- Revenue increased 16%, or $12.6 million, to $92.6
million
- Gross margin expanded 130 basis points to 30.7%
- Operating income grew 22% to $7.6 million
- Earnings per diluted share up 4% to $0.47
- Another quarter of record orders and record backlog
Allied Motion Technologies Inc. (Nasdaq: AMOT) (“Allied Motion”
or “Company”), a designer and manufacturer that sells precision and
specialty controlled motion products and solutions to the global
market, today reported financial results for its second quarter
ended June 30, 2019. Results include the TCI, LLC (“TCI”)
acquisition that was completed December 6, 2018.
“The One Allied strategy to gain market share through our
emphasis to provide engineered solutions for customers in selected
target markets is the primary driver of our continued growth.
Expanded utilization of our Allied Systematic Tools (“AST”) to
improve quality, delivery, cost and innovation is contributing to
our improved margins and helped to offset the increased pricing
from a supplier of a key electronic assembly. Our recent
acquisition of TCI has strategically expanded our addressable
market and was a strong contributor to sales and earnings,”
commented Dick Warzala, Chairman and CEO.
He added, “We achieved yet another record level of orders and
backlog in the quarter as we continued to have strong order flow in
the U.S., partially offset by some general economic softness in
Europe. Our strong backlog provides us confidence for the near-term
as we continue to focus on the long-term by investing in the
development of Allied Motion multi-technology solutions that
‘Change the Game’ and create value for our customers.”
Second Quarter 2019 Results (Narrative compares with
prior-year period unless otherwise noted)
Revenue of $92.6 million was up $12.6 million, or 16%, and
reflects growth across all of the Company’s served markets. Revenue
increased more than 18% when excluding a $2.0 million unfavorable
impact of changes in foreign currency exchange rates. Organic
growth was more than 3%, which reflects double-digit U.S.
performance, partially offset by softer market conditions in
Europe. Sales to U.S. customers were 58% of total sales for the
quarter compared with 52% from the second quarter last year, with
the balance of sales to customers primarily in Europe, Canada and
Asia. The Company believes that Revenue excluding foreign currency
exchange impacts, which is a non-GAAP measurement, is a useful
measure in analyzing organic sales results. See the attached table
for a description of non-GAAP financial measures and reconciliation
of Revenue to Revenue excluding foreign currency exchange
impacts.
Gross margin expanded 130 basis points to 30.7%, as a result of
higher volume, favorable mix across a number of served markets, the
recent acquisition of TCI, and the lessening of atypical items that
had negatively impacted the sequential first quarter gross margin.
The supplier identified in the first quarter that is discontinuing
operations and subsequently increased their prices for any new
orders is still a headwind that will likely impact the Company
through the end of 2019 given the current level of inventory.
Operating costs and expenses as a percent of revenue were up 90
basis points to 22.5%, largely due to higher selling costs related
to additional personnel and incremental intangible asset
amortization related to the TCI acquisition. General and
administrative expense as a percent of revenue decreased 10 basis
points to 10.3%, and engineering and development as a percent of
revenue decreased 10 basis points to 6.1%, despite significant
additions to the engineering group to support Allied Motion’s
growth.
Operating income increased 22% to $7.6 million as operating
margin improved 40 basis points to 8.2%.
Interest expense increased to $1.4 million on higher debt
balances that funded the TCI acquisition.
The effective tax rate was 28.0% compared with 27.4% in the
prior-year period. Net income increased to $4.4 million, or $0.47
per diluted share, compared with $4.2 million, or $0.45 per diluted
share. The Company adjusted its effective tax rate for fiscal 2019
to be in the range of 28% to 30%.
Earnings before interest, taxes, depreciation, amortization,
stock compensation expense and business development costs
(“Adjusted EBITDA”) was $12.1 million, up $2.1 million or 21%. As a
percent of sales, Adjusted EBITDA was 13.1%, up 60 basis points.
The Company believes that, when used in conjunction with measures
prepared in accordance with U.S. generally accepted accounting
principles, Adjusted EBITDA, which is a non-GAAP measure, helps in
the understanding of its operating performance. See the attached
table for a description of non-GAAP financial measures and
reconciliation table for Adjusted EBITDA.
Year-to-Date (YTD) 2019 Results (Narrative compares with
prior-year period unless otherwise noted)
Strong demand for Allied Motion’s products and solutions from
all the Company’s served markets resulted in revenue of $186.5
million, up $30 million, or 19%. The impact of FX fluctuations was
unfavorable $5.2 million for the year-to-date period. Sales to U.S.
customers were 56% of total sales compared with 52% for the same
period last year, with the balance of sales to customers primarily
in Europe, Canada and Asia.
Gross profit increased 22% to $56.1 million, and gross margin
was up 70 basis points to 30.1% largely due to higher volume,
favorable mix and the TCI acquisition.
Operating costs and expenses as a percent of revenue were 22.1%,
up 70 basis points. As a result, operating margin declined 10 basis
points to 8.0%.
Net income was up $0.5 million, or 6%, to $8.9 million. Adjusted
EBITDA for the period was $23.9 million, up 21%. As a percent of
sales, Adjusted EBITDA was 12.8%, up 20 basis points.
Balance Sheet and Cash Flow Review
Cash and cash equivalents were $10.5 million compared with $8.7
million at the end of 2018. Total debt was $123.3 million as of
June 30, 2019, up $0.8 million from year-end 2018. Debt, net of
cash, was $112.8 million, or 50.4% of net debt to
capitalization.
Year-to-date capital expenditures were $6.4 million and included
investments for productivity improvement and growth initiatives.
The Company expects to invest $15 million to $18 million in capital
expenditures during fiscal 2019, with the majority focused on the
previously announced Vehicle market project wins, off-road vehicle
steering capabilities and incremental investments related to the
addition of TCI.
Orders and Backlog Summary ($ in
thousands)
Q2
2019
Q1
2019
Q4
2018
Q3
2018
Q2
2018
Orders
$
95,317
$
93,744
$
84,911
$
85,081
$
86,238
Backlog
$
133,507
$
130,646
$
131,997
$
115,713
$
111,170
The year-over-year increase in orders and backlog reflects
strength across all the Company’s served markets and the
incremental orders and backlog from the acquisition. Foreign
currency translation had an unfavorable $2.3 million impact on
second quarter orders compared with the prior-year period.
Backlog reached a record level, increasing 20% over the
prior-year period and 2% from the sequential first quarter. The
time to convert the majority of backlog to sales is approximately
three to six months. A nominal amount of the $225 million of
previously announced new Vehicle market awards are included in the
backlog. The Company is currently investing in these programs and
expects to begin shipments at very low levels by the end of 2019,
with full rate production by the end of 2021.
Conference Call and Webcast
The Company will host a conference call and webcast on Friday,
August 2, 2019 at 10:00 am ET. During the conference call,
management will review the financial and operating results and
discuss Allied Motion’s corporate strategy and outlook. A question
and answer session will follow.
To listen to the live call, dial (201) 689-8263. In addition,
the call will be webcast and may be found at:
https://www.alliedmotion.com/investor-relations/
A telephonic replay will be available from 1:00 pm ET on the day
of the call through Friday, August 9, 2019. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13692058 or access the webcast replay via the Company’s website. A
transcript will also be posted to the website once available.
About Allied Motion Technologies Inc.
Allied Motion (Nasdaq: AMOT) designs, manufactures and sells
precision and specialty controlled motion products and solutions
used in a broad range of industries within our major served
markets, which include Vehicle, Medical, Aerospace & Defense,
and Industrial. The Company is headquartered in Amherst, NY, has
global operations and sells into markets across the United States,
Canada, South America, Europe and Asia.
Allied Motion is focused on controlled motion applications and
is known worldwide for its expertise in electro-magnetic,
mechanical and electronic motion technology. Its products include
brush and brushless DC motors, brushless servo and torque motors,
coreless DC motors, integrated brushless motor-drives, gear motors,
gearing, modular digital servo drives, motion controllers,
incremental and absolute optical encoders, active (electronic) and
passive (magnetic) filters for power quality and harmonic issues,
and other controlled motion-related products.
The Company’s growth strategy is focused on being the controlled
motion solutions leader in its selected target markets by
leveraging its “technology/know how” to develop integrated
precision solutions that utilize multiple Allied Motion
technologies to “change the game” and create higher value solutions
for its customers. The Company routinely posts news and other
important information on its website at
http://www.alliedmotion.com/.
Safe Harbor Statement
The statements in this news release and in the Company’s August
2, 2019 conference call that relate to future plans, events or
performance are “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995.
Forward‑looking statements include, without limitation, any
statement that may predict, forecast, indicate, or imply future
results, performance, or achievements, and may contain the word
“believe,” “anticipate,” “expect,” “project,” “intend,” “will
continue,” “will likely result,” “should” or words or phrases of
similar meaning. Forward‑looking statements involve known and
unknown risks and uncertainties that may cause actual results to
differ materially from the expected results described in the
forward‑looking statements. The risks and uncertainties include
those associated with: the domestic and foreign general business
and economic conditions in the markets we serve, including
political and currency risks and adverse changes in local legal and
regulatory environments; the introduction of new technologies and
the impact of competitive products; the ability to protect the
Company’s intellectual property; our ability to sustain, manage or
forecast its growth and product acceptance to accurately align
capacity with demand; the continued success of our customers and
the ability to realize the full amounts reflected in our order
backlog as revenue; the loss of significant customers or the
enforceability of the Company’s contracts in connection with a
merger, acquisition, disposition, bankruptcy, or otherwise; our
ability to meet the technical specifications of our customers; the
performance of subcontractors or suppliers and the continued
availability of parts and components; changes in government
regulations; the availability of financing and our access to
capital markets, borrowings, or financial transactions to hedge
certain risks; the ability to attract and retain qualified
personnel who can design new applications and products for the
motion industry; the ability to implement our corporate strategies
designed for growth and improvement in profits including to
identify and consummate favorable acquisitions to support external
growth and the development of new technologies; the ability to
successfully integrate an acquired business into our business model
without substantial costs, delays, or problems; our ability to
control costs, including the establishment and operation of low
cost region manufacturing and component sourcing capabilities; and
other risks and uncertainties detailed from time to time in the
Company’s SEC filings. Actual results, events and performance may
differ materially. Readers are cautioned not to place undue
reliance on these forward‑looking statements as a prediction of
actual results. Any forward-looking statement speaks only as of the
date on which it is made. New risks and uncertainties arise over
time, and it is not possible for us to predict the occurrence of
those matters or the manner in which they may affect us. The
Company has no obligation or intent to release publicly any
revisions to any forward looking statements, whether as a result of
new information, future events, or otherwise.
FINANCIAL TABLES FOLLOW
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per
share data)
(Unaudited)
For the three months
ended
For the six months
ended
June 30,
June 30,
2019
2018
2019
2018
Revenue
$
92,630
$
79,981
$
186,526
$
156,557
Cost of goods sold
64,208
56,464
130,442
110,486
Gross profit
28,422
23,517
56,084
46,071
Operating costs and expenses:
Selling
4,136
2,943
8,229
5,640
General and administrative
9,569
8,336
18,519
15,792
Engineering and development
5,676
4,963
11,483
9,918
Business development
3
165
56
316
Amortization of intangible assets
1,430
878
2,862
1,762
Total operating costs and expenses
20,814
17,285
41,149
33,428
Operating income
7,608
6,232
14,935
12,643
Other expense (income):
Interest expense
1,435
602
2,615
1,216
Other (income) expense, net
(1)
(200)
(19)
(94)
Total other expense, net
1,434
402
2,596
1,122
Income before income taxes
6,174
5,830
12,339
11,521
Provision for income taxes
(1,729)
(1,599)
(3,424)
(3,092)
Net income
$
4,445
$
4,231
$
8,915
$
8,429
Basic earnings per share:
Earnings per share
$
0.47
$
0.46
$
0.95
$
0.91
Basic weighted average common shares
9,408
9,268
9,378
9,241
Diluted earnings per share:
Earnings per share
$
0.47
$
0.45
$
0.95
$
0.90
Diluted weighted average common shares
9,456
9,356
9,419
9,321
Net income
$
4,445
$
4,231
$
8,915
$
8,429
Foreign currency translation
adjustment
548
(3,532)
(339)
(1,845)
(Loss) income on derivatives
(436)
247
(698)
851
Comprehensive income
$
4,557
$
946
$
7,878
$
7,435
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except per
share data)
(Unaudited)
June 30,
December 31,
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
10,463
$
8,673
Trade receivables, net of allowance for
doubtful accounts
of $555 and $530 at June 30, 2019 and
December 31, 2018,
respectively
51,799
43,247
Inventories
52,420
54,971
Prepaid expenses and other assets
4,201
4,003
Total current assets
118,883
110,894
Property, plant and equipment, net
49,780
48,035
Deferred income taxes
506
341
Intangible assets, net
65,446
68,354
Goodwill
53,153
52,639
Right of use asset
18,164
-
Other long-term assets
4,618
5,038
Total Assets
$
310,550
$
285,301
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
25,032
25,867
Accrued liabilities
20,142
18,722
Total current liabilities
45,174
44,589
Long-term debt
123,288
122,516
Deferred income taxes
3,516
3,860
Pension and post-retirement
obligations
4,328
4,293
Right of use liability
15,206
-
Other long-term liabilities
7,838
8,230
Total liabilities
199,350
183,488
Stockholders’ Equity:
Common stock, no par value, authorized
50,000 shares; 9,600
and 9,485 shares issued and outstanding at
June 30, 2019 and
December 31, 2018, respectively
35,697
33,613
Preferred stock, par value $1.00 per
share, authorized 5,000 shares;
no shares issued or outstanding
-
-
Retained earnings
85,058
76,718
Accumulated other comprehensive loss
(9,555)
(8,518)
Total stockholders’ equity
111,200
101,813
Total Liabilities and Stockholders’
Equity
$
310,550
$
285,301
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the six months
ended
June 30,
2019
2018
Cash Flows From Operating
Activities:
Net income
$
8,915
$
8,429
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization
7,327
5,622
Deferred income taxes
(491)
(282)
Stock compensation expense
1,540
1,094
Debt issue cost amortization recorded in
interest expense
87
74
Other
(166)
133
Changes in operating assets and
liabilities, net of acquisition:
Trade receivables
(8,692)
(7,639)
Inventories
1,973
(6,840)
Prepaid expenses and other assets
(289)
(504)
Accounts payable
(795)
5,788
Accrued liabilities
(557)
1,511
Net cash provided by operating
activities
8,852
7,386
Cash Flows From Investing
Activities:
Purchase of property and equipment
(6,401)
(5,555)
Cash paid for acquisition, net of cash
acquired
-
(13,312)
Net cash used in investing activities
(6,401)
(18,867)
Cash Flows From Financing
Activities:
Borrowings on long-term debt
7,695
14,252
Principal payments of long-term debt
(7,000)
(2,500)
Dividends paid to stockholders
(605)
(522)
Stock transactions under employee benefit
stock plans
(710)
261
Net cash (used in) provided by financing
activities
(620)
11,491
Effect of foreign exchange rate changes on
cash
(41)
(271)
Net increase (decrease) in cash and cash
equivalents
1,790
(261)
Cash and cash equivalents at beginning of
period
8,673
15,590
Cash and cash equivalents at end of
period
$
10,463
$
15,329
ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures (In thousands)
(Unaudited)
In addition to reporting net income, a U.S. generally accepted
accounting principle (“GAAP”) measure, the Company presents Revenue
excluding foreign currency exchange impacts and Adjusted EBITDA
(earnings before interest, income taxes, depreciation and
amortization, stock compensation expense, and business development
costs), which are non-GAAP measures.
The Company believes that Revenue excluding foreign currency
exchange impacts is a useful measure in analyzing organic sales
results. The Company excludes the effect of currency translation
from revenue for this measure because currency translation is not
under management’s control, is subject to volatility and can
obscure underlying business trends. The portion of revenue
attributable to currency translation is calculated as the
difference between the current period revenue and the current
period revenue after applying foreign exchange rates from the prior
period.
The Company believes Adjusted EBITDA is often a useful measure
of a Company’s operating performance and is a significant basis
used by the Company’s management to evaluate and compare the core
operating performance of its business from period to period by
removing the impact of the capital structure (interest), tangible
and intangible asset base (depreciation and amortization), taxes,
stock-based compensation expense, business development costs
related to acquisitions, and other items that are not indicative of
the Company’s core operating performance. Adjusted EBITDA does not
represent and should not be considered as an alternative to net
income, operating income, net cash provided by operating activities
or any other measure for determining operating performance or
liquidity that is calculated in accordance with generally accepted
accounting principles.
The Company’s calculation of Revenue excluding foreign currency
exchange impacts for the three and six months ended June 30, 2019
is as follows:
Three Months Ended
Six Months Ended
June 30, 2019
June 30, 2019
Revenue as reported
$
92,630
$
186,526
Currency impact
2,010
5,150
Revenue excluding foreign currency
exchange impacts
$
94,640
$
191,676
The Company’s calculation of Adjusted EBITDA for the three
months and six months ended June 30, 2019 and 2018 is as
follows:
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net income
$
4,445
$
4,231
$
8,915
$
8,429
Interest expense
1,435
602
2,615
1,216
Provision for income tax
1,729
1,599
3,424
3,092
Depreciation and amortization
3,668
2,831
7,327
5,622
EBITDA
11,277
9,263
22,281
18,359
Stock compensation expense
866
598
1,540
1,094
Business development costs
3
165
56
316
Adjusted EBITDA
$
12,146
$
10,026
$
23,877
$
19,769
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190801006049/en/
Company: Sue Chiarmonte Allied Motion Technologies Inc.
Phone: 716-242-8634 x602 Email: sue.chiarmonte@alliedmotion.com
Investor: Deborah K. Pawlowski Kei Advisors LLC Phone:
716-843-3908 Email: dpawlowski@keiadvisors.com
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