Allied Motion Technologies Inc. — Form 10-Q summary
Issuer note: The request metadata names ALLIENT INC, but the supplied filing is for Allied Motion Technologies Inc. (Nasdaq: AMOT). Confirm the issuer before relying on this summary. The filing covers the quarter and nine months ended September 30, 2022; financial statements are unaudited. Amounts below are in millions of dollars unless noted.
Business context and reporting period
Allied Motion designs, manufactures, and sells precision motion products and systems for industrial, vehicle, medical, and aerospace and defense markets. It reports one operating segment. Results include acquisitions completed in 2022 and reflect a changing acquisition footprint following three 2021 acquisitions.
Financial performance
| Metric | Q3 2022 | Q3 2021 | First nine months 2022 | First nine months 2021 |
|---|---|---|---|---|
| Revenue | $134.4 | $103.5 | $371.9 | $306.7 |
| Gross profit / margin | $43.3 / 32.2% | $32.0 / 30.9% | $116.5 / 31.3% | $93.3 / 30.4% |
| Operating income / margin | $11.7 / 8.7% | $8.7 / 8.4% | $23.5 / 6.3% | $22.0 / 7.2% |
| Net income | $6.6 | $6.0 | $13.7 | $22.5 |
| Diluted EPS | $0.41 | $0.41 | $0.86 | $1.56 |
| Operating cash flow | Not separately provided | Not separately provided | $(5.8) | $19.9 |
- Q3 revenue rose 30%; management attributed the increase to 37% higher volume, acquisitions, and organic growth of 15%, partly offset by a 7% unfavorable currency impact. Q3 bookings increased 5% to $126.2; backlog rose 67% year over year to $310.2.
- For the first nine months, revenue increased 21%, with volume up 26%, organic growth of 10%, and a 5% unfavorable currency impact. Bookings rose 19% to $420.7. Industrial and aerospace and defense were key growth markets; vehicle and medical revenue declined year over year for the nine-month period.
- Gross margin improved in both comparisons, which management attributed to higher-volume cost absorption, pricing, and favorable mix, including acquisition mix. Q3 net income rose 11%, but diluted EPS was unchanged as share count increased. Nine-month net income fell 39%, principally reflecting the absence of a $7.4 tax benefit recorded in 2021, plus higher acquisition-related costs, amortization, and interest expense.
- Management-reported non-GAAP adjusted diluted EPS was $0.60 for Q3 versus $0.49, and $1.45 for nine months versus $1.30. Adjusted EBITDA was $19.9 and $49.0, respectively. These are non-GAAP measures and are not substitutes for GAAP results.
Balance sheet, cash flow, and liquidity
- At September 30, cash was $19.7, current assets $227.2, and current liabilities $88.1; working capital was $139.1 and the current ratio approximately 2.6.
- Long-term debt was $231.6, including $223.1 outstanding under the revolving facility and $9.2 in noncurrent finance leases, net of debt issuance costs. Cash less reported long-term debt was approximately $(211.9). The revolver’s stated capacity was $280 million, with approximately $56.9 million unused; availability may be constrained by covenant calculations.
- Nine-month operating cash flow was negative $5.8, versus positive $19.9 in 2021. The filing cites working-capital investment, notably inventory built to secure critical components, and higher receivables. Inventory increased to $112.1 from $89.7 at year-end 2021; receivables increased to $79.9 from $51.2.
- Investing cash outflow was $55.6, including $44.6 of net acquisition cash consideration and $11.0 of capital expenditures. Financing cash inflow was $61.0, mainly from debt issuance. Cash declined $2.8 during the nine months.
Material changes, outlook, and risks
- 2022 acquisitions: FPH, ThinGap, and Airex were acquired in May and June. Their purchase prices were approximately $41.4 million and $16.5 million, respectively, for FPH and ThinGap/Airex collectively, subject to purchase-price adjustments. Acquisitions contributed revenue and added intangible amortization, goodwill, debt, and shares issued. The filing also notes 2021 acquisitions ORMEC, ALIO, and Spectrum Controls.
- The credit agreement was amended in August 2022, increasing the revolving facility from $225 million to $280 million, changing the benchmark from LIBOR to SOFR, and retaining February 2025 maturity. The company reported covenant compliance at quarter-end. Financial covenants include minimum interest coverage of 3.0x and a leverage limit of 4.0x, stepping down to 3.5x for quarters ending on or after December 31, 2023, subject to specified acquisition provisions.
- Management expected a full-year 2022 effective tax rate of approximately 25%–27% and capital expenditures of $15–$20 million. It provided no clear revenue or earnings guidance in the supplied filing text. Management said cash, operating cash flows, and borrowing capacity should meet ordinary-course needs for the next 12 months.
- Risks and uncertainties cited include inflation and higher rates, supply-chain disruption and labor shortages, COVID-19 effects, the Ukraine conflict and related energy/component costs, foreign-currency movements, customer and supplier concentration, and the ability to integrate acquisitions and realize growth or synergies. One customer represented 11% of Q3 revenue and 12% for the nine-month period.
- Foreign-currency translation losses were $9.6 in Q3 and $19.5 for nine months, weighing on comprehensive income and equity. Interest expense increased to $2.3 in Q3 and $4.9 for nine months, partly due to acquisition-related borrowings and higher rates; $100 million of revolver debt was hedged with interest-rate swaps.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported no material changes to the risk factors in the 2021 Form 10-K.
Most important facts to verify
- Confirm that Allied Motion Technologies Inc. (AMOT), rather than ALLIENT INC, is the intended issuer.
- Review acquisition purchase-price allocations, integration progress, acquisition-related costs, and whether expected synergies emerge.
- Assess the sustainability of inventory and receivables growth, negative operating cash flow, and the impact of working capital on future cash conversion.
- Verify revolver availability, interest-rate exposure, covenant headroom, and the effect of higher borrowing costs.
- Reconcile GAAP results with management’s non-GAAP adjustments and the unusually favorable 2021 tax comparison. The MD&A gives nine-month gross profit as $116.641 million in one passage, while the financial statements report $116.531 million; confirm the correct figure in the filed statements.