an increase of 0.3 percentage points from 26.2% in the prior year [105][103]. - Operating income for the three months ended March 31, 2025, was $64.9 million, down $3.7 million or 5.4% from $68.6 million in the same period of 2024 [102]. - For the three months ended March 31, 2025, net income was $44.7 million, compared to $45.5 million for the same period in 2024 [131]. - EBITDA for Q1 2025 was $72.4 million, with an EBITDA margin of 17.4%, consistent with the 17.4% margin in Q1 2024 [131]. - Adjusted EBITDA for Q1 2025 increased to $81.7 million, with an Adjusted EBITDA margin of 19.6%, up from 18.8% in Q1 2024 [131]. - Diluted earnings per share for Q1 2025 remained at $0.54, while Adjusted earnings per share rose to $0.63 from $0.60 in Q1 2024 [132]. - Free cash flow for Q1 2025 was $16.3 million, a significant improvement from a negative $18.8 million in Q1 2024 [134]. - Adjusted free cash flow for Q1 2025 was $19.8 million, compared to a negative $12.7 million in Q1 2024 [134]. - Cash provided by operating activities for Q1 2025 was $28.7 million, a recovery from a cash outflow of $8.2 million in Q1 2024 [134]. Expenses and Costs - The company incurred approximately $9.3 million in one-time expenses during the three months ended March 31, 2025, with expectations of incurring an additional $10 million to $15 million in 2025 related to becoming a standalone public company [101]. - Selling, general and administrative expenses increased due to higher people-related and consulting expenses during the first three months of 2025 [99]. - Research, development, and engineering expenses were $9.1 million, a decrease of $1.0 million or 9.9% compared to $10.1 million in the prior year, representing 2.2% of net sales [107][103]. - Interest expense decreased to $8.4 million, down $2.1 million or 20.0% from $10.5 million in the same period of 2024, due to lower outstanding borrowings [110]. - The company incurred one-time separation costs of $9.3 million in Q1 2025, up from $6.0 million in Q1 2024 [131]. Market Conditions - Approximately 14% of net sales in 2024 were generated through first-fit sales to OEMs, while 86% were from the aftermarket, indicating a strong recurring revenue base [85]. - Market demand for aftermarket and first-fit products softened in early 2025 due to economic uncertainties related to recent U.S. government tariff announcements [96]. - The U.S. announced a new universal baseline tariff of 10% and a 145% tariff on products of Chinese origin, leading to significant volatility and uncertainty in global demand [86]. Currency and Economic Impact - The appreciation of the U.S. dollar against foreign currencies negatively impacted the company's consolidated results of operations in the first three months of 2025 [100]. - Direct material cost pressures have generally stabilized, although rising costs were observed in the latter portions of the period [98]. - Overall supply chain conditions have stabilized with minimal disruptions and backorders largely recovered [97]. - The company continues to monitor and evaluate factors affecting its business, including economic conditions, commodity prices, and supply chain challenges [95]. Capital Expenditures and Debt - The company expects to incur capital expenditures of approximately $5 million to $10 million in 2025 in connection with the Separation from Cummins [101]. - Capital expenditures for the three months ended March 31, 2025, were $12.4 million, corresponding to approximately 3.0% of net sales, compared to $10.6 million or 2.5% of net sales in the prior year [119]. - Total debt was $588.8 million as of March 31, 2025, down from $600 million at December 31, 2024 [124]. Taxation - The effective tax rate for the three months ended March 31, 2025, was 21.3%, a decrease of 0.7 percentage points from 22.0% in the prior year [111]. Interest Rate Risk - The company is exposed to interest rate risk related to a $600 million term loan facility and a $400 million revolving credit facility, with a potential $0.7 million annual impact from a 0.125% change in SOFR [139].