Allied Motion Technologies Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; compared with the three months ended March 31, 2020. Unless otherwise stated, dollar amounts below are in millions. The filing identifies the registrant as Allied Motion Technologies Inc. (NASDAQ: AMOT).
Business context and results
The company designs, manufactures and sells controlled-motion components and systems for Vehicle, Medical, Aerospace & Defense, and Industrial markets. It reports one operating segment. Q1 revenue growth reflected strength in Medical and Vehicle markets, including a full quarter of Dynamic Controls, partly offset by lower Industrial and Aerospace & Defense sales.
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Revenue | $101.7 | $92.4 | Up 10%; volume increased 5.4% and currency contributed 4.6% favorable impact ($4.3) |
| Gross profit / margin | $30.1 / 29.6% | $28.0 / 30.4% | Gross profit up 7%; margin down 0.8 percentage points |
| Operating income | $6.6 | $6.7 | Down 2% |
| Net income | $11.9 | $4.0 | Up 196%; materially boosted by a discrete tax benefit |
| Diluted EPS | $0.83 | $0.28 | Up 196%; per-share data reflect the 3-for-2 stock split retrospectively |
| Operating cash flow | $5.6 | $(3.0) | Improved $8.5 |
| Capital expenditures | $3.1 | $1.7 | 2021 full-year expectation: $12–$15 |
| Cash and cash equivalents | $24.7 at March 31 | $23.1 at December 31, 2020 | Quarterly increase of $1.6 |
| Debt | $120.4 gross facility borrowings; $119.9 net of issuance costs | $120.7 gross at December 31, 2020 | Facility effective rate 2.49%; $104.6 of stated unused capacity |
Material changes and financial position
- Bookings reached a record $114.6 million, up 23% year over year; backlog was $152.3 million, up 14% from $133.2 million.
- Revenue by target market: Vehicle $34.5 million, Medical $23.3 million, Industrial $31.3 million, Aerospace & Defense $7.4 million, and Other $5.2 million. Medical and Vehicle grew; Industrial and Aerospace & Defense declined.
- Gross margin fell because of tight supply-chain costs, incremental spending to maintain on-time deliveries, and higher-than-normal warranty costs tied to a claim. General and administrative expense rose 17%, and engineering and development expense rose 12%, partly reflecting Dynamic Controls and development activity.
- Cash from operations improved year over year; working-capital movements and net income adjusted for noncash items were cited as drivers. Investing cash outflow was $3.1 million, versus $16.2 million a year earlier, which included $14.5 million for the Dynamic Controls acquisition. Financing cash flow was a $0.3 million use, versus $26.3 million provided in Q1 2020, when acquisition-related borrowing occurred.
- Current assets were $149.6 million and current liabilities $55.7 million at quarter-end. Long-term debt was $119.9 million; the revolving facility matures in February 2025. The company reported covenant compliance and stated it had sufficient cash, borrowing capacity and expected operating cash flows for ordinary needs over the next 12 months.
Outlook, risks and unusual items
- No revenue or earnings guidance is provided in the supplied filing text. Management expected 2021 capital expenditures of $12–$15 million and described record Q1 bookings and continuing demand opportunities.
- Management said COVID-19 continued to affect supply-chain predictability and certain customer markets, while demand rebounded in others. It cited supplier operating constraints and said the pandemic’s future effects remained uncertain. The company maintained safety measures and aligned variable costs and discretionary spending with conditions.
- The reported effective tax rate was negative 103.2%, versus 28.0% a year earlier. A discrete tax benefit of approximately $7.4 million, primarily from recognition of New Zealand net operating loss carryforwards following a change in local tax legislation, materially increased net income. The income statement reports a total income tax benefit of $6.1 million.
- Foreign-currency translation reduced comprehensive income by $4.0 million. The company began using short-term foreign-currency contracts in Q1; it recorded a $0.14 million loss on those contracts. A 10% U.S. dollar movement would have affected Q1 sales by approximately $4.5 million, while the net-asset translation sensitivity was estimated at $9.9 million.
- One customer represented 16% of Q1 revenue and 19% of quarter-end trade receivables. Interest-rate exposure remains on $60.4 million of unhedged floating-rate debt; management estimated that a 100-basis-point rate change would affect quarterly interest expense by about $0.15 million.
- The company declared a $0.02-per-share quarterly dividend. A 3-for-2 stock split was effected April 30, 2021, after quarter-end. Management reported effective disclosure controls and no material changes in internal control over financial reporting; it reported no material changes to the risk factors in its 2020 Form 10-K.
Important facts for investors to verify
- Whether record bookings and backlog convert to revenue, and whether demand remains strong in Vehicle and Medical markets.
- Whether supply constraints, expedited-delivery costs and warranty claims continue to pressure gross margin.
- The sustainability of earnings excluding the substantial discrete New Zealand tax benefit.
- Cash conversion, receivables and working-capital trends, alongside planned $12–$15 million capital expenditures.
- Revolver availability and covenant headroom under the credit agreement, plus customer concentration and currency and interest-rate exposures.