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$400 million in Q4 2023 [19][29] - Adjusted EBITDA for Q4 2024 was $78 million, representing a margin of 19.1$71 million and 17.9% in the prior year [21][33] - For the full year 2024, sales reached $1.67 billion, a 2.5$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$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]