Allied Motion Technologies Inc. — Q2 2021 Form 10-Q
Company identification: The filing is for Allied Motion Technologies Inc. (NASDAQ: AMOT), not a company identified in the request metadata as “ALLIENT INC.” Reporting period ended June 30, 2021; filed August 4, 2021. Amounts below are in U.S. dollars; financial statement amounts are in thousands unless noted.
Business context and reporting period
Allied Motion designs, manufactures and sells controlled-motion components and systems to Vehicle, Industrial, Medical, Aerospace & Defense, and other markets. It reports one operating segment. Results cover the three and six months ended June 30, 2021, compared with the same 2020 periods.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | First half 2021 | First half 2020 |
|---|---|---|---|---|
| Revenue | $101.5 million | $86.7 million | $203.2 million | $179.0 million |
| Gross profit / margin | $31.2 million / 30.7% | $26.5 million / 30.5% | $61.3 million / 30.2% | $54.5 million / 30.4% |
| Operating income | $6.7 million | $5.1 million | $13.3 million | $11.8 million |
| Net income | $4.6 million | $2.9 million | $16.6 million | $6.9 million |
| Diluted EPS | $0.32 | $0.20 | $1.14 | $0.49 |
Q2 operating margin was approximately 6.6%; first-half operating margin was approximately 6.6%. First-half GAAP net income includes a $7.373 million discrete tax benefit, primarily tied to recognition of New Zealand net operating loss carryforwards. The first-half effective tax rate was negative 40.3%, versus 28.8% a year earlier. Q2 effective tax rates were 21.9% and 29.9%, respectively.
- Cash flow: First-half operating cash flow was $16.5 million, versus $6.6 million in 2020. Capital expenditures were $5.9 million; investing cash outflow was $5.9 million. Financing cash outflow was $9.9 million, including $7.6 million of debt principal payments and $0.7 million of dividends.
- Liquidity: Cash was $23.4 million at June 30, 2021. Current assets were $151.8 million and current liabilities $59.3 million. The current ratio was approximately 2.6. Management said cash, borrowing capacity and expected operating cash flows were sufficient for ordinary-course needs over the next 12 months.
- Debt: Long-term debt, net of issuance costs, was $112.4 million, down from $120.1 million at year-end 2020. The $225 million revolving facility matures in February 2025; unused availability was $112.1 million, subject to covenant-based limitations. The company reported covenant compliance. Net debt after cash was approximately $89.0 million.
- Other metrics: Bookings were $119.0 million in Q2, up 48%; first-half bookings were $233.6 million, up 35%. Backlog was $170.4 million at June 30, up 33% from a year earlier. Adjusted EBITDA, a non-GAAP measure, was $12.4 million for Q2 and $24.4 million for the first half.
Material changes versus prior periods
- Q2 revenue increased 17%; management attributed the rise mainly to Vehicle and Industrial market recovery, with a 12.4% volume increase and 4.7% favorable currency impact. Medical sales fell against a prior-year period elevated by pandemic-related demand.
- First-half revenue rose 14%, reflecting an 8.8% volume increase, 4.7% favorable currency impact and the inclusion of Dynamic Controls for the full six months.
- Gross margin edged up in Q2 but declined 0.2 percentage points for the first half. Management cited supply-chain costs and lower-margin Medical sales as pressures.
- First-half net income rose 139%, substantially influenced by the $7.373 million discrete tax benefit. Excluding the specified non-GAAP adjustments, first-half adjusted net income was $9.3 million, compared with $7.4 million.
- First-half cash increased only $0.3 million despite stronger operating cash flow, reflecting debt repayments, capital spending, dividends and foreign-exchange effects. Prior-year investing and financing flows included the Dynamic Controls acquisition.
Outlook, management commentary, risks and unusual items
- Management reported record Q2 bookings and growing backlog, but gave no specific revenue or earnings guidance. Capital expenditures were expected to total $12 million to $15 million in 2021.
- COVID-19 and variants continued to create supply-chain and operating uncertainty. Supplier constraints and higher costs to secure materials affected delivery predictability; management said the recovery also supported demand in some markets.
- A cybersecurity breach occurred during Q2, described as a ransomware incident in the risk-factor disclosure. The company said it contained the issue, restored operations without material quarterly impact, implemented additional security measures and paid no ransom.
- Other key risks include dependence on suppliers and significant customers, customer demand and backlog conversion, foreign-currency exposure, competition and technology changes, and access to financing. One customer represented 16% of first-half revenue and 18% of receivables at June 30.
- The company uses interest-rate swaps and foreign-currency contracts. At June 30, $60 million of revolving debt was hedged; $10 million of foreign-currency contracts were outstanding. Management estimated a 100-basis-point move on unhedged floating-rate debt would affect interest expense by about $130,000 for Q2.
- The filing reports a 3-for-2 stock split effective April 30, 2021; share and per-share figures were retrospectively adjusted.
Most important facts for investors to verify
- How much of the first-half earnings increase is sustainable after excluding the discrete tax benefit?
- Whether supply-chain constraints, input costs and the elevated backlog translate into timely shipments and preserved margins.
- Whether bookings, backlog and recovery in Vehicle and Industrial markets persist, and how Medical demand develops.
- Debt covenant headroom, revolving-facility availability and refinancing or interest-rate exposure through the February 2025 maturity.
- Whether the cybersecurity incident has any subsequent operational, customer, regulatory or financial effects beyond those disclosed.
- The assumptions behind the $12 million–$15 million 2021 capital-spending estimate and management’s 12-month liquidity assessment.