PHINIA Inc. (NYSE: PHIN), a leader in premium fuel systems,
electrical systems, and aftermarket solutions, today reported
results for the first quarter ended March 31, 2024.
First Quarter Highlights:
- U.S. GAAP net sales of $863 million, an increase of 3.4%
compared with Q1 2023.
- Excluding $17 million of contract manufacturing sales, sales
were up slightly compared to Q1 2023. Favorable pricing and
currency were partially offset by lower commercial vehicle sales in
Europe.
- Operating income of $71 million and adjusted operating income
of $97 million includes the benefit of a supplier settlement and
inflationary pass-through. Operating margin of 8.2% and an adjusted
operating margin of 11.5%, 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 were in line with
expectations.
- U.S. GAAP net earnings of $0.62 per diluted share.
- Excluding $0.46 per diluted share related to non-comparable
items (detailed in the non-GAAP appendix below), adjusted net
earnings of $1.08 per diluted share.
- Net earnings of $29 million with net margin of 3.4%, a
year-over-year decrease of 80 bps.
- Adjusted EBITDA of $131 million with adjusted EBITDA margin of
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.
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 $12 million in dividends and
repurchased $23 million of our outstanding shares. Additionally, in
early April, we strengthened our financial position even further
with the issuance of $525 million of senior secured notes which
enabled us to repay our Term Loan B facility and outstanding
balance on our revolving credit facility. The completion of this
refinancing initiative was an important step and provides us with
more financial flexibility under which we can continue to invest in
the strategic growth and evolution of the company.
"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
$325 million and $424 million of available capacity under its
revolving credit facility. Long-term debt at quarter end was $706
million.
Capital expenditures during the quarter were $43 million with
the funds primarily used for investments in new machinery and
equipment related to new program launches. Dividends paid to
shareholders in the quarter were $12 million while share
repurchases totaled $23 million. Net cash provided by operating
activities was $31 million and adjusted free cash flow was $13
million.
2024 Full Year Guidance:
The Company reaffirms its FY 2024 outlook for net sales of $3.42
billion to $3.58 billion, adjusted sales of $3.40 billion to $3.55
billion, net earnings and margin of $125 million to $160 million
and 3.7% to 4.5%, respectively, adjusted EBITDA of $470 million to
$510 million, and adjusted EBITDA margin of 13.8% to 14.4%. PHINIA
expects to generate $160 million to $200 million in adjusted free
cash flow. Adjusted tax rate is expected to be in the range of 28%
to 32%.
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 Auburn Hills, Michigan, USA.
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 U.S. administrative
policy, including changes to existing trade agreements and any
resulting changes in international trade relations; our ability to
protect our intellectual property; failure of or disruption in our
information technology infrastructure, including a disruption
related to cybersecurity; our ability to identify, attract, retain
and develop a qualified global workforce; difficulties launching
new vehicle programs; failure to achieve the anticipated savings
and benefits from restructuring and product portfolio optimization
actions; extraordinary events (including natural disasters or
extreme weather events), political disruptions, terrorist attacks,
pandemics or other public health crises, and acts of war; risks
related to our international operations; the impact of economic,
political, and market conditions on our business in China; our
reliance on a limited number of OEM customers; supply chain
disruptions; work stoppages, production shutdowns and similar
events or conditions; governmental investigations and related
proceedings regarding vehicle emissions standards, including the
ongoing investigation into diesel defeat devices; current and
future environmental and health and safety laws and regulations;
the impact of climate change and regulations related to climate
change; liabilities related to product warranties, litigation and
other claims; compliance with legislation, regulations, and
policies, investigations and legal proceedings, and new
interpretations of existing rules and regulations; tax audits and
changes in tax laws or tax rates taken by taxing authorities;
volatility in the credit market environment; impairment charges on
goodwill and indefinite-lived intangible assets; the impact of
changes in interest rates and asset returns on our pension funding
obligations; the impact of restrictive covenants and requirements
in the agreements governing our indebtedness on our financial and
operating flexibility; our ability to achieve some or all of the
benefits that we expect to achieve from the spin-off; other risks
relating to the spin-off, including a delay or inability to
transition key infrastructure, services and solutions, a
determination that the spin-off does not qualify as tax-free for
U.S. federal income tax purposes, restrictions under the Tax
Matters Agreement, and our or BorgWarner Inc.’s failure to perform
under various transaction agreements; and other risks and
uncertainties described in our reports filed from time to time with
the Securities and Exchange Commission.
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, 2024
December 31, 2023
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 the United States (GAAP). Such
non-GAAP financial measures are reconciled to their most directly
comparable GAAP financial measures below. The reconciliations
include all information reasonably available to the Company at the
date of this press release and the adjustments that management can
reasonably predict.
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
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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
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