Earnings call transcript Q1 2023

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Operator

Good day and welcome to the Allied Motion Technologies First Quarter Fiscal Year 2023 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Craig Mychajluk, Investor Relations. Please go ahead.

Craig Mychajluk

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

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

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

you're If two statement. slide to please those reviewing, turn Harbor for the Safe slides

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

documents at and and Securities with as our the in release earnings by risks are find discussed or other well These documents Commission. these Exchange company website with as filed and sec.gov. the the other factors on uncertainties

well I believe non-GAAP measures, call our will evaluating that want which be out to we'll point as performance. we today's during discuss some useful in

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

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

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

Dick Warzala

strategy strengthened motion This and a a as record performance diversification very level controlled of well our Thank to level We precision the entire market execute measurably sales improved high you, our Craig that quarter, delivered everyone. demand solutions. our line. to further achieved team welcome within of our ability at particularly speaks as bottom industries in profile, margin and the

highest XX% up across million along history. $XXX.X organic targeted of markets impressive revenue and in was with most the demand reflected quarter First level XX%, recent higher of growth

strength strong substantially Of from handling. to gas, higher with vertical surgical-related the timing. the Defense also incremental organic And saw grew HVAC, quarter medical program demand markets note industrial was oil growth from within due acquisitions within and in industrial and and markets material during Aerospace and markets double-digit growth automation, our and demand medical end-market defense our mobility. demand

our operating This the XXX% Equally important sales more technology first doubled leverage was last strong accretive year's income strengthening volume margin reflects more quarter. operating translated higher of into income as acquisitions. over than gross the including which continued net increased solutions-based margin, and and

adjusted On were last $X.XX, share our basis, an per per XX% from year. share up earnings $X.XX

a the what helped typically generated from Given solid which is operations, cash performance, quarter. offset consumption strong cash earnings we higher

were in sequentially environment. orders macro later was down I in given will the backlog performance supply Our not to presentation. and which unexpected chain both the this talk Improving

off is XXXX start. to Overall, strong a

results an over margin our to in expect technology to solutions We and profile. and time continue drive enhanced yield investments

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

Mike Leach

Dick. you, Thank

include details some As the regarding XXXX. during our four, the a reminder, results Starting we on our quarter acquisitions slide provide second topline. of completed

to quarter $X.X was $XXX.X exchange unfavorable in revenue revenue XX%, $XX.X million or increased million rate of on First quarter. fluctuations million. impact The the

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

each saw drivers largest Industrial Medical were modest markets. and commercial was up XX% grew demand were automotive by Defense specific as end about more Sales within XX%, for of Dick vehicles. distribution the was XXX%. is quarter. X% higher market the year-over-year. market the sales declined within vehicle, behind One of quarter. Aerospace Powersports market lower the growth growth agricultural these reviewed vehicle than still the total and up increased was channel XX% highlighted, and demand during in that offset As and component

change in by continues remains up a sales. behind and shows mix XX% our be largest X of strong to Slide total drivers market, our change. market basis revenue the TTM that on Industrial and trailing the making XX-month our

Solid A&D organic growth medical and well recent contributed growth. contributions to this as performance from as acquisitions the and

market and weaker the was slightly demand up Vehicle trailing truck demand. automotive than XX-month as growth vehicle offset on basis, a agricultural commercial more

from first and the pricing more volume, higher Slide accretive quarter XX.X%, period. remaining supply on Higher chain costs. basis XXX and labor offset highlighted gross constraints material X, margin than margin our acquisitions prior As was and up year points global

see making XX-month in strategy trailing gross we Consistent with XX.X%, of can you objectives, from stated level we are our on annualized XXXX. as chart the a margin achieved the up the progress in XX% our by executing right

Moving on to X. Slide

XX.X%, the our first reflected all X.X% basis more of XXX Operating obtained aspects up AST from with down points, sales, basis toolkit quarter of The doubled of strong income along than operating points. $XX.X and in million, to operating were was revenue which utilization or Lean expenses which as XXX percent of a business. growth, leverage revenue consistent costs our

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

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

in or due basis diluted income benefits. Net income $X.XX tax at on per tax $X.X XXX% share, adjusted effective and discrete or million, quarter to up net was was XX%. an The per to increased diluted share XX.X% million, $X.XX $X.X lower the rate

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

up of million, adjusted performance. XXX to progress metric, XX.X% of revenue, internal our from first Adjusted basis use was an it $XX which EBITDA or useful as increased EBITDA and in We XX% is and quarter believe points the determining XXXX. operating

the cash was flow. or million, XX Total acquisition, first end. and quarter, a at was was cash XX.X% we of million, X net debt year-end which overview up deferred reflected of our debt net in prior million $X In $X.XX and Slides quarter $XXX made balance from approximately $XXX provide about a million our payment to of for an capitalization. XXXX. Debt position cash sheet

leverage ratio times. X.X bank was Our

We income higher of generated and lower which $X.X reflected operations, of net levels million cash inventory. from

The cash is the first generation, year. typically million a quarter cash in with higher period of consumption are cash pleased the we $XX.X prior compares our with so which usage

drive cash our strong to we continue consistent on flow Based historical cash projections, trends. to with year, this flow expect

projects. $X.X quarter were First million and capital largely expenditures customer new focused on we're

range with year. X.X $XX quarter X.X the compared times first and We in expect $XX million. improved to million last CapEx between to XXXX Inventory times turns

continue teams our and challenges. customer meet sourcing Our inventory lead manage time to and combating, demand, while

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

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

Dick Warzala

Thank you, Mike. Slide XX shows and backlog our levels. orders

and $XXX book-to-bill $XXX X.XX ratio orders of times million backlog approximately resulted First quarter million. of in a of approximately

are support weakness positive growth. While some is backlog our in with demand healthy of we seeing overall to pockets a Europe, our outlook

backlog up supply sequential fourth the year period, decreased some over the Our constraints. chain XXXX, X% prior quarter given but was of of loosening from the

accelerate the lead making shipments times improvements supply our the good we our lead reduce to products. in as backlog, of and are inroads several long we chain, Given

sales time our do nine-month the one. of to of to quarters, backlog decline the to still our to next next ratio is majority stabilizes as slightly, backlog convert book-to-bill six expect we window. the within couple The Over around

industrial markets, We levels XX should to success positioned automation increased Turning around continue wide which within and strong slide range continue well is industrial presence for economic remain a handling, to of well our our expected oil current through outlook. Demand material benefit and for our as gas. relatively as to from environments. at market

We inroads acquisitions. are instrumentation-related away benefit, Medical business focused surgical from markets we have with to pandemic-related environment more applications overall defense leverage as normalized A&D recent making further end markets. on expect and the solid sales to sales a our and trended

anticipating And for and our objectives of automotive vehicle markets our in look and firm An improves and to future beyond. is XXXX up beyond modest down lastly, driving paying as are year, supply chain from opportunities. this our margin demand we the conversion focus cash continue to we debt for schedules area reload as customers growth

as potential of M&A element still actively out key are We building pipeline, overall strategy. grooming acquisitions growth our our and a

year the level while of on remains, started targeted growth many the a and strong believe our to markets. a heightened we continue can on execute opportunities note, and within capitalize we tailwinds We uncertainty and strategy our

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

Operator

comes go ahead. begin now Greg will the with Capital question We session. Please question-and-answer Palm Group. Instructions] The first Craig-Hallum [Operator today from

Greg Palm

kind a the on good there. you customer-driven, of start pockets around It off whether to everybody. whether taking mentioned. Thanks. certain maybe would helpful just whether more of with it's Yes, certain broad-based the for little starting it's be the just Thanks markets, end bit questions. I Yes, across morning, commentary weakness. color geographies that's get guess, we'll

Mike Leach

a more predominantly Europe, we in this I particularly about that think, Greg. broad-based, and little markets in It's fairly talking basis in industrial guess Europe. a do the is again like is little we're order it's it, on pronounced more in the But Germany. see I

through. mostly would that conflict as seen we impacted customers as But Ukrainian by Obviously, some describe driven. I well the So, flow it's tell it, would sporadic. macroeconomic have specific we've that you been do I also have

being we'll month quite think being surprising month low. really orders, one one I then bounce strong and from

our higher compression XX by driven, of lead mostly six right? this time were simply months that about what times. you think But, a bit ago chain lot this to those we of got then We times chain orders again, just on lead is, expectation improving. because expect compare supply months going seeing And that a see over And that. also driven we've book-to-bill to ago, supply little flip, talked a we've I

Greg Palm

for of whether seen And And as cancellations softness purposes? destocking altogether have it's that you sense inventory maybe the you get part units do normalization I in guess, on orders?

Dick Warzala

more you seeing first that the correct, accurate is of more think adjustments. in some part I that are

levels, lead and times people again, the seeing that is issues. occurring. some back supply in to are you okay? as flowing now through lead fully longer adjustments expected are materials the And normal chain starting times it built to We come are more to schedules, had and some So

And energy would, planned releases instability impact what some we are there while in expected product cancellations hear areas. upon Ukraine sales on it into based In well impact that are to and the we But emphasize been about Mike And I Eastern holding the the as cost, strength reductions, well. remaining quite said. Europe, we let's on call continue has see crisis, rare. market. many some Europe up overall, But

Greg Palm

just pipeline. a I your Okay. Does this XXXX. like we've down sense. the pay the environment big, about in out the talked opportunities know, change And of year then for here, I does come And Makes in maybe, a to near on there's strategy, M&A the and robust big in? environment that kind some desire mean term, capital allocation could based of acquisitions around guess current just terms debt valuations does or that coming thinking your an in

Dick Warzala

mean, Yes, like you're we some do to I there opportunities, there have to have absolutely, their ready so I we're strategic down seeing felt add think ready come areas because the so that looking are to and be we we correct. here. have at, that out and valuations some would future always are in we be because we

So some up. Valuations have opening things are declined.

selective, that strategically. we We're it And standpoint. to strategic out figure a acquisitions to do what to enhance where pay were major cash also value asked really that us that something to this if looking be feel be position seeing maybe creative from are. these flow ability And in changes then, we and and would strong a it really we're across you done. would that's way year, down the expect to like have While our we a we debt we if come us, get at to we pick

focused good now, debt. we're But there that on good think opportunities our of overall, think add could portfolio focused some and a that down also spot. on platform. strategic a paying value right we We're are couple out I in We're to

Greg Palm

Thanks. leave lot. it Thanks there. a I’ll

Dick Warzala

Greg. you, Thank

Operator

Your go from Ted Instructions] comes Please with [Operator Securities. ahead. question Jackson next Northland

Ted Jackson

very a solid Thank you. Dick, quarter. on congratulations, my

Dick Warzala

Ted. Thanks,

Ted Jackson

more the around I few have financials. a questions

So starting margins. with gross

for least your long-term your fair it my more Is to that You that quarter increase kind was relative that would for point your margin year little in than to a a about release, expected. first is for increase commented in At and that to robust would somewhere your margin see on the of X% year full presentation have assume we percentage margin an the might be XXXX, expectations, basis. looking across be gross press to in goal I north XX%. of annualized see you the

Dick Warzala

of And we and in I statements the about followed things. them improvement. and talk made couple overall a calls conference gross I just we about here. Well, want profit yes, comment to up a to some make operating think margin

focused margin So yes, We're are both. we gross the focused on on improvement.

picture that have are context, the I a taking operating improvement. think stated, looking achieve in to feel us comfortable will combination the of gross at we're margin margin as put okay? do do bigger this And want actions we it. now and repeating right it really I what in that allow we keep But we I'll to

new we're to the about those and leveraging There us in the on. will in opportunities make we orders, that confusion, higher to actually that have allow working addition sure are goals. AST are that, in our to have combination may some that realize margins it's that, So two. bring what synergies confusing to the very we us with we sales of but can And really focused not gross set several stated it's to the we realize brings on added solution certainly opportunities. we

I So hope that helps.

Ted Jackson

Sure.

second The going first we that question. second first quarter. top we sequential some in on Are see was Should eye line versus to build quite the in in to you growth the to expect see quarter? upon Second the strong revenue quarter? my quarter

Dick Warzala

good Yeah. Yeah, question.

occurred. So of things a couple

first with. substantially. noticed lead been had over We've that's quarter We've long increase As the that that's constraints. had supply increased chain last We've times strong you year. had a dealing very we've a of backlog

items pent-up in that we So and that we some started to needed did demand due past call flow I'll of it up supply some chain we clean had in as here to some, see QX.

but So represents not it. say will call the QX to a call in proper I'll back solid of we'll QX and expectations normally data go set build manner QX be and clean-up, and we of to you nice historical from see QX sales. be QX really that to some so I QX think I'd the let's in is from to it We guys do that resulted forth. crescendo strong and that would we'll that, jump And clean-up off the We expect well say QX wouldn't QX.

because up we of constraints seen we've chain think some to and picked I up supply QX, we cleaned do able so. that were things

Mike Leach

it will in enjoyed be right? I is QX. we in I just going this from just Crescendo say, the seasonality here I already was don't Ted. as as I steep to pronounced as as And that the past a don't of think standpoint, the it's do will while been we've think benefit some traditionally be seasonality it think expect of some in

Ted Jackson

fair the the for of reset I'm putting the more think is to of lack normalized kind a your sort rest basically to into second but I'm but second maybe let quarter that. about a way mouth, words like these the of flow agree expecting in of, then through of from and and of and think mean, it of Is taking what of to So putting kind to recognizing not of them, it kind a the that with year normalized, sort I remainder that would level quarter year? be of the

Dick Warzala

factor fallen I those better think the way say look you out past some quarter that they the those of if in Well, it due fine were where the think would at have although for maybe the would revenues to to adjustment catch-up I first that's QX. fallen and have it's of

because and there supply QX, success chain I So demand loosening still some enjoyed and said some as we there strong. of

QX that QX be QX would about more upon accelerated of to and the way and higher it. were sales little at look clean-up based saying a was it's some best bit into adjusting QX So some

Ted Jackson

I two I'm they get have questions to financials. then I out about just going more line. mean now are

that's in line of pushed than there the You take that Is account I first a quarter was one-off little as have strength think in or of in there year? I rest the that Is bit should into about should anything have that did maybe the the higher about? be there I I there G&A the because the on thought. there might anything aware in top

Mike Leach

think to in that. performance compensation I would incentive and I point Well, first impacts the certainly QX

driver G&A dependent performance for the in on that's terms probably up. obviously as of the of of largest be That the how continues. being that So will well year rest trend

Dick Warzala

for going We've in Yes. see expensing of for. And couple accrue planned August show it a not occurs. we're to beginning the an and to that recruiting We those basis And the there. Investor there's year. we're again, this a an little expenses bit other just time that participation we're things on here do trade we're first active have Day annualized recognizing for when and had more

So going things of are some that QX we through rest of events the know those are preparing year. for be that happening to we're in that the

Mike stated as planned Investor that marketing expansion and bigger are that So trade that push would it the opportunities some in you coming of side these and some tell that, also events area I on other Day. show of

Ted Jackson

kind flow your driver to levels the we to think cash mean mean, regards of it quarter. in to flow. I your back because want Okay. there that not it's with of operating this getting cash a guess you of just what discussion year. at regards as kind through your with regards is and roll kind we working kind forward is your I And last view out about of just anything a I'm see working to free like payables? capital to topic of trending your inventory into your receivable then questioning circle how first how I capital jumped of should there's my quick I with it's

Dick Warzala

focus year. certainly, the it's this of organization And a Sure.

about the as right QX from issue talked we've us capital conversion that for past standpoint. improve. QX usually the seasonality a critical to and think consumption is about tend drives and turns working I in

that So by the and And it's driven better past fear to generate in that in think in just continued of be us working turns mere or a years. given a of by volume. again, I the think fact supply managing cash closely. part it improvement the of year, has than the do intend QX we this to we higher that capital to much saw allows again, fair the amount going environment I couple those chain And that

I for was how very I But that item. would improvement again, by To out at the and look the call of that's very, I higher support QX inventory key So levels businesses. the improvement is with stable right? would encouraged returns to in QX me

Ted Jackson

maybe finally turns Well, the and to as we sort Is get this going year was or ask we what I a turn to is that year? through towards you we next by chance pickup is really going pre-pandemic forward? that something had see levels go there a can but not that expect in would this year improvement of back see nice turns

Mike Leach

Yeah.

what those certainly the think drive there move to trying continue from a that portion of higher relative the good drive to of and past lot though the intent pre-pandemic that to I in levels. we've that's to it about I right? X.X% volume talked is going leveraging and us the to we're Sustaining way X.X% think a again the gets

not the from more to there's will a cost products products. inflationary we're that go But out as headwinds also or is chain driven as the lower volume of it's the a That and an standpoint. well describing certainly, supply others what from into We're markets than standpoint. again, the be There's it aspect well. fighting nature So as higher of right volume battles that what certainly of woods still reality whether better. that. we're having they're terms And lot producing we're by in are

Dick Warzala

can Yeah. Tom. more I that, some to add

on And most importantly it it. was And can supply a and hands AST toolkit that on But our emphasis it chain. I some we I'll we great tell our had this think focus area a It great have tools focused it's is it. just opportunities focus Mike's on. of provides certainly entire team to them GM is you on mentioned meetings and that to reemphasize strong one I deck all our year.

And only up. was past, able missing of we're well. in. occurred to couple up parts as were your of there parts a that inventory few chain sitting start drive consume of has that the would ship And parts lot supply your being a a getting as to the dues in that because And inventory crunch the then past rest move them that couple couldn't stragglers of do to to inventory as and has that it a took those able again flow parts that that drove with

say that's real It's very area. and working are chain that a huge So We bit of our is and is there's I on coming improving tied that capital and team on that a on all lead focus company. improving. a down quite would the There's encouraging realized clearly entire emphasis it. times and knows Supply up signs.

and create well certainly more in a acquisitions it So growth And we to cash expansion, continue position the that I where to a the margin significant helpful were, what turns our us strategic have put for can here giving down do and does get top everybody think those calculation ability and as pay to solutions. very generate ability to story line our and as working been improvement. strategic on to our debt back that do it's us capital in the

So ahead. tell I great excited There's it. you about would we're opportunities

a see pay well-focused, normal rather than is we do we operating team understands scramble. love opportunity just could and to the environment Our to get can just us back to where would what do

question. So a great

I think it focus. a is

will We will improvement. see and we it be continued focused on

Ted Jackson

ton it. of Again, Congratulations but I’ve nice it questions, really, was on quarter. really done

Mike Leach

Thank you, Ted.

Dick Warzala

Ted. Thanks

Operator

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

Dick Warzala

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

always, talking in at of you Institutional will Investor to be with after day. Thank again please XXst. all interested that forward out great Wednesday, on results. we Otherwise in-person and any Craig-Hallum your for have as Conference reach those second time feel a For at quarter to participating are the our of and to Minneapolis we you participation May look free XXXX you us

Operator

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

disconnect. may You now

Allient (ALNT) 4 May 232023 Q1 Earnings call transcript