Allied Motion Technologies Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unless noted otherwise, figures below are in millions of U.S. dollars; the filing reports financial statements in thousands. The company designs, manufactures and sells precision and specialty controlled-motion products and systems across vehicle, industrial, medical, and aerospace and defense markets. It reports one operating segment.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $114.8 | $101.7; up 13% |
| Gross profit / margin | $33.5 / 29.2% | $30.1 / 29.6% |
| Operating income / margin | $4.3 / 3.7% | $6.6 / 6.5% |
| Net income | $2.5 | $11.9 |
| Diluted EPS | $0.16 | $0.83 |
| Adjusted net income / adjusted diluted EPS | $3.8 / $0.24 | $4.6 / $0.32 |
| Adjusted EBITDA | $12.9 | $12.0 |
| Operating cash flow | $(13.4) | $5.6 |
- Revenue increased through 16% higher volume, including the three acquisitions completed in Q4 2021; organic growth was 5.3%. Currency reduced reported revenue by approximately $3.2 million.
- Revenue grew most in Industrial ($45.8 million versus $31.3 million) and Aerospace and Defense ($9.4 million versus $7.4 million). Vehicle and Medical revenue declined year over year.
- Gross margin fell 0.4 percentage points. Management cited $0.8 million of acquisition inventory step-up amortization and higher material and labor costs, including supply-chain-related costs.
- Net income fell 79%, substantially reflecting the absence of a $7.4 million discrete tax benefit recorded in Q1 2021. Higher acquisition-related amortization and business-development costs also weighed on results. The 2021 effective tax rate was unusually low at negative 103.2%, versus 21.3% in 2022.
- Bookings rose 35% to $155.3 million; backlog rose 90% to $289.3 million. Both comparisons include the impact of the Q4 2021 acquisitions.
- Cash was $16.9 million at quarter-end, down $5.5 million from year-end. Working-capital investment—particularly receivables and inventory—drove the operating cash outflow. Inventory was $97.2 million, up from $89.7 million at December 31, 2021.
- Total reported long-term debt was $178.6 million, including $169.7 million drawn on the revolving facility and $9.3 million of finance lease obligations. The company had $55.3 million of unused revolver capacity and reported compliance with its covenants. Revolver maturity is February 2025.
Outlook, risks and unusual items
- Management expects a 2022 effective tax rate of approximately 24%–26% and capital expenditures of $15–$20 million. No revenue or earnings guidance is stated in the filing.
- Management said cash, expected operating cash flows and borrowing capacity should be sufficient for ordinary-course needs over the next twelve months.
- COVID-19 continued to disrupt suppliers, component availability, shipment timing and hiring of direct labor; the company also reported increased costs and delayed shipments. China-related lockdowns affected shipment timing through certain ports, but had not significantly affected production facilities as of the filing.
- The Ukraine conflict increased energy and component costs in Europe and extended some Europe–Asia-Pacific shipment times. The company did not consider the impact material at that time, while noting uncertainty.
- The Twinsburg, Ohio manufacturing facility consolidation was expected to be completed in Q2 2022. The notes report $0.5 million of related costs in Q1 2022, including accelerated lease costs and severance. Three 2021 acquisitions—ORMEC, ALIO and Spectrum Controls—also added amortization, integration-related costs and acquisition payment obligations.
- Foreign exchange reduced Q1 revenue, and the company uses currency contracts and interest-rate swaps to manage exposures. $100 million of revolver borrowings was hedged at March 31, 2022; the remaining debt exposure is subject to floating rates.
- Management reported effective disclosure controls and no material changes in internal control over financial reporting. The filing states there were no material changes to the risk factors disclosed in the 2021 Form 10-K.
Key facts for investors to verify
- Whether backlog and bookings convert to revenue as expected, given supply constraints, delayed shipments and elevated working capital.
- Whether gross margins recover as acquisition inventory step-up effects and inflationary and supply-chain costs evolve.
- Debt, covenant headroom and borrowing availability, particularly as rates change and acquisition-related obligations come due.
- The 2022 tax-rate and capital-spending outlook, alongside the cash-flow impact of inventory and receivables.
- The filing contains apparent date inconsistencies: the Twinsburg discussion in MD&A refers to costs in Q1 2021, whereas the financial-statement note reports $0.488 million in Q1 2022; the interest-rate sensitivity discussion also refers to debt outstanding at March 31, 2021 despite surrounding disclosure describing March 31, 2022. Confirm these details against the filed statements.