Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Allied Motion Third Quarter 2022 Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Craig Mychajluk of Investor Relations.

Craig Mychajluk

Please go ahead. you. Thank I apologize off, the everyone want delay. just first to to for And technical had difficulties. We some appreciate time certainly Allied We your Motion. interest as in your today as well

and Dick Joining financial results which the Officer. you a the Financial accompany company's after our open update outlook, copy the XXXX Mike review and along our after call results on that Q&A. to and Mike are strategic going third me up Chairman, can our progress alliedmotion.com, discussion. the with on not, were the have Should Dick President that market we'll on our for CEO; it website If are Chief yesterday at and today's slides released and Leach, of closed. find an Warzala, quarter provide

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

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

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

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

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

Richard Warzala

as which our the you, Thank during power the everyone. quarter, results strategy We challenging our executed macro in very and strong well global third demonstrated a welcome, Craig, teams of delivered environment.

market end Allied benefit and offerings, platform further organically We both continue our One to and drive new solution mix from global diversified leverage to inorganically record sales. our developed

grew Third of to currency with constant on basis. growth strong XX% a organic revenue quarter million, XX% $XXX.X

seen X and demand the from demand solid primary demand end we from across each from Aerospace markets benefiting strong and timing was XX% and automation, XXX% target incremental defense growth. our organic program up of with to growth. market While of defense Revenue in our the our gas. acquisitions broad-based revenue and have oil were markets, drivers and due industrial acquisitions, grew industrial pumps, quarter,

profile We continue macroeconomic to strengthen our headwinds. ongoing margin despite

X.X%, delivered of represented income gross Operating XXX margin of from $XX.X grew the basis million EBITDA and points ago XX.X%. margin expanded record with margin adjusted a which XX basis a year XX% XX.X%, period. a increase to to point We

per While certainly this We material our that global issues XX% income $X.XX per which recent performance share or share per and chain pressures energy, helping, we also $X.XX equate achieved was continue the and to M&A net share, activity prior supply is our logistics, adjusted year labor. inflationary of manage period. on teams in to up

a have our businesses has encouraged a each acquired are well. recently markets. enhanced of from We and our value pipeline target and of order to with coating our integration levels solid continue opportunities The Mike of the to progressed have Each end of these are it let and that, maximize potential the the more financials. realize with full to businesses. margin-enhancing for we me and over Mike? review in-depth hard working opportunities proposition, turn of And

Michael Leach

you, Dick. Thank

XXXX. second we quarter our provide of detail completed on acquisitions and XXXX line. our reminder, of quarter regarding some top a during X, As the Starting fourth the results Slide include the

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

Excluding was FX, XX% organic revenue XX%. and revenue up growth was

vehicle market The compared the the are Europe, each sales were have XX% of of during markets of medical market. U.S. Canada higher pandemic-related and sell to trucks, balance total sales XX% XX% demand largely and small while medical from to surgeries reflect X%. Sales acquisitions reflected in Vehicle grew recent our market, small, customers year's recent primarily elective and growth and The quarter. were component while Pacific. return the mix Asia now lapped in commercial Revenue increased from benefiting total a markets and in to and automotive acquisitions. of revenue with last that continues shift in of the customers impact the our the sales U.S. our period to the largely distribution

driven total by shows growth mix on Sales up and has revenue X Slide change our the Industrial our the by makes sales. year to slide. the noted verticals XX% XX-month seen and were the up market in on XX% last a industrial markets nice of over trailing basis. now

a market some organic which agricultural impacts contributed as market benefiting broad offset was defense was business verticals. to chain similar Our the market by the solid TTM acquisitions vehicle, And and market noted, timing. X% demand we and while is supply are revenue growth, driving contracted to second reflecting as in Medical challenges defense from growth program basis, vehicle aerospace largest quarter. third and relatively flat strong other truck on

disruptions the than continued record progress last our with the was from costs. depicted pricing more and points profit objectives, volume, high can rising you in As margin basis XX.X%, chain the our down see ago chart Higher offset basis material Consistent stated gross the Slide up and XXX from are global supply and year on we making quarter. acquisitions on points and accretive period achieved right. XX X, our just labor annualized

Moving on to Slide X.

that a million of or compared were revenues activity in X.X% year and Operating XX up to but $X.X XX.X%, operating a attributable largely ago X.X% development basis with have than SG&A basis expenses fully leverage as more which costs Third with income of helping reached of quarter our expenses to level M&A engineering lowest $XX.X period. or line, decreased our million the added record yet points the XX we step-up the XX.X% points, amortization years. X on gain offset in as percent not as and revenue, sales well costs leveraged,

combined stated, execution higher we we disciplined our long have leveraging toolkit, the volume. with term the As anticipate our margins over growing of AST, lean with

line we results. X, Slide present our adjusted On and bottom EBITDA

income grow adjusted including and of diluted earnings net company's of assets, to intangible a intangible well understanding items, assets adjusted certain of for of noncash as our provides which inclusive GAAP for organically. amortization Our acquisitions the better acquisitions. strategy related have through EPS adjusting as power, believe that the to EPS been amortization reflects We

the Third $X.XX quarter of in was per discrete increase period investment share XX.X% an The rate XX.X% the million an year benefit income with effective adjusted or net for tax as per $X.X adjusted compared a was tax included was period. That $X.XX share. prior prior diluted XX.X% credit.

income revenue, operating an XXXX useful nearly We changes based progress performance. points. We basis tax on the XX% $XX metric in determining EBITDA geographic and as be which XX% XX% Adjusted adjusted the use approximately it XX.X% million to to is to our expect of to or EBITDA our full up internal increased mix. was and year XX for believe

an our approximately sheet debt quarter Total cash X $XXX Slide at XX balance of million and and provide end. flow. overview was

increase a The second in largely debt XXXX net which the net debt acquired, XX.X% expansion quarter, funded used support debt new $XXX million lease to X the debt. of was end the complete we quarter $XX net with During growth. continued during about finance that million the the of also to highlighted acquisitions manufacturing to cash capitalization. of was third of first for cash about facility was of quarter, or cash reflects At

on to over Our our approximately with time flow manner and in with ratio performance. consistent cash bank was our we projections, leverage historical aligns expect deliver Based that a is X.XXx.

year, largely new $XX in operations we've opportunities customer million of and on investments, utilized growth and from far cash $X.X this which projects. focused net invested million capital So

were the expectations the range $XX based some million round the of have slightly $XX and lead sourcing refined in XXXX third and our we on and year performance of to As the our up projects, manage we quarter, demand, from between challenges. continue customer X.Xx our teams slightly Inventory lowered CapEx combat to XXXX end increasing out time as and turns inventory million. pace to our meet

customers. turn the and With that, Dick. Our largely DSO now back over to the saw of mix XX to days a I'll to jump due in quarter call timing

Richard Warzala

Thank you, Mike.

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

from Our reflected a chain up we convert the time of backlog the quarter, backlog sequential constraints. period, the supply X within the to which second next some over is XX% year decline months. majority was although saw loosening sales The prior to the of X%

are While there some stabilization speaking, to components long we supply times, starting are lead our generally some chain. see still within with

Slide outlook. our for to XX Turning

We expect acquisitions. of leverage our the potential see and are benefits recent full a to stronger company today further we as

$XXX margin our our delivered stronger we in created will that competitive across XXXX a has profile. a platform new an important, position incrementally annually fully strategy Equally markets. approximately to As be higher million our M&A with of realized targeted reminder, have business long-term

strong improving by will customers and acquisitions, and that markets relatively levels the across to an organic our volumes largely market. our indicator pandemic-related Specifically, from anticipate many significant been demand the continue XXXX. chain have bolstered vehicle given in up continue as exposure This increase Defense expected for demand in our and solid. at further levels end most our we continue recent growth Aerospace Overall, current is has be markets. with be stable, And lapped our program is automotive to supply industrial strong is the schedules to demand occurring participation. and firm should our Medical

did typical December. primarily occurring As experience holiday shutdowns in reminder, we our the modest due was adjustments the and seasonality This to shipments. a reductions quarter customer past, in demand, fourth in reflecting in inventory

to back Now may the into seasonality business that business creeping normalizing, we be see minor in some conditions QX. seem

significant We the when each to our in growth. of target long-term and innovate invest each and for will opportunities end various continue offer markets markets

may outlook to remain we these global highly confident unique through continue challenges. the While our in ability softened, navigate to have

serving With customers on capitalize the and strategy open our questions. that, executing to our improve our on throughout focused the while operator, stay and excellence opportunities execution to continuing drive line operational for will growth let's We company.

Operator

Instructions]. [Operator

Our Greg first question today with Palm come Group. will from Craig-Hallum Capital

Gregory Palm

guess on light headwinds. bookings that your there initial out severe I gives good Maybe I kind a results, are up. just FX mean, still the mean demand the that broad seeing caution? the of suggests you commentary pretty start anything still holding of commentary things some landscape? on with especially you Congrats in pretty are were strong. I

just dig So to a that wanted maybe into bit further. little

Richard Warzala

fairly some I saying to we've we lead they as that to see, to did would supply back improving. there's been you would getting are quarter-over-quarter. all that deliveries sequentially say No, was reduction predictable And to that I strong. along, continuing be becoming think mentioned, would we were of We chain more occur been and that start some expect as normal, times are

to those that suggest forward would occurring, some robust we're are still that, I of in So of and demand of light all going seeing all you here.

Gregory Palm

guess, mean, of what Assuming at quantify normalized pain of related points supply from seeing you they Or to headwinds supply I are there? margins margin out still the some here? has sort point? are And that could some the past, on chain abate? that boost margins. to this you've to I impact chain able specifically, that still been And further in

Richard Warzala

the as do scooping up I would some throughout caused attempting exception open for thing been had what's chains out I to not that I floodgates times us were as the same we and not more battling as tell the were seeing specific Sure. to mentioned, significant electronic to But you, assembly. they're electronic significant think parts components to where seeing not of say now and as see customers major the overall demand It happens. you there. well a of as challenge as very to have go we're I very it's regard that, when and but are secondary markets. happening experiencing supply get frequently, components, number We're happened PPDs into components it still long now, we're our that everyone the company. reliability in it's the well seeing the and getting that. some We improving. delivery, you are they're pipeline their with the would signs because start supply components, still in placing the with that, shortage again, lead and to

It's say, running it's to starting electronic definitely stabilize. not we're see specific So I we're improving. just overall, issues. components. that into times, At would

say that would to gone COVID hasn't I you And away.

a We demand that have commodities made an seen our some but where where they're in has by on you there's experienced And decisions down. scrambling couple life that they're uptick approved you're slowed meaning instances been alternative value at suppliers, suppliers notices, in also certain giving to going of been to long have or in of we've and products find by customers. types notice could be an where

it but it's away, hasn't gone totally improved. So definitely

Gregory Palm

Understood. Yes.

that? over as amount but EBITDA just is but like we've of look to I margins, since the just the been it know And operating the seems On probably impressive. the been But broadly out quarters, nature, right? last how acquisitions margin you've highest a initiatives, to company. sort speaking, some their focus upside, become partly ahead, quarterly was think higher the the really in years, I really help sustainable the the of broken point internal the couple leverage following that's due given has you margin definitely just

Richard Warzala

to Yes. I'll Mike that. speak let

Michael Leach

Greg. think sustainable. we sense will to the that but in right? that expansion, I definitely more We seen you talking broadcasting been movement. And we've that We that have margin are a do would still the along. margin is along, But we effectively. it tell that's have we've have we all ways leveraging the part is We about be up. that of part expansion go. Yes, think think I gross backlog do of that been tied all Obviously,

affect return, as And some in speaking, QX, expect being at fully generally yes, on that Some pushing in quarter yet to some so of you, right? expect noted, that or expect of over That, ultimately will was to leveraged. additional singular those leverage business the leverage those past, potentially Dick But to seasonality would not level ability we very caution see I the acquisitions in across common we basis, in drive we a time. do are revenue our point given continue time, to see in costs. the just to

Richard Warzala

Yes. not just room for could And add that there's I where we think that, what think we emphasize to Mike said We here fact be. to improvement. we're to on significant think is the continued

Gregory Palm

their to much further how by-product increase versus is that just And a of internal that revenue initiatives volume help additional continuing of can own? drive margin improvements on

Richard Warzala

utilizing, the gains are Certainly, but going set are there. is said out AST our on with we've volume to see drive our focused that, some footprint We've starting activities been in rationalization past, we manufacturing and cost. help tool as to to

So we that think we'll multiple there's leverage. paths there

Operator

[Operator Instructions].

Capital. is today from Sweeney Our of next ROTH question Gerry

Gerard Sweeney

around Question development engineering acquisitions.

You're that's longer technology the want adding think of a solutions, company and to drive lot around term. I where you

your I maybe don't know, positioning how Just of changed have give wondering of the efforts details over years. little if couple on you bit could a these last,

just and where that the of those really integration how well. position I months made out. this some you, of of XX backlog, I'm XX, revenue, you that's sort driving XX, how curious think series could are acquisitions You going take acquisitions

Richard Warzala

level, it, of those the really in Sure. a solution all Gerry, just motor together company much put opportunity, mean more can and going in a the a it, what's solutions. exciting, just electronics.' talking bear definitely we we there, the let's within and to say, acquisitions when application. higher, and we where here in into look now some But It it look we adding and next a where and we our a to a driven in at terms base. focus at, of forward of past, at we're acquisitions revenue plans of that Yes. we products per mentioned, terms And market-specific technology-oriented, X can set a at is large gearbox, in solution beyond that putting continues maybe year technology motor is 'okay, call expand, I much has higher months. we'd saw bring or as particular value versus XX whole would, But the was some the last look the a within is maybe were a we where focus

at way the that's And we're it. looking

what and together. One it combination, and is we call together the how the and we the TUs whole made the technologies engineering So Team commitment global and it that very is see that to to how really across all get pulling made exciting all investment pull all the strategy we team across and

to utilize standardized with the leading-edge could off, and we of come blocks building secondly, leverage; established that really up solutions. First platforms

So we unique we think market to the the can that yet. even areas may not see opportunity bring identified of understand solution that we've a or market

applications unit in what significant. incremental addition existing increased value where we're the bring to is could we But of or each that, to selling

and interested conversation exciting today I incredible. center, whether or entire driven it And X culture a and technology would and definitely travel programs function, rotate company X, that, really support to we're solution at the it's no letting wow, very you of in so look having, you had is, also say, Board them and you to and And the corporate we get the facilities same throughout or doing But have years where one it's looked does tell Board the their on, change it's working it's projects I think headed. things that it's the in you consistent. a to that whether itself our and what is what see understand that I can get ago, we it's matter we're the if that they're tell at our management they centralized can a back it to company. went is you inputs, whether different And again in one-on-one meet an we're Board And our it's very do, what mentioned operations, exciting.

So that's exciting. what's really

and X X just case, quite acquisitions, moved, handled a integration do again, It's doing drive this be We simple. X bit or the naturally. had and to we in very piece a to important We the happens Well, quite It had became differently. year. process.

a the of seen uptick it. in you've substantial training side So

today that to and for to to be made Allied the see market will are Allied who changes going website starting and to who You're is the prepare in ourselves future? be the

think it's exciting. I very And

there's you've what think of acquisitions level a reaching call on the to and end a Well, the training have a excitement it, sales with the got can sudden, within smaller is where, is The that all to on we technology opportunities a company. they sitting out generate get about resources, of and You out to focused people as XXX from the everywhere. play, limited a high. let's other in right And quite penetrate market one manage to and sales. more Allied. And opportunities lower session that do of there go we're ensure tentacles

moved right on That's shortage say. and focus making it's high to opportunities no from sure a from corporate of that acquisition the So the those. we're on all standpoint. picking can I And focus to there's integration money high really invest

really it's times. exciting So

Gerard Sweeney

just gradual terms change process? of how market into... Or you Yes. Does kind this in fits how of to that a or just curious sales go is

Richard Warzala

question. a That's great

see, process. a part you at go in platforms an actually engineering what change. against have standard build We're leverage. getting, change. I end Systems we're as But We've to is most successful our is do with terms off going we system to good higher integration, of And into or it's customer. custom. will set not our that of skill we a an we'll of becomes say that But we and the it's We really to And it, not way user tailored not eliminating. get developments. that change it not of very because you That's more So of necessary. end different important levels market because a not question, won't that custom continue. we're it can sophistication the work been

program. Program management of part a more becomes project important that and

see that that. our do to resources in certain places realignment and adding and you we're technology units So better support operations of

is later of that move we internally we're XXXX So the year, and actually part this what into as integration process. all working on

great So question. it's a

be in We have that their was Automation TCI with and fair distribution up there. and opened the Rockwell between channel automation will Spectrum

we Rockwell, to that go know just for and And have and opportunities systems not others it's companies how market say engineering management to higher-level for integration, have program system we're opportunities. systems that change will that I the integrators the that with. working folks, more brought there's also, automation those the we to but But

into of we it's technology become those technology some integration and as really great future, So this you're on opportunities process to starting from major through laying see that's a everybody getting question, the our that go as significant where several, focused out and we're units. and we're plans getting to many leverages familiar moving

Gerard Sweeney

you're or If Not not sure X see don't adequate how some transition, were ask I an this revenue, today. component to this were this I'm years we versus how to that of and or ask to ago ask say, to Would of X this that you're that question, the not evolution, of track we'll to sales but believe, it. and like, sales much right to solution were ask way here is question you, getting least. be along sure, sit at component I moving if rid sales, knowing appropriate component how sales versus again,

Richard Warzala

you're correct. No, absolutely

we're is that or and we what IO having system X is a a something We a years motor internally. development and call electronics. There's ago embedded seeing we that There's would sophisticated. we're goes much Here's would sale kinds sale. challenge, software sale about gearbox. have the today, What was call ago, are X control. that component said the years system multi-access today say We sales, talking There's a of system there was really gearing system The would a on. motor, some all sale, and support. more

be composite in materials weighting be could could It There's types vehicles. for of motors. many there light -- many

not sales "jeez, say, call a that no We became kind to it's just of look we of train and where at system a that's way way That or system." what and became before. say, of feedback at life gearing drive a and you're and that selling force we selling it "Hey, life. you're a longer motor, control our So electronics motor the had to

So in true part more I the call sophisticated what or perhaps call, the that a that value many cases, in It's machine integration would system process. today the we the before component more either much real embedded is and higher-level of higher. a of a system and a becomes and we're much much logic

So that software their there's really some value. does development drive incredible in know-how goes and it the

sale, it just say, might sale a $X,XXX sale a difference let's $XXX,XXX $XX,XXX now is. $X,XXX what and really could be the beyond will a That's So been, sale that. be have

your future major XX%, So in content sophistication more our much it's tell solution-oriented, value to like XX% are approaching we're you after. we're really, answer more to much definition, With sales so of we these and we to back XX% original that question, higher at and in programs the go would as forth. if but go than that our looking more investing

Operator

gentlemen, no time, and questions. this Ladies further showing at

the remarks. the like I'd closing session. to over conference will management for back to question-and-answer We turn any conclude

Richard Warzala

some technical difficulties call Motion. us to interest start getting you, late I the everyone, call in did for have Thank Yes. in your and the apologize would on for like Allied for as also our hosting joining initiated. today's company

again. that doesn't hopefully, Now happen

with on the Industrial participating we at reach are always, XXXX Conference Thank Barrett and of day. Chicago those a out to any again participation, we free interested, next fourth November will great look XXth. that all be Thursday, our in-person for you to quarter to you your in after at us and Otherwise, results. as time, feel have you week talking please For forward

Operator

thank The and for presentation. conference today's we has now attending you concluded,

lines. You your may now disconnect

Allient (ALNT) 3 Nov 222022 Q3 Earnings call transcript