ALNT - Earnings call 2 2023

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Operator

Good day, and welcome to the Allied Motion Technologies Second 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 Mr. Craig Mychajluk, Investor Relations. Please go ahead, sir.

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

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

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

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

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

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

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

Richard Warzala

Sadly, a welcome, comments, I everyone. Thank everyone. call to ago Smith, some XX CEO after and be the to past brought something with the I'd I our Allied halfway forever that, off-script Board, one of the that Chairman relate for CFO, have pass into this I as brief me years to first like Dick was former And you, like and illness. time would start the Sunday and way grateful. Craig, will Dick that at

great of and exhibited do the and he company. a honesty, was was friend, integrity right levels what willingness highest the Dick to partner for

Beyond and always that, first. was Dick a family family man came

and Our thoughts Rest in Dick and Dick. to will peace, his prayers out go family.

We miss you will be will not and forgotten. you,

Now have I'll start written with we as the script here.

translated and first successfully delivering strategy leverage, operating continue which cash off, measurably improved generation. sales bottom and line strong to our execute into by organic double-digit record we a growth So with solid

with highlighted power strength strength with a HVAC Our and increased continued XX% automation and XX% industrial of continued quarter. X handling our top What over systems. line oil second for gas quality demand drove growth demand vehicle targeted our our industrial markets, for solutions markets, by each year's reflected which material in last projects, and strong industrial and

from shifting by our lower programs, also markets acquisitions were due in to sales increased automotive partially and lead to Defense demand X% some of during that Europe. ramping grew contributions the long program by of commercial the market benefited backlog. Aerospace in incremental projects offset We agricultural Vehicle defense continued timing. XX% quarter vehicle due and

operating points. higher quarter, mix, income are was overall. Driving to contraction in which $XX the margin XXX by X% impacted delivered we was record focus. saw a of margin while with up were in And operating out the performance some a we up as markets leverage X.X%, medical basis of million seeing play Lastly, margins gross continues we largely which our be for

$XX.X generated $X.XX per was income We reduced the income operations significant an up to per our operating during per share improved $X.X balance million per of quarter. increased On to $X.XX by the share net share. debt and XX% share. adjusted million cash Given net from performance, basis,

down backlog talk up our about sequentially, later first emphasizing in market, the this since performance the to within will were orders presentation. in while demand further Our quarter the supply I improvements due the was chain. continued

positioned first has half us The for XXXX a of strong year.

energized continued executing the more successes strategy for the is let financials. team me growth the turn entire by it to into over well a Our operational expect we of review the in-depth to and and that, company, continue Mike throughout our future. With

Michael Leach

Thank you, Dick.

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

a in A our TTM trailing end space occurred rate million. revenue change. XX-month Second the quarter growth revenue that exchange strong was impact behind with XX%. the the change market, to $XXX.X reduction touched backlog by the The portion $X.X increased revenue by and a of record million mix up XX% shows in the Dick is in to customers significant was revenue quarter. Slide driven XX% the on unfavorable our Industrial million in Organic fluctuations or X $XX on as basis highlights quarter. of up for industrial see on XX% still in and is the be and which market markets market was our is sales which specific total One of channel, sales has growth of total The XX% targeted remains drivers our well. a our our to largest demand. our solid and small other distribution, component sales. industrial growth markets continues markets continued identified. quarterly making

market and and agricultural and XX-month contributions Medical growth has and in A&D. acquisitions Eastern more sports Europe, on current slightly Solid gains from program than substantial power weaker defense up basis growth, demand by as was organic driven events. benefited geopolitical revenue offset demand vehicle medical contributed in the truck from to growth performance in timing commercial automotive, the trailing mobility a market

margin period. by Consistent by stated we Slide strategy of with executing the from points year more volume remaining XX.X%, on quarter prior are objectives, and annualized our global you supply disruptions. the in making chain on highlighted chart As see unfavorable our was XXX the was than our progress Slide down X, gross right the X. second Higher basis offset mix can

on Slide X. Moving to

the of increased the strong X.X% up revenue as in our along of present and to results second which points. see XXX operations XX.X%, You as leverage points. On income operating revenue of our or costs XX% basis adjusted and we our a million growth sales, down and net $XX were expenses X, can a income, was income record GAAP percent Operating quarter results. XXX EBITDA adjusted basis net Slide with inherent

better useful of as of diluted benefits as net our from reflects per quarter intangible points acquisitions XX.X% Our an XX% We cash as or $X.X organically. Net was the due of million company's on to inclusive quarter well which have rate down certain and noncash use for And in our adjusted of diluted and performance. Slides mix. tax to been progress and provides an to was sheet flow. year and basis, second for in operating X net is million which to tax the assets, income income of XX balance and for EBITDA XXXX income XX%. determining approximately believe EBITDA full our through per it overview $X.XX strategy XX.X% amortization power, items, or fully believe we expected adjusted $XX.X a understanding earnings discrete or share, grow was share. EPS of the which internal million rate XX%. the $X.X an adjusted income up The up our slightly increased tax Adjusted $X.XX We revenue, XX increased metric and the adjusted XX% effective XX% basis XXXX. diluted be geographic to provide to adjusting

a was the second the of As first approximately Total year-end net end quarter, was of the cash reminder, which quarter. million, $X.X cash $XXX about capitalization. debt debt million acquisition, or our was of at we made deferred for a million XXXX. prior our to Debt $XXX down position payment net million in reflected from XX.X% cash in $X.XX

leverage last continue and adjusted improved capital $X.X this with net X.XXx. due during due period. inventory significant $XX from year. CapEx largely cash projections, of historical consistent and generated $XX million prior to cash expenditures million, higher XXXX bank turns. Based we to increase were with cash $XX in flow increase to range quarter to trends. to on drive customer we stronger million focused ratio the operations our our under projects reflects project the Our cash new from expect year timing, income usage Inventory down a were on and million strong turns was million Year-to-date, Xx expectations to million. between The second We flow year improved capital working compared year-to-date, to from $XX.X now $XX X.Xx

Dick. to of now back days, DSO largely Our turn I'll the stable customers. With that, reflecting mix call over was XX and at timing

Richard Warzala

Mike. you, Thank

million Turning of our of book-to-bill $XXX levels million. to quarter, the nearly second Slide backlog XX shows and a resulted in backlog orders of ratio that orders $XXX a in X.Xx and approximately

there be Although challenges platform. with long-term some weaknesses some excellent in growth we see continues and our Europe, still global for of creation to opportunities pockets across value near-term

long first in reduce X% lead and as the several reflecting improvements sequential decreased we accelerate supply the backlog products. of continued Our from XXXX, of quarter shipments chain our the times lead

expect below the mentioned of our the to the we as book-to-bill is The convert drops our decline coming X within slightly time quarters majority quarter, we backlog to last As backlog to sales over X. next months. ratio

our within our to markets, solutions. material XX. is industrial and should from Demand benefit quality power market continue Slide strong handling levels which around relatively increased continue Turning to presence to industrial automation, expected at

a leverage several the for On product the defense side, we are comprehensive with and emerging our increase ability develop inquiries applications. significant portfolio to solutions new to experiencing

as to on normalized environment instrumentation-related Our the within markets surgical medical are schedules markets. from customers our vehicle sales lastly, end our still growth supply improve returned ramp demand and modest markets anticipating chain And we and year beyond. and have a to this up focused continues more

driving paying quarter, conversion and this debt cash demonstrated we focus. As the is down

out as will planned continue we of note, our opportunities debt will as pipeline, key our a support actively to that overall element M&A M&A potential build efforts On are grooming growth focus reduction we activities. We our strategy. these

continue the have strategy While we uncertainty remains our into well we that can future. global execute in the successfully proven markets, to confidence

leverage Before ringing will the Day you at interested, August the Investor hosting of accommodate to: our Investor NASDAQ for Q&A, taking reminder closing on at expand to event plan global And and objectives. for a last our and two, actions more capabilities Day but further Wednesday, will about ensure just the to be understanding with you three, open we goals of our in for our bell. The company our us least, execute for how open questions. we up well better our visit share; our and XX:XX to a.m. on the line we those event. will opportunity Analyst the hear inaugural the The into are a will achieve number off you proven kick the continue to XX. and we Relations a past markets; one, for Eastern process manufacturing operator, engineering great our future. Please that are available details NASDAQ not and gain and be market grow success Investor With leverage and website strengthen our help let's more we that,

Operator

Group. [Operator come question will Palm the from And first Instructions] Capital Greg with Craig-Hallum

Greg Palm

news hear Sorry the Dick. to about

So condolence all is and family of his you.

maybe I So or just bit start like little areas. certain out in of what can seeing by guess sounds you're verticals recapping just of maybe there. softening geographic we a It kind

from So there. time, what seeing and color real of more maybe bit little go we on then a you're kind can just

Richard Warzala

I that we couple of of to I say adjustments chain was and incoming intake some you that we prepared would would decrease. as the inflated somewhat probably see to last over schedules were and that here Sure. started normalize overall, that supply order so years would certainly and expect to forth orders the the mean, well

seem have on we be that. downs hand, in will ups concerned we into there our are positioned, really experienced be will that other and noted see, We the and Greg, think increase pretty the markets. as is to going probably very well XX% by in of future. What not some some But I revenues, we

the may can see us we up the so and And for we forth. less future. here at we still volatility them I the geopolitical think concerns we've think numbers have But And conference levels see We very Mike quarter some other into what past. hand, some we that so where exhibited were concerns. overall, very more had here delivered than our the on portfolio the and call, past. strong some as experienced we the in put the doing quarter-to-quarter growth. we here -- strong the covered and those feel we've continue that to markets But as I continue said we've in see we we during strong confident are diversified for mentioned quite opportunities

Greg Palm

talked past have you've a feel are? it's I of thing? years. of that kind few Do some is elevated order And levels position a in customers? or more demand of you inventory the you customers know in or past about quarters at activity of that just I they're sense mean, a like some what a where Or just concern real-time

Richard Warzala

our but But that. you to upon it's communication I would a there's we have excellent by are some say the mean, customers, some seeing that customer. were conservative customers demand just of something others to and pipeline. would based varies have frankly. for really expected, they reshuffling, were I longer with just we time we And more quite blanket and than adjustments some mature periods It in place

our So off future. I into or seeing a major going is that not away no part on We're don't the that. business concern drop -- there's just there's

I as each customer it's past them thing, And certainly when have shortages differently, the based to entered of much things, say as we same would come But this customer. longer so really, it's the of earlier orders lead supply experienced also these had and and on their to and of I bit And in them. you times forecast, historical we that drastic would have seen as depends chain trends the expected, being say really that business normal but not out upon is manages little it a adjustments. by we

Greg Palm

Yes.

about basis. good where good annual you leverage. another margin you've margins, on solid Operationally, an talked operating I Okay. quarter gross know expansion saw

or can your I with think do of think you still volume more a you you've ways still there's Are of of on that targeted sort XXX basis points. outlook? demand comments curious, chain that comfortable some some muted you you in over past light take Or some basically elevated the still the costs we've just of incurring out? I'm are point? that year or And about those seeing ended this at talking cost supply been have

Richard Warzala

of here. No, questions couple I think -- a okay,

part overall we've off, and consider come First think we've to margin. you've margin. stated let's to as well as increase of goal got stated -- gross back And the that margin was operating I that our gross

the margin basis that's we So So make we going will that's really that look let's the of give really on improvements mix. is combination per forward. Operating to we're think what in and points the that take quarter-to-quarter focus that future okay? and margin will margin from or us operating sure gross clear difficult XXX challenge year, always on a at. And is that on based that's what's year-over-year sometimes I

of others it, markets in serving terms we -- gross markets certain involved that that. call on those on that mean, solution the mix the higher are the of we obviously, based the based we're have upon, in depending sold, the much margin as margins I'll opposite as the content the as well our in IP will set. you of and lower I be So certain and have know, products, and products

level -- set a with let's going margin commitments to meeting of margin here are say gross points let's So think we XXX level, operating and for combination and I improvement, our okay? basis proceed

Operator

question will Ted come Northland with Securities next Jackson (sic) The Securities ]. Northlink from [

Edward Jackson

Congrats, quarter, solid had very guys. a

you in of that all up feel able organic the on you I normalizing the chains second on continue it, Q&A So that show of what orders with you're to a and that But following an year. would, up around I commentary. going just floating to understand couple to out One, questions. prior of also pretty be call dialogue? from some, half supply shipments. picked the kind because to regards and growth if Is confident basis

Richard Warzala

we're organic mean that confident think from we continue grow. can standpoint, I I Yes. an growth to certainly

some waiting backlog that Okay. What that -- based just see based in chain would we that on our normalized and we're quarter-over-quarter. of you I had is see up ship, and was past, I I think want and seasonality seeing forward. free that we're think then more the for going what I that in items on comment in rate, there we're shipment supply quarter-over-quarter the saying to clarify business seeing more to sit a And

you our lower closer the Now been down as happens cyclical But for in get Many know for has more really, what quarter-over-quarter. crapshoot fourth and multiple August. what because us in in past quarter, customers. we'll based less weeks is countries seeing tendency upon be that's we shut a let to and QX. always with shipments in we're a stability Europe

some of guess say be is to we So is to I going else expectations you or in that and saw we that's But so would cyclicality saw there. August, July everyone I the see that do we to seasonality and weakness muted, the okay? past the

Edward Jackson

Okay.

to quarter? backlog, clarify look With if regards your Just -- you to how if we third backlog were of of kind little bit. a help your in ships backlog, in much

Richard Warzala

Well, reported the days. say would dates have say have you our -- we backlog our we what's I in backlog -- when or our because items release in here's and the to firm that which production only backlog

So by it customer. varies

a have we'll officially -- quarter. you wash a planned out don't very that's into forecasted on pretty when those. We book but release, firm we it so to short are call lead see Those a our and backlog, order pretty time or much order they in and really when period depending the production have, ship that goes of times date, within the it much

the in third as go that much for quarter, point. blanket our and XX% okay? the quarter, is this plus in pretty quarter So consider at well question, would the third it's orders locked your within come you answer will to So backlog, if

Michael Leach

that the it ship backlog, next of Yes. months. X We what's it's right? most hasn't X will in our changed, within backlog to the The have stated dynamic of

Edward Jackson

And over, shifting a some they performance is Okay. channel earlier difficult and in curiosity, the for and week they honestly, reported distribution Rockwell as of I just then had you results well. stock know out in the

the given I on within things was center that put to thing terms a that think them Allied of distribution during there of need is only about in probably to has quarter Rockwell, we bit One front? of the place that some played for it out and they that that, And impacted a your Motion, and this new anything curious, regards in was timing anything is there really that revenues. that with to hiccup caused little exposure and

Richard Warzala

really. Not

Edward Jackson

Okay. the press With regards It's been it, current Dick, this to And X because of that quarter, the Europe kind certain to pretty is if would. probably you kind Or kind kind just of regard well, then, say, you there it about of a of discussion last -- the same softness maybe pockets to continuation with releases. of believe, any consistent in to, and that's Ukraine regards the of would, relative relative reason weakness is shift affected of with war? first quarter? generalized if

Richard Warzala

I What upon based surprisingly, that and is -- great it to booking forth. so the so X you really the that had And would the Yes. some we bookings and we this, forth. X and on quarters seeing weren't some in And Europe, in a say is impact magnitude. to expected

softness additional have some work strong there's levels, We still but off them. the to seen booking backlogs in

little bookings Orders softness strong. So here but has placed. -- But bit are the holiday it's noticed. been that in again, of last still season impacting the Ukraine and got months is Europe. have energy too, the I few reality were we've prices, the you've remained in war, a think, There

predict. to that's hard So one a

Edward Jackson

Yes.

just question only My the that You're last vehicle that problem. not the business. one has is on

side there, and the forward of commercial because and vehicle market. there's it, is which on the you're ag vehicle clearly the offset clearly But equipment equation, call from emission things, stuff. ag of business the pull-through commented and of been within commercial the strength rule of small changes it's the some in You seeing demand side some,

color do Given commercial line of aggregate? regards with could of a out we you vehicle to 'XX? exposure maybe little relative that item part the performing dynamic, market and to business roll see give And that that into the how that your the market within 'XX as vehicle is you

Richard Warzala

commercial Sure. Well, increase. say overall significant, overall, specifics about have the we we're into us to impact market, about of would going vehicle talk sales for on very you automotive is the not that I okay? seen not what percentage We

It talk which the Europe, We we the much up. demand agriculture have which the the say that in are mute which is offset, volume essentially it and equipment with are down. going we OEMs our greater a will growth. on in working of is some seen Where programs I'll shut and Eastern magnitude, about that

the until there on has So shipments us versus in of reduction impact that automotive ramp-up. a level on greater commercial the

slower and substitute equipment Europe to demand agricultural for a a gladly about expected in have when we happy so to growth have would Eastern definitely So company. be so say, a, were back favorable talk And impact impact the impact in let's automotive, be forth, in see would we the and we and margins, the would go construction with swap that that what perfectly to those forth levels and positive that mix equipment would that. and the and

little you are future. that volume, we've And are the like the teaches that, softness, that are that would bring. to cost commercial So a market always impacts overall areas these markets discipline just core the really that and our what's experiencing automotive to X growing. our I that other company markets intention continue defect And and in is our while the And strength. said of it do other to the diversification the benefits of the mentality some unit on the in is say and we can positive the you that

that increase And the powerful answer we that an I overweighted increase. have market. that in weighted, -- over offset that It's be don't increases. to let's okay? So it. we hope those understand that see to is benefits, But seen do sure you area we'll to but think want the enough that realize your see make in it's helps than don't to question, also we I more We get continue

Michael Leach

new programs we is the And couple the coming last of income been discussing for the that have years. from

Richard Warzala

coming. Correct. Yes, they're

Operator

[Operator will Gabelli Kearney question next with Our Instructions] Funds. come Brett from

Brett Kearney

follow to new was I program on the awards. up going vehicle,

the globally. kind are if You on kind products historically whether there the the just to with to remind maybe of still timetables. And these could product on you're But of us program programs Maybe there? the in prepared kind set it right nicely be you you've and covered ramp discussion if customer also, have term on developed? And be you those original your customers you and of remarks some of some supporting in there. some opportunities launches schedules then growing done new of seems seem that guys perform as there relationships longer the

Richard Warzala

are those through I all Yes. programs delayed COVID. mean,

And let's so forecast definitely would say, for behind. that the without supply provided I And original years were we were COVID, and you we that tell look we're at without and, probably programs pushed. they X chain

in moving okay? area. base revenue So what tell our be okay? matter annual will in It's moving they full the has you and nothing of for that that pushed the level next delayed, what would a we've terms program at moving nicely. of ramping are be in were expect was and forward So but ramp-up So we levels we to clearly Programs what it's that just be they're up, year, they out at shipment stated new I we'll forward, are stated, changed forward.

Brett Kearney

Excellent.

applications side. insulate OEM the like medical place guys the medical you from seems there's I of we've the that you're heard destocking Maybe on are and one, channel. think but last folks the there some kind what side It industrial topic the just we've some you, covered negatives of inventory of on on seeing business? then maybe And adjustments positives the Okay. across taking

Richard Warzala

and the Yes. take X.X has a that look back I of the or surgical. years, of -- COVID and shipping. those normalize and and past on that, surgical, were I instrumentation course, within period including mean, period surgical back equipment in they're what it, COVID the surgical year And you time you that's so time, -- to products robotics time. other we'll kind think at one and of equipment a a the We're other that say the shipping to, during were would I call you I mean, our surgical our they I said not goes when oncology go normal we've of here, tracking tell and last nicely. that been non-COVID -- all

So But areas. stable. It's hand, other not some but if seeing right? in it. other we're -- there's know X% steady. And I say So on rate should where correction think that and it, seen it's the growth higher. probably all there the pretty be growth certainly we're would the than to up our seeing it's for rate been And overall I maybe drag really year-over-year. going don't overall may company I you It's we've that restocking, occurring, that's not some we're on on a be

Operator

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

Richard Warzala

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

again to reach to XXXX you our free all forward quarter of look we out feel after please time, third always, results. and at with As talking any

In on please Conference September at to Northland in Investor XX Nasdaq, for us join the addition Day Capital have at your Markets Minneapolis. Thank day. the a participation, great you and

Operator

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

disconnect. now may You

Allient (ALNT) 3 Aug 232023 Q2 Earnings call transcript