Allient Inc. (ALNT) — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Unless noted, dollar figures below are in millions. Allient, formerly Allied Motion Technologies, changed its name and ticker from AMOT to ALNT on August 23, 2023. The company designs and manufactures motion, controls, power and related solutions serving industrial, vehicle, medical, and aerospace and defense markets.
Financial performance
| Metric | Q3 2023 | Q3 2022 | First nine months 2023 | First nine months 2022 |
|---|---|---|---|---|
| Revenue | $145.3 | $134.4 | $437.6 | $371.9 |
| Gross profit / margin | $47.5 / 32.7% | $43.3 / 32.2% | $139.3 / 31.8% | $116.5 / 31.3% |
| Operating income | $11.9 | $11.7 | $35.3 | $23.5 |
| Net income | $6.7 | $6.6 | $19.8 | $13.7 |
| Diluted EPS | $0.41 | $0.41 | $1.22 | $0.86 |
| Interest expense | $3.2 | $2.3 | $9.3 | $4.9 |
- Q3 revenue grew 8%; management attributed growth to a 7% volume increase and 1% favorable currency impact. Organic growth was 7%. Industrial was the principal growth driver. Nine-month revenue rose 18%, including the full-period contribution of 2022 acquisitions; reported organic growth was 16%.
- Q3 net income was nearly flat year over year despite higher gross profit, as operating expenses and interest costs increased. Nine-month operating income rose 50% and net income rose 44%.
- Q3 bookings increased 23% to $154.9 million, mainly due to order timing in aerospace and defense. Nine-month bookings declined 1% to $415.1 million. Backlog was $309.6 million, essentially unchanged from $310.2 million a year earlier.
- Non-GAAP adjusted diluted EPS was $0.61 for Q3 versus $0.60; for nine months, $1.75 versus $1.45. Adjusted EBITDA was $20.8 million for Q3 and $60.3 million for nine months. These are company-defined non-GAAP measures, not substitutes for GAAP results.
Cash flow, balance sheet and liquidity
- Nine-month operating cash flow was $27.1 million, versus cash used of $5.8 million in 2022. Investing used $18.9 million, including $7.9 million of capital expenditures and acquisition payments; financing used $14.5 million. Cash declined $6.8 million to $23.8 million from year-end 2022.
- At September 30, cash was $23.8 million, current assets $244.8 million, and current liabilities $94.7 million. Inventory was $117.3 million and trade receivables $90.6 million. The company reported $224.4 million of long-term debt, including $216.1 million under its revolving facility and $8.7 million of noncurrent finance lease obligations.
- The $280 million revolving facility matures in February 2025. Unused facility capacity was $63.9 million, subject to borrowing and covenant limitations. The company reported compliance with all covenants at quarter-end; the maximum leverage ratio tightens to 3.5:1 for quarters ending on or after December 31, 2023. Management believes cash, facility flexibility, and expected operating cash flows are sufficient for ordinary needs over the next 12 months.
- $20.2 million of cash was held at foreign subsidiaries and may be subject to withholding tax if repatriated. The company declared quarterly dividends of $0.03 per share in Q2 and Q3 2023.
Outlook, developments and risks
- Management expects a 2023 effective tax rate of approximately 23%–25% and full-year capital expenditures of $12–$15 million. The filing provides no specific revenue or earnings guidance.
- Allient acquired Sierramotion on September 22, 2023, for a preliminary purchase price of $8.4 million, including contingent consideration; operating results since acquisition were not material. The purchase-price allocation remains subject to adjustment. The company also had $12.5 million of remaining deferred consideration related to the Spectrum Controls acquisition, due no later than January 3, 2024.
- Management cited inflation, higher interest rates, supply-chain and labor constraints, geopolitical uncertainty, and normalization of customer ordering patterns as continuing sources of volatility. It said geopolitical impacts were not material to results at the time of filing. Q3 interest expense rose 35%, primarily due to higher rates; nine-month expense rose 90%, reflecting higher rates and average debt.
- Foreign exchange remains a risk: a hypothetical 10% U.S. dollar movement would affect reported sales by an estimated $4.7 million for Q3 and $14.7 million for the first nine months, before partially offsetting cost effects. A 100-basis-point change on unhedged floating-rate debt was estimated to affect interest expense by about $0.3 million for the quarter.
- Customer concentration is notable: two customers represented 14% and 10% of Q3 revenue; one customer represented 18% of trade receivables at quarter-end. The company said there were no material changes to risk factors from its 2022 Form 10-K and reported disclosure controls were effective.
Important facts for investors to verify
- Whether bookings, backlog, and customer order patterns convert into revenue, particularly given nine-month bookings were slightly lower year over year and Q3 bookings were affected by order timing.
- Debt capacity, covenant headroom, refinancing plans ahead of the February 2025 facility maturity, and the impact of higher interest rates.
- Sierramotion’s final purchase-price allocation, contingent consideration, and integration performance, alongside the remaining Spectrum Controls payment.
- Customer concentration and the collection of receivables, including the customer accounting for 18% of quarter-end receivables.
- The filing reports Q3 effective tax at 23.0% in MD&A and 23.1% in the financial-statement note; confirm the intended reported figure.