PHINIA Inc. (NYSE: PHIN), a leader in premium fuel systems,
electrical systems, and aftermarket solutions, today reported
results for the third quarter ended September 30, 2024.
Third Quarter Highlights:
- Net sales of $839 million, a decrease of 6.4% compared with Q3
2023.
- Lower Fuel Systems (FS) sales in Europe and China partially
offset by strong Aftermarket segment sales in Europe led to lower
net sales compared to Q3 2023.
- Excluding the effects of contract manufacturing that ended in
the quarter, adjusted sales were $838 million, down 3.7%
year-over-year.
- Operating income of $66 million and operating margin of 7.9%,
representing a year-over-year increase of $20 million and 280 basis
points (bps), respectively.
- Primarily driven by lower separation and transaction expenses
and lower supplier and inflationary costs partially offset by lower
revenues.
- Adjusted operating income of $87 million and adjusted operating
income margin of 10.4%, representing a year-over-year increase of
$5 million and 100 bps, respectively.
- Net earnings of $31 million and net margin of 3.7%,
representing a year-over-year increase of $32 million and 380 bps,
respectively.
- Net earnings per diluted share of $0.70.
- Adjusted net earnings per diluted share of $1.17 (excluding
$0.47 per diluted share related to non-comparable items detailed in
the non-GAAP appendix below).
- Adjusted EBITDA of $120 million with adjusted EBITDA margin of
14.3%, representing a year-over-year increase of $3 million and 90
bps, respectively.
- Increased pricing for the Aftermarket segment combined with
cost controls in both segments led to margin expansion.
- Net cash generated by operating activities of $95 million,
representing a year-over-year decrease of $60 million.
- Adjusted free cash flow was $60 million.
- Repurchased $75 million of outstanding shares with $188 million
remaining on $400 million share repurchase program.
- In the quarter, the Board increased authorization on share
repurchase program by $250 million, from $150 million to $400
million.
- Issued $450 million aggregate principal amount of 6.625% senior
unsecured notes due 2032. Net proceeds used in part to repay all of
the Company’s outstanding borrowings under its Term Loan A
Facility.
Key Wins in Strategic Growth Markets:
New business wins remained strong across all end markets. A few
examples of new business awards in Q3 are:
- Second product win in the off-highway diesel market with an
electronically-controlled, low pressure common rail injection
system for compact diesel engines for use in excavators, forklifts,
and generators and designed to reduce emissions and increase fuel
efficiency.
- Conquest win in India’s growing combustion market with a
European automaker for an LV GDi 1.0L pump.
- Conquest GDi win with a US automaker for use in a high-volume
application for light duty trucks and luxury SUVs.
- Our Aftermarket segment renewed our agreement with one of our
largest global independent aftermarket customer groups; Signed a
first-time agreement with a major customer group in Europe; and
signed a new agreement with a North American customer to expand
cooperation into their business in Mexico.
Brady Ericson, President and Chief Executive Officer of PHINIA
commented: “PHINIA achieved excellent financial performance in the
third quarter of 2024, despite revenue softness in some markets.
Our team’s ability to meet increased Aftermarket demand while
flexing overheads in appropriate parts of the business enabled
expansion of adjusted EBITDA margins by 90 basis points, and
generation of $60 million in adjusted free cash flow. We continue
to book high quality, bottom line accretive new business in both
the Fuel Systems and Aftermarket segments demonstrating the ongoing
success of our strategy.”
Balance Sheet and Cash Flow:
The Company ended the quarter with cash and cash equivalents of
$477 million and $499 million of available capacity under its
Revolving Credit Facility. Long-term debt at quarter end was $987
million.
Capital expenditures during the quarter were $25 million with
the funds primarily used for investments in new machinery and
equipment for new program launches. Dividends paid to shareholders
in the quarter were $10 million, while share repurchases totaled
$75 million. Net cash provided by operating activities was $95
million and adjusted free cash flow was $60 million.
2024 Full Year Guidance:
Given the softening of the end vehicle markets, the Company is
revising its full-year 2024 guidance and now expects net sales of
$3.36 billion to $3.41 billion and adjusted sales of $3.34 billion
to $3.39 billion. The refined net earnings and adjusted EBITDA are
projected at $105 million to $125 million and $470 million to $490
million, respectively, resulting in earnings margin of 3.1% and
3.7% and adjusted EBITDA margin of 14.1% to 14.5%. PHINIA continues
to expect to generate $160 million to $200 million in adjusted free
cash flow. Adjusted tax rate is expected to be in the range of 33%
to 37%.
The Company will host a conference call to review third quarter
2024 results and take questions from the investment community at
8:30 a.m. ET today. This call will be webcast at PHINIA Q3 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 HARTRIDGETM. 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 to contribute to lower carbon mobility, we
are the partner of choice for a diverse array of 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 U.S. federal
securities laws. 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. and foreign
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 changes in 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 determination that the
spin-off does not qualify as tax-free for U.S. federal income tax
purposes, restrictions and obligations under the Tax Matters
Agreement, and our or BorgWarner Inc.’s failure to perform under,
and any dispute relating to, the 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 September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Fuel Systems
$
484
$
561
$
1,529
$
1,621
Aftermarket
355
335
1,041
997
Net sales
839
896
2,570
2,618
Cost of sales
652
719
2,003
2,080
Gross profit
187
177
567
538
Gross margin
22.3
%
19.8
%
22.1
%
20.6
%
Selling, general and administrative
expenses
108
104
324
306
Other operating expense, net
13
27
35
72
Operating income
66
46
208
160
Equity in affiliates’ earnings, net of
tax
(3
)
(2
)
(8
)
(8
)
Interest expense
20
22
81
34
Interest income
(4
)
(4
)
(12
)
(9
)
Other postretirement income, net
—
—
1
(1
)
Earnings before income taxes
53
30
146
144
Provision for income taxes
22
31
72
75
Net earnings (loss)
$
31
$
(1
)
$
74
$
69
Earnings (loss) per share— diluted
$
0.70
$
(0.02
)
$
1.63
$
1.46
Weighted average shares outstanding —
diluted
44.1
47.0
45.4
47.0
PHINIA Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
September 30, 2024
December 31, 2023
ASSETS
Cash and cash equivalents
$
477
$
365
Receivables, net
920
1,017
Inventories
486
487
Prepayments and other current assets
93
58
Total current assets
1,976
1,927
Property, plant and equipment, net
882
921
Other non-current assets
1,166
1,193
Total assets
$
4,024
$
4,041
LIABILITIES AND EQUITY
Short-term borrowings and current portion
of long-term debt
$
—
$
89
Accounts payable
588
639
Other current liabilities
434
420
Total current liabilities
1,022
1,148
Long-term debt
987
709
Other non-current liabilities
311
297
Total liabilities
2,320
2,154
Total equity
1,704
1,887
Total liabilities and equity
$
4,024
$
4,041
PHINIA Inc.
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
OPERATING
Net cash provided by operating
activities
$
95
$
155
$
235
$
188
INVESTING
Capital expenditures, including tooling
outlays
(25
)
(37
)
(85
)
(117
)
Payments for investment in equity
securities
(1
)
—
(1
)
(2
)
Proceeds from asset disposals and other,
net
1
—
2
2
Net cash used in investing activities
(25
)
(37
)
(84
)
(117
)
FINANCING
Proceeds from issuance of long-term debt,
net of discount
450
708
975
708
Payments for debt issuance costs
(6
)
(14
)
(15
)
(14
)
Borrowings (repayments) under Revolving
Facility
—
75
(75
)
75
Repayments of debt, including current
portion
(294
)
(1
)
(722
)
(1
)
Dividends paid to PHINIA stockholders
(10
)
(12
)
(33
)
(12
)
Payments for purchase of treasury
stock
(75
)
(9
)
(188
)
(9
)
Payments for stock-based compensation
items
—
—
(3
)
—
Cash outflows related to debt due to
Former Parent
—
(634
)
—
(728
)
Cash inflows related to debt due from
Former Parent
—
—
—
36
Net transfers to Former Parent
—
(63
)
—
(5
)
Net cash provided by (used in) financing
activities
65
50
(61
)
50
Effect of exchange rate changes on
cash
3
(14
)
22
(5
)
Net increase in cash and cash
equivalents
138
154
112
116
Cash and cash equivalents at beginning of
period
339
213
365
251
Cash and cash equivalents at end of
period
$
477
$
367
$
477
$
367
PHINIA Inc.
Net Debt (Unaudited)
(in millions)
September 30, 2024
December 31, 2023
Total debt
$
987
$
798
Cash and cash equivalents
477
365
Net debt
$
510
$
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 September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Fuel Systems net sales
$
484
$
561
$
1,529
$
1,621
Spin-Off agreement adjustment
(1
)
(26
)
(23
)
(26
)
Fuel Systems adjusted sales
483
535
1,506
1,595
Aftermarket net sales
355
335
1,041
997
Adjusted sales
$
838
$
870
$
2,547
$
2,592
Adjusted Operating Income and Operating
Margin (Unaudited)
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Operating income
$
66
$
46
$
208
$
160
Separation and transaction costs
4
25
24
84
Intangible asset amortization expense
7
7
21
21
Restructuring expense
6
4
11
10
Losses for other one-time events
4
—
4
—
Royalty income from Former Parent
—
—
—
(17
)
Adjusted operating income
$
87
$
82
$
268
$
258
Net sales
$
839
$
896
$
2,570
$
2,618
Operating margin %
7.9
%
5.1
%
8.1
%
6.1
%
Adjusted sales
$
838
$
870
$
2,547
$
2,592
Adjusted operating margin %
10.4
%
9.4
%
10.5
%
10.0
%
Adjusted EBITDA and EBITDA Margin
(Unaudited)
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net earnings (loss)
$
31
$
(1
)
$
74
$
69
Depreciation and tooling amortization
33
35
100
105
Interest expense
20
22
81
34
Provision for income taxes
22
31
72
75
Intangible asset amortization expense
7
7
21
21
Interest income
(4
)
(4
)
(12
)
(9
)
EBITDA
109
90
336
295
Separation and transaction costs
4
25
24
84
Restructuring expense
6
4
11
10
Losses for other one-time events
4
—
4
—
Other postretirement expense (income),
net
—
—
1
(1
)
Royalty income from Former Parent
—
—
—
(17
)
Equity in affiliates' earnings, net of
tax
(3
)
(2
)
(8
)
(8
)
Adjusted EBITDA
$
120
$
117
$
368
$
363
Adjusted sales
$
838
$
870
$
2,547
$
2,592
Adjusted EBITDA margin %
14.3
%
13.4
%
14.4
%
14.0
%
Net Earnings (Loss) to Adjusted Net
Earnings (Unaudited)
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net earnings (loss)
$
31
$
(1)
$
74
$
69
Separation and transaction costs
3
22
22
81
Intangible asset amortization
6
6
18
19
Loss on extinguishment of debt
2
—
17
—
Restructuring expense
5
4
9
8
Losses for other one-time events
3
—
3
—
Royalty income from Former Parent
—
—
—
(17)
Tax adjustments
2
1
—
1
Adjusted net earnings
$
52
$
32
$
143
$
161
Adjusted Net Earnings Per Diluted Share
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net earnings per diluted share
$
0.70
$
(0.02)
$
1.63
$
1.46
Separation and transaction costs
0.08
0.48
0.48
1.72
Loss on extinguishment of debt
0.03
—
0.37
—
Intangible asset amortization expense
0.13
0.13
0.40
0.40
Restructuring expense
0.11
0.08
0.19
0.17
Losses for other one-time events
0.08
—
0.08
—
Royalty income from Former Parent
—
—
—
(0.36)
Tax adjustments
0.04
0.02
—
0.03
Adjusted net earnings per diluted
share
$
1.17
$
0.69
$
3.15
$
3.42
Adjusted Free Cash Flow
(Unaudited)
(in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Net cash provided by operating
activities
$
95
$
155
$
235
$
188
Capital expenditures, including tooling
outlays
(25
)
(37
)
(85
)
(117
)
Effects of separation-related
transactions
(10
)
(25
)
31
35
Adjusted free cash flow
$
60
$
93
$
181
$
106
Adjusted Sales Guidance
(Unaudited)
(in millions)
Full Year 2024 Guidance
Low
High
Net sales
$
3,363
$
3,413
Spin-Off agreement adjustment
(23
)
(23
)
Adjusted sales
$
3,340
$
3,390
Category: IR
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241031557830/en/
IR contact: Kellen Ferris Vice President of Investor Relations
investors@phinia.com +1 574-210-5713
Media contact: Kevin Price Global Brand & Communications
Director media@phinia.com +44 (0) 7795 463871
PHINIA (NYSE:PHIN)
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