Executive Summary

Q4 delivered modest top-line growth with improving profitability: revenue $406.7M (+1.8% YoY), adjusted EBITDA $77.7M (19.1% margin), GAAP EPS $0.48 and adjusted EPS $0.58, supported by pricing and cost improvements despite FX and logistics/material headwinds .
2025 outlook implies flat to modest growth: revenue $1.67B–$1.735B (flat to +4%), adjusted EBITDA margin 19%–20%, adjusted EPS $2.35–$2.60; management flagged FX headwinds and input cost inflation (steel, labor) early in the year, with better 2H cadence as price realization and volumes improve .
Cash returns continue: $10M buyback in Q4 (remaining authorization $130M at year-end) and $0.05 quarterly dividend; cash from operations was $20M and adjusted FCF $28.4M in Q4, reflecting separation-related working capital friction that is expected to abate in 2025 .
Estimate context: S&P Global consensus data could not be retrieved at this time (API limit), so we are not presenting a vs-consensus comparison; see Estimates Context for details.

What Went Well and What Went Wrong

What Went Well

Margin execution and structural improvement: Adjusted EBITDA margin reached 19.1% in Q4 (vs. 17.9% LY), and expanded 410 bps since 2022, driven by supply chain transformation and cost actions; management aims to sustain 19%–20% margins in 2025 .
Share gains and technology leadership: Management estimates ~200 bps market outperformance in 2024 and highlighted the NanoNet N3 launch enabling compact designs with superior service life across varied fuels; new first-fit win with a major European OEM supports continued outgrowth .
Capital allocation consistency: $10M repurchased in Q4 (total $20M since July) with $130M remaining; ongoing $0.05 dividend underscores commitment to returns alongside growth investments .

Quote: “Since 2022, we have expanded adjusted EBITDA margin by 410 basis points. This is a significant accomplishment by the Atmus team.” – CEO Steph Disher .

What Went Wrong

End-market softness and FX: Management cited soft aftermarket and first-fit demand, with stronger USD creating ~2% revenue headwind and early-year margin pressure due to FX mismatches .
Input cost inflation and pricing lag: Steel and labor inflation expected to pressure margins in H1; pricing actions lag until mid-year, shifting 2025 seasonality more to 2H .
Separation-related frictions and cash conversion: Q4 cash from operations fell to $20M (vs. $41.7M LY) as working capital inefficiencies tied to separation (e.g., changing intercompany settlement terms) weighed on FCF; adjusted FCF $28.4M excludes these items .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Net Sales ($M)	$399.7	$403.7	$406.7
Gross Margin ($M)	$105.6	$111.3	$107.1
Gross Margin (%)	26.4%	27.6%	26.3%
Net Income ($M)	$34.8	$43.8	$40.1
Diluted EPS (GAAP)	$0.42	$0.52	$0.48
Adjusted EBITDA ($M)	$71.4	$79.1	$77.7
Adjusted EBITDA Margin (%)	17.9%	19.6%	19.1%
Adjusted EPS	$0.49	$0.61	$0.58

KPI and Cash Metrics

KPI	Q4 2023	Q3 2024	Q4 2024
Cash from Operations ($M)	$41.7	$70.7	$20.0
Adjusted Free Cash Flow ($M)	$29.9	$64.7	$28.4
Weighted Avg Diluted Shares (M)	83.5	83.6	83.5

Notes:

Q4 sales +1.8% YoY on higher volume and pricing, partly offset by FX; gross margin dollars improved YoY but percentage was roughly flat due to higher logistics/materials and one-time restructuring costs .
Q4 adjusted EBITDA excludes $6.5M one-time separation and $4.1M restructuring costs; adjusted EPS backs out these with related taxes .

Segment breakdown: Not disclosed in the press release. Management commentary framed trends by aftermarket vs. first-fit, not by reported segments .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($B)	FY2025	n/a	$1.67–$1.735	New
Adjusted EBITDA Margin (%)	FY2025	n/a	19%–20%	New
Adjusted EPS	FY2025	n/a	$2.35–$2.60	New
Separation Costs (one-time)	FY2025	n/a	$5–$10M	Disclosure (non-GAAP add-back expectation)
Dividend	Ongoing	$0.05/qtr	$0.05/qtr	Maintained

Additional market outlook (management):

Aftermarket market growth expected 0%–3% in 2025; first-fit market down 0%–10% globally (blended) .
Seasonality skewed to 2H due to FX headwinds, input cost lag, and timing of recovery; Q1 margins expected similar to prior year with sequential improvement thereafter .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024, Q3 2024)	Current Period (Q4 2024)	Trend
Supply chain separation/Belgium warehouse	Q2: Highlighted separation costs; dividend/buyback launch . Q3: Ongoing separation costs; raised FY24 guidance .	95% of distribution network transitioned; Belgium warehouse still ramping; sustaining 19–20% margins going forward .	Execution maturing; shifting from cost takeout to growth enablement .
FX and pricing lag	Q3: FX headwinds noted in gross margin .	FX a “much more significant” 2025 headwind; pricing lags until midyear; early-year margin pressure .	Headwind near term; better in 2H as pricing flows .
Input costs (steel/labor)	Q3: Favorable commodities aided margins .	Steel and labor inflation expected; potential tariff effects on steel .	Renewed inflation risk; watch pricing cadence .
Aftermarket	Q3: Solid performance, raised FY24 .	2025 market outlook flat to +3%; company targeting ~2% share-driven outgrowth plus ~1% price, offset by ~2% FX .	Recovery later in 2025; share gains continue .
First-fit	Q3: Volume/pricing tailwinds .	U.S. heavy-duty flat to -10%; medium-duty -5% to -15%; prebuy for 2027 uncertain; China weak/low visibility .	Soft H1; potential improvement in 2H .
Tariffs/macro	—	China tariff impact immaterial and priced; modeled Mexico/US scenarios with pricing and sourcing levers if needed .	Manageable so far; contingency planning ongoing .
Technology/NanoNet N3	—	Next-gen media (NanoNet N3) supports compact filters, longer life; platform for industrial filtration optionality .	Product leadership underpinning share gains .
Capital returns	Q2: Dividend + $150M buyback announced . Q3: $10M buyback .	$10M buyback in Q4; $130M remaining; expect continued returns in 2025 .	Ongoing .
Industrial filtration M&A	—	Primary path remains inorganic; pipeline robust; gating factor is strategic fit and scalable returns, not valuation .	Disciplined, patient .

Management Commentary

Strategic focus: “We continue to build long-term shareholder value through execution of our growth strategy and delivering cash returns to investors.” – CEO Steph Disher (press release) .
Margin durability: “We have delivered ahead of our expectations the margin expansion opportunities... we intend to continue to sustain [19%–20%].” – CEO Steph Disher .
Outgrowth confidence: “We feel very positive about the outgrowth... strongly underpinned by committed business and wins... both aftermarket and first-fit.” – CEO Steph Disher .
Cadence/seasonality: “Q1 likely looks fairly similar to last year... with sequential improvement as volume picks up and price realization kicks in throughout the year.” – CFO Jack Kienzler .
Tariff posture: “China tariffs... immaterial... we have taken action to price... modeled scenarios on Mexico... we have flexibility in sourcing... ready to act.” – CEO Steph Disher .

Q&A Highlights

Margin and 2025 cadence: FX and input costs (steel, labor) drive early-year pressure; pricing catch-up midyear; 2H-biased revenue and margin improvement; Q1 expected similar to prior-year levels .
Aftermarket vs. first-fit: Aftermarket market outlook flat to +3% with ~2% share gains; first-fit global market down 0%–10% amid U.S. HD softness and uncertain prebuy; China remains weak with low visibility .
Restructuring: $4M severance taken in Q4 (U.S. and China). China actions are structural; U.S. headcount to be reinvested selectively into growth as demand recovers .
Tariffs: Immediate lever is pricing; broader responses depend on policy outcomes; supply chain sourcing flexibility provides resilience .
Industrial filtration: Organic effort is in infancy and not material in 2025; primary path remains M&A with disciplined strategic fit and scalability focus .
Margin “cruising altitude”: Management targets sustaining 19–20% adjusted EBITDA margins while pivoting supply chain efforts to support top-line growth (value engineering, customer value packages) .

Estimates Context

We attempted to retrieve S&P Global consensus estimates for Q4 2024 EPS and revenue, but the request failed due to a daily limit error, so we cannot provide a vs-consensus comparison at this time. Values were unavailable from S&P Global due to API request limits.

Key Takeaways for Investors

Margin sustainability looks credible: management plans to operate at 19%–20% adjusted EBITDA margins in 2025 despite FX/input headwinds; watch Q1 similarity to prior year and sequential improvement as a key test of guidance cadence .
2H-weighted setup: FX/pricing lag and market recovery timing drive a back-half skew; near-term prints may be more resilient on margins than on growth—helps de-risk downside but delays upside catalysts to midyear and beyond .
Share gain thesis intact: Aftermarket outperformance (~200 bps in 2024) plus NanoNet N3 and first-fit wins support continued relative growth even in flat markets; supports multiple resilience vs. peers .
Cash conversion watchlist: Separation-related working capital drags weighed on Q4 CFO and FCF; management expects these to fade in 2025—monitor inventory and payable normalization through H1 .
FX sensitivity elevated: Strong USD is a notable 2025 headwind; if DXY moderates or management executes midyear pricing, upside to margin/EBITDA vs. early-year trajectory is possible .
Tariff risk manageable: Current China impact is immaterial and priced; modeled Mexico/US scenarios with pricing and sourcing flexibility—policy clarity could remove an overhang .
Capital returns ongoing: $130M buyback capacity plus dividend provide support; pacing will likely balance separation capex ($5–$10M) and M&A optionality .

Atmus Filtration Technologies Inc. (ATMU)·Q4 2024 Earnings Summary