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

Allient Reports Record Gross Margin of 32.7% on Revenue of $145.3 Million in Third Quarter 2023


Allient Inc. (formerly known as Allied Motion Technologies Inc.) (Nasdaq: ALNT) ("Allient" or the "Company"), a global designer and manufacturer of precision and specialty Motion, Controls and Power products and solutions for targeted industries and applications, today reported financial results for its third quarter ended September 30, 2023.

"Our third quarter was strong and reflected solid top-line results, record gross margin, and robust cash generation that enabled us to reduce our debt and complete a strategic acquisition. In addition, we secured a $31 million defense market order during the quarter, a testament to our enhanced positioning within the sector and the strength of our quoting and activity over the past year," commented Dick Warzala, Chairman and CEO. "Once again, our Industrial markets led the way with 32% sales growth over last year's third quarter, largely driven by industrial automation projects and power quality solutions. Also contributing were improvements within the supply chain environment, which supported the shipping of some long lead projects."

He added, "We still see exciting opportunities as we expand our presence in targeted verticals, launch innovative solutions and further streamline our business for greater efficiency. While the global outlook has softened, particularly in Europe, we expect our business for the remainder of the year to reflect a pre COVID-19 environment and be consistent directionally with our fourth quarter results from prior years. The increasing global unrest we are all experiencing, has the potential to present additional challenges in our day-to-day operations and I'm confident that the Team at Allient has the experience and dedication to navigate through these uncertainties while remaining focused on executing our long-term strategy. In summary, we are excited and confident in our future, as we believe we are well-positioned to create additional value for all stakeholders of our Company."

Third Quarter 2023 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue increased 8%, or $10.9 million, to $145.3 million and reflected strong industrial sales, which included shipping some long lead projects which were in backlog. The acquisition of Sierramotion did not have a material impact on sales during the third quarter. Excluding the favorable impact of foreign currency exchange rate fluctuations on revenue of $1.8 million, organic growth was 7%. Sales to U.S. customers were 61% of total sales for the third quarter of 2023 compared with 59% in 2022, 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.

Industrial markets sales were up 32% in the quarter, benefiting from strong end market demand within industrial automation, material and vehicle handling, oil & gas, and HVAC. Aerospace & Defense sales decreased 7%, largely due to program timing within the space industry. Sales in the Vehicle markets decreased 7%, as higher commercial automotive demand was more than offset by lower demand within agricultural vehicles, which largely reflected softness in Europe, largely influenced by the Ukrainian conflict. Medical market revenue was down 1%, as softer medical mobility demand was mostly offset by a more normalized pre COVID-19 sales environment focused on surgical and instrumentation related end markets. Sales through the Distribution channel, which are a small component of total sales, were down 7%.

Gross margin was 32.7%, up 50 basis points from the prior-year period as higher volume and favorable mix more than offset elevated raw material costs.

Operating costs and expenses were 24.5% of revenue, up 100 basis points, of which 70 basis points was attributable to higher business development costs in the quarter as the Company continued to rationalize its manufacturing footprint. As a result, operating income of $11.9 million compared with $11.7 million, and as a percent of revenue was 8.2%, down 50 basis points.

Net income increased 1% to $6.7 million, or $0.41 per diluted share, from $6.6 million, or $0.41 per share, in the prior-year period. Adjusted net income, which excludes amortization of intangible assets related to acquisitions, business development costs and other non-recurring items, increased to $10.0 million, or $0.61 per diluted share, compared with adjusted net income of $9.7 million, or $0.60 per diluted share. The effective tax rate was 23.0% in the third quarter of 2023. The Company expects its income tax rate for the full year 2023 to be approximately 23% to 25%. See the attached tables for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses ("Adjusted EBITDA") was $20.8 million, up $1.0 million, or 5%. As a percentage of revenue, Adjusted EBITDA was 14.3%, down 50 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) 2023 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue of $437.6 million increased $65.7 million, or 18%, reflecting strong demand in Industrial and Aerospace & Defense markets, and incremental sales from acquisitions. Excluding the unfavorable impact of foreign currency exchange fluctuations on revenue of $1.9 million, organic growth year-to-date was 16%. Sales to U.S. customers were 58% of total sales for the year-to-date periods of 2023 and 2022, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific.

Gross margin was 31.8%, up 50 basis points due to higher volume and margin accretive acquisitions. Operating costs and expenses as a percent of revenue was 23.7%, down 130 basis points due to operating leverage and decreased business development costs, which were elevated in 2022 due to significant acquisition activity. As a result, operating income was $35.3 million, or 8.1% of sales, compared with $23.5 million, or 6.3% of sales.

Net income increased 44% to $19.8 million, or $1.22 per diluted share, compared with $13.7 million, or $0.86 per diluted share. Excluding amortization of intangible assets related to acquisitions, business development costs and other non-recurring items, adjusted net income was $28.4 million, or $1.75 per diluted share, compared with $23.0 million, or $1.45 per diluted share, in the comparable period of 2022. Adjusted EBITDA increased to $60.3 million from $49.0 million, and as a percent of revenue was 13.8%, up 60 basis points.

Balance Sheet and Cash Flow Review

Cash and cash equivalents were $23.8 million compared with $30.6 million at year-end 2022. The change largely reflects a $6.25 million deferred payment made during the first quarter of 2023 for a prior acquisition.

Cash provided by operating activities was $27.1 million for the year-to-date period compared with cash usage of $5.8 million in the prior-year period. The increase reflected higher net income and stronger inventory turns. Capital expenditures were $7.9 million year-to-date and largely focused on new customer projects. The Company has adjusted its expected 2023 capital expenditures to be in the range of $12 million to $15 million from its previous expectations of $16 million to $20 million due to program timing and supply chain impacts.

Total debt of $224.4 million was down $11.1 million from year-end 2022. Debt, net of cash, was $200.5 million, or 45.3% of net debt to capitalization. The Company's leverage ratio, as defined in its credit agreement, was 2.9x at quarter-end.

Orders and Backlog Summary ($ in thousands)

Q3 2023

Q2 2023

Q1 2023

Q4 2022

Q3 2022

Orders

$

154,908

$

137,008

$

123,198

$

145,564

$

126,158

Backlog

$

309,636

$

298,695

$

308,635

$

330,078

$

310,186

Third quarter orders increased 23% year-over-year and 13% sequentially. The increase reflects a $31 million defense market order that is expected to convert to sales over the next two years, and strong demand for power quality solutions. Foreign currency translation had a favorable $1.5 million impact on third quarter orders compared with the prior-year period. The third quarter orders represented a book-to-bill ratio of 1.1x.

Backlog increased 4% from the sequential second quarter of 2023 reflecting the large defense order during the quarter, partially offset by continued improvements within the supply chain environment which has enabled the shipping of some long lead industrial market focused projects as customer order patterns return to a pre COVID-19 environment. The time to convert the majority of the 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 2, 2023 at 10:00 am ET. During the conference call, management will review the financial and operating results and discuss Allient's corporate strategy and outlook. A question and answer session will follow.

To listen to the live call, dial (412) 317-5185. In addition, the webcast and slide presentation may be found at: www.allient.com/investors.

A telephonic replay will be available from 2:00 pm ET on the day of the call through Thursday, November 9, 2023. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 10182417 or access the webcast replay via the Company's website. A transcript will also be posted to the website once available.

About Allient Inc.

Allient (Nasdaq: ALNT) is a global engineering and manufacturing enterprise that develops solutions to drive the future of market-moving industries, including medical, life sciences, aerospace and defense, agriculture, transportation, robotics and automation. Allient is a family of companies driven by the same goal: to act as one team to provide the most robust, reliable, and high-value products and systems in Motion, Controls, and Power? from mobile weapons systems used by the military to powered wheelchairs that enhance people's lives.

Allient solutions enable applications that address customers' most critical challenges so they can seize new opportunities and change the game. The Company's strategy is to deliver innovative solutions for its targeted markets to drive growth, while adding new technologies and capabilities through acquisition. Headquartered in Buffalo, N.Y., Allient employs more than 2,250 team members around the world. To learn more, visit www.allient.com.

Safe Harbor Statement

The statements in this news release 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, the ability to attract and retain qualified personnel, the ability to successfully integrate an acquired business into our business model without substantial costs, delays, or problems, 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

ALLIENT 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,

 

2023

 

2022

 

2023

 

2022

Revenue

$

145,319

 

$

134,405

 

$

437,637

 

$

371,912

 

Cost of goods sold

 

97,821

 

 

91,108

 

 

298,328

 

 

255,381

 

Gross profit

 

47,498

 

 

43,297

 

 

139,309

 

 

116,531

 

Operating costs and expenses:

Selling

 

6,021

 

 

5,497

 

 

18,354

 

 

16,336

 

General and administrative

 

14,642

 

 

13,148

 

 

43,624

 

 

37,239

 

Engineering and development

 

10,702

 

 

9,702

 

 

31,041

 

 

28,879

 

Business development

 

1,194

 

 

199

 

 

1,791

 

 

2,464

 

Amortization of intangible assets

 

3,075

 

 

3,054

 

 

9,226

 

 

8,133

 

Total operating costs and expenses

 

35,634

 

 

31,600

 

 

104,036

 

 

93,051

 

Operating income

 

11,864

 

 

11,697

 

 

35,273

 

 

23,480

 

Other expense, net:

Interest expense

 

3,164

 

 

2,337

 

 

9,309

 

 

4,900

 

Other expense, net

 

42

 

 

243

 

 

187

 

 

9

 

Total other expense, net

 

3,206

 

 

2,580

 

 

9,496

 

 

4,909

 

Income before income taxes

 

8,658

 

 

9,117

 

 

25,777

 

 

18,571

 

Income tax provision

 

(1,992

)

 

(2,508

)

 

(6,027

)

 

(4,878

)

Net income

$

6,666

 

$

6,609

 

$

19,750

 

$

13,693

 

 

Basic earnings per share:

Earnings per share

$

0.42

 

$

0.42

 

$

1.24

 

$

0.89

 

Basic weighted average common shares

 

15,979

 

 

15,661

 

 

15,940

 

 

15,373

 

Diluted earnings per share:

Earnings per share

$

0.41

 

$

0.41

 

$

1.22

 

$

0.86

 

Diluted weighted average common shares

 

16,237

 

 

16,169

 

 

16,198

 

 

15,929

 

ALLIENT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)

September 30,

December 31,

 

2023

 

2022

Assets

Current assets:

Cash and cash equivalents

$

23,836

 

$

30,614

 

Trade receivables, net of provision for credit losses of $1,220 and $1,192 at September 30, 2023 and December 31, 2022, respectively

90,631

 

76,213

 

Inventories

 

117,291

 

 

117,108

 

Prepaid expenses and other assets

 

13,045

 

 

12,072

 

Total current assets

 

244,803

 

 

236,007

 

Property, plant, and equipment, net

 

67,895

 

 

68,640

 

Deferred income taxes

 

3,447

 

 

4,199

 

Intangible assets, net

 

113,791

 

 

119,075

 

Goodwill

 

130,298

 

 

126,366

 

Operating lease assets

24,977

 

22,807

 

Other long-term assets

 

11,380

 

 

11,253

 

Total Assets

$

596,591

 

$

588,347

 

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

42,470

 

$

39,467

 

Accrued liabilities

 

52,237

 

 

48,121

 

Total current liabilities

 

94,707

 

 

87,588

 

Long-term debt

 

224,364

 

 

235,454

 

Deferred income taxes

 

5,804

 

 

6,262

 

Pension and post-retirement obligations

 

2,893

 

 

3,009

 

Operating lease liabilities

20,291

 

18,795

 

Other long-term liabilities

 

6,391

 

21,774

 

Total liabilities

 

354,450

 

 

372,882

 

Stockholders' Equity:

Common stock, no par value, authorized 50,000 shares; 16,280 and 15,978 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

94,742

 

 

83,852

 

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

 

?

 

 

?

 

Retained earnings

 

161,953

 

 

143,576

 

Accumulated other comprehensive loss

 

(14,554

)

 

(11,963

)

Total stockholders' equity

 

242,141

 

 

215,465

 

Total Liabilities and Stockholders' Equity

$

596,591

 

$

588,347

 

ALLIENT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

For the nine months ended

September 30,

 

2023

 

2022

Cash Flows From Operating Activities:

Net income

$

19,750

 

$

13,693

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities

Depreciation and amortization

 

18,956

 

 

19,222

 

Deferred income taxes

 

122

 

 

2,775

 

Stock-based compensation expense

4,165

 

3,752

 

Debt issue cost amortization recorded in interest expense

225

 

127

 

Other

 

987

 

 

785

 

Changes in operating assets and liabilities, net of acquisitions:

Trade receivables

 

(14,358

)

 

(27,560

)

Inventories

 

(1,344

)

 

(25,782

)

Prepaid expenses and other assets

 

(1,553

)

 

(3,133

)

Accounts payable

 

2,871

 

 

6,501

 

Accrued liabilities

 

(2,689

)

 

3,796

 

Net cash provided by (used in) operating activities

 

27,132

 

 

(5,824

)

 

Cash Flows From Investing Activities:

Consideration paid for acquisitions, net of cash acquired

 

(11,004

)

 

(44,596

)

Purchase of property and equipment

 

(7,850

)

 

(11,026

)

 

Net cash used in investing activities

 

(18,854

)

 

(55,622

)

 

Cash Flows From Financing Activities:

Proceeds from issuance of long-term debt

 

11,000

 

 

69,952

 

Principal payments of long-term debt and finance lease obligations

(22,325

)

(6,514

)

Dividends paid to stockholders

 

(1,348

)

 

(1,147

)

Tax withholdings related to net share settlements of restricted stock

 

(1,827

)

 

(1,334

)

Net cash (used in) provided by financing activities

 

(14,500

)

 

60,957

 

Effect of foreign exchange rate changes on cash

 

(556

)

 

(2,269

)

Net decrease in cash and cash equivalents

 

(6,778

)

 

(2,758

)

Cash and cash equivalents at beginning of period

 

30,614

 

 

22,463

 

Cash and cash equivalents at end of period

$

23,836

 

$

19,705

 

ALLIENT 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 fully 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. Organic growth is reported revenues adjusted for the impact of foreign currency and the revenue contribution from acquisitions.

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, 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 GAAP.

The Company's calculation of Revenue excluding foreign currency exchange impacts for the three and nine months ended September 30, 2023 is as follows:

Three Months Ended

 

Nine Months Ended

September 30, 2023

 

September 30, 2023

Revenue as reported

$

145,319

 

 

$

437,637

Foreign currency impact

 

(1,793

)

 

 

1,869

 

Revenue excluding foreign currency exchange impacts

$

143,526

 

 

$

439,506

 

The Company's calculation of Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022 is as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2023

2022

2023

2022

Net income

 

$

6,666

$

6,609

$

19,750

$

13,693

Interest expense

 

 

3,164

 

2,337

 

9,309

 

4,900

Provision for income tax

 

 

1,992

 

2,508

 

6,027

 

4,878

Depreciation and amortization

 

 

6,421

 

6,692

 

18,956

 

19,222

EBITDA

 

18,243

 

18,146

 

54,042

 

42,693

Stock-based compensation expense

 

 

1,354

 

1,262

 

4,165

 

3,752

Foreign currency loss

 

 

58

 

257

 

257

 

54

Business development costs

 

 

1,194

 

199

 

1,791

 

2,464

Adjusted EBITDA

 

$

20,849

$

19,864

$

60,255

$

48,963

ALLIENT INC.
Reconciliation of GAAP Net Income and Diluted Earnings per Share to
Non-GAAP Adjusted Net Income and Adjusted 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, 2023 and 2022 is as follows:

Three Months Ended

September 30,

2023

Per diluted

share

 

2022

Per diluted

share

Net income as reported

$

6,666

$

0.41

$

6,609

$

0.41

Non-GAAP adjustments, net of tax (1)

Amortization of intangible assets - net

 

 

2,355

 

0.14

 

 

2,725

 

0.17

Foreign currency gain/ loss - net

 

 

44

 

-

 

 

197

 

0.01

Business development costs - net

 

915

 

0.06

 

152

 

0.01

Adjusted net income and adjusted diluted EPS

$

9,980

$

0.61

$

9,683

$

0.60

 

Weighted average diluted shares outstanding

 

16,237

 

16,169

Nine Months Ended

September 30,

2023

Per diluted

share

 

2022

Per diluted

share

Net income as reported

$

19,750

$

1.22

 

$

13,693

$

0.86

Non-GAAP adjustments, net of tax (1)

 

 

 

 

 

Amortization of intangible assets - net

 

 

7,067

 

0.44

 

 

7,417

 

0.47

Foreign currency gain/ loss - net

 

 

197

 

0.01

 

 

41

 

-

Business development costs - net

 

1,372

 

0.08

 

 

1,887

 

0.12

Adjusted net income and adjusted diluted EPS

$

28,386

$

1.75

 

$

23,038

$

1.45

 

 

 

 

 

Weighted average diluted shares outstanding

 

 

 

16,198

 

 

 

15,929

_____________________________

(1)

Applies a blended federal, state, and foreign tax rate of approximately 23% applicable to the non-GAAP adjustments.

Adjusted net income and diluted EPS are defined as net income as reported, adjusted for certain items, including amortization of intangible assets and unusual non-recurring items. Adjusted net income and diluted EPS are not a measure determined in accordance with GAAP in the United States, 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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