AMOT - Earnings call transcript Q2 2018

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Operator

Greetings, and welcome to the Allied Motion Technologies Second Quarter 2018 Earnings Call. At this time all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. for Technologies. Relations Investor Pawlowski, Allied Motion Deb Thank you.

may begin. You

Deb Pawlowski

and morning, you, your certainly Motion. appreciate Thank interest We Allied as your good well everyone. Melissa, as time in today

it President are Financial on Chief Dick the for an and quarter and up to progress Warzala, call XXXX Leach, going Officer. the outlook, are company's we our on and Mike strategic me our Joining will after update Chairman, review and Mike results CEO; our provide open Dick Q&A. which second and

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also accompany on find the website today's will slides discussion. that You the

harbor. reviewing are slides, you to those safe Slide turn If the please X for

to aware, on that other statements These to are we forward-looking the These in risks discussion by risks some with as and formal the and cause actual are and that documents call. this on well as during with to well make provided uncertainties are Commission. other the differ as factors stated is the statements as results company as factors Exchange uncertainties filed subject could future events other release and may today's as you earnings the what during call from Securities materially apply Q&A. As well

which some measures, out to You that can non-GAAP find evaluating these believe during will documents our or useful at as in well point discuss call, on I wanted will our sec.gov. performance. website today's be we we

prepared the a or in consider with this isolation GAAP. as You information for presentation additional of should results in accordance substitute not

our the release in of and reconciliations slides. to non-GAAP provided measures accompanying comparable earnings the tables have GAAP We

will over Slide begin. please X, Dick So and to to with turn turn it I Dick? to that,

Richard Warzala

$X.X increased products with XX% year and market-leading Revenues recent $XX record quality of custom solutions position and Thank million, positive and million. you, quarter from nearly validating further strength and net The first our we customers the the to and our continued, welcome, income last to momentum offer. a doubled everyone. Debbie, the

talked and infrastructure, to about quite investments, We improve both a our have bit drive and efficiency. operational growth in people

work much remains, our are the results. in impact of Although operational we seeing leverage

margin higher despite compensation. basis to Orders record X.X% This reaching increased incentive-based new the points quarter's quarter to $XX.X marking and of backlog million, a grew investments XX% increased XXX expanded to fifth operating $XXX.X million, level. consecutive XX% and

Regarding strong the by growth, major of all top line, aided year-over-year markets our was economic achieved a double-digit certainly served environment. strong which

addition, of quarter. offering that In a to Vehicle widening and Notably, and improved broad for the our achieved businesses motion third custom control consecutive for much we markets of our solutions. are innovative market solutions sales expanding range tie both year-over-year platform critical

strategy, stronger previously our component growth business, continuous help and mentioned, and foster our sustainable increasingly of diversify a key long-term As provide revenue, larger we growth of which the foundation future. a well is into efforts which to should will organic believe

potential Once a is priority, solution still results During bit Adding well. have period contributor Allied providers overall, long-term remain a going the believe we distribution by sales the after but extended small again, partners or we attractive, distribution a an of growth. remains impressive and is the new contracted and encouraged is quarter, seen.

worth reach, of a ASP our financials. and Mike, me this We potential With solutions. market review in integrated turn is reach it expand And to significantly let that, the for well effort. believe onboarding are our as terms mentioned, XX the time, a over to and our to has the channel you previously digest We our understanding takes lot on target of to to how of by have year-end. as goal they products

Mike Leach

to Dick. refer you, X. Slide Please Thank

favorable of key X/X strong an impressive our million, broad-based organic, revenue X quarter up of in was $XX growth growth nearly the XX% up with Second the when impact and Almost markets. still all FX. and was excluding was XX% it

customers the for our lift period. mix and U.S. months the XXXX. nice corner, finally sales providing For X growth, quarter, the to with change XX% of the Slide to market in revenue At were TTM turned to shows trailing by our June the XX% Vehicle total in compared XX XX% appears sales. ended prior is XX, year the sales a market have

in across our included up share within As the couple picked in of results. a Maval on points group is provides notable our X Slide strength is a performance. board. that experienced Vehicle operating detail strong reminder, a market growth Industrial, Also the of which has

opportunities expenses and penetrate expenses further solution XX.X% markets. gross to support Total margin to basis for and technology though, growth. last sales basis G&A our were quarter to and a incentive year. from contribution expand personnel higher of respectively. points, of would points, to as the further point and expenses of our basis Second decline XX.X% up acquisition. as like of margin due add, we our down time lower sales, quarter discussed primarily due were additional expect operating see for XXX compensation down was were was XX recent to strategy second XX.X% E&D to do and the over the basis have while multi the leverage to selling XX XXX gross quarter I previously, XX.X% compared desired margin we we The some points XX

for XX%. period. comparatively be elevated fiscal prior third quarter also anticipate the year second it's compared range XX% $X.X $X.X flat rate was to XXXX the effective expanded income operating quarter increased for from fewer with result, and reform, quarter tax effective We the recent discrete in elevated XX.X% the due quarter basis XX% XX.X% in items, rate million. X.X%. the beneficial tax expected and margin operating the to to between reflects and our tax points in XXX quarter. for million, was The expense million a and to Interest The rate or was $X.X at to As the

a should quarter, fourth rate the However, driving which lower year see full the estimate. in we is

to in results, at margin commentary was end the Maval metric, provides review XX.X% the to is in our with of was If points X you quarter it overview are an net XXX today. adjusted the income Slide We which sheet can productivity flow. Adjusted acquisition in and primarily debt and XX.X% so XX% expanded is slide funded XXXX. as expenditures which and first growth basis EBITDA reflected of and in from and bottom included end was please These reconciliation see and the determining Debt, net our $XX million our were use look X, measures, slide. capitalization, for Adjusted slides. in EBITDA or our to numbers $XX.X useful balance sales. strong at you the cash million. up initiatives. Capital at internal reflected first debt, as adjusted in performance. up to an line investments with X XX.X% through of non-GAAP believe million of cash, the EBITDA related The our the of improvement be $X.X progress recent advised operating months, expectations release net of the at disclosures and line our on

a level in we'll the our begin at the to wins Also, the turns Xx, which level for developing CapEx our to inflation. down the of XXXX as off-road was DSO tightened to Inventory XXXX. fiscal the range some the did from with combat next stocking XX, stages in given improved we're improved capabilities. is needed quarter, million, first consistent recent days capital in significant next spending between ramping of supply year. increase We sequential and the and of that our inventory levels early to expect to and support continue higher chain $XX XX quarter generation of inventory $XX plans million We to back project the end

wiring. very the On many things are know, could front, and as fluid the tariff change

we continue to evaluate. monitor So and

are largest half to processed turn commodity that steel. Currently, I'll and our with that limited. It contracts the of about inflation. copper, material call you. our costs is fairly to note now is exposure over cost back have protection Our important address we magnets

Richard Warzala

We'll million. Mike. $XXX level ended announced over second we to Thank favorable quarter the to sequential important end and backlog over that quarter of record reported is XX% quarter. turn market a with orders are X% or X. last grew in Vehicle numbers. Slide demand up note than It year awards first in We the so backlog With million, FX, of the to in the more second $XXX $XX.X our included million record you, now strong markets a not

expect revenue mid-XXXX. to from We begin at ramping those awards

increased and inventory deliveries are risks components. commentary While of in Overall, associated the managing believe seeing times of we for Mike's on with relatively continue demand This we well. key extended lead with to ties and acceleration this opposite materials some are side we that, on we levels. see

slide. last the onto Moving

Our consistent. focus remains

individual have units off great our is diversified an increasingly unit, building North of and We momentum American motors, going consolidation foundation. continues American motor into North well. business one The

marketing supplementing and market We to our are resources strength. application-specific in growth with of our areas of continue and the sales personnel addition our

continuous and to optimize to we prudently Further, it increase enhancing sales, North non-motor penetration. which the our continue last unit, our operational and manufacturing we American and AST, addition, are doing just invest and remains growth, focus. formed into in markets newly our over important is our areas of of engineering North driving to business developing to through our business in market mechatronics In an are working improvement of align the all We'll as goal support efficiency the operations with target planned been years. have several we to American implementation

strategic element various have pursue we strategy, important to used as As our we and always, continue overall acquisitions an opportunities. of

multiples today's are relatively in As widely environment. high known,

will organic continue of several We from strategy, execute demonstrated execution well our to of are combination prudent future of expansion. over the open our the have our the steadfast for is approach on and while let's years and M&A, from remain growth that, last So we financially growth to goal stray any we line a acquisitions operator, acquisition. we positioned beneficial and consistent questions. With rate in to not the

Operator

comes of Our Craig-Hallum. the line from Instructions] [Operator Greg with Palm first question

Greg Palm

you're What hearing the the that lots macro, the off of demand mentioned. there, environment. in assessment? indicate Starting Obviously, change Is that customers? noise your backlog, results, you from tariff-related any seeing fair out as activity you are really a it doesn't with order

Richard Warzala

not it last you, we're doesn't you the change don't -- several heard quarters. really -- a I seeing While over

conference impact having supply side But on I I in want be line that, think, orders, think are subject. do far customers in and think mentioned we've the shipments. for getting as already another that We tariffs the tight. they that's, here that an being mean, careful in to seen, we've as because past I is calls, their

Greg Palm

have might end most upside been? expectations market From to an you standpoint, your the seeing what are where compared previous

Richard Warzala

What board. said the what's working I confident internally new we in programs mean, previous and say, we've Across expectations, were several we've that various there been our on areas.

board. say shows And it So results. I will our in the think across I

All of markets up. the are

Greg Palm

at slowly, way do the but terms win at you've will I'm greater saying of looks. consistent expected to I magnitude that pretty sense into market, those this Vehicle that's guess, point start layered been the and I it year sort Yes, what in some point sort get mid-XXXX, project of fairly in in for the assuming timing point? you're of those the ramp think any backlog? up next at the off

Richard Warzala

think off in I Not we're Correct some swing ramp Mike, by midyear start in Yes, XXXX. if do full wrong, I'm but starts XXXX. to everything probably correct. me in but up you're XXXX, XXXX,

Mike Leach

Full seen crescendo or until really Yes, be it in rates 'XX, slow be late will a -- that's And Greg. then. correct. won't

Greg Palm

Got how what that release. hit point firm it. that do I'm some assuming the backlog? that at when those points get works? Is you the And

Mike Leach

Correct.

Richard Warzala

Yes.

Greg Palm

Last one.

that update just valuations, You can to Maybe upon Thanks. could just if give you an simply environment. get M&A don't pipeline. much, briefly know the changed give touched they've all there? -- I on just an update the I but was hoping

Mike Leach

Sure.

slight I have think may pipeline of the you in how the change noticed opportunities. I've described

believe we're company, we're plenty very than strongly the committed bad what not and being out and organic We're think disrupt in you and more very acquisition. the pursuing. passing there's potential doing of there, on We growth careful to we're I that may consider selective. by opportunities I of think a

in cautious we acquisitions, and me, doesn't have we apply the potential ensure that number working on trust But and growth it will that that a them pursuing. impact business itself. of sound developed be currently judgment to So the we're really we company we've are

Greg Palm

the Congrats I'll luck Thanks Got. and good again forward. then. hop going back queue. in

Mike Leach

Thank you Greg.

Operator

your next proceed Thank with the [Operator comes line question. you. Dougherty Company. Please Ryan & Our Instructions] of question from Dick with

Dick Ryan

about from something expect extended -- Thank to you. of times. when you is lead there away Say, read And second half should half very during any take that on you the the first we Dick, strong year? what mentioned given this performance,

Richard Warzala

deliver. it has areas. Dick think, I so there management really times. together critical And you electronic strong. -- our continues become I keep I to here in can satisfied. will seeing to lead there Well, team think we're sure impact to to And it we've material, years some mean, the in got have demand positions, really think make our out commitments is have our plan customers continue going discussing be doing support X the out do certain yes, inventories you've components, us make there. think critical because had years especially to customers in to we components future. of that challenges protect for We're that's to and you'll it's for X ensure certain able notice everything extended that I and I we And -- almost be that areas. it's are And for That's -- to customers where our a and that the we impossible something, increased, in to

going -- have those a customer you there alternatives make key satisfy So order But have down demands discrete So aren't we and are components have designed we in out not to watch we closely. closely, you and it's something really -- sure products, to to components lock that's -- risk your into very are when the watching certainly electronic it's you forward. there's there,

Dick Ryan

Okay. give look perspective the half year? Can at second of how you on should we the us

Richard Warzala

No.

Dick Ryan

versus Well, I'd try. Maybe first thought half? I

Richard Warzala

Dick. try. Yes, Nice try, of course. Nice

Dick Ryan

critical created any market Has How keep your tightness staff? the does in impacted the to ability stresses? that or hire

Richard Warzala

very And good know, low. that's a Yes, rates, around the Yes, we the question. world. are unemployment as

And to going in new we've could several the into things to we strategic organization areas. year, order to people key I do and recruit personnel. think I recognize -- needed also tell we to you, that retain, some So the we additional our in added growth

having in our and need are we continue we in both believe growth. So success the retaining we personnel recruiting to

So market. it's tight a

you fairly. incentive think one be we a we compensating definitely increased I you're fairly, about have are You to made our sure And that that's area that And talked show compensation rewarding we results. that to we to in the from to invested need coming of into We've Directors retain year, they're and our ensure our the support we that that, change a lot, people. Board a our with we're, that recognize do that critical success. that

too. need we, well, that they to see And you in So we be results. that's, when our rewarded do

Dick Ryan

pressures? in Okay. of seeing that there And any that remains, the pricing and that strong the is margin you're gross new changes Anything sort? in pipeline that orders

Mike Leach

were fighting constantly we think pricing pressure. I

I think that's to natural industry. just the

and helps as well. to help larger we're before, we discussion leasing our However, to acquisition positive niches portion margin. a with as being dilutive that in the sell talked in sales, and of a And a and way, the on sales. we've in solution That continue having the our where little market continued margins we A&D drive key success Medical, like penetration touched

in it's are the I percentage balance So kind discussed, that a But between just certainly, the short positive things, there it's XX%. of, as are term. driving above that two

Operator

are floor there time. final further comments you the this to for I'll Warzala, turn Mr. any back at no questions

Richard Warzala

look like again, in everyone, once operator. to And thank you a to and to for in Well, We, the participating you. forward great you, thank call, Thank near the again day. we have future. everyone talking

Operator

concludes today's teleconference. This you. Thank

for at lines you time. participation. You may disconnect your your this Thank

Allient (ALNT) 4 Aug 182018 Q2 Earnings call transcript