Atmus Filtration Technologies Inc.

an answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star and one. I would now like to turn the call over to Todd Chirillo, Executive Director of Investor Relations. You may begin.

Thank you, Kayla. Good morning, everyone, and welcome to the Atmos Filtration Technologies third quarter 2024 earnings call. On the call today, we have Steph Disher, Chief Executive Officer, and Jack Hindsler, Chief Financial Officer. Certain information presented today will be forward-looking and involve risks and uncertainties that could materially affect expected results. Please refer to our slides and our website for the disclosure of the risks that could affect our results and for reconciliation of any non-GAAP measures referred to on our call. For additional information, please see our SEC filings and the investor relation pages available on our website at atmos.com. Now, I'll turn the call over to Steph.

Thank you, Todd, and good morning, everyone. Our team delivered another quarter of solid performance, despite continued softness in the aftermarket and weakening first-fit markets. The dedication and hard work of our global employees consistently focused on delivering technology-leading products for our customers, allows us to deliver these results even in challenging market conditions. On the call today, I will provide an update about our performance during the quarter, share an updated outlook for the year, and highlight progress executing our growth strategy. Jack will then provide additional details regarding our financial performance. Let me begin with some comments on our capital allocation priorities. We are focused on growth in both our core business and expansion into industrial filtration and will continue to allocate our capital to fuel this growth. Additionally, share repurchases and quarterly dividends are components of our balanced approach to capital allocation. We continue to assess opportunities for share repurchases with a minimum annualised target of offsetting dilution from long-term incentive compensation. In the third quarter, we repurchased $10 million of shares as part of the $150 million program we announced last quarter. We also paid a cash dividend of $0.05 per share. Now let's turn to third quarter financial results and our updated outlook for 2024. Sales were $404 million compared to $396 million during the same period last year, an increase of approximately 2%. Adjusted EBITDA in the third quarter was $79 million, or 19.6%, compared to $73 million, or 18.3%, in the prior period. Adjusted EBITDA for the quarter includes $9 million of one-time standalone costs and $7 million for the same period last year. Adjusted earnings per share was 61 cents in the third quarter of 2024 and adjusted free cash flow was 65 million. Adjusted free cash flow excludes 10 million of one time separation related items. We have made substantial progress moving from transition service agreements with Cummins to operating as a fully standalone company. We estimate to have completed 80% of the transition and expect to be 90% complete by the end of this year. This transition is a significant milestone for our company and will enable us to focus our energy on growth. Now, let me provide some insight into our global markets. Beginning with the aftermarket, we continue to see soft freight activity, a trend we have seen throughout the year. Our continued outperformance in share gains coupled with tailwinds from prior year destocking activity allowed us to more than offset market weakness. Demand in the US heavy duty first fit market softened in line with our expectations, while US medium duty demand remains resilient. The India market softened and China did not show any signs of rebounding. Turning to our outlook, I will start with the aftermarket. As we have progressed through the year, we have become more confident in our opportunities to grow revenue, despite challenging market conditions. We are expecting our overall global aftermarket revenue to be up approximately 2 to 4% compared to last year. As we have seen throughout the year, we are still experiencing year-over-year declines in freight activity and have not yet seen a positive inflection. We expect our global markets for the aftermarket to be down approximately 2% to 3%, reflecting soft freight activity along with continued weakness in the off-highway construction, mining, and agricultural markets. Of setting market conditions, our outperformance is expected to continue as we execute our growth strategy and expand our new business winds. We expect our market outperformance to contribute 2% to aftermarket revenue growth. Adding an additional 2% of revenue growth will be the benefit related to destocking year over year. You may recall our customers were destocking from 2Q through 4Q in 2023 as supply chains normalised. This activity is not expected to repeat. Pricing is also expected to provide an additional 1.5% year-over-year increase. Let's now turn to our first fit markets. In the US, our view of the heavy-duty market remains unchanged, with expectation of down 7% to 12% for the full year. We anticipate further softening in the fourth quarter in line with industry expectations. Our expectation of the medium duty market remains unchanged at flat to up 5%. Demand for trucks in India is expected to continue softening and we anticipate weak market conditions to continue in China. Overall, our continuing outperformance gives us the confidence to raise our revenue guidance to now be in a range of up 1 to 3% compared to the prior year, with global sales in an expected range of 1.65 to 1.675 billion. We have delivered strong operational performance throughout the year, and we are raising our adjusted EBITDA margin to be in an expected range of 19.25% to 19.75%. We are also raising our adjusted EPS outlook and now expect to be in a range of $2.35 to $2.50. Now, I would like to discuss our plans for growth. During the third quarter, we brought our global enterprise leaders together to focus on our long-term strategic vision for unlocking growth opportunities as a fully independent company. Our team has been executing on our growth strategy. As a reminder, there are four pillars to our growth strategy. Our first pillar is to grow share in first fit. We are realigning our organization and adding resources to our account management teams to focus on first-fit growth. This has resulted in increased bid rates for new business opportunities and will allow us to further capture market share. We are leaders in fuel filtration and crankcase ventilation and continue to win with the winners as we partner with industry-leading OEMs. The reorientation of our organization for growth coupled with technology leadership, provides us with the continued opportunity to expand with new and existing OEMs around the world. Our second pillar is focused on accelerating profitable growth in the aftermarket. Our outperformance through challenging market conditions this year demonstrates our ability to grow share in the aftermarket. We are expanding and adding aftermarket partnerships for continued growth allowing us to deliver Fleetguard products when and where our customers need them. We have also implemented advanced digital analytic tools for our sales team to identify cross-sell and up-sell opportunities and generate new customer leads. This provides a win-win for both Atmos and our dealers to increase sales of Fleetguard products. Our third pillar is focused on transforming our supply chain. We are continuing to transition our supply chain to our own dedicated network. This quarter, we opened a new warehouse facility in the United Kingdom, increasing the volume being distributed through dedicated ATMOS facilities to approximately 85%. During the fourth quarter, we anticipate transitioning our remaining European facility to the ATMOS network, at which point substantially all our volume will go through our own distribution network. Controlling our distribution network allows us to improve on-shelf availability and provide our customers with FleetGuard products when and where our customers need them. Our distribution network transformation is delivering results, as we achieved all-time high delivery and availability metrics during the quarter. I am proud of the ATMOS team, delivering a significant accomplishment while simultaneously transforming our distribution network. Turning to supply chain efficiency, our adjusted EBITDA performance continues to demonstrate the results of our supply chain transformation and the cost reduction efforts we are driving through the organization. At the midpoint of our guidance, we expect to expand adjusted EBITDA margin 390 basis points since the end of 2022, another significant achievement by the ATMOS team. Our fourth pillar is to expand into industrial filtration markets. Our strategy remains focused on growth into industrial filtration, primarily through inorganic acquisitions. As a reminder, we are broadly looking at three verticals, industrial air, industrial liquids excluding water, and industrial water. We continue to take a disciplined approach as we review a robust pipeline of opportunities for inorganic expansion in these three verticals. We have also been focusing on opportunities to expand in industrial filtration organically. We recently launched multiple products to grow organically. While we were in the early stages of organic industrial product growth, this demonstrates another opportunity for continued growth for Atmos. Now, Jack will discuss our financial results in more detail.