Summary
- Atmus Filtration Technologies has filed for a U.S. IPO.
- The filtration unit of Cummins is seeking to separate from its parent firm; it sells a range of engine filtration products for on- and off-highway vehicles and industrial equipment.
- ATMU has increased revenue but produced lower operating profits.
A Quick Take On Atmus Filtration Technologies
Atmus Filtration Technologies Inc. ( ATMU ) has filed to raise $100 million in an IPO of its common stock, according to an S-1 registration statement.
The firm provides filtration products for on- and off-highway vehicles and industrial equipment.
ATMU has grown revenue but operating profits have dropped.
I’ll provide an update when we learn more IPO details from management.
Atmus Overview
Nashville, Tennessee-based Atmus Filtration Technologies Inc. was founded to design and manufacture filtration technologies for engines and industrial equipment.
Management is headed by Ms. Steph Disher, who has been with the firm since 2013 and was previously Operations Director and Managing Director for parent firm Cummins in the South Pacific region.
The company’s primary offerings include the following:
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OEM filtration parts
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Aftermarket filtration parts
As of December 31, 2022, Atmus has booked fair market value investment of $505 million from investors including parent firm Cummins Inc. ( CMI )
Atmus - Customer Acquisition
The company seeks customers among OEMs and through aftermarket distributors in over 150 countries worldwide.
The firm's sales force operates in 25 countries and combined with its manufacturing and distribution centers, has a presence on six continents.
Selling, G&A expenses as a percentage of total revenue have been stable as revenues have increased, as the figures below indicate:
Selling, G&A | Expenses vs. Revenue |
Period | Percentage |
2022 | 8.9% |
2021 | 8.8% |
(Source - SEC)
The Selling, G&A efficiency multiple, defined as how many dollars of additional new revenue are generated by each dollar of Selling, G&A expense, was 0.9x in the most recent reporting period. (Source - SEC)
Atmus’ Market & Competition
According to a 2022 market research report by Allied Market Research, the global market for automotive air filters was an estimated $4.7 billion in 2020 and is forecast to reach $7.8 billion by 2030.
This represents a forecast CAGR of 5.4% from 2021 to 2030.
The main drivers for this expected growth are increasing regulations on the emission of greenhouse gases and a desire by manufacturers for better-performing technologies.
Also, the chart below shows the automotive filter market growth trajectories for various vehicle types through 2030:
Automotive Air Filter Market (Allied Market Research)
The company operates in other engine filtration markets globally.
Major competitive or other industry participants include the following:
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MANN+HUMMEL
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Donaldson
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Parker
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MAHLE
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Others
Atmus Filtration Technologies’ Financial Performance
The company’s recent financial results can be summarized as follows:
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Increasing top-line revenue
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Growing gross profit but decreasing gross margin
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Decreased operating profit
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Lowered cash flow from operations
Below are relevant financial results derived from the firm’s registration statement:
Total Revenue | ||
Period | Total Revenue | % Variance vs. Prior |
2022 | $ 1,562,100,000 | 8.6% |
2021 | $ 1,438,800,000 | |
Gross Profit (Loss) | ||
Period | Gross Profit (Loss) | % Variance vs. Prior |
2022 | $ 358,900,000 | 2.4% |
2021 | $ 350,500,000 | |
Gross Margin | ||
Period | Gross Margin | |
2022 | 22.98% | |
2021 | 24.36% | |
Operating Profit (Loss) | ||
Period | Operating Profit (Loss) | Operating Margin |
2022 | $ 203,600,000 | 13.0% |
2021 | $ 214,700,000 | 14.9% |
Net Income (Loss) | ||
Period | Net Income (Loss) | Net Margin |
2022 | $ 170,100,000 | 10.9% |
2021 | $ 171,300,000 | 11.0% |
Cash Flow From Operations | ||
Period | Cash Flow From Operations | |
2022 | $ 177,000,000 | |
2021 | $ 202,300,000 | |
(Source - SEC)
As of December 31, 2022, Atmus had no cash and $430 million in total liabilities.
Free cash flow during the twelve months ending December 31, 2022, was $144.5 million.
Atmus Filtration Technologies Inc. IPO Details
Atmus intends to raise $100 million in gross proceeds from an IPO of its common stock, although the final figure may be higher.
All of the proceeds from the IPO will go to parent firm Cummins as part of Atmus' separation process.
Management’s presentation of the company roadshow is not available yet.
Regarding outstanding legal proceedings, management says the firm is subject to claims as a normal part of its business and does not believe any claims are material individually or in the aggregate.
The listed bookrunners of the IPO are Goldman Sachs, JPMorgan and other investment banks.
Commentary About Atmus’ IPO
ATMU is seeking to float its shares on U.S. public capital markets as it begins its separation process from parent firm Cummins.
The company’s financials have shown growing top-line revenue, increasing gross profit but decreasing gross margin, lowered operating profit and decreased cash flow from operations.
Free cash flow for the twelve months ending December 31, 2022, was $144.5 million.
Selling, G&A expenses as a percentage of total revenue have been stable as revenue has increased; its Selling, G&A efficiency multiple was 0.9x for the most recent calendar year.
The company has 'not yet determined the extent to which [it] will pay dividends' on its common stock.
The firm’s CapEx Ratio indicates it has spent moderately on capital expenditures as a percentage of its operating cash flow.
The market opportunity for engine filtration products is large and expected to grow at a moderate rate of growth over the coming years.
Goldman Sachs is the lead underwriter and the only IPO led by the firm over the last 12-month period has generated a return of 95.0% since their IPO. This is a top-tier performance for all major underwriters during the period.
Risks to the company’s outlook as a public company include a distribution of all or part of parent firm Cummins’ remaining equity interest in Atmus to its shareholders after the IPO, which may lead to new investors selling those interests putting downward pressure on Atmus’ stock price.
When we learn more IPO details from management, I’ll provide a final opinion.
Expected IPO Pricing Date: To be announced.
For further details see:
Atmus Filtration Technologies Starts IPO Process