Atmus Filtration Technologies (ATMU)2024-11-08 20:15Financial Data and Key Metrics Changes - Sales for Q3 2024 were 396 million in the same period last year [7] - Adjusted EBITDA for the quarter was 73 million, or 18.3%, in the prior period [7][26] - Adjusted earnings per share was 0.52 last year [27] - Adjusted free cash flow was 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 1.675 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 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 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 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]