Atmus Filtration Technologies Inc.

Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the Atmos Filtration Technologies fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again, press the star one. I would now like to turn the conference over to Todd Chirillo, Executive Director, Investor Relations. You may begin.

Thank you, Operator. Good morning, everyone, and welcome to the Atmos Filtration Technologies fourth quarter and full year 2024 earnings call. On the call today, we have Steph Disher, Chief Executive Officer, and Jack Kinsler, 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 on 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 relations pages available on our website at ATMIS.com. Now I'll turn the call over to Steph.

Thank you, Todd, and good morning, everyone. Our team achieved another quarter and full year of strong results by delivering industry-leading filtration solutions for our customers. I want to thank our global team for their tremendous efforts throughout the year that made these results possible. On the call today, I will provide a summary of our fourth quarter and full year financial results. and our outlook for 2025. I will also share some of the significant progress we have made implementing our four pillar growth strategy. Jack will then provide a detailed review of our financial results. As I reflect on 2024, I would like to highlight some of the unforgettable accomplishments our team delivered during the year. In March, the common share exchange was completed. And for the first time in our more than 65 year history, we became a fully independent company. This has allowed us to accelerate our growth strategy and deliver significant market outperformance. We initiated our capital allocation program, balancing share repurchases with a consistent dividend return. Since our announcement in July, we have repurchased a total of $20 million of stock $10 million in both the third and fourth quarter. We have $130 million remaining under our board authorisation and expect a continuation of capital return to shareholders in 2025. We have made substantial progress on our operational separation from our former parent Cummins and intend to be complete in 2025. As we begin 2025, we have launched our We Protect campaign to increase awareness of our Atmos brand. The campaign is focused on three key elements. Science that safeguards, championing a cleaner world and securing a better future. Now let's turn to the four pillars of our growth strategy and highlights from 2024. Our first pillar is to grow share in first fit. We have realigned our organization and added resources to our account management team to focus on growth in first fit. We are seeing results. We announced a new business win with a major European OEM for our industry leading fuel filtration and crankcase ventilation content in 2024. We further expanded our technology leadership in fuel filtration with the launch of our next generation media in our Nanonet product portfolio, Nanonet N3. This media has wide-ranging applications, enabling compact filter designs while delivering superior service life in the harshest environments across a wide variety of fuels. The reorientation of our organization for growth, coupled with industry leading filtration technology, provides us with the continued opportunity to expand with new and existing OEM customers around the world. Our second pillar is focused on accelerating profitable growth in the aftermarket. We estimate that we outperform the market by approximately two percentage points in 2024. This consistent outperformance in challenging market conditions demonstrates our ability to grow share. We are expanding our product coverage with our industry-leading FleetGuard brand available to customers through new channels to market. We are also investing with our customers in high growth geographies. For example, we recently held a three-day Latin American customer event focused on strategic discussions, market insights, and business development opportunities. Additionally, we are using advanced data analytic tools. This enhances our team's ability to provide our industry-leading FleetGuard products for our customers when and where they need them. Our third pillar is focused on transforming our supply chain. In the fourth quarter, we completed the transition of our Belgium warehouse and have now transitioned 95% of the distribution network from Cummins. While we have not yet realized normal operating levels in Belgium, our team continues to focus on bringing the facility to its full operational capacity and delivering technology-leading Fleektar products to our customers. 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. Since 2022, we have expanded adjusted EBITDA margin by 410 basis points. This is a significant accomplishment by the ATMOS team. Achieving these results during a period of an extended freight recession and establishing our own operational independence. 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 will continue to take a disciplined approach as we review a robust pipeline of opportunities for inorganic expansion in these three verticals, ensuring any opportunity will be the right strategic fit for Atmos and deliver value to all our stakeholders. Now let's discuss our results, starting with the fourth quarter. Our team delivered another strong financial performance in the fourth quarter. Sales were $407 million compared to $400 million during the same period last year, an increase of 1.8%. While our strong outperformance drove sales, we are still experiencing soft end market conditions in both our aftermarket and first fit markets. In response to these conditions, we determined it was prudent to reduce costs through restructuring actions in both the US and China. We incurred one-time costs of $4 million associated with employee severance, which are excluded from our adjusted results and my following comments. We believe these actions will allow us to navigate current market conditions while preserving the ability to scale as markets rebound. Continuing with our results, adjusted EBITDA was 78 million or 19.1%. compared to 71 million or 17.9% in the prior period. Adjusted EBITDA excludes 7 million of one-time standalone costs. Adjusted earnings per share was 58 cents in the fourth quarter of 2024 and adjusted free cash flow was 28 million. Adjusted free cash flow excludes 14 million of one-time separation related items in the quarter. Now let's review our results for the full year. Sales were $1.67 billion, an increase of 2.5% from 2023. We saw a strong outperformance throughout the year in the face of soft market conditions. Adjusted EBITDA was $330 million, up from the prior year of $302 million. Adjusted EBITDA margin rose 110 basis points from the prior year to 19.7%. Adjusted EBITDA excludes 25 million of one-time standalone costs. Expanding margins by 110 basis points is an impressive accomplishment by the ATMOS team, especially considering the challenging market conditions faced during the year. Adjusted earnings per share was $2.50 and adjusted free cash flow was 115 million. Now let's turn to our outlook, starting with the aftermarket. We are expecting a recovery in freight activity as we progress through the year, but the timing of the inflection is still unclear. This recovery will be dependent on global economic conditions, which remain fluid. Overall, we anticipate global markets for the aftermarket to be flat to up 3% compared to last year. Our continued execution of our growth strategy will drive market outperformance and is expected to contribute 2% to aftermarket revenue growth. Pricing is also expected to provide an additional 1% of year-over-year increase. We do expect continued strength in the US dollar, which will result in approximately 2% revenue headwinds. Let's now turn to our first fit markets. In the US, we expect the heavy duty market to be flat to down 10%. While we expect emissions regulations for 2027 to remain unchanged, the potential impact of a pre-buy in the second half of the year remains unclear. For US medium duty, we expect production to be down 5 to 15%, driven by a reduction in backlogs. Demand for trucks in India is expected to be flat to down as we have yet to see the ramp up in government infrastructure spending. And in China, where we have low visibility to the market, we anticipate weak market conditions to continue. Overall, we expect total company revenue for 2025 to be flat to up 4%, compared to the prior year with global sales in an expected range of 1.67 to 1.735 billion. We expect our strong operational performance to continue and deliver adjusted EBITDA margin in a range of 19% to 20%. Adjusted EPS is expected to be in a range of $2.35 to $2.60. Now, I will turn the call over to Jack, who will discuss our financial results in more detail.