Allied Motion Technologies Inc. — Q3 2019 Form 10-Q
Entity note: The filing is for Allied Motion Technologies Inc. (NASDAQ: AMOT), although the request metadata names ALLIENT INC. Verify the intended issuer. Unless otherwise noted, dollar amounts below are in thousands.
Business context and reporting period
The filing covers the quarter and nine months ended September 30, 2019. Allied Motion designs and manufactures controlled-motion products and systems for vehicle, industrial, medical, and aerospace and defense markets. It reports one operating segment. TCI, acquired in December 2018, contributed to 2019 sales and earnings.
Financial performance
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $96,633 | $80,092 | $283,159 | $236,649 |
| Gross profit / margin | $30,030 / 31.1% | $23,762 / 29.7% | $86,114 / 30.4% | $69,833 / 29.5% |
| Operating income | $8,812 | $7,226 | $23,747 | $19,869 |
| Net income | $4,618 | $4,860 | $13,533 | $13,289 |
| Diluted EPS | $0.49 | $0.52 | $1.43 | $1.42 |
| Adjusted EBITDA | $13,641 | $10,809 | $37,519 | $30,577 |
Q3 reported revenue increased 21%; excluding unfavorable currency effects, it was $98,200, up 22.6%. Nine-month reported revenue rose 20%; excluding currency effects, it was $289,876, up 22.5%. Despite higher revenue and operating income, Q3 net income fell 5%, primarily reflecting higher operating costs, interest expense, and taxes. The 2019 tax rate was 36.9% for Q3 and 31.1% year to date, versus 26.7% and 26.8%, respectively, in 2018.
Cash flow, liquidity, and debt
- Nine-month operating cash flow was $17,004, compared with $11,286 in 2018; investing cash outflow was $9,280, and financing cash outflow was $7,513.
- Cash was $8,578 at September 30, 2019, down $95 from year-end 2018. Trade receivables were $56,004, up from $43,247 at year-end; inventory was $51,376, down from $54,971.
- Long-term debt, net of issuance costs, was $116,486, versus $122,516 at December 31, 2018. The revolver had $59,608 available and matures in October 2021. The company reported compliance with all debt covenants.
- Current assets were $120,040 and current liabilities $48,248. The company reduced net debt by approximately $6,700 during Q3.
Changes, outlook, and risks
- Growth was reported across served markets, with contributions from TCI. Q3 bookings were $90,726, up 7%, and backlog was $125,821, up 9% year over year. Gross margin improved 140 basis points in Q3, attributed to volume, product mix, and TCI.
- Higher selling costs, acquisition-related amortization, and interest expense offset some operating gains. Management also noted expense associated with an ongoing supplier issue; the filing does not quantify its financial effect.
- Management expected 2019 capital expenditures of $13–$15 million; $9.28 million had been spent in the first nine months. The filing provides no specific revenue or earnings guidance. Management said working capital, capital spending, and dividends were expected to be funded by operating cash flow and revolver availability.
- Unusual items included a foreign tax-audit settlement affecting the tax rate and a related $384 non-income-based tax assessment recorded in other expense. Foreign currency reduced revenue by approximately $1,567 in Q3 and $6,717 year to date.
- Risks include economic and currency exposure, customer and supplier concentration, demand and backlog conversion, competition and technology changes, acquisition integration, and access to financing. One customer represented 17% of Q3 revenue and 17% of receivables at quarter-end. No material changes to previously disclosed risk factors were reported.
Investor verification priorities
- Confirm the intended issuer: the supplied filing identifies Allied Motion Technologies Inc., not ALLIENT INC.
- Assess whether growth and backlog convert to sales and cash, particularly given the increase in receivables and the significant customer concentration.
- Track gross-margin sustainability and the effects of supplier issues, acquisition costs, and higher interest expense.
- Review revolver usage, covenant headroom, maturity/refinancing plans, and planned capital expenditures.
- Evaluate the tax-audit effects and currency sensitivity; distinguish reported results from management’s non-GAAP measures.