Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the Allied Motion Technologies Fourth Quarter and Fiscal Year 2022 Financial Results Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions].

As a reminder, this conference is being recorded.

I would now like to turn the call over to Craig Mychajluk of Investor Relations. you. Thank

begin. may You

Craig Mychajluk

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

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

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

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

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

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

in accompanying of and comparable GAAP earnings the have provided release non-GAAP to We tables reconciliations slides. the measures

over to to With and that, Dick? turn turn X, begin. Dick to it I'll Slide please

Dick Warzala

and Allied year leverage their and I'm while further everyone. as diversified proud end headwinds. fourth to the incredibly record organically for strategy, mix our our Thank teamwork market quarter team our of One navigating of capped and as a you, and Craig, efforts, execute consistent both platform. advanced The dedication Allied Allied, develop inorganically continue our priorities, off welcome, global focused we and macro the entire strategic

net highlights the and constraints. overall There in last a which spite income operating created were quarter, of higher impressive due fourth our growth of across the number from by our markets, incremental grew and strengthening over per during each as an share our last inefficiencies organic year. the sales year's were quarter. adjusted fourth quarter. Both to of chain the margin revenue income earnings of basis, of $X.XX, $X.XX acquisitions and from up included XX% important demand profile, target was Equally during the doubled on labor XX%, global supply And

substantiates the we milestone markets. and reflected level. Defense our and achieved grew reached XX% across For annual organic investments which revenue demand solid Industrial the basis, our a on as grow, markets our We performance have Aerospace of believe to constant the currency XX% across a our We diversify & year, business. XXX within made strong we million growth strengthen

another As strategy. quarter growth acquisitions quarter our three key in you are know, second completed XXXX of XXXX. the component acquisitions of strategic We a and fourth in of three the

position, these potential working competitive realize have are teams of with well and The margin value the our proposition progressed Collectively, new to offerings, maximize profile. and overall improved enhanced integrations businesses. our full technology opportunities they strengthened our hard and our

was fully acquisition we basis not up of our was income delivered have per achieved we stated diluted we adjusted net Overall, yet and which these leveraged the margin expansion, the $X.XX, share XXX for points. a $X.XX per reaching basis, gross or costs, million XX% record on goal which year. year, still of for XX.X% $XX.X And income share annual up net of

for review to me let over more a that, in-depth it of the turn With Mike financials.

Mike Leach

Thank you, Dick.

quarter our and XXXX slide XXXX. some second on of As during Starting a the reminder, the provided completed results our five, acquisitions topline. we've quarter the detail of include fourth regarding

we seasonality with back adjustments customer the particularly did holiday business expected, during normalizing. to general December, fourth the into As business see quarter, shutdowns minor and some in typical primarily due conditions inventory seeping the associated

target Nevertheless, markets acquisitions. XX% million, which sales demand from of each reflected to fourth $XXX increased and revenue quarter higher across incremental our

The exchange million was in rate the revenue of unfavorable $X.X fluctuations impact quarter. on

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

and XXX% market from in commercial powersports grew Revenue end growth timing, sales demand. in market vehicle strong X% saw reflecting automotive, and aerospace growth our from handling, Industrial industrial and was within program material electronics. market, acquisition automation, and XX%, growth, organic demand. incremental the We defense largely sales market trucks, demand

a surgical-related medical there to While distribution while during in pressures medical markets pumps, XX% lower small revenue, increased our markets, of the The component from benefited total market, were pandemic-related sales. quarter. offsetting due

and our highlighted, strong, the recent results growth to full currency total for balance Sales On mix to customers continues XX% impact largely to were the US acquisitions Europe, market. up reflect revenue which constant XXXX, XX% our of was with US our the that Asia-Pacific. of organic sells sales Dick for The As compared shift customers the with revenue growth. primarily to are of basis, XX% year of year, a with Canada, also XX%. in included XX% in

be change. industrial as offset growth year by by noted the total construction for lower market, our the the commercial revenue slide. our along shows Sales largest the XX% six verticals rate in change the up slightly, each and growth vehicle in and period our were the XXXX over full market of to last driven nice making behind and and markets XX%, with mix seen powersports. demand sales Vehicle year has truck continues sales. grew market Industrial on to strong for up the Slide drivers the

a flat basis, in fourth on nearly was revenue quarter. impacts full similar reflecting market year Medical the

were Aerospace and we growth growth, the timing. While also Defense acquisitions organic solid from driving contributed benefiting market program defense to &

highlighted As X. on Slide

ago the more our supply year and are by Consistent Higher material than rising disruptions Our can XX.X%, costs. stated we basis XX.X%. accretive margin chart executing strategy gross objectives, chain right, and with making achieved the global from pricing margin record annual period. fourth XXX quarter continued our margin annualized in offset labor and of progress points level volume, a we was acquisitions up the you see the as on gross

helping, M&A this to our activity recent is that higher-margin sales. global While solution-based team also performance we drive our continue to quite certainly

or sales, which Slide points. attributable Fourth of quarter costs was our more to were percent income on $X.X XXX and basis a basis than largely to revenue up activity. operating M&A X. up quarter Moving modest million points, as Operating XX XX.X%, second a doubled expenses to X.X% of

and Operating costs, costs engineering expense year intangible higher amortization with in Overtime, to and sales also development full expenses we for elevated the continued to were R&D those fully expect resulted costs. which due activity, business growth. M&A leverage

GAAP X, our and adjusted net Slide adjusted with we EBITDA income On along income, net present results.

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

the Fourth allowance year tax XX.X% in per XX.X% $X.X period. the XX% $X.X period foreign per adjusted a deferred was jurisdiction. net diluted prior $X.XX as asset income compared rate prior was tax million adjusted million $X.XX The effective or the included diluted quarter valuation share from a with share, in up of

to year income approximately expect XXXX for be rate tax full XX%. to our the We XX%

XXX up Adjusted which EBITDA increased fourth points XX% in the million, or $XX.X to was quarter basis of XX.X% from revenue, XXXX.

performance. year, We was up internal use full EBITDA a metric adjusted adjusted basis points. believe is progress our up in in the million XX% as to determining EBITDA For as and of percent and XX it was our sales useful XX%, $XX.X an operating

balance XX flow. funded and complete and of cash XX second million used $XXX overview We provide Slides which cash three about quarter, in debt. our million with was the in to approximately acquisitions debt cash at largely the of an acquired, $XX net was year-end. Total sheet

The growth. to finance cash the of we XX.X% or of quarter million, XXXX, reflects during first about for was of facility net a debt, the highlighted manufacturing capitalization. lease new At net debt debt of XXXX $XXX end expansion continued support increase also that the to

leverage bank ratio times. Our was X.XX

the During XXXX, decrease year we due and generated from high $X.X prior to working levels a of inventory million of from cash operations, timing. capital

performance, expect fourth were quarter. aligns with Based during manner Full on we new cash million can cash is our projections, you $XX.X were a see consistent year and in to our the largely customer deliver capital flow recent on historical with expenditures and the focused over generation time projects. and that strong

to and CapEx XXXX $XX million. million between We $XX expect range

meet our challenges. sourcing slight change a continue turns times and performance customer increasing were our combat demand manage our X.X XXXX, to teams time lead to as in Inventory from XXXX inventory and

bump days, saw of a Our up XX mix to timing customers. DSO and largely to due

With turn call back over to that, I'll Dick. the now

Dick Warzala

We pipeline from and end levels Thank target solid of with each have entered encouraged opportunities our Mike. side our continue XXXX momentum to a as with we you, markets. order on are of

ratio As highlighted times backlog on broad-based noted FX Slide robust level headwind year-end. at and of $XXX.X of than was of record and million. drove orders of X.X a more reflects The a million million $XXX order quarter book-to-bill XX, fourth $XX.X

backlog sequentially. to The period time XX% is sales within over nine up the backlog of to and convert months. was Our year majority the next the X% prior

there still stability supply times, While some are speaking, are chain. seeing we sub within long lead our components generally with

for Turning outlook. to Slide XX our

confident continue capitalizing to in opportunities many macroeconomic within While a underlying of remains, a are targeted believe growth heightened level strength and strategy can are we markets. execute we demand our trends we of on position the our and positive uncertainty by

strong market well expected material oil to current and our handling, benefit and around within at as is from continue presence industrial as Specifically, to demand should relatively tailwinds. increased gas our which continue industrial markets, levels automation,

our Defense our to be further given expected is acquisitions, & bolstered anticipate exposure we and by program recent growth participation. and organic Aerospace

chain firm demand customers the schedules improve We growth modest continues our and up XXXX. to for automotive are supply from our segments vehicle to within as anticipating market continue

away should trend sales focused more to end the related higher-margin from environment a Our surgical pandemic-related the continue markets. normalized medical sales on to markets

the larger, of are to business and creating Having more continuous gained into robust support well growth greater served base of traction markets, organic sustainable in many our a future. we

an are growth an overall growth equally acquisitions over strategic important fostering While remains our strategy organic of the element long-term. emphasis,

focused recent cash grooming while out building down We conversion, on and our pipeline. M&A still and maximizing our opportunities acquisitions, driving debt, paying are potential currently

further lean AST, our of we business. tool our through as kit multi-technology of enhance utilization improvement by Lastly, demonstrated we we solution, continuous continue last year our driving expanding aspects our opportunities, all believe and can this to in margin profile

line With that, for open let's operator, the questions.

Operator

Thank you.

of line proceed Greg session. be with question-and-answer will questions. We first Craig-Hallum. your questions [Operator come Please Palm the conducting now Our a Instructions] from with

Greg Palm

Thanks. And some as quarterly Morning the start were out wanted little a I just about a much little bit bit sequentially, I of maybe bookings past to years. quite as everyone. sequentially. the down Revenues results. bit what is think up a really stood actually not but

if any I'm behavior of, noticed curious change what you customers, So, the hearing you've year? your and of kind in for kind in expectations are just terms of at next seeing

Dick Warzala

color many correct add going it. I'll upon delaying that for in orders, crap you, of making the year I years and would for new one what's you're reasons always starts. of sure more not levels -- some until -- fourth look start better and we've We're from a holding receiving quarter things happen as customers, I'll Greg, say always to our let said, based of Mike inventory back year-end the prior But is shoot. to to

we see diversity would to think and background a something that extent that's a given expect dip broader that seasonal our to I big or past say few extent. minimized of now, So, not we been forward a I going had that the would company certain it's based should that's we been certain in on And like reduced that the may suppliers.

that. that, strong no and to going drop add Mike next color year In demand addition and into off you're maybe correct. see did to some We to wants

Mike Leach

dig been backlog may to only very backlog a in the in operating was So, think backlog and the of from right? ability into in what we're chain, would see think thing a that's as have allowing drop I with the by where that right, supply I with well ship, perspective. some Yes, offset we sales to Dick that to add some said us I improvement and that QX to expected partially strong seasonality

Greg Palm

and makes change order Yes, Any Okay. year-to-date sense. basis? a notable in sentiment patterns on

Mike Leach

really bit to little degree. varies We've we a demand, the been seen order into of shocked patterns haven't by QX, a any change the month-by-month. Greg. the significant strength Heading It in

weakness in play, level are much little from terms just I a it's forward-looking. the year think generally But surprising all side little as at support a of there. demand so we've pretty speaking, European events long, and stated maybe out macroeconomic the of larger

Greg Palm

Yes.

And with the that little you a one QX, down Okay. out? dip Anything was mix? question. anything else And relative if then stood sticking quarter, point to did that even curious QX margin just out levels. want was bit more Gross I there to sequentially just

Dick Warzala

into So through again, much if you absorption, much And I volume, of inventory. shop sequential holiday right? that's to not type We're will, and leveraging volume standpoint, a part then pushing own as seasonality from boost our putting You're the as generating will. shutdowns, if floor not think you your that right?

unexpected. not that's think I So

inflationary cost I is with still pressures. will say battle constant a it

the years cost job, battle, prices a we've seen and a selling to has what and done think offset, it good the constant but has it's good team from a over raising doing ebbs – I So a team good perspective, flows.

Greg Palm

Got it.

will I it there. Okay. leave Thanks.

Dick Warzala

Greg. Thanks,

Operator

Thank you.

Our next Northland the Ted Securities. with Jackson from of questions your Please with line proceed questions. come

Ted Jackson

Congratulations Mike. solid a and quarter. Dick very on you, Thank

Dick Warzala

Thanks, Ted.

Ted Jackson

ago, talk to saw I like & is line. ramp top of talk strength maybe an kind could And Ukraine. I'd I war article through about to Journal the strength. orders in start on let's there would a the it, weeks a a questions. to been, guess One, defense see call and I'd I relative maybe I -- Aerospace on few There going talking got what continue you We to a about like know Defense. little several you like in to was not Europe have of bit obviously in going with has XXXX. sort we interesting expectations

supply pointed handle the of out because what lines finger lack demand these they production that issues just be to might not a Really that there. pointed and that at the they are or really manufacturing out was capacity scale

seeing And of maybe so of we see backdrop of you're of color, could the as market walk talk I through how XXXX defense in that that and go us if you with business kind you performing what beyond? kind through wonder and sort about

Dick Warzala

volumes, that looking Sure. Well, through and with standpoint pretty we been I yet at the is orders would article Ted, assigned say delivery those to higher have actual the accurate has days. inquiries delivery you, while to of quoting, the there with from -- come to higher for see volumes

what I done timing. there's is certainly So get they think what the work front-end can and being to determine what's available, under

that issue it what's look would the we're And of have sales the when you required in one system. just element our at from we that is

device three deliver, because to even reschedule a it it. deliver, right, and going make we So doesn't quarters of to they're sense if could everyone able can't reshuffle being and to have though sitting any not there all ship

handle we've that other interesting, shuffling. basis out, urgent says, pushing on to it, equipment free requirements, up we've real, they which in get some seen that we some current some can a seen call what resulted so more could actually capacity. okay, What's So shuffling let's

from the complete fulfill the our to not device requirements be. that of that's chain again, standpoint, whatever And supply from might required

would So article is the accurate. I quite say,

replenished. in to We seen at being point demand assured we all have And is have some the they can be not and -- -- will are here that be time inventories depleted, there.

Ted Jackson

Yes.

given themselves like maybe terms the some a issues it it's production driver term sounds business. in be in it of So little of as of will through? clearly issues kind lumpier bullish these the a work near But the

Dick Warzala

Correct

Ted Jackson

XX% K, the was Next like spending line about $XX looks top call it million. of revenue, on Polaris it, is the one, just through

to it's terms bring Polaris. of their I diversify, regards exposure trying the to a in call, concerns pretty to important sort some XXXX. of expressed really listen a done outlook nice with mean, down the still And you in You've clearly But job customer. if to they

not sort really, avenues to that's that of I the to to as of of maybe per I market. in in really as if against let's modest level? push wanted And where view But are modest a growth growth And terms wrong an I'm vehicle, that growth a on going think like to avenue vehicle growth, you that. your backdrop, your the -- Polaris of side-by-side about the say, they're even where just recall, I square is -- with allow talking

Dick Warzala

growth diversification gone have as sales Sure. Yes. I the think mean why overall percentage the that. in and overall correct. the I’d answer of I our strong, Polaris And been has That's you're markets business part through the been of with absolutely remained Allied down. it company. and of has other reason

was but not something definitely do, to did we to. that that So want wanted we

go want And reduced. don't the down. market I see think you than I would COVID. But whole something to sell we probably really years are. had get to not boom closer to And settling we that multiple that, I much during Polaris we there's volume the or and it's should some demand people to business. will end mean, in whether a that we Obviously, is within is say market Polaris expect. out

But noted, sales as won't the it of you of future. as would we customer an given base and as have level it impact have have the in of had diversification the that huge

forth. and vehicle whether it's that major the seeing in, strength. other programs are we're we some other And So the invested some construction in so trucks markets or that or automotive we've -- we've buses had vehicles past, and

that. all getting And in benefit starting off, a So it's several emerging in pretty some the designed take to strong on last applications have and electrification. position we've from we're are good that to been in we involved that years

backlog. we unscheduled it backlog. as that in a booking. record booked. We We contracts our those call didn't have also We We have don't

we firming are And from expect components, we schedules do that still industry but But upon do our which with our increase is that, keeping the certain that's lead-times stronger. not -- up schedules some that that in backlog based see for see So and an getting then there. we'll challenges has automotive. low, are standpoint

so the from of I you of an the -- side-by-side, to little as are the sports side-by-sides a different we applications, type more the commercial, when think forth. on what many -- So, like ATV mentioned as and -- say offset residential offset whereas And might see to would in product, industrial, definitely ATV sports utility used market.

Ted Jackson

of -- regards I kind question your would another prompted of business. the just section you to with another

some your you world, equipment there -- like the lot work for them terms a is You because of to in and through. kind of have players that that in have I could sense the you will businesses of listen construction tell to if you what heavy to exposure equipment backlog

just could segment So, mean, exposure see mean, -- business in I you the your and how I some would? I could there, for really vehicle comes business how color just that -- kind of you that if a I maybe market, of I'm the benefit from of much around be can just that

Dick Warzala

whole us, large -- again, it's than quite player. the market, vehicle for the it's other It's it's diversified Yes. --

way. submarkets just the I power saying this and other from sports -- from the Let's mean that coming the we all it these have. of XX% rest put the coming business of large piece it market

in construction, It to of the that the we has so strong, trucks. been and with worked to is past have fruition. programs exposure which -- strong, do and So coming a we lot are think to that on agricultural, be has we've some continue should do -- in

So, is There us. for are we for that and a opportunities, to do grow opportunities the some There future into see we do backlog. see.

Ted Jackson

people a I get I'm Okay. list, to talk. because don't going one line of but kind out just of want to more. I'm to going have other whole

first I backlog far like curious pickup backlog, scheduled this the that you to $XXX On healthy. number, that quarter, I'm a into of nice in so had was, it's quarter? how it look backlog, out think go million backlog I at beyond when we're the much is

Dick Warzala

we're the of quarter. We're two-thirds the -- of for us, already so way far first out

it, looking we're of-- rest the we're of at relative the kind So, backlog at to whole looking as

Ted Jackson

that. still for I'm in I'm still not. December. stuck awake I

Dick Warzala

the I don't top my you. of Got might you to-- want off head. Mike, the have number

Mike Leach

No. the But gotten as would again, backlog, to it's of predominantly characterize lead-times six months. stretched would say characterize last have couple years, backlog I to nine I next -- over the in the because the

not I'm QX, yes, sure I for But sorry. again So, do that. -- would I'm --

Dick Warzala

as said, we seen Yes. incoming we've orders. Yes, strength I continued of mean,

backlog I asked we'll that continues strong. you And say I number. in So, remain would it's the future, don't the But get -- kind we into an I the I we exact to we're And know prepare. way get two-thirds said, don't -- We to of to have going we don't as it's forward-looking. to -- have think know of through. obviously, that

are don't. we – to where we know got So, and we

Mike Leach

the not first Yes. we're would And right? fill quarter, I suggest that for looking for

Dick Warzala

Correct.

Ted Jackson

actually, that's helpful. that's Well, very

time. questions, So at I'm to much. back I queue, out at do step have I'll very and of that more come in Thanks later but going a

Operator

you. Thank

next Our with with questions Brett question. Kearney come from line your of proceed Please Funds. Gabelli the

Brett Kearney

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

Dick Warzala

Good morning, Brett.

Mike Leach

Good morning.

Brett Kearney

North Act, your sense CHIPS the hard it's where in IIJA. to and customers related some But parse sure into particularly what's in industrial inflation in federal of I kind to are coming for your talking of hearing from historic some kind to broader within partners exactly on reindustrialization you seeing applications US your channel market. your how industrial of unfold. there's kind orders supported we're out of environment also plant the some America? that's concern's guys growth of solutions industrial place streams, Reduction your of the Science the and end market, recent the spending activity and Act, the are on you're there could out some really on by touch of strong But taking Obviously, just macro part within to the going wanted in I'm the from. build-out, folks

Dick Warzala

Incredible demand requirements. and really to more the fulfill there that's what's being about a able Yeah. That's it's out question. great

any to space So we're slowdown serve I would mention there. acquisitions extent. one that, a And that seeing great not larger of our

on there's there you mean, out factors be of of to backlog would But future. just working a a play global say I that XXX%, in fact, number the into but that, we agree industrialization the that -- US, As I into mean, the I we're I we'll a supplier. a sits matter come

see we let were labor over the pre-COVID still it they're up. constraints world. And So They today. all haven't and the there

innovation everybody's part here to of be in to seeing. the order that a thought becoming see process able labor minimize constraints you So they're

I is So to out well future to that – they're demand some thing And that's the there's down the looking the for the slow that, agree into ability frame it strength here. the going it's only suppliers time able the meet to and for. be

Brett Kearney

much, Dick. Thanks Excellent. so

Dick Warzala

Thank you, Brett

Operator

[Operator come questions with Thank the Gerry your next from you. of Instructions] with Our Please Capital. questions. proceed line ROTH Sweeney

Gerry Sweeney

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

Dick Warzala

morning, Good Gerry.

Gerry Sweeney

of Just One, about a inflation, little battle. talked bit a couple follow-up you questions. constant quick

more you both sort through? market if those – catch necessary? date catch is cost still costs and Are material trailing of labor where up are up up the you to pricing, costs on little curious to receptive bit? Just pushing a And

Dick Warzala

says, Mike at point. Maybe to let I'll start. he I'll this add whenever

Mike Leach

last us Again, to there's would it and automatically which I is late ebbs things had sense said, I would that caught allowed the we about Gerry, we right? earlier, contractual agreements, pass I up through. call in say, talked flows. And year, When

don't it's Again, the on here degree, difficult to zero-based we where a that good really do any purchase As lag help about in a as passing and margin your doesn't six it past, the through to the job that -- talked a right? is margins over and classically there's all it, which pushed and seeing through I in gross debate large think team and processed well. did month we've variances It's results. price a three to with pass-through then And being the like. usually

cautionary you increase. My in that, it was see note hey, as well reports seeing you're continue only to our just prices

crossroads point at be and going we're not easily. and in to inflation time, of battle going as to each to demand So a come able we're kind it here, other through pass here where to some

a it's -- I said, battle. just it's like So constant

the the months. flush jump. we're with moderated see here massive not that seen market say -- sense we're wouldn't the But in -- the I not extent. some current three it's significant in continue we've So to They're increases that seeing to last

Gerry Sweeney

Yeah. velocity, Less narrowed. I you. Got guess. Or gap the Yeah. got I has it.

Dick Warzala

Yeah. of the I agree but up we Well, I I'd the some do we up said mean, to exactly have who's and -- going see and and I Mike say, to standpoint haven't. going start And as up what expected get And okay. from some keep prices paying would agree be and and point the pushback. that pass-through at them, there's to slowing,

And into play are commodities I impacts and certainly rates, so easy. inflation the which rate overall labor When say the comes that easy.

are If you're commodity to contractually that back increases, by the or cost going contracts. in you bound it's price labor you're increases, it's too, minus, just plus but whether contract, these

market where there. think in where are occurring, to going happen the And the that. cost we're the what's the and days long-term contracts today, I be predict It's hard who to of to where to expected cost in follow foolish can anybody these downs future, do signing would for up control downs

you to because future in staying rough constant achievable. that the got So the yourself get, putting that to challenge it's not let's cost of improvements just outs a battle that and but a in not having hold, careful to you're necessarily you're not make be some sure call you're norms position are efficiency it,

other So the piece. that's It's upfront.

and watching be quotes. that certainly careful. aware we're And to now and in new contracts and doing of got in certainly we're that what very and You

Gerry Sweeney

one But and I'm just themes I it. it how an was to Staying just main on sure is out but you record. have been basis, and curious, progression. -- any given the Obviously, sales continue believe three, of will -- moving those not But a detail se. a ongoing type much sales of margins of any I'm five component year per over to with bracket time, go one, full solution the and a way much how want from Got it's sort thing. of you into be can guess, to years I progression changed period sales this,

terms little open Just in up a that of bit visibility?

Dick Warzala

where that you of calls was call the today. question sales, Yeah. back, what Well, said transition let's from call we five And have business component percentage we and in this the would is the sales. what to solution our call we go we multiple years, what if solutions we've discussed sales how it, components

mentioned it's calls difficult is, we sale a that have also what solution considered more back to that would little a adding say, We let's motor. previous a then, in gearing because

sophisticated we a to -- that That's Today, company. component just electronics, the a some created a versus we are I team feedback of adding mean, more forth. question, we in your more consider But normal software-based and adding answer kind of have sale. so solution a sale and

very We interesting a very, at working yesterday and market? are that about our getting the did that we're we're We're projects discussion in do that what had in we we seeing the board programs. meeting in content putting on some

motors And we portion We solution-based started many our thing. ago significant part with the years that's part start And as we've selling that won focus. number up adding integrated of drives our the new it's of as of a opportunities of this business. selling,

company just shift sophisticated us but business But -- be with not get the okay. we increase integrated be drive really shifted the But they need, have the will like, that we're market and the more real not We'll they let's doing of needs about what more to okay? faster in we where going have that of of it. our be now, saying, too, never really a we're is and that's the more wins definitely component there you think trend opportunity. that's solutions speed had where transitioned, Well, and are was a beyond forever. solutions. that go today, and where system-based just And motor, So meeting a has out, that been here requirements it play, simulation and customer, got some okay, modeling the we've a to add to

past. major what staff team, So that's global go we it projects we global we these started group in solutions. had that to -- where in And appropriately than the electronics level and of system-based by another them big on We the team, engineering change. on to we've now we continues And the win beyond invested our it grow call at the programs. expanded take saying out

team, come be even our So hesitate would bit be. you I a numbers than XX%, global almost more sale and as XXX% inaccurate tell where But can the just that to classifications the I I technologies opportunity, would is back, certainly, in with little I would multiple being a applied solution. to the my – say, in – system would level it's higher that

over a content products product. lot of electronics your And into you and And on start measuring went and business amortized based Well, are their when upon the us larger, because high-end margins a that you're caution we developed. more sales, like that There's of getting investment so that, solution electronics. yes, sophisticated really being software higher, a these too, forth. be be to millions it's more material that that have could and/or into dollars these software margins

that's where more that's way. what and on we're it's we headed. see more And So its well and –

Gerry Sweeney

aspect qualitative the helpful actually very That's it. from appreciate I just where are. Got you understanding of it.

Thank you. it. appreciate I So

Dick Warzala

Okay. Thank you, Gerry.

Operator

you. Thank

from Our questions Jackson come line of next Northland Securities. Ted with the

Ted Jackson

Thanks. Welcoming back. myself

again are line on that are I on drive I on and revenue kind a efforts a a going to back give know performance, forward? you have your seeing growth And some line? back discussion of to kind an driver color line going top I growth growth, you there. but business. really what terms the to you that that top driven continue of Can little I How nice have new and that you've actions what the you in that quick to plans of regards major and are So made with of not it's know area circle been distribution have it's focused wanted

Dick Warzala

one through to would conscious channel, our know knowing end we're that decision for Ted, what's distribution you, of say interesting because It's XXX% distribution sells we which acquisitions, we that markets through it they're the don't -- I report the Sure. channel. the is serving.

into market. we're So it reporting end the

So our increased. distribution sales and business definitely has

let's some, are opportunities that and the some today. growing can go working channel on it, we're call the that not through we in participating seeing And opportunity, we're

our increasing increase what in business other channel we our it. So to the at growing faster amount that's And than through ways channel. have way. reporting we've are We're been we we're But the growing that that can looking showing. volume it of currently we leverage it's successful not into the

broad it's and it and that and So real expand base of products important because going opportunity from reached to standpoint. customer it's us a that to other channel hasn't the are increase into us. a And for it, our business

Ted Jackson

terms Is existing distribution driven your partners into do your see being that of in partners, growth or the growth by your products expanding system...? you coming as you're bringing more future of distribution

Dick Warzala

the today our Yes. leverage I you looking solution/product you waters that best start it's take say that with, Great to question. I’ll have question. market, test distribution That's way it, call the successfully for given existing to through them partners the have about, test we we right with mix channel. us the expand can products. Great the reach do to to to, our love the would

the shoes. opportunity us So out the best that's for of

focus I to to what is forward the to be on us there more channel. channels. focus into for initially don't distribution opportunity existing looking seeing Certainly, with additional I our -- initially bring is grow an know, the But our product think I opportunity think will

Ted Jackson

some bit just could your if XXXX. my little -- Okay. is that business for that mean might business. well, you're where around questions, you the about little guidance I investments invested is in the talk making wondered of doesn't One say, a noted guidance if we where that bit the that run and maybe possible? on It is the But on. I CapEx And money in little then more being a perhaps of you more I two for really bit a touch guess, than, would had last kind model

the income how two. then on expense, give guidance are of a with note regards you. development you if And could business statement, to Thank a kind you your just that just Those last my little on XXXX. side in see

Dick Warzala

Mike take those. let I'll

Mike Leach

Hello, Ted.

that, CapEx product because simply the from lined flow and the right, to to a the XXXX, of probably supply the projects. didn't had complete out projects allow ebb we us for has sense in we all little of vendors execute So chain, delivery

of add see not of also, probably they obviously, into some tell capital I the being to you, our as And additional added lighter intensive, So business that outlook low It to was XXXX. the little end and a on that bit the on side. flowing XXXX would well. while right, the you mix, is

that meet throughout customer capacity CapEx our adding and aligning existing we on growth future the equipment to one XX% of right? tooling, plus, new line it's of the spent adding So factories, is driven, project demands a Most supporting growing programs. year, to I with our product would say,

I talked I majority would CapEx from everything spend, we're say of have again, is not that, supported. growth we're what we don't the and we before, that's the maintenance we nature Most standpoint, significant like, of -- -- CapEx think we've of safety a expenditures. the do

Dick Warzala

add then the here. let I'll and that to I'll jump Well, to next section Mike on

what he's that's would he supply to -- mentioned, correct. reasons of some chain, and that yes, So, covered for other be things get occurred. the delayed There's and that,

I we're overall need, can't doing, -- not element delay that mean, one they chain, were if necessarily the they so yes, we an supply to but get delayed program solution. launches they of that addition everything in then program. when And anything

launches, go capital program delayed some the it. were to So delayed into investment then which there

early we're we some had on to that expanding as And that see we've -- I item they're opportunities they're with as and new they're Another well. been working is ramp. finding on that, success success we've some starting some think ramping,

into in we the that do of investments, there costs so estimates some efficiencies capital quality, of and at, program things forth So, well, that and mentioned original because and allowed we've and comes looked that's all require that that expansion play. we've beyond one

with will but expand expand, support it. to additional those streams So revenue they'll

is and standardization to lines in that We've with up additional come localization of has we're some some of manufacturing. investing Another thing product that caused are I'll mention some certain you, multinational. that expected that spending additional

geographic need our call be in customers, close demand let’s in demand the belief our duplication there's enough some, I'll North there's and we so And from been but to standpoint that Europe in duplication, in, call, that. enough is to that, it, expansion they're systems in America, region, of one and may may both it may of appropriately, been sized we be and planning And capital some be multiple our in be around putting has not ones. it large redundant one so

Reynosa, there's that's product needed we've the the end the down in but that we had got we sophisticated We and it customers back, And automated, Highly ramping a Mexico. that those okay, produce reasons going on said, that very right come a up quick, Europe. great and at and looked payback highly program we're can now. into they're and facility -- we

a at hate could in you're to best going it, and And ideal costs put transportation then cost transportation And say we but of be internal little in those the I payback Europe everything and looking something are then, we that heavy we eliminate problems. it method, year with could and and that things transportation in at always air of realized started a in our freighting quite some costs. over capital and cost duplicating happens

So going but that's in.

and hey, equivalents because more upgrading, is And efficiencies them. facilities of production. thing, is it to which constraints. of and look another fantastic at full-time does get you I says, mention I need in the last job, our six again, I'll labor one And can't

efficiency. doing more automate to I'm generate So today what have doing I and today what to upgrade I'm

and no longer to get same by equivalent. So more need can six the I using product. for that I have our full-time output produce we're improving – equipment capital a the the

and So our why, I those future. reasons continue, the that strengthen good think definitely those are – company and other for and will they're

So now back to that more color to I'll but over CapEx, it turn Mike.

Mike Leach

Yes.

our activity rationalization some then activity would of M&A the or on our that, relative facilities. costs right? It's two of things, debt drive and I either of say, to So bit really expansion

larger we're growth there. in a example about very be facilities good are a that forward, into like a to ongoing. a going look more, things accommodate should beneficial that move making much we from of be much so American that's we the lesser and more optimize changed And Again, at facility North much But one always and right? costs But of is do a footprint like locations those advanced that those our to looking again, AST tool side from lean standpoint. recently set a cost activities and/or a will things of – our

it again, activity. – But will is that drive M&A

with on paying opportunities some of we've opportunities growing are always we at are we're focused of those aligned down such talked timing As priorities. debt, and always moment before, not the but the

So it them and to means M&A fund those and what are, drive that path opportunities the we'll continue down expenditures. will on dependent our how develop

Ted Jackson

of reframe question. me Kind my let

I imagine would So forecast. their doesn't into you built since have M&A that that anyone any covers

it of you since year that no least? of out. M&A And of actually and guidance. it's bit would so, ask forma hard operational is something kind sort to of kind state kind not item model do see, expense might pro kind at back with that's a you because towards a had some year. a were constant line helpful it that of of if it's absent of just as that kind mean, M&A reevaluation kind to be a you that of not work $XXX,XXX really and within And it I kind it a little steady state, any be like assume XXX,XXX efficiency steady I stuff of we track we see we Is P&L a of for your why

Dick Warzala

Yeah.

you Ted. come back us on that, to Let

representative I think in here. number you be bit a I more could shooting of think the little mean, rather do to we to a and of be really here something going what now, would come with just mark is right we than up future that

think at, okay, here's did. looking be we I what just we

do if three, it say, two. to we're of how do we do to So six, it's going instead to going whatever. We're

back you into Let us that to model. you get plug a can number with your

be I accurate. more think

Ted Jackson

all taking on a nice again very Okay. my quarter. That's for Thanks and questions fair. congratulations

Dick Warzala

Thank you.

Operator

turn further comments. call no management are closing over for I'd any questions There you. this the to like to time. back at now Thank

Dick Warzala

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

first in of are us March to and week again Thank day. to great have you person reach on participation, interested, after next to out at you ROTH talking will California of Otherwise, please Point look as your participating quarter any Monday, XXXX for you with all you our and -- feel we to free that Dana be forward those results. time, XX. in at Conference For we the always, a

Operator

your appreciate Thank you. today's This conclude teleconference. does participation. We

rest day. your disconnect may the at time. this of You lines Enjoy your

Allient (ALNT) 8 Mar 232022 Q4 Earnings call transcript