AMOT - Earnings call transcript Q2 2021

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Operator

Good day, and welcome to the Allied Motion Technologies Second Quarter Fiscal Year 2021 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please now Craig Mychajluk would like to to over conference the of turn I Investor Relations. Please go ahead.

Craig Mychajluk

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

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

ask As to part of that order for today's you three or to Q&A, to questions we your participants. enough time do all limit in allow try two

go can for the You certainly back into queue additional follow-ups.

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

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

reviewing statement. for turn those to If please X slide slides, you're harbor safe the

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

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

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

Dick Warzala

Thank strategy also solid you, of performance and Strong and welcome recovery. we million, economic while quarter of of XX.X%. execution drive rollout around the our to ramping One the last vehicle Allied recovery and solutions, operating revenue leverage over everyone. new Craig, our growth projects industrial year's we organic ongoing second grew to the achieved XX% reflecting Total and markets. Notably, $XXX double-digit in continued

which vehicles. commercial power market Our vehicle other as growth The markets construction such up XX% as markets by of automotive sports ended. HVAC, been mostly year-over-year and gas over for medical our resurgence XX% as was has were gains well driven and demand up was industrial material in largely end projects the from has year residual and the prior handling, in pandemic as automation, well. electronics with which as has Revenue broad-based normalized oil

many chain others, by A&D markets of material cost. our although growth. pandemic, saw improvements sequential and and higher faced by lead we demand by Our continue to in a and in constraints orders Overall, be the record quarter. times we backlog on the encouraged we impacted extended Like demonstrated and resulting level material increasing are as XX% supplies significant have basis,

to job inventory managing teams have components orders tight we our to an believe been and requirements sourcing future demand electronics and are given satisfy fulfilling building example, for has anticipated date. For We customer very strategically possible demand. done if excellent

points up EBITDA margin Operating reflected in points. margin to market these our and efforts basis foreseeable these performance. However, result margin margin continue The adjusted sequential to we expect future. XX basis adverse gross basis XX points a On XXX XX.X%. was for was basis was the of improved up conditions

$X.X to As over diluted share. the XX% million $X.XX increased result, net year prior income per a or

of X.XX operations and from ratio cash to to strong quarter. generate improve leverage $X.X reduce further by during $XX.X million bank enabled to the times. total our million continue us debt This We

in experts fairly operations we immediately issue forensic up We impact results the our which quarter, the we're were We issue were breach. without the able in and running contain of and field. that able among were During to on to our playbook able early for we implement and those a risk were material management get the the to entails back the quarter. discovered a subject bringing cybersecurity

act our to forward. to security with Unfortunately, issue pleased measures ability national breach believe additional we and our We is all We have also thus the and are decisively safeguarding contain a were cybersecurity systems. since move quickly risk. implemented further at and

on, are the over strength increasingly we confident we order the backlog record potential encouraged by our about trends. making excited progress longer initiatives model. our And are are are the increasing Moving business of we with in and and our term and

the drive further making are areas earnings strategy our improve scalability investments necessary our excellence of to we power. enable Importantly, growth, on One strategic and to and execute Allied

me apart enabling our Mike for Our in-depth business solutions turn more competition, and review offering our financials. it advanced breadth solution integrated for and continue motion from more ability complete us be product us provide the from customers current controlled to With to share us. customers. key that to a skills our The sets for our that engineering create and a of over market differentiator an take gain of let optimized to

Mike Leach

Thank you, Dick.

share X, and April. the and split regarding reflect a As in our stock per top reminder, completed release provide some slide slides information on three-for-two all our detail line. Starting we in earnings share

vehicle, particularly $XXX.X Second million. revenue was strong $XX.X million quarter increased XX% year-over-year. to in improving XX% or Demand

benefiting year-over-year quarter. fluctuations the in The impact of are a grew sequential favorable verticals on and industrial on exchange XX% continued X% from $X.X Both was rate recovery. million economic basis. Our revenue markets the

impacts within of of economic market, in from A&D. seen industrial or The has addition customers by the trailing XX-month over revenue vehicle reflects our Slide TTM with change our which primarily was year. the in period while our deferrals Total sales strong demand mix balance the and XX%, basis, market Excluding of And on Controls to geographic year Canada FX, Asia well. was last market revenue improving Dynamic impact the diversified the Pacific. The revenue continued that XX.X%. in of model from the the the reduced were down XX-month market to shows headwinds was up up US medical prior COVID-XX reflects to reflected up X change the Sales order the including demand for impact pandemic demand. of trailing period. to a pandemic XX% the still significant was perform customers, given Europe, X% business and in mix the in

gross As or our reflecting compared depicted Slide million $X.X was year X, million higher prior volume on up period. $XX.X profit XX% the with to

basis margin increased volume favorable points reflecting mix sequentially to gross AST. levels, Our XX.X%, the disciplined and toolkit strong Lean second quarter our execution XXX of

to term. our those the chain of the the continue managing the constraints over believe grow supply to headwinds lingering that for impacts. expect we long constantly and cost some Ultimately, as near-term. is are We well seeing margins impact team do we and anticipate stated, we we offset to hard continue material working have But

on Moving Slide X. to

quarter from cost $X.X XX.X%, percent and up XXXX. improved quarter and X.X% to income XXXX of bottom effective XX of Net costs largely and increased points to G&A share-based offset largely as see primarily second million, XX higher or $X.X rate awards. the compensation can adjusted XX EBITDA tax Second The the The basis million increased quarter line XX.X% On basis results. from million for and was diluted to income disciplined increased volume by Operating our the tax of operating second quarter the $X.XX in points line slightly Slide discrete points XX.X%. rate margin $X.XX first per X, which was year-over-year of income up from year-over-year a up related compared you the higher control revenue $X.X quarter sequentially. XXXX. basis was with as Operating was from benefits, incentive lower share driven

XX.X% rate the in quarter of and $XX.X range Adjusted believe adjusted to We our and cash was sheet progress at determining useful debt year from an our basis from or and We the resulting internal – as operating sales, flow. We adjusted $XX quarters in of million million performance. period. to between net EBITDA XXXX of Slides of X end and down was net debt basis million points cash down XX%, and $XX.X balance of XX period. for an million of increased XX.X% net XX a million remaining prior or it provide is capitalization $X.X the for paid of and Sequentially, overview year-end. metric income $X.X to debt total quarter XXX tax sales million in points. $XXX.X Debt expect the during debt of EBITDA was up the XX% use the XX%. EBITDA our

leverage $XX.X level, period. we ratio quarter to and future to in X.XX quarter this the end. times year-to-date for total will And strong was for debt of at while cash million second generated paying acquisitions. continue at flow reload focus down are on We operations from $XX.X bank million Our comfortable we the a of

as Second projects implementations. focused as largely quarter CapEx customer well was $X.X ERP on and new million

to from our range million. expect were times, slightly X.X million Inventory and turns XXXX CapEx between fiscal We $XX $XX XXXX. down

combat teams well work demand time to lead meet managing as sourcing increasing levels we have and been our inventory challenges. customer Our and

in days the XX at consistent was DSO quarter. Our

and diversified long enhanced we of to end strength efficiency, over that the Given and continue balance agility free are back call and Dick. the markets positioned demonstrated further now term. With well I'll growth flow turn profitable to over cash sheet, our confident driving the

Dick Warzala

Thank you, Mike.

encouraging X% the year increase full of strengthened onset that orders Turning the quarter. XXXX, and Since reaching demand has the the we resulted have pandemic, a This highlights achieved over in million of order market position in point and second and represents sequentially. XX% record the one XX, consistent up growth, during second low to of trends $XXX Slide quarter customer backlog. as our

continued increased and $XXX first over three our major industrial in improving From next to and order than Approximately, solid XX% backlog recovery X.XX third the activity XX% sales book-to-bill Backlog of remain markets contributing second within convert our and surgeries. for is expected perspective, with our we to at increasing over our to to seeing All more channels is reflecting six are Demand in strong was to the demand our was quarter, medical quarter. to we be economic sequential elective the as are vehicle still in million. of over quarter year's market ratio up market the conditions. months. expect market quarter ongoing the last XX%, a expected solid

see have will beyond. a take constraints expect We our chain positive of capabilities we the encouraged supply cautious continue do though anticipate to and in to our leverage chain A&D We landscape. near-term. increased which supply We XXXX continue are quoting in a this we we the impact orders, and believe dynamic not navigate improvement with approach help strength markets, meaningful to fiscal any to inflation can management to and

Additionally improved tight productivity are volume and place the leverage help to operational offset supply challenges chain. of the in gains

and to strong continue to generation element same will remains pay overall important which our us down execute cash an Our strategy. acquisitions, enable debt the time of at

building we has pipeline valuations. been acquisition Our high continuing are very but to see

has history with our Motion. prudent M&A profitability profile long-term our growth the we enhance as As look strategy of be we demonstrated, Allied and to will

a in we given that of With stable optimistic As questions. open to believe growth the have expanding we more the line that look let's margins. platform And are will forward, drive operator, a deliver that continue for can we we future. environment, emergence the we

Operator

We [Operator proceed. Instructions] from Craig-Hallum session. It begin looks of like the comes Group. Capital first our question-and-answer Palm question Please now will Greg

Greg Palm

just and off morning everyone. guess, Congrats starting the results good revenue orders. Good on thanks. with here. Yeah, I

So orders revenue. significantly outpaced

material, got that It So inhibit fulfilled, quarter. was at that the all? your to a maybe I'm sound this but if like curious impact ship there cybersecurity was anything doesn't pushed ability you into chunk did maybe wasn't

Dick Warzala

Greg. Thanks Yes thanks question. and the for

some it a material I impact, While mean, get did items wasn't pushed.

deliver entry customers. Our product to systems are to directly our order from which your integrated means systems,

the business impact, that some have said do have was as impact on not some And there's was July it just material. not okay? nothing systems no it certainly system lost in So impacted, delayed company. was -- but you certainly not tell multiple that into business there It's But we And I a would we was but So it. every did material. definitely there.

Mike Leach

more would so I I it issues breach think And did. Greg, us probably chain was probably supply -- the add impacted just that than

Greg Palm

Yeah. that of Makes sense. thinking. And line I guess on

light I gross were ahead So of margins chain even supply challenges. think nicely expectations of in more

And maybe are expecting quantify in able You up right really gross of some maybe of you in thinking cetera. away? import got about I you're near-term, headwind costs to the go not eventually if these now? increase is to think that but we you expansion et how further what Are free that terms much logistics margin assume the you said items

Dick Warzala

Sure. have the our material outlined in Well, first increase clauses think core as is increase go -- and into that contracts I that increasing the and are show able indexes to inflation the of material or are -- our so at to off, we products most we've that pass look we're past and major if that they're on. components able clauses

on production the When a to go we secondary customers in market which components, our comes out engaged product it to discrete So maybe we're moving in need some totally fortunate secure process. to are keep order us -- there. with and

And the of costs, we and continue by do and our especially our X% to those that we're made integrated our offerings, and as a in goes to increase to get years. to past will operational per year for our goal buys we we continue with solution statement to gain in gone components next here these electronic the our standpoint, is customers on. them authorization and and spot during our can we've that we if to the going. we'll additional believe offerings pipeline solution notify -- we engage margins So do see as efficiencies process that gaining to time and see improvements that we're to improve go XX incur to the out going keep that From have ensure that margin

-- keep obviously We see So this I impact mean that signs delta here. shutting be. number the if and that continue how don't working the to I are continuing figure does We're thing would everybody in of with hard. mean what to we forge increasing this teams going signs you infections tell to see we ahead. a the out any knows And with coronavirus time everybody to from I now of going And will of down. see over is out us affect variant a of our here woods. But not scramble. it's right who way

capabilities on reactionary got strategic So we'll supply. back it been abilities the activities anyways they've been teams I'm encouraged that to under our best sourcing while control our and as our strategic of haven't leverage able and to some do they long to in getting have that to that been get We've and we'll track the we the continue of here run. more

Greg Palm

leverage? based about to and you operating And Okay. mean, are the That's thinking hear. see those in certainly on you're commentary line versus backlog to that good of ahead, curious And top exceed path indicative as million on how so revenues a your quarterly the you looking is $XXX right? clearly but further improvements, just investments business I those this I'm balancing

Dick Warzala

then I'll ahead you very Yeah, you you Do Mike, take in good. jump -- and to go want or want just that after.

Mike Leach

there. talked improvements the structure building few is to well. we're done along past for the we margin I expect leverage that we replicating past think anticipate And the forward a right we've heavily that investing foundation occur think to the I been growth, what significant here foundationally future One largely going platform think, the with we've that as the Greg going years. that gross We've operating and Yeah. growth for I certainly some in in drive, in while Allied in

past pace to at investments that has in organization we've as not as with made. be the we're been the that which So will rapid building it the have

improvement XX over to in months operating even margins, gross leverage XX the help So magnify next -- think well certainly the months. as next the will I

Greg Palm

a understood. … and lot Okay, Thanks

Dick Warzala

is it, is capability One I yeah about very Mike we what that that to that, programs, projects, to a would is talk a to going continue. technology underneath core going and major that of the platform to really that strong And add engineering product, have that the just encouraging to -- sorry, I company. add And as have we -- I'm and our the and within was platform Allied, strong leveraging means that's mentioned development and say, on development major focus

We And get that to going and company. in drive that the XXX we've really have are. are and strong that the the where we key leverage got them engineers sure a to making focus activities on, capability, working in over the substantial growth together, that's future ability

So it's very encouraging.

Our get right out faster, and continue model-based quicker in design, capabilities, improve the get we much can react meaning, simulation there. solution to designed

plenty internally, tell in, So, is that. a and integrated have solutions, can emphasis within company again, I continued the invest you to we

continue. out for from are realize going that combination And to going going as the we're We're find that that and and companies Allied partners there disciplined. bring to the acquisitions value looking the to as stay value. the we're additional in -- said, well. company they we're right the combination really But to of So acquired additional we where and want

Greg Palm

No. best Understood. going color. of forward. luck helpful Thanks and really Actually

Dick Warzala

Thanks Thank you. Greg.

Operator

question next of And comes from Ryan Please Dick proceed. our Colliers.

Dick Ryan

you. Thank

you So the you've of awards look have worked backlog, now how Dick, that previously when backlog? new much at vehicle their way announced the into

Dick Warzala

Right million vehicle backlog of only the now, is the new $X.X awards.

… it's So

Dick Ryan

Okay.

Dick Warzala

business. … new

know is. why releases, backlog, that when about a we So the that's when awards the in this backlog. that releases is how production that, that's the And we put were they production, when works book something okay? yeah But know get reminder, move what when to had. again into we the coming order. That's of value had -- large vehicles we actually orders, We that firm I don't from talk we for Dick and and you these

up. that you is that, track. forward. there million it's we that on moving ramping And But we're I of tell only show. $X.X So And can there's it

Dick Ryan

Okay.

the in from that's of costs a But development had cadence see Looking I'm are you're Are you things at at, -- do where at kind or are through uptick your some I up, valuations are moving QX. or M&A. accept? we? we that picking hard an that the it add-backs, business of tied things to bit just little you looking sure to are think we still funnel, of is looking

Dick Warzala

to Well, maybe a deal as two, we'll you in would high level earlier the the be to confidence tell stay of before execute I mentioned was of year, I the that, we're And a able going with disciplined. more. that end commentary or

deal activity, can in engaging we're sides. value So there both added that from is be where truly

that partners that whether it's we markets looking And -- we've to expand regard. looking -- acquire we where that's and we're value we both the that past, talent vertical for So -- fundamental whether if get company. in a board very it's period where overlap, it's capabilities, in parties technology/know-how company success acquiring. -- good acquire ensure geographic it There's keep always we also us, we the be that work And these we on because an that long talent, that's what it’s our good we're done. of it's company, for them a absolutely intend talent. we and when it's when it's or And had for a we the a when to of a when out acquire But And obtained, company. there's complementary. And there's go technology, time. the that market products, acquire greatest then we for .And we we can see it critical, groom course,

is just encouraged. moving for we're moving fast that, and long-term that you the Activity hard. valuations make tell from sense stayed us. will away don't We've I So

Dick Ryan

greater Can cybersecurity impact quantify the from been the chain has Mike, mentioned, issue. chain having on a supply And issues? Sure. impact what supply the you than revenue revenue you

Mike Leach

it's constant described I and if the material I'd impacts. like that that describe think, as deferred cause no classify over seven-figure the as low of different cancellation I a that it or pace that, frankly, anything ultimately quarters. than battle. will would Again, as tempo in of nothing would Again, them impact Nothing last really the Yeah. it's We've orders. sense couple and you a

to inventory elevated We're see right? building our little strategic a probably customers. You protect bit of inventory,

talked efforts about. not It some $X But to Some of material million the quarterly a perpetually I extent. something ability fashion. call A it And the gross to basis are $X It's our it directly get at comes as timeline and on things overly I'll perspective. maybe impacts expecting that just million by as receive in. timely becomes cost put just of would margins revenue to describe to lot again, that you're a a putout source from just we've impacted impact. on a of good

a just manage. it's tough So thing to

Dick Warzala

let's line put they're add at shortages Well. assembly and building to or automotive component the chips missing the you them waiting be that, missing. that, may And be and they hear as is electronics. receive through look supply They're from, back to chain that also may vehicles and a that when

by impacted there's that If think -- seeing model. tendency out. But some a their product, to get have the build we're I companies everything So of customer well. as need our they some we're change everyone are can't saying, to push they to

lean and are and do meet flow piece hey, one can't at we the future. looking certain in market seeing saying, customers never demand manufacturing, but that You're we'll we

product, out. missing can't they'll they continuing their will build, really enough of there's push but -- build some to that push where out. if it there's If So they enough components significant are them

they're of good with of we're a you into going team components our little impact onboard the market a really our closely what there's customers bit So to and I'll the has doing. ensure as tell working secondary that and well. sourcing with job done

Mike Leach

And, of Dick, of that deferral, QX. a right, mentioned, I out as similar saw level we coming

So flow-through we And, at the the a the it. quarter of obviously, impact the had had coming quarter. you back end from into

it still but itself it's of last So exists. of kind the couple normalized over quarters,

Dick Ryan

on you strong execution. and Thank Sure. the congratulations

Dick Warzala

Dick. you, Thank

Operator

Brett [Operator Funds. of Please from Gabelli comes question next ahead. Instructions] go Kearney Our

Brett Kearney

my Good guys. taking Hi, question. for morning. Thanks

Dick Warzala

morning, Good Brett.

Mike Leach

Good morning.

Brett Kearney

kind excited to are solutions be new there's win rolling about? projects curious up. been Obviously, new of on to you able just have anything and that's going offerings that that much there's the you've particularly But of some ramping whether else out. solution you mentioned on side the You vehicle

Dick Warzala

talk suffice our our it them. some we're markets. that appreciate it's Well, existing to base -- seeing can and I in have of about to market that's we're really don't customer I they to I expanding are And -- But we say, them. reach there's several there. mean, want our exciting I that color every no, it, unfortunately, about give what's of is good in actually, all you into

Our focus can't that and is ahead keeping the is happening. -- we're thing better competition, can is value and designs by or really ahead integration of that, too of more customers whether And integration. them active in really and there, can more into our I other or next-generation and incorporation it's that's complete product drive but to we're elements it's just, the components our components ahead on a we more if motor I of a of a delivering of solution, passive filters, it's the in say and the a redesigns -- control with of feedback and we're encouraging gearing -- a our say through

and A&D, I'll had in where in, So grow medical. It's direction the -- there. success it's the to it it's that is company in from expand industrial, of board, say, continuing the we've is just the and it's across

plenty them. plenty, of So just

Brett Kearney

color. helpful really Thanks That’s so much.

Dick Warzala

Brett. you, Thank welcome. You’re

Operator

for over I time, conference have questions. no we to closing the back remarks. now any session. This would this the At to management like question-and-answer concludes turn further

Dick Warzala

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

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

Operator

you attending presentation. The conference for Thank today's has now concluded.

disconnect. now may You

Allient (ALNT) 8 Aug 212021 Q2 Earnings call transcript