Allied Motion Reports 9% Revenue Growth and Record Orders and Backlog in Third Quarter 2021

Rhea-AI Summary

Allied Motion Technologies reported third-quarter financial results for 2021, achieving a 9% increase in revenue to $103.5 million, fueled by strong demand in Industrial and Vehicle markets, particularly with a 39% growth in Industrial sectors. Gross margin improved to 30.9%, reflecting strategic pricing and higher volume. Net income surged 49% to $6.0 million or $0.41 per diluted share. Record orders of $119.9 million resulted in a book-to-bill ratio of 1.2x and a backlog of $185.6 million—up 9% sequentially.

Positive

• Revenue increased by 9% to $103.5 million.
• Gross margin improved by 120 basis points to 30.9%.
• Net income rose 49% to $6.0 million, or $0.41 per diluted share.
• Record orders of $119.9 million, up 35% year-over-year.
• Backlog increased to a record $185.6 million, up 9% sequentially.

Negative

• Ongoing inflationary pressures and global supply chain disruptions persist.
• Labor shortages continue to pose challenges.

• Revenue grew 9% to $103.5 million over the prior-year period, driven by strong recovery in Industrial markets
• Gross margin expanded 120 basis points to 30.9% year-over-year and 20 basis points sequentially on higher volume, strategic pricing and improved mix
• Achieved net income of $6.0 million, or $0.41 per diluted share, up 49%
• Record orders of $119.9 million drove a book-to-bill ratio of 1.2x
• Record backlog of $185.6 million, up 9% sequentially

AMHERST, N.Y.--(BUSINESS WIRE)-- 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 third quarter ended September 30, 2021. All share and per share information reflect the April 30, 2021 3-for-2 stock dividend.

“Our results reflect continued strength in most of our served markets, particularly within our broad-based Industrial vertical. We had strong demand for products and solutions tied to industrial automation, vehicle handling, and the oil & gas sector,” commented Dick Warzala, Chairman and CEO. “Navigating the current environment has continued to be a challenge given ongoing inflationary pressures, global supply chain disruptions and labor shortages. While we do not see these challenges abating in the near-term, we are adeptly managing the situation in cooperation with our suppliers and customers. We have implemented actions within our control to mitigate the impact which we believe is evident by our measurable expansion in margins and profitability during the quarter.

“As we look out, demand remains strong and most customers will accept all product that we can deliver. While we expect some seasonality in the fourth quarter given typical holiday shutdowns and inventory adjustments, our current backlog indicates that the “normal” dip in revenues could be less than what we’ve experienced in prior years. Ultimately, we remain confident in our strategy and have a positive outlook for our business over the long term.”

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

Revenue increased 9% to $103.5 million, driven by strong demand in the Industrial and Vehicle markets. The Industrial markets benefitted from continued economic recovery in a number of industries, which resulted in 39% growth. Recovery within the construction and agriculture industries combined with strong execution by our team drove 5% growth within the Vehicle markets. Excluding the favorable impact of foreign currency exchange rate fluctuations on revenue of $0.8 million, revenue was up 8.5%. Sales to U.S. customers were 56% of total sales, unchanged from the same period last year, 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.

Gross margin was 30.9%, up 120 basis points from the third quarter of 2020, and up 20 basis points from the sequential 2021 second quarter. The increases were largely attributable to strong volume, strategic pricing and improved mix, partially offset by global supply chain challenges and rising material and labor costs.

Operating costs and expenses as a percent of revenue were 22.6%, down 30 basis points. Operating income was $8.7 million, or 8.4% of sales, up from $6.5 million, or 6.8%, in the third quarter of 2020. Higher volume drove operating leverage, which more than offset increased incentive compensation, which was aligned with the revenue and net income growth.

Net income was $6.0 million, or $0.41 per diluted share, up from $4.0 million, or $0.28 per diluted share in the third quarter of 2020. The effective tax rate was 24.6% compared with 25.4% in the prior-year period. The lower tax rate was aided by our continued tax planning initiatives. The Company expects its income tax rate for the fourth quarter of 2021 to be approximately 25%. Excluding the discrete tax benefit of $7.4 million recorded in the first quarter of 2021, the Company expects its full year 2021 income tax rate to be approximately 24%.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses (“Adjusted EBITDA”) was $14.5 million, up $3.0 million, or 26%. As a percent of sales, Adjusted EBITDA was 14.0%, up 190 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) 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue of $306.7 million increased $33.0 million, or 12%, reflecting strong demand in Vehicle and Industrial markets as economic conditions continued to recover from the impact of the COVID-19 pandemic. The impact of FX fluctuations was favorable $9.2 million for the year-to-date period. Sales to U.S. customers were 54% 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 30.4% compared with 30.2% in the prior-year-period. The margin improvement reflects strong demand and improved mix, partially offset by increased costs given global supply chain disruptions and the proactive decision to incur incremental costs to ensure on-time deliveries to customers.

Operating costs and expenses as a percent of revenue were 23.2%, down 30 basis points. Operating income was $22.0 million, up from $18.2 million. Operating margin improved 50 basis points to 7.2%.

Net income was $22.5 million, or $1.56 per diluted share, compared with $10.9 million, or $0.76 per diluted share. The increase reflects a net discrete tax benefit of $7.4 million recorded in the first quarter of 2021 relating to new legislation enacted in New Zealand. Excluding the discrete tax benefit, business development costs and foreign currency gains/losses, adjusted net income was $15.3 million, or $1.06 per diluted share, compared with $11.6 million, or $0.81 per diluted share, in the comparable period of 2020. Adjusted EBITDA increased to $38.8 million from $33.2 million. Adjusted EBITDA margin of 12.7% was up 60 basis points. See the attached tables for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share and Adjusted EBITDA.

Balance Sheet and Cash Flow Review

Cash and cash equivalents were $19.2 million compared with $23.1 million at year-end 2020. Year-to-date net cash provided by operations was $19.9 million and was primarily used to fund capital expenditures of $9.8 million and net debt repayment of $10.6 million. The capital investments were largely focused on new customer projects and ERP implementations. The Company expects 2021 capital expenditures to be approximately $12 million to $15 million.

Total debt was $109.3 million compared with $120.1 million at year-end 2020. With cash of $19.2 million, debt, net of cash, was $90.1 million, or 35.7% of net debt to capitalization. The Company’s leverage ratio, as defined in its credit agreement, was 2.22x at quarter-end.

Orders and Backlog Summary ($ in thousands)

		Q3 2021			Q2 2021			Q1 2021			Q4 2020			Q3 2020
Orders		$	119,940		$	118,974		$	114,644		$	108,466		$	88,958
Backlog		$	185,561		$	170,364		$	152,262		$	141,344		$	123,700

Orders of $119.9 million reached a record level, increasing 35% over the 2020 third quarter and 1% sequentially. Foreign currency translation had a favorable $1.0 million impact on third quarter orders compared with the prior-year period. Backlog increased 9% over the sequential second quarter and 50% over the prior-year period to a record $185.6 million. The time to convert the majority of 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 4, 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 (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, November 11, 2021. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13723716 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 November 4, 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						For the nine months ended
		September 30,						September 30,
		2021			2020			2021			2020
Revenues		$	103,509		$	94,653		$	306,723		$	273,696
Cost of goods sold			71,488			66,513			213,417			191,054
Gross profit			32,021			28,140			93,306			82,642
Operating costs and expenses:
Selling			4,365			3,734			12,979			11,819
General and administrative			10,620			10,008			32,549			28,880
Engineering and development			6,768			6,434			20,967			18,865
Business development			94			8			268			432
Amortization of intangible assets			1,504			1,499			4,527			4,423
Total operating costs and expenses			23,351			21,683			71,290			64,419
Operating income			8,670			6,457			22,016			18,223
Other expense, net:
Interest expense			777			844			2,445			2,799
Other (income) expense, net			(29)			231			(158)			307
Total other expense, net			748			1,075			2,287			3,106
Income before income taxes			7,922			5,382			19,729			15,117
Income tax (provision) benefit			(1,950)			(1,369)			2,804			(4,173)
Net income		$	5,972		$	4,013		$	22,533		$	10,944
Basic earnings per share:
Earnings per share		$	0.41		$	0.28		$	1.57		$	0.77
Basic weighted average common shares			14,411			14,271			14,375			14,231
Diluted earnings per share:
Earnings per share		$	0.41		$	0.28		$	1.56		$	0.76
Diluted weighted average common shares			14,502			14,369			14,478			14,309

ALLIED MOTION TECHNOLOGIES INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited)
		September 30,			December 31,
		2021			2020
Assets
Current assets:
Cash and cash equivalents		$	19,209		$	23,131
Trade receivables, net of provision for credit losses of $545 and $382 at September 30, 2021 and December 31, 2020, respectively			55,723			47,377
Inventories			72,239			62,978
Prepaid expenses and other assets			10,365			8,728
Total current assets			157,536			142,214
Property, plant and equipment, net			55,215			55,428
Deferred income taxes			7,188			330
Intangible assets, net			60,643			65,859
Goodwill			60,583			61,860
Right of use assets			17,104			19,023
Other long-term assets			5,341			4,483
Total Assets		$	363,610		$	349,197
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	35,131		$	27,668
Accrued liabilities			27,315			24,862
Total current liabilities			62,446			52,530
Long-term debt			109,312			120,079
Deferred income taxes			4,230			4,659
Pension and post-retirement obligations			5,139			5,340
Right of use liabilities			13,126			14,975
Other long-term liabilities			6,945			8,558
Total liabilities			201,198			206,141
Stockholders’ Equity:
Common stock, no par value, authorized 50,000 shares; 14,715 and 14,632 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively			43,792			41,278
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding			—			—
Retained earnings			126,568			105,065
Accumulated other comprehensive loss			(7,948)			(3,287)
Total stockholders’ equity			162,412			143,056
Total Liabilities and Stockholders’ Equity		$	363,610		$	349,197

ALLIED MOTION TECHNOLOGIES INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
		For the nine months ended
		September 30,
		2021			2020
Cash Flows From Operating Activities:
Net income		$	22,533		$	10,944
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			13,317			11,682
Deferred income taxes			(7,440)			(931)
Stock-based compensation expense			3,100			2,640
Debt issue cost amortization recorded in interest expense			106			109
Other			1,235			360
Changes in operating assets and liabilities, net of acquisition:
Trade receivables			(9,586)			(2,136)
Inventories			(11,747)			(4,575)
Prepaid expenses and other assets			(675)			(725)
Accounts payable			8,168			492
Accrued liabilities			909			(2,840)
Net cash provided by operating activities			19,920			15,020
Cash Flows From Investing Activities:
Purchase of property and equipment			(9,761)			(6,560)
Consideration paid for acquisitions, net of cash acquired			—			(14,728)
Net cash used in investing activities			(9,761)			(21,288)
Cash Flows From Financing Activities:
Borrowings on long term debt			819			26,979
Principal payments of long-term debt			(11,417)			(12,299)
Payment of debt issuance costs			—			(401)
Dividends paid to stockholders			(1,007)			(875)
Tax withholdings related to net share settlements of restricted stock			(1,700)			(814)
Net cash (used in) provided by financing activities			(13,305)			12,590
Effect of foreign exchange rate changes on cash			(776)			489
Net (decrease) increase in cash and cash equivalents			(3,922)			6,811
Cash and cash equivalents at beginning of period			23,131			13,416
Cash and cash equivalents at end of period		$	19,209		$	20,227

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 and nine months ended September 30, 2021 is as follows:

		Three Months Ended			Nine Months Ended
		September 30, 2021			September 30, 2021
Revenue as reported		$	103,509		$	306,723
Currency impact			(813)			(9,191)
Revenue excluding foreign currency exchange impacts		$	102,696		$	297,532

The Company’s calculation of Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020 is as follows:

		Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021			2020
Net income		$	5,972		$	4,013		$	22,533		$	10,944
Interest expense			777			844			2,445			2,799
Provision (benefit) for income tax			1,950			1,369			(2,804)			4,173
Depreciation and amortization			4,427			4,055			13,317			11,682
EBITDA			13,126			10,281			35,491			29,598
Stock compensation expense			1,303			920			3,100			2,640
Foreign currency (gain) loss			(69)			283			(42)			493
Business development costs			94			8			268			432
Adjusted EBITDA		$	14,454		$	11,492		$	38,817		$	33,163

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 and nine months ended September 30, 2021 and 2020 is as follows:

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
			2021		Per diluted share				2020		Per diluted share				2021		Per diluted share				2020		Per diluted share
Net income as reported		$	5,972		$	0.41		$	4,013		$	0.28		$	22,533		$	1.56		$	10,944		$	0.76
Non-GAAP adjustments, net of tax
Discrete income tax benefit			-			-			-			-			(7,373)			(0.51)			-			-
Foreign currency (gain) loss			(50)			-			211			0.01			(30)			-			357			0.02
Business development costs			72			-			6			-			205			0.01			313			0.02
Adjusted net income and diluted EPS		$	5,994		$	0.41		$	4,230		$	0.29		$	15,335		$	1.06		$	11,614		$	0.81
Weighted average diluted shares outstanding						14,502						14,369						14,478						14,309

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/20211103006233/en/

Investor Contact:

Deborah K. Pawlowski

Kei Advisors LLC

Phone: 716-843-3908

Email: dpawlowski@keiadvisors.com

Source: Allied Motion Technologies Inc.

FAQ

What were the revenue results for Allied Motion Technologies in Q3 2021?

Allied Motion Technologies reported a revenue increase of 9% to $103.5 million for Q3 2021.

How much did the net income grow for Allied Motion in Q3 2021?

Net income grew 49% to $6.0 million, or $0.41 per diluted share.

What is the stock symbol for Allied Motion Technologies?

The stock symbol for Allied Motion Technologies is AMOT.

What were the record orders for Allied Motion Technologies in Q3 2021?

Record orders reached $119.9 million in Q3 2021.

How has the backlog changed for Allied Motion in Q3 2021?

The backlog increased 9% sequentially to a record $185.6 million.