Atmus Filtration Technologies (ATMU) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sales for Q4 2024 were $407 million, an increase of 1.8% from$ 400 million in Q4 2023 [19][29] - Adjusted EBITDA for Q4 2024 was $78 million, representing a margin of 19.1%, compared to$ 71 million and 17.9% in the prior year [21][33] - For the full year 2024, sales reached $1.67 billion, a 2.5% increase from$ 1.63 billion in 2023 [22][35] - Adjusted EBITDA for the full year was $330 million, up from$ 302 million in 2023, with an adjusted EBITDA margin of 19.7% [22][38] - Adjusted earnings per share for Q4 2024 was $0.58, compared to$ 0.49 in Q4 2023 [21][34] Business Line Data and Key Metrics Changes - The company outperformed the aftermarket market by approximately two percentage points in 2024 [13] - The new NanoNet product portfolio was launched, enhancing technology leadership in fuel filtration [11] - The company completed the transition of its Belgian warehouse, achieving 95% transition of the distribution network from Cummins [15] Market Data and Key Metrics Changes - The U.S. heavy-duty market is expected to be flat to down 10% in 2025, while medium-duty production is anticipated to decline by 5% to 15% [26] - In China, weak market conditions are expected to persist, with low visibility into recovery [27] Company Strategy and Development Direction - The company is focused on a four-pillar growth strategy, including growing share in first fit, accelerating aftermarket growth, transforming the supply chain, and expanding into industrial filtration [10][17] - The capital allocation program includes share repurchases and dividends, with $20 million repurchased in 2024 [8] Management's Comments on Operating Environment and Future Outlook - Management anticipates a recovery in freight activity but acknowledges uncertainty regarding timing due to fluid global economic conditions [24] - For 2025, total company revenue is expected to be flat to up 4%, with adjusted EBITDA margin projected between 19% and 20% [28] Other Important Information - The company incurred one-time costs of$ 4 million related to restructuring actions in Q4 2024 [20][30] - The effective tax rate for 2024 was 21%, down from 24.3% in 2023, due to a change in earnings mix and one-time foreign tax credits [39] Q&A Session Summary Question: Can you provide insight on EBITDA margin and its future outlook? - Management indicated that the 19.7% EBITDA margin in 2024 was above guidance, with expectations of headwinds from foreign exchange and input costs impacting future margins [46][50] Question: What is the outlook for aftermarket and first fit growth? - Management expressed confidence in a 2% growth in aftermarket revenue, supported by committed business and new partnerships [56][58] Question: How are you managing tariff exposure in manufacturing? - The company has modeled various scenarios regarding tariffs and has implemented pricing actions to mitigate impacts, particularly from China tariffs [96][100] Question: What is the status of your industrial filtration expansion? - The primary path for industrial filtration growth remains through acquisitions, although initial product launches are in early stages with limited revenue expected [108][110] Question: Can you discuss the first fit market assumptions, particularly in China? - Management expects continued weak conditions in China, with a range of flat to down 5% for the year, but is prepared to scale if demand improves [126]