PHINIA Inc. (NYSE: PHIN), a leader in premium fuel systems,
electrical systems, and aftermarket solutions, today reported
results for the second quarter ended June 30, 2024.
Second Quarter Highlights:
- Net sales of $868 million, a decrease of 2.1% compared with Q2
2023.
- Excluding $5 million of contract manufacturing sales, sales
were down slightly compared to Q2 2023.
- Lower commercial vehicle (CV) sales in Europe and light vehicle
(LV) sales in China were partially offset by favorable mix within
the Aftermarket segment.
- Operating income of $71 million and operating margin of 8.2%,
representing a year-over-year increase of $15 million and 190 basis
points (bps), respectively.
- Driven primarily due to lower separation and transaction,
supplier, and inflationary costs which were partially offset by
lower revenues. Q2 2023 also benefited from retroactive customer
recoveries.
- Adjusted operating income of $84 million and adjusted operating
margin of 9.7%, representing a year-over-year decrease of $10
million and 90 bps, respectively.
- Net earnings of $14 million and net margin of 1.6%,
representing a year-over-year decrease of $21 million and 230 bps,
respectively.
- Net earnings were negatively impacted by a $15 million loss on
the extinguishment of debt.
- Net earnings per diluted share of $0.31.
- Adjusted net earnings per diluted share of $0.88 (excluding
$0.57 per diluted share related to non-comparable items detailed in
the non-GAAP appendix below).
- Adjusted EBITDA of $117 million with adjusted EBITDA margin of
13.6%, representing a year-over-year decrease of $13 million and
110 bps, respectively.
- Impacted by an increase in employee costs, including standalone
company costs, transactional currency losses and lower sales.
- Net cash generated by operating activities of $109 million,
representing a year-over-year increase of $43 million.
- Adjusted free cash flow was $108 million.
- Repurchased $90 million of outstanding shares with $13 million
remaining on $150 million share repurchase program.
Key Wins in Strategic Growth Markets:
New business wins remained strong across all end markets. A few
examples of new business awards in Q2 are:
- Contract extension for gasoline fuel delivery modules for a
2-wheeler with a leading global Original Equipment Manufacturer
(OEM), supporting the customer mostly in the Indian market.
- Conquest business win to supply fuel delivery modules to a
leading luxury global OEM for three of its LV platforms in the
Asian, North American, and European markets.
- Awarded an ECU contract to augment a previously awarded GDi
fuel system; a major win as this is the first full-system package
utilizing PHINIA’s complete hardware, software and calibration;
This is a conquest win that adds additional content with a leading
domestic Chinese OEM, in the LV segment, supporting both the
Chinese and export markets.
Brady Ericson, President, and Chief Executive Officer of PHINIA
commented: “This month, we celebrate our first anniversary as a
standalone entity. During our first year, we successfully executed
the financial, operational and capital allocation strategies that
we described in our pre-spin Investor Day. We generated strong free
cash flow and returned over $180 million to shareholders in the
form of share repurchases and dividends. We made tremendous
progress by exiting the Transition Services Agreements and all
material Contract Manufacturing Agreements with our former parent.
And, lastly, we continued to build on our reputation as a
well-known and trusted supplier to drive long-term customer
relationships, which, together with recent conquest wins, are
translating into significant new business. Our accomplishments from
the past year are being recognized, as evidenced by PHINIA’s recent
addition to the Russell 2000.
As we look at the second quarter results, our top line reflects
solid performance from our Aftermarket segment, particularly in
Europe, offset by weaker CV sales in Europe and lower LV sales in
China, due to challenging macro conditions for our Fuel Systems
segment. Our cash generation remains healthy, with adjusted free
cash flow of $108 million in the quarter and $121 million year to
date.
Although we are not adjusting our sales guidance range, we do
see sales coming in at the low end of the range due to the softer
than expected OE markets. However, we are confident in our
strategies as our Aftermarket segment remains resilient, we are
remaining financially and operationally disciplined during this
down cycle, and we expect many new product and technology launches
in the coming years.”
Balance Sheet and Cash Flow:
The Company ended the quarter with cash and cash equivalents of
$339 million and $499 million of available capacity under its
Revolving Credit Facility. Long-term debt at quarter end was $821
million.
Capital expenditures during the quarter were $17 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 $11 million while share
repurchases totaled $90 million. Net cash provided by operating
activities was $109 million and adjusted free cash flow was $108
million.
2024 Full Year Guidance:
The Company expects its FY 2024 outlook for net sales and
adjusted sales to be at the low end of the previously provided
ranges, with net sales of $3.42 billion to $3.58 billion, adjusted
sales of $3.40 billion to $3.55 billion, adjusted EBITDA of $470
million to $510 million, and adjusted EBITDA margin of 13.8% to
14.4%. PHINIA continues to expect to generate $160 million to $200
million in adjusted free cash flow. The Company has revised its
adjusted tax rate expectation to be in the 33% to 37% range and
therefore now expects net earnings and margin of $100 million to
$140 million and 2.9% to 3.9%, respectively.
The Company will host a conference call to review second quarter
2024 results and take questions from the investment community at
8:30 a.m. ET today. This call will be webcast at PHINIA Q2 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 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 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 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 June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Fuel Systems
$
518
$
551
$
1,045
$
1,060
Aftermarket
350
336
686
662
Net sales
868
887
1,731
1,722
Cost of sales
680
698
1,351
1,361
Gross profit
188
189
380
361
Gross margin
21.7
%
21.3
%
22.0
%
21.0
%
Selling, general and administrative
expenses
112
103
216
202
Other operating expense, net
5
30
22
45
Operating income
71
56
142
114
Equity in affiliates’ earnings, net of
tax
(2
)
(3
)
(5
)
(6
)
Interest expense
39
6
61
12
Interest income
(4
)
(2
)
(8
)
(5
)
Other postretirement expense (income),
net
1
(1
)
1
(1
)
Earnings before income taxes
37
56
93
114
Provision for income taxes
23
21
50
44
Net earnings
$
14
$
35
$
43
$
70
Earnings per share— diluted
$
0.31
$
0.74
$
0.93
$
1.49
Weighted average shares outstanding —
diluted
45.7
47.0
46.1
47.0
PHINIA Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)
June 30, 2024
December 31, 2023
ASSETS
Cash and cash equivalents
$
339
$
365
Receivables, net
964
1,017
Inventories
471
487
Prepayments and other current assets
84
58
Total current assets
1,858
1,927
Property, plant and equipment, net
870
921
Other non-current assets
1,145
1,193
Total assets
$
3,873
$
4,041
LIABILITIES AND EQUITY
Short-term borrowings and current portion
of long-term debt
$
13
$
89
Accounts payable
572
639
Other current liabilities
420
420
Total current liabilities
1,005
1,148
Long-term debt
821
709
Other non-current liabilities
300
297
Total liabilities
2,126
2,154
Total equity
1,747
1,887
Total liabilities and equity
$
3,873
$
4,041
PHINIA Inc.
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
OPERATING
Net cash provided by operating
activities
$
109
$
66
$
140
$
33
INVESTING
Capital expenditures, including tooling
outlays
(17
)
(42
)
(60
)
(80
)
Payments for investment in equity
securities
—
(2
)
—
(2
)
Proceeds from asset disposals and other,
net
—
2
1
2
Net cash used in investing activities
(17
)
(42
)
(59
)
(80
)
FINANCING
Net decrease in notes payable
(75
)
—
(75
)
—
Proceeds from issuance of long-term
debt
525
—
525
—
Payments for debt issuance costs
(9
)
—
(9
)
—
Repayments of debt, including current
portion
(425
)
—
(428
)
—
Dividends paid to PHINIA stockholders
(11
)
—
(23
)
—
Payments for purchase of treasury
stock
(90
)
—
(113
)
—
Payments for stock-based compensation
items
—
—
(3
)
—
Cash outflows related to debt due to
former parent
—
6
—
(94
)
Cash inflows related to debt due from
former parent
—
6
—
36
Net transfers to former parent
—
(9
)
—
58
Net cash used in financing activities
(85
)
3
(126
)
—
Effect of exchange rate changes on
cash
7
5
19
9
Net decrease in cash and cash
equivalents
14
32
(26
)
(38
)
Cash and cash equivalents at beginning of
period
325
181
365
251
Cash and cash equivalents at end of
period
$
339
$
213
$
339
$
213
PHINIA Inc.
Net Debt (Unaudited)
(in
millions)
June 30, 2024
December 31, 2023
Total debt
$
834
$
798
Cash and cash equivalents
339
365
Net debt
$
495
$
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 June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Fuel Systems net sales
$
518
$
551
$
1,045
$
1,060
Spin-off agreement adjustment
(5
)
—
(22
)
—
Fuel Systems adjusted sales
513
551
1,023
1,060
Aftermarket net sales
350
336
686
662
Adjusted sales
$
863
$
887
$
1,709
$
1,722
Adjusted Operating Income and Operating
Income Margin (Unaudited)
(in
millions)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Operating income
$
71
$
56
$
142
$
114
Separation and transaction costs
3
41
20
59
Intangible asset amortization expense
7
7
14
14
Restructuring expense
3
2
5
6
Royalty income from Former Parent
—
(12
)
—
(17
)
Adjusted operating income
$
84
$
94
$
181
$
176
Net sales
$
868
$
887
$
1,731
$
1,722
Operating margin %
8.2
%
6.3
%
8.2
%
6.6
%
Adjusted sales
$
863
$
887
$
1,709
$
1,722
Adjusted operating margin %
9.7
%
10.6
%
10.6
%
10.2
%
Adjusted EBITDA and EBITDA Margin
(Unaudited)
(in
millions)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net earnings
$
14
$
35
$
43
$
70
Depreciation and tooling amortization
33
36
67
70
Provision for income taxes
23
21
50
44
Intangible asset amortization expense
7
7
14
14
Interest expense
39
6
61
12
Interest income
(4
)
(2
)
(8
)
(5
)
EBITDA
112
103
227
205
Separation and transaction costs
3
41
20
59
Restructuring expense
3
2
5
6
Other postretirement expense (income),
net
1
(1
)
1
(1
)
Royalty income from Former Parent
—
(12
)
—
(17
)
Equity in affiliates' earnings, net of
tax
(2
)
(3
)
(5
)
(6
)
Adjusted EBITDA
$
117
$
130
$
248
$
246
Adjusted sales
$
863
$
887
$
1,709
$
1,722
Adjusted EBITDA margin %
13.6
%
14.7
%
14.5
%
14.3
%
Net Earnings to Adjusted Net Earnings
(Unaudited)
(in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net earnings
$
14
$
35
$
43
$
70
Separation and transaction costs
3
41
19
59
Loss on extinguishment of debt
15
—
15
—
Intangible asset amortization
6
6
12
13
Restructuring expense
2
1
4
4
Royalty income from Former Parent
—
(9
)
—
(14
)
Tax adjustments
—
2
(2
)
—
Adjusted net earnings
$
40
$
76
$
91
$
132
Adjusted Net Earnings Per Diluted Share
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net earnings per diluted share
$
0.31
$
0.74
$
0.93
$
1.49
Loss on extinguishment of debt
0.33
—
0.33
—
Intangible asset amortization expense
0.13
0.12
0.26
0.27
Separation and transaction costs
0.05
0.86
0.40
1.24
Restructuring expense
0.05
0.03
0.09
0.09
Royalty income from Former Parent
—
(0.19
)
—
(0.30
)
Tax adjustments
0.01
0.05
(0.03
)
0.01
Adjusted net earnings per diluted
share
$
0.88
$
1.61
$
1.98
$
2.80
Adjusted Free Cash Flow
(Unaudited)
(in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net cash provided by operating
activities
$
109
$
66
$
140
$
33
Capital expenditures, including tooling
outlays
(17
)
(42
)
(60
)
(80
)
Effects of separation-related
transactions
16
41
41
60
Adjusted free cash flow
$
108
$
65
$
121
$
13
Adjusted Sales Guidance
(Unaudited)
(in millions)
Full Year 2024 Guidance
Low
High
Net sales
$
3,422
$
3,575
Spin-off agreement adjustment
(22
)
(25
)
Adjusted sales
$
3,400
$
3,550
Category: IR
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240730256616/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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PHINIA (NYSE:PHIN)
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