Atmus Filtration Technologies Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joseph O'Dea - Wells Fargo Securities, LLC - Analyst : Hi. Good morning, everyone. Thanks for taking my questions. Clearly, really good EBITDA performance in the quarter. And Jack, it looks like EBITDA was up $12 million sequentially on revenue that was up 6%. So you talked to price, volume, and cost, but could you kind of break that down a little bit more and in particular what you saw on the cost side? And then related, it does look like guide implies that the EBITDA margin doesn't stay as strong in the back half of the year. So any bridge details there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 02, 2024 / 3:00PM, ATMU.N - Q2 2024 Atmus Filtration Technologies Inc Earnings Call

Question: Joseph O'Dea - Wells Fargo Securities, LLC - Analyst : Got it. Those are helpful details. And then, Steph, wanted to touch on I think, some really good color related to aftermarket and what you're seeing in that market. I guess, when we think about the components of growth and think about visibility into the rest of the year and aftermarket for you, I would think that the pricing is in place at this point. The destock is a comp situation. And so the swing factor seemed like it would more so be related to outperformance and market trends. And so could you just talk about the visibility that you have into continued outperformance versus the market, and how you think about the variability of the market into the back half of the year?

Question: Joseph O'Dea - Wells Fargo Securities, LLC - Analyst : Got it. Thanks very much.

Question: Tami Zakaria - JPMorgan Chase & Co. - Analyst : Hey. Good morning. Thank you so much and very nice quarter. So a couple of questions. Just following up on that aftermarket question from before, so how much was aftermarket down globally in the first half versus the 2% to 4% decline you expect this year? The genesis of my question is, do you expect the global aftermarket to be worse than the 2% to 4% in the back half?

Question: Tami Zakaria - JPMorgan Chase & Co. - Analyst : Thank you. That is very helpful. So the follow-up question is, when I look at the guide, full-year revenue guide, to get to the midpoint of the sales guide, the back half needs to be down, call it, about 1% year-over-year, versus the growth that you've seen in the first half. So are you expecting

Question: Tami Zakaria - JPMorgan Chase & Co. - Analyst : Understood. Okay. Thank you.

Question: Robert Mason - Robert W. Baird & Co. Incorporated. - Analyst : Yes. Again, nice work, Steph, and Jack. Maybe to circle back again just to the aftermarket business. So just so I'm clear, you've raised the outlook for the full year in aftermarket, from flat to 2% to flat to up 5%. And again, it sounds like maybe the market conditions are a little bit worse. So it sounds like share gains are better in your outlook. Could you put a little more color around that in terms of where you're gaining share, whether it's domestic or international, whether it leans more on road versus off road, just -- or products in particular? Just a little more color there, please.

Question: Robert Mason - Robert W. Baird & Co. Incorporated. - Analyst : That's very helpful color, Steph, appreciate that. Just as to my follow-up, could you speak to the expansion of your capital allocation strategy here, I guess, in the near term in terms of how you might be looking at share repurchases versus M&A just, I guess, given what you have may have right in front of you in the M&A pipeline?

Question: Robert Mason - Robert W. Baird & Co. Incorporated. - Analyst : Sure. Thanks, Steph. Appreciate it.

Question: David Ridley-Lane - Bank of America Corporation - Analyst : Thank you. This is David Ridley-Lane on for Andrew. Could you just maybe give us an update on your progress in adding independent distributors to the Fleet guard network?

Question: David Ridley-Lane - Bank of America Corporation - Analyst : Thank you. And then maybe a quick one for Jack, just a clarification point. Does the guidance now have 1.5% price for the year or was that just an aftermarket specific comment?

Question: David Ridley-Lane - Bank of America Corporation - Analyst : Thank you very much.

Question: Jerry Revich - The Goldman Sachs Group, Inc. - Analyst : Yes. Hi. Good morning, everyone.

Question: Jerry Revich - The Goldman Sachs Group, Inc. - Analyst : Steph, Jack, hi. On gross margins, just to come back to the quarter, you had a massive step up sequentially this year over 30% gross margins on pretty similar sales, which I think is well ahead of normal seasonality. So what about the business accelerated 2Q versus 1Q? Is it normalization of costs? Is it new price increases? And then, as I think about that within the context of the back half guide, obviously, you folks have a track record as a public company and have continually beating expectations. So it does sound like that's part of the framework for the guide, unless you tell me there was something not recurring in the quarter?

Question: Jerry Revich - The Goldman Sachs Group, Inc. - Analyst : Okay, super. I appreciate it. And then, Jack, can we just follow up on capital deployment policy? One of the big opportunities we've discussed over the past couple of years for your business separate from Cummins was to build out the industrial filtration part of the franchise. And given the dividend and the stock buyback authorization, I'm wondering if you can comment on the M&A pipeline maybe less robust than we thought over the past couple of years, and what does that tell us about the M&A opportunity set over the next 12 months to 18 months?

Question: Jerry Revich - The Goldman Sachs Group, Inc. - Analyst : Appreciate it, Steph, and Jack. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 02, 2024 / 3:00PM, ATMU.N - Q2 2024 Atmus Filtration Technologies Inc Earnings Call

Question: Bobby Brooks - Northland Capital Markets - Analyst : Hey. Good morning, guys. Thank you for taking my question. Just wanted to kind of double click on the buyback. So it sounds like the buybacks is more opportunistic than programmatic. Just given your commentary earlier on that, buyback is maybe the swing factor with how have you leaned into a buyback would be with the M&A opportunities, or am I maybe reading into that too much and then it's just -- it'll be a mix of both maybe a base programmatic approach and flex harder or lean harder into it and what M&A looks like?

Question: Bobby Brooks - Northland Capital Markets - Analyst : Got it. That's great color. Thank you, Steph. And then, could you just maybe remind us so obviously, there's a tailwind in the quarter was lower raw material cost. Could you just remind us what maybe are the three most important raw material costs to the business?

Question: Bobby Brooks - Northland Capital Markets - Analyst : Got it. Thank you. Yeah, I'll turn it over -- turn it back to the queue. Congrats on a great quarter, guys.