Q4 2023 Atmus Filtration Technologies Inc Earnings Call

February 14, 2024

Todd Zarrillo executive director Investor Relations to begin the call.

Todd over to you.

Thank you operator, good morning, everyone and welcome to the Atmos filtration technologies fourth quarter and full year 2023 earnings call on the call today, we have Seth Fischer, Chief Executive Officer, and Jack Kinzler, Chief Financial Officer.

Certain information presented today will be forward looking and involve risks and uncertainties that could materially affect expected results.

Thank you for standing by and welcome to the Atmos filtration technologies fourth quarter and full year 2023 earnings call.

Please refer to our slides on our website for the disclosure of the risks that could affect our results and for a reconciliation of any non-GAAP measures referred to on our call for.

I would now like to walk them towards Zarrillo Executive director Investor Relations to begin the call Todd over to you.

For additional information please see our SEC filings and the Investor Relations pages available on our website at Atmos Dot Com now I will turn the call over to staff.

Thank you operator, good morning, everyone and welcome to the Atmos filtration technologies fourth quarter and full year 2023 earnings call on the call today, we have Scott Fischer, Chief Executive Officer, and Jack Kinzler, Chief Financial Officer certainty.

Thank you Todd and good morning, everyone I'm excited to join you today to share an update on Aetna.

I will discuss our fourth quarter and full year financial results and our outlook for 2024.

Information presented today will be forward looking and involve risks and uncertainties that could materially affect expected results.

I will also share some of the significant progress we have made implementing our growth strategy.

First let's discuss our performance in the fourth quarter.

Please refer to our slides on our website for the disclosure of the risks that could affect our results and for a reconciliation of any non-GAAP measures referred to on our call for.

We drive strong financial performance in the fourth quarter, delivering an impressive finish to our first year as a public company.

For additional information please see our SEC filings and the Investor Relations pages available on our website at <unk> Dot Com now I will turn the call over to staff.

Sales were 400 million compared to 385 million during the same period last year.

An increase of approximately 4%.

Adjusted EBITDA in the fourth quarter was 71 million or 17, 9%.

Thank you Todd and good morning, everyone I'm excited to join you today to share an update on that.

<unk> to $53 million or 13, 9% in the prior periods.

I will discuss our fourth quarter and full year financial results.

Our outlook for 2024.

Adjusted EBITDA for the quarter excludes $8 million of one time, standalone costs and $7 million for the same period last year.

I will also share some of the significant progress we have made implementing our growth strategy.

First let's discuss our performance in the fourth quarter.

Adjusted earnings per share was <unk> 49 in the fourth quarter of 2023, and adjusted free cash flow was $30 million.

We drive strong financial performance in the fourth quarter, delivering an impressive finish to our first year as a public company.

Adjusted free cash flow excludes 4 million of onetime capital expenditures related to separation from Cummins.

Sales were 400 million compared to $385 million during the same period last year.

As expected we saw some continued destocking and softer freight activity, which dampened revenues from our after market.

An increase of approximately 4%.

Adjusted EBITDA in the fourth quarter was 17 1 million or 17, 9%.

This was offset by continued strong demand in U S. The state markets.

<unk> to 53 million or 13, 9% in the prior periods.

Okay.

Our markets remain strong and in China, we saw demand slowly recovering.

Adjusted EBITDA for the quarter excludes $8 million of one time, standalone costs and $7 million for the same period last year.

Now, let's review our full year results.

Adjusted earnings per share was <unk> 49 in the fourth quarter of 2023, and adjusted free cash flow was $30 million.

Sales for 2023 were $1 63 billion and.

An increase of approximately 4% from 2022.

Adjusted EBITDA margin Rose 300 basis points from the prior year to 18, 6%.

Adjusted free cash flow excludes $4 million of one time capital expenditures related to separation from Cummins.

As expected we saw some continued destocking and softer freight activity, which dampened revenues from our after market.

EBITDA has been adjusted for onetime separation costs, which were $29 million in 2023 compared to $9 million in 2022.

This was offset by continued strong demand in U S for state markets.

Okay.

Adjusted earnings per share was $2 and 31.

Okay.

Markets remained strong and in China, we saw demand slowly recovering.

For the full year.

And adjusted free cash flow was $1 52 million.

Now, let's review our full year results.

Free cash flow has been adjusted for 9 million of onetime capital expenditures related to our separation.

Sales.

Turning to our global markets now I want to share some insight into the material drivers for our business and provide you with our guidance for 2024.

Our business is diversified geographically and the length of the cycle for after market and it varies.

In 2024, we anticipate first fit and after market will be counter cyclical.

Let's start with aftermarket for both on highway and off highway markets.

As a reminder, after market represents approximately 80% of our global revenues.

We experienced softer freight activity and destocking during the second half of 2023 in on highway market.

In North America, which represents a significant portion of our business. We saw the Cass freight index down about 9% in the second half compared to prior year.

And down five 5% over the full year.

We believe we are largely through the Destocking and expect on highway after market to improve as we move through 2024 driven by growth in flight activity.

In global off highway markets, we are monitoring several key industry.

We expect construction in North America will be supported by resilient demand in nonresidential construction, which has aided in part by government infrastructure spending.

In Europe, we expect the weakness in construction activity to continue due to overall economic conditions.

And global mining markets are expected to be relatively flat from a robust 2023.

Based on these market assumptions, we anticipate overall after market for on highway and off highway to be flat to up 3%.

Turning to our global first fit markets, our three key geographies the U S, China and India.

In the U S. We anticipate heavy duty truck will be down 10% to 15%.

And medium duty truck will be flat to down 5%.

We expect the first half demand will remain robust before it begins to decline in the second half of 2024.

The recovery in China has been sluggish and we anticipate a continued muted recovery.

We expect heavy duty and medium duty truck production to be in the range of down 5% to up 10%.

China is the most difficult market for us to forecast leading to this wide range in outlook.

In India, we see industry demand for trucks to be flat to up 5% for the year.

Driven by strong on highway performance.

As a result of these market drivers and our growth plans, we anticipate total revenue to be down 1%.

Two up 3%, resulting in guidance for global sales in the range of $1 six one to 167 5 billion in 2024.

We expect continued strong operational performance and to deliver adjusted EBITDA margins of $18, two 5% to $19 two 5%.

Additionally, we anticipate adjusted EPS will be in a range of $2.10 to.

The $2 35.

Now I would like to take a moment to share the progress we have made on implementing our four pillar growth strategy.

The first pillar is to grow share in first fit.

While our biscuit business.

Business represents about 20% of our overall business.

Is the foundation for driving recurring revenue in our after market.

We are a leader in fuel filtration and crankcase ventilation products.

And we are focused on growing this leadership position with global OEM customers.

We are winning with the winners and have continued to secure Cummins new vehicle platform.

As an independent company, we also have the ability to accelerate growth with other leading global Oems.

Additionally, we are continually investing in new product development in.

In 2023, we opened two new technical centers for key global markets.

20% of our overall business. It is the foundation for driving recurring revenue in our after market.

The first center opened in Wuhan, China, and our second is our global capability Center in Pune, India.

We are a leader in fuel filtration and crankcase ventilation products and we are focused on growing this latest ship position with global OEM customers.

Our second pillar is to accelerate profitable growth in the after market.

We are transforming our global distribution capabilities to provide our customers with industry leading product availability.

We are winning with the winners and have continued to secure Cummins new vehicle platforms.

We established three new distribution centers in Brazil, Mexico, and Dallas, Texas, and we have also transitioned our largest distribution center in Kentucky from Cummins.

As an independent company, we also have the ability to accelerate growth with other leading global Oems.

Additionally, we are continually investing in new product development.

We have plans in place to establish independent distribution centers in Europe, and Asia Pacific in 2024.

In 2023, we opened two new technical centers for key global markets.

The first center opened in Wuhan, China, and our second is our global capability Center in Pune, India.

Furthermore, we have a unique multichannel path to diverse global market, which includes an exclusive agreement with Cummins to distribute our products.

Our second pillar is to accelerate profitable growth in the aftermarket.

At the same time, we are growing our distribution network and have expanded our presence in key independent channels in north.

We are transforming our global distribution capabilities to provide our customers with industry leading product availability.

Brazil and Mexico.

We established three new distribution centers in Brazil, Mexico, and Dallas, Texas, and we have also transitioned our largest distribution center in Kentucky from comments.

This increase in channel presence will support continued growth in our aftermarket.

The third pillar is transform our supply chain.

We are investing in our manufacturing capacity to improve automation and provide our customers with industry leading products.

We have plans in place to establish independent distribution centers in Europe, and Asia Pacific in 2024.

Completed a fully automated green cartridge production line in France.

Furthermore, we have a unique multichannel path to diverse global market, which includes an exclusive agreement with Cummins to distribute our products.

In Korea, we are expanding our production capabilities for them then our net filtration media.

At the same time, we are growing our distribution network and have expanded our presence in key independent channels in north.

These investments will continue to improve our operational excellence and operating costs.

Our fourth pillar is to expand into industrial filtration markets.

Brazil and Mexico.

This increase in channel presence will support continued growth in our after market.

We intend to pursue this growth inorganically through a disciplined programmatic approach.

The third pillar is transform our supply chain.

Our capital allocation priorities, we will continue to reflect our focus to grow it.

We are investing in our manufacturing capacity to improve automation and provide our customers with industry leading products.

Both organically and Inorganically.

In closing I want to take the opportunity to provide you with an update on Cummins announcement to launch the share exchange.

Completed a fully automated green cartridge production line in France.

In Korea, we are expanding our production capabilities for our nano net filtration media.

As expected Cummins has announced they will commence an exchange offer to fully split of the remaining interest in atmos.

These investments will continue to improve our operational excellence and operating costs.

We have filed a registration statement on form S. Four with the Securities and Exchange Commission today.

Our fourth pillar is to expand into industrial filtration markets.

We intend to pursue this growth inorganically through a disciplined programmatic approach.

In connection with the Cummins announcement.

Pursuant to the exchange offer common shareholders will have the opportunity to exchange their shares of common and common stock.

Our capital allocation priorities will continue to reflect our focus to growth.

Both organically and Inorganically.

Shares of Atmos.

Upon successful completion, Cummins will no longer be the controlling shareholder of us.

In closing I want to take the opportunity to provide you with an update on the <unk> announcement to launch the share exchange.

The completion of the exchange offer will be a significant milestone for atmos.

As expected Cummins has announced they will commence an exchange offer to fully split of their remaining interest in Atlas.

Allowing us to unlock our full potential and accelerate the delivery of our growth strategy.

We have filed a registration statement on form S. Four with the Securities and Exchange Commission today in connection with the comments announcements.

I am proud of our Atmos team, who have worked hard to deliver these results.

As I reflect on 2023, we made significant progress.

Pursuant to the exchange offer common shareholders will have the opportunity to exchange their shares of <unk> common stock.

And these fuels my belief in what is possible for Atmos as a fully independent company.

I'm, even more excited for the opportunities we have in front of us in 2024.

The shares of Atmos.

Upon successful completion, Cummins will no longer be the controlling shareholder of us.

Now I will turn the call over to Jack who will discuss our financial results in more detail.

The completion of the exchange offer will be a significant milestone for atmos, allowing us to unlock our full potential and accelerate the delivery of our growth strategy.

Thank you Steph and good morning, everybody.

We delivered another strong quarter of financial performance in the fourth quarter sales.

Sales were $400 million compared to $385 million during the same period last year, an increase of approximately 4%.

I am proud of our Atmos team, who have worked hard to deliver these results.

The increase in sales was primarily driven by pricing and the favorable impact of currency, partially offset by a decrease in volume.

As I reflect on 2023, we made significant progress.

This fuels my belief in what is possible for Atmos as a fully independent company.

Gross margin for the fourth quarter was $106 million, an increase of $23 million compared to the fourth quarter of 2022.

I'm, even more excited for the opportunities we have in front of us in 2024.

In addition to pricing, we also benefited from lower freight and commodities, which more than offset the impact of lower volumes.

Now I will turn the call over to Jack who will discuss our financial results in more detail.

As a reminder, during the fourth quarter of 2022, we took action to significantly right size, our inventory and experienced short term operational inefficiencies as we slowed production fees.

Thank you Steph and good morning, everybody.

We delivered another strong quarter of financial performance in the fourth quarter.

Sales were $400 million compared to $385 million during the same period last year, an increase of approximately 4%.

<unk> did not repeat in 2023.

Selling administrative and research expenses for the fourth quarter were $58 million, an increase of $6 million over the same period in the prior year.

The increase in sales was primarily driven by pricing and the favorable impact of currency, partially offset by a decrease in volume.

The increase was primarily driven by higher administrative costs related to our separation from coming in.

Gross margin for the fourth quarter was $106 million, an increase of $23 million compared to the fourth quarter of 2022.

In addition to the impact of higher variable compensation driven by overall company performance.

In addition to pricing, we also benefited from lower freight and commodities, which more than offset the impact of lower volumes.

Joint venture income was $9 million in the fourth quarter, an increase of $2 million from 2022 due to improved performance at our joint ventures in India and China.

As a reminder, during the fourth quarter of 2022, we took action to significantly rightsize, our inventory and experienced short term operational inefficiencies as we slowed production.

This resulted in adjusted EBITDA in the fourth quarter of $71 million or 17, 9% compared to $53 million or 13, 9% in the prior period.

These actions did not repeat in 2023.

Selling administrative and research expenses for the fourth quarter were $58 million, an increase of $6 million over the same period in the prior year.

Adjusted EBITDA for the quarter excludes $8 million of one time, standalone costs and exclude $7 million for the same period last year.

The increase was primarily driven by higher administrative costs related to our separation from Cowen.

These onetime costs, primarily related to the establishment of functions previously co mingled with common such as information technologies distribution centers and human resources.

In addition to the impact of higher variable compensation driven by overall company performance.

Joint venture income was $9 million in the fourth quarter, an increase of $2 million from 2022 due to improved performance at our joint ventures in India and China.

Adjusted earnings per share was <unk> 49 in the fourth quarter of 2023.

Which was the same amount in the prior year.

Higher interest expense incurred from debt issued at our IPO offset stronger underlying financial results.

This resulted in adjusted EBITDA in the fourth quarter of $71 million or 17, 9% compared to $53 million or 13, 9% in the prior period.

Adjusted free cash flow was $30 million this quarter compared to $63 million in the prior year.

Last year, we generated significant cash flow from the reduction of our inventory and supply chain improves.

Adjusted EBITDA for the quarter excludes $8 million of one time standalone costs and excludes <unk> 7 million for the same period last year.

Now, let's discuss our full year 2023 financial results.

These onetime costs, primarily related to the establishment of functions previously co mingled with coming such as information technologies distribution centers and human resources.

Sales were $1 63 billion compared to $1 $5 6 billion in 2022, an increase of 4%.

We benefited from $102 million of pricing actions, which were partially offset by $34 million of lower volume and $2 million of foreign exchange headwinds.

Adjusted earnings per share was <unk> 49 in the fourth quarter of 2023, which.

Which was the same amount in the prior year.

Interest expense incurred from debt issued at our IPO offset stronger underlying financial results.

Gross margin was $433 million, an increase of $74 million from 2022.

Adjusted free cash flow was $30 million this quarter compared to $63 million in the prior year.

In addition to favorable pricing, we saw commodities and freight improved by $41 million.

Last year, we generated significant cash flow from the reduction of our inventory.

This was partially offset by lower volumes and unfavorable manufacturing costs.

<unk> improves.

Selling administrative and research expenses for the full year, 2023, or $217 million, an increase of $39 million compared to the prior year.

Now, let's discuss our full year 2023 financial results.

Sales were 163 billion compared to $1 $5 6 billion in 2022, an increase of 4%.

The increase was primarily driven by administrative costs related to the separation from Cummins and variable compensation.

We benefited from $102 million of pricing actions, which were partially offset by $34 million of lower volume and $2 million of foreign exchange headwinds.

Variable compensation is higher this year as our employees delivered strong results relative to our plan.

Gross margin was $433 million, an increase of $74 million from 2022.

Our team will receive the payout of the incentive compensation in the first quarter of 2024, which will impact first quarter cash flow from operations.

In addition to favorable pricing, we saw commodities and freight improved by $41 million.

Joint venture and other income was $37 million in 2023 compared to $32 million in the prior year, primarily due to increased performance of our India joint venture.

This was partially offset by lower volumes and unfavorable manufacturing costs.

Selling administrative and research expenses for the full year, 2023, or $217 million, an increase of $39 million compared to the prior year.

Adjusted EBITDA was $302 million or 18, 6% compared to $243 million or 15, 6% in 2022.

The increase was primarily driven by administrative costs related to the separation from Cummins and variable compensation.

One time costs related to separation were $29 million for the full year 2023 compared to $9 million in 2022.

Variable compensation is higher this year as our employees delivered strong results relative to our plan.

We believe these costs will be in a range of $5 million to $15 million in 2024 significant progress on our separation was achieved in 2023.

Our team will receive the payout of the incentive compensation in the first quarter of 2024, which will impact first quarter cash flow from operations.

The effective tax rate for 2023 was 24, 3% compared to 19, 6% in 2022.

Joint venture and other income was $37 million in 2023 compared to $32 million in the prior year, primarily due to increased performance of our India joint venture.

The increase was driven by a change in the mix of earnings between the U S and foreign operations related to a legal entity restructuring implemented in anticipation of the IPO and separation.

Adjusted EBITDA was $302 million or 18, 6% compared to $243 million or 15, 6% in 2022.

For the full year 2023, adjusted EPS was $2 31.

Onetime costs related to separation were $29 million for the full year 2023 compared to $9 million in 2022.

Compared to $2 13 in 2022.

Higher interest expense incurred from debt issued at our IPO lowered results in 2023.

We believe these costs will be in a range of $5 million to $15 million in 2024 significant progress on our separation was achieved in 2023.

For the full year 2023, adjusted free cash flow was $152 million compared to $129 million in 2022.

The effective tax rate for 2023 was 24, 3% compared to 19, 6% in 2020 to.

Strong profitability and our focus on working capital management generated robust cash flow, which was partially offset by increased interest expense.

The increase was driven by a change in the mix of earnings between U S and foreign operations related to a legal entity restructuring implemented in anticipation of the IPO and separation.

Now, let's turn to the strength of our balance sheet at the end of 2023.

We ended the year with $168 million of cash on hand, driven by strong free cash flow generation.

For the full year 2023, adjusted EPS was $2 31.

Bind with a full availability of our $400 million revolving credit facility, we have $568 million of available liquidity.

Compared to $2 13 in 2022.

Higher interest expense incurred from debt issued at our IPO lowered results in 2023.

Our cash position and strong performance. During 2023 has resulted in a net debt to adjusted EBITDA ratio of one four times at the end of the year.

For the full year 2023, adjusted free cash flow was $152 million compared to $129 million in 2022.

Our balance sheet provides us with operational flexibility as we enter 2024 to focus on value creation and delivering total shareholder value by deploying capital for both continued organic growth and strategic inorganic initiatives.

Strong profitability and our focus on working capital management generated robust cash flow, which was partially offset by increased interest expense.

Now, let's turn to the strength of our balance sheet at the end of 2023.

In closing I want to thank our global team for their commitment, which allowed us to deliver exceptional results during our first calendar year as a public company.

We ended the year with $168 million of cash on hand, driven by strong free cash flow generation.

We are looking forward to continuing our momentum as we execute on our strategy in 2024.

Combined with the full availability of our 400 million revolving credit facility, we'd have $568 million of available liquidity.

Now we will take your questions.

Okay.

Our cash position and strong performance. During 2023 has resulted in a net debt to adjusted EBITDA ratio of one four times at the end of the year.

The floor is now opened for your questions to ask a question at this time simply press the star followed by the number one on your telephone keypad.

I'll now take a moment to compile our roster.

Our first question comes from the line of Joe O'dea with Wells Fargo. Please go ahead.

In closing I want to thank our global team for their commitment, which allowed us to deliver exceptional results during our first calendar year as a public company.

Hi, good morning.

Yeah.

Morning, Joe wanted to start on the.

On the on the revenue outlook and so.

We are looking forward to continuing our momentum as we execute on our strategy in 2024.

So aftermarket flat to plus three.

Total down one to up three what are you thinking about for our first fit range and just any commentary on within that range are you anticipating share gain any any kind of sizing a share gain opportunity.

Now we will take your questions.

Okay.

The floor is now open for your questions to ask a question at this time simply press the star followed by the number one on your telephone keypad.

I'll now take a moment to compile a roster.

Yeah. Good morning, Joey Thank you for your question.

So let's talk about the first fit side as you talked about and as a reminder, this drives about 20% of our revenue overall.

Our first question comes from the line of Joe O'dea with Wells Fargo. Please go ahead.

Hi, good morning.

The range I would point you to is at the low end down 14%.

Yeah.

Good morning, just wanted to start on the.

On the on the revenue outlook and.

And at the higher end down 5% with them with a mid range of nine and a half to fend them.

So aftermarket flat to plus three.

Total down one to up three what are you thinking about for first fit range and just any commentary on within that range are you anticipating share gain any any kind of sizing a share gain opportunity.

That Ah.

So that's the range, we're seeing on market outlook, obviously heavily driven by the U S exposure to first fit in our heavy duty market medium Judy as I talked about we expect not to be down quite as much.

Yeah. Good morning, Joey Thank you for your question.

Given the inventory levels there in terms of share gains.

So let's talk about the first fit side as you talk to that and as a reminder, this drives about 20% of our revenue overall.

We do see some share gain and I point, you to our overall growth algorithm over the long run.

A range I would point you to is at the low end.

Generally speaking, we see a market run at 2%.

Down 14%.

And we talked to a price of 1% and share gains of 1% to 2% and in this case, we've got it in and around around 1%.

And at the higher end down 5% with them with a mid range of nine and a half to send down.

That Ah.

And then just any kind of first half versus second half perspective, and how you're thinking about it.

So that's the range, we're seeing on market outlook, obviously heavily driven by the U S exposure to first fit in our heavy duty market medium Judy as I talked about.

Not sure to what degree first fit demand is holding up better than the first half and then as that would kind of slide.

We expect not to be down quite as much.

See aftermarket coming in a stronger way in the back half.

Given the inventory levels there in terms of share gains.

Mhm.

We do see some share gain and I point, you to our overall growth algorithm over the long run.

The way we're seeing it is that we expect it.

To remain pretty resilient through the first quarter and into the second quarter, and then drop off mall in the second half.

Generally speaking, we see a market Ron at 2%.

We talked to a price of 1% and share gains of 1% to 2% and in this case, we've got it in and around around 1%.

Then on the after market side, we actually expect that to be counter cyclical we'll have to see how this plays out of course.

We saw the after market, particularly the on highway markets in the U S significantly down in the third and fourth quarters.

And then just any kind of first half versus second half perspective, and how you're thinking about it.

Not sure to what degree first fit demand is holding up better than the first half and then as that would kind of slide eight.

I think I referenced it already but that cast index is a good indicator of that for US. It was it was down 9% in the second half of 2023.

See aftermarket come in in a stronger way in the back half.

So as a comparative as we head into the second half of 2024, we do expect an inflection point in freight activity.

Mhm.

<unk>.

The way we're seeing it is that we expect it.

To remain pretty resilient through the first quarter and into the second quarter, and then drop off mall in the second half.

In the aftermarket we also expect where all the way through Destocking now and so we see some positive tailwind for us in the aftermarket in the second half.

Then on the after market side, we actually expect that to be counter cyclical we'll have to see how this plays out of course.

I appreciate those details and then Steph I wanted to ask on M&A and just any.

We saw the after market, particularly the on highway markets in the U S significantly down in the third and fourth quarters.

Commentary on kind of progress with the pipeline over the last six to nine months and then what calls you're setting for the M&A team globally into into 2024.

I think I referenced that already but that caste index is a good indicator of that for US. It was it was down 9% in the second half of 2023.

So as we've talked about there our strategy the fourth pillar of our strategy to expand into industrial filtration market certainly very determined to pursue that strategy. We've been working five on clarifying our strategy the target markets, we want to.

So as a comparative as we head into the second half of 2024, we do expect an inflection point in freight activity.

EMEA after market, we also expect where all the way through Destocking now and so we see some positive tailwind for us in the aftermarket in the second half.

Enter into and then what is our opportunity to win in those markets a lot of the work in the last year with my strategy change and my leadership team has been in that space.

I appreciate those details and then Steph I wanted to ask on on M&A and just any.

Commentary on kind of progress with the pipeline over the last six to nine months and then what calls you're setting for the M&A team globally into into 2024.

What markets, we want to target and then how we're going to win in a particular market by leveraging our technology capabilities, but also our global footprint and distribution ability and sorry.

So as we've talked about there our strategy the fourth pillar of our strategy to expand into industrial filtration markets certainly very determined to pursue that strategy. We've been working <unk> on clarifying our strategy the target markets, we want to.

We have a good view of that I would say, we announced we've been building a pipeline of M&A. We've been regularly reviewing M&A targets throughout the course of the last year.

That's allowing us to fine tune our aim I suppose.

Entering two and then what is our opportunity to win in those markets a lot of the work in the last year with my strategy team and my leadership team has been in that space.

I would describe it the way you guys take a very disciplined approach to M&A and we are working through that.

The goals on giving the team he's obviously I want to expand into industrial filtration markets and see an acquisition and go through that.

What markets, we want to target and then how we're going to win in those particular markets by leveraging our technology capabilities, but also our global footprint and distribution ability and sorry.

But very much this needs to be the right acquisition that balances growth aspirations that we have with generating and creating value and returns.

We have a good view of that I would say, we announced we've been building a pipeline of M&A. We've been regularly reviewing M&A targets throughout the course of the last year.

That's helpful. Thank you.

Thanks, Joe.

Our next question comes from the line of Rob Mason with Baird. Please go ahead.

That's allowing us to fine tune our aim I suppose.

Yes, good morning, Steph and Jack congratulations on the quarter.

I would describe it the way you guys had a very disciplined approach to M&A and we are working through the goals on giving the team. He's obviously I want to expand into industrial filtration markets and see an acquisition and cross through that.

I wanted to probe just your thoughts around what the puts and takes could be in gross margin.

For the year.

Your outlook.

And specifically I was curious your view on where cost is and also.

But very much this needs to be the right acquisition that balances growth aspirations that we have with Jana, writing and creating value and returns.

Any efficiency gains.

Can speak to and.

Maybe lastly, just how you think the $5 million to $15 million of one time costs would flow through just the reported.

That's helpful. Thank you.

Gross margin.

Okay.

Thanks, Joe.

Okay. Good morning, Ralph Thanks for the question I might ask Jack to take the later on this one.

Our next question comes from the line of Rob Mason with Baird. Please go ahead.

Thanks, Greg Good morning, Rob Thanks for your question so.

Hi, Yes, good morning, Steph and Jack congratulations on the quarter.

I'll start first with <unk>.

The impacts of price and volume from a gross margin perspective.

I wanted to probe just your thoughts around what the puts and takes could be in gross margin.

For the full year stuff alluded, we're envisioning price of about 1%.

Some puts and takes from a volume perspective again with aftermarket.

For the year.

In your outlook.

And specifically I was curious your view on where cost is and also.

Hopefully improving year on year, offset a bit by first fit reductions.

Any efficiency gains that you can speak to.

And then we have some share gain initiatives all three of those put together equates to roughly.

Maybe lastly, just how you think the $5 million to $15 million of one time costs would flow through just the reported.

An offset if you will of the gross margin level.

Gross margin.

Yeah.

And so as you think about the benefit of price what we're expecting is a pretty healthy incremental gross margin backdrop.

Okay. Good morning, Rob. Thanks for the question I might ask Jack to take the later on this one.

Thanks, Greg Good morning, Rob. Thanks for your question. So I'll start first with we've kind of impacts of price and volume from a gross margin perspective.

Partially offset by.

Some continued investment in our separation activities.

We've talked about we saw.

For the full year, our stuff alluded, we're envisioning price of about 1%.

A few of our distribution centers too.

Decoupled from Cummins over the course of 2024 and into the beginning of 2025.

Some puts and takes from a volume perspective again with aftermarket.

Which will obviously drive some of those onetime costs, but also drive.

Hopefully improving year on year, offset a bit by first foot reductions.

Some inefficiencies, which are inherent of USD decoupled.

And then we have some share gain initiatives all three of those put together equates to roughly.

So is it.

Is it fair to think about gross margins kind of flattish year over year with the full year that you just reported.

An offset if you will at the gross margin level.

And so as you think about the benefit of price what we're expecting is a pretty healthy incremental gross margin backdrop.

Yes, I think.

Generally speaking, we would see probably some gross margin expansion driven by that pricing activity.

Partially offset by.

Some continued investment in our separation activities.

Other input.

Rob, which we're keeping a close eye on is the input costs.

We've talked about we still have.

A few of our distribution centers too.

Right, so our baseline assumption and what we're seeing right now is that commodities and freight.

Couple from Cummins over the course of 2024 and into the beginning of 2025.

<unk> relatively flat year on year.

Which will obviously drive some of those one time costs, but also drive.

Obviously, if those dynamics change then we'll revisit price in order to preserve our margins.

Some inefficiencies, which are inherent of USD decoupled.

I understand.

So is it.

Just as a follow up.

Is it fair to think about gross margins kind of flattish year over year with the full years did you just reported.

You mentioned distribution centers that would expand into Asia Europe, how should we think about those activities in the context of a.

Share gain opportunities.

Yes, I think.

Generally speaking we received probably some gross margin expansion driven by that pricing activity.

Principally in the aftermarket, but should we look.

For outsized share gain opportunity internationally as a result of some of those actions.

Other input.

Rob, which we're keeping a close eye on is the input costs.

Right, so our baseline assumption and what we're seeing right now is that commodities and freight.

So Rob I would say firstly that we progressed or embarrassed about distribution center transition from comments already so we obviously focused on the larger.

<unk> relatively flat year on year.

Obviously, if those dynamics change then we'll revisit price in order to preserve our margin.

Distribution centers first state remaining distribution centers in Asia Pacific and Europe is part of that transition, so really servicing our existing business and transitioning those distribution centers across as part of our overall supply chain transformation, we do see opportunity in terms of product availability throughout.

I understand.

Just as a follow up.

You mentioned distribution centers that would expand into Asia Europe, how should we think about those activities in the context of a.

Share gain opportunities.

Principally in the aftermarket, but should we look.

Distribution network on a roll and we do expect that to accelerate growth in our after market I would say that's integrated into the overall sort of shed summary that that I gave you earlier.

For outsize share gain opportunity internationally as a result of some of those actions.

So Rob I would say firstly that we've progressed or embarrassed about distribution center transition from comments already so we obviously focused on the larger.

In that in that outgrowth algorithm of the 1% to 2% at the topline growth level is how we're still thinking about it right now.

Obviously, we'll continue to push for for accelerating that growth further.

Distribution centers first states remaining distribution centers in Asia Pacific and Europe is part of that transition that really servicing our existing business and transitioning those distribution centers across as part of our overall supply chain transformation, we do see opportunity in terms of product availability throughout.

That's great. Thanks, Jeff.

Our next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Yes, hi, good morning, everyone.

Good morning, Gerry Gerry.

Distribution network at her role and we do expect that to accelerate growth in our after market I would say that's integrated into the overall sort of sure summary that that I gave you earlier.

I'm wondering if we just go back to the M&A talk.

Topic.

When you look at the range of outcomes based on your M&A pipeline can you just give us a sense of how much capital. You think you can put to work over the next 12 to 18 months I appreciate that.

In that in that outgrowth algorithm of the 1% to 2% at the topline growth level is how we're still thinking about it right now.

Wide range of outcomes, but can you just give us a flavor for is your level of optimism.

Obviously, we'll continue to push for for accelerating that growth further.

The ability to move the needle on that.

That part of the strategy within the 12 month timeframe.

That's great. Thanks Steph.

Our next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Thanks for the question Gerry.

Look I would say I don't have an M&A specific deal to talk to you at this point sitting here my expectation is our capital allocation priorities, we will be very much focusing on creating the flexibility for us to make the right M&A investment when we identify that that would be the first thing I would.

Yes, hi, good morning, everyone.

Good morning, Gerry Gerry Stephane I'm wondering if we just go back to the M&A.

Topic.

When you look at the range of outcomes based on your M&A pipeline can you just give us a sense of how much capital. You think you can put to work over the next 12 to 18 months and I appreciate that.

Say, obviously, we're balancing other things in our capital allocation priorities as well, but you should expect our capital allocation priorities to two.

Wide range of outcomes, but can you just give us a flavor for is your level of optimism.

Demonstrate that.

In terms of the size of targets and what we're looking at and I've said before that we're really looking at targets in that $50 million to $60 million revenue range generally speaking now I don't intend to be bound to that but.

Ability to move the needle.

That part of the strategy within the 12 month timeframe.

Thanks for the question Gerry.

But I'm expecting that we are taking a programmatic approach to acquisitions, we want to build out our capabilities and the creation of value as we progress further expanding into industrial filtration markets and sorry.

It will be that size level of of revenue and then you know.

Say, obviously, we're balancing other things in our capital allocation priorities as well, but you should expect our capital allocation priorities to two.

Subject to market multiples, which I won't speculate on here as to as to how that might translate into into capital allocation, but hopefully that gives you at least some thinking around the prioritization in and how it fits around our growth plans.

Demonstrate that.

Okay. Thank you.

Separately the 27.

Regulations coming coming into play you spoke about.

But I'm expecting that we are taking a programmatic approach to acquisitions, we want to build out our capabilities and the creation of value as we progress expanding.

<unk> gained new platforms earlier in the call any opportunities with 27 changeover either for share or content for you folks.

Expanding into industrial filtration markets I'm sorry.

We continue to be focused on being a leader in fuel filtration and crankcase ventilation in particular, we are targeting all of those opportunities to grow our share.

It will be.

<unk> size level of of revenue and then subject to market multiples, which I won't speculate on here as to as to how that might translate into into capital allocation, but hopefully that gives you at least some thinking around the prioritization in and how it fits surround our growth plan.

In those platforms and we're having success and so we're obviously very strong.

Our strong partnership with Cummins, which will continue and we've been able to secure those platforms with Cummins and we will continue to look to win other business in those platforms and we've.

Okay. Thank you.

Separately, the 27 engine regulations coming coming into play.

You spoke about potential to gain new platforms earlier in the call any opportunities with the 2007 changeover either for share or content for you folks.

We've had some success in that as well that this is very much focused on growing our share in fuel and crankcase ventilation as we see that opportunity coming up for 2027.

We continue to be focused on being a leader in fuel filtration and crankcase ventilation in particular, we are targeting all of those opportunities to grow our share.

Okay Super.

Lastly on the comments front with the transition of dialer medium duty engines, nearly 100000 units over.

The next call it five or so years.

In those platforms and we're having success and so we are obviously very strong.

Is that a global opportunity for you folks would you be would you benefit across the board on that or are there any regions, where you wouldn't participate in and how.

Our strong partnership with Cummins, which will continue and we've been able to secure those platforms with Cummins and we will continue to look to win other business in those platforms and.

How do you expect the cadence of that transition to play out as you plan your capacity.

We would absolutely expect that to be a global opportunity for us and and to play out either over the period of time.

We've had some success in that as well, but this is very much focused on growing our share in fuel and crankcase ventilation as we see that opportunity coming up for 2027.

Our investment we pre plan, obviously, our investment in capacity and we are investing in capacity to ensure that we can make and service that demand and support our customers.

Okay Super.

Lastly on the comments front with the transition of dialer medium duty engines, nearly 100000 units over.

Okay. Thank you.

Thanks sure.

The next call it five or so years.

Our next question comes from the line of Andrew <unk> with Bank of America. Please go ahead.

Is that a global opportunity for you folks would you be would you benefit across the board on that or are there any regions, where you wouldn't participate in how.

Hi, guys good morning.

How do you expect the cadence of that transition to play out as you plan your capacity.

Good morning Congrats.

Congratulations on a great quarter.

Just just a question in terms of when you talk about your aftermarket if you sort of mentioned that destock.

We would absolutely expect that to be a global opportunity for us and and to play out either over the period of time.

Is almost over so as I look to your forecast.

What is the headwind.

Our investment we pray plan, obviously, our investment in capacity and we are investing in capacity to ensure that we can meet and service that demand and support our customers.

Embedded.

And your number from the destock for the year and what sort of.

I guess I'm trying to sort of figure out sell through versus sell in.

Okay. Thank you.

Thanks sure.

But it's interesting Andrew as you look at the after market projection and I've given a range in our after market of zero to 3% correct as part of our overall guidance with a midpoint of 1.5% and.

Our next question comes from the line of Andrew <unk> with Bank of America. Please go ahead.

Hi, guys good morning.

Good morning, and.

Congratulations on a great quarter.

Just just a question in terms of when you talk about your aftermarket if you sort of mentioned that destock.

Sorry.

Two I would say disentangle some of the fright indices and the freight activity from the Destocking activity. While you would think that the de stocking activities just a supply side issue.

Is almost over so as I look to your forecast.

What is the headwind.

Embedded.

I do think it is intermingled in the freight downturn that we saw in the Cas Index for example of 9% in quarter three and four.

And your number from the destock for the year and what sort of.

I guess I'm trying to sort of figure out sell through versus sell in.

So look the best projection I can't give you an after market at this point as we as we turn that corner and as I said, it's going to be more weighted to the second half.

But it's interesting Andrew as you look at the after market projection and <unk>.

Given.

Range after market of zero to 3% as part of our overall guidance with a midpoint of 1.5% and.

Is my expectation, particularly as we saw those headwinds in the second half of 2023.

That it'll be in that range of the of the zero to 3%, we haven't seen the inflection point yet.

Sorry.

Difficult to I would say disentangle some of the fright indices in the freight activity from the Destocking activity. While you would think that the de stocking activities just a supply side issue.

Particularly in the on highway markets of that tuning, we're still seeing depressed freight activity.

As I said the Destocking, we've seen by say conclude but we're still saying that date press freight activity will need to say that time before we can give any more.

I do think it is intermingled in the fright downturn that we saw in the Cas Index for example of 9% at quarter three and four.

Optimism around the after market outlook.

So look the best projection I can give you an after market at this point as we as we turn that corner and as I said, it's going to be more weighted to the second half.

Rusty rush called the bottom on freight for the summer earlier today. So there we go.

Sorry, I Couldnt I couldnt resist that.

But.

Is my expectation, particularly as we saw those headwinds in the second half of 2023.

Here's a character so.

Just just a quick question.

For a full separation from comments.

That it'll be in that range of the of the zero to 3%, we haven't seen the inflection point yet.

The board planning to revisit potential cash return to shareholders I know folks asking questions on M&A.

Particularly in the on highway markets of that tuning, we're still seeing depressed freight activity.

Is that the first priority, what's the thinking on sort of a return of capital to shareholders. Thank you.

As I said the Destocking, we've seen by say conclude but we're still saying that date press fright activity, we will need to say that ton before we can give any more.

Thank you for the question, we certainly we'll revisit that with our board as we as we move through the surety strange and the transition that obviously is subject to the board's decision, but we would certainly look to revisit that I think Jack it might be less you're just talking about.

Optimism around the after market outlook.

Rusty rush called the bottom on freight for the summer earlier today. So there we go.

Sorry, I Couldnt I couldnt resist.

But.

We're thinking about the capital allocation priorities, yeah, absolutely and thanks for the question Andrew.

Here's a character so.

Just just one question.

So just a reminder, we are coming out of 2023 and a position of strength from a balance sheet perspective, as I mentioned $586 billion of liquidity and one four times net debt to adjusted EBITDA.

For a full separation from comments is the board planning to revisit potential cash return to shareholders I know folks asking questions on M&A.

Is that the first priority of what's the thinking on sort of return of capital to shareholders. Thank you.

Our number one priority is to continue to reinvest in the business to enable topline growth across our growth platforms. In addition to.

Yes. Thank you for the question, we certainly we'll revisit that with our board as we as we move through the Sherry strange in the transition that obviously is subject to the board's decision, but we would certainly look to revisit that I think Jack it might be less you're just talking.

Our successful operational separation from Cummins.

Obviously, continuing to fund strategic growth initiatives with a focus on expansion into industrial filtration markets as Jeff mentioned, we will take.

Take a disciplined approach to that M&A balancing profitable growth with return on invested capital.

About how we're thinking about the capital allocation priorities, yes, absolutely and thanks for the question Andrew.

Just a reminder, we are coming out of 2023 and a position of strength from a balance sheet perspective, as I mentioned 586 billion of liquidity and one four times net debt to adjusted EBITDA.

And then as you.

You mentioned continuing to evaluate cash returns to shareholders.

With the goal of delivering strong total shareholder return.

We did pay down the revolver inside of Q3, and so I wouldn't expect any significant debt reductions outside of the contractual ones that we highlighted.

Our number one priority is to continue to reinvest in the business to enable topline growth across our growth platforms. In addition to.

Terrific. Thanks, so much.

Our successful operational separation from Cummins.

Thank you.

Our next question comes from the line of Bobby Brooks with Northland Capital markets. Please go ahead.

Obviously, continuing to fund strategic growth initiatives with a focus on expansion into industrial filtration markets at Steph mentioned, we will take.

Hey, good morning team. Thank you for taking my question so.

Take a disciplined approach to that M&A balanced and profitable growth with return on invested capital.

So pretty strong year over year ROE good morning, Bobby and welcome.

Hey, Thanks, Steph I really appreciate it.

And then as you.

You mentioned continuing to evaluate cash returns to shareholders.

So pretty strong so really strong year over year revenue growth for the fourth quarter.

With a goal of delivering strong total shareholder return.

Obviously, you already mentioned that it was driven by pricing and favorable impacts of currency, but slightly offset by decreased volumes. So I was just wondering if you could maybe help frame how much of an impact each of those factors were in the fourth quarter and then also maybe discuss how those.

We did pay down the revolver inside of Q3, and so I wouldn't expect any significant debt reductions outside of the contractual ones that we highlighted.

Terrific. Thanks, so much.

Thank you.

Our next question comes from the line of Bobby Brooks with Northland Capital markets. Please go ahead.

You kind of already touched on it.

Anything incremental that you want to add on how those factors influencing 2024 guide.

Hey, good morning team. Thank you for taking my question so.

Thanks, Jack do you want to secondly, yes, absolutely and welcome Bob Good to hear from you.

So pretty strong year over year ROE good morning, Bobby and welcome.

Some of the quarter over quarter dynamics pricing.

Hey, Thanks, Steph I really appreciate it.

So pretty strong so really strong year over year revenue growth for the fourth quarter.

Versus last year in the same quarter was about $17 million or just about 4% year over year volume was about an $8 million headwind or about 2%.

<unk> reduction and then some FX benefits of about 5 million or slightly over 1%. So that's kind of the top line back.

Backdrop as Steph mentioned.

You kind of already touched on it but.

We look at 2024, we would expect price to be about 1% of our benefits.

Anything incremental that you want to add on how those factors influencing 2024 guide.

Share gains of about 1% offset by.

Thanks, Jack do you want <unk>.

Absolutely and welcome Bob Good to hear from you.

Just about 1% of our net volume headwind again with the impacts of first.

The quarter over quarter dynamics pricing.

Offsetting the.

Versus last year in the same quarter was about $17 million or just about 4% year over year volume was about an $8 million headwind or about a 2%.

The expected recovery in aftermarket.

As we think about 24 versus 23 have not embedded any significant FX.

Movements based on what we see right now.

<unk> reduction and then some FX benefits of about 5 billion or slightly over 1%. So that's kind of the topline.

Got it got it I appreciate that.

And then.

Shifting to the next question other 11 distribution centers you guys had exiting 2023 could you just remind me how many of those are in APAC Europe and.

On the backdrop as Steph mentioned.

As we look at 2024, we would expect price to be about 1% of our benefits.

Share gains of about 1% offset by.

You plan to split off from coming to just plan to stand up as your own soul distributions.

Just about 1% of our net volume headwind again with the impacts of versa.

Distribution centers, and then could you discuss the financial impact you've seen from what you've learned from standing up the Brazil, Mexico and Dallas facilities.

Offsetting the.

The expected recovery in aftermarket.

As we think about 24 versus 23 have not embedded any significant FX moves.

And maybe how you will apply those learnings to the rest of your footprint.

Movements based on what we see right now.

Got it got it I appreciate that.

Thanks for that question. We have currently four of the 11 shared facilities still with Cummins and so we'll look to transition noise.

And then.

Shifting to the next question other 11 distribution centers you guys had exited in 2023 could you just remind me how many of those are in APAC Europe and.

Progressive plan.

<unk> 2024, and I think South Africa extends into 2025 is the only remaining one beyond this calendar year.

You plan to split off from coming to this plan.

And up as your own soul.

Suddenly we are at the tail end, if I describe it that way of our distribution center transition still obviously very important to us in terms of our global our global footprint, but as I talked about earlier, we have prioritized the appeal.

Distribution centers, and then could you discuss the financial impact you've seen from what you've learned from standing up the Brazil, Mexico, and Dallas facilities, and maybe how you will apply those learnings to the rest of your footprint.

All of the 80%.

Yes.

Distribution centers and have moved towards those effectively.

Thanks for that question. We have currently four of the 11 shared facilities fill with Cummins and so we'll look to transition noise.

In terms of what we've learned and the opportunities generally we've been able to size the work within the quarter I would say obviously there is some build of inventory inside a quarter.

However, a progressive plan over the course of 2024, and I think South Africa extends into 2025 is the only remaining one beyond this calendar year.

As we make the transition of the different facilities and set all of that up generally speaking, we've been able to do that in the quarter there.

Systems transitions and facilities transitions as part of this and all I would say I guess is it with each one of these you get slicker and how you and how you manage it and and so I'm not I'm not expecting any issues with the ones that are ahead of us we have a clear plan.

Suddenly we are at the tire lens, if I describe it that way of our distribution center transition still obviously very important to us in terms of our global our global footprint, but as I talked about earlier, we have prioritized.

The 80% of <unk>.

And I would expect us to manage our <unk>.

Distribution centers and have many stories is effectively.

To support our customers through that transition very effectively.

In terms of what we've learned and the opportunities generally we've been able to size the work within the quarter I would say obviously there is some build of inventory inside a quarter.

Given how much practice we've had.

Got it that's.

Thats really good color.

And then maybe just touching on.

As we make the transition of the different facilities and said all of that up generally speaking, we've been able to do that in the quarter.

The fully automated line manufacturing line in France could you, maybe just remind us what the timeline of one one that was completed and maybe talk about because I know you guys want to be.

<unk> transitions and facilities transitions as part of this and all I would say I guess it with each one of these you get slicker and how you and how you manage it and and so I'm not I'm not expecting any issues with the ones that are ahead of us we have a clear plan.

Take the learnings from that and obviously you specifically chose to do that in a high cost region right to see to see those benefits most.

And I would expect us to manage our <unk>.

<unk>.

Just.

To support our customers through that transition very effectively.

So along with the timeline just talk about maybe when you think you could get to a point, where youre comfortable with the learnings to maybe apply that.

Given how much practice we've had.

Got it that's.

Your manufacturing footprint elsewhere.

That's really good color.

And then maybe just touching on.

Yeah.

Yeah. So automation overall is a key part of our supply chain transformation strategy for reference our largest manufacturing facility in Mexico in San Luis Potosi.

The fully automated line manufacturing line in France could you, maybe just remind us the timeline of one one that was completed and maybe talk about because I know you guys want to be.

Take the learnings from that and obviously you specifically chose to do that in a high cost region right to see to see those benefits most.

And sorry, our strategy for automation varies by location and I would describe in all side by the different lines and opportunity sets in sorry, we very much focused on the green cartridge line is one of our Vega automation undertakings and it's a fully automated line as disk.

<unk>.

Just.

So along with the timeline just talk about maybe when you think you could get to a point, where youre comfortable with the learnings to maybe apply that.

Linked from in some cases, such as in Mexico, We're using assisted robotics.

Your manufacturing footprint elsewhere.

Which really removed some fit to the activity in the manufacturing line, but not all of it.

Yeah.

Yeah. So automation overall is a key part of our supply chain transformation strategy for reference our largest manufacturing facility in Mexico in San Luis Potosi.

So there's been a lot of learnings for us in France, as we've installed a green cartridge line that decision was taken last year I think commissioned early this year, we've been trying to scale that up so I certainly I expect efficiency benefits as we get into into 2024 associated with that line in particular.

And sorry, our.

<unk> for automation varies by location and I would describe in all side by the different lines and opportunity sets in sorry, we very much focused on the green cartridge line is one of our Vega automation undertakings and it's a fully automated line as distinct from in some cases such as <unk>.

Because just how that all works together as taken us some time to land.

Also part of that Green cartridge line.

Not just the automation all of that but just the production ability that we had and it will give us much more speed than our existing.

In Mexico, we're using assisted robotics.

Green cartridge line, that's more manual.

Which really removed some set to the activity in the manufacturing line, but not all of it.

To be able to support really growing demand for this particular product.

So there's been a lot of learnings for us in France, as we've installed a green cartridge line that decision was taken last year I think commissioned early this year, we've been trying to scale that up so certainly I expect efficiency benefits as we get into into 2024 associated with that line in particular.

In Europe and beyond.

We will continue to strategically invest in that kind of capacity.

And I guess the matching there is what's the regional requirements what are the global requirements and then do we best serve as opposed to a fully automated line for this.

Other end of the spectrum of just robotics too to support parts of the line.

Because just how that all works together as taking us some time to land.

Also part of that Green cartridge line.

That's great. Thank you. Thank you Stephen I appreciate that and I'll turn I'll turn the call back over to the operator. Thank you.

Not just the automation all of that but just the production ability that we had and it will give us much more speed than our existing.

Thank you.

Green cartridge line, that's more manual to be able to support really growing demand for this particular product in Europe and beyond.

I would now like to turn the call over to Todd <unk> for closing remarks.

Thank you that concludes our teleconference for today. Thank you all for participating and your continued interest and as always the Investor relations team will be available for questions. After the call.

We will continue to strategically invest in that kind of capacity.

And I guess the matching there is whats the regional requirements what are the global requirements and then do we best serve as opposed to a fully automated line for at least the.

This concludes today's call you may now disconnect.

Other end of the spectrum of just robotics too to support parts of the line.

Yeah.

Okay.

That's great. Thank you. Thank you Stefan I appreciate that and I'll turn I'll turn the call back over to the operator. Thank you.

[music].

Thank you.

I would now like to turn the call over to Todd <unk> for closing remarks.

This concludes today's call you may now disconnect.

Yeah.

Okay.

[music].

Q4 2023 Atmus Filtration Technologies Inc Earnings Call

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