Business context and reporting period
Allied Motion Technologies Inc. (the issuer named in the filing; the request metadata says “ALLIENT INC”) designs and sells controlled-motion products and systems for vehicle, industrial, medical, and aerospace and defense markets. This unaudited Form 10-Q covers the quarter ended March 31, 2019; comparisons are with the quarter ended March 31, 2018 unless noted. The TCI acquisition, completed in December 2018, contributed to year-over-year growth.
Key financial results
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $93.9 million | $76.6 million; up 23% reported |
| Revenue excluding FX impact (non-GAAP) | $97.0 million | Up 26.7% versus prior-year reported revenue |
| Gross profit / margin | $27.7 million / 29.5% | $22.6 million / 29.5% |
| Operating income / margin | $7.3 million / 7.8% | $6.4 million / 8.4% |
| Net income / diluted EPS | $4.5 million / $0.48 | $4.2 million / $0.45 |
| Adjusted EBITDA (non-GAAP) | $11.7 million | $9.7 million |
| Bookings / backlog | $93.7 million / $130.6 million | Bookings up 16%; backlog up 22% |
Interest expense rose 92% to $1.18 million, and the effective tax rate increased to 27.5% from 26.2%. Comprehensive income was $3.3 million versus $6.5 million, affected by unfavorable foreign-currency translation and derivative movements.
Cash flow, balance sheet, and liquidity
- Operating cash flow was negative $2.4 million, versus positive $1.7 million a year earlier, mainly reflecting working-capital needs, including a $10.9 million increase in trade receivables.
- Investing cash outflow was $2.5 million, primarily capital expenditures; prior-year investing outflow of $15.5 million included the Maval OE Steering acquisition.
- Financing provided $6.5 million, including $6.6 million of revolver borrowings. Cash at quarter-end was $10.2 million.
- Long-term debt was $129.1 million net of issuance costs; approximately $45.5 million remained available on the $175 million revolving facility. The effective revolver rate was 4.26%, and the company reported compliance with its covenants. Facility maturity is October 2021.
- Current assets were $120.7 million and current liabilities $45.2 million. Adoption of lease accounting resulted in a $19.0 million right-of-use asset and $19.3 million of lease liabilities at quarter-end.
Material changes, outlook, and risks
Growth reflected higher sales across served markets, organic growth, and TCI. Revenue increased in each reported target market; industrial and aerospace and defense had particularly strong increases. Foreign exchange reduced reported Q1 revenue by approximately $3.1 million. Gross margin was unchanged, but management cited supplier price increases from a supplier discontinuing operations and spending on tooling and prototype samples for new vehicle programs; it expected both effects to moderate over coming quarters. Selling, general and administrative, engineering, and intangible amortization expenses increased, with acquisitions and growth investments contributing.
Management expects 2019 capital expenditures of $15–18 million, with spending expected to rise during the remainder of the year. It said working-capital, capital expenditure, and dividend needs are expected to be funded by operating cash flow and credit-facility availability. The filing provides no specific revenue or earnings guidance. Management cited long sales cycles and development-to-production timelines, and warned that actual results may be affected by economic and currency conditions, customer demand and concentration, supply availability, competition, financing, and acquisition integration. No material changes to the previously disclosed risk factors were reported. One customer represented 16% of Q1 revenue and 20% of quarter-end trade receivables.
Important facts for investors to verify
- Resolve the issuer-name discrepancy in the request metadata: the filing is for Allied Motion Technologies Inc.
- Check the filing’s cash narrative: MD&A says cash “decreased” by $1.511 million, but the balance sheet and cash-flow statement show cash rising from $8.673 million to $10.184 million, a $1.511 million increase.
- Assess whether receivables growth, negative operating cash flow, and additional revolver borrowing persist as sales expand.
- Monitor the effects of supplier pricing, vehicle-program tooling costs, and acquisition-related expenses on margins and cash generation.
- Review the TCI purchase-price allocation, which remained preliminary, and the company’s progress against its stated capital expenditure range.