- Strong demand in Medical market drove total quarterly revenue
of $94.7 million, up 9% over the sequential second quarter
2020
- Operating margin expanded 100 basis points sequentially from
operating leverage on higher volume
- Strong cash generation: Cash from operations of $8.4 million in
the quarter and $5.5 million of free cash flow*
- Strengthening balance sheet: Paid down $4.4 million of debt in
the quarter *Free cash flow is a non-GAAP metric defined as cash
flow from operations less capital expenditures of $2.9 million
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 third quarter
ended September 30, 2020. Results include the Dynamic Controls
Group (“Dynamic Controls”) acquisition that was completed on March
7, 2020.
“Our global team continues to perform very well in the face of
uncertainty. Our third quarter results demonstrated the tremendous
focus and dedication of our employees and is reflective of our
diverse market channel strategy. Continued strong demand in our
Medical market and a rebound in our Vehicle market were met with
superior execution, resulting in sales growth of 9% sequentially,
and nearly offset the impact of the pandemic on our other markets
on a year-over-year basis for the third quarter,” commented Dick
Warzala, Chairman and CEO. “We continued to improve our financial
strength, generating cash to pay down debt while making the
necessary investments to drive momentum and emerge in an even
stronger position.”
He added, “Given the recent global uptick in COVID-19 positive
test results, we remain diligent in our actions to ensure the
ongoing safety of our workforce, and we continue to closely monitor
the potential impacts on our business and our served markets.
Moving forward, we will continue to focus on areas that we can
control, including proactive new product development to address the
emerging needs of our served markets, optimally meeting the
requirements of several new project opportunities, and last, but
not least, utilizing our AST Toolkit to drive continuous
improvement in all areas of our business.”
Third Quarter 2020 Results (Narrative compares with
prior-year period unless otherwise noted)
Revenue of $94.7 million was down 2%, reflecting lower sales to
most markets given the ongoing impact from the pandemic. Mostly
offsetting that decline was strong demand in the Medical markets,
which increased more than 60% and included the contribution from
Dynamic Controls. The third quarter also benefited from a strong
rebound in the Vehicle market. When compared with the second
quarter of 2020, revenue increased 9% driven by a very strong and
measurable increase in demand in the Vehicle market. The impact of
foreign currency exchange rate fluctuations was favorable by $1.8
million for the third quarter. Revenue excluding the effect of
foreign currency translation is a non-GAAP measure. The Company
believes this measure is useful for 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 translation.
Gross margin in the quarter was 29.7% compared with 31.1% in the
third quarter of 2019. The change reflects lower revenue and an
unfavorable mix.
Operating costs and expenses as a percent of revenue were 22.9%,
up 100 basis points, largely due to lower revenue and incremental
expenses related to Dynamic Controls. As a result, operating income
declined to $6.5 million or 6.8% of sales. Operating margin
expanded 100 basis points sequentially from operating leverage on
higher volume.
Third quarter net income was $4.0 million, or $0.42 per diluted
share, compared with $4.6 million, or $0.49 per diluted share, in
the 2019 third quarter. The effective tax rate for the quarter was
25.4%. Allied Motion expects its income tax rate for full year 2020
to range between 27% to 29%.
Earnings before interest, taxes, depreciation, amortization,
stock-based compensation expense, business development costs, and
non-income based tax assessment (“Adjusted EBITDA”) was $11.2
million for the third quarter compared with $13.6 million in 2019.
As a percent of sales, Adjusted EBITDA was 11.8% versus 14.1%. 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 2020 Results (Narrative compares with
prior-year period unless otherwise noted)
Revenue of $273.7 million was down $9.5 million, or 3%,
reflecting strong growth in Medical of almost 60%, which was offset
by a decline in demand in all other market verticals resulting from
the global economic impact of the COVID-19 pandemic. The impact of
FX fluctuations was unfavorable $1.0 million for the year-to-date
period. Sales to U.S. customers were 53% of total sales compared
with 57% for the same period last year, with the balance of sales
to customers primarily in Europe, Canada and Asia.
Gross margin was 30.2% compared with 30.4% in the 2019 period as
productivity, cost containment efforts and the favorable impact of
Dynamic Controls helped to mostly offset the impact of lower
revenue.
Operating costs and expenses as a percent of revenue were 23.5%,
up 150 basis points, largely driven by the addition of Dynamic
Controls and higher business development costs. As a result,
operating margin declined 170 basis points to 6.7%.
Net income of $10.9 million declined $2.6 million, while
adjusted EBITDA was $32.7 million, or 11.9% of sales, compared with
$37.5 million or 13.3% of sales.
Balance Sheet and Cash Flow Review
Cash and cash equivalents were $20.2 million compared with $13.4
million at the end of 2019. The Company generated net cash from
operations of $8.4 million in the third quarter and $15.0 million
for the year-to-date period.
In the quarter, the Company paid down $4.4 million in debt with
no incremental borrowings. At the end of the quarter total debt was
$124.4 million. Compared with year-end 2019, total debt was up
$14.6 million, reflecting $26 million in borrowings to acquire
Dynamic Controls in March 2020. Debt, net of cash, was $104.2
million, or 43.7% of net debt to capitalization.
Year-to-date capital expenditures were $6.6 million. As a result
of the decision to delay certain projects, capital expenditures for
full year 2020 were adjusted down to range between $9 million to
$11 million from the previous range of $10 million to $12 million.
This level continues to enable all key projects to move forward,
while deferring lower priority activities.
Orders and Backlog Summary ($ in thousands)
Q3
2020
Q2
2020
Q1 2020
Q4
2019
Q3
2019
Orders
$
88,958
$
80,365
$
92,923
$
86,315
$
90,726
Backlog
$
123,700
$
127,701
$
133,187
$
124,950
$
125,821
Foreign currency translation had a favorable $1.7 million impact
on third quarter orders compared with the prior-year period. The
time to convert the majority of backlog to sales is approximately
three to six months. A nominal amount of the previously announced
$325 million of Vehicle market awards is currently included in
backlog. The Company has begun shipments at very low levels for the
first of four, seven-year awards, though given the COVID-19
situation, production for the initial projects are not expected to
gain traction until 2021.
Conference Call and Webcast
The Company will host a conference call and webcast on Thursday,
November 5, 2020 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 webcast and slide presentation may be found at:
www.alliedmotion.com/investor-relations
A telephonic replay will be available from 1:00 pm ET on the day
of the call through Thursday, November 12, 2020. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13710949 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. Headquartered in Amherst, NY, the Company 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 www.alliedmotion.com.
Safe Harbor Statement
The statements in this news release and in the Company’s
November 5, 2020 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. Examples of forward-looking
statements include, among others, statements the Company makes
regarding expected operating results, anticipated levels of capital
expenditures, the Company’s belief that it has sufficient liquidity
to fund its business operations, and expectations with respect to
the conversion of backlog to sales. Forward-looking statements are
neither historical facts nor assurances of future performance.
Instead, they are based only on the Company’s current beliefs,
expectations and assumptions regarding the future of the Company’s
business, future plans and strategies, projections, anticipated
events and trends, the economy and other future conditions. Because
forward-looking statements relate to the future, they are subject
to inherent uncertainties, risks and changes in circumstances that
are difficult to predict and many of which are outside of the
Company’s control. The Company’s actual results and financial
condition may differ materially from those indicated in the
forward-looking statements. Therefore, you should not rely on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, general economic and business conditions,
conditions affecting the industries served by the Company and its
subsidiaries, conditions affecting the Company's customers and
suppliers, competitor responses to the Company's products and
services, the overall market acceptance of such products and
services, the pace of bookings relative to shipments, the ability
to expand into new markets and geographic regions, the success in
acquiring new business, the impact of changes in income tax rates
or policies, the severity, magnitude and duration of the COVID-19
pandemic, including impacts of the pandemic and of businesses’ and
governments’ responses to the pandemic on our operations and
personnel, and on commercial activity and demand across our and our
customers’ businesses, and on global supply chains; our inability
to predict the extent to which the COVID-19 pandemic and related
impacts will continue to adversely impact our business operations,
financial performance, results of operations, financial position,
the prices of our securities and the achievement of our strategic
objectives and other factors disclosed in the Company's periodic
reports filed with the Securities and Exchange Commission. 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 nine months
ended
September 30,
September 30,
2020
2019
2020
2019
Revenue
$
94,653
$
96,633
$
273,696
$
283,159
Cost of goods sold
66,513
66,603
191,054
197,045
Gross profit
28,140
30,030
82,642
86,114
Operating costs and expenses:
Selling
3,734
4,144
11,819
12,373
General and administrative
10,008
9,932
28,880
28,451
Engineering and development
6,434
5,705
18,865
17,188
Business development
8
8
432
64
Amortization of intangible assets
1,499
1,429
4,423
4,291
Total operating costs and expenses
21,683
21,218
64,419
62,367
Operating income
6,457
8,812
18,223
23,747
Other expense:
Interest expense
844
1,359
2,799
3,974
Other expense, net
231
140
307
121
Total other expense, net
1,075
1,499
3,106
4,095
Income before income taxes
5,382
7,313
15,117
19,652
Provision for income taxes
(1,369
)
(2,695
)
(4,173
)
(6,119
)
Net income
$
4,013
$
4,618
$
10,944
$
13,533
Basic earnings per share:
Earnings per share
$
0.42
$
0.49
$
1.15
$
1.44
Basic weighted average common shares
9,514
9,414
9,487
9,390
Diluted earnings per share:
Earnings per share
$
0.42
$
0.49
$
1.15
$
1.43
Diluted weighted average common shares
9,579
9,464
9,539
9,435
Net income
$
4,013
$
4,618
$
10,944
$
13,533
Foreign currency translation
adjustment
3,433
(2,369
)
2,937
(2,708
)
Gain (loss) on derivatives
70
(105
)
(1,347
)
(803
)
Comprehensive income
$
7,516
$
2,144
$
12,534
$
10,022
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except per
share data)
(Unaudited)
September 30,
December 31,
2020
2019
Assets
Current assets:
Cash and cash equivalents
$
20,227
$
13,416
Trade receivables, net of provision for
credit losses of $580 and allowance for doubtful accounts of $405
at September 30, 2020 and December 31, 2019, respectively
51,265
44,429
Inventories
61,643
53,385
Prepaid expenses and other assets
6,620
4,413
Total current assets
139,755
115,643
Property, plant and equipment, net
54,058
53,008
Deferred income taxes
895
490
Intangible assets, net
66,366
62,497
Goodwill
60,460
52,935
Right of use assets
18,115
16,420
Other long-term assets
4,202
4,835
Total Assets
$
343,851
$
305,828
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
29,312
$
23,640
Accrued liabilities
22,821
23,001
Total current liabilities
52,133
46,641
Long-term debt
124,387
109,765
Deferred income taxes
4,721
3,399
Pension and post-retirement
obligations
5,229
5,139
Right of use liabilities
14,643
13,715
Other long-term liabilities
8,346
7,975
Total liabilities
209,459
186,634
Stockholders’ Equity:
Common stock, no par value, authorized
50,000 shares; 9,757 and 9,599 shares issued and outstanding at
September 30, 2020 and December 31, 2019, respectively
40,674
37,136
Preferred stock, par value $1.00 per
share, authorized 5,000 shares; no shares issued or outstanding
—
—
Retained earnings
102,659
92,589
Accumulated other comprehensive loss
(8,941
)
(10,531
)
Total stockholders’ equity
134,392
119,194
Total Liabilities and Stockholders’
Equity
$
343,851
$
305,828
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the nine months
ended
September 30,
2020
2019
Cash Flows From Operating
Activities:
Net income
$
10,944
$
13,533
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization
11,682
11,071
Deferred income taxes
(931
)
(563
)
Stock-based compensation expense
2,640
2,374
Debt issue cost amortization recorded in
interest expense
109
131
Other
360
581
Changes in operating assets and
liabilities, net of acquisition:
Trade receivables
(2,136
)
(13,643
)
Inventories
(4,575
)
1,664
Prepaid expenses and other assets
(725
)
(232
)
Accounts payable
492
(727
)
Accrued liabilities
(2,840
)
2,815
Net cash provided by operating
activities
15,020
17,004
Cash Flows From Investing
Activities:
Purchase of property and equipment
(6,560
)
(9,280
)
Cash paid for acquisitions, net of cash
acquired
(14,728
)
—
Net cash used in investing activities
(21,288
)
(9,280
)
Cash Flows From Financing
Activities:
Borrowings on long term debt
26,979
9,091
Principal payments of long-term debt
(12,299
)
(15,000
)
Payment of debt issuance costs
(401
)
—
Dividends paid to stockholders
(875
)
(887
)
Stock transactions under employee benefit
stock plans
(814
)
(717
)
Net cash provided by (used in) financing
activities
12,590
(7,513
)
Effect of foreign exchange rate changes on
cash
489
(306
)
Net increase (decrease) in cash and cash
equivalents
6,811
(95
)
Cash and cash equivalents at beginning of
period
13,416
8,673
Cash and cash equivalents at end of
period
$
20,227
$
8,578
ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures (In thousands)
(Unaudited)
In addition to reporting revenue and net income, which are U.S.
generally accepted accounting principle (“GAAP”) measures, the
Company presents Revenue excluding foreign currency exchange rate
impacts, and EBITDA and Adjusted EBITDA (earnings before interest,
income taxes, depreciation and amortization, stock-based
compensation expense, business development costs, and non-income
based tax assessment), which are non-GAAP measures.
The Company believes that Revenue excluding foreign currency
exchange rate 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 EBITDA and Adjusted EBITDA are often a
useful measure of a Company’s operating performance and are 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. EBITDA
and Adjusted EBITDA do 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 nine months ended September 30,
2020 is as follows:
Three Months Ended
Nine Months Ended
September 30, 2020
September 30, 2020
Revenue as reported
$
94,653
$
273,696
Currency impact
(1,833
)
971
Revenue excluding foreign currency
exchange impacts
$
92,820
$
274,667
The Company’s calculation of Adjusted EBITDA for the three and
nine months ended September 30, 2020 and 2019 is as follows:
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Net income
$
4,013
$
4,618
$
10,944
$
13,533
Interest expense
844
1,359
2,799
3,974
Provision for income taxes
1,369
2,695
4,173
6,119
Depreciation and amortization
4,055
3,744
11,682
11,071
EBITDA
10,281
12,416
29,598
34,697
Stock-based compensation expense
920
833
2,640
2,374
Business development costs
8
8
432
64
Non-income based tax assessment
-
384
-
384
Adjusted EBITDA
$
11,209
$
13,641
$
32,670
$
37,519
ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of GAAP Net Income and Diluted Earnings per Share
to Non-GAAP Adjusted Net Income and Diluted Earnings per
Share (In thousands, except per share data)
(Unaudited)
The Company’s calculation of Adjusted net income and Adjusted
diluted earnings per share for the three and nine months ended
September 30, 2020 and 2019 is as follows:
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
Per diluted share
2019
Per diluted share
2020
Per diluted share
2019
Per diluted share
Net income as reported
$
4,013
$
0.42
$
4,618
$
0.49
$
10,944
$
1.15
$
13,533
$
1.43
Non-GAAP adjustments, net of tax
Non-income based tax assessment
-
-
384
0.04
-
-
384
0.04
Income tax provision charge
-
-
433
0.05
-
-
433
0.05
Business development costs
6
0.00
-
-
313
0.03
-
-
Adjusted net income and diluted EPS
$
4,019
$
0.42
$
5,435
$
0.57
$
11,257
$
1.18
$
14,350
$
1.52
Weighted average diluted shares
outstanding
9,579
9,464
9,539
9,435
Adjusted net income and diluted EPS are defined as net income as
reported, adjusted for unusual non-recurring items. Adjusted net
income and diluted EPS are not a measure determined in accordance
with generally accepted accounting principles in the United States,
commonly known as GAAP, and may not be comparable to the measure as
used by other companies. Nevertheless, the Company believes that
providing non-GAAP information, such as adjusted net income and
diluted EPS are important for investors and other readers of the
Company’s financial statements and assists in understanding the
comparison of the current quarter’s and current year’s net income
and diluted EPS to the historical periods’ net income and diluted
EPS.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005724/en/
Investor Contact: Deborah K. Pawlowski Kei Advisors LLC
Phone: 716-843-3908 Email: dpawlowski@keiadvisors.com
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