Allient (ALNT) 3 Nov 182018 Q3 Earnings call transcript

Company Profile

Participants

Craig Mychajluk	IR
Richard Warzala	Chairman, CEO & President
Michael Leach	CFO
Deborah Pawlowski	Chairman, CEO and Founder, Kei Advisors LLC
Gregory Palm	Craig-Hallum Capital Group
Richard Ryan	Dougherty & Company
Josh Goldberg	G2 Investment Partners
Michael McCroskey	Principal Securities

Call transcript

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Operator

Greetings, and welcome to Allied Motion Technologies, Inc.

Third Quarter 2018 Financial Results. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Craig Mychajluk.

Craig Mychajluk

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

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

yesterday financial should our market after a released of that You can website on the the If them results you have www.alliedmotion.com. not, closed. were copy find at

the accompany On also you'll website, slides today's discussion. that

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

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

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

and I'll to to that, prepared measures With or turn over provided accordance Slide the We You comparable a Dick should with not to it consider results non-GAAP to earnings please X, accompanying this Dick? the in of in presentation begin. the in GAAP our and release tables reconciliations as information turn slides. of substitute for additional isolation GAAP.

Richard Warzala

everyone. welcome, and Craig, you, Thank

been proposition well be coupled market-leading customer our value focus XX% of driven has served very proving another our an We Revenue solutions is for to efficiently all increased and our perform what was double-digit continue markets. with Allied and delivering approach engagement to of major by effective to business. in One million, $XX.X determined as manage quarter on a to growth environment strong record our

certainly have economic strong from environment. We a benefited

expanding powerful as also and broad servicing selling range and trends, which innovative both customers-critical solutions. are such require are robotics, factory motion into markets that of automation platform and control We a

sources strategy. we a a of been Our headwind past, in bit the develop effort the recent fourth improved of Vehicle key remain long-term contributor in to very component our this an increase quarter and base believe the Distribution achieved for overall, business. business more for line is had a that our top organic which growth year-over-year of of the market, consecutive in is avenues quarter. attractive, but sales and is revenue growth we Diversifying potential contracted much engaged long-term a fostering small and robust

year-over-year, improve the Our Orders model in XX% and points saw to off, operational potential operating reaching grew you to $XXX it record efficiency basis a with nearly quarter consecutive as backlog were efforts margin level. XX to are the quarter, our in-depth business the our we for X%. million backlog marking expanding XX% of more that turn $XX leverage up over paying let of a to review sixth me the Mike, million, With of new financials.

Michael Leach

X. Slide to refer Please Dick. you, Thank

within was was Vehicle organic with revenue up over impact quarter and million, A&D. the when markets, XX% the million. growth major in growth X/X and More over excluding of unfavorable FX up and all just broad-based than of $XX.X XX% Third served strong was of of $X.X our particularly

trailing power revenue compared rebound very XX% XX% sports XX mix aided Slide trends months Also of change the X for September shows the continues U.S. the strength year with prior in sales in reflect with in quarter, to our on factory the our XXXX. form customers notable by by business provides the TTM to The period. XX% continued in fueled first performance. Vehicle market the market is growth, Industrial, were Slide Maval acquisition ended total well and in For the sales the by which XX, in quarter. the X detail OE's increasingly our to operating of steering favorable automation. the market

XX.X% volume with operating gross the lower somewhat expenses helped the to for quarter of recent up quarter compared personnel were incentive points. acquisition. additional were to of basis E&D growth. G&A reach the XX.X% of the quarter to points profile was Higher Total expenses for of last down margin down offset XX.X% our while basis impact expenses XX primarily basis margin third due points, compensation and and of Third selling support sales year. sales, XX productivity XXX higher and XX.X% were the of to

and the was and in We XX%. which year fiscal million, we lower quarter a XX% XX tax with is As for margin at estimate. fourth rate tax reform Interest for between operating million period. XXXX expanded quarter expect recent $X driving tax to full increased compared X%. or the XX.X% the reflects And to points million. our a the was effective result, flat year income the basis rate in rate and $X.X to prior XX.X% anticipate range expense from effective operating the $X.X quarter, The XX%

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

supply continue again X.X of in of million of past of inventory We expected stocking quarter, inventory XX and with to between off-road was support CapEx were did We is days, our extended as the million, and lead DSO to this expect in in part is support demands mentioned capabilities. higher in customers. but the developing turns project next quarter Inventory the pipeline level Also, strong levels plans to our early XXXX for support period increase significant customer $XX as tightened our which the chain given wins our to and large year. will last needed times. turns stages up sales capital to a spending in certain $XX of be we're the that quarter next due payment some in fiscal range generation ramping and the

As the we mentioned last situation. we fluid, quarter, remain and monitor and very evaluate tariffs still continue to

I'll as Dick. fairly we remains In back limited inflation, contracts turn our now half of to have cost our terms inflation. exposure commodity of call with about over the protection addressing

Richard Warzala

record second Thank We $XX.X of did awards, third of with backlog million. level end orders included With over quarter. X% strong demand quarter was second the Absent quarter. you, XX% Vehicle previously The in in close a the hit million million, the we to are in order turn market up announced, Slide to Mike. continued level $XXX backlog unfavorable now FX, the We'll end not grew relatively to in markets, we record reported third numbers. quarter X. $XXX our sequential this sequential nearly level

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

our a future. sustainable organic of the well enhances creating realize are into to continuous larger growth base and we business that Importantly, ability

as year-end goals and sales strategic at outlook with to made remains Adding XX partners, our on progress we or by at on reach executing a goal our excellent basis. distribution ASPs, channel priority, on new long-term to slide, on focused are our achieve XXXX, a our signed expand we XX reach during Looking of point. objectives ensure this we to our strategy we and target

or is and and potential unit, digest this understanding is North element going at To do X%. our have the in reach will of not culture an effort the improvements as expect significantly multiyear early a long into as and our innovation. are well involved emphasize how has be that American in North Tools, Allied onboarding market and while space as reach and of high type stages solutions. our to revenue that products mentioned, lot cost is competitors very up AST, our previously put individual a a The Building is we we of continuous it consolidation new of to channel, around through a our our well. their Motors integral delivery, a terms in to in perspective, XX% distribution to units expand performance continues rate, believe much As ASPs our quality, Systematic American integrated in generating worth contributing X as of partners and effort. to we of process, motor we is the and

to in we OE In strengthen solutions. Maval steering to addition, as the of combined our make progress, our further capabilities technologies continues business steering integration

Maval neutral to slightly in the expect accretive to We earnings XXXX. to acquisition be

we've experienced future. and backlog growth, the solid into have strong the During heading year, a we organic

an acquisitions overall important fostering is element of equally emphasis, growth While strategy. are our organic an strategic

the approach to and good we that our develop they as well. strategic remain a work continue acquisition consistent in fit and to opportunities, We ensure, economics are

have and several margin long-term years we questions. the our markets. we can organic which enhance the With operator, profile is and open solution further line the our our penetrate of desired continue we opportunities believe, for over expansion. multi-technology And importantly of we further we and from to strategy as goals, let's that, expand mentioned time, demonstrated rate over acquisitions Lastly, combination a our growth last

Operator

Instructions]. [Operator

Our first Craig-Hallum. from Greg question Palm the line comes from of

Gregory Palm

thoughts macro, you Dick, backlog talking some somewhat insulated order kind other of, would overall to, the versus and results love on are the be based to about. get I just Industrials your seem on what

there? maybe don't out trying to think to here in us exposure can you remind minute on brief you -- And a us but much you Asia-Pac, just remind what you're just your exposure customers? really is from So what I seeing have can

Richard Warzala

Sure.

And way with we first. of do, will near you that products term side, there. China it's that tariffs a cost in exposure something China but have the the there, companies by don't I would most, are great will right term the with seeing the -- deal tariffs of are for handled our if use all, not agree hopefully, supply will start chain Let's and that a and get -- pass-through resolved that something in with we're is we we and many one now that it's short being deal and in resolved get obviously,

remind of because off depending cases cases, we XX as we can the contracts build watching in everyone times hours, the in window, a and get it's short some very we the X-week some closely, do of some and we markets, I many terms delivery In work with window, see framed macroeconomics, a to uncertainty bit on relationship within end a little -- that of it customers. cases, that lead say X-week think I in we're just we

a So bit fluctuation you little in some going fluctuation Nothing demand. on. you see see major, of

Gregory Palm

at standpoint, of, anything out you here as, stands sort From a outsized strength you? what end market in certain jumps QX, out to that

Richard Warzala

Actually, was mentioned, as strong. everything we quite

But I It's it the there be there jumps market out. not really -- our nothing there's we're general could things out continue happening strong end out. across-the-board. to can And in jumps that impacted say again, fairly So nothing that market, so that industrial it's looks be by. --

Gregory Palm

great. That's

few longer the As low talked for been think to -- it running outlook for gross sort a know I last first high mid-XXs, you've margins, deck, it's 'XXs, but we've in I of an would relate where I I've it say, seen before, about term, to the most the time, years.

So multi-solution there? of I'm some you is depended versus mix, get this curious, how volume type of just much How products? these

Richard Warzala

here everyone, think, put leave that continuously IR your that margin No, We'll margin. answers we directly, impact remind we that I was in to think, the an believe there a the on in to question I answer that there. our way did since -- have if our opportunity, to Greg stated, for they going just negative gross it it acquisition, when is we've expansion

eliminate So see were we if there. you progress will that I think in calculation, making to that are the we

talk starting We're about effect. leveraging also to the We that see take have. that footprint we

So that up. line continue long we'll in stays we're growth as confident the see volume the margin gross to as

we -- gross the margins. volume course, to they to also those as up and going continues as expand. the has do continue And it's Of the on a it impact we're company, implement will stay to throughout to leverage have positive that the long up confident continue ASTs solutions, to to that multi-technology overall as but -- we the mentioned, overheads stays it's -- grow, and it -- and

you people in the IR but blame they So they're correct can say. what

Gregory Palm

in thing think, good quarterly, likewise nice I 'XX. my was the EBITDA have don't there. a QX largest front on margin math, I where by or mean, expansion, to QX, It's and know, that operating I since,

I or what X-year longer of we assuming gross mid-XXs to So I if kind have of operating structure but I to X-year term a margin, guess, low should for know, kind going you you margin company? a be the out mean, thinking get don't target, sort of forward,

Richard Warzala

business or talking about structure talking You're about itself ...? you're

Gregory Palm

out margin, or X strive about X structure of targets what I'm cost going years? operating you sort the either to margin kind Like just maybe operating thinking margin for that of targets EBITDA and

Richard Warzala

Sure. it one. to I'll that's turn Mike, tough a over

Michael Leach

Greg, as past, Well, do there. expect we in continued expansion about we've to the talked see

the that think, I area leverage strong. is capability in particularly

engineering we As we've invest to we'll talked, have and heavily. again continue

grow. those future growth see I opportunity think we That and leverage is in need we'll the as well continue said, areas our to administrative invest to plans. continue think as I organization you'll have We to So the to to where on an selling. support

expectation potential leverage is However, significant revenues again continued full assuming is in increase my -- there. is the that that there there capability

Gregory Palm

any more one is environment year, maybe last current commentary you of basis mentioned, and really me. the I'm make about going enthusiastic relative quarter of valuations the guess, for thoughts. of and but landscape, to I hear would sort after be to beginning the curious didn't your and a on Okay. pipeline last anything acquisitions M&A just does great? are, where or get I kind how

Richard Warzala

it Sure. think, We and we grow all in certainly, along say can Greg, many Well, provide I very we've and and and that times strategy. company I we're conference in our about talked I results we've disciplined we're still what do. good what a think on demonstrated we organically very see of we call, with awful most. we we part But that. pick, the as that see important the an overall pass And stated lot, we as careful

we've feel fit to to standpoint and say acquisition, will confident sure model I our work again, can diligence the the an fit So from that future. and you our right due make believe, it's and when the and cost our you strategic done that right a it's we I in if to do continues homework,

pipeline companies right that So work here keep sure happen. we're up, we'll evaluate, it is when popping doing make we'll and occurs to the plugging are there, will along our one and just

Operator

Instructions]. [Operator

from Ryan Dougherty & line Our Dick next of from comes the question Company.

Richard Ryan

I us mentioned don't slide in little commentary. Dick, and referencing what on you deck think, the perspective it you're Can new your Solution you customer a addressed wins, you there? give

Michael Leach

we're working several have think Solution we I wins. new on Well, customers

do a commentary we When win, have our in. careful, I shipments production selected and to we're added some probably win when see win, got actually designing continuously to in we it win little to solutions it we going we've time a -- But that and on I call seeing but the takes it are for we bit have that. been be and a bit think longer. and I we call a and So opportunities designed should little a experiencing get a should multi-technology

or off at up and product quickly -- not we're can production. the whether that they end and in their whether or course, of takes the not Now ramp of mercy how

that it space. just the have that ongoing that company it's in an to is and So reminder we of focus wins continue a

Richard Ryan

segment? and to how the us of, of segment And sense the factory a that segment. the reference Industrial significant Can automation the a within kind give contribution within that robotics or, you of is Industrial how needle is, moving

Richard Warzala

Yes.

in it call it handling all when the applications, to and because go that's look it to and we single factory you it's -- solution and a global. that to opportunities future hit our ramp-up factory automation, point, it's hard that largest and automation, we've this manner If fast opportunity industrial we of for packages build globe. you is automation prefer in or around, quality we've after call And integrated Really maybe find growth addressing Industrial call of certainly and warehousing put would and all can go we're wouldn't so think really the materials the team -- taken I market. forth. together recently you using we automation after industrial that the harder over industrial the it consider I at in to think of at provide this, and very we but And globally. that products our a because an look this platform even internally have this our And

If how the cost-effective exciting automation that value and our play we our it's grow, shortage have into can to for quickly space would together in labor. that market, you, proposition we of pull we say long-term play customers. elements a and going it's a market, be speed can see definitely fast-growing it I of into definitely then to to is you an moves So that continue will

it's one. good So a

Richard Ryan

Okay. currently give quarter pipeline How you last perspective does or bid ago, X us? the versus months look can whatever

Richard Warzala

There's I'd a you there, don't drastic see -- there's I that change say change wouldn't much say to quarter. Dick. quarter

it's mean, But position us, to it's in certain we so continues expand again, do multi-technology continuing we .I some to and pipeline of in solution in opportunities. recognized companies we seeing occurring. have market and come what I segments, the the we're And -- where do are a that is think see terms -- leadership

be we that's we're So need to fortunately, stages win to business. design this where the is see early in you what in of

Richard Ryan

of Last question on Key organic of, if about that will, knocking range. targets umbrella out of is brings above your Allied's you kind your gross gross there, get talked you're that margin, lower margin, XX% door, they One maybe or the are you In Allied those on forward-looking of then -- core side, the margin on the approach to margins up? that part, those end gross in profile gross M&A. margin short list -- it's is the under you've targets once them

Richard Warzala

out, one margins, acquisitions As we're the that's looking looking our of have attractive would that's the at one looking criteria and areas is that we're at of I say companies. gross

I Greg, average from system our overall on focus were margin, company you, and below from that into would of and not organic. to become the a I both is what bring bring that expansion significantly our as it that question really idea see through where with you say up, of but gross is again, the the acquire Now reminded say but the prior to company would an margins I then part that, margins in solution the that, acquisition we a gross we did

we can provide focus that that. those on So will

Richard Ryan

becoming that? you an retention, more me. handling is issue that One Okay. Employee are how or from

Richard Warzala

market recognizing I'm tough, number we've job think the up job. -- the globe, smaller and would companies I into their companies us, coming there excellent had an for in into sure, At that us to side good happening. when come that's, have is have And our a of we why make there year, of very talent, companies, the bonus and yourselves, made bet smaller program want improvements a critical people that talent. I a Remind for people they better that and sell might you have can your when market variable of tight done because on retain mean the that done you're we've you of asking the some retaining order is the the recognized company, is We've on than do of the you even also we is each around we're do market well this that's what's compensation question. point, we a, you exactly and say, do to to I

So fine. I think retention be will our

market We it's aware recruiting been recruiting and of it's stay for we're it so top forth, but and current that constantly rates us. critical, good in people, as we people will are on

issues many haven't We had there.

Operator

Our GX line from next question Josh comes Partners. of from the Goldberg Investment

Josh Goldberg

Dick, can if in you a because whether I Industrial some just guess, of your NAFTA? about Vehicles content, you I'll start of in opportunity to the or talk little off it's increase changes have bit in the

Richard Warzala

has we Sure. And change is from is a market North -- content the talk requirement in from the went North to American that that It's good XX.X% for we about -- that NAFTA strong our in the and obviously, -- continent XX%. XX.X% question. know American occurred Vehicle

good challenge, the vehicle a even XX.X% XX% meet so. for that -- meet us, more to challenge to was that's a for be obviously, the that a is companies I do it's to and know going So

a our American looking ways finding and basis at content it on that our again, increase and them can new proactive North to requirements. leveraging customers footprints where there our to So we that's partners, meet help we're very help

just on we ways resource looking can offshore and they being customers So a our company a partner be says we're there's proactive, greater when that meet to for from the in to and into can -- ensure components I a North to it. bringing some are at that ours we like that and/or we America materials them do to need say that with are working of with what

positive. a it's So

Josh Goldberg

congress through it or...? though, hasn't clear you So any just of gone seen yet the haven't this been because I'm aspects so

Richard Warzala

say, I even gearing because not that to mean, now back mean, -- XX.X% the in already it's before addressed happen. the meeting challenge. were sitting we've been a anything. having and content Well, said, going XX%, let's to greater going at up and not like, I do they no. struggles mean, it's already as I I is they're we've everybody change it's

sitting and sitting talking So let's back, saying, our what see we No. you back and here." before are are you "Well, They if customers happens and do it's can "Hey, help to not to that it anything." first us people are saying, do

Josh Goldberg

Dick, that guys I to you it's growth rate where motion you being it, single Do and year? think further? think are likely that, want help Do might event control both can positioned probably next market, even that talked you increase you you outperform that double-digit about and your know even inorganically. organically

Richard Warzala

Well again, an about early happens to production. here the X that it when on years full typically opportunity takes you is a being we're as design good get X win what side, talking to from

just going the aren't will because be critical. companies will able unless term penalty would I make to it to sure it They to a really that select working in time, and goes away. you have time for the be short potentially So take to of resource they longer period it's but will pay tell you

beyond and tell I a at an of XXXX So big it would but opportunity, there say, I that you sudden this all wouldn't is jump certainly. a is look because of that, that,

Josh Goldberg

the the And, bit actually just like more making about It the Dick. XX-Q maybe Okay. finished and a it building you this still business I great year inventory job acquisitions. of far one to and that questions. maybe situation. really had looks quick another push business by the in a other way, for this just guess, the goods. that Two Talk inventory so was one quarter? great a for Mike little some you sign Was down fourth that then

Michael Leach

calling mentioned in from framed Dick some XX earlier, weeks. times, many contracts range X operate to where we of hours, windows can the as Well, X

would in see we out fluctuations to window pushed in result where have and can get a quarter inventory. would things So that a we could build some quarter

portion So been I Again, that's think there's build... a some of it. strategic

Josh Goldberg

what more concerning that's anyway you you Not that it quarter, for not the in expecting third overbuilt case? than the demand thought

Michael Leach

Correct.

Josh Goldberg

Okay.

Richard Warzala

manufacturing in. as I used to to that in add building new China the from older it can a we opened facility If well that's that operate we've transitioning is

build some I inventory So think there there's well. accommodate transition to strategic that as

Josh Goldberg

X, other fair not Okay. trouble you that guys Is from still some affected to component because that the are November you're issues say yet? companies seeing have ordering really of that you're it positive, tariff

Richard Warzala

there's Again, us. the that an impact on tariffs have

I we've -- -- material, pass-through that a been and not mentioned, accepted that on pass think to the that we're in pretty -- it's where to the costs to described there component past it's the intend overly as is we those there's Dick well in customers. marketplace

is net impact So the minimal. to us

Josh Goldberg

Okay.

the Maval that the are side. doesn't an that on know get integrated your seeing grow acquisition you it integrated because let's to of combine away, happen solution And product the year, as I acquisition? your to product say you you the design right it Vehicle wins be Regarding and but the talked this in call is has solution there in with steering have roar about the would on opportunity fourth quarter that for you hope the wins

Michael Leach

those for that to question with suppliers that's separate again with our here was Allied would it Let a base. customer me components Maval you an -- good occur a more was basically themselves. working and integrated and purchase design, the it customer between you is customer add parts supplying And buy the that, product two And extra sell the individual the interface to you extra labor. versus and have cost do and and when have integration product extra then or see do would to and typically the and address working base the very then fully couplings already similar that that

what secondly, expand integrated buy who responsibility push the potentially we're to the we higher change from incorporates our use into both number seeing. that one really to they single takes solution in supplier level saying, devices, want their "Hey, supplier and which like -- of technology systems. ways, would in offering part for So type is That's would the two X the

We So already direction is we that the it the portfolio. before for working together working that more parallel. did Solutions when it trend yes, on answer in just the even in were made acquisition knowing it, part sense is, a our of that and were we became

Josh Goldberg

One for years, Okay. Obviously, really back here, and even the be -- I the you must acquisitions this being and you as a as one talked being year Dick, know great immediate go made well? looking company acquisition way buy able a for acquisitions. your me. to XX mean, point big really in this Last the pretty you've positive Globe changing I acquisition to was you've Allied, something into few other now about your if them the few right integrate

Richard Warzala

have. we Well,

Okay. our the our the acquired and build abilities find And develop of values. that and that the company, of acquisitions confident can additional and to with together together are to we we as into long capabilities criteria, the look, we the part in, confident Allied again, acquisition to -- continue with as culture and talent course, that's to will leverage integrate ways have and we I think in coming

at team the has regard. So it. -- do compliment that think our I thank and become in is say, experienced more that even Josh, better I you for

we to companies together Our really way ability of AST an to toolkit bring to terms and in that is strive and so culture forth, a leverage. do great find

ways, comfortable every continue that ways, find bit and and it a little stress find will say, but to longer, Sometimes we confident I'm day. we do I takes we very it

So expected. and think that's I thanks compliment you what your there, can again for

Josh Goldberg

Yes.

companies it buy your get pretty are NAFTA into big. if can I the size there's you be and other know be a company yes the lot guys guys for of customer need working on a you of Especially, is... ability years, you have covering not think the something you, that this the company quite to that scale base I couple you verge and bigger analysts and this of in sell a and but of couple

Richard Warzala

ones, two Dick But and of good Greg, very course.

Josh Goldberg

opportunity not have time obviously, and you for double couple the get so for had to you a has grow coverage, company a that I don't think good guys I'm knows anymore Greg call long grow but years. of great I digits digits, Dick, analyst Don't next telling do double should very disagree. high a

Operator

from the from Michael comes Principal question next of Securities. line Our McCroskey

Michael McCroskey

It's The great up questions. analyst any everything drawing a the you jump all on think payables than the we're they color that right but bit folks seem in help probably to be. as time. Can blush more the my with come, We'll doing. two? are receivables little me of you I more we've first Appreciate Couple got. see at interest and made those to me should pick

Michael Leach

customers. extended receivables, to suggest I Well, in driven certainly vehicle by key terms. large with terms I you it's think, the would you key some market see particularly some that the

for that the So line that strategic is tight are as for again, payable components in extremely both from it's the a It's fueled a have will, growth, to Then by AP vehicle of supply if as build with then you're the you the inventory, grows well. gone obviously build, there's us. well. market adjusting inventory I and the has think, on again, -- chain acquisition you seen seeing. some lot with -- Maval payables through we've for probably which if DSO the will that is been impact, natural going standpoint, the And the a and

Michael McCroskey

sense. Makes

get You touched geopolitical talk having that, at on just that know all? that? can Is before. guys little touching bit you you plan I internal there's on you tech some a transfer. chaining further China little versus the on out? supply press I about issues Can internal a If Can the

Richard Warzala

been. into China, And we to of definitely really that what back to ground couple move has call say update and that's really can't couple also at grow. of anyone before or was on are things, it and as bringing China Sure, call with plan to the that's absolutely. Well, sourcing continue remind obviously, supply who that to the beyond were to than were although, in whatever our or China our the people that. a longer-term in have first and expand we things our new, to there's people new who emphasis parts And occurring a to are more

be in was higher Recognizing here, in us So -- business team supply we ground expand business and they it a one we gives a close the that a continues did a in it has of Asia. region, and are credit the on level, to for very Asian recertification, it additional base think China. the And go to was occurred prepare great continue qualification and time there. move in which so new opportunity will a invest job, facility, to our to the these China, at the see already more was up, to the on as China. of need seamless some the we that to investing and we that it and to And, to old issues was cropping

is that, the about China non-China components where of going in cause are it's can source in the that's some already about sources type more. applications other being some going We're areas go clear, talked no particular, question to the find for in or the that content use qualification. we certain and Vehicles, if to I earlier, and increased area supply, not parts have about of also you're defense more some and to qualified we a magnets seeing the answer to in back to -- Now and now need there components talked defense

overnight. systems went couple and longer been utilized happen to say, in vehicles they're or be They these easy things got all processes. So and have but some of kinds now that and a procedures in it's no designed you've qualification that don't qualified of defense through can aircraft

but we expect that's and Again, or now, that because how long-term, occurring if we standard-wise more will So business, have fairly it don't long it what you will will components know a now can an continue that's China about were their grew but cost-effective about And short-term, no same probably that's other certainly tariffs. talked impact. for little is expensive there be those choice. than they that

Michael McCroskey

Okay.

one... this So

Michael Leach

Let too. recognize here our think important let just do that expand other what's one me me Because is footprint. to thing -- Michael, just I

in was closely footprint developing more and in customer produce longer America the invested As to give had to Europe, expected in advantage. globally need us that North going the the term an we in to fully Asia, we

investing, and little intelligent ourselves now and see developing can start base. and supply So and we we a we we some to that about leveraging, in caring do suffered bit are decisions geographically sources customer close a our where can overhead position where produce make to of in

So I do want to emphasize, I do see of company. that as a strength our

Michael McCroskey

those to for for China a what all newer, coming just that I'm cheaper specifically been may and here, area was has was it back along from source so... over necessarily who footprint for be clarify that hearing So not is, the

Richard Warzala

That's correct.

Michael McCroskey

situation So the geopolitical as your a is downplayed depending for on source components you're with not markets? because for pulling that other

Richard Warzala

and whether everywhere, beginning footprint Asia, so, do and are it more sense progress in, what do the globally we're regions, working and time, plant and about higher whether duplicate even in that global to correct servicing geographic talking you strategy correct. good China be situation the in and we to level in our utilized. for that's producing What can't labor if and where a That's have what volume where look that's that just Yes. tight again, factories, we're we is there need that we some in is and is Europe North sense, and they customers was it's now America, China. people beyond facility China in how and It's invested we at makes fully we ago we was all while put we automation think make everything in better years point in in we have -- to I to invested or did it's would it's it also that of in whether future, satisfy than and I'm have, and it's at what making in that that, China. And in demand expecting automation that these

Michael McCroskey

again And fine one not pressures the China. as far on as governmental I'm to undue geopolitical tune concerns hearing final from any tech. specifically

where see getting that? I'm You

Richard Warzala

I that know the Mike maybe that. view and fact have there, on area mean, I we're I, already growing -- in a we cognizant but be Sure. a certainly I point recognizing don't that don't good to. really strain ground we technical the what -- on we China, there's have you're talent you in -- on right, stress based to there's that a of have and

Now I say that any there. not overreaching we would concerns have

Michael McCroskey

gears, other the big into of actually not seemed sales to increasing Changing sales outlier, Anything Good. a there to expense an were bit the G&A. year-over-year a compared the flat deal, but little expense discuss? sales

Michael Leach

there. a I there's of say, wouldn't I again, for really mean No, anything couple reasons I that. think, there's

in go or see way help will growth what -- as you and be sales/ to it the target marketing/sales we've -- call added has, focused those as a people point certainly, position and some -- into up to we better. I had As penetrate market the time. sales anything place. And team will our in this us to base primarily wouldn't but of But we was I that in expand be at necessary, continue it more reading

Deborah Pawlowski

sales a it's same as as not of so rate growing coming the sales the -- down It's too at are. percent

Richard Warzala

with considerations is I to commissionable product subject are I there's mix into that. read things. mean, certain That anything there to sales. think don't

Michael McCroskey

on little growth? a Okay. on growth that year-to-year to out acquisition this versus bit Can Help bit? talk little a you organic color

Richard Warzala

Sure.

were think not much everyone I on asked in with did with the disclosure, you regard growth acquisition, to our the can I X/X disclose -- line think, about public and but of here we we is the past, organic.

Michael McCroskey

that. one answers Wow. comment. Excellent. It Last

members, not seemed appointment, addition release board the an New much interesting to certainly comments? interesting an and

Richard Warzala

Linda? You're talking about

Michael McCroskey

Yes.

Richard Warzala

Linda. feel and good very the Linda to that's complementary always that a a bright that is to to to team very practical, we the addition going a we and always, board. somebody we've even think, great she's know at very about added person, have Certainly, I be we looked as

going certainly something requirement. stay she in As continue we more diversity, front were forward requirement more we is and become have add to lacking here that a that to a that's of of does which that us and

good spent things, and perspective challenge to style is very culturally continue and us. so important which good think always brings well fits the and bit Again, very certain with think I She to she's and extremely is I be is her a she which will to quite an board, demeanor of about feel already, supportive we her a Linda. So excellent with going contributor. time different

think add, good very I for us.. a good so it's And add

Michael McCroskey

extremely interesting. the looked addition. like an unbelievably From excellent was outside, it It

Operator

gentlemen, remarks. I for back call session. the question-and-answer Ladies the And turn of the to we and end closing have reached to management like

Richard Warzala

for on everyone, interest joining call, today's and you, Motion. your us Allied thank Well, in

will conferences. We upcoming be X investor attending

to be quarter Micro look feel Conferrence. please York then thank we results. the day. West have on time, the Over to and and forward In be us to LA meantime, you For operator. at you November Craig-Hallum any will LD we The will at out again great for Select with New Again, talking City Coast after in XX and those at X, at we on free reach participation Alpha fourth the a your all Conference area, in to our you December

Operator

This concludes today's conference.

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

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