Q1 2025 Atmus Filtration Technologies Inc Earnings Call
Operator: Thank you for standing by.
Thank you for standing by my name is Kayla and I will be a conference operator today.
Kayla: My name is Kayla, and I will be your conference operator today.
Kayla: At this time, I'd like to welcome everyone to the Atmus Filtration Technologies first quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise.
Speaker Change: At this time I would like to welcome everyone to the Atmos filtration technologies first quarter 2025 earnings call.
All lines have been placed on mute to prevent any background noise.
Kayla: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press the star and 1 button.
Speaker Change: After the Speakers' remarks, there will be a question and answer session.
Speaker Change: If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Speaker Change: If you'd like to withdraw your question again press the star and one.
Todd Chirillo: I would now like to turn the call over to Todd Chirillo, Executive Director, Investor Relations. You may begin. Thank you, Kayla.
Speaker Change: I would now like to turn the call over to Todd Carrillo Executive Director Investor Relations you may begin.
Speaker Change: Thank you Kayla and good morning, everyone and welcome to the Atmos filtration technologies first quarter 2025 earnings call on the call today, we have Steph, Yes, sure Chief Executive Officer, and Jack Kinsler, Chief Financial Officer.
Stephanie Disher: Good morning, everyone, and welcome to the Atmus Filtration Technologies first quarter 2025 earnings call.
Stephanie Disher: On the call today, we have Steph Disher, Chief Executive Officer, and Jack Kienzler, Chief Financial Officer. Certain information presented today will be forward-looking and involve risks and uncertainties that could materially affect expected results.
Certain information presented today will be forward looking and involve risks and uncertainties that could materially affect expected results.
Stephanie Disher: Please refer to the slides on our website for the disclosure of the risks that could affect our results and for reconciliation of any non-GAP measures referred to on our call.
Speaker Change: Please refer to the 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.
Stephanie Disher: For additional information, please see our SEC filings and the investor relations pages available on our website at atmus.com.
Speaker Change: For additional information please see our SEC filings and the Investor Relations pages available on our website at <unk> Dot com.
Stephanie Disher: Now, I'll turn the call over to Steph. Thank you, Todd. And good morning, everyone. Our team achieved another quarter of solid results by delivering industry-leading filtration solutions for our customers. I want to thank our global team for their dedication and hard work to start 2025.
Scott: Now I'll turn the call over to Scott.
Scott: Thank you Todd and good morning, everyone.
Scott: The team achieved another quarter of solid results by delivering industry, leading filtration solutions for our customers.
Scott: I want to thank our global team for their dedication and hard work to start 2025.
Stephanie Disher: On the call today, I will provide a summary of our first quarter financial results and our outlook for 2025. I will also share our progress on executing our four-pillar growth strategy.
Scott: On the call today, I will provide a summary about first quarter financial results and our outlook for 2025.
I will also share our progress on executing our four pillar growth strategy.
Stephanie Disher: Jack will then provide a detailed review of our financial results. We continue to execute our capital allocation program, balancing share repurchases with a consistent dividend return. During the first quarter, we repurchased another $10 million of stock, bringing our total amount repurchased since the program announcement last July to $30 million. We have $120 million dollars remaining under our board authorization and expect to continue returning capital to shareholders throughout the remainder of the year.
Jack will then provide a detailed review of our financial results.
Scott: We continue to execute our capital allocation program.
Speaker Change: I think share repurchases with a consistent dividend return.
Speaker Change: During the first quarter, we repurchased another $10 million of stock, bringing our total amount repurchased since the program announcement last July to 30 minutes.
Speaker Change: We have $120 million remaining under our board authorization and expect to continue returning capital to shareholders throughout the remainder of the year.
Stephanie Disher: We have also made significant progress on our operational separation from our former parent commons and intend to complete remaining separation activities in 2025.
Speaker Change: We have also made significant progress on our operational separation from our former parent coming and intend to complete remaining separation activities in 2025.
Stephanie Disher: Before providing an update on our growth strategy, I want to share our views on the current tariff environment. We have dedicated teams closely monitoring and taking action in an environment which is fluid. We largely produce in-region for regions, which has had the effect of reducing the impact of tariffs. This model allows us to efficiently serve our customers when and where they need us. In North America, we have manufacturing facilities in Tennessee and Wisconsin to support the United States. along with a manufacturing facility in Mexico. The majority of our products from Mexico for the U.S. market are certified compliant or expected to be certified compliant under the USMCA trade agreement.
Speaker Change: Before providing an update on our growth strategy I want to share our views on the current tariff environment.
Speaker Change: We have dedicated teams closely monitoring and taking action and an environment, which is fluid.
Speaker Change: We largely produce in region for region, which has had the effect of reducing the impact of tariffs.
Speaker Change: This model allows us to efficiently serve our customers when and where they need us.
Speaker Change: In North America, we have manufacturing facilities in Tennessee, and Wisconsin to support the United States.
Speaker Change: Along with a manufacturing facility in Mexico.
Speaker Change: The majority of our products for Mexico for the U S market I certify compliance or expected to be certified compliance under the U S. M. C. I tried agreement.
Stephanie Disher: While we have taken a regional focus, there are some products we source globally.
Speaker Change: Well, we have taken a regional focus there are some products we source globally.
Stephanie Disher: The most substantial impact to date has been the significant tariffs implemented on China. We have acted swiftly to adjust our pricing to reflect our increased costs and minimise the tariff impact on our business. Our pricing goal is to remain margin dollar neutral and pass through the increased costs we incur to the market. we have a demonstrated ability to adjust pricing to reflect inflationary input costs. The estimated pricing from tariffs in 2025 is approximately 1.5%. This incorporates announced tariffs on China of 145%, U.S. broad-based 10% tariffs on other countries, and assumes substantially all Mexico products will be certified USMCA compliant.
Speaker Change: The most substantial impact to date has been a significant tariffs implemented on China.
Speaker Change: We have acted swiftly to adjust our pricing to reflect our increased cost and minimize the tariff impact on our business.
Speaker Change: Our pricing goal is to remain margin dollar neutral and pass through the increased costs, we incurred to the market.
Speaker Change: We have a demonstrated ability to adjust pricing to reflect inflationary input costs.
Speaker Change: The estimated pricing from terrorists in 'twenty 'twenty five is approximately one 5%.
Speaker Change: This incorporates announced tariffs on China of 145% U S broad based 10% tariffs on other countries and assume substantially all Mexico products will be satisfied U S. M C I compliance.
Stephanie Disher: It does not incorporate any impact from the Section 232 investigation the administration announced last week, which may impact tariffs for medium and heavy duty trucks and related parts. The outcome of this investigation is unknown.
Speaker Change: It does not incorporate any impact from the section 232 investigation, the administration announced last week, which may impact tariffs for medium and heavy duty trucks and related parts.
Speaker Change: The outcome of this investigation is ongoing.
Stephanie Disher: While pricing is an immediate action we can take, we are also assessing medium and long-term actions which can be implemented to reduce the impact of tariffs to our customers. With over 80% of our revenue derived from supporting our customers in the aftermarket, our business is fundamentally resilient. We will adapt as needed and continue to support our customers while focusing on our growth strategy to drive shareholder value.
Speaker Change: While pricing isn't immediate action. We can take we are also assessing medium and long term actions, which can be implemented to reduce the impact of tariffs to our customers.
Speaker Change: With over 80% of our revenue derived from supporting our customers in the aftermarket our business is fundamentally resilient.
Speaker Change: We will adapt as needed and continue to support our customers, while focusing on our growth strategy to drive shareholder value.
Stephanie Disher: Now, let's turn to the four pillars of our growth strategy and our progress in the first quarter. Our first pillar is to grow share in First Fit. We have realigned our organisation and added resources to our account management teams to focus on First Fit growth, which is allowing us to achieve increased bid rates for new business opportunities. We continue to win with the winners as we partner with industry-leading OEMs as they grow their business and take market share. We are leaders in fuel filtration and crankcase ventilation. This leadership expanded earlier this year with the launch of our next generation of Nanonet media, Nanonet N3.
Speaker Change: Now, let's turn to the four pillars of our growth strategy and our progress in the first quarter.
Speaker Change: Our third pillar is to grow share in first fit we have realigned our organization and added resources to our cat management teams to focus on first fit growth.
Speaker Change: Which is allowing us to achieve increased speed rights to new business opportunities.
Speaker Change: We continue to win with the winners as we partner with industry, leading Oems as they grow their business and take market share.
Speaker Change: We are leaders in fuel filtration and crankcase ventilation.
Speaker Change: This leadership expanded earlier this year with the launch of our next generation of nano Nat media Nandonet and trade.
Stephanie Disher: This media enables compact filter designs while delivering superior service life in the harshest environments across a wide variety of fuels. The reorientation of our organization for growth, coupled with product and technology leadership, allows us the continued opportunity to expand with new and existing OEMs around the world.
Speaker Change: These are made this media enables compact filter designs, while delivering superior service life in the harshest environments across a wide variety of fuel.
Speaker Change: The reorientation of our organization for growth, coupled with product and technology leadership allows us the continued opportunity to expand with new and existing Oems around the world.
Stephanie Disher: Our second pillar is focused on accelerating profitable growth in the aftermarket. Through our multi-channel path to market, we are expanding market coverage of our industry-leading FleetGuard products. Additionally, we are increasing brand awareness through our WeProtect campaign launched in the first quarter that focuses on our strengths. Science that Safeguards, Championing a Cleaner World, and Securing a Better Future. Furthermore, we are expanding the use of advanced data analytic tools, increasing our ability to provide industry-leading FleetGuard products for our customers when and where they need them.
Speaker Change: Our second pillar is focused on accelerating profitable growth in the after market.
Speaker Change: Through our multichannel paths to market, we are expanding market coverage of our industry, leading play guard products.
Speaker Change: Additionally, we are increasing brand awareness through our we protect campaign launched in the first quarter that focuses on our strength.
Speaker Change: Science that safeguard championing, a cleaner world and securing a better future.
Speaker Change: Furthermore, we are expecting the youth, we're expanding the use of advanced data analytic tool, increasing our ability to provide industry, leading play guard products for our customers when and where they need them.
Stephanie Disher: Our third pillar is focused on transforming our supply chain. We have transitioned 95% of our distribution network from Cummins, with our most recent facility having opened late last year in Belgium. We expect to transition our remaining facility in South Africa during the second quarter. During the first quarter, our team focused on bringing our Belgian location to a normalised operating level with a focus on improving customer experience. We also celebrated the grand opening of our newest media manufacturing facility in Maedo, South Korea. The facility is designed to economically manufacture Nanonet Plus multi-layer media and increase production capacity for our existing nanofiber line to meet growing market demands for premium performance filters.
Speaker Change: Our third pillar is focused on transforming our supply chain.
Speaker Change: We have transitioned 95% of our distribution network from Cummins with our most recent facility having opened late last year in Belgium.
Speaker Change: We expect to transition our remaining facility in South Africa during the second quarter.
Speaker Change: During the first quarter, our team focused on bringing our Belgium location to a normalized operating level with a focus on improving customer experience.
Speaker Change: We celebrated the Grand opening of our newest media manufacturing facility in late or South Korea. The facility is designed to economically manufacturer none of that plus multi layer media and increased production capacity for our existing nano fiber line to meet growing market demand.
Speaker Change: Premium performance filters.
Stephanie Disher: The plan also allows us to broaden our capabilities and make a large variety of media configurations to support a diverse range of our customer needs.
Speaker Change: The plan also allows us to broaden our capabilities and make a large variety of media configurations to support a diverse range of our customer needs.
Stephanie Disher: Our fourth pillar is to expand into industrial filtration markets. Our strategy remains focused on growth into industrial filtration, primarily through inorganic aquifers. As a reminder, we are broadly looking at three verticals, industrial air, industrial liquids excluding water, and industrial water.
Speaker Change: Our fourth pillar is to expand into industrial filtration market.
Speaker Change: Our strategy remains focused on growth into industrial filtration, primarily through inorganic acquisitions.
Speaker Change: As a reminder, we are broadly looking at three verticals industrial an industrial liquids, excluding water and industrial water.
Stephanie Disher: In the near term, economic uncertainty and market volatility is softening M&A activity. However, we continue to review opportunities for inorganic expansion with a disciplined approach and a focus on delivering long-term shareholder value.
Speaker Change: In the near term economic uncertainty.
Speaker Change: Certainty and market volatility is softening M&A activity.
Speaker Change: However, we continue to review opportunities for inorganic expansion with a disciplined approach and a focus on delivering long term shareholder value.
Stephanie Disher: Now, let's discuss our first quarter results. Despite challenging market conditions, our team delivered solid financial performance to start 2025. sales were $417 million compared to $427 million during the same period last year, a decrease of 2.4%. While unfavorable foreign exchange was the most significant driver of lower overall sales, we continue to see soft market conditions in most of our global markets. adjusted EBITDA was $82 million or 19.6% compared to $80 million or 18.8% in the prior period. Adjusted EBITDA excludes $9 million of one-time stand-alone costs. Adjusted earnings per share was $0.63 in the first quarter of 2025 and adjusted free cash flow was $20 million.
Speaker Change: Now, let's discuss our first quarter results.
Speaker Change: Despite challenging market conditions, our team delivered solid financial performance to start 2025.
Speaker Change: Sales were for $17 million compared to 427 million during the same period last year.
Speaker Change: A decrease of two 4%.
Speaker Change: Well unfavorable foreign exchange was the most significant driver of lower overall sales, we continue to stay soft market conditions in most of our global markets.
Speaker Change: Adjusted EBITDA was 82 million or 19, 6% compared to 80 million or 18, 8% in the prior period.
Speaker Change: Adjusted EBITDA excludes 9 million of one time standalone costs.
Speaker Change: Adjusted earnings per share was 63 cents in the first quarter of 2025, and adjusted free cash flow was $20 million.
Stephanie Disher: Adjusted free cash flow excludes $4 million of one-time separation related items in the court.
Speaker Change: Adjusted free cash flow excludes 4 million of onetime separation related items in the quarter.
Stephanie Disher: Now let's turn to our market outlook for 2025. While we are confident in our ability to navigate the evolving tariff environment and adapt quickly, the overall impact on our end markets is less clear. We feel it is helpful to provide the market with guidance, however, our visibility in the current environment is limited.
Speaker Change: Now, let's turn to our market outlook for 2025.
Speaker Change: While we are confident in our ability to navigate the evolving tariff environment and adapt quickly the overall impact on our end markets is less clear.
Speaker Change: We feel it is helpful to provide the market with guidance. However, our visibility in the current environment is limited.
Stephanie Disher: Given the heightened uncertainty, we want to provide as much transparency as possible regarding our underlying assumptions. As and when those assumptions change, we will adjust future guidance appropriately. Our guidance does not assume a broad-based economic recession. and reflects tariff impacts which are effective as of today. We expect tariff impacts to continue to evolve in response to ongoing policy and trade negotiations.
Speaker Change: Given the heightened uncertainty we want to provide as much transparency as possible regarding our underlying assumptions.
Speaker Change: As and when those assumptions change, we will adjust future guidance appropriately.
Speaker Change: Our guidance does not assume a broad based economic recession.
Speaker Change: And reflects tariff impacts which are effective as of today.
Speaker Change: We expect tariff impacts to continue to evolve in response to ongoing policy and trade negotiations.
Stephanie Disher: Starting with the market guidance for aftermarket, a recovery of freight activity is less certain than when we started the year. Previously, we expected freight activity to strengthen as the year progressed. Now, we expect freight activity to continue at current levels, and the midpoint of our guidance is flat year over year, with a range of down 1.5% to up 1.5%. We continue to execute our growth strategy which will enable us to outperform the underlying market. Our outlook remains unchanged and we expect our performance to add 2% of aftermarket revenue growth. Pricing is expected to provide approximately 3.2% of year-over-year revenue increase.
Speaker Change: Starting with the market guidance for after market.
Speaker Change: A recovery of freight activity is less certain than when we started the year preview.
Speaker Change: Previously, we expected freight activity to strengthen as the year progressed now we expect freight activity to continue at current levels and the midpoint of our guidance is flat year over year with a range of down one at a hospital to up 1%.
Speaker Change: We continue to execute our growth strategy, which will enable us to outperform the underlying market.
Speaker Change: Outlook remains unchanged and we expect outperformance to add 2% of after market revenue growth.
Speaker Change: Pricing is expected to provide approximately three 2% of year over year revenue increase.
Stephanie Disher: Pricing is comprised of two components. The first is base pricing actions to offset certain input costs, including steel, which is expected to be approximately 1.7%. The second component is tariff pricing. As I noted earlier, we are adjusting pricing approximately 1.5% in response to tariffs. While we expect to be margin neutral over the full year, we do expect some lag in the implementation of Mitigation Act. While the US dollar has weakened from the strength we saw in the first quarter, the currency environment remains fluid.
Speaker Change: Pricing is comprised of two components.
Speaker Change: It is based pricing actions to offset certain input costs, including steel.
Speaker Change: Which is expected to be approximately one 7%.
Speaker Change: The second component is tariff pricing as I noted earlier, we are adjusting pricing approximately one 5% in response to tariffs.
Speaker Change: While we expect to be margin neutral over the full year, we do expect some lag in the implementation of mitigation actions.
Speaker Change: Well the U S. Dollar has weakened from the strength we saw in the first quarter the currency environment remains fluid.
Stephanie Disher: We expect the full year of a strong U.S. dollar to be an approximate 1.5% revenue headwind.
Speaker Change: We expect the full year of a strong U S dollar to be an approximate one 5% revenue headwind.
Stephanie Disher: Let's now turn to our first bid market. In addition to economic uncertainty, the U.S. EPA announced in March a number of reviews of regulations for the U.S. heavy-duty market.
Speaker Change: Let's now turn to our first fit market.
Speaker Change: In addition to economic uncertainty the U S. A P I announced in March a number of reviews of regulations for the U S heavy duty market.
Stephanie Disher: Given these dynamics, we have not assumed any pre-buy activity in our first fit market outlook. In the U.S., we now expect the heavy duty market to be down 5% to 15%. For U.S. medium duty, we expect production to be down 10% to 20%.
Speaker Change: Given these dynamics, we have not assumed any pre buy activity in our first fit market outlook.
Speaker Change: In the U S. We now expect the heavy duty market to be down 5% to 15%.
Speaker Change: The U S medium, Judy we expect production to be down 10% to 20%.
Stephanie Disher: We continue to expect demand for trucks in India to be flat to down as we have yet to see the ramp up in government infrastructure spending. And in China, where we have low visibility to the market, we anticipate weak market conditions to continue.
Speaker Change: We continue to we expect demand for trucks in India to be flat to down as we've yet to see the ramp up in government infrastructure spending.
Speaker Change: And in China, where we have low visibility to the market, we anticipate anticipate weak market conditions to continue.
Stephanie Disher: Overall, while the components of our revenue algorithm have changed, our expected total company revenue for 2025 remains in a range of flat to up 4% compared to the prior year, with global sales in an expected range of 1.67 to 1.735 billion. We expect to react swiftly to changing market conditions and continue delivering strong operational performance. Our expected adjusted EBITDA margin remains in a range of 19% to 20%. Lastly, Adjusted EPS is expected to be in a range of $2.35 to $2.60. While the tariff environment remains fluid, we are confident in our ability to navigate these challenges and deliver strong shareholder value.
Speaker Change: Overall, while the components of our revenue algorithm have changed our expected total company revenues for 2025 remains in a range of flat to up 4% compared to the prior year with global sales and unexpected range of $1 six seven to $1 73 five.
Speaker Change: I've been in.
Speaker Change: We expect to react swiftly to changing market conditions and continuing.
Speaker Change: And continue delivering strong operational performance.
Speaker Change: Our expected adjusted EBITDA margin remains in a range of 19% to 20%.
Speaker Change: Lastly, adjusted EPS is expected to be in a range of $2.35 to $2.60.
Speaker Change: While the tariff environment remains fluid we are confident in our ability to navigate these challenges and deliver strong shareholder value.
Jack Kienzler: Now, I will turn the call over to Jack, who will discuss our financial results in more detail. Thank you, Steph, and good morning, everyone. Despite challenging markets, our team delivered another quarter of solid financial performance. Sales were $417 million compared to $427 million during the same period last year, a decrease of 2.4%. The decrease in sales was primarily driven by unfavorable foreign exchange of 3%. and lower volumes of 1%, partially offset by pricing of 1%. Gross margin for the first quarter was $111 million, compared to $112 million in the first quarter of 2024. In addition to foreign exchange and volumes, we were also unfavorably impacted by one-time separation and logistics costs, partially offset by pricing, lower manufacturing costs, and favorable warranty costs.
Jack: Now I will turn the call over to Jack who will discuss our financial results in more detail.
Jack: Thank you Steph and good morning, everyone.
Jack: Challenging markets our team delivered another quarter of solid financial performance.
Jack: Sales were 417 million compared to $427 million during the same period last year, a decrease of two 4%.
Jack: The decrease in sales was primarily driven by unfavorable foreign exchange of 3%.
Jack: And lower volume of 1%, partially offset by pricing of 1%.
Jack: Gross margin for the first quarter was $111 million compared to $112 million in the first quarter of 2024 and.
Jack: In addition to foreign exchange and volumes were also unfavorably impacted by one time separation and logistics costs, partially offset by pricing lower manufacturing costs and favorable warranty costs.
Jack Kienzler: Selling, administrative, and research expenses for the first quarter were $55 million, an increase of $2 million over the same period in the prior year. Joint venture income was $9 million in the first quarter, down $1 million to our 2024 performance. This resulted in adjusted EBITDA in the first quarter of 82 million, or 19.6%, compared to 80 million, or 18.8%, in the prior period. Adjusted EBITDA for the quarter excludes $9 million of one-time standalone costs. Completing the transition of our Belgium warehouse from Cummins was complex and required more resources than originally anticipated. As a result, we incurred a higher cost to minimize the impact to our customers.
Jack: Selling administrative and research expenses for the first quarter were $55 million, an increase of 2 million over the same period in the prior year.
Jack: Joint venture income was $9 million in the first quarter down $1 million to our 2020 for performance.
Jack: This resulted in adjusted EBITDA in the first quarter of 82 million or 19, 6%.
Jack: The $80 million or 18, 8% in the prior period.
Jack: Adjusted EBITDA for the quarter excludes $9 million of one time to standalone costs.
Jack: Leading the transition of our Belgian warehouse from Cummins was complex and required more resources than originally anticipated.
Jack: As a result, we incurred higher cost to minimize the impact to our customers.
Jack Kienzler: As a result of these higher Q1 costs, we are revising our full-year guidance for one-time costs to now be in a range of $10 to $15 million. Adjusted earnings per share was $0.63 in the first quarter of 2025 compared to $0.60 last year. Adjusted free cash flow was $20 million this quarter compared to an outflow of $13 million in the prior year. Lower incentive compensation payments and more efficient use of working capital drove improved performance this year. Free cash flow has been adjusted by $4 million for capital expenditures related to our separation from Cummins. We expect one-time capital expenditures related to our separation activities from Cummins to be complete this year, and these costs to be in a range of $5 to $10 million for 2025.
Jack: As a result of these higher Q1 costs, we are revising our full year guidance for onetime costs to now be in a range of $10 million to $15 million.
Jack: Adjusted earnings per share was 63 cents in the first quarter of 2025 compared to <unk> 60 last year.
Jack: Adjusted free cash flow was $20 million this quarter compared to an outflow of $13 million in the prior year.
Jack: Lower incentive compensation payments and more efficient use of working capital drove improved performance this year.
Jack: Free cash flow had been adjusted by $4 million for capital expenditures related to our separation from Cummins.
Jack: We expect onetime capital expenditures related to our separation activities from Cummins.
Jack: To be completed this year and these costs to be in the range of $5 million to $10 million for 2025.
Jack Kienzler: The effective tax rate for the first quarter of 2025 was 21.3% compared to 22% last year. The decrease was driven by a change in the mix of earnings among tax jurisdictions.
Jack: The effective tax rate for the first quarter of 2025 was 21, 3% compared to 22% last year.
Jack: The decrease was driven by a change in the mix of earnings among tax jurisdictions.
Jack Kienzler: Now let's turn to our balance sheet and the operational flexibility it provides us to execute our growth and capital allocation strategy. We ended the quarter with $183 million of cash on hand. Combined with the full availability of our $400 million revolving credit facility, we have $583 million of available liquidity. Our strong liquidity position provides us with the operational flexibility in the current dynamic market to effectively manage our business and execute on growth opportunities.
Jack: Now, let's turn to our balance sheet and the operational flexibility it provides us to execute our growth and capital allocation strategy.
Jack: We ended the quarter with $183 million of cash on hand, combined with the full availability of our 400 million revolving credit facility, we have $583 million of available liquidity.
Jack: Our strong liquidity position provides us with the operational flexibility in the current dynamic market to effectively manage our business and execute on growth opportunities.
Jack Kienzler: Our cash position and continued solid performance to start 2025 has resulted in a net debt-to-adjusted EBITDA ratio of 1.2 times for the trailing 12 months ended March 31st.
Jack: Our cash position and solid continued solid performance to start 2025 has resulted in a net debt to adjusted EBITDA ratio of one two times for the trailing 12 months ended March 31.
Jack Kienzler: In closing, I want to thank our global team for their hard work and dedication to deliver solid performance for the start of 2025.
Jack: In closing I want to thank our global team for their hard work and dedication to deliver solid performance for the start of 2025.
Jack: Okay.
Kayla: Now we will take your questions. At this time, I'd like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Please limit to one question and one follow-up question.
Jack: Now we will take your questions.
Jack: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. Please limit to one question and one follow up question.
Jerry Revich: Our first question comes from the line of Jerry Revich with Goldman Sachs. Your line is open. Yes, hi, good morning, everyone, and a nice quarter in a challenging environment.
Speaker Change: Our first question comes from the line of Jerry Revich with Goldman Sachs. Your line is open.
Jerry Revich: Yes, hi, good morning, everyone.
Speaker Change: Nice quarter in a challenging environment.
Stephanie Disher: I want to ask if we think about the possible manufacturing transitions that are feasible for your business over time, Steph, can you just give us a broad feel for what that might look like if some of these tariffs are here to stay? How much can you alter your supply base if we see visibility on long-term care? Good morning, Gerry, and thank you. Good to talk to you.
Jerry Revich: I wanted to ask you.
Jerry Revich: If we think.
Jerry Revich: Think about the possible manufacturing transitions that are feasible for your business over time stuff can you just give us a broad feel for what that might look like if some of these tariffs are here to say how much.
Jerry Revich: Alter your supply base.
Jerry Revich: If we see visibility on long term curves.
Gerry: Good morning, Gerry and thank you good to talk to you.
Stephanie Disher: Look, I think it may be useful just to start with a broader articulation of tariffs and their impacts. I think in the near term, really, the mitigation actions that we are focused on is, first and foremost, ensuring we avail ourselves of the certifications or the exemptions available under the USMCA certification. So we have a significant manufacturing facility in Mexico that supports some of our aftermarket requirements in the US, and we are really working hard to avail ourselves of USMCA certifications and the exemptions available there. In the short term, we are also focused on looking at the routing of our delivery routes around the world and where it makes sense for the flow of our product to go and what adjustments we can make on resourcing of product and our distribution flows.
Gerry: Look I think it might be useful just to start with a broader articulation of the tariffs and that impacts I think in the near time really the mitigation actions that we are focused on.
Gerry: First in formalized ensuring we avail ourselves of the certifications of the exemptions available under the U S. M. C. I certifications are we have a significant manufacturing facility in Mexico that supports some of our after market requirements in the U S. And we are really working hard to avail ourself.
Gerry: The U S M C H certifications than any extensions available there in the short time. We are also focused on looking at the routing of our delivery routes around the world and where it makes sense for the flow of our product to guard and what adjustments, we can make on re sourcing of product and our distribution plays.
Stephanie Disher: And so they are the primary short-term focus in terms of manufacturing transitions.
Gerry: And so they are the primary short term focus in terms of manufacturing transitions I would say, we're not contemplating at this point any long term manufacturing changes, we're well established in the U S. We have a strong presence can certainly talk more to the broader <unk>.
Stephanie Disher: I would say we're not contemplating at this point any long-term manufacturing changes. We're well established in the US. We have a strong presence, can certainly talk more to the broader outlook of tariffs and their impact on us. I covered a lot of that in my script as well.
Gerry: Cause tariffs and their impact on us I covered a lot of that in my in my script as well.
Jerry Revich: We're constantly monitoring the situation, but not planning any long-term manufacturing shifts at this stage. Super appreciate the color.
Gerry: Constantly monitoring the situation, but not planning any long term manufacturing shifts.
Gerry: At this stage.
Speaker Change: Super I appreciate the color and then.
Stephanie Disher: And then, you know, challenging environment for a range of industrial companies. To what extent is this environment potentially helping drive a more active M&A pipeline? Can you just give us an update, given how fragmented some of the competitors are on the industrial filtration side? Should we be optimistic about this environment creating an opportunity for you folks to potentially close some deals? Certainly. We are very focused in our leadership team and in the broader organisation on staying focused on our growth strategy. And we're really focused on those things that we can control in what is a very noisy environment right now.
Gerry: Challenging environment.
Gerry: For a range of industrial companies.
Speaker Change: Is this environment potentially helping drive a more active M&A pipeline can you just give us an update given how fragmented.
Gerry: Some of the competitors are on the industrial filtration side.
Gerry: Should we be optimistic about this environment, creating an opportunity for you folks.
Gerry: Potentially.
Gerry: We closed some deals.
Gerry: Certainly.
Gerry: We are very focused in our leadership came in and the broader organization on staying focused on our growth strategy and we're really focused on those things that we can control and what is a very noisy environment right. Now so as you rightly point out expansion into industrial filtration through an M&A strategy.
Stephanie Disher: So as you rightly point out, expansion into industrial filtration through an M&A strategy is still core to our direction and our growth We are continuing to evaluate a range of targets in our M&A pipeline. I do want to acknowledge, as I did in my opening comments, the market has made that degree of difficulty a little higher, I would say, just in terms of the availability of targets given the uncertain landscape. And we'll have to continue to evaluate that. But we remain focused on building a strong pipeline of M&A, assessing those targets alongside our strategic criteria and financial criteria, and have that as a core part of our growth strategy for the future.
Gerry: <unk> is still core to our direction and our growth strategy and we're very focused on that we've got our team continuing to work on it.
Gerry: We are continuing to evaluate a range of targets in our M&A pipeline.
Gerry: I do want to acknowledge as I did in my opening comments. The market has made that a degree of difficulty a little higher I would say just in terms of the availability of targets given the uncertain landscape.
Gerry: And we will have to continue to evaluate that but we remain focused on building a strong pipeline of M&A.
Gerry: I think those targets alongside our strategic criteria and financial criteria and have that as a core part of our growth strategy for the future.
Jerry Revich: Thank you. Thank you, Jerry.
Gerry: Thank you Sir.
Speaker Change: Thank you Jerry.
Rob Mason: And your next question comes from the line of Rob Mason with Baird. Your line is open. Yes, good morning, Steph, Jack. Stephanie, certainly appreciate all the detail that you provided around, you know, the movements on the top line. I guess, you know, could you summarize real quick if you think about all those puts and takes between currency, pricing, you know, changes in your market view? Do you still essentially shake out near the midpoint of your revenue range? I know it didn't change, but just within the range, how do all those shake out? I think that's the right way to read it.
Speaker Change: And your next question comes from the line of Rob Mason with Baird. Your line is open.
Rob Mason: Hi, Yes, good morning Steph.
Speaker Change: Stephanie certainly appreciate all the detail that you've provided around.
Stephanie: Thank you.
Stephanie: The movements on the topline I guess.
Stephanie: Could you summarize real quick if you think about all those puts and takes between currency pricing.
Stephanie: Changes in your market view.
Stephanie: Do you still.
Stephanie: Centrally you shake out near the midpoint of your revenue range I know it didn't change, but just within the range.
Stephanie: How does it all those shake out.
Stephanie: I think that's the right way to read it good morning, Rob by the way I think that's exactly the right way to read it that it shakes out about the midpoint am I.
Stephanie Disher: Good morning, Rob, by the way. I think that's exactly the right way to read it, that it shakes out about the midpoint. You know, I think certainly since our previous guidance, we have seen a softening in the market. I talked about in the aftermarket that, you know, previously we were expecting a rebound in the second half of the year or an increased set of freight activity in the second half of the year, particularly given we've been in pretty depressed conditions from a freight activity perspective for some time. I do feel like I'm repeating a story from last year.
Stephanie: I think certainly since our previous guidance, we have seen a softening in the market I talked about in the after market that.
Stephanie: Previously we were expecting a rebound in the second half of the year or an increase that is freight activity in the second half of the year, particularly given we've been in pretty depressed conditions from a freight activity perspective for some time I do feel like I'm repeating a story from last year I was expecting it to come back last year and the SEC.
Stephanie Disher: I was expecting it to come back last year in the second half. And so now we have assumed that it's really flat year over year at the midpoint for aftermarket guidance. And then obviously we continue to see downwards pressure on the first bit market, which is a much lower exposure for us. We're now north of the 80% in the aftermarket in terms of our latest ratio of aftermarket to first bit given due to the part of the cycle that we are in. And we have not assumed any pre-buy activity inside, you know, 2025 on the first bit side.
Stephanie: Half and.
Stephanie: So now we have assumed that is really flat year over year at the midpoint for after market guidance and then obviously, we continue to see downward pressure on that on the first fit market, which has a much lower exposure for us where we're now north of the 80% in the after market in terms of our lightest ratio of.
Stephanie: After market to first fit given to what given due to the part of the cycle that we're in and and we have not assumed any pre buy activity inside 2025 on.
Stephanie Disher: And so I think that's the market outlook. And then, of course, you see the pricing associated with tariffs coming into our guide now, which was not there when we guided previously. And that is offsetting some of these markets. Sure. And then just as a follow-up, you did not change your contribution you expect from market shares. So I'm curious, just with market volumes moving around, your ability to add that extra couple points of revenue, has there been any developments, incremental developments on the market share side? It's a great question and one we're certainly continuing to have with our team.
Stephanie: On the first fit side and sorry, I think that's the market outlook and then of course, you see the pricing associated with tariffs are coming into our guide now which was not there when we guided previously and that is that is offsetting some of this market softness.
Stephanie: Sure.
Stephanie: And then just as a follow up you did not change your contribution you expect from market shares. So I'm curious just with market volumes moving around.
Stephanie: Your ability to add that extra.
A couple of points of revenue.
Stephanie: Has there been any developments incremental developments on the market share side.
Stephanie: It's a great question and one we're certainly continuing to have with our team. We are very focused on continuing to grow share and whilst that I think the challenge to that if I. Just described then it gets more challenging in the environment that we're in is just a slowing of decision making.
Stephanie Disher: We are very focused on continuing to grow share. Whilst that, I think the challenge to that, if I just describe it, that gets more challenging in the environment that we're in is just the slowing of decision making in different companies when you're trying to gain share. I think given a lot of share was anticipated in the aftermarket around our coverage and we had it pretty well underpinned, is what gives us the confidence to still confirm that guidance in market share gains. That is something we're closely monitoring, more related to decision making by our end customers to enable us to be able to continue to make those share gains.
Stephanie: And different companies when you're trying to gain share I think given a lot of share was anticipated in the after market around our coverage and we had it pretty well underpinned is what gives us the confidence to still confirm that guidance in market share gains that is something we're closely monitoring more.
Stephanie: Lighted to decision, making by our customers to enable us to be able to continue to make that shake shack guidance.
Rob Mason: Very good.
Stephanie: Very good thank you.
Tami Zakaria: And your next question comes from the line of Tami Zakaria with J.P. Morgan. Your line is open. Hey, good morning. Thank you so much. So, my first question is on pricing. I think you're expecting, you said, 3.2% for the year, and the first quarter was about a point. And so, should we expect pricing to accelerate to about 4% and 2% and hold at that rate for the rest of the year to get to that 3.2%? Or does pricing ramp throughout the year and then eventually at a high rate in 4Q that gets us to 3.2% for the full year?
Speaker Change: And your next question comes from the line of Tami Zakaria with JP Morgan Your line is open.
Tami Zakaria: Hey, good morning, Thank you so much.
Tami Zakaria: So my first question is on pricing I think Youre expecting you said three 2% for the year and the first quarter. It was about a point and so should we expect the pricing.
Tami Zakaria: Pricing to accelerate to about 4% and two P. M hold at that rate for the rest of the year to get to that $3, two or does pricing ramp throughout the year and then eventually at a high rate in <unk> that gets us to three point to for the full year.
Tami Zakaria: Yeah, good morning, Tami.
Jack: Yeah. Good morning, Tammy I'm, Jack do you want to take that one sure good morning, Kevin.
Jack Kienzler: Jack, do you want to take that one? Yeah, sure. Good morning, Tami. So, the way I would think about it is a little bit more of a ramp versus being even each quarter, just as we have both the base pricing actions as well as the mid-year kick-in here in July. So, it'd be more like just a touch of over three, I would guess, in the second quarter and then build up into between the 4% and 5% range in Q3 and Q4. Got it. That's super helpful.
Speaker Change: So the way I would think about it is a little bit more of a ramp versus being even each quarter just as we are.
Speaker Change: Both the pace the base pricing actions as well as the midyear kick in here in July so it would be more like <unk>.
Speaker Change: Just to touch up over three I would guess in the second quarter and then build up into.
Speaker Change: Between the four and 5% range in Q3 and Q4.
Speaker Change: Got it that's Super helpful. And then second question on tariffs I appreciate the detailed comments and I I acknowledge it's very fluid right now, but just for our understanding let's see section 232 goes into effect in the U S. M C exemption no longer <unk>.
Stephanie Disher: And then second question on tariffs. I appreciate the detailed comments, and I acknowledge it's very fluid right now. But just for our understanding, let's say Section 232 goes into effect and USMCA exemption no longer exists, but then China tariffs are rolled down or rolled back to some decent level or reasonable level. So between those two, would Section 232 impact be offset by a rollback of China? Or how should we think about if one goes down and the other comes into effect? Have you done any scenario analysis on that? We have done lots of scenario analysis, Tami, and so let me try and answer your question as best I can without getting to hypotheticals on hypotheticals about what might be.
Speaker Change: Exist, but then China tariffs are rolled down a road back to some <unk>.
Speaker Change: In decent level or a reasonable level. So between those two wood wood wood section 232 impact be offset by a rollback of China or how should we think about if one goes down and the other comes into effect have you done any scenario analysis on that.
Speaker Change: We have done lots of scenario analysis, and so let me try and answer your question as best I can without getting too hypotheticals on hypotheticals about what might be.
Stephanie Disher: You know, what I'd like to do as I answer the tariff question, I do really want to start with thanking and appreciating our team. Really, it is, I've had the privilege of seeing Atmus' teamwork at its absolute best in response to the evolving tariff landscape. We've had a taskforce set up, led by Charles Masters, the president of our Power Solutions business, and supported in leadership by Paul Massey, our vice president of supply chain, and this really has been a total company effort. Our trade team, our legal team, our procurement team, our sales team, and just to see that working together, not only within the US, but globally, is really what has enabled us to get our arms around this impact quickly.
Speaker Change: What I'd like to do as I answer the tariff question I do really want to start with thanking and appreciating our team.
Speaker Change: Really it is I've had the privilege of saying Atmos teamwork at an absolute best in response to the evolving tariff landscape we have.
Speaker Change: Had a task force set up led by Charles Masters, the President of our power solutions business and supported in latest shaped by pull nasty, our vice president of supply chain and this really has been a total company asset our trade team our legal team our procurement team South came in just to see that working together.
Speaker Change: Not only within the U S that globally has really is really what has enabled us to get our arms around this impact quickly and implement mitigation action that is the key actually to what will put us in good shape as we move forward no matter the landscape on tariff sorry, just wanted to start with.
Stephanie Disher: And implement mitigation actions. That is the key, actually, to what will put us in good shape as we move forward, no matter the landscape on tariffs. So, just wanted to start with that. If I then talk about what is the impact of tariffs today, what are the mitigation actions we're taking? And then how do I see the unknowns playing out in the future? And how will we respond to those? If I just start with the impact today, really, I would break that down into three key areas. The first and most significant at the moment, by far, is China.
Speaker Change: That if I then talk about what is the impact of tariffs today, what are the mitigation actions, we're taking and then how do I see the a nine.
Speaker Change: Playing out in the future and how we respond to those so I just thought with the impact today I'm really I would break that down into three key areas.
Speaker Change: First and most significant at the moment by far is China.
Stephanie Disher: Whilst we only import less than 2% of our U.S. sales from China, as we've previously shared, we're very much a region-for-region strategy, but we do import some of our products from China. 145% of anything is a big number, so that is by far the majority of our impact today. We then have the second part is tariffs from Mexico. With our largest manufacturing plant in Mexico, and that's supporting the aftermarket in the U.S., that has the potential to be larger than that China impact, is how I would describe it. Right now, that impact is much lower because of the high proportion of USMCA certification that we have already and are moving towards.
Speaker Change: And whilst we only import less than 2% of Valueact styles from China.
Speaker Change: Previously shed with very much a region for region strategy.
Speaker Change: But we do import some of our products from China.
Speaker Change: Mm, 145% of anything is a big number so that is by far the majority of our impact today.
Speaker Change: We then have the second part is Paris from Mexico without largest manufacturing plant in Mexico and that supporting the after market in the U S.
Speaker Change: That has the potential to be larger than that China impact I guess, how I would describe it.
Speaker Change: Right now that impact is much lower because of the high proportion of U S. MCA certification.
Speaker Change: That we we have already and are moving towards and sorry, and then the third category of impact is the broad based sort of 10% on other countries, which is a much lesser impact given our region for region.
Stephanie Disher: Then the third category of impact is the broad-based 10% on other countries, which is a much lesser impact given our region-for-region strategy. So, they're the impacts as I see them right now. In terms of the mitigations, the way we are approaching mitigation is first and foremost to try and put in place actions that can mitigate the cost of tariffs for our customers. So the biggest one there is the certifications under USMCA and prioritizing that. The second activity is some of the short-term measures in the supply chain that we are taking, like delivery rerouting, so that we don't have product coming through the U.S.
Speaker Change: Strategy.
Speaker Change: Other impacts as I see them right now in terms of the mitigation. The way we are approaching mitigation is first and foremost to try and put in place action that can mitigate the cost of tariffs for our customers. So the biggest one that is the certifications on the U S. M C I and prioritizing that.
Speaker Change: The second activity is some of the short term measures in the supply chain that we are taking like delivery rerouting. So that we don't have product coming through the U S. But then inevitably goes up again, so really looking at those delivery pathway and where we might be at the race or a short term way.
Stephanie Disher: but then inevitably goes out again. So really looking at those delivery pathways and where we might be able to resource in a short-term way product manufacturing. And then after taking all of those measures and trying to reduce the impact of tariffs, we are then, our principle is to really pass the cost of tariffs to the market through pricing. And our principle is to ensure, you know, margin neutral, margin dollar neutral as we pass that pricing to the market. Given our high aftermarket business, parts business, we're confident in our ability to pass pricing to the market and that's how we would progress.
Speaker Change: Product manufacturer.
Speaker Change: And then after taking all of those measures and trying to reduce the impact of tariffs. We are then our principle is to really pass the cost of tariffs to the market through pricing.
Speaker Change: And our principle is to ensure margin neutral margin dollar neutral as.
Speaker Change: As we as we pass that pricing to the market given our high after market business pods business, we're confident in our ability to pass pricing to the market and that's how we would that's how we would progress.
Stephanie Disher: In terms of the future uncertainties and what might happen from here, you know, you point out the Section 232 investigation. I would expect us to follow these same principles in the application of those, you know, potential outcomes. So we'll assess the outcome, we'll look to avail ourselves of all exemptions, you know, available. We'll look to minimize that impact to customers and where we are not able to minimize that, you know, reduce that or eliminate that impact, we will pass that cost to the market through pricing. That is very clear, thank you.
Speaker Change: In terms of the future uncertainties and what might happen from here you know you point out the section 232 investigation.
Speaker Change: And I would expect us to follow the same principles and the application of those potential outcomes. So we'll assess the outcome, we'll look to avail ourselves of all exemptions.
Speaker Change: Billable will look to minimize that impact to customers and where we are not able to minimize that reduced that ever eliminate that impact we will pause that cost to the market through pricing.
Speaker Change: That is very clear thank you.
Tony: Thank you Tony.
Andrew Obin: And your next question comes from the line of Andrew Obin with Bank of America. Your line is open. Hi, this is David Ridley laying on for Andrew Obin. So I think, you know, the supply chain crisis a few years back, you were slower to pass through pricing.
Speaker Change: And your next question comes from the line of Andrew <unk> with Bank of America. Your line is open.
Speaker Change: Hi, This is David Ridley Lane on for Andrew Ruben.
Speaker Change: So I think the supply.
Speaker Change: Jane crisis, a few years back you were slower to pass through pricing I'm wondering.
David Ridley: I'm wondering Not to put too fine a point on it, but do your contracts with the OEMs on the first fit side, was there something different this time that allowed you to pass through the pricing on tariffs so quickly? Mm-hmm. It's a great question. And I do think we did lag a bit in the supply chain crisis. And we heavily relied on, you know, really the twice a year in the U.S. pricing actions during that time, right? So, it's the January and the July, as an example, with a notice period, which meant you had a long lag in the aftermarket.
Speaker Change: Not to put too fine a point on it but do your contracts with the Oems on the first fit side. It was there something different this time that allowed you to pass through the pricing on tariffs so quickly.
Speaker Change: Mhm.
Speaker Change: It's a great question and I do think we did lag a bit in the supply chain crisis, and we heavily relied on.
Speaker Change: Twice a year in the U S pricing actions during that time right. So in January and the July as an example, with a notice period, which meant you had a long lag in the after market.
Stephanie Disher: We have already taken the pricing actions related to We've already informed our customer base that we intend to take pricing action immediately on tariffs rather than, you know, apply the January and July timing for the aftermarket, which is the majority of our business. And so, that's the first thing I would say on the lag. The lag impact will still exist somewhat. So, we'll be watching the second quarter here closely as we look to implement the mitigation measures, because it takes some time to scale those up, not just the pricing, but the other dimensions of mitigation measures as well.
Speaker Change: We have already taken the pricing actions related to tariffs, we have already informed our customer base that we intend to take pricing action immediately on tariffs rather than apply the January and July timing for the after market, which is the majority of our business and so that's the first thing.
I would say on on the lag the lag impact will still exist. Some watch so we'll be watching the second quarter here closely as we look to implement the mitigation measures because it takes some time to scale scale those up not just the pricing, but the other dimensions of mitigation measures as well.
Stephanie Disher: And on the first bit side, much lower proportion of our business, but obviously, that's on a contract by contract basis. And it varies based on where that impact is. And so, we'll look to work through that with customers and to be able to pass that price through to our customers.
Speaker Change: And on the first fit side much lower proportion of our business, but obviously that's on a contract by contract basis and it varies based on where that impacted and so we'll look to work through that with customers and to be able to pass that that price through to our customers.
Stephanie Disher: about it, and if... The tariff situation can be different for some of your competitors, Seth. Is there any, you know, silver lining here in that perhaps some of your European-based firms export from Europe or some of your other competitors have, you know, low-cost manufacturing elsewhere in other regions and are importing? Is there any benefit on a competitive set that might help you on the market share? Hmm, I think it's a good question and we have looked at some of this from a scenario planning perspective. I don't think there's a major relativity difference either way, to be honest.
Speaker Change: Got it.
Speaker Change: It is.
Speaker Change: The tariff.
Speaker Change: Our situation can be different for some of your competitors is there.
Speaker Change: Yes.
Speaker Change: Silver lining here and.
Speaker Change: Perhaps some of your European based firms export from Europe, or some of your other competitors of.
Speaker Change: Low cost manufacturing elsewhere.
Speaker Change: In other regions that are important is there any benefit on our competitors.
Speaker Change: That might help you on the market share gains.
Speaker Change: I think it's a good question and we have looked at some of this from a scenario planning perspective, I don't think there's a major relativity difference either way to be honest, there will be puts and takes out a product level, but overall as you aggregate that up I'm.
Stephanie Disher: There will be puts and takes at a product level, but overall, as you aggregate that up, you know, it's not something we're relying on in our guidance and also we're not assuming a relativity downside the other way either. So, obviously we'll have to manage this at an individual product level as it plays out and an individual customer level to make sure we're supporting our customers and we're winning with our customers every day. That's at the heart of where this needs to happen. But at an aggregate level, the best guidance I can provide you right now, I don't expect significant share gains associated with tariffs and I don't expect significant share losses.
Speaker Change: Not something we're relying on in our guidance.
Speaker Change: And also we're not assuming it.
Speaker Change: Relativity downside the other way either sorry.
Speaker Change: Obviously, we'll have to manage this at an individual product level as it plays out in an individual customer level to make sure we're supporting our customers and we're winning with our customers every day, that's at the heart of way, where this needs to happen, but at an aggregate level. The best the best guidance I can provide you right now I don't think I don't expect significant share.
Speaker Change: Gains associated with tariffs and I don't expect significant share losses.
Bobby Brooks: Thank you very much.
Speaker Change: Understood. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Okay.
Bobby Brooks: And your next question comes from the line of Bobby Brooks with Northland Capital. Your line is open. Hey, good morning, team. Thanks. Sorry about that. Thanks for taking the question.
Speaker Change: And your next question comes from the line of Bobby Brooks with Northland Capital. Your line is open.
Bobby Brooks: Hey, good morning. Thanks.
Speaker Change: Sorry about that thanks for taking the question.
Bobby Brooks: So with all the noise regarding the EPA and potentially rolling back some emissions, and I know it's near impossible to quantify the headwind it would cause if these 2027 rules get axed, but I was kind of more curious on how would a rollback of emission standards that have been acted over the last four to five years impact the... It's certainly something, good morning Bobby, it's certainly something we're looking at closely. In March, obviously, the EPA announced a number of regulations opened up for review. I think the announcement I read was about 31, and that includes, you know, the standards on NOx that were due to come into effect in the 2027 model year production.
Speaker Change: So with all the noise regarding the EPA and potentially rolling back some admissions and I know, it's near impossible to quantify the headwind. It would cause. This is 2027 rules get ask but I was kind of more curious on how would a rollback of emission standards that have been enacted over the last four to five years impact the business.
Speaker Change: Mhm mhm.
Bobby Brooks: It's certainly something good morning, Bobby It's certainly something we're looking at closely in March obviously, the API announced a number of regulations opened up for review.
Bobby Brooks: I think the announcement I read was about 31 and that includes <unk>.
Bobby Brooks: And it's on Nox that would do to come into effect.
Bobby Brooks: In the 2027.
Bobby Brooks: Model year production.
Stephanie Disher: So that's now under review. We're not sure exactly how that review is going to come out. I think we're also reviewing EB mandates and a number of other things as part of the regulatory review. We're monitoring that to understand the implications.
Bobby Brooks: So that's now under review, we're not sure exactly how that review is going to come out saying. We're also reviewing a b mandates and a number of other things as part of the regulatory review.
Bobby Brooks: We are monitoring that to understand the implications here is how I would characterize it I think we're very well positioned as we look ahead. So.
Stephanie Disher: Here's how I would characterize it. I think we're very well positioned as we look ahead. So, we are a global leader in filtration solutions. We sit at the table with leading OEMs and have relationships with the leading OEMs around the world. And we have solutions that we're providing them today that meet today's regulations. We are also very capable to meet their needs for future regulatory requirements and have already, you know, in production and planning for that with our OE partners. So, the way I, we'll have to see how the regulatory environment plays out. We're already supporting our customers at today's level of regulatory requirements.
Bobby Brooks: We are a global leader in filtration solutions, we sit at the table with leading Oems that have relationships with the leading Oems around the world.
Bobby Brooks: And we have solutions that we're providing them today.
Bobby Brooks: That make today regulations.
Bobby Brooks: We are also very capable to meet their needs for future regulatory requirements and are already in production and planning for that.
Bobby Brooks: Our partners. So the way I will have to see how the regulatory environment plays out we're already supporting our customers at today's level of regulatory requirements and.
Stephanie Disher: We will be ready to support if the regulation goes in and then we also will continue to support our customers if it stays where it is today.
Bobby Brooks: We will be ready to support if the regulation goes in.
Bobby Brooks: And then we also will continue to support our customers is if it stays where it is today.
Stephanie Disher: got it that's helpful color and I guess just a follow up on that is. Given how strong of a relationship you guys have with these OEMs across the globe, would, is it your sense, would OEMs actually start to change their future? Future Designs to spec in less emissions tech, or would maybe truck owners and operators pay to pull these systems out? I feel like that's kind of unlikely, but just curious to hear what you're hearing from your customers. Yeah, I think I wouldn't speculate on any of that at the moment. I, you know, I think the review has only just been opened.
Speaker Change: Got it that's helpful color and I guess, just a follow up on that is.
Speaker Change: Given how strong the relationships you guys have with these Oems across the globe wood.
Speaker Change: Your sense with Oems actually start to change their future.
Speaker Change: Your design to spec and less emissions tanker truck owners or would maybe truck owners and operators pay to pull these systems out I feel like that's kind of unlikely, but just curious to hear what you're hearing from your customers.
Speaker Change: Yeah, I think I wouldn't speculate on any of that at the moment I I you know I think the review has only just been I can't not sure exactly how that review is going to I'm going to play out I do think obviously will all need to monitor that and then understand how to our customers.
Stephanie Disher: Not sure exactly how that review is going to play out.
Stephanie Disher: I do think, obviously, we'll all need to monitor that and then understand how do our customers need to approach, you know, that evolving landscape for their business, and therefore, how do we best I think one of the things that's giving me a great deal of optimism, I would say, you know, when you take a company public, you stand it up, you need to deal in a much more agile way as a team. You certainly do learn how to operate in an uncertain environment.
Speaker Change: Need to approach that evolving landscape for their business and therefore, how do we best support them I think one of the things that's giving me a great deal of optimism I would say when you take a company public he stand it up you need to deal in a much more agile way as a team.
Speaker Change: Certainly do learn how to how to operate in an uncertain environment and sorry, I guess I would just finalize my question.
Bobby Brooks: And so, I guess I would just finalize my question, my response to your question here by saying, I really think it's the team you've got in place, their ability to navigate in a changing landscape that equips you as things emerge, but too early to speculate on that from my perspective. Fair enough, and I appreciate the call.
Speaker Change: My response to your question here by saying I really think it's the team you've got in place and their ability to navigate in a changing landscape that equips you.
Speaker Change: As things emerge, but too early to speculate on that from my perspective.
Speaker Change: Fair enough I appreciate the color and just one last one for me is on my call back last quarter. Jack you gave some great color about how Atlas could reconfigure some shipping shepherd around to help avoid tariffs.
Bobby Brooks: And just one last one for me is, on my callback last quarter, Jack, you gave some great color about how Atmus could reconfigure some shipping routes to help avoid tariffs. And Stephanie's touched on it a couple times in the Q&A, but I think it would be really beneficial to just double click on some of those, some of the examples of how you could reconfigure some shipping routes. And then secondly, I was just curious if these potential reconfigurations, it seems like some of them might have already started to happen, or are they still just a plan and not necessarily going?
Speaker Change: You just touched on it.
Speaker Change: Times in the Q&A, but I think it would be really beneficial to just double click on some of those some of the examples of how you could reconfigure some shipping routes and then secondly, I was just curious if these potential reconfigurations. It seems like some of them might have already started to happen or are they still just a plan and not necessarily gone yet.
Jack Kienzler: Thanks for the question, Bobbie. Yeah, so if you take the mitigation actions that Steph was highlighting, you know, really what we've done is try to analyze and quantify the tariff exposure, and then the first you know, actions that we look to take are, you know, what can we do to mitigate that impact so as to mitigate, you know, any ultimate impact that goes to our customers. And so those types of shipping land reconfigurations are certainly a part of that, as well as looking at, you know, resourcing, so on and so forth, as you can imagine.
Speaker Change: Yeah go ahead. Thanks for the question Bobby Yes, So if you.
Speaker Change: If you take the mitigation actions that stuck with highlighting real.
Speaker Change: What we've done is try to analyze and quantify the tariff exposure and then the first.
Speaker Change: Actions that we look to take or what can we do to mitigate that impact so as to mitigate any ultimate impact.
Speaker Change: It goes to our customers and so those types of shipping line Reconfigurations are certainly a part of that as well as looking at.
Speaker Change: Resourcing, so on and so forth as you can imagine.
Jack Kienzler: As you know, we have enacted some, you know, some actions already on that page. And then, you know, as we've also taken advantage of a number of different exceptions available to us, and so as we work through that list and exhaust that list, that's when we turn to price to really look to stay margin neutral. So, yes, we have put those in place in a number of different areas, and we will look to continue to identify other mitigation areas, you know, as and when they become clear to us.
Speaker Change: As you know we have enacted some some action already on that page and then.
Speaker Change: We've also taken advantage of a number of different exceptions.
Speaker Change: Exception is available to us and so as we work through that list and.
Speaker Change: And exhaust that list when we turn to price too to really look to stay margin neutral. So yes, we have put in.
Speaker Change: In place.
Speaker Change: And a number of different areas and we will look to continue to identify other mitigation areas.
Speaker Change: Awesome.
Speaker Change: Become clearer to us.
Todd Chirillo: And there are no further questions at this time.
Todd Carrillo: And there are no further questions at this time, Todd <unk> I'll turn the call back over to you.
Todd Chirillo: Todd Chirillo, I'll turn the call back over to you. Thank you.
Todd Carrillo: Thank you that concludes our teleconference for today. Thank you all for participating and for your continued interest.
Todd Chirillo: That concludes our teleconference for the day. Thank you all for participating and for your continued interest.
Operator: Have a great day.
Speaker Change: Good day.
Operator: This concludes today's conference call.
Speaker Change: This concludes today's conference call you may now disconnect.
Operator: You may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: [noise].