- Achieved gross margin of 30.5%, as solid Medical market demand
partially offset softness from other markets impacted by
COVID-19
- Generated $9.6 million in cash from operations resulting in
$7.6 million of free cash flow
- Paid down nearly $8 million of debt in the quarter
Allied Motion Technologies Inc. (Nasdaq: AMOT) (“Allied Motion”
or “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 second quarter
ended June 30, 2020. Results include the Dynamic Controls Group
(“Dynamic Controls”) acquisition that was completed on March 7,
2020.
“I want to acknowledge the incredible efforts and dedication of
our employees who have done an excellent job helping us navigate
the challenges of the COVID-19 pandemic. We have continued to
operate all of our facilities and were able to flex up and support
the increased demand from various Medical market customers, many of
which are at the forefront of combating this pandemic. Moving
forward, we will remain vigilant and continue to implement the
measures required to ensure the health and safety of all our
employees and their families,” commented Dick Warzala, Chairman and
CEO. “Our second quarter performance was relatively solid and
demonstrated the success of our One Allied strategy and the
execution of our Allied Systematic Tools. We were pleased with our
gross margin level given the decline in revenue and we continued to
generate significant cash from operations in the quarter.”
He further added, “While we are somewhat subject to
macroeconomic conditions, we can control the success of our new
product development efforts, which continue to be a priority. We
are on-track to create several exciting new products and solutions
to ensure that we will meet the emerging needs of our served target
markets. With the uncertainty of the current COVID-19 environment,
the demand signals continue to be mixed and highly dependent on the
vitality of the end markets we serve. For Allied, this translates
into effectively managing the encouraging trends and stabilization
within certain markets, while at the same time dealing with the
continued volatility and uncertainty in various other markets.
Overall, I am confident that our team will continue to execute well
and that we have the right strategies and structure in place to
succeed in our markets for the long-term.”
Second Quarter 2020 Results (Narrative compares with
prior-year period unless otherwise noted)
Revenue of $86.7 million was down 6%, and reflected lower sales
to all markets except Medical, which nearly doubled year-over-year
and included the contribution from Dynamic Controls. Revenue
decreased by 5% when excluding a $1.4 million unfavorable impact of
changes in foreign currency exchange rates. Revenue excluding the
effect of foreign currency translation is a non-GAAP measure. The
Company believes this measure is useful for 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 translation.
Gross margin for the quarter was solid at 30.5%, down just 20
basis points. The impact of the decline in revenue was partially
offset by cost containment efforts and improved mix, given the
greater percentage of Medical market sales, including the favorable
impact of Dynamic Controls.
Operating costs and expenses as a percent of revenue were 24.7%,
up 220 basis points, largely due to lower revenue with incremental
expenses related to Dynamic Controls, higher business development
costs, and incremental COVID-19-related costs associated with
ensuring employee health and safety. As a result, operating income
decreased 34% to $5.1 million and operating margin declined 240
basis points to 5.8%.
Second quarter net income was $2.9 million, or $0.30 per diluted
share, compared with $4.4 million, or $0.47 per diluted share.
Excluding business development costs, adjusted net income for the
2020 second quarter was $3.0 million, or $0.32 per diluted share.
The Company believes that, when used in conjunction with measures
prepared in accordance with U.S. generally accepted accounting
principles, adjusted net income, 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 Net Income and Diluted Earnings
per Share.
Earnings before interest, taxes, depreciation, amortization,
stock compensation expense and business development costs
(“Adjusted EBITDA”) was $10.0 million for the second quarter
compared with $12.1 million in 2019. As a percent of sales,
Adjusted EBITDA was 11.6% versus 13.1%. 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) 2020 Results (Narrative compares with
prior-year period unless otherwise noted)
Revenue of $179.0 million was down $7.5 million, or 4%,
reflecting strong Medical market demand, offset by lower sales from
the Company’s other major market verticals given the global
economic impact of the COVID-19 pandemic. The impact of FX
fluctuations was unfavorable $2.8 million for the year-to-date
period. Sales to U.S. customers were 52% of total sales compared
with 56% for the same period last year, with the balance of sales
to customers primarily in Europe, Canada and Asia.
Gross margin for the year-to-date period expanded 30 basis
points to 30.4% despite deceased revenue. The margin increase was
largely driven by productivity, cost containment efforts and
improved mix, including the favorable impact of Dynamic
Controls.
Operating costs and expenses as a percent of revenue were 23.9%,
up 180 basis points, largely driven by the addition of Dynamic
Controls and higher business development costs. As a result,
operating margin declined 140 basis points to 6.6%.
Net income for the period decreased $2.0 million to $6.9
million. Adjusted EBITDA was $21.5 million compared with $23.9
million. As a percent of sales, Adjusted EBITDA was 12.0%, down 80
basis points.
Balance Sheet and Cash Flow Review
Cash and cash equivalents were $19.0 million compared with $13.4
million at the end of 2019. In the quarter, the Company paid down
$7.9 million of debt, resulting in $128.5 million of total debt as
of June 30, 2020. Compared with year-end 2019, total debt was up
$18.7 million, reflecting funds used to make the Dynamic Controls
acquisition. Debt, net of cash, was $109.4 million, or 46.4% of net
debt to capitalization.
Year-to-date capital expenditures were $3.6 million. The Company
expects its capital expenditures for full year 2020 to range
between $10 million to $12 million. This level enables key projects
to move forward, while deferring lower priority activities.
Orders and Backlog Summary ($ in thousands)
Q2
2020
Q1
2020
Q4
2019
Q3
2019
Q2
2019
Orders
$
80,365
$
92,923
$
86,315
$
90,726
$
95,317
Backlog
$
127,701
$
133,187
$
124,950
$
125,821
$
133,507
Foreign currency translation had an unfavorable $1.8 million
impact on second quarter orders compared with the prior-year
period. The time to convert the majority of backlog to sales is
approximately three to six months.
As announced on June 25, 2020, the Company recently won the
nomination for another award to provide a customer-specific
solution for the Company’s Vehicle market in Europe and Asia. This
award is in addition to three previously disclosed Vehicle market
awards received since 2017, and brings the total awards received
for Vehicle Market solutions to approximately $325 million at
current currency exchange rates. A nominal amount of these Vehicle
market awards is currently included in backlog as the Company has
begun shipments at very low levels for the first of four,
seven-year awards. Given the COVID-19 situation, Allied Motion
expects production for the initial projects to remain flat through
2020 and begin to gain traction in 2021. All awards are expected to
concurrently be at full rate production midway through 2024 and
running at that rate into early 2026.
Conference Call and Webcast
The Company will host a conference call and webcast on Thursday,
August 6, 2020 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, August 13, 2020. To listen to the
archived call, dial (412) 317-6671 and enter replay pin number
13705866 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.
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 August
6, 2020 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.
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In thousands, except per
share data)
(Unaudited)
For the three
months ended June
30,
For the six months ended
June 30,
2020
2019
2020
2019
Revenue
$
86,661
$
92,630
$
179,043
$
186,526
Cost of goods sold
60,201
64,208
124,541
130,442
Gross profit
26,460
28,422
54,502
56,084
Operating costs and expenses:
Selling
3,842
4,136
8,085
8,229
General and administrative
9,710
9,569
18,872
18,519
Engineering and development
6,197
5,676
12,431
11,483
Business development
177
3
424
56
Amortization of intangible assets
1,483
1,430
2,924
2,862
Total operating costs and expenses
21,409
20,814
42,736
41,149
Operating income
5,051
7,608
11,766
14,935
Other expense (income):
Interest expense
901
1,435
1,955
2,615
Other expense (income), net
17
(1)
76
(19)
Total other expense, net
918
1,434
2,031
2,596
Income before income taxes
4,133
6,174
9,735
12,339
Provision for income taxes
(1,237)
(1,729)
(2,804)
(3,424)
Net income
$
2,896
$
4,445
$
6,931
$
8,915
Basic earnings per share:
Earnings per share
$
0.30
$
0.47
$
0.73
$
0.95
Basic weighted average common shares
9,509
9,408
9,474
9,378
Diluted earnings per share:
Earnings per share
$
0.30
$
0.47
$
0.73
$
0.95
Diluted weighted average common shares
9,536
9,456
9,518
9,419
Net income
$
2,896
$
4,445
$
6,931
$
8,915
Foreign currency translation
adjustment
1,932
548
(496)
(339)
Loss on derivatives
(329)
(436)
(1,417)
(698)
Comprehensive income
$
4,499
$
4,557
$
5,018
$
7,878
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except per
share data)
(Unaudited)
June 30, 2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents
$
19,019
$
13,416
Trade receivables, net of provision for
credit losses of $605 and allowance for doubtful
accounts of $405 at June 30, 2020 and
December 31, 2019, respectively
49,595
44,429
Inventories
61,453
53,385
Prepaid expenses and other assets
3,699
4,413
Total current assets
133,766
115,643
Property, plant and equipment, net
53,465
53,008
Deferred income taxes
846
490
Intangible assets, net
67,378
62,497
Goodwill
59,501
52,935
Right of use assets
18,987
16,420
Other long-term assets
4,556
4,835
Total Assets
$
338,499
$
305,828
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
27,453
$
23,640
Accrued liabilities
22,210
23,001
Total current liabilities
49,663
46,641
Long-term debt
128,452
109,765
Deferred income taxes
4,649
3,399
Pension and post-retirement
obligations
5,205
5,139
Right of use liabilities
15,471
13,715
Other long-term liabilities
8,779
7,975
Total liabilities
212,219
186,634
Stockholders’ Equity:
Common stock, no par value, authorized
50,000 shares; 9,744 and 9,599 shares
issued and outstanding at June 30, 2020
and December 31, 2019, respectively
39,786
37,136
Preferred stock, par value $1.00 per
share, authorized 5,000 shares; no shares
issued or outstanding
—
—
Retained earnings
98,938
92,589
Accumulated other comprehensive loss
(12,444)
(10,531)
Total stockholders’ equity
126,280
119,194
Total Liabilities and Stockholders’
Equity
$
338,499
$
305,828
ALLIED MOTION TECHNOLOGIES
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the six months
ended
June 30,
2020
2019
Cash Flows From Operating
Activities:
Net income
$
6,931
$
8,915
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization
7,627
7,327
Deferred income taxes
(841)
(491)
Stock based compensation expense
1,720
1,540
Debt issue cost amortization recorded in
interest expense
73
87
Other
885
(166)
Changes in operating assets and
liabilities, net of acquisition:
Trade receivables
(1,178)
(8,692)
Inventories
(5,193)
1,973
Prepaid expenses and other assets
1,472
(289)
Accounts payable
(1,627)
(795)
Accrued liabilities
(3,270)
(557)
Net cash provided by operating
activities
6,599
8,852
Cash Flows From Investing
Activities:
Purchase of property and equipment
(3,614)
(6,401)
Cash paid for acquisitions, net of cash
acquired
(14,728)
—
Net cash used in investing activities
(18,342)
(6,401)
Cash Flows From Financing
Activities:
Borrowings on long term debt
26,979
7,695
Principal payments of long-term debt
(7,937)
(7,000)
Payment of debt issuance costs
(401)
—
Dividends paid to stockholders
(569)
(605)
Stock transactions under employee benefit
stock plans
(797)
(710)
Net cash provided by (used in) financing
activities
17,275
(620)
Effect of foreign exchange rate changes on
cash
71
(41)
Net increase in cash and cash
equivalents
5,603
1,790
Cash and cash equivalents at beginning of
period
13,416
8,673
Cash and cash equivalents at end of
period
$
19,019
$
10,463
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 (benefit), depreciation and amortization, stock
compensation expense and business development costs), 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, 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 six months ended June 30, 2020
is as follows:
Three Months Ended June
30, 2020
Six Months Ended June
30, 2020
Revenue as reported
$
86,661
$
179,043
Currency impact
1,381
2,804
Revenue excluding foreign currency
exchange impacts
$
88,042
$
181,847
The Company’s calculation of Adjusted EBITDA for the three
months and six months ended June 30, 2020 and 2019 is as
follows:
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Net income
$
2,896
$
4,445
$
6,931
$
8,915
Interest expense
901
1,435
1,955
2,615
Provision for income tax
1,237
1,729
2,804
3,424
Depreciation and amortization
3,877
3,668
7,627
7,327
EBITDA
8,911
11,277
19,317
22,281
Stock compensation expense
931
866
1,720
1,540
Business development costs
177
3
424
56
Adjusted EBITDA
$
10,019
$
12,146
$
21,461
$
23,877
Reconciliation of GAAP Net Income and
Diluted Earnings per Share to Non-GAAP Adjusted Net 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 and six months
ended June 30, 2020 and 2019 is as follows:
Three Months Ended June
30,
Six Months Ended June
30,
2020
Per diluted share
2019
Per diluted share
2020
Per diluted share
2019
Per diluted share
Net income as reported
$2,896
$ 0.30
$4,445
$ 0.47
$6,931
$ 0.73
$8,915
$ 0.95
Non-GAAP adjustments, net of tax
Business development costs
124
0.02
2
-
302
0.03
40
-
Adjusted net income and diluted EPS
$3,020
$ 0.32
$4,447
$ 0.47
$7,233
$ 0.76
$8,955
$ 0.95
Weighted average diluted shares
outstanding
9,536
9,456
9,518
9,419
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805006066/en/
Investor: Deborah K. Pawlowski Kei Advisors LLC Phone:
716-843-3908 Email: dpawlowski@keiadvisors.com
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