Allied Motion Technologies Inc. (AMOT) — Q2 2020 Form 10-Q
Filing identity: The filing names the issuer as Allied Motion Technologies Inc. Reporting period ended June 30, 2020; comparisons are against 2019. Amounts below are USD millions unless noted. The company designs and manufactures controlled-motion products and systems for vehicle, medical, aerospace and defense, and industrial markets.
Financial performance
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $86.7 | $92.6 | $179.0 | $186.5 |
| Gross profit / margin | $26.5 / 30.5% | $28.4 / 30.7% | $54.5 / 30.4% | $56.1 / 30.1% |
| Operating income | $5.1 | $7.6 | $11.8 | $14.9 |
| Net income | $2.9 | $4.4 | $6.9 | $8.9 |
| Diluted EPS | $0.30 | $0.47 | $0.73 | $0.95 |
| Operating cash flow | Not provided by quarter | $6.6 | $8.9 |
Q2 revenue fell 6% year over year and net income fell 35%; first-half revenue declined 4% and net income declined 22%. Q2 operating margin was approximately 5.8%, versus 8.2% a year earlier. First-half gross margin improved modestly, but operating income declined as operating expenses rose. Q2 bookings were $80.4 million, down 16%; backlog was $127.7 million, down 4% from the comparable prior-year date.
Revenue mix shifted sharply: Q2 vehicle revenue declined to $18.6 million from $30.8 million, while medical revenue rose to $24.3 million from $12.2 million, including the Dynamic Controls acquisition. For the first half, vehicle revenue was $46.6 million versus $64.4 million; medical revenue was $38.8 million versus $24.6 million.
Cash, debt and liquidity
- Cash and equivalents were $19.0 million at June 30, up from $13.4 million at year-end 2019. Current assets were $133.8 million and current liabilities $49.7 million.
- Long-term debt, net of issuance costs, was $128.5 million; gross revolver borrowings were $129.1 million. Approximate net debt after cash was $110.1 million.
- The amended revolving facility totals $225 million and matures in February 2025; $95.9 million was unused at quarter-end. The company reported compliance with its financial covenants.
- First-half operating cash flow was $6.6 million. Investing cash outflow was $18.3 million, including $14.7 million for the Dynamic Controls acquisition and $3.6 million of capital expenditures. Financing provided $17.3 million, primarily reflecting revolver borrowing.
Material changes, outlook and risks
- COVID-19: Management attributed weaker demand, especially in Vehicle, to pandemic-related disruption. Supplier and facility interruptions and customer production reductions also affected operations. Management expected uncertainty to continue to weigh on demand in Q3 and beyond; no specific revenue or earnings guidance was provided.
- Acquisition: Allied Motion acquired Dynamic Controls on March 7, 2020, expanding its medical-market and electronics/software capabilities. The preliminary purchase-price allocation included $6.6 million of goodwill and $7.8 million of identifiable intangible assets; goodwill is not tax deductible. Dynamic Controls contributed $9.9 million of Q2 revenue and $1.0 million of Q2 earnings. Acquisition-related costs were $0.2 million in Q2 and $0.4 million for the first half.
- Management said cash, borrowing availability and anticipated operating cash flows should cover ordinary-course needs for the next 12 months. The company was controlling discretionary spending, aligning variable costs with demand, freezing hiring and wages, and maintaining key engineering capabilities.
- Expected 2020 capital expenditures remained $10–12 million. Management also cited acquisition integration, customer and supplier conditions, foreign exchange, and the pandemic’s uncertain duration and effects as risks.
- Interest-rate swaps hedged $60 million of revolver borrowings. The filing estimated a 100-basis-point rate change would affect first-half interest expense by about $0.35 million. A single customer represented 11% of Q2 revenue and 15% of receivables at quarter-end.
Important facts for investors to verify
- Whether vehicle-market demand, bookings and backlog recover after pandemic-related disruption, and whether medical-market growth offsets weakness elsewhere.
- Dynamic Controls’ ongoing contribution, final purchase-price allocation and realization of anticipated integration benefits.
- Cash conversion and working-capital trends, particularly the first-half inventory increase, alongside debt levels and covenant headroom.
- Progress against the $10–12 million 2020 capital expenditure expectation and management’s stated 12-month liquidity assessment.
- Customer concentration and sensitivity to foreign-exchange and interest-rate movements.