AMOT - Earnings call transcript Q2 2022

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Allied Motion Technologies Inc.

Second Quarter Fiscal Year 2022 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Craig Mychajluk, Investor Relations. ahead. go Please

Craig Mychajluk

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

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

a you have financial website that it should the the You copy market results discussion. with our were of the slides after closed. on today’s that at along released can yesterday alliedmotion.com, If accompany not, find

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

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

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

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

begin. accompanying earnings I’ll With and turn slides. Slide that, to to over the Dick? We and have comparable measures release GAAP in provided it Dick X, the to to please tables turn non-GAAP of reconciliations

Dick Warzala

Craig, welcome, everyone. Thank you, and

initiatives. results strategic demonstrate execution to the of Our growth continue successful our

XX% organic solid grew growth record $XXX.X quarter Second to XX%. of revenue a million with

over demand, last resulting of in year. saw market XX% growth markets industrial strong Our

oil material We are also broader acquisitions from market, ago HVAC gas, and and market offerings, economic benefiting aerospace to contributed industrial instrumentation. defense acquisitions verticals, and recovery and from continued year handling, the new solution doubled which period. in automation, the end including Recent

well quarter the basis the ago quarter. top are improvement was margin line, level in gross in was points our as a a the basis is performance, a consistent of of over year the we This doing first record our highlight from points significant we XX.X%. While stated objectives sequential XXX up XXX achieved with and the which

growth prior costs we for on fully share achieved leveraged. Even persist. to continue per and supply in activity to share from solid M&A and energy, into that with the also per but $X.XX, not at performance level, issues up acquisitions that inflationary have account associated future We of invest X% adjusted income $X.XX the year as certainly we performance the taking operating multiple the teams and yet was period. been equate logistics, our manage is net our this helping, continue labor material as Our global to pressures continue chain headwinds to

quarter presentation. continue profitability backlog record and more on yielding quarter, I orders will of augment pipeline front we nearly the opportunities the to million. in to M&A had order as talk high backlog and We remains X.Xx a with second the levels and our Our of growth continue book-to-bill a in strategy. strong later of $XXX a be to busy

use and slotless and precise Located in aerospace, high-torque-to-volume turn the applications three acquisitions you California, compact motion high-performance require quarter. we in our medical X, capabilities motor highlight in providing completed motors Slide to we package. industry-leading precision defense ThinGap cogging Camarillo, a in expands the by for If that zero

semiconductor and robotics, potential the to see We also instrumentation our capability markets. into advance solution total

existing critical FPH the acquired cost-effective light with ground-based electrical believe and defense leading technologies locations Group systems leverage industry. drive drive reliable or FPH in advanced, brings we has future certifications and adds Ontario, contractors manufacturing weighting and and in we FPH Second, and defense defense deeper can Michigan. technically vehicles we which and licenses relationship proven a to applications. with penetration prime within Canada

global AMOT products welcome utilized position Lastly, accelerate engineering solutions, and patented industrial have motors technologies into Airex robotic life linear six highlights to we certifications They in years. in the value to target markets Allied the previous historical to several into capabilities. market $XXX the new of performance. we defense, range. better expansion like leading cash made us assures the defense, expect employees relationships cash exceed up manner enhance automation, million provide contribution flow collective sciences, technologies, all and and our one, create of over broadening which they remainder offerings all in sciences, semiconductor in important our solutions medical. on that and revenue with the expand of Hampshire. customers. they provide Allied with $XXX Allied force We range thank combined and and the is EBITDA further selected our to to with significant high consistent Based are years Allied By we and to winding platform. teens integrating complement margins price with many including to acquisitions gross semiconductor provide X own out million motor to so, opportunities the growing our Allied payments, and expect the and in and purchase that projections, over the is, more The in including the acquired including rotary our focused time six Alio In and manufacturing, of They high-precision our potential was believe into linear applications. high for capabilities of markets, new and solution intent higher capabilities. on maximize providing our of future aligns and us established robotics, approximately our value we proven would doing global Thus, certainly offerings margins reviewing competitive to New linear our acquisitions, XX% the In full the our current our the And will add and approximately XX% been expand with margin-enhancing aerospace family. the a was realize and and technology XXXX, as some the in is delever fourth, is new significant best-in-class our new was and bring aerospace resources lead and applications. for acquisitions, and and other XX stock. with Somersworth, engineering for Their and of they in is A company industry life new proposition history, highest Ultimately, our opportunities, and density electromagnetic We acquisitions solutions demanding positioned businesses. these positioning. each

review additional to that, six we financials. on Allied color that let individual the surrounding you the be it me Mike? the While caution over And Mike I One potential with we full and focus in as providing leveraging not in-depth provided will of have opportunities. we unit will acquisitions, the a information will more now for turn future performance

Mike Leach

Dick. Thank you,

XX, towards on acquisitions a on noted end from Airex May ThinGap on As a partial on quarter completed of May FPH include Slide our quarter was X, XX, and the reminder, June results of the XX. the as contribution

had XXXX top regarding detail the line. from quarter Slide also our on contributions XXth we We the X, Starting acquisitions. provide some

incremental record quarter. exchange million, level, $XXX.X Second unfavorable a increased markets, from industrial sales in was the of in the which million discussed, XX% fluctuations $X.X quarter and to Dick rate revenue The strong demand on impact revenue acquisitions. reflected as

supply U.S. up organic lower some revenue to of XX%. and XX% and strong primarily from Europe, customers in Canada due that total largely mix markets industrial market X%, chain lapping last ago, trailing construction growth XX% XX-month noted Asia sales the offsetting on contributed the declined to Excluding and FX, growth which sell XX% by period, to basis. And year our were strong verticals. sales market. broad in year with The was recent of from vehicle of aerospace that X% by were The shows defense were Vehicle the broad change commercial revenue agricultural in was and the acquisitions market the customers still the supply Pacific. markets, prior of reflects within benefiting partially revenue end as largely than chain the the pandemic-related slide. a challenges down were vertical the the the and to sales. by was challenges due offset was as automotive. vehicle markets market period shift doubled were XX% impact to in Sales Sales to X% less demand U.S. balance compared acquisitions truck, a driven market X other that markets up mix Slide to and year’s our our on in of medical

contributed the similar markets second reflects change the the The TTM pandemic-related in noted, medical a in performance. As as TTM to quarter, which and defense aerospace acquisitions growth the quarter. basis drove on comps

up material non-cash As depicted points year on price offset continued Slide costs as as global costs. accretive rising margin from XXX XX.X%, ago acquisition Higher selling was the increases disruptions, record profit supply and labor basis than period. more acquisitions level pricing, a volume, well gross and X, our chain and

improvement significant the sequential As Dick see you the quarter. over noted, can

on with to added higher fully that operating the million was development and not increase to as have was XX.X%, of income second in and $X.X Operating period. expenses up revenue we development quarter costs of all percent and amortization our or This attributable compared costs as Moving with million well as $X.X XXX X.X% Slide points. ago a leveraged. M&A basis yet X, activity were X.X% sales engineering or business year expenses

leveraging term a volume have we our AST, margins net and toolkit, with our net execution disciplined we with we lean income GAAP our As growing continuing to long adjusted systems along as X, combined with provider. adjusted present evolve results. income the the stated, and higher over Slide EBITDA of On anticipate

other development XXXX. which or and rate Second quarter $X.X per and effective $X.X $X.XX excludes The adjusted per costs second $X.XX share million was tax share the in quarter income, was diluted net million second the with items, XX% of quarter. in nonrecurring compared diluted business

XX% approximately metric our XXXX million up operating million at XX approximately $XX.X an of quarter Total to flow. an and overview basis determining and was or be it adjusted $XXX our geographic rate of debt cash as in to We We year mix. income XX EBITDA which internal is XX% and XXX for performance. EBITDA use balance sheet Slides full provide useful expect the was revenue, believe Adjusted end. changes tax progress XX.X% points. on and based to was our

cash facility to Net highlighted of by the largely in support of the the million the was that of funded XX.X% manufacturing the new a second Germantown, our first During $XX.X complete end three The quarter, approximately which quarter was reflects net $XXX the about for Wisconsin ratio to and our of used expansion debt or At continued we debt. to bank finance cash was cash of debt acquired, XXXX acquisitions. was capitalization, also leverage increase during lease of quarter, million debt net X.Xx. growth.

on have delever and the which $XX.X sheet for ability and the that on net quarter We reload operations from customer our focused opportunities. acquisitions We demonstrated utilized investments, expectation historically our continue $X.X capital our generated is to largely million future during strategy projects. growth we cash million to new following will balance

and CapEx with be our combat our XXXX on time were We manage XXXX expect turns $XX to growth second in Inventory between demand, performance inventory continue the million to customer $XX to our and as lead range quarter million and meet opportunities. increasing focused to challenges. teams consistent sourcing our Xx

the Our DSO will largely With due in back Dick. to to timing. the I turn over days that, call XX increased quarter, to slightly now

Dick Warzala

Mike. you, Thank

noted Our remained This in highlighted $XXX reflects as million. backlog XX. ratio of than X.Xx. and were level on Orders a headwind FX the book-to-bill bookings million also of strong $X quarter, more Slide a representing

convert and quarter X two-thirds increasing of prior Our increase to million. was over first of our to About in another the companies. the The year record, hit the to approximately acquired within from months. backlog $XXX next majority the the XX% sales over sequential backlog the up quarter is time XX% sequential period

collective We we remain our on the been acquisitions higher in in a outlook. added now enhanced contributions, markets are having reiterate, margin strategic six financial competitive have is profile. And measurably to offerings approximately an be of previously now are believe busy on and strengthened. new that target Allied. to to Slide over with Equally front, $XXX XX, as important completed positioning period. M&A X-month million these our we To mentioned, have business the will we fully technology Turning our positive annually additions realized XXXX overall

we to across are we forward, our leverage As excited markets. targeted look position stronger competitive our

Specifically, and material strong many our demand remain expected markets handling. gas oil to and industrial and particular, industrial across in is end automation,

Over muted continuation the be to due short-term, vehicle to demand chain is constraints. of expected supply the

However, and solid. XXXX. the production into largely we Medical have later should And recent do levels with encouraging pandemic-related lapped this aerospace improve, especially should the remain defense strong see and year demand and markets acquisitions.

questions. operator, continue and confident the remain, the are potential ability in future. open our line bottom necessary remain to our mitigate we enhance headwinds impacts for make can anticipate adjustments While in performance With and line that that, highly confident we both the let’s top to and to

Operator

Capital comes Please Instructions] The question first with Greg ahead. go Palm [Operator Craig-Hallum Group. from

Greg Palm

the Yes. everyone. Thanks. morning results Good Congrats good here. on

Dick Warzala

Greg. you, Thank

Greg Palm

starting maybe talked, at bit the July little on the or does markets, strong still based macro, thus on any concerned far slowdown, maybe imply but geographies seeing time any more view last are broader a on versus what it is you bookings, we with end based are any point? are that everything seeing So, you a quarter, this in like fairly

Dick Warzala

have Well, everything and given the expect it’s do to seeing see seen Europe, course, seem war. impacts that in of indicators far, and are slowdowns are FX say right be to we business We still so we Europe headwinds some and continuing quite we in But things potentially, now, and typical the potentially still strong. summer Ukraine in are the of that summer in you positive. have in

Greg Palm

Got it.

spot. I better are And seeing quarter, in acquisitions improvement? improvement Okay. How quarter contributors? the quantify to the higher-margin you And bright from gross impact of you still much chain margin, knowing that any are the from this able are the quantify alone which mean, the you was from clearly challenges. the or…? those Did can supply that also then what get the

Dick Warzala

– of are to we weren’t supply Well, we some things slight mean slight are seeing I the improvements, start I times lead pleasant let’s some chain. that when showing starting expected. And shorten, surprises getting some chain say and supply improvements. up

side, still surprises On the are that negative occurring. other there are the

end say that That’s prevent day. that than that will better those are So, fighting battle. components our here. some are a shipping missing at be challenge, still to are starting you every products. others. would couple Electronic see find from components I teams still some doing what may tunnel to your you. the to And are those continue the it’s And although that we we battles I of tell are the of light

say have margin units. are business where as the a As to really build higher, also some versus call we core inefficiencies clearly, I far as inability the will the of call on we it though, that existing and contribution core our business, acquisitions our as shortages improvement acquisitions, them, the to of material let’s seen it, we team mentioned, the who profile testament the continues is have impact. to did our I products. and units, focus complete that And in technology because it’s think an

of some to improvements. to Some away, that’s see we starting are and go starting

and have We quite consolidation, facility well. that’s also gone done

going also the and have around during quarter, well. product shifted that’s We quite some lines

doing yes, businesses. higher with in the team but from a it an comes operating for the working see impact, of I they it’s the clearly overall, the positive have, margin what increase majority and So, generating margin excellent the impact – job is

of were the a higher. those percentage were the remember, frankly, They quarter occurred that clearly in quite near, were they standpoint, Now end from the near quarter.

Mike Leach

add delivered, as acquisitions concur point the margin. would collective I and margin perspective past XXX deliver the delivered from in six largely of would that collectively think goal – our basis add the expected Yes. a improvement said they and and I we that in

on contractual in previously here being a that the – on lag selling caught basis. in other terms about certainly, The we elevated basis talked is significantly I through the And input to costs. basis item fight them would lag a increases both from in QX a price highlight negotiated passed contractual and of that up on

quarter will, I those comp in acquisition if some passing the contributor think the extent, to price So, neutralizing, is that strong selling besides to success chain impact. increases and another along was our the you supply

Greg Palm

helpful. That’s Yes.

assume continue mean the So, improve, that I mean mean if you a higher-margin saw the would any case? chains to then why have mean if wouldn’t I you that I probably run I sort I can improved be QX think future seem supply logical about reason contribution the in And go in from will you forward, rate what now of quarters. upon full be acquisitions. it that

Dick Warzala

No, that. levels are we logically, the that one I – it very does able caution that think we chain to is you backlog to impacted you do – that’s acquisitions for lagging is electronic have supply us components. we been right. moving be would but to that and contributing And sense it’s The not and and that’s it make the see had do still strong, and where we the planned, initially to by been of one

of not that. quarter are even full we three. that in questionable resolve So, And itself whether will it’s the realizing impact

have is on would muting accurate. just there. But what I some fairly I caution stated, think there is you So, going Greg, overall,

Mike Leach

as And extent. impact described it some the I think margin than Dick on margin operating to but is gross side, the does more side that so impact margin gross

Greg Palm

Got it.

of these sense you one, Okay. the are us progress of customer in solutions can new traction the some types just terms you wins, maybe are specific what seeing then Great. that applications give what most last you in? markets seeing And or into end names, without of for getting most

Dick Warzala

we is which here of seeing diversification. again, mean are the literally, What Yes. I speaks well across interesting. kind to our are I think it’s They board,

vehicle So, would solutions And our are we special in I are because some we specialty. quite say, say, specialty – we seeing will applications. those

opportunities, We are opportunities, defense industrial so opportunities. medical seeing

So, vertical. this It’s of feel It’s – Oil HVAC you the is has it. I would about we we still and this to to exciting of just growth course, that opportunities. are that platform. that’s one part have not strong. markets subset gas, strong. just created been created say We

solution the So, across impact there. are offerings, having And board. our I it’s an think

Greg Palm

luck going it the Awesome. Good Alright. I on again will leave forward. Congrats results. there.

Mike Leach

Thank you, Greg.

Dick Warzala

Thanks Greg.

Operator

[Operator from Please with Sweeney next ahead. Gerry comes Instructions] ROTH Capital. go The question

Gerry Sweeney

for Dick Mike. Thanks taking my morning and Good call.

Dick Warzala

morning Gerry. Good

Mike Leach

morning. Good

Gerry Sweeney

that Dick, had units, where you evolving you little sort the Spectrum some to suspect I that in that Controls, to you of chain hitting of bit a say targets mentioned I of going was don’t supply to business with Spectrum but earlier, did one as said terms be you because that it. was one necessarily just correct out call acquisitions get still know and you issues. it I of in Am want assumption? slow

Dick Warzala

not I am to that. deny going

Gerry Sweeney

Okay. just Alright. I just modeling want purpose… it for because it’s

Dick Warzala

largely Sure, get supply it, you spy chain. on and

Gerry Sweeney

the to I brings the I mean that bullish team, the it’s technology second, it to follow-up obviously, on the very But mean still Yes. is obviously.

Dick Warzala

Absolutely. a are The really preventing or backlog getting full there door it’s from is here the components it’s that out strong I the production rate mean interesting. here. and us few

I well. and I performed fairly – and to would and So, say I everyone else is at that, that Gerry we think without even that, you, look

yet. are cylinders clicking here on we all so And not

it it forward to So, today. in, look kicks even definitely the where that is a will improve part that’s we here to are when in good future

Gerry Sweeney

Yes.

key mean was are at always provider completely even But we, a that acquisitions there I I Just one themes, help I mix component standpoint, idea and these some a whole going we helps point, sales that and will manner. solution should solutions in the obviously, I the shift it. since at more at margins, from in mean sales. think of from component probably Motion there? believe mirror guess in to Allied of you I become to a the, towards, solution on rearview sales look total or be

Dick Warzala

system to going will shipping the component, embedded to the a to pictures left, motor, here embedded. at And that called solution system just similar question. that and and want I if was has you we that it’s so Great is exception deck, with on and/or in past, to the system you this look internally point would to solutions mention electronics it’s we cabling you a are electronics the And embedded to and just, past answer in Yes. the we the the the are that be X. there, think solution the we the in to talked today, the something offering, that you shown solution here we be would like steering Slide motor and about and forth. about first point gearing, Slide culture way call and And a that look – and you to which to same say years, will and What we more that Slide call have you lower a a GPS-guided what slide automated that’s okay. best it, of Yes, were going am compared X module, bulk is would relatively and it. , a our that the the the call product the Allied left of the prior rest that I we top motor at for and then the offering slide and/or level I electronics gearing be connectors I actually seeing a of X in vehicle future, just use what to say are that’s that is have that’s it’s when solution look I anyone becoming slide let’s on part the in

dollars out let’s solution, we thousands the a in ASP tens much without even out we you of, talking electronics talking say, are an that here, dollars. about motor So, numbers hundreds or When me let to other are $XXX something, throw too from and range solutions showing that with and you and thousands giving anywhere of the of start system information just of you $XXX. getting of are into $XXX, of

we So, future, software components we out they And the you involved. level, sophistication offer, what you into to it that – they bringing would we that that’s tell are I are but do higher level embed much at more have all going that look a see. as the higher

are that You and ASPs software, that solution more Allied going precise see and to are embedded more packages a that provider do into design transitioning with high-level more can model-based solution simulations informatics, very are much higher.

not to So, to future component other price that abandon markets, at world. And very develop magnitude but evolve need, we can a there. to of and continue to the IP, it we electronic do it that’s continues will feel core in not and that us ability anywhere software, technology, produce are the will core solutions that competitive of leverage our still, into it’s we and product even our we We in abandon we core because in gives and and that those a unifying motor okay. sophisticated, what’s just and tremendous They that. amount is

much are more past transitioning this in communications more call past of will call then – what them a much good changing. It’s including a picture much components again, more components embedding we these rather than embedded solution And So, higher at and we is probably we the capabilities. systems. IP, level, of getting is are the software,

Gerry Sweeney

it. Got

it have quarter. appreciate I couple congrats call, I I to and a of a you. Thank on to, follow-up for a want them other but I but really say am great questions, going Okay.

Dick Warzala

Gerry. you, Thank

Mike Leach

Thank you.

Operator

I over This question-and-answer like concludes any to would to the turn the management closing back conference session. remarks. for

Dick Warzala

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

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

Operator

concludes today’s conference This call.

your Thank have day. a participating may You and disconnect pleasant lines. for you

Allient (ALNT) 7 Aug 222022 Q2 Earnings call transcript