Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Allied Motion Reports 9% Revenue Growth and Record Orders and Backlog in Third Quarter 2021


Allied Motion Technologies Inc. (Nasdaq: AMOT) ("Allied Motion" or "Company"), a designer and manufacturer of precision and specialty controlled motion products and solutions for the global market, today reported financial results for its third quarter ended September 30, 2021. All share and per share information reflect the April 30, 2021 3-for-2 stock dividend.

"Our results reflect continued strength in most of our served markets, particularly within our broad-based Industrial vertical. We had strong demand for products and solutions tied to industrial automation, vehicle handling, and the oil & gas sector," commented Dick Warzala, Chairman and CEO. "Navigating the current environment has continued to be a challenge given ongoing inflationary pressures, global supply chain disruptions and labor shortages. While we do not see these challenges abating in the near-term, we are adeptly managing the situation in cooperation with our suppliers and customers. We have implemented actions within our control to mitigate the impact which we believe is evident by our measurable expansion in margins and profitability during the quarter.

"As we look out, demand remains strong and most customers will accept all product that we can deliver. While we expect some seasonality in the fourth quarter given typical holiday shutdowns and inventory adjustments, our current backlog indicates that the "normal" dip in revenues could be less than what we've experienced in prior years. Ultimately, we remain confident in our strategy and have a positive outlook for our business over the long term."

Third Quarter 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue increased 9% to $103.5 million, driven by strong demand in the Industrial and Vehicle markets. The Industrial markets benefitted from continued economic recovery in a number of industries, which resulted in 39% growth. Recovery within the construction and agriculture industries combined with strong execution by our team drove 5% growth within the Vehicle markets. Excluding the favorable impact of foreign currency exchange rate fluctuations on revenue of $0.8 million, revenue was up 8.5%. Sales to U.S. customers were 56% of total sales, unchanged from the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific. See the attached table for a description of non-GAAP financial measures and reconciliation of revenue excluding foreign currency exchange rate fluctuations.

Gross margin was 30.9%, up 120 basis points from the third quarter of 2020, and up 20 basis points from the sequential 2021 second quarter. The increases were largely attributable to strong volume, strategic pricing and improved mix, partially offset by global supply chain challenges and rising material and labor costs.

Operating costs and expenses as a percent of revenue were 22.6%, down 30 basis points. Operating income was $8.7 million, or 8.4% of sales, up from $6.5 million, or 6.8%, in the third quarter of 2020. Higher volume drove operating leverage, which more than offset increased incentive compensation, which was aligned with the revenue and net income growth.

Net income was $6.0 million, or $0.41 per diluted share, up from $4.0 million, or $0.28 per diluted share in the third quarter of 2020. The effective tax rate was 24.6% compared with 25.4% in the prior-year period. The lower tax rate was aided by our continued tax planning initiatives. The Company expects its income tax rate for the fourth quarter of 2021 to be approximately 25%. Excluding the discrete tax benefit of $7.4 million recorded in the first quarter of 2021, the Company expects its full year 2021 income tax rate to be approximately 24%.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses ("Adjusted EBITDA") was $14.5 million, up $3.0 million, or 26%. As a percent of sales, Adjusted EBITDA was 14.0%, up 190 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) 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue of $306.7 million increased $33.0 million, or 12%, reflecting strong demand in Vehicle and Industrial markets as economic conditions continued to recover from the impact of the COVID-19 pandemic. The impact of FX fluctuations was favorable $9.2 million for the year-to-date period. Sales to U.S. customers were 54% of total sales compared with 53% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific.

Gross margin was 30.4% compared with 30.2% in the prior-year-period. The margin improvement reflects strong demand and improved mix, partially offset by increased costs given global supply chain disruptions and the proactive decision to incur incremental costs to ensure on-time deliveries to customers.

Operating costs and expenses as a percent of revenue were 23.2%, down 30 basis points. Operating income was $22.0 million, up from $18.2 million. Operating margin improved 50 basis points to 7.2%.

Net income was $22.5 million, or $1.56 per diluted share, compared with $10.9 million, or $0.76 per diluted share. The increase reflects a net discrete tax benefit of $7.4 million recorded in the first quarter of 2021 relating to new legislation enacted in New Zealand. Excluding the discrete tax benefit, business development costs and foreign currency gains/losses, adjusted net income was $15.3 million, or $1.06 per diluted share, compared with $11.6 million, or $0.81 per diluted share, in the comparable period of 2020. Adjusted EBITDA increased to $38.8 million from $33.2 million. Adjusted EBITDA margin of 12.7% was up 60 basis points. See the attached tables for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share and Adjusted EBITDA.

Balance Sheet and Cash Flow Review

Cash and cash equivalents were $19.2 million compared with $23.1 million at year-end 2020. Year-to-date net cash provided by operations was $19.9 million and was primarily used to fund capital expenditures of $9.8 million and net debt repayment of $10.6 million. The capital investments were largely focused on new customer projects and ERP implementations. The Company expects 2021 capital expenditures to be approximately $12 million to $15 million.

Total debt was $109.3 million compared with $120.1 million at year-end 2020. With cash of $19.2 million, debt, net of cash, was $90.1 million, or 35.7% of net debt to capitalization. The Company's leverage ratio, as defined in its credit agreement, was 2.22x at quarter-end.

Orders and Backlog Summary ($ in thousands)

 

Q3 2021

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Orders

$

119,940

$

118,974

$

114,644

$

108,466

$

88,958

Backlog

$

185,561

$

170,364

$

152,262

$

141,344

$

123,700

 

Orders of $119.9 million reached a record level, increasing 35% over the 2020 third quarter and 1% sequentially. Foreign currency translation had a favorable $1.0 million impact on third quarter orders compared with the prior-year period. Backlog increased 9% over the sequential second quarter and 50% over the prior-year period to a record $185.6 million. The time to convert the majority of backlog to sales is approximately three to nine months.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, November 4, 2021 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 11, 2021. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13723716 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-Pacific.

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 4, 2021 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

(In thousands, except per share data)

(Unaudited)

 

 

 

For the three
months ended

 

For the nine
months ended

 

 

 

September 30,

 

September 30,

 

 

 

2021

 

2020

 

2021

 

2020

 

Revenues

 

$

103,509

 

$

94,653

 

$

306,723

 

$

273,696

 

Cost of goods sold

 

 

71,488

 

 

66,513

 

 

213,417

 

 

191,054

 

Gross profit

 

 

32,021

 

 

28,140

 

 

93,306

 

 

82,642

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

4,365

 

 

3,734

 

 

12,979

 

 

11,819

 

General and administrative

 

 

10,620

 

 

10,008

 

 

32,549

 

 

28,880

 

Engineering and development

 

 

6,768

 

 

6,434

 

 

20,967

 

 

18,865

 

Business development

 

 

94

 

 

8

 

 

268

 

 

432

 

Amortization of intangible assets

 

 

1,504

 

 

1,499

 

 

4,527

 

 

4,423

 

Total operating costs and expenses

 

 

23,351

 

 

21,683

 

 

71,290

 

 

64,419

 

Operating income

 

 

8,670

 

 

6,457

 

 

22,016

 

 

18,223

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

777

 

 

844

 

 

2,445

 

 

2,799

 

Other (income) expense, net

 

 

(29)

 

 

231

 

 

(158)

 

 

307

 

Total other expense, net

 

 

748

 

 

1,075

 

 

2,287

 

 

3,106

 

Income before income taxes

 

 

7,922

 

 

5,382

 

 

19,729

 

 

15,117

 

Income tax (provision) benefit

 

 

(1,950)

 

 

(1,369)

 

 

2,804

 

 

(4,173)

 

Net income

 

$

5,972

 

$

4,013

 

$

22,533

 

$

10,944

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

0.41

 

$

0.28

 

$

1.57

 

$

0.77

 

Basic weighted average common shares

 

 

14,411

 

 

14,271

 

 

14,375

 

 

14,231

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

0.41

 

$

0.28

 

$

1.56

 

$

0.76

 

Diluted weighted average common shares

 

 

14,502

 

 

14,369

 

 

14,478

 

 

14,309

 

ALLIED MOTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

September 30,

 

December 31,

 

 

2021

 

2020

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,209

 

$

23,131

Trade receivables, net of provision for credit losses of $545 and $382 at September 30, 2021 and December 31, 2020, respectively

 

 

55,723

 

 

47,377

Inventories

 

 

72,239

 

 

62,978

Prepaid expenses and other assets

 

 

10,365

 

 

8,728

Total current assets

 

 

157,536

 

 

142,214

Property, plant and equipment, net

 

 

55,215

 

 

55,428

Deferred income taxes

 

 

7,188

 

 

330

Intangible assets, net

 

 

60,643

 

 

65,859

Goodwill

 

 

60,583

 

 

61,860

Right of use assets

 

 

17,104

 

 

19,023

Other long-term assets

 

 

5,341

 

 

4,483

Total Assets

 

$

363,610

 

$

349,197

Liabilities and Stockholders' Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

35,131

 

$

27,668

Accrued liabilities

 

 

27,315

 

 

24,862

Total current liabilities

 

 

62,446

 

 

52,530

Long-term debt

 

 

109,312

 

 

120,079

Deferred income taxes

 

 

4,230

 

 

4,659

Pension and post-retirement obligations

 

 

5,139

 

 

5,340

Right of use liabilities

 

 

13,126

 

 

14,975

Other long-term liabilities

 

 

6,945

 

 

8,558

Total liabilities

 

 

201,198

 

 

206,141

Stockholders' Equity:

 

 

 

 

 

Common stock, no par value, authorized 50,000 shares; 14,715 and 14,632 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

 

 

43,792

 

 

41,278

Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding

 

 

?

 

 

?

Retained earnings

 

 

126,568

 

 

105,065

Accumulated other comprehensive loss

 

 

(7,948)

 

 

(3,287)

Total stockholders' equity

 

 

162,412

 

 

143,056

Total Liabilities and Stockholders' Equity

 

$

363,610

 

$

349,197

ALLIED MOTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the nine months ended

 

 

September 30,

 

 

2021

 

2020

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net income

 

$

22,533

 

$

10,944

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

Depreciation and amortization

 

 

13,317

 

 

11,682

Deferred income taxes

 

 

(7,440)

 

 

(931)

Stock-based compensation expense

 

 

3,100

 

 

2,640

Debt issue cost amortization recorded in interest expense

 

 

106

 

 

109

Other

 

 

1,235

 

 

360

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

Trade receivables

 

 

(9,586)

 

 

(2,136)

Inventories

 

 

(11,747)

 

 

(4,575)

Prepaid expenses and other assets

 

 

(675)

 

 

(725)

Accounts payable

 

 

8,168

 

 

492

Accrued liabilities

 

 

909

 

 

(2,840)

Net cash provided by operating activities

 

 

19,920

 

 

15,020

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

Purchase of property and equipment

 

 

(9,761)

 

 

(6,560)

Consideration paid for acquisitions, net of cash acquired

 

 

?

 

 

(14,728)

Net cash used in investing activities

 

 

(9,761)

 

 

(21,288)

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

Borrowings on long term debt

 

 

819

 

 

26,979

Principal payments of long-term debt

 

 

(11,417)

 

 

(12,299)

Payment of debt issuance costs

 

 

?

 

 

(401)

Dividends paid to stockholders

 

 

(1,007)

 

 

(875)

Tax withholdings related to net share settlements of restricted stock

 

 

(1,700)

 

 

(814)

Net cash (used in) provided by financing activities

 

 

(13,305)

 

 

12,590

Effect of foreign exchange rate changes on cash

 

 

(776)

 

 

489

Net (decrease) increase in cash and cash equivalents

 

 

(3,922)

 

 

6,811

Cash and cash equivalents at beginning of period

 

 

23,131

 

 

13,416

Cash and cash equivalents at end of period

 

$

19,209

 

$

20,227

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 foreign currency gains/losses), 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, foreign currency gains/losses on short-term assets and liabilities, 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, 2021 is as follows:

Three Months Ended

 

Nine Months Ended

September 30, 2021

 

September 30, 2021

Revenue as reported

$

103,509

 

$

306,723

Currency impact

 

(813)

 

 

(9,191)

Revenue excluding foreign currency exchange impacts

$

102,696

 

$

297,532

The Company's calculation of Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020 is as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

 

2021

 

2020

 

 

2021

 

2020

Net income

$

5,972

$

4,013

 

$

22,533

$

10,944

Interest expense

 

777

 

844

 

 

2,445

 

2,799

Provision (benefit) for income tax

 

1,950

 

1,369

 

 

(2,804)

 

4,173

Depreciation and amortization

 

4,427

 

4,055

 

 

13,317

 

11,682

EBITDA

 

13,126

 

10,281

 

 

35,491

 

29,598

Stock compensation expense

 

1,303

 

920

 

 

3,100

 

2,640

Foreign currency (gain) loss

 

(69)

 

283

 

 

(42)

 

493

Business development costs

 

94

 

8

 

 

268

 

432

Adjusted EBITDA

$

14,454

$

11,492

 

$

38,817

$

33,163

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, 2021 and 2020 is as follows:

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

 

2021

 

Per
diluted
share

 

 

2020

 

Per
diluted
share

 

 

2021

 

Per
diluted
share

 

 

2020

 

Per
diluted
share

Net income as reported

$

5,972

$

0.41

$

4,013

$

0.28

$

22,533

$

1.56

$

10,944

$

0.76

Non-GAAP adjustments, net of tax

Discrete income tax benefit

 

 

-

 

-

 

 

-

 

-

 

 

(7,373)

 

(0.51)

 

 

-

 

-

Foreign currency (gain) loss

 

 

(50)

 

-

 

 

211

 

0.01

 

 

(30)

 

-

 

 

357

 

0.02

Business development costs

 

72

 

-

 

6

 

-

 

205

 

0.01

 

313

 

0.02

Adjusted net income and diluted EPS

$

5,994

$

0.41

$

4,230

$

0.29

$

15,335

$

1.06

$

11,614

$

0.81

 

Weighted average diluted shares outstanding

 

14,502

 

14,369

 

14,478

 

14,309

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.


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