Allied
Motion Technologies Inc. (Nasdaq: AMOT) (“Company”), a
designer and manufacturer that sells precision and specialty controlled
motion products and solutions to the global market, today reported
financial results for its first quarter ended March, 31, 2019. Results
include the TCI, LLC (“TCI”) acquisition that was completed December 6,
2018.
“Our One Allied approach continues to prove effective, driving
strong organic growth and record orders as we expanded our market share
in many of our served markets. Further, our acquisition of TCI is
meeting our expectations as it has expanded our offerings, brought
excellent talent and broadened our markets. TCI’s new projects and
customers complemented our organic growth to drive total revenue up
23%,” commented Dick Warzala, Chairman and CEO. “Gross margin was
unchanged as we increased our investment in R&D and other key resources
to facilitate growth opportunities. There were also some atypical
impacts to gross margin in the quarter, including increased costs for
certain electronic assemblies that we are focusing on reducing over the
next several months. With our focus on Allied Systematic Tools (AST), we
expect to drive improvements in all areas of our business to make
further inroads into desirable end markets and to continuously improve
quality, delivery, innovation and cost.”
First Quarter 2019 Results (Narrative compares with prior-year
period unless otherwise noted)
Record revenue of $93.9 million was up $17.3 million, or 22.6%. The
increase was due to growth across all of the Company’s served markets.
The increase reflects organic growth of 12.8%, when excluding a $3.1
million unfavorable impact of changes in foreign currency exchange. The
Company believes that Revenue excluding foreign currency exchange
impacts, which is a non-GAAP measurement, is a useful measure in
analyzing organic sales results. See the attached table for a
description of non-GAAP financial measures and reconciliation of Revenue
to Revenue excluding foreign currency exchange impacts. Sales to
U.S. customers were 54% of total sales for the quarter compared with 53%
from the first quarter last year, with the balance of sales to customers
primarily in Europe, Canada and Asia.
Gross margin was unchanged at 29.5%. The recent acquisition of TCI was
margin accretive, but that benefit was offset by two atypical items,
which negatively impacted gross margin by a total of approximately 90
basis points. The first relates to a supplier who is discontinuing
operations and subsequently increased their prices for any new orders.
The second item was the timing of investment into tooling and prototype
samples related to new Vehicle market programs. Both impacts are
expected to moderate over the coming quarters.
Operating costs and expenses as a percent of revenue were up 60 basis
points to 21.7% largely due to additional personnel and engineering to
support the Company’s growth, higher stock compensation expense and
incremental intangible asset amortization of $562 thousand related to
the TCI acquisition. General and administrative expense as a percent of
revenue decreased 20 basis points to 9.5%, and engineering and
development as a percent of revenue decreased 30 basis points to 6.2%.
Operating income increased 14% to $7.3 million. Operating margin was
7.8% compared with 8.4%. Lower operating margin reflected the impact of
atypical items on gross margin, investments in growth and higher
amortization expense from the TCI acquisition.
Interest expense increased $566 thousand to $1.2 million on higher debt
balances that funded acquisitions.
The effective tax rate was 27.5% compared with 26.2% in the prior-year
period. Net income increased to $4.5 million, or $0.48 per diluted
share, compared with $4.2 million, or $0.45 per diluted share. The
Company anticipates its effective tax rate for fiscal 2019 to be in the
range of 26% to 29%.
Earnings before interest, taxes, depreciation, amortization, stock
compensation expense and business development costs (“Adjusted EBITDA”)
was $11.7 million, up $2.0 million or 20%. As a percent of sales,
Adjusted EBITDA was 12.5%, down 20 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.
Balance Sheet and Cash Flow Review
Cash and cash equivalents were $10.2 million compared with $8.7 million
at the end of 2018. Total debt was $129.1 million as of March 31, 2019,
up $6.5 million from year-end 2018. Debt, net of cash, was $118.9
million, or 52.7% of net debt to capitalization.
Capital expenditures were $2.5 million and included investments for
productivity improvement and growth initiatives. The Company expects to
invest $15 million to $18 million in capital expenditures during fiscal
2019. Most of the capital expenditures are to support the significant
Vehicle market project wins that will begin ramping by year-end,
off-road vehicle steering capabilities and incremental investments
related to the addition of TCI.
Orders and Backlog Summary ($ in thousands)
|
Q1 2019 |
Q4 2018 |
Q3 2018 |
Q2 2018 |
Q1 2018 |
|||||||||||||||||||||
| Orders | $ | 93,744 | $ | 84,911 | $ | 85,081 | $ | 86,238 | $ | 80,699 | |||||||||||||||
| Backlog | $ |
130,646 |
$ | 131,997 | $ | 115,713 | $ | 111,170 | $ | 107,321 | |||||||||||||||
The year-over-year increase in orders and backlog reflect recent
acquisitions and strength across all the Company’s served markets.
Foreign currency translation had an unfavorable $2.9 million impact on
the first quarter compared with the prior-year period.
Backlog was up 22% over the prior-year period and down slightly from a
record level in the sequential fourth quarter of 2018. The time to
convert the majority of backlog to sales is approximately three to six
months. Not included in the backlog are previously announced new
business awards of $225.0 million that are expected to begin shipping in
late 2019.
Conference Call and Webcast
The Company will host a conference call and webcast on Thursday, May 2,
2019 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, participants can call (201) 689-8263. In
addition, the call will be webcast live and may be found at: http://www.alliedmotion.com/investors.
A telephonic replay will be available from 1:00 pm ET on the day of the
call through Thursday, May 9, 2019. To listen to the archived call, dial
(412) 317-6671 and enter replay pin number 13689434 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. The Company is
headquartered in Amherst, NY, has global operations and sells into
markets across the United States, Canada, South America, Europe and Asia.
Allied Motion is focused on controlled motion applications and is known
worldwide for its expertise in electro-magnetic, mechanical and
electronic motion technology. Its products include brush and brushless
DC motors, brushless servo and torque motors, coreless DC motors,
integrated brushless motor-drives, gear motors, gearing, modular digital
servo drives, motion controllers, incremental and absolute optical
encoders, active (electronic) and passive (magnetic) filters for power
quality and harmonic issues, and other controlled motion-related
products.
The Company’s growth strategy is focused on being the controlled motion
solutions leader in its selected target markets by leveraging its
“technology/know how” to develop integrated precision solutions that
utilize multiple Allied Motion technologies to “change the game” and
create higher value solutions for its customers. The Company routinely
posts news and other important information on its website at http://www.alliedmotion.com/.
Safe Harbor Statement
The statements in this news release and in the Company’s May 2, 2019
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, and may
contain the word “believe,” “anticipate,” “expect,” “project,” “intend,”
“will continue,” “will likely result,” “should” or words or phrases of
similar meaning. Forward-looking statements involve known and unknown
risks and uncertainties that may cause actual results to differ
materially from the expected results described in the forward-looking
statements. The risks and uncertainties include those associated with:
the domestic and foreign general business and economic conditions in the
markets we serve, including political and currency risks and adverse
changes in local legal and regulatory environments; the introduction of
new technologies and the impact of competitive products; the ability to
protect the Company’s intellectual property; our ability to sustain,
manage or forecast its growth and product acceptance to accurately align
capacity with demand; the continued success of our customers and the
ability to realize the full amounts reflected in our order backlog as
revenue; the loss of significant customers or the enforceability of the
Company’s contracts in connection with a merger, acquisition,
disposition, bankruptcy, or otherwise; our ability to meet the technical
specifications of our customers; the performance of subcontractors or
suppliers and the continued availability of parts and components;
changes in government regulations; the availability of financing and our
access to capital markets, borrowings, or financial transactions to
hedge certain risks; the ability to attract and retain qualified
personnel who can design new applications and products for the motion
industry; the ability to implement our corporate strategies designed for
growth and improvement in profits including to identify and consummate
favorable acquisitions to support external growth and the development of
new technologies; the ability to successfully integrate an acquired
business into our business model without substantial costs, delays, or
problems; our ability to control costs, including the establishment and
operation of low cost region manufacturing and component sourcing
capabilities; and other risks and uncertainties detailed from time to
time in the Company’s SEC filings. Actual results, events and
performance may differ materially. Readers are cautioned not to place
undue reliance on these forward-looking statements as a prediction of
actual results. 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. |
|||||||||||
| For the three months ended | |||||||||||
| March 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| Revenue | $ | 93,896 | $ | 76,576 | |||||||
| Cost of goods sold | 66,234 | 54,022 | |||||||||
| Gross profit | 27,662 | 22,554 | |||||||||
| Operating costs and expenses: | |||||||||||
| Selling | 4,093 | 2,697 | |||||||||
| General and administrative | 8,950 | 7,456 | |||||||||
| Engineering and development | 5,807 | 4,955 | |||||||||
| Business development | 53 | 151 | |||||||||
| Amortization of intangible assets | 1,432 | 884 | |||||||||
| Total operating costs and expenses | 20,335 | 16,143 | |||||||||
| Operating income | 7,327 | 6,411 | |||||||||
| Other expense (income): | |||||||||||
| Interest expense | 1,180 | 614 | |||||||||
| Other (income) expense, net | (18 | ) | 106 | ||||||||
| Total other expense, net | 1,162 | 720 | |||||||||
| Income before income taxes | 6,165 | 5,691 | |||||||||
| Provision for income taxes | (1,695 | ) | (1,493 | ) | |||||||
| Net income | $ | 4,470 | $ | 4,198 | |||||||
| Basic earnings per share: | |||||||||||
| Earnings per share | $ | 0.48 | $ | 0.45 | |||||||
| Basic weighted average common shares | 9,340 | 9,251 | |||||||||
| Diluted earnings per share: | |||||||||||
| Earnings per share | $ | 0.48 | $ | 0.45 | |||||||
| Diluted weighted average common shares | 9,375 | 9,325 | |||||||||
| Net income | $ | 4,470 | $ | 4,198 | |||||||
| Foreign currency translation adjustment | (887 | ) | 1,687 | ||||||||
| Income (loss) on derivatives | (262 | ) | 604 | ||||||||
| Comprehensive income | $ | 3,321 | $ | 6,489 | |||||||
|
ALLIED MOTION TECHNOLOGIES INC |
||||||||||||
|
March 31, |
December 31, |
|||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 10,184 | $ | 8,673 | ||||||||
| Trade receivables, net of allowance for doubtful accounts of $560 | ||||||||||||
| and $530 at March 31, 2019 and December 31, 2018, respectively | 53,795 | 43,247 | ||||||||||
| Inventories | 52,962 | 54,971 | ||||||||||
| Prepaid expenses and other assets | 3,733 | 4,003 | ||||||||||
| Total current assets | 120,674 | 110,894 | ||||||||||
| Property, plant and equipment, net | 48,083 | 48,035 | ||||||||||
| Deferred income taxes | 424 | 341 | ||||||||||
| Intangible assets, net | 66,788 | 68,354 | ||||||||||
| Goodwill | 52,362 | 52,639 | ||||||||||
| Right of use asset | 18,978 | – | ||||||||||
| Other long-term assets | 4,708 | 5,038 | ||||||||||
| Total Assets | $ | 312,017 | $ | 285,301 | ||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 26,225 | $ | 25,867 | ||||||||
| Accrued liabilities | 18,944 | 18,722 | ||||||||||
| Total current liabilities | 45,169 | 44,589 | ||||||||||
| Long-term debt | 129,051 | 122,516 | ||||||||||
| Deferred income taxes | 3,604 | 3,860 | ||||||||||
| Pension and post-retirement obligations | 4,316 | 4,293 | ||||||||||
| Right of use liability | 15,818 | – | ||||||||||
| Other long-term liabilities | 7,261 | 8,230 | ||||||||||
| Total liabilities | 205,219 | 183,488 | ||||||||||
| Stockholders’ Equity: | ||||||||||||
| Common stock, no par value, authorized 50,000 shares; 9,607 | ||||||||||||
|
and 9,485 shares issued and outstanding at March 31, 2019 and
December 31, 2018, respectively |
35,564 | 33,613 | ||||||||||
| Preferred stock, par value $1.00 per share, authorized 5,000 shares; | ||||||||||||
| no shares issued or outstanding | – | – | ||||||||||
| Retained earnings | 80,901 | 76,718 | ||||||||||
| Accumulated other comprehensive loss | (9,667 | ) | (8,518 | ) | ||||||||
| Total stockholders’ equity | 106,798 | 101,813 | ||||||||||
| Total Liabilities and Stockholders’ Equity | $ | 312,017 | $ | 285,301 | ||||||||
|
ALLIED MOTION TECHNOLOGIES INC. |
|||||||||||
| For the three months ended | |||||||||||
| March 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| Cash Flows From Operating Activities: | |||||||||||
| Net income | $ | 4,470 | $ | 4,198 | |||||||
| Adjustments to reconcile net income to net cash provided by | |||||||||||
| operating activities | |||||||||||
| Depreciation and amortization | 3,659 | 2,791 | |||||||||
| Deferred income taxes | (297 | ) | 2,822 | ||||||||
| Stock compensation expense | 674 | 496 | |||||||||
| Debt issue cost amortization recorded in interest expense | 43 | 37 | |||||||||
| Other | 347 | 609 | |||||||||
| Changes in operating assets and liabilities, net of acquisition: | |||||||||||
| Trade receivables | (10,941 | ) | (8,231 | ) | |||||||
| Inventories | 1,291 | (3,887 | ) | ||||||||
| Prepaid expenses and other assets | (161 | ) | (1,408 | ) | |||||||
| Accounts payable | 490 | 5,479 | |||||||||
| Accrued liabilities | (2,014 | ) | (1,211 | ) | |||||||
| Net cash (used in) provided by operating activities | (2,439 | ) | 1,695 | ||||||||
| Cash Flows From Investing Activities: | |||||||||||
| Purchase of property and equipment | (2,505 | ) | (2,222 | ) | |||||||
| Cash paid for acquisitions | – | (13,312 | ) | ||||||||
| Net cash used in investing activities | (2,505 | ) | (15,534 | ) | |||||||
| Cash Flows From Financing Activities: | |||||||||||
| Borrowings on long term debt | 6,568 | 14,500 | |||||||||
| Principal payments of long-term debt | – | (4,350 | ) | ||||||||
| Stock transactions under employee benefit stock plans | (63 | ) | 849 | ||||||||
| Net cash provided by financing activities | 6,505 | 10,999 | |||||||||
| Effect of foreign exchange rate changes on cash | (50 | ) | 253 | ||||||||
| Net increase (decrease) in cash and cash equivalents | 1,511 | (2,587 | ) | ||||||||
| Cash and cash equivalents at beginning of period | 8,673 | 15,590 | |||||||||
| Cash and cash equivalents at end of period | $ | 10,184 | $ | 13,003 | |||||||
ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of
Non-GAAP Financial Measures
(In thousands)
(Unaudited)
In addition to reporting net income, a U.S. generally accepted
accounting principle (“GAAP”) measure, the Company presents Revenue
excluding foreign currency exchange impacts and Adjusted EBITDA
(earnings before interest, income taxes, depreciation and amortization,
stock compensation expense, and business development costs), which are
non-GAAP measures.
The Company believes that Revenue excluding foreign currency exchange
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 Adjusted EBITDA is often a useful measure of a
Company’s operating performance and is a significant basis used by the
Company’s management to evaluate and compare the core operating
performance of its business from period to period by removing the impact
of the capital structure (interest), tangible and intangible asset base
(depreciation and amortization), taxes, stock-based compensation
expense, business development costs related to acquisitions, and other
items that are not indicative of the Company’s core operating
performance. Adjusted EBITDA does 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, 2019 is as follows:
|
|
Three Months Ended | ||||||
|
|
March 31, 2019 | ||||||
| Revenue as reported | $ | 93,896 | |||||
| Currency impact | 3,140 | ||||||
| Revenue excluding foreign currency exchange impacts | $ | 97,036 | |||||
The Company’s calculation of Adjusted EBITDA for the three months ended
March 31, 2019 and 2018 is as follows:
| Three Months Ended | ||||||||||||
| March 31, | ||||||||||||
| 2019 | 2018 | |||||||||||
| Net income | $ | 4,470 | $ | 4,198 | ||||||||
| Interest expense | 1,180 | 614 | ||||||||||
| Provision for income tax | 1,695 | 1,493 | ||||||||||
| Depreciation and amortization | 3,659 | 2,791 | ||||||||||
| EBITDA | 11,004 | 9,096 | ||||||||||
| Stock compensation expense | 674 | 496 | ||||||||||
| Business development costs | 53 | 151 | ||||||||||
| Adjusted EBITDA | $ | 11,731 | $ | 9,743 | ||||||||
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