PHINIA Reports Strong First Quarter 2024 Results and Reaffirms 2024 Outlook
- Strong first-quarter results for PHINIA Inc. with U.S. GAAP net sales of $863 million, up 3.4% from Q1 2023.
- Operating income of $71 million and adjusted operating income of $97 million were reported.
- Adjusted EBITDA stood at $131 million, representing a 160 bps year-over-year increase.
- PHINIA reaffirmed its 2024 outlook with net sales expected to range between $3.42 billion to $3.58 billion.
- Adjusted EBITDA guidance for 2024 is between $470 million to $510 million.
- The company expects adjusted free cash flow of $160 million to $200 million for the year.
- None.
Insights
PHINIA Inc.'s reported increase in net sales by 3.4%, reaching $863 million, indicates a solid start to the year, outpacing the slightly negative growth trend in European commercial vehicle sales. This top-line growth, however, must be dissected to understand the underlying drivers. The reported figures include a supplier settlement and inflationary pass-through, which suggests that some of the growth might be non-recurring or dependent on external factors rather than indicative of core business performance.
Furthermore, the distinction between reported operating income ($71 million) and adjusted operating income ($97 million) is critical. The adjustments imply that some earnings may be influenced by non-operational factors, which could affect the sustainability of margins. An improved operating margin of 8.2% and an adjusted operating margin of 11.5% could signal efficiency improvements, but investors should be cautious about one-time benefits inflating these numbers.
From a cash flow perspective, the net cash generated from operating activities ($31 million) and adjusted free cash flow ($13 million) are relatively modest. These figures are essential for the company's ability to invest in growth without resorting to additional debt or equity financing. Speaking of which, the issuance of $525 million in senior secured notes is a notable move to reduce borrowing costs and improve financial flexibility. However, this also increases PHINIA's debt load, a factor that must be balanced against free cash flows and potential impacts on future net earnings.
The new business wins highlighted by PHINIA, including contracts with leading global OEMs, are indicative of the company's competitive position in the fuel system industry. Notably, securing a mix of contract extensions and conquest business wins shows the company's ability to retain existing customers and attract new ones from competitors, possibly hinting at market share growth. However, the actual impact on the company's bottom line from these wins will depend on the terms of the contracts and the profitability of these new deals.
It's also worth paying attention to the company's strategic positioning in various geographies. For instance, the reference to localization in South America could be tapping into regional growth opportunities and cost efficiencies. Similarly, securing business for light vehicle platforms in North America suggests a potential increase in demand within this segment that PHINIA is well-poised to capture.
For retail investors, the reaffirmed guidance for FY 2024 suggests stability and confidence in the company's future performance from the management's perspective. Particularly, the projection of $160 million to $200 million in adjusted free cash flow could provide further assurance about the company's liquidity and its ability to maintain shareholder returns through dividends and share repurchases.
Analysing the dividend and share repurchase activities reveals the company's commitment to returning value to shareholders. With $12 million paid in dividends and $23 million spent on share repurchases, PHINIA signals a shareholder-friendly capital allocation policy. However, the sustainability of these practices should be evaluated against the backdrop of the company's adjusted free cash flow and long-term debt levels.
The balance sheet conditions, with strong cash and cash equivalents and available credit, alongside long-term debt, provide a mixed picture. On one hand, there's ample liquidity to accommodate short-term obligations, but on the other, the increased debt due to the new note issuance could pressure future financials, particularly if the economic environment results in tighter credit conditions or decreased demand.
While the balance sheet and cash flow details provide a snapshot of the company's current financial health, investors should monitor the trend of these figures over time to assess the company's ability to manage debt and continue investing in growth while rewarding shareholders.
First Quarter Highlights:
-
U.S. GAAP net sales of$863 million 3.4% compared with Q1 2023.-
Excluding
$17 million Europe .
-
Excluding
-
Operating income of
$71 million $97 million 8.2% and an adjusted operating margin of11.5% , represents a year-over-year increase of 130 basis points (bps) and 170 bps, respectively.-
Q1 2024 segment adjusted operating margin of
13.6% also includes the benefits noted above. -
Corporate costs of
$18 million
-
Q1 2024 segment adjusted operating margin of
-
U.S. GAAP net earnings of$0.62 -
Excluding
$0.46 $1.08
-
Excluding
-
Net earnings of
$29 million 3.4% , a year-over-year decrease of 80 bps. -
Adjusted EBITDA of
$131 million 15.5% , a year-over-year increase of 160 bps. -
Net cash generated by operating activities of
$31 million -
Adjusted free cash flow was
$13 million
-
Adjusted free cash flow was
Key Wins in Strategic Growth Markets:
New business wins remained strong across all end markets. A few examples of new business awards in Q1 are:
- Important contract extension win and volume uplift to supply fuel injectors to a leading global original equipment manufacturer (OEM), in the commercial vehicle (CV) segment for its European business.
-
Contract extension for important GDi fuel system with leading global OEM, supporting the customer with its localization plan in
South America . -
Conquest business win to supply GDi fuel systems to a leading global OEM for one of its light vehicle (LV) platforms in
North America .
Brady Ericson, President, and Chief Executive Officer of PHINIA commented: "I am pleased to report that we began the new year delivering strong first quarter results which support our full year guidance. The strong performance in the quarter was driven by our Aftermarket business, coupled with positive contributions from inflationary pass-through and a supplier settlement. Furthermore, the first quarter showcased the operating discipline of our teams as we are focused on realizing efficiencies and margin expansion across our business segments.
"Our capital allocation strategy continues to be a balanced approach of investing for growth and returning value to our shareholders through cash dividend and share re-purchases. To that end, during the quarter, we paid
"We have delivered against the initiatives we have laid out and our financial results are also reflective of this. New business wins are at record levels with a significant portion being new business conquests which bodes well for further market share gains. Additionally, we are well positioned from a balance sheet perspective to execute our operating strategy and to address market conditions as they unfold for the remainder of 2024 and beyond.”
Balance Sheet and Cash Flow:
The Company ended the quarter with cash and cash equivalents of
Capital expenditures during the quarter were
2024 Full Year Guidance:
The Company reaffirms its FY 2024 outlook for net sales of
The Company will host a conference call to review first quarter 2024 results and take questions from the investment community at 8:30 a.m. ET today. This call will be webcast at PHINIA Q1 2024 Earnings Call. Additional presentation materials will be available at Investors.phinia.com.
About PHINIA
PHINIA is an independent, market-leading, premium solutions and components provider with over 100 years of manufacturing expertise and industry relationships, with a strong brand portfolio that includes DELPHI®, DELCO REMY® and HARTRIDGE®. With over 13,000 employees across 44 locations in 20 countries, PHINIA is headquartered in
Across commercial vehicles and industrial applications (heavy-duty and medium-duty trucks, off-highway construction, marine, aviation, and agricultural), and light vehicles (passenger cars, trucks, vans and sport-utility), we develop fuel systems, electrical systems and aftermarket solutions designed to keep combustion engines operating at peak performance, while at the same time investing in advanced technologies to unlock the potential of alternative fuels.
By providing what the market needs today to become more efficient and sustainable, while also developing innovative products and solutions for a cleaner tomorrow, we are the partner of choice for a diverse array of commercial vehicle, industrial, light vehicle and aftermarket customers – powering our shared journey toward a cleaner tomorrow.
(DELCO REMY is a registered trademark of General Motors LLC, licensed to PHINIA Technologies Inc.)
Forward-Looking Statements: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical fact that provide current expectations or forecasts of future events based on certain assumptions and are not guarantees of future performance. Forward-looking statements use words such as “anticipate,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “likely,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or other words of similar meaning.
Forward-looking statements are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and which could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements. Risks, uncertainties, and factors that could cause actual results to differ materially from those implied by these forward-looking statements include, but are not limited to: adverse changes in general business and economic conditions, including recessions, adverse market conditions or downturns impacting the vehicle and industrial equipment industries; our ability to deliver new products, services and technologies in response to changing consumer preferences, increased regulation of greenhouse gas emissions, and acceleration of the market for electric vehicles; competitive industry conditions; failure to identify, consummate, effectively integrate or realize the expected benefits from acquisitions or partnerships; pricing pressures from original equipment manufacturers (OEMs); inflation rates and volatility in the costs of commodities used in the production of our products; changes in
We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PHINIA Inc. |
|
|
|
||||
Condensed Consolidated Statements of Operations (Unaudited) |
|||||||
(in millions, except earnings per share) |
|
|
|||||
|
Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Fuel Systems |
$ |
527 |
|
|
$ |
509 |
|
Aftermarket |
|
336 |
|
|
|
326 |
|
Net sales |
|
863 |
|
|
|
835 |
|
Cost of sales |
|
671 |
|
|
|
663 |
|
Gross profit |
|
192 |
|
|
|
172 |
|
Gross margin |
|
22.2 |
% |
|
|
20.6 |
% |
|
|
|
|
||||
Selling, general and administrative expenses |
|
104 |
|
|
|
99 |
|
Other operating expense, net |
|
17 |
|
|
|
15 |
|
Operating income |
|
71 |
|
|
|
58 |
|
|
|
|
|
||||
Equity in affiliates’ earnings, net of tax |
|
(3 |
) |
|
|
(3 |
) |
Interest expense |
|
22 |
|
|
|
6 |
|
Interest income |
|
(4 |
) |
|
|
(3 |
) |
Earnings before income taxes |
|
56 |
|
|
|
58 |
|
|
|
|
|
||||
Provision for income taxes |
|
27 |
|
|
|
23 |
|
Net earnings |
$ |
29 |
|
|
$ |
35 |
|
|
|
|
|
||||
Earnings per share— diluted |
$ |
0.62 |
|
|
$ |
0.75 |
|
|
|
|
|
||||
Weighted average shares outstanding — diluted |
46.1 |
|
|
47.0 |
|
||
|
|
|
|
||||
PHINIA Inc. |
|
|
|
||
Condensed Consolidated Balance Sheets (Unaudited) |
|||||
(in millions) |
|
|
|||
|
March 31, 2024 |
|
December 31, 2023 |
||
ASSETS |
|
|
|
||
Cash and cash equivalents |
$ |
325 |
|
$ |
365 |
Receivables, net |
|
1,023 |
|
|
1,017 |
Inventories |
|
489 |
|
|
487 |
Prepayments and other current assets |
|
80 |
|
|
58 |
Total current assets |
|
1,917 |
|
|
1,927 |
Property, plant and equipment, net |
|
888 |
|
|
921 |
Other non-current assets |
|
1,173 |
|
|
1,193 |
Total assets |
$ |
3,978 |
|
$ |
4,041 |
|
|
|
|
||
LIABILITIES AND EQUITY |
|
|
|
||
Short-term borrowings and current portion of long-term debt |
$ |
90 |
|
$ |
89 |
Accounts payable |
|
612 |
|
|
639 |
Other current liabilities |
|
420 |
|
|
420 |
Total current liabilities |
|
1,122 |
|
|
1,148 |
Long-term debt |
|
706 |
|
|
709 |
Other non-current liabilities |
|
300 |
|
|
297 |
Total liabilities |
|
2,128 |
|
|
2,154 |
|
|
|
|
||
Total equity |
|
|
|
||
Total liabilities and equity |
|
1,850 |
|
|
1,887 |
|
$ |
3,978 |
|
$ |
4,041 |
PHINIA Inc. |
|
|
|
||||
Condensed Consolidated Statements of Cash Flows (Unaudited) |
|
|
|
||||
(in millions) |
|
|
|
||||
|
March 31, 2024 |
|
March 31, 2023 |
||||
OPERATING |
|
|
|
||||
Net cash provided by (used in) operating activities |
$ |
31 |
|
|
$ |
(33 |
) |
INVESTING |
|
|
|
||||
Capital expenditures, including tooling outlays |
|
(43 |
) |
|
|
(38 |
) |
Proceeds from asset disposals and other, net |
|
1 |
|
|
|
— |
|
Net cash used in investing activities |
|
(42 |
) |
|
|
(38 |
) |
FINANCING |
|
|
|
||||
Repayments of debt, including current portion |
|
(3 |
) |
|
|
— |
|
Dividends paid to PHINIA stockholders |
|
(12 |
) |
|
|
— |
|
Payments for purchase of treasury stock |
|
(23 |
) |
|
|
— |
|
Payments for stock-based compensation items |
|
(3 |
) |
|
|
— |
|
Cash outflows related to debt due to former parent |
|
— |
|
|
|
(100 |
) |
Cash inflows related to debt due from former parent |
|
— |
|
|
|
30 |
|
Net transfers to former parent |
|
— |
|
|
|
67 |
|
Net cash used in financing activities |
|
(41 |
) |
|
|
(3 |
) |
Effect of exchange rate changes on cash |
|
12 |
|
|
|
4 |
|
Net decrease in cash and cash equivalents |
|
(40 |
) |
|
|
(70 |
) |
Cash and cash equivalents at beginning of year |
|
365 |
|
|
|
251 |
|
Cash and cash equivalents at end of period |
$ |
325 |
|
|
$ |
181 |
|
PHINIA Inc. |
|
|
|
||
Net Debt (Unaudited) |
|||||
(in millions) |
|
|
|
||
|
|
|
|
||
|
March 31,
|
|
December 31,
|
||
Total debt |
$ |
796 |
|
$ |
798 |
Cash and cash equivalents |
325 |
|
365 |
||
Net debt |
$ |
471 |
|
$ |
433 |
Non-GAAP Financial Measures
This press release contains information about PHINIA’s financial results that is not presented in accordance with accounting principles generally accepted in
Management believes that these non-GAAP financial measures are useful to management, investors, and banking institutions in their analysis of the Company's business and operating performance. Management also uses this information for operational planning and decision-making purposes.
Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measure. Additionally, because not all companies use identical calculations, the non-GAAP financial measures as presented by PHINIA may not be comparable to similarly titled measures reported by other companies.
A reconciliation of each of projected Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow, which are forward-looking non-GAAP financial measures, to the most directly comparable GAAP financial measure, is not provided because the Company is unable to provide such reconciliation without unreasonable effort. The inability to provide each reconciliation is due to the unpredictability of the amounts and timing of events affecting the items we exclude from the non-GAAP measure.
Adjusted EBITDA and Adjusted EBITDA Margin
The Company defines adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) as net earnings less interest, taxes, depreciation and amortization, adjusted to exclude the impact of restructuring expense, separation and transaction costs, other postretirement income and expense, equity in affiliates' earnings, net of tax, impairment charges, other net expenses, and other gains and losses not reflective of our ongoing operations. Adjusted EBITDA margin is defined as adjusted EBITDA divided by adjusted sales.
Adjusted Operating Income and Adjusted Operating Margin
The Company defines adjusted operating income as operating income adjusted to exclude the impact of restructuring expense, separation and transaction costs, intangible asset amortization expense, impairment charges, other net expenses, and other gains and losses not reflective of the Company’s ongoing operations. Adjusted operating margin is defined as adjusted operating income divided by adjusted sales.
Adjusted Sales
The Company defines adjusted sales as net sales adjusted to exclude certain agreements with BorgWarner that were entered into in connection with the spin-off.
Adjusted Net Earnings Per Diluted Share
The Company defines adjusted net earnings per diluted share as net earnings per share adjusted to exclude the tax-effected impact of restructuring expense, separation and transaction costs, impairment charges, other net expenses, and other gains, losses and tax amounts not reflective of the Company’s ongoing operations.
Adjusted Free Cash Flow
The Company defines adjusted free cash flow as net cash provided by operating activities after adding back adjustments related to the ongoing effects of separation-related transactions, less capital expenditures, including tooling outlays.
Adjusted Sales (Unaudited) |
|
|
|
|||
(in millions) |
|
|
|
|||
|
|
|
|
|||
|
Three Months Ended March 31, |
|||||
|
|
2024 |
|
|
|
2023 |
Fuel Systems net sales |
$ |
527 |
|
|
$ |
509 |
Spin-off agreement adjustment |
|
(17 |
) |
|
|
— |
Fuel Systems adjusted sales |
|
510 |
|
|
|
509 |
|
|
|
|
|||
Aftermarket net sales |
|
336 |
|
|
|
326 |
Adjusted sales |
$ |
846 |
|
|
$ |
835 |
Adjusted Operating Income and Operating Income Margin (Unaudited) |
|
|
|
||||
(in millions) |
|
|
|
||||
|
|
|
|
||||
|
Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Operating income |
$ |
71 |
|
|
$ |
58 |
|
Separation and transaction costs |
|
17 |
|
|
|
18 |
|
Intangible asset amortization expense |
|
7 |
|
|
|
7 |
|
Restructuring expense |
|
2 |
|
|
|
4 |
|
Royalty income from Former Parent |
|
— |
|
|
|
(5 |
) |
Adjusted operating income |
$ |
97 |
|
|
$ |
82 |
|
|
|
|
|
||||
Net sales |
$ |
863 |
|
|
$ |
835 |
|
Operating margin % |
|
8.2 |
% |
|
|
6.9 |
% |
Adjusted sales |
$ |
846 |
|
|
$ |
835 |
|
Adjusted operating margin % |
|
11.5 |
% |
|
|
9.8 |
% |
Segment Adjusted Operating Income and Segment Operating Income Margin (Unaudited) |
|
|
|||||
(in millions) |
|
|
|
||||
|
|
|
|
||||
|
Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Fuel Systems |
$ |
55 |
|
|
$ |
43 |
|
Margin % |
|
10.8 |
% |
|
|
8.4 |
% |
Aftermarket |
|
60 |
|
|
|
48 |
|
Margin % |
|
17.9 |
% |
|
|
14.7 |
% |
Segment adjusted operating income |
$ |
115 |
|
|
$ |
91 |
|
Margin % |
|
13.6 |
% |
|
|
10.9 |
% |
Adjusted EBITDA and EBITDA Margin (Unaudited) |
|
|
|
||||
(in millions) |
|
|
|
||||
|
|
|
|
||||
|
Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Net earnings |
$ |
29 |
|
|
$ |
35 |
|
Depreciation and tooling amortization |
|
34 |
|
|
|
34 |
|
Provision for income taxes |
|
27 |
|
|
|
23 |
|
Intangible asset amortization expense |
|
7 |
|
|
|
7 |
|
Interest expense |
|
22 |
|
|
|
6 |
|
Interest income |
|
(4 |
) |
|
|
(3 |
) |
EBITDA |
|
115 |
|
|
|
102 |
|
Separation and transaction costs |
|
17 |
|
|
|
18 |
|
Royalty income from Former Parent |
|
— |
|
|
|
(5 |
) |
Restructuring expense |
|
2 |
|
|
|
4 |
|
Equity in affiliates' earnings, net of tax |
|
(3 |
) |
|
|
(3 |
) |
Adjusted EBITDA |
$ |
131 |
|
|
$ |
116 |
|
|
|
|
|
||||
Adjusted sales |
$ |
846 |
|
|
$ |
835 |
|
Adjusted EBITDA margin % |
|
15.5 |
% |
|
|
13.9 |
% |
Net Earnings to Adjusted Net Earnings (Unaudited) |
|
|
|
||||
(in millions) |
|
|
|
||||
|
Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Net earnings |
$ |
29 |
|
|
$ |
35 |
|
|
|
|
|
||||
Separation and transaction costs |
|
16 |
|
|
|
18 |
|
Intangible asset amortization |
|
6 |
|
|
|
7 |
|
Restructuring expense |
|
2 |
|
|
|
3 |
|
Royalty income from Former Parent |
|
— |
|
|
|
(5 |
) |
Tax adjustments |
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
||||
Adjusted net earnings |
$ | 51 |
|
|
$ |
56 |
|
Adjusted Net Earnings Per Diluted Share (Unaudited) |
|
|
|
||||
|
|
|
|
||||
|
Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Net earnings per diluted share |
$ |
0.62 |
|
|
$ |
0.75 |
|
|
|
|
|
||||
Separation and transaction costs |
|
0.34 |
|
|
|
0.38 |
|
Intangible asset amortization expense |
|
0.13 |
|
|
|
0.15 |
|
Restructuring expense |
|
0.03 |
|
|
|
0.06 |
|
Royalty income from Former Parent |
|
— |
|
|
|
(0.11 |
) |
Tax adjustments |
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
|
|
||||
Adjusted net earnings per diluted share |
$ |
1.08 |
|
|
$ |
1.19 |
|
Adjusted Free Cash Flow (Unaudited) |
|
|
|
||||
(in millions) |
|
|
|
||||
|
|
|
|
||||
|
Three Months Ended March 31, |
||||||
|
|
2024 |
|
|
|
2023 |
|
Net cash provided by operating activities |
$ |
31 |
|
|
$ |
(33 |
) |
Capital expenditures, including tooling outlays |
|
(43 |
) |
|
|
(38 |
) |
Effects of separation-related transactions |
|
25 |
|
|
|
19 |
|
Adjusted free cash flow |
$ |
13 |
|
|
$ |
(52 |
) |
Adjusted Sales Guidance (Unaudited) |
|
|
|
||||
(in millions) |
|
|
|
||||
|
|
|
|
||||
|
Full Year 2024 Guidance |
||||||
|
Low |
|
High |
||||
Net sales |
$ |
3,420 |
|
|
$ |
3,575 |
|
Spin-off agreement adjustment |
|
(20 |
) |
|
|
(25 |
) |
Adjusted sales |
$ |
3,400 |
|
|
$ |
3,550 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240425084517/en/
IR contact:
Gordon Muir
Vice President and Treasurer
investors@phinia.com
+1 574-210-5713
Media contact:
Kevin Price
Global Brand & Communications Director
media@phinia.com
+44 (0) 7795 463871
Source: PHINIA INC
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