AMOT - Earnings call transcript Q3 2020

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Operator

Good day, ladies and gentlemen, and welcome to Allied Motion Technologies Third Quarter Fiscal 2020 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. At this time, we do ask that you please limit yourself to two questions and then allow other people to get in their queue.

You may re-queue up At this time, it is now my pleasure to give your host Mr. Mychajluk. Craig you. Thank

begin. You may

Craig Mychajluk

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

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

of Q&A, to that or allow today's part the you additional limit you three to queue you As do ask into follow-up. and the we order go participants your two for back for can questions all in

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

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

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

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

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

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

Dick Warzala

you, everyone. and Craig, welcome, Thank

during As times. Allied see results, well unusual these from perform to you can our has continued

Our build growth. entire their is and agility drive to as we team demonstrating Allied resiliency momentum

the bodes We combined the long-term reduce generating that to for meet members And right appreciate success. talent are team they are as scale, efforts with of our as of customers our an superior I to tirelessly momentum, group, their a roles. and well work energy we for execution. ongoing and our structured right have This support the needs outstanding commitment with increased to in each sequentially market us generation markets. million served the of more than million. quarter, debt level management X% diverse drove strategy for several impacted $XX size $X.X drove enabled solid the last cash of Disciplined to and the was about solid $X just which even our quarter. Sales shy during of by revenue the results pandemic million as cash year's total

making even to also investments are in momentum more once further to a our emerge normalized capital world returns stronger We state. position the and an

liquidity we agreement economy existing to that earlier business we and a year expanding successfully this Given XXXX, execution availability recovers. sufficient under effective and the and as environment to that have deliver credit our today's margins manage navigate our will extended model

facilities together medical continually consistently operations while applications ventilators, global to muted. we respond equipment the requests respiratory somewhat our medical, this strong, work from market were a vehicle demand nice customer to equipment other rebound products quarter. remained Encouragingly, ensure our Our environment. rapidly in for in evolving medical saw In and

sights Through long success. talent our we A&D to has order and end on Industrial as core engineering kept believe this, all due term result sustained future the our markets within been activity of our our challenged deferrals a and softness COVID-XX. is in expected, As Europe to and of

advantage to of taking We increase engineering are in have our investment retained this the capabilities. critical environment even and talent

advanced engineering motion of complete and for breadth us product is customers us. Our apart up and applications customers take growth to our our key One and customers. offering from our market differentiator our solution strength that sets in our Allied integrated long-term The and to for fully business an share company. our with controlled, committed optimized gain remain enabling the a strategy from competition ensure solutions executing ability create skills to new current more of We and provide

serving, all doing, the leverage continue let in-depth more areas Mike for to will progressing and what day. We the it focus turn And development partly, and focus global control, on our on are these every within successfully financials. product over them we our markets to are that, continuing me review a of our we we efforts footfall. With to

Mike Leach

Thank you, an line provide overview Dick. of on Slide top X. We our

end months revenue million were Dynamic X As we reflects March in the was within of include to be the Sales customers addition various the A&D had increase to and revenue million the considering end diversification X%. quarter. prior to primarily $XX.X to We broadening scope pickup of markets. market customers XX% this can were of markets U.S. is period, or XX. market year-over-year within Overall, for accounts strong dynamic economic Total impact Canada business. and market pandemic demand shows a XX% in powersports a found with in and in reminder, controls. Controls, the reflected in sequential the did results nice Dynamic and prior our solid Europe, sales we impact our demand with geographic acquired by business which year down medical mix revenue change resilience last with certain September the and down of particularly see X% of in helped the Asia. the trailing in and has revenue third reduced the some in the add Industrial, The basis, COVID-XX Medical shift market. On approximately in has this XX% Vehicle our XXXX. of The Controls pandemic Vehicle. a our change only on in increasing from mix the The $X by Slide on XX quarter from the ended second a balance quarter, for a rebound

As and of the mix lower average which footprint the to we component have going noted cost comment, in majority forward, impact margin an noted well from when side our year-over-year. on believe while manufacturing margin sales our those lower and system in on carried source relatively certain were to that profiles begun of gross benefited do volume we was mechanical Medical for area other X, efforts to their still Expanding pass expire. to than than components XX.X% containment the as One costs tariffs best have components We we the as are there possible. nature, complete impacted margin Slide close that mix our had our the our exemptions are and potential products quarter certain nice being on pickup as as our a were market, more unfavorable on strategically managed offset sales. along. efforts comparing on or Nonetheless, have allowed those our

to environment, competitive Given headwind with. a potential contend there today's be could

to on Moving X. Slide

X.X% the was quarter $X.X with for million period. compared year or total prior Our operating the income in X.X% sales of third

operating increase largely the overall revenue a the due combined to XXX Dynamic sequentially. margin expenses expenses incremental combined, addition percent related as to points lower revenue XX.X%, variance increase revenue The Our did the to of basis of an with year-over-year of overall reflects Controls.

to As maintaining continue drive market gain we key we future to growth consider and Dick acquired vital and mentioned, are which engineering capabilities, share.

to Turning X. Slide

the You $X.XX $X.X was adjusted quarter per $X.XX can diluted bottom or for On per $X net a EBITDA from increased significantly and share. income sequential income or million see our GAAP net diluted basis, share. million GAAP line results.

XX.X%. Adjusted effective was was the XX.X%, and a million EBITDA XXXX between and rate to continue XX% quarter overview range sales metric for cash rate X to in it third and our useful full use progress an The for as tax and quarter XX of internal the as is we adjusted provide to performance. and $XX.X of was believe our operating tax flow. percent fiscal and determining effective Slides anticipate balance XX%. sheet We EBITDA an

cash, operational disciplined cash and million further pay period. down $X.X third than capital $XX of debt quarter of XXXX the debt Total debt when efforts $XXX.X to given already on debt the Our us nearly year-end the again net with in to that by more or up $X.X generation reduction of the compared and Debt, acquisition; already allowed management improved Company. once $X to capitalization. half strong paid year-to-date This cost took solid in quarter are however, Dynamic the in and $XX the million off the primarily acquire have million up was efforts, nearly we Controls for our cash million reflected due XX.X% of an net as million, debt equivalents end the we cash XXXX. million to structure from were was

at leverage bank was Our end. quarter ratio X.XXx

are heightened the While to uncertainty debt surrounding pandemic. at continue to we paying this down due level, focus on comfortable we COVID-XX

leverage covenant reminder, debt-to-EBITDA of were is a flexibility. reflecting financial solid ratio Year-to-date expenditures As our maximum million. $X.X X.Xx, capital

activities. fiscal delayed to forward XXXX level all -- the to between previous projects move enable result million $XX our to $XX of This to $XX we've $X certain million deferring As million. to the million priority lower revised CapEx of a range range projects, decision while from continues be key

turns quarter from inventory up X.Xx, from sequentially were down but Third year-end, at X.Xx X.X.

ramp-up As leading have components with environment. lead the temporarily within of sourcing times the customer programs, to This, of substantial elevated a is providing a that there inventory are new pandemic levels. reminder, particularly critical number combined challenges,

terms customers market. driven at was market the with in activity DSO and Our extended increasing that by XX days, Vehicle associated

demonstrated Before it to again capabilities. Dick, over highlight our I'd like I to back turn cash-generating

cash now that, more strength the Given Dick. to financial changes our the ability the over to the have rapidly our a of environments, to in successfully we turn liquidity pandemic. believe as uncertain operating that importantly, back when well With in current as we be adjust call navigate and from strength through position I'll but we to emerge economy, available

Dick Warzala

Thank you, Mike.

pre-COVID XX, to the sales increase at six three depicted the were As Slide encouraging. end quarter months. orders and near approximately million, next we was to on majority was with over which Backlog saw to levels, $XXX sequentially convert

awards online ramp-up thereafter. each The about this the market. of for $XXX total, is in now quarter secured second year, Vehicle amount begin to of reported six pandemic awards other In million production four in the the these just backlog reminder, has at And COVID-XX customer-specific we are another a have of award in anticipating projects. provide with and included to to solution months XXXX, coming nine numbers. we of our nomination currently slowed first the this a for we traction to our of nominal gain the As awards that time, the

are steadily an infection ahead, the is that We world more most of due state well as around the as to markets. normal Looking rates signs uneven our served to there surrounding in cautious business our recovery heightened a certain economic in end markets. returning increasing remain uncertainty

demand outbreak of We initial from market expect needed was the virus our hand as to that the with our customers. moderate the on for Medical equipment is

also past, mindful quarter and are of year some expect we do has the well. the fourth our in that We as some seasonality exhibited same see this to

the emphasis Our what been on can has about through control. we really crisis focusing

areas firmly ramp our all opportunities, own effectively our and AST exciting as efforts of development drive to of our project utilizing requirements toolkit committed We optimally the they customers to new are improvement business. meeting their some continuous in up supporting

of several as additional are technologies supply example, localize future. more will but to for looking chain markets, market long-term our certain prospective us well and develop on provide identified certainty specific continue ability as investing products we those developing one-off embarked solutions. broad and into our In to only increased emerging the By to also market-relevant customers needs customer base meet focusing competitive transition also have meet of advantages their Medical and we to supply understanding products well. market-based market, from the more thoroughly demands, we on with not to opportunities, to have have served believe We leverage to there our solutions to

the engaging Given certification efforts business are process, pandemic this during should exciting our that there is more efficient drivers wide operator, our controlled cost in qualification be that of variety our growth to win questions. ability the create the we open brighter. to strengthen line And effective, areas a never more some been With Overall, for has in solutions future. ability we and applications and can additional long for the a for that, let's believe motion future.

Operator

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

Greg Palm

which I looks customer in mean, Vehicle increase start, by I was it to segment, largest primarily like pretty your guess sequentially Yes. Great. meaningful there. led

sales it that? more isolated more broad-based mean, -- than segment powersports, thoughts Was are within there? the So What was rebound your a specifically? was the I curious if

Dick Warzala

Yes. Thanks, Greg.

strong market, correct markets other powersports in in saw a in the rebound also rebound You're there sequential that was but as a vehicle we well.

Greg Palm

sticking And Vehicle quite with few Vehicle the an award, specifically, demand over about here increased the seems you standpoint, cars a market announced end it last it. passenger previously I made bit Got has months. some mean, comments like globally from for

been So I mean, you're and of viewing so? contracts any have how to or they'll the there changes over the those ramp how next year sort

Dick Warzala

have correct. I'd to say No, you're

basis -- the the that think a it's encouraging the on see coming automotive I of business global to side is back.

to back continue year we'll increase down into that started year-over-year think but below numbers XXXX next there's it bounce although a year, then going and significantly, quite seeing I will good probably that levels. we're be the is

were is months, those back future. the of was shut know, all several most the out and basically, bit to ticking that the products little you actually So think as we a pushed the for of it up. into is And delayed, delivery that of automotive has down programs

but impact, yes, been ramp-up. definitely impact a short-term long-term no has the on So there

Greg Palm

And this of kind capabilities, years, mean, given to sense. the investments broadly customer guess any mean, I of own whether give I pipeline resulting mean, on Just all more get these thoughts. thinking I of I been mean, for in about in chains environment. sense last curious then the you just few makes your can new share making Yes, resources, you've the over supply us gains? your activity? looked broad market I how's that's sort

Dick Warzala

our applications that in opportunity have and markets and at more good successful there's in focused into Yes, expanding we us. past it future. we reach think I the looked that for quite at mean, I really targeting certain our been in we've the the been think efforts

we as we then solutions solution. that focused I at solutions, allows in create had utilize that and So are market-based mentioned of more could think that remarks which customer-specific available I my that one-off basically to platform, on prepared us versus look customers this universe

continued we working we think our see have leading edge new the on past. with the strengthened and We in areas success we in those competitive solution. the And that the launching we help had So products providing a customers are are in us markets that into future. keep more

fully through product So already to going did or doing I mentioned furloughs and that keep to I their and helped layoffs them and to stay the to focused developed of I us really launched we felt working given it's have some products that employed, whole keep working our were When And pandemic our have team come our think has departments. for they here. engineering efforts in start that many there on back, on, part to ready -- future generation. our get customers

think and better. focus pipeline our better I And So feel feel we we is the is good.

exciting where to continues we more opportunities, that top which the as really from and that when far transition do multi-technology of current grow. top to them are at as to for And advantage. the the competitive opportunities, past call these opportunities, working we solutions, we're a the on, integrated see us more gives Our believe solutions, we look it's been

Operator

next ROTH of comes with line Gerry Our Sweeney Capital. question the from

Gerry Sweeney

powersports supply not sorry little and a auto, bit the and if that it did the and it's I us upside of there some pending -- in on in if bit maybe involved of if powersports, maybe particular. -- could I that catch-up slide sure backlog you felt Vehicle, a to little auto wanted market. I'm like was in a part to visibility sort was of of bit work, the follow-up apologies, wondering in the demand as some any revenue? there give of And was And not market. little

Dick Warzala

Okay.

your powersports. So there's If about are there's pending? And backlog demand really there? questions any if

Gerry Sweeney

year. a earlier to while -- of did as Yes. some a was any of curious down there run and There quarter the for for third was for in little of My year? the on rest if the demand going manufacturing rate was products. that visibility catch-up was And this and bit shut sense occur maybe the

Dick Warzala

Okay. enough. Fair

first our was -- were was that in dealing some customers and definitely well. products off, and their pandemic catch-up disruptions there, some the occurring. So some there's end demand There to were produce say that there I some they was would of with the ability as as

-- were depleted. So that definitely, think dealer been have we've much inventories, heard I pretty

sold. being ship they that could anything So was

So some the drop-off. I out, it up. And going a is since dealers. has the in dipped can imagine trending the don't and out still see inventory quarter, demand in The has been see getting as catch-up hands fourth there it been we demand, terms up, occurring continuation think trending you we a of into then of into

that's the certain then So the built today marketplace -- a would tell as I being so increased you in filling clearly well. that, pipeline to demand extent the that's and

Gerry Sweeney

materials Got you I the the was? in think gave amount us what quarter. QX us that you it. was provide Dynamic the that -- on any QX, provide chance impact Any could in And then

Dick Warzala

in Well, patient you say also I I that that will would And surge supply products up. a for is And But market give first to medical do rehab there. patient the make I COVID I make as own don't of mobility electronics to impact again, did a business had, the they We some softer and COVID given the some business. see quarter full than the QX you, tell demand addition in but had was as in QX. that has -- the QX. actually ticked we that see remember that. and that's surge, and decrease When don't into a who QX. giving markets, think crisis, I they expect right? we market the in And the quarter-over-quarter, we decrease, other the So crisis that you were you in in seeing But decrease do mobility -- now, we the is, we're the I the that volume. tell saw terms, relative actually a typically, regulators. -- revenue the quite some would oxygen of markets, seen markets, part in

Operator

Our next Colliers. Ryan with question from of line Dick comes the

Dick Ryan

talked side, I know been quarter? of seen in Dick, last but earlier didn't changes If you cancellations, what have but on some quarter, Vehicle here in you you backlog? last the any said kind the see you backlog backlog? pushes from any about there's

Dick Warzala

No.

I think, still certain Dick, industrial, where industrial we demand, consistent -- it's aerospace and for that. have delays, and markets still push-outs mean, but we markets it's in defense, consistent. seen not cancellations, I seen and us, have with in the certain

seen have cancellations. not We any

of customer, Now we we you and were Medical some overlap equipment, up. high, cautious of big looking things market And quite every were and seen not very when fighting has up you would demands have we were there's real. there's there is these as to get COVID-specific definitely were to caught coming was have people in it that seeing that the the were the some we if something from that the we not now added there. we seemed it's everything volumes at say -- market I and That that as areas, And duplicated a where different certain from for seeing were coming that were inquiries share tell business. that devices, believe

requirements have pushed next equipment seen out Medical, we in some now year. orders the With into being

Dick Ryan

Okay.

you activity, of side, may or on M&A What on doing able some have going COVID what's pay cash not like seems the be kind of take a industry that generation you kind may to but in of? down the that It debt. of ability M&A? are limited advantage to On obviously, nice, you

Dick Warzala

Sure.

active up had interesting the it yesterday, what How mean, In we M&A quite I reviewed date think happened? groom mentioned don't And quite our found I We to and correct. past, reviewing I to on are many you're we? that them mean, cases, the potential Where was customers. as had we our and -- active. progress activity you're that the here. sellers was absolutely we yesterday. so asking for here, in were question our all market. And meeting it's and pipeline? these show we The we've forth. of We we on is opportunities. what necessarily the wait which

of postponed them, is our we what was And And for those our mutually efforts, timing right we right different so postponed I activity potential of future the I'll opportunities. acquisitions. is believe the those think was that's a now so about, mean, internal number grooming targeting a here. which that lot activities. for to the what is to opportunities restart timing discussions potential call we've restart And with

a in need. I companies pursue. in And we're have we're again, get the pickup a and fit bit to past, we've that good of actively little seen coming complementary And making We they're done in pretty sure can and strategic that to potential a as market. they going you disciplined tell

a look going the uptick. sense at impact. be of impacted little based those that going are be bit a to to Those valued going in to want want on, this not or valuations. an to there's upon and forward past. A a they're positive impact that valid got that So going market had the Whether is in negative COVID it's challenge to

see times the uptick that activity. -- a it's the valuations challenge view will do an all So of how for businesses. in us I here be we're I But and we starting these unique, think tell to are little and you bit would

Operator

Our Company. line Kearney next with & of the comes question Gabelli from Brett

Brett Kearney

side? some I capabilities able folks both bring workforce to electrical more that specifically thinking comments, environment competitive get, from build-out, Dick, got to additional broad, was you guess, software able talent continue ability, acquisition? to if take your the I that to I be be the capture to wondering might and your Controls available. Dynamic a related and I resources otherwise from that would this in-house talent was an Or to think you seeing in is mentioned otherwise your advantage them the lot guess, if more not bring to in and

Dick Warzala

your to think I here. Well, Sure. answer question

let's at internal First, look the resources.

mentioned, employed. As we kept fully everyone we

an I us out mean, So times recruit and they're engineering retain it COVID, talent. to that mean, get -- talent. was difficult and very standpoint, important before it for from go we I to our felt was

to didn't and retaining difficulty we we want be this. making have So then with cut in out when response to short-term came caught the of

So that that really on of board. I as the was resources the respect -- we part of talent also, we think that, but we Company, have or the demonstrated that the do culture the

So that was our ever first goal, retain employed and when the talent actively that that we them be we we came have than to better and the out, ensure that would we kept and engaged opportunities. stronger with fully

to I the offerings and existed Allied those utilize solutions right Second the with side teams and to opportunities say, and a during cooperation on is has and thing, onboard. That the and came combined tremendous Dynamic that's within create, that already what that meetings and conference be them bringing where product so the look pandemic. for as we you onboard that markets the integration calls we've extensive with capability those of there in how mentioned, future right to And would -- and of technology correct. came targeted at we've -- control product through start-up efforts Dynamic, offerings multi resources and during your seen forth to

some at technology again, well. and -- definitely And future are some and think product is that engaged integrated were all offerings fully as that significant I in and combined they looking employed. we've fully So progress made

that, at had mean, certainly hiring, still or of or talent, moving board. and when it's terms I we been the forward on very employed We but environment, recruiting either I talent it talent entertained that. we have the we're made and additional longer different looked you as cautiously had a where for were circumstances find tell of whatever sense. have opportunity brought to far engaged actively reason, As that will they no in

I well retain future will in the to think attract able be our play talent. for demonstrated actions to us here and

Operator

Jeff Value Corp. the Geygan Investment of [Operator question Instructions] Global from comes line Our with next

Jeff Geygan

Dick, you little just us how you've versus expectation? and Control could moment a performed Dynamics a bit take it, tell about acquired it's your since

Dick Warzala

Sure.

the performance I think coming exceeded Dynamic I out mean, again, of our right chutes, expectations.

products basis. Control. the produce, As earlier, that a -- Dynamic I we're of they line in on some It performance what year we in it seen look at we higher with would will demand. What be mentioned thought the be now, right total we've for were

I had quarter overall, pro forma to in be mentioned for we expect had quarter question, we line. in two, [indiscernible]. three as the in our a Gerry's them to relative that year, So put right And place

Jeff Geygan

hear. to Good Great.

You proved glad making so in that. hear acquisitions yourselves adept and the integrating past, to at

capital specifically, type Slide on particularly what describe and mentioned, that acquiring looks Can and X, about acquiring? You you're CapEx capabilities. continued capabilities of bit your And more investment little engineering you a engineering like? what

Dick Warzala

that's solve -- more necessary really can problems. adding efficient more the that and investments is the adding And them is I'll It's people. itself. Yes. been talking the engineering the be and I'll tools equipment in much then so the that CapEx, the The to we we've capabilities side And not just CapEx giving some we're address capabilities, and about, about making. -- talk of let Mike about it's some effective. more about the

heck design capability That more talk solution accelerate more that's model-based a integrated to you'd expanding on which seeing effective focus team, integrated much work you're global focus have of in engineering of simulation we I'll call electronics element as was ramped past that that global that about brute moving the design, Our -- the and the we And a in us trial process. of an done up, heard ensure electronics with error, efficient. us an expanded being tools, that. force. to key making team and better solution, me it and more the were now, that it's Much a by and acronym a lot past on and to we utilizing

engineering on So the areas. the capital it there. of we're capital making the support that's we talked in let that about investment I'll other side the And investments talk about Mike

Mike Leach

cost-savings maintenance or to describe XX% CapEx, that -- basis. say, XX% extent perspective that From to have I our focused, as on we on program probably would spend would an overall think M&E I expenditures, focused maybe growth annualized it's our limited an CapEx I to the highly of

is some of we've equipment into programs, lines this growth year, supporting to either most last that customers probably see year. year are and you So what contracts of announced, particular, in new well-established late that new well-established and/or next-generation with products next support the and

that Some of ramp those ramp-up. wins as months expenditures in that of the had automotive significant announced up, over preparation XX last the we've we've

Jeff Geygan

Great. growth, And your investment the ROI return how the just think expectation do what Or annually, you on following XX% to of up on that? you on about type that. CapEx XX% of do The have?

Mike Leach

obviously, competing are focus on priorities with Well, the our capital have right, lot M&A. external we we a through growth, for of as

diverting internally, it of some model we What from obviously these returns. do we'll will, product to need business the a to up that it performance the set entertain undertake current have that is, typically newer to So similar contracts. build if be us you demonstrated in with in for from -- we things. or line, the we they And has those we really exceed performance line our case ground when

of especially exceed divert they external the there to have that the was or meet that for other in like getting again, the automotive time acceptable, capital return investment expectations, percentage again, our a delivered that case in or activity. past specific and and frame have we without new built sure would some were a M&A growth meet contracts required delivering, So that that business the about when objectives and would opportunity shareholders' would what making we've

Jeff Geygan

question. Sure. Appreciate it. Last

Dick Warzala

let me add too. just a little Jeff, bit

talking I about at shouldn't competitive about the versus there want traditional improvement. going look are make -- that you buy, versus to how so I is say chain do and we Mike buy. supply And cases And he's talking many about you control several is to understanding coming and think talking as of where the where growth he's there are many, become make but think where the have forth. I efficiency there, and supply -- from you and

future. the strategy element being our continue key of our we've as into be As about a local talked strategy a key element to sourcing of and out

challenging more the how some we for buy, take paybacks internally. I'll versus So at by a today that to our we pricing call better better can might be industrial team make certainly it, equipment employ negotiating pricing, on look we're -- at on, a able favorable opportunity to equipment arrive to capital for

we've So see advantage doing a a totally be I'd gives and But capital today, us in -- equipment times, some some as us of to integrated. we to there. we want signs vertically well. outsource. see that very more gives us say, it And well. positive to been makes competitive There's sense it's certainty not opportunities supply It a more as of heck certain we gives that and lot invest there that

we're straight So that's evaluating at versus that's that looking I and or okay? by analysis, we're make an a that strictly another area payback, analysis

Jeff Geygan

really I'll That's And turn question, helpful. Yes. then last it back.

that, that's finished of my or product material experienced? peaked you a more discussion components cetera? you that, if here is around the whether that I'm South et whether bit I'm you've then or localization looking type or your your mentioned you And us adding the tell You coming raw prospects sourcing. curiosity can sourcing impacted, or The to Europe, goods? can America, And if wondering with it's little tariffs. some it's from, are wondering localize about tariffs Asia, comment on to Medical where of

Dick Warzala

the years I'll from is we we're And get customers the by about mean We if everything our The driven couple Mike. to the some one. turn the And about being may doing supply the talking that localize over you're more we and Sure. hard -- you certainty. easy the localization again, we're that, with localization type, of ways of can a chains, several we bringing suppliers, idea schedule have run part one can I ago. strategy you tariffs, of a okay? if increase in started have into issues. let's we I'll there's going that. typically Asia, right is, that additional demand say take And what that's global just and

You have of issues may supply.

product. You may hasn't away. airfreight that's have age-old gone an problem the And that

and strikes, have those got -- happened. then add impact tariffs You've to doc that. then And may that and potential that you

that chain, you're times, the of or a length a supply cost a in chain, of factors. the So at shown at I is look carrying acquiring you has product delivery, the true part. the the of really it's the us component inventory the what look It lead or if risk supply to think amount

may supply a are is And -- our a seen in suppliers obviously long that are an and those footprint. feel opportunities and we with of and non-North -- urgency can to base has chain there up but that on there's is product products a really we focus supply upon a strategic take that who had sourcing are highlighted lining And have global have to there's in we've negotiate get to time because component we're North controllable the global supply an what can we those about that, immediately or, here or don't they be strategic cycle but the So those things in global we from if coming a we European-based show which to can non-European where capability position that region supply supply a chain. and also started. American future because a produce in to especially critical the build based that market a and pricing lead that end up seems working we that's more COVID process, the talk ability by base, shorten the in is, to American end themselves in And that Medical say, opportunity on design share in locations have the than we basis, up, doing sourcing. So is we've leverage okay? multiple so going the one I'll

it's piece, let I'll that's forth the it and impacts and the Mike talk So had then and -- call I'll so easy tariffs about on us.

Mike Leach

Sure.

deal Jeff, I overseas, control, But not it's into those about particularly which, is amount So this the a goes and certainly it's Chinese-sourced describe tariffs, again, fair this. sourced of product discussion having would motion with in again, again, localizing to broad-based. efforts the components, And in China.

be bearings, could could talking talking components, component. about electrical could ball you you talking So be you be mechanical about about

are with again, we and So of customer. And those tariffs process, my been those our closely trying be good those to passed tariff those passing lack today successful customers simply with how or some back costs would the point partners specific customers exemptions quite just tariffs, with of in And have along. rolled initiated, to exemptions, wouldn't to describe received not when comments our we've with issue. those and off. also those is were back very of where that my as your the being the since navigate of And and along it's point having one We've chosen to we've that worked products. we've with that In I inflow that the applied on exemptions, I and along for in any path because rather savings or and costs that of the occurs. those tariffs, go arbitrary forth to strategic to -- we've it's strategically the those difficult price some the sense certain of examples pass customers There's sensitivity nature. just customer relationships

I saying with deal guess, given that things. just it would So -- we I -- here, to is again, what situation. would will highlighted as we're these variability, it's to I describe I just as potential, have continued having how absorb It's the not

Operator

for like this further have floor no the Ladies at time, and back to comments. gentlemen, I turn questions. we would closing the management

Dick Warzala

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

we Industrial For the two conferences. on upcoming November The participating Craig-Hallum XX, Conference followed Thursday, XX. Conference be November virtual by be those Global Tuesday, will of will in interested, on Baird you

out and a fourth feel have you forward our day. As talking for and the with please of after to Year quarter any Thank participation. again to safe, great Stay free time, your to all you look reach us we in New always, at results.

Operator

Ladies and this teleconference. gentlemen, today's Thank concludes you.

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

Allient (ALNT) 7 Nov 202020 Q3 Earnings call transcript