AMOT - Earnings call transcript Q4 2020

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Operator

Greetings. Welcome to Allied Motion Technologies Fourth Quarter Fiscal Year 2020 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. to conference like Mychajluk, to now Relations. Investor would turn over the Craig I you. Thank

begin. may You

Craig Mychajluk

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

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

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

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

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

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

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

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

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

Dick Warzala

of met. essential I saying we to a of environment, continuing goes exceptionally team demonstrated the that without Thank at create used Craig, adjustments We supplier, resilience I same that defense entire proud to responded by situation most and an necessary tirelessly the XXXX critical onset while these times. time and our of changing qualified welcome, everyone. our would safe worked you, agility including At during as these all and our guess because support agree products am was pandemic, the an and the are unusual us be it work to ensure of to year. medical, are agriculture. making the and customers that industries to rapidly challenging the Allied

our result, able to of our with volumes a As operational. manage facilities our inventory varying manufacturing facilities in of staffing markets. successfully we several to to We our all to adjusted to responsive levels customers. our levels align production keep demand were maintain we for delivery of And end meet levels

our a successfully further refinanced other platform higher This significantly Controls. pursue pandemic our further increased to closed markets. resources, critical to team end products of of the integrated and around solutions – the and agreement able provides and were our We strategy for vertical patient While the engineering position market our medical our acquisition The leverage achievements. of develop and mobility rehabilitation, acquisition lending available and impacted company electronic the level Dynamic the our strengthen position efforts economic across our and to of the significantly long-term we committed operations, a flexible markets to growth. number significant and execution included

key provides and existing new solutions, which We the several with next realized several for also by innovative revenue wins streams customers years. providing

and for exceptional Medical year revenue markets our to advancing while Fourth engagement results largely Medical Controls, XX% a the our powersports by as a the performance solid in increase up our compared focused XX%. impact This was pandemic priorities on strategic X% $XX to including allowed served several quarter and financial all market. us only market continued executing and by increased challenging with disciplined markets was of down our was almost in saw offset X% as revenue XXXX. even ending focus backlog. significant environment, orders markets. XXXX driven Our Driven with increase quarter other decline and in million Vehicle we Dynamic this navigate record within an to fourth approach and recovery by This levels and of of that in Medical year

For offset as disciplined the achieved headwinds. gross a margin year, management and help diverse mostly COVID-related of our strategy efforts we full XX.X% cost market

Our fourth some detail. quarter gross impacts margin particular will that in atypical Mike had

management cash which of generation $X.X total quarter, solid million us reduce drove the during Our $X to by debt almost enable effective and cash discipline million. execution

$XX time, normalized generating year, strategic to flow we been the million a returns debt, we’ve million $XX almost For from making paid once position the economy capital to and investments operations. stronger and cash nearly our of At more of momentum even further state. down while emerging the same

in our confident business our the initiatives of are model. strength and We

measures their to We all will of health required and implement the safety remain families. the ensure and employees to continue our of vigilant and

long-term stockholders approved close announced our I This April Before the we driving in on at outlook our dividend announced on of XX. it split continued also effect quarter business yesterday, and Directors our record over that confidence reflects shareholder that Board action XX for will and take X-for-X of turn growth stock standard the Mike, a to for of value. April

shares investor assist base. for We of more the me also a of in-depth over liquidity it With believe turn to our greater will this provide the company that, expanding and financials. review let and Mike

Mike Leach

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

benefit revenue Fourth demand include driven was FX incremental million reminder, the a of the acquired $X.X $XXX.X year end our $X.X impact $XX which increase Medical, a was Revenue to at the our down for $X.X including favorable was FX Controls, of fluctuations million the in continued X% we the came million by or a As in million. impact in results despite strong X%. for market. quarter March, revenue the growth on favorable million, Dynamic full on revenue for Revenue Vehicle. year. Dynamic, full were up in pandemic quarter on XXXX. X.X%

Medical XX%. Our of reflecting Dynamic addition due favorable impact the grew and to COVID-XX. Again, market

order the Slide Controls. end various year and by the Overall, our many production shut facilities the December shows COVID-XX down decline down. broadening Dynamic to our the reflected sheer scope by year-over-year change While were our was were Europe, the the Vehicle customers the Vehicle markets the to shift prior XX. XX%, and hit impact to year, of reduce Again, year resilience sales X pandemic of primarily the Sales some still mix U.S in in period customers, down geographic completely pandemic when revenue our A&D. in rebounded, with for within diversification the the and market reflects in mix full when of demand The Industry, first and deferrals addition revenue ended economic given Asia. customers Canada, change has has markets earlier the we’re in as added the of from in XX% business. in balance

to costs gross due Slide X, be duties efforts freight and in close to XXXX duties have margin reflects costs As well to compared strategically fourth quarter impact unfavorable depicted due to We our under declines XX.X% fixed manufacturing components in fourth Industrial A&D for certain of impacted began the nearly as XX.X% expedited on quarter. of that Nonetheless, as some with change managed was and benefited higher expiration facilities certain relatively mix for and there from increased source quarter, the and result components of exemptions. our the we of believe $XXX,XXX tariffs, our charges. The footprint and the the an the a absorption in of were possible. have tariffs as to

constraints, and combined customer margin the the with Additional and supply teams XX.X%, with which unintended to our chain resulted full meet is schedules. freight in Gross compared demand powersports costs for work XX.X%. hard inefficiencies was some year support reflects high and demand in

markets helped lower to of efforts and impact offset freight. containment and cost volumes diverse the partially duties and the Our higher tariffs,

operating to of by X, fourth $X.X incremental million revenue costs to points and for basis and income revenue $X.X to quarter X.X% of down the the Moving XX We period. our partially or offset drive cost a Slide the compared control Controls. sales, on was prior Dynamic in year expenses higher XX.X% managed related as percent million or to with total X.X% operating

gross the through decline the from However, offset upside. margin than flow more that impact

of business the as to to costs driven addition XX.X%. again Dynamic points and higher decision basis XXX increase declined margin market revenue vital a and our percent a operating basis to future continue maintain share. engineering of operating gain to consider X.X%, which capabilities, year, by drive full expenses point largely is of we key conscious XX development Controls, the For growth costs to reflecting and This

important been income Slide our due to XX.X% line. return XXXX That year that of the fourth weakening our These the effective $X.XX and and for and full third Net of $X.X withholding Turning tax $XXX,XXX diluted global million a It per the the million loss currency during full dollar. to or line tax short-term within was foreign jurisdiction to The quarter, U.S. income netted result incurred revaluation respectively. bottom as Net that the you X, acquisition. by offset in previous for had expense or adjusted assets share. we $XX.X of $XXX,XXX production quarter charged note of per to foreign was assessments other in fourth of Allied a diluted the can XX.X% quarter for for share. EBITDA and tax and and expanded a two quarter are results. the the a liabilities items was rate year of XXXX, see was is our amount $X.XX

Adjusted down million paid $XX.X and determining total paid atypical funds reconciliation an $XX million adjusted EBITDA for $XX it XX.X% Slides net slides. or In $X.XX million operating provided net the encourage sheet disclosures of Debt, the was XXXX. to was million, $X.X with our overview cash, an sales. per and $XX.X the associated that has item EBITDA Accordingly, million compared tables useful to the tax year $XX to from Dynamic basis, provide as Dynamic effective the and release $XX.X and review XX.X% to use debt for XX.X% reflecting EBITDA quarter diluted net performance. believe XX and other that XXXX in At year XXXX, debt, of in of the and are Full was $X.X tax adjusted Excluding been adjusted million was the quarter, essentially share acquire and for $X.XX XX% acquisition income full in Controls. for our approximately nearly items, XX%. $XXX.X and is rates debt of up per metric million year-end, balance million and flow. progress net X we cash or on with the debt million range share It anticipate of We noteworthy capitalization. the our diluted is net Controls internal sales. fiscal year was non-GAAP between for period. and We you off. used

times ratio year-end. leverage at bank was Our X.XX

focus to While continue we this are at on debt. paying we comfortable down level,

year, last February to up in which million reduce of our a cost facility, capacity allowing our new the reminder, $XXX also expansion revolving a with expanded an million. feature credit accordance $XXX senior and we debt borrowing As included

our leverage used off-road of was fund wins $X.X which capital cash ratio Additionally, vehicle on we expenditures This the the XXXX million. enhanced our announced EBITDA capabilities. and Vehicle generated operations to We large $X.X million previously strong million, to focused to were the in annual fourth steering to next-generation from quarter, $XX.X X.X in debt projects, largely advancing new customer part project market total increasing of coverage the of times. flexibility by bringing flow

turns between our that been projects times, capital end consists expect were of well which $XX from investments X.X some at to and new customer million of CapEx XXXX for as down fiscal from XXXX $XX We Inventory range million, X.X the projects. as XXXX. deferred times have

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

DSO Our at days with was XX consistent XXXX. relatively

debt growth is it and organic acquisitions. to as initiatives, our paying reload turn reiterate I back Dick, Before, well let as over to for me down primary that advancing internal focus future

in capabilities well rapidly our sufficient cash to to the we’ll to our from strength near-term be adjust when have pandemic. turn changes whether current to uncertainties, financial and strong liquidity believe emerged as shape With we ability a now Given we of economy, call position Dick. and a are we demonstrated any that, generating the liquidity this over as I’ll back in

Dick Warzala

Thank you, Mike.

another XX% level second awards for As challenging level environment. we the backlog total record be of At orders production XXXX, million quarter XXXX. sequentially, Slide $XXX we to raising XX, to of quarter climb initial to expecting was shipments the fourth this provide approximately the award to is Vehicle convert to of given of time, approximately depicted award orders XXXX. X% awards of up backlog the begun grew million is to specific compared to level. the market, of operating and at expected three year-end all In months. to majority are at to next Full record reported currently rate of a The also of our the $XXX sales secured up on in very million. the a We at nomination represented a $XXX full million, first customer fourth award the six Backlog quarter than all million, of numbers. our year our that over more a $XXX in $X included solution now solid XX%

create in to and market the perspective, in right as financial that us keep at and strategy of remains continue all taken environment business, AST we operational we toolkit drive were areas the to leadership that While to a the will allow actions through optimistic believe business operational the building. of position organic a normalcy. our our continuous We’ll are way control, and a various and includes inorganic to uncertain, economic will and strong can to continue drive team to world and XXXX improvement on have back outlook focus the through our our vaccines their organization we advance working utilizing we that we to our on the growth areas work From around we continue for opportunities. path

Powersports the Within growth. While and lap market that broad base long-term our we there strong drive our continues play, markets, look demand. we and leverage few expect markets progress will continue demand now to to to to dynamics identify and Dynamic market returning moderate, at especially previous are of develop opportunities as we Vehicle based profitable continue acquisition market from as technologies the demand automotive levels have and the Medical to first our to be we solutions quarter. Controls of to

announced. award may As with of previously we not are up runoff have expected, new programs some line the that perfectly of the seeing legacy ramp large that the we programs

understanding thorough This we of us and demonstrated agility further can efficiency, growth varied cash to and are of perform still our being Ultimately, pockets over are taking also penetration, cautious by still pandemic well markets across long-term. We’re and market positions our markets near-term while a level to better, record the the profitable us market uncertainty. that served we and confidence end beginning impacted with backlog perform some flow diversified as free enhanced trends. A&D gives approach seeing Industrial our others drive

controlled and margins motion Importantly, we the our will variety given create and more solutions applications, expanding diversified wide deliver believe to economy as of efficient ability business model a recovers. we cost-effective for

our of an let’s internal annual long-term the on that for an goal be margin achieved operator, to questions. that and point line only strategy. strong through alignment have open year increase percentage can executing commitment the X established continuing With per gross drive We

Operator

you. Dick Thank Our is first Instructions] [Operator from proceed. with question Ryan Colliers. Please

Dick Ryan

Hey, Thank Dick. you.

end wins On there contributions backlog? your the shape there that are variances markets point various in I the QX, key does can were mirror to of in the does orders strong backlog the or and record any how you mean, up? specific any that

Dick Warzala

you production would deliveries contract is business there say, a little normal see backlog. across our mirrors it I’ll and we which – mix into relative I A&D it that what increasing book But our would have that those – But terms say A&D I’d dates don’t we across come in do did for area. Dick, it get it’s skew just the an we the in of our I the would as had just board most the sales which if maybe part, with that I commitment the you mix times, markets. business. – lead tell Sure. firm more markets. of when But mirrors think then tell the firm there that in it’s within want that it and it within bit to we firm a normal saysthat and I’ll

Dick Ryan

look of When first the any and to quarter, see at Which or you shoots we there green growth when the in? out year. end rest the markets close Okay. looking then at for the growth to out – should market various look some coming hope some you we’re of see the

Dick Warzala

think encouraging I seeing much we’re across most some now. very markets signs pretty

the as we you – trends. as lockdowns about I business, starting we’re Our see Europe. oil positive improvements hear of But spikes there European COVID mean, and so especially seeing spikes forth, up, very obviously, we’re in the well. have still and prices to course concerns go as

quite and things think we’re moving So starting I here optimistic turn that are we’re forward. to

Dick Ryan

efforts acquisitive talking what’s you up of the change on out have side, of any environment match, near-term? the quarter, kind in thought activity the M&A last Okay. there. here on current your last had And about, one you’re and One turning that

Dick Warzala

hitting you say in up. change thought. will I that to definitely And it’s No

Dick Ryan

Thank great. you. Okay,

Operator

Please Greg question is next from with Palm Our proceed. Craig-Hallum.

Greg Palm

to gross on guess, commentary starting going I everyone. back maybe morning margin. Good just the thanks. Yes,

if back margin that So sort a of to that talked you still about, than we expected. out I’m $XXX,XXX lower coming

of versus And and else. So is upward. long-term trend just how kind of you was much the is kind this seem something least of some pretty transitory curious of mixed that that at confident

of going on kind just improvement more you’re maybe So little about how a detail bit thinking forward. the going

Dick Warzala

Yes, Greg.

a there. I’ll at of what do play is, think factors I there’s number

Mike. we impacts the – got this that see turn over And on the think it’s so he’s I where to a mean, in handle here are, we what mitigate let’s good can I future.

Mike Leach

Greg. mixed is clearly it related, So

how quarter about last talked it impacting little bit we think I a things. mixes

from while margin of the a typically one is are that So lower again, than an the lower at which quite just that than of our nature the has And impact products absence and certainly A&D, to then sold, we margins volume throughout would the I products, is our related last gross volume the typically bad perspective, standpoint. Medical gross pandemic certainly in other is right. us. the strong And nature year, Vehicle. entire And again, of well is we’ve seen across margin average. as Certainly, The higher COVID barges a traditionally operation certainly, general up new from a Medical margin year, close being particularly surge were or carried while board, classify average. our having

such clearly, surge certain we’ll markets, the Along presented out it’s when say and that fixed and in seen supply overhead well that our well. chain of and lift again, I impact as that, then issues. of a they duties as and a tariffs get will, just absorbed are the with, not So volume being we’ve strongly as some returns would costs as of some constraints

even freight quarter things just suppliers. in as in get this that’s well. our our demands ramps period, just and Again, and the meeting when to demand it products those pandemic there’s And expedited has the of type from with I like tougher. as chunky mentioned, freight expedited so, throughout It tighter customer. And up of focus pretty on was made again, been challenges And been it. the

There certainly, some were So costs. inefficiencies. we’ve incurred some

Greg Palm

it. Got

year things of progress that start of, like it a here sounds to through So should this lot sort improve. as one-timers

Dick Warzala

those Sure. That’s going are and where knows how as being tariffs. long Who well.

us potentially So have put well. I some develop. would to would that number Those But – things that’s as see QX in taking we we one a are mitigation large continued time to those the impact. point to we expect behind certainly keep of to efforts

Greg Palm

rate sense. of now we of award Makes know be The million award up you ramp until run the Vehicle full from the in that’s thinking $X Yes. I should that in XXXX. progression said then? of backlog, about How now the

Dick Warzala

so I been couple mentioned, And well, to Yes, up we production. here see I And Starting I each – are as you’ll of plan XXXX. first rate as we’ll there’s think ramp provided know times. on in coming in that’s the think planned, what is going we’ll of awards now is, in you’re now of why full full see on. what the what ramp the up we’ve up of into the we moving that the varying as that production of and long see stay said rate is next years they each as programs

following be onboard, – year year. the each coming be and on there’ll coming year this each ramping So and one next in

Greg Palm

Okay, know, reason between and good. but then and backlog, won’t higher seasonality what the just QX. revenue any QX you one, QX than you looking saw given And last guide, don’t why QX in be I at

quarter-to-date, are how pretty positive treading things kind curious seems like overall. of Just activity it is

Dick Warzala

thinking were XXX%. by you are what that with we’re argue to encouraged here. and going I’ve not improving seeing I’m said, things concurring what while that, not I’m mentioned we

So a statement. I statement what think was fair your

in the were general, I turn. December know year, we’re end it’s was, is going always but with last fourth won’t I say, consistent And statement it And of course, very a certain obviously, else us. your we is that seeing. to quarter say given positive, very in – We don’t last what which everything the occurred challenge think year, way Of at extremely as unusual performing well markets for year. year, our particular

Greg Palm

luck Okay. going All of Best forward. right. Thanks.

Dick Warzala

Thank you, Greg.

Operator

proceed. is from question Please next with Sweeney Capital. Our ROTH Gerry

Gerry Sweeney

Hi, good morning. Thanks for my taking questions.

Dick Warzala

Good morning.

Mike Leach

Good morning, Gerry.

Gerry Sweeney

one been the auto of start supply little may some side of shortages, I even bit and bit revenue know specifically off about auto be new business think well. a figure the on Vehicle with I little related, but wanted about on And that that more talk segment going mismatch would up. to stick curious you’ve to of any talk the bit that mentioned ship I powersports and can down impact as a short-term. your of once little and and going some of it into new powersports legacy there’s – in chain sort a products does in issues

Dick Warzala

Okay.

second the let me The ramp that clarify had – automotive as it there’s the a the about your So we were seen programs mismatch a that – first would mismatch. down. that up legacy seeing I’ll ramping if is not timing, statement we we it and planned, the are that were kept ramping before down we and had all awards originally have we ramp had

So progress were delayed. delayed. downs while The ramp given the were ramp continued ups were delayed, that they the

the that’s specific absolutely a to become Vehicle With and for we challenges it’s battle. seeing of regard and are All constant we markets the awards. have new provide. important all So feeling as related electronics, solutions us those that mean I to element a right, challenges, to many It’s so electronics that those. in

solve So well as we its active one’s passives up components. – one as soon another as as you and popping

components. be here or short-term, we I to times mean ordering continue you to it so And that I been these to start And Plastics there’s people lead see things going to significant And you we’ve plastics. one and a especially these a as through it’s do issues. think having and been the the cycles obviously challenge new in for through requalification to times continue, new has it’ll sure suppliers hope the ramping for fairly double I amount lead of queues are today, are seeing and quite watch We’re but out make been tremendous been have when in extend, also able challenge. to start just before, some can of and work out. gone forth.

demand or And commitments our so the we accelerating if to for increasing period a that that – we stuck with from working can they’re get customers and that sure we’re parts of demand back to make don’t ensure just we we’re time. longer getting use

of also continue work short-term. clearly hard react and and think also of, lead on it’s and of extending alternative magnets plastics the to also sure we challenges, the very it’s because the So to causing supply bearings I the electronics and even said, can because to times as supply us in and are

Gerry Sweeney

Are those to stay if costs any those time any just are through pass that period of elevated – or they an costs something… able you of is for extended over of

Dick Warzala

certainly for everything, there’s demands increased reimbursed have that them. when larger I’m Certainly, getting protection contracts, toward we times, contracts get lead and all to say, them not so get do extended we longer-term, in we reimbursed. going protection increases work cost on our we of that have on

and and supply you then keep may pushed the and to can what short-term on We to weeks from is increase. pass notifies have XX the many happens times prices them customer on It’s being times commodity Gerry expedite every it on, can materials, And but you the on. and cost pass So these time bursts been have certainly it’s working back passing supplier we those or lead not reimbursed. and XX keep go you we and getting then satisfied, to chain on. now, and go later incur you do the costs just you work that

Gerry Sweeney

it. got Yes,

So it. little delay a a there’s it’s there, bit got

it. you. appreciate it Okay. for Thank me. That’s I

Dick Warzala

Thank you, Gerry.

Operator

Instructions] Kearney question is Please Gabelli proceed. with Funds. Our next [Operator from Brett

Brett Kearney

guys, morning. Hi good

Dick Warzala

Good morning.

Mike Leach

Good morning, Brett.

Brett Kearney

Good morning.

well you we about as did, side, companies but coming as you are generally going folks all and as forward. markets ramp which of about challenges you’re thoughtful staffing as covered, labor of you So undertook how not team approach back, not out production of have hearing of but curious you took the and some care just comprehensive there year, as the last obviously workforce the really new ramping Dick, some your good supply from guys just up side think your up some meeting wins the thinking on

Dick Warzala

level new step need The is Number and Sure. the contracts to decreases of automation, feel other, produce to I improved things automation that you the about loyalty there’s couple that product here we’re forward certainly done the the having that do the the large some also, started the we’ve future yes, Vehicle awards, if launches additional of one that product up, talking workforce, protected we labor for ramp so to that as there. implementing and there. the mean so move production we’ve we

maybe We who job it’s knows haven’t losses and of is it’s out maybe right now. because and what that of market of seen there people that the because

to position going call that engineering that material we we’ve ramping pockets, I’d we in think key productions the So this, and of to say I supply doing a we be will we’ve we it’s the on long-term. key I look as a also see – efforts that come to been think you, that, as need out the to anticipating and some actively but now out and I will recruiting do them And and here we’re in grow selective process as other recruiting areas, here, have through challenges. far something there certain some as areas, do. as we working even demand for certain that The positioned areas we’re I’ll in tell would better while primarily been areas ensure too, strategic

Brett Kearney

so much. you Thank Terrific.

Dick Warzala

You’re welcome.

Operator

the remarks. the question-and-answer conference turn have session. We to like would end over closing to for of reached I back our management

Dick Warzala

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

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

the conclude call Now operator.

Operator

conclude you. today’s conference. This Thank does

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

Allient (ALNT) 11 Mar 212020 Q4 Earnings call transcript