Allied Motion Reports Record Revenue, Orders and Backlog in First 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 first quarter ended March 31, 2021. All share and per share information reflect the April 30, 2021 3-for-2 stock dividend.

“Our first quarter performance was fueled by double-digit growth in Medical and Vehicle, which drove total revenue to a record level,” commented Dick Warzala, Chairman and CEO. “While our Industrial and Aerospace & Defense revenue was down quarter-over-quarter, we are seeing encouraging signs of improvement overall in our served markets as demonstrated by our record incoming and booked orders in the quarter. We believe we are managing our inventory levels well even as we work to deal with supply chain challenges to meet customer demand. Importantly, gross margin saw sequential improvement on higher volume despite near-term headwinds created by supply chain constraints as we maintain our focus on meeting the needs of our customers.”

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

Record revenue of $101.7 million increased 10%, driven by strong demand in the Medical and Vehicle markets. Medical markets improved measurably, up 60% over the prior-year period, including the benefit from a full quarter of Dynamic Controls, which was acquired in March 2020. Sales to the Vehicle market grew 23%, reflecting strong demand in powersports. The favorable impact of foreign currency exchange rate fluctuations on revenue was $4.3 million. Sales to U.S. customers were 51% 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 29.6%, up 170 basis points from the sequential 2020 fourth quarter, but down 80 basis points from the first quarter of 2020. The change from the prior-year period was primarily attributable to increased costs given the tight supply chain and the decision to incur incremental costs to ensure on time deliveries to customers.

Operating costs and expenses as a percent of revenue were 23.1%, unchanged over the prior-year period. Higher volume drove operating leverage, which helped to offset increased incentive compensation. Operating income was $6.6 million, or 6.5% of sales, compared with $6.7 million, or 7.3%.

During the quarter, Allied Motion recorded a net discrete tax benefit of $7.4 million relating to new legislation enacted in New Zealand. As a result, first quarter net income was $11.9 million, or $0.83 per diluted share, compared with $4.0 million, or $0.28 per diluted share, in the 2020 first quarter.

Excluding the discrete tax benefit, business development costs and foreign currency gains/losses, adjusted net income was $4.6 million, or $0.32 per diluted share, compared with $4.3 million, or $0.30 per diluted share, in the prior-year period. See the attached table for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share. Absent the tax benefit, the effective tax rate for the first quarter was 22.4%. The Company expects its income tax rate for the remaining quarters of 2021 to range between 26% to 28%.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses (“Adjusted EBITDA”) was $12.0 million compared with $11.5 million in the prior-year period. As a percent of sales, Adjusted EBITDA was 11.8% versus 12.5% in the prior-year period. 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.

Balance Sheet and Cash Flow Review

Cash and cash equivalents increased $1.6 million to $24.7 million from year-end 2020. The Company generated net cash from operations of $5.6 million in the first quarter of 2021 compared with cash out flow of $3.0 million in the first quarter of 2020.

Total debt was $119.9 million at quarter-end, and debt, net of cash, was $95.2 million, or 38.3% of net debt to capitalization.

Capital expenditures were $3.1 million during the quarter and largely focused on new customer projects and ERP implementations. The Company expects 2021 capital expenditures to be approximately $12 million to $15 million.

Orders and Backlog Summary ($ in thousands)

		Q1 2021			Q4 2020			Q3 2020			Q2 2020			Q1 2020
Orders		$	114,644		$	108,466		$	88,958		$	80,365		$	92,923
Backlog		$	152,262		$	141,344		$	123,700		$	127,701		$	133,187

Orders of $114.6 million reached a record level, increasing 23% over the 2020 first quarter. Foreign currency translation had a favorable $4.2 million impact on first quarter orders compared with the prior-year period. Backlog increased 8% over the sequential fourth quarter and 14% quarter-over-quarter to a record $152.3 million. The time to convert the majority of backlog to sales is approximately three to six months. Included in the current backlog is approximately $5 million of the previously announced $325 million of Vehicle market awards. The Company has begun shipments for the first of four, seven-year awards, and all four awards are expected to concurrently be at full rate production in 2024.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, May 6, 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 [phone]. 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, May 13, 2021. To listen to the archived call, dial [phone] and enter replay pin number 13718359 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 May 6, 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
		March 31,
		2021			2020
Revenue		$	101,677		$	92,382
Cost of goods sold			71,609			64,340
Gross profit			30,068			28,042
Operating costs and expenses:
Selling			4,218			4,243
General and administrative			10,748			9,162
Engineering and development			6,959			6,234
Business development			19			247
Amortization of intangible assets			1,512			1,441
Total operating costs and expenses			23,456			21,327
Operating income			6,612			6,715
Other expense, net:
Interest expense			861			1,054
Other (income) expense, net			(119)			59
Total other expense, net			742			1,113
Income before income taxes			5,870			5,602
Income tax benefit (provision)			6,057			(1,567)
Net income		$	11,927		$	4,035
Basic earnings per share:
Earnings per share		$	0.83		$	0.28
Basic weighted average common shares			14,306			14,180
Diluted earnings per share:
Earnings per share		$	0.83		$	0.28
Diluted weighted average common shares			14,438			14,274

ALLIED MOTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
		March 31,			December 31,
		2021			2020
Assets
Current assets:
Cash and cash equivalents		$	24,725		$	23,131
Trade receivables, net of provision for credit losses of $509 and $382 at March 31, 2021 and December 31, 2020, respectively			56,252			47,377
Inventories			61,429			62,978
Prepaid expenses and other assets			7,150			8,728
Total current assets			149,556			142,214
Property, plant and equipment, net			54,808			55,428
Deferred income taxes			7,456			330
Intangible assets, net			63,856			65,859
Goodwill			60,902			61,860
Right of use assets			18,881			19,023
Other long-term assets			4,526			4,483
Total Assets		$	359,985		$	349,197
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	32,382		$	27,668
Accrued liabilities			23,314			24,862
Total current liabilities			55,696			52,530
Long-term debt			119,882			120,079
Deferred income taxes			4,658			4,659
Pension and post-retirement obligations			5,045			5,340
Right of use liabilities			14,895			14,975
Other long-term liabilities			6,761			8,558
Total liabilities			206,937			206,141
Stockholders’ Equity:
Common stock, no par value, authorized 50,000 shares; 14,724 and 14,632 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively			42,936			41,278
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding			—			—
Retained earnings			116,698			105,065
Accumulated other comprehensive loss			(6,586)			(3,287)
Total stockholders’ equity			153,048			143,056
Total Liabilities and Stockholders’ Equity		$	359,985		$	349,197

ALLIED MOTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		For the three months ended
		March 31,
		2021			2020
Cash Flows From Operating Activities:
Net income		$	11,927		$	4,035
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			4,431			3,750
Deferred income taxes			(7,029)			(488)
Stock-based compensation expense			797			789
Debt issue cost amortization recorded in interest expense			35			38
Other			890			72
Changes in operating assets and liabilities, net of acquisition:
Trade receivables			(9,912)			(7,463)
Inventories			56			(3,978)
Prepaid expenses and other assets			1,862			275
Accounts payable			4,994			3,043
Accrued liabilities			(2,484)			(3,039)
Net cash provided by (used in) operating activities			5,567			(2,966)
Cash Flows From Investing Activities:
Purchase of property and equipment			(3,076)			(1,696)
Consideration paid for acquisitions, net of cash acquired			—			(14,541)
Net cash used in investing activities			(3,076)			(16,237)
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt			—			26,979
Payment of debt issuance costs			—			(401)
Tax withholdings related to net share settlements of restricted stock			(256)			(256)
Net cash (used in) provided by financing activities			(256)			26,322
Effect of foreign exchange rate changes on cash			(641)			(152)
Net increase in cash and cash equivalents			1,594			6,967
Cash and cash equivalents at beginning of period			23,131			13,416
Cash and cash equivalents at end of period		$	24,725		$	20,383

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 months ended March 31, 2021 is as follows:

			Three Months Ended March 31, 2021
Revenue as reported			$	101,677
Currency impact				(4,274)
Revenue excluding foreign currency exchange impacts			$	97,403

The Company’s calculation of Adjusted EBITDA for the three months ended March 31, 2021 and 2020 is as follows:

		Three Months Ended
		March 31,
		2021			2020
Net income		$	11,927		$	4,035
Interest expense			861			1,054
(Benefit) provision for income tax			(6,057)			1,567
Depreciation and amortization			4,431			3,750
EBITDA			11,162			10,406
Stock-based compensation expense			797			789
Foreign currency (gain) loss			(12)			92
Business development costs			19			247
Adjusted EBITDA		$	11,966		$	11,534

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 months ended March 31, 2021 and 2020 is as follows:

		Three Months Ended
		March 31,
		2021			Per diluted share			2020			Per diluted share
Net income as reported		$	11,927		$	0.83		$	4,035		$	0.28
Non-GAAP adjustments, net of tax
Discrete income tax benefit			(7,373)			(0.51)			-			-
Foreign currency (gain) loss			(9)			(0.00)			66			0.00
Business development costs			15			0.00			178			0.01
Adjusted net income and diluted EPS		$	4,560		$	0.32		$	4,279		$	0.30
Weighted average diluted shares outstanding						14,438						14,274

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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