Yahoo Finance Atmus Filtration Technologies Inc (ATMU) Q1 2024 Earnings Call Transcript Highlights: ...
Revenue: Q1 2024 revenue was $427 million, up approximately 2% from $419 million in Q1 2023.
Adjusted EBITDA: Reached $80 million or 18.8% of revenue, consistent with the previous year's percentage.
Net Income: Not explicitly mentioned, but related metrics such as adjusted EBITDA and EPS provided.
Earnings Per Share (EPS): Adjusted EPS was $0.6 in Q1 2024.
Free Cash Flow: Adjusted free cash flow was negative $13 million, factoring in $6 million of one-time separation costs.
Gross Margin: Gross margin increased to $112 million from $110 million in Q1 2023.
Market Capitalization: Not directly mentioned, but financial stability discussed in terms of strong balance sheet and liquidity.
Same-Store Sales: Not applicable as Atmus Filtration Technologies is not a retail business.
Store Locations: Not applicable, but expansion of distribution facilities mentioned, including new centers in Dallas, Texas, and Singapore.
Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Atmus Filtration Technologies Inc reported a 2% increase in sales, reaching $427 million compared to $419 million in the same period last year.
The company successfully completed its separation from Cummins, becoming a fully independent company, which included the appointment of new independent directors to its board.
Adjusted EBITDA remained stable at 18.8%, with a total of $80 million, demonstrating consistent operational efficiency.
Atmus Filtration Technologies Inc is expanding its market share, particularly in the aftermarket segment, which is helping to offset some market weaknesses.
The company is actively pursuing growth in industrial filtration markets and has a strong pipeline of M&A opportunities to enhance long-term shareholder value.
Negative Points
Adjusted free cash flow was negative $13 million, influenced by one-time separation-related costs and increased working capital requirements.
The company faces challenges in the China market, where demand continues to fall short of expectations, and in Europe, where economic conditions remain depressed.
There is an anticipated decline in the U.S. first-fit markets, particularly in the second half of 2024, with heavy-duty truck outlook revised to a decrease of 7% to 12%.
Separation costs and cash impacts associated with becoming a standalone company are still being incurred, with one-time costs expected to be between $10 million to $20 million for 2024.
The global market outlook for both on-highway and off-highway aftermarket segments has been slightly downgraded from previous guidance, now expected to be flat to up 2%.
Q & A Highlights
Q: Can you provide some color on the share gains mentioned in the quarter? Are they on the OE side or aftermarket side, and are they coming from new customers or increasing share of wallet gains?A: (Stephanie Disher - CEO, Director) The share gains are primarily in the aftermarket. These gains more than offset any headwinds seen in market conditions, indicating a strong performance in that segment.
Q: Can you comment on whether there is any opportunity for your current products, especially on the coolant side, to be used in the data center end market in light of the liquid cooling technology that data centers require?A: (Stephanie Disher - CEO, Director) There is a significant growth opportunity in the power generation markets linked to data centers, with strong potential for both filtration and coolant products. While many applications are standby, they present strong tailwinds for growth in these markets.
Q: How did the first quarter compare to your internal plans, and can you provide insights on seasonality going into the second quarter?A: (Stephanie Disher - CEO, Director) The first quarter was slightly ahead of expectations, primarily driven by market share gains in the aftermarket. The company expects the impact of declining markets in first-fit to start in the second half of the year, with a steady aftermarket expected throughout.
Q: There was a revision to the separation cost outlook for the year. Can you discuss the completion of these activities and what might extend beyond 2024?A: (Stephanie Disher - CEO, Director) The majority of transition service agreements with Cummins should conclude by the end of 2024, with significant progress already made. The revision in costs is mainly due to the timing of IT system projects and risk mitigation efforts.
Q: Can you provide an update on the M&A landscape and your expectations for capital deployment in this area over the next 12 to 18 months?A: (Stephanie Disher - CEO, Director) The focus is on expanding into industrial filtration markets with a disciplined approach to acquisitions, aiming for one to two acquisitions per year in the $100 million to $150 million range each.
Q: What are your expectations for aftermarket share gains and the strategies driving these gains?A: (Stephanie Disher - CEO, Director) Aftermarket share gains are driven by enhanced distribution and availability, partnerships with growing players, and strong branding and marketing efforts. The focus is on ensuring product availability and aligning with successful partners to drive growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
