Allied Motion Reports Operating Income Growth of 60% to a Record $12.0 Million on Revenue of $146.8 Million in Second Quarter 2023

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 second quarter ended June 30, 2023. Results include the acquisitions completed during the second quarter of 2022.

“Driving overall margin improvement continues to be an emphasis within Allied and while we did experience a slight contraction in our gross margin, primarily due to mix, our operating leverage improvements delivered record operating income of $12.0 million and a 210 basis point improvement for the quarter. Once again, we delivered record sales and strong organic growth of 17% for the quarter. Industrial Markets were up 39% over last year’s second quarter, largely driven by industrial automation projects and power quality solutions. Solid demand from our other target market verticals also contributed to our overall sales growth in the quarter,” commented Dick Warzala, Chairman and CEO.

He added, “While we have experienced positive improvements in the supply chain, which has helped to reduce our backlogs, we do expect some near-term challenges with macro-economic softness in parts of Europe. For the long term, we still see tremendous opportunities for growth and value creation across our global platform. Ultimately, we have confidence that we can continue to successfully execute our proven strategy well into the future.”

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

Revenue increased 20%, or $24.0 million, to a record $146.8 million and reflected higher demand across most target markets and incremental revenue from acquisitions completed during last year’s second quarter. Excluding the unfavorable impact of foreign currency exchange rate fluctuations on revenue of $0.4 million, organic growth was 17%. Sales to U.S. customers were 58% of total sales for the second quarter of 2023 and 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 39% in the quarter, benefiting from strong end market demand within industrial automation, material and vehicle handling, oil & gas, and HVAC. Aerospace & Defense sales increased 11%, which reflected incremental contributions from acquisitions. Sales in the Vehicle markets increased 7%, as higher commercial automotive and powersports demand more than offset lower demand within agricultural vehicles. Medical market revenue was up 3% due to higher demand for medical mobility. Sales through the Distribution channel increased 17%.

Gross margin was 31.3%, down 110 basis points from the prior-year period as higher volume was more than offset by unfavorable mix and continued raw material pricing increases.

Operating costs and expenses were 23.2% of revenue, down 310 basis points, which reflected the operating leverage obtained from strong revenue growth, including the successful integration of recent acquisitions. As a result, operating income increased 60% to $12.0 million compared with $7.5 million, and as a percent of revenue was 8.2%, up 210 basis points.

Net income increased 48% to $6.8 million, or $0.42 per diluted share, from $4.6 million, or $0.29 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 $9.5 million, or $0.58 per diluted share, compared with adjusted net income of $7.7 million, or $0.48 per diluted share. The effective tax rate was 23.9% in the second quarter of 2023, which reflected discrete tax benefits of 1.6% in the period. The Company expects its income tax rate for the full year 2023 to be approximately 24% to 26%. 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 $20.4 million, up $4.2 million, or 26%. As a percentage of revenue, Adjusted EBITDA was 13.9%, up 70 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 $292.3 million increased $54.8 million, or 23%, reflecting strong demand in Industrial and Aerospace & Defense markets, and incremental sales from acquisitions. The impact of foreign currency exchange fluctuations was unfavorable by $3.7 million for the year-to-date period. Sales to U.S. customers were 57% of total sales, equal to the percent of sales for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific.

Gross margin was 31.4%, up 60 basis points due to higher volume and margin accretive acquisitions, which more than offset recent unfavorable mix. Operating costs and expenses as a percent of revenue were 23.4%, down 250 basis points, due to operating leverage and decreased business development costs. As a result, operating income was $23.4 million, or 8.0% of sales, compared with $11.8 million, or 5.0% of sales.

Net income increased to $13.1 million, or $0.81 per diluted share, compared with $7.1 million, or $0.45 per diluted share. Excluding amortization of intangible assets related to acquisitions, business development costs and other non-recurring items, adjusted net income was $18.4 million, or $1.14 per diluted share, compared with $13.4 million, or $0.85 per diluted share, in the comparable period of 2022. Adjusted EBITDA increased to $39.4 million from $29.1 million, and as a percent of revenue was 13.5%, up 120 basis points.

Balance Sheet and Cash Flow Review

Cash and cash equivalents were $24.1 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 $17.3 million for the year-to-date period compared with cash usage of $0.3 million in the prior-year period. The increase reflected higher net income and stronger inventory turns. Capital expenditures were $6.1 million year-to-date and largely focused on new customer projects. The Company expects 2023 capital expenditures to be in the range of $16 million to $20 million.

Total debt of $227.5 million was down $8.3 million from year-end 2022. Debt, net of cash, was $203.4 million, or 46.2% of net debt to capitalization. The Company’s leverage ratio, as defined in its credit agreement, was 3.06x at quarter-end.

Orders and Backlog Summary ($ in thousands)

	Q2 2023				Q1 2023				Q4 2022			Q3 2022			Q2 2022
Orders	$	137,008		$		123,198		$		145,564		$	126,158		$	139,209
Backlog	$	298,695		$		308,635		$		330,078		$	310,186		$	323,873

Foreign currency translation had an unfavorable $0.4 million impact on second quarter orders compared with the prior-year period. The second quarter orders represented a book-to-bill ratio of 0.9x.

Backlog decreased 3% from the sequential first quarter of 2023 reflecting more normal levels as improvements continued within the supply chain 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, August 3, 2023 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 2:00 pm ET on the day of the call through Thursday, August 10, 2023. To listen to the archived call, dial [phone] and enter replay pin number 10180165 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 that are used in a broad range of applications within the Industrial, Vehicle, Medical, and Aerospace & Defense Markets. 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 controlled motion technologies. Its products include nano precision positioning systems, servo control systems, motion controllers, digital servo amplifiers and drives, brushless servo, torque, and coreless motors, brush motors, integrated motor-drives, gear motors, gearing, incremental and absolute optical encoders, active (electronic) and passive (magnetic) filters for power quality and harmonic issues, Industrial safety rated I/O Modules, Universal Industrial Communications Gateways, light-weighting technologies, and other controlled motion-related products.

The Company’s growth strategy is focused on becoming a leading global controlled motion solution provider in its selected target markets by further developing its products and services platform to utilize multiple Allied Motion technologies which create increased 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 August 3, 2023 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, 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

ALLIED MOTION TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
		For the three months ended								For the six months ended
		June 30,								June 30,
		2023				2022				2023				2022
Revenue		$	146,769			$	122,722			$	292,318			$	237,507
Cost of goods sold			100,792				82,948				200,507				164,273
Gross profit			45,977				39,774				91,811				73,234
Operating costs and expenses:
Selling			6,301				5,808				12,333				10,839
General and administrative			14,162				12,595				28,982				24,091
Engineering and development			9,952				9,791				20,339				19,177
Business development			400				1,417				597				2,265
Amortization of intangible assets			3,142				2,645				6,151				5,079
Total operating costs and expenses			33,957				32,256				68,402				61,451
Operating income			12,020				7,518				23,409				11,783
Other expense, net:
Interest expense			3,162				1,525				6,145				2,563
Other (income) expense, net			(42	)			(279	)			145				(234	)
Total other expense, net			3,120				1,246				6,290				2,329
Income before income taxes			8,900				6,272				17,119				9,454
Income tax provision			(2,131	)			(1,691	)			(4,035	)			(2,370	)
Net income		$	6,769			$	4,581			$	13,084			$	7,084
Basic earnings per share:
Earnings per share		$	0.42			$	0.30			$	0.82			$	0.47
Basic weighted average common shares			15,969				15,355				15,921				15,226
Diluted earnings per share:
Earnings per share		$	0.42			$	0.29			$	0.81			$	0.45
Diluted weighted average common shares			16,219				15,932				16,178				15,752

ALLIED MOTION TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
		June 30,				December 31,
		2023				2022
Assets
Current assets:
Cash and cash equivalents		$	24,120			$	30,614
Trade receivables, net of provision for credit losses of $1,155 and $1,192 at June 30, 2023 and December 31, 2022, respectively			87,245				76,213
Inventories			116,098				117,108
Prepaid expenses and other assets			11,781				12,072
Total current assets			239,244				236,007
Property, plant, and equipment, net			68,518				68,640
Deferred income taxes			3,765				4,199
Intangible assets, net			113,160				119,075
Goodwill			127,987				126,366
Operating lease assets			21,852				22,807
Other long-term assets			10,968				11,253
Total Assets		$	585,494			$	588,347
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	42,368			$	39,467
Accrued liabilities			45,389				48,121
Total current liabilities			87,757				87,588
Long-term debt			227,106				235,454
Deferred income taxes			6,024				6,262
Pension and post-retirement obligations			2,861				3,009
Operating lease liabilities			17,557				18,795
Other long-term liabilities			7,395				21,774
Total liabilities			348,700				372,882
Stockholders’ Equity:
Common stock, no par value, authorized 50,000 shares; 16,268 and 15,978 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively			92,483				83,852
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding			—				—
Retained earnings			155,772				143,576
Accumulated other comprehensive loss			(11,461	)			(11,963	)
Total stockholders’ equity			236,794				215,465
Total Liabilities and Stockholders’ Equity		$	585,494			$	588,347

ALLIED MOTION TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		For the six months ended
		June 30,
		2023				2022
Cash Flows From Operating Activities:
Net income		$	13,084			$	7,084
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			12,535				12,531
Deferred income taxes			(14	)			1,222
Stock-based compensation expense			2,811				2,490
Debt issue cost amortization recorded in interest expense			150				71
Other			685				793
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables			(11,151	)			(15,407	)
Inventories			832				(22,003	)
Prepaid expenses and other assets			287				1,601
Accounts payable			2,822				9,850
Accrued liabilities			(4,768	)			1,478
Net cash provided by (used in) operating activities			17,273				(290	)
Cash Flows From Investing Activities:
Consideration paid for acquisitions, net of cash acquired			(6,250	)			(44,569	)
Purchase of property and equipment			(6,118	)			(6,354	)
Net cash used in investing activities			(12,368	)			(50,923	)
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt			4,000				64,203
Principal payments of long-term debt and finance lease obligations			(12,567	)			(3,406	)
Dividends paid to stockholders			(872	)			(776	)
Tax withholdings related to net share settlements of restricted stock			(1,653	)			(1,240	)
Net cash (used in) provided by financing activities			(11,092	)			58,781
Effect of foreign exchange rate changes on cash			(307	)			(1,185	)
Net (decrease) increase in cash and cash equivalents			(6,494	)			6,383
Cash and cash equivalents at beginning of period			30,614				22,463
Cash and cash equivalents at end of period		$	24,120			$	28,846

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, 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 six months ended June 30, 2023 is as follows:

		Three Months Ended			Six Months Ended
		June 30, 2023			June 30, 2023
Revenue as reported		$	146,769		$	292,318
Foreign currency impact			410			3,662
Revenue excluding foreign currency exchange impacts		$	147,179		$	295,980

The Company’s calculation of Adjusted EBITDA for the three and six months ended June 30, 2023 and 2022 is as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2023				2022				2023			2022
Net income	$	6,769			$	4,581			$	13,084		$	7,084
Interest expense		3,162				1,525				6,145			2,563
Provision for income tax		2,131				1,691				4,035			2,370
Depreciation and amortization		6,390				6,096				12,535			12,531
EBITDA		18,452				13,893				35,799			24,548
Stock compensation expense		1,544				1,141				2,811			2,490
Foreign currency (gain) loss		(15	)			(254	)			199			(203		)
Business development costs		400				1,417				597			2,265
Adjusted EBITDA	$	20,381			$	16,197			$	39,406		$	29,100

ALLIED MOTION TECHNOLOGIES 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 six months ended June 30, 2023 and 2022 is as follows:

		Three Months Ended
		June 30,
			2023		Per diluted share				2022		Per diluted share
Net income as reported		$	6,769		$	0.42		$	4,581		$	0.29
Non-GAAP adjustments, net of tax (1)
Amortization of intangible assets - net			2,407			0.14			2,233			0.14
Foreign currency gain/ loss - net			(11	)		-			(194	)		(0.01	)
Business development costs - net			306			0.02			1,085			0.06
Adjusted net income and adjusted diluted EPS		$	9,471		$	0.58		$	7,705		$	0.48
Weighted average diluted shares outstanding						16,219						15,932

		Six Months Ended
		June 30,
			2023	Per diluted share				2022		Per diluted share
Net income as reported		$	13,084	$	0.81		$	7,084		$	0.45
Non-GAAP adjustments, net of tax (1)
Amortization of intangible assets - net			4,712		0.29			4,693			0.30
Foreign currency gain/ loss - net			152		0.01			(155	)		(0.01	)
Business development costs - net			457		0.03			1,735			0.11
Adjusted net income and adjusted diluted EPS		$	18,405	$	1.14		$	13,357		$	0.85
Weighted average diluted shares outstanding					16,178						15,752

___________________
			(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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230802878852/en/

The Allied Motion Technologies Stock at the time of publication of the news with a raise of +1,40 % to 36,10EUR on Lang & Schwarz stock exchange (02. August 2023, 22:33 Uhr).