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Atmus Filtration Technologies Inc. (ATMU)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 net sales were $417M, down 2.4% YoY; diluted EPS was $0.54 and adjusted EPS $0.63, with adjusted EBITDA of $82M and a 19.6% margin. The company reaffirmed FY 2025 guidance: revenue $1.67B–$1.735B, adjusted EBITDA margin 19–20%, adjusted EPS $2.35–$2.60 .
  • Gross margin dollars were $110.5M (26.5% of sales), essentially flat YoY despite FX headwinds and separation/logistics costs; pricing and manufacturing/warranty offsets supported margins .
  • Management cited tariff-related pricing actions (~1.5% of revenue), base pricing (~1.7%), and FX (-1.5% headwind) embedded in the 2025 outlook; aftermarket revenue guide midpoint now flat YoY (range -1.5% to +1.5%) .
  • Liquidity remained strong with $183M cash and full availability of a $400M revolver ($583M total liquidity); net debt/adjusted EBITDA was 1.2x (TTM) .
  • Key near-term catalysts: reaffirmed guidance despite tariff/FX uncertainty, tariff-pricing implementation ramp, and completion of separation activities (including Belgium warehouse normalization and lower one-time costs later in 2025) .

What Went Well and What Went Wrong

What Went Well

  • Pricing and operational execution supported margin stability: “Adjusted EBITDA was $82 million or 19.6%… pricing, lower manufacturing costs and favorable warranty costs” . Gross margin % rose to 26.5% from 26.2% YoY .
  • Capital returns continued: $10M repurchases in Q1 with $120M remaining authorization; $0.05 quarterly dividend maintained .
  • Strategic progress: launch of NanoNet N3 media and progress on supply-chain transformation (Belgium distribution transition; new Mado, South Korea media facility) .

What Went Wrong

  • Top-line softness: Net sales fell 2.4% YoY on FX (-3%) and volumes (-1%), partially offset by pricing (+1%) .
  • Separation/logistics costs weighed on results; Q1 incurred elevated expenses to normalize Belgium operations, prompting revised full-year one-time cost guidance to $10M–$15M .
  • Market backdrop: management now assumes flat aftermarket freight activity at the midpoint; first-fit markets expected down in U.S. heavy and medium-duty (HD -5% to -15%; MD -10% to -20%) with China remaining weak and India flat-to-down .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$403.7 $406.7 $416.5
Gross Margin ($USD Millions)$111.3 $107.1 $110.5
Gross Margin (%)27.6% 26.3% 26.5%
Operating Income ($USD Millions)$63.2 $54.6 $64.9
Net Income ($USD Millions)$43.8 $40.1 $44.7
Diluted EPS ($)$0.52 $0.48 $0.54
Adjusted EPS ($)$0.61 $0.58 $0.63
Adjusted EBITDA ($USD Millions)$79.1 $77.7 $81.7
Adjusted EBITDA Margin (%)19.6% 19.1% 19.6%
Net Income Margin (%)10.8% 9.9% 10.7%

Notes and non-GAAP impacts:

  • Q1 adjusted EBITDA excludes $9.3M in one-time separation costs; adjusted EPS adds back $0.11 less $0.02 tax impact .
  • Q4 adjusted results excluded $6.5M separation and $4.1M restructuring costs; Q3 adjusted results excluded $8.9M separation costs .

KPIs

KPIQ3 2024Q4 2024Q1 2025
Cash from Operations ($USD Millions)$70.7 $20.0 $28.7
Capital Expenditures ($USD Millions)$16.4$10.0 $12.4
Adjusted Free Cash Flow ($USD Millions)$64.7$28.4 $19.8
Effective Tax Rate (%)18.4% 21.2% 21.3%
Cash and Equivalents ($USD Millions)$196.8 $184.3 $183.3
Net Debt / Adjusted EBITDA (x)—1.2x 1.2x (TTM)

Estimates comparison (Q1 2025)

  • S&P Global consensus for Q1 2025 EPS and revenue was unavailable at time of analysis. Boldly, no beat/miss assessment can be made for Q1 2025 versus consensus. Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)FY 2025$1.67–$1.735 $1.67–$1.735 Maintained
Adjusted EBITDA Margin (%)FY 202519–20 19–20 Maintained
Adjusted EPS ($)FY 2025$2.35–$2.60 $2.35–$2.60 Maintained
One-time Stand-alone Costs ($USD Millions)FY 2025—$10–$15 (revised higher) Raised
One-time Separation Capex ($USD Millions)FY 2025$5–$10 $5–$10 Maintained
Aftermarket Revenue Growth (YoY)FY 2025Flat to +3% Range -1.5% to +1.5% at market level; company outperformance adds ~+2% Softer market; company still targets outgrowth
U.S. Heavy-Duty MarketFY 2025Flat to -10% -5% to -15% Lowered
U.S. Medium-Duty MarketFY 2025-5% to -50% -10% to -20% Narrowed/updated
Tariff Pricing ContributionFY 2025—~1.5% New disclosure
Base Pricing ContributionFY 2025~1% ~1.7% Raised
FX Revenue HeadwindFY 2025~2% ~1.5% Updated
Dividend per Share ($)Quarterly$0.05 $0.05 Maintained
Share Repurchases ($USD Millions)Q1 2025$130 remaining $120 remaining; $10 repurchased in Q1 Continued execution

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
Tariffs/MacroLimited tariff impact noted; focus on supply-chain resilience Scenario planning for China/Mexico tariffs; pricing readiness; region-for-region manufacturing Tariff pricing ~1.5%; USMCA certifications; re-routing; Section 232 watch; margin-dollar neutral goal Escalating focus and actions
Pricing cadenceAdjusted EBITDA margin expansion via pricing and costs ~1% pricing in 2025 guide; lag until midyear Base pricing ~1.7%; tariff pricing ~1.5%; ramp in Q3–Q4 to 4–5% quarterly rate Acceleration expected H2
Supply chain transformation95% distribution transitioned; Belgium opening Belgium transition completed; still normalizing; margin gains since 2022 (+410 bps) Higher Q1 costs to protect customers; one-time cost guidance lifted; Belgium normalization ongoing Execution with near-term cost drag
Product/technologyNanoNet N3 launch; leadership in fuel/crankcase NanoNet enabling compact filters; tech platform for growth Emphasis on NanoNet N3; new Mado, South Korea media facility Platform scaling
Regional trendsU.S./global markets soft; aftermarket outperformance U.S. HD flat to -10%; MD down; China weak; India flat-to-down U.S. HD -5% to -15%; MD -10% to -20%; China weak; India flat-to-down; aftermarket midpoint flat Continued softness
Regulatory/legal—EPA 2027 emissions context; prebuy optionality unclear EPA review of regulations; company ready for multiple outcomes Monitoring
M&A/industrial filtrationPipeline building; disciplined approach Robust pipeline; valuation not primary constraint; strategic fit/scalability key Market volatility softens M&A; continue disciplined pursuit across industrial air/liquids/water Continuing but paced

Management Commentary

  • “Our pricing goal is to remain margin dollar neutral and pass through the increased costs we incurred to the market… estimated pricing from tariffs in 2025 is approximately 1.5%” — Steph Disher, CEO .
  • “Adjusted EBITDA was $82 million or 19.6%… we are revising our full year guidance for onetime costs to now be in a range of $10 million to $15 million” — Jack Kienzler, CFO .
  • “We largely produce in region-for-region… majority of our products from Mexico for the U.S. market are certified compliant or expected to be certified compliant under the USMCA” — Steph Disher .
  • “Combined with the full availability of our $400 million revolving credit facility, we have $583 million of available liquidity… net debt to adjusted EBITDA ratio of 1.2x” — Jack Kienzler .

Q&A Highlights

  • Tariff mitigation and pricing: Management detailed USMCA certifications, shipping lane reconfigurations, and immediate tariff pricing actions to remain margin-dollar neutral; no long-term manufacturing shifts planned currently .
  • Pricing ramp: CFO expects pricing to ramp through the year—just over 3% in Q2, rising to 4–5% quarterly in Q3–Q4 as base and tariff pricing fully implement .
  • Market cadence and guidance weighting: First half comps are challenging; improvement expected later as aftermarket and first-fit recover; Q1 margins likely similar to prior-year levels before sequential improvement .
  • M&A pipeline: Valuation not primary hurdle; focus on strategic fit and scalability; near-term market uncertainty softens activity, but pipeline work continues .
  • Regulatory environment: EPA reviews underway; company prepared to support customers under multiple regulatory outcomes; too early to speculate on OEM design changes .

Estimates Context

  • Q1 2025: S&P Global consensus for EPS and revenue was unavailable; no beat/miss determination can be made. Values retrieved from S&P Global.
  • FY 2025 consensus vs guidance:
    • Revenue consensus: $1.741B* vs guidance $1.67B–$1.735B (consensus near high end) . Values retrieved from S&P Global.
    • EPS normalized consensus: $2.63* vs adjusted EPS guidance $2.35–$2.60 (consensus modestly above mid- to high-end). Values retrieved from S&P Global.
    • EBITDA consensus: $344.1M* vs implied adjusted EBITDA margin 19–20% (in line). Values retrieved from S&P Global.
MetricFY 2025 Consensus*Company Guidance
Revenue ($USD Billions)$1.741$1.67–$1.735
EPS (Normalized, $)$2.63$2.35–$2.60
EBITDA ($USD Millions)$344.1Margin 19–20%

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin resilience and pricing power are intact despite FX/tariff headwinds; Q1 adjusted EBITDA margin held at 19.6% while adjusted EPS improved YoY to $0.63 .
  • Guidance reaffirmation (revenue, margin, EPS) in a fluid backdrop indicates management confidence; however, one-time costs are higher ($10–$15M), reflecting separation/logistics work in H1 .
  • Expect pricing benefits to ramp in H2 (including tariff pass-throughs); near-term margins likely similar to prior-year levels with sequential improvement later in 2025 .
  • Aftermarket now modeled flat at midpoint, but company continues to target ~+2% outgrowth via coverage, data analytics, and Fleetguard channel expansion .
  • Regulatory and tariff developments are critical swing factors; management has detailed mitigation playbooks (USMCA certifications, re-routing, resourcing) and will price to maintain margin dollars .
  • Liquidity and leverage provide flexibility (cash $183M; $400M revolver; net debt/adj EBITDA ~1.2x), supporting continued capital returns and selective M&A .
  • Trading implications: near term, headline risk around tariffs/FX could drive volatility; medium term, execution on pricing and supply-chain normalization should support margins and cash generation, while inorganic expansion remains a potential upside lever .