Financial Data and Key Metrics Changes - Sales for Q4 2024 were $407 million, an increase of 1.8% compared to $400 million in Q4 2023 [19][29] - Adjusted EBITDA for Q4 2024 was $78 million, representing a margin of 19.1%, up from $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, with an adjusted EBITDA margin of 19.7%, an increase of 110 basis points from the previous year [22][38] Business Line Data and Key Metrics Changes - The company outperformed the aftermarket market by approximately two percentage points in 2024, indicating strong growth in this segment despite overall market softness [13] - The company launched a new product, NanoNet N3, enhancing its fuel filtration technology, which is expected to drive growth in both first fit and aftermarket segments [11][12] 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][126] - Overall, total company revenue for 2025 is projected to be flat to up 4%, with global sales expected between $1.67 billion and $1.735 billion [28] Company Strategy and Development Direction - The company is focused on a four-pillar growth strategy, which includes growing share in first fit, accelerating aftermarket growth, transforming the supply chain, and expanding into industrial filtration markets [10][17] - The company has initiated a capital allocation program, balancing share repurchases with dividends, having repurchased $20 million of stock since July 2024 [8] Management's Comments on Operating Environment and Future Outlook - Management anticipates a recovery in freight activity throughout 2025, but the timing remains uncertain due to fluid global economic conditions [24] - The company expects continued strength in the U.S. dollar, which will create a revenue headwind of approximately 2% [25] - Management expressed confidence in achieving a 2% growth in aftermarket revenue driven by ongoing execution of their growth strategy [24][57] Other Important Information - The company incurred one-time restructuring costs of $4 million in Q4 2024, which are excluded from adjusted results [20][30] - The effective tax rate for 2024 was 21%, down from 24.3% in 2023, due to a change in the mix of earnings among tax jurisdictions [39] Q&A Session Summary Question: Can you provide insight on EBITDA margin and its future outlook? - Management noted 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 indicated that the guidance for aftermarket growth is 0% to 3%, while first fit is expected to decline by 0% to 10% [82] 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 company is primarily pursuing inorganic growth through acquisitions for industrial filtration, with initial product launches in infancy and not expected to contribute significantly in 2025 [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 operations if demand improves [126]

Fourth Quarter and Full Year 2024 Earnings Call February 21, 2025 Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995, including, without limitation, those that are based on current expectations, estimates and projections about the industries in which we operate and management's views, plans, objectives, projections, beliefs and assumptions. Forward-looking stat ...

Company Performance - Atmus Filtration Technologies (ATMU) reported quarterly earnings of $0.58 per share, exceeding the Zacks Consensus Estimate of $0.53 per share, and up from $0.49 per share a year ago [1] - The earnings surprise for this quarter was 9.43%, following a previous quarter where the company reported earnings of $0.61 per share against an expectation of $0.52, resulting in a surprise of 17.31% [2] - The company achieved revenues of $406.7 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.51% and showing an increase from $399.7 million year-over-year [3] Market Outlook - Atmus Filtration shares have not appreciated since the beginning of the year, contrasting with the S&P 500's gain of 4% [4] - The current consensus EPS estimate for the upcoming quarter is $0.61 on revenues of $434.6 million, and for the current fiscal year, it is $2.52 on revenues of $1.71 billion [8] - The Zacks Industry Rank indicates that the Pollution Control industry is currently in the bottom 29% of over 250 Zacks industries, suggesting potential underperformance compared to higher-ranked industries [9] Estimate Revisions - The estimate revisions trend for Atmus Filtration has been unfavorable, leading to a Zacks Rank 4 (Sell) for the stock, indicating expectations of underperformance in the near future [7] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [6]

Financial Performance - Atmus reported net sales of $407 million for Q4 2024, a 1.8% increase from $400 million in Q4 2023[4]. - For the full year 2024, Atmus achieved net sales of $1,670 million, up $42 million or 2.5% from the previous year[11]. - Gross margin for Q4 2024 was $107 million, representing 26.3% of net sales, slightly down from 26.4% in Q4 2023[5]. - Adjusted EBITDA for Q4 2024 was $78 million, with an adjusted EBITDA margin of 19.1%, compared to $71 million and 17.9% in Q4 2023[7]. - The company reported GAAP net income of $40 million for Q4 2024, translating to diluted earnings per share of $0.48, up from $35 million or $0.42 per share in Q4 2023[8]. - For the full year 2024, Atmus posted a GAAP net income of $186 million, or $2.22 per diluted share, compared to $171 million or $2.05 per share in 2023[14]. - Adjusted earnings per share for the year ended December 31, 2024, rose to $2.50, up from $2.31 in 2023, reflecting an increase of 8.2%[39]. - Basic earnings per share for the year ended December 31, 2024, were $2.23, up from $2.06 in 2023, representing an 8.2% increase[35]. - Net income for the year ended December 31, 2024, reached $185.6 million, a 8.0% increase from $171.3 million in 2023[28]. Cash Flow and Capital Expenditures - Adjusted free cash flow for Q4 2024 was $28 million, down from $30 million in Q4 2023[10]. - Cash provided by operating activities for Q4 2024 was $20.0 million, a decrease of 52.0% compared to $41.7 million in Q4 2023[41]. - Free cash flow (non-GAAP) for Q4 2024 was $10.0 million, down 60.8% from $25.5 million in Q4 2023[41]. - Adjusted free cash flow (non-GAAP) for the year ended December 31, 2024, was $114.5 million, a decrease of 25.0% from $152.4 million in 2023[41]. - Capital expenditures for the year ended December 31, 2024, were $48.6 million, an increase of 6.1% from $45.8 million in 2023[41]. - One-time separation capital expenditures for the year ended December 31, 2024, totaled $15.0 million, compared to $9.2 million in 2023[41]. Assets and Liabilities - Total assets as of December 31, 2024, increased to $1,190.3 million from $1,088.6 million in 2023, reflecting a 9.3% growth[31]. - Total liabilities decreased to $962.9 million in 2024 from $1,007.9 million in 2023, a reduction of 4.5%[31]. - Cash and cash equivalents at the end of the period increased to $184.3 million from $168.0 million in 2023, a growth of 9.1%[32]. Future Outlook - Atmus expects revenue for 2025 to be in the range of $1,670 million to $1,735 million, with an adjusted EBITDA margin between 19.0% and 20.0%[5]. - Adjusted earnings per share for 2025 is projected to be in the range of $2.35 to $2.60[5]. One-time Costs and Expenses - One-time restructuring costs for Q4 2024 amounted to $4.1 million, with no such costs reported in Q4 2023[41]. - The tax impact of one-time restructuring costs for Q4 2024 was $1 million, compared to $2 million in Q4 2023[39]. - The company reported one-time expenses related to Information Technology, warehousing, manufacturing, and Human Resources separation costs[39].

Company Overview - Atmus Filtration Technologies (NYSE: ATMU) is a leader in designing and manufacturing filtration products under the Fleetguard brand, offering a wide range of products including fuel, lube, and air filters [1] Investment Philosophy - The investment approach emphasizes fundamental analysis, focusing on financial health, competitive positioning, and management quality to identify undervalued companies [1]

Industry Overview - The Zacks Pollution Control industry is positioned to benefit from increasing demand for air pollution abatement products due to rising greenhouse gas emissions and heightened public awareness of health risks [1][4] - The industry includes companies providing innovative filtration systems, medical waste management solutions, energy recovery devices, and other products across various sectors such as automotive, healthcare, and construction [3] Major Trends - There is a healthy demand for air pollution control products driven by rapid urbanization and increased greenhouse gas emissions from the industrial sector [4] - Stringent government regulations globally are expected to boost demand for pollution control equipment, particularly in Europe and the U.S. [5] - The addition of oil rigs in response to geopolitical instability is likely to increase demand for pollution control services [6] - The emergence of alternative energy sources and electric vehicles, while beneficial for the environment, poses challenges to the industry's growth [7] Industry Ranking and Performance - The Zacks Pollution Control industry currently holds a Zacks Industry Rank of 78, placing it in the top 31% of over 250 Zacks industries, indicating strong near-term prospects [8][9] - The industry's earnings estimates for 2024 have increased by 2.6% over the past year, reflecting positive sentiment among analysts [10] - Over the past year, the industry has grown by 28.6%, underperforming compared to the broader Industrial Products sector and the S&P 500 Index, which rose by 28.9% and 31.4% respectively [12] Valuation Metrics - The industry is currently trading at a forward P/E ratio of 26.46X, higher than the S&P 500's 22.65X and the sector's 21.8X [14] Key Companies - **Tetra Tech (TTEK)**: A leading provider of consulting and engineering services, benefiting from U.S. government infrastructure priorities. The stock has gained 28.2% in the past year [16][17] - **Atmus Filtration (ATMU)**: A designer and producer of filtration solutions, with a 72.4% stock increase over the past year, supported by effective pricing and capital allocation strategies [19][21] - **Donaldson Company (DCI)**: Engaged in manufacturing filtration systems, with a focus on innovation and growth investments. The stock has increased by 16.3% in the past year [23][24]

Core Viewpoint - Atmus Filtration Technologies (ATMU) has shown significant stock performance, with a 10.5% increase over the past month and an 87.6% rise since the beginning of the year, outperforming both the Zacks Industrial Products sector and the Zacks Pollution Control industry [1][2]. Financial Performance - The company has consistently exceeded earnings expectations, reporting an EPS of $0.61 against a consensus estimate of $0.52 in its latest earnings report [2]. - For the current fiscal year, Atmus Filtration is projected to achieve earnings of $2.45 per share on revenues of $1.66 billion, reflecting a 6.06% increase in EPS and a 2.16% increase in revenues [3]. - The next fiscal year forecasts an EPS of $2.53 on revenues of $1.72 billion, indicating year-over-year growth of 3.37% in EPS and 3.7% in revenues [3]. Valuation Metrics - The stock trades at 18 times the current fiscal year EPS estimates, below the peer industry average of 25.6 times [7]. - On a trailing cash flow basis, Atmus Filtration trades at 17.1 times compared to the peer group's average of 21.5 times [7]. - The company has a PEG ratio of 4.8, which does not position it among the top value stocks [7]. Style Scores and Zacks Rank - Atmus Filtration has a Value Score of B, a Growth Score of A, and a Momentum Score of C, resulting in a combined VGM Score of B [6]. - The stock holds a Zacks Rank of 2 (Buy), supported by rising earnings estimates, indicating potential for further stock price appreciation [8].

Financial Data and Key Metrics Changes - Sales for Q3 2024 were $404 million, an increase of approximately 2% compared to $396 million in the same period last year [7] - Adjusted EBITDA for the quarter was $79 million, or 19.6%, compared to $73 million, or 18.3%, in the prior period [7][26] - Adjusted earnings per share was $0.61 in Q3 2024, up from $0.52 last year [27] - Adjusted free cash flow was $65 million, compared to $50 million in the prior year [27] - The effective tax rate for Q3 2024 was 18.4%, down from 23.1% in 2023 [28] Business Line Data and Key Metrics Changes - The aftermarket segment continues to experience softness, but the company gained market share, offsetting some market weakness [9] - U.S. heavy-duty first-fit market demand is expected to decline by 7% to 12% for the full year, while medium-duty demand remains flat to up 5% [13] - Global aftermarket revenue is expected to grow by approximately 2% to 4% compared to last year, despite overall market declines [10][11] Market Data and Key Metrics Changes - The India market has softened, and China shows no signs of recovery [9] - The overall global aftermarket is expected to decline by approximately 2% to 3% due to soft freight activity and weakness in off-highway markets [11] - The company anticipates a revenue range of $1.65 billion to $1.675 billion for the year, reflecting a 1% to 3% increase compared to the prior year [14] Company Strategy and Development Direction - The company is focused on growth in core business and expansion into industrial filtration, with a balanced approach to capital allocation including share repurchases and dividends [6] - The growth strategy includes four pillars: growing share in first-fit, accelerating aftermarket growth, transforming the supply chain, and expanding into industrial filtration markets [15][21] - The company is transitioning to a dedicated supply chain network, with 85% of volume distributed through Atmus facilities [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in revenue growth opportunities despite challenging market conditions, with expectations for continued outperformance [10][11] - The company is experiencing downward pressure on volumes due to fewer working days and a decline in heavy-duty truck demand [33] - Management anticipates that both first-fit and aftermarket markets will be at the bottom of the cycle, with potential improvements expected in the second half of 2025 [40][41] Other Important Information - The company repurchased $10 million of shares as part of a $150 million program [6] - The transition from Cummins is approximately 80% complete, with expectations to reach 90% by the end of the year [8] - Onetime costs related to separation from Cummins are expected to total between $20 million and $25 million in 2024 [26] Q&A Session All Questions and Answers Question: Discussion on expectations for the fourth quarter - Management noted that revenue is expected to be relatively flat sequentially, with downward pressure from fewer working days and a decline in heavy-duty truck demand impacting volumes [33][34] Question: Visibility on 2025 margin profile - Management indicated that while they cannot provide specific guidance for 2025, they expect to sustain margin expansion achieved in 2024 [38][42] Question: Insights on international business performance - Management highlighted that all markets are experiencing downside, with India being the strongest but still softening, while China remains challenged [55][56] Question: Breakdown of onetime costs - Onetime costs for Q3 were $9 million, with $5 million in cost of sales and $4 million in SG&A, primarily related to IT and supply chain separation costs [49][50] Question: Organic expansion into industrial filtration - Management mentioned that while organic growth in industrial filtration is in early stages, it is seen as a spark for innovation, with a focus on acquisitions for significant growth [72][73]

Financial Performance - Net sales for the three months ended September 30, 2024, were $403.7 million, an increase of $7.5 million or 1.9% compared to $396.2 million for the same period in 2023 [103]. - For the nine months ended September 30, 2024, net sales were $1,262.9 million, an increase of $34.5 million or 2.8% compared to $1,228.4 million in 2023 [112]. - Gross margin increased to $111.3 million for the three months ended September 30, 2024, up $8.4 million or 8.2% from $102.9 million in 2023, with a gross margin percentage of 27.6%, an increase of 1.6 percentage points [104][102]. - Gross margin for the nine months ended September 30, 2024, was $355.0 million, an increase of $27.9 million or 8.5% from $327.1 million in 2023, with a gross margin percentage of 28.1%, up 1.5 percentage points [113][111]. - Operating income for the three months ended September 30, 2024, was $63.2 million, an increase of $4.4 million or 7.5% compared to $58.8 million in 2023 [1]. - Net income for the three months ended September 30, 2024, was $43.8 million, representing a $6.2 million increase or 16.5% from $37.6 million in 2023 [1]. - The net income margin improved to 11.5% for the nine months ended September 30, 2024, compared to 11.1% in the prior year [143]. - Diluted earnings per share for Q3 2024 was $0.52, up from $0.45 in Q3 2023, representing a 15.6% increase [144]. - Adjusted earnings per share for the nine months ended September 30, 2024, was $1.92, compared to $1.82 for the same period in 2023, reflecting a 5.5% growth [144]. Expenses and Costs - The company incurred approximately $8.9 million in one-time expenses during the three months ended September 30, 2024, and approximately $18.7 million during the nine months ended September 30, 2024, related to becoming a standalone public company [99]. - The company expects to incur one-time expenses of approximately $20 million to $25 million in 2024 in connection with becoming a standalone public company [99]. - Selling, general and administrative expenses were $46.4 million for the three months ended September 30, 2024, an increase of $5.1 million or 12.3% compared to $41.3 million in 2023 [105]. - Research, development, and engineering expenses decreased to $9.7 million for the three months ended September 30, 2024, down $1.4 million or 12.6% from $11.1 million in 2023 [106]. - Interest expense for the nine months ended September 30, 2024, was $31.4 million, an increase of $16.2 million compared to $15.2 million in 2023, primarily due to the timing of borrowings [118]. - Higher working capital requirements resulted in a cash outflow of $81.9 million for the nine months ended September 30, 2024, compared to a cash inflow of $2.0 million in the same period of 2023 [127]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $85.4 million for the nine months ended September 30, 2024, a decrease of $61.9 million compared to $147.3 million in the same period of 2023 [127]. - Capital expenditures for the nine months ended September 30, 2024, were $38.6 million, representing approximately 3.1% of net sales, compared to $29.6 million or 2.4% of net sales in the prior year [129]. - Capital expenditures for Q3 2024 were $16.4 million, up from $10.5 million in Q3 2023, representing a 56.2% increase [146]. - Adjusted free cash flow for the nine months ended September 30, 2024, was $86.1 million, down from $122.5 million in the same period of 2023, indicating a decrease of 29.6% [146]. - Free cash flow for Q3 2024 was $54.3 million, compared to $47.8 million in Q3 2023, marking a 13.6% increase [146]. Debt and Financing - As of September 30, 2024, total debt was $596 million, a slight decrease from $600 million at December 31, 2023, with a weighted-average term of 2.9 years [134]. - The company borrowed $650 million from a credit agreement upon completion of its IPO to pay Cummins in partial consideration for the Separation [88]. - The company has a revolving credit facility capacity of $400 million as of September 30, 2024, with no outstanding borrowings [122]. - The company has a $600 million term loan facility and a $400 million revolving credit facility, with interest rates tied to SOFR [152]. - A 0.125% change in SOFR would result in a $0.7 million annual impact on interest expense based on outstanding borrowings as of September 30, 2024 [152]. Market Conditions - Aftermarket demand remained depressed in the first nine months of 2024, reflecting soft market conditions, with uncertainty regarding recovery [94]. - Overall supply chain conditions have largely stabilized from a year ago, with minimal disruptions and backorders largely recovered [95]. - Direct material cost pressures have stabilized, but labor impacts continue to affect the company's Selling, general and administrative expenses, which increased during the first nine months of 2024 [97]. - The appreciation of the U.S. dollar against foreign currencies had a slightly unfavorable impact on the company's condensed consolidated results of operations in the first nine months of 2024 [98]. Taxation - The effective tax rate for the three months ended September 30, 2024, was 18.4%, a decrease of 4.7 percentage points from 23.1% in 2023, driven by a change in the mix of earnings among tax jurisdictions [108]. - The effective tax rate decreased to 20.9% for the nine months ended September 30, 2024, down 2.9 percentage points from 23.8% in the prior year, driven by a change in the mix of earnings among tax jurisdictions [121]. - The tax impact of one-time separation costs for Q3 2024 was $1.6 million, slightly lower than $1.7 million in Q3 2023 [144].

Company Performance - Atmus Filtration Technologies (ATMU) reported quarterly earnings of $0.61 per share, exceeding the Zacks Consensus Estimate of $0.52 per share, and up from $0.52 per share a year ago [1] - The earnings surprise for this quarter was 17.31%, following a previous quarter where the company reported earnings of $0.71 per share against an expectation of $0.58, resulting in a surprise of 22.41% [2] - The company posted revenues of $403.7 million for the quarter ended September 2024, which was 1.31% below the Zacks Consensus Estimate, but an increase from $396.2 million in the same quarter last year [3] Stock Performance - Atmus Filtration shares have increased approximately 76.5% since the beginning of the year, significantly outperforming the S&P 500's gain of 25.2% [4] - The current consensus EPS estimate for the upcoming quarter is $0.52, with expected revenues of $406.42 million, and for the current fiscal year, the estimate is $2.34 on revenues of $1.67 billion [8] Industry Outlook - The Pollution Control industry, to which Atmus Filtration belongs, is currently ranked in the bottom 17% of over 250 Zacks industries, indicating potential challenges ahead [9] - The performance of Atmus Filtration's stock may be influenced by the overall outlook for the industry, as historical data shows that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [9] Future Expectations - The trend of estimate revisions for Atmus Filtration is currently mixed, leading to a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market in the near future [7] - Investors are encouraged to monitor how estimates for the coming quarters and the current fiscal year may change following the recent earnings report [8]