Allied Motion Technologies Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. The filing identifies the registrant as Allied Motion Technologies Inc. (NASDAQ: AMOT), not “ALLIENT INC” as stated in the request metadata. Unless noted otherwise, financial amounts below are in millions of dollars; the filing reports financial statements in thousands.
Business context
Allied Motion designs and manufactures controlled-motion components and systems for vehicle, industrial, medical, and aerospace and defense markets. It reports one operating segment. Results include contributions from TCI, acquired in December 2018; the purchase-price allocation remained preliminary.
Financial performance
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $92.6 | $80.0 | $186.5 | $156.6 |
| Gross profit / margin | $28.4 / 30.7% | $23.5 / 29.4% | $56.1 / 30.1% | $46.1 / 29.4% |
| Operating income | $7.6 | $6.2 | $14.9 | $12.6 |
| Net income | $4.4 | $4.2 | $8.9 | $8.4 |
| Diluted EPS | $0.47 | $0.45 | $0.95 | $0.90 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $8.9 | $7.4 |
- Q2 revenue rose 16% reported; management cited 18.3% growth excluding a $2.0 million unfavorable currency impact (a non-GAAP measure). Six-month reported revenue rose 19%; excluding $5.2 million of currency impact, management reported 22.4% growth.
- Q2 net income increased 5%, less than revenue growth, as operating expenses and interest expense rose. Interest expense was $1.4 million versus $0.6 million in Q2 2018. Six-month interest expense was $2.6 million versus $1.2 million.
- Management attributed higher gross margins to volume, product mix, and TCI. It said improved product mix helped offset an ongoing supplier issue. Q2 selling expense rose 41%, and intangible amortization rose 63%, principally reflecting acquired businesses and growth-related costs.
- Bookings were $95.3 million in Q2, up 11%; backlog at June 30 was $133.5 million, up 20% year over year. For the first half, bookings were $189.1 million, up 13%.
- Management reported Q2 adjusted EBITDA of $12.1 million versus $10.0 million; first-half adjusted EBITDA was $23.9 million versus $19.8 million. These are non-GAAP measures.
Cash, debt, and liquidity
- Cash was $10.5 million at June 30, 2019, up $1.8 million from year-end. First-half operating cash flow of $8.9 million less capital expenditures of $6.4 million implies approximately $2.5 million of cash flow after capital spending.
- Long-term revolver debt was $123.3 million net of debt issuance costs (gross borrowings $123.7 million). Cash-adjusted debt was approximately $113.2 million. The $175 million facility matures in October 2021; the company reported compliance with its financial covenants.
- The filing gives differing available-capacity figures: approximately $52.8 million in the debt note and $51.3 million in MD&A. Verify the correct amount.
- Current assets were $118.9 million and current liabilities $45.2 million. The company expects working capital, capital spending, and dividends to be funded by operating cash flow and available credit.
- Management expected 2019 capital expenditures of $15–$18 million; $6.4 million had been spent during the first half. The company declared quarterly dividends of $0.03 per share in both Q1 and Q2.
Material changes, outlook, and risks
- Growth was reported across served markets, with TCI also contributing. U.S. sales increased as a share of revenue; foreign exchange reduced reported sales. Q2 sales to one customer represented 15% of revenue, and that customer was 17% of receivables at June 30.
- Adoption of lease accounting in January 2019 recognized operating lease right-of-use assets of $18.2 million and total lease liabilities of $18.7 million at June 30. The filing says adoption materially affected the balance sheet but did not significantly affect net income or cash flows.
- The filing provides capital-spending expectations but no specific revenue or earnings guidance. Management’s forward-looking statements identify risks including economic and currency conditions, customer demand and backlog conversion, competition, supplier availability, customer concentration, acquisition integration, financing access, and cost control. The company reported no material changes to previously disclosed risk factors.
- Foreign-exchange movements affected reported sales; management estimated a hypothetical 10% U.S. dollar move would affect Q2 sales by about $3.1 million and first-half sales by about $6.5 million, before partially offsetting cost and expense effects. Of $123.7 million of revolver debt, $40 million was hedged; the remainder was floating-rate exposure.
Investor verification priorities
- Confirm the issuer identity: the filing is for Allied Motion Technologies Inc. (AMOT), which differs from the request’s “ALLIENT INC.”
- Reconcile the filing’s revolver availability figures of $52.8 million and $51.3 million.
- Check the first-half diluted EPS discrepancy: the financial statements report $0.95, while the MD&A comparison table reports $0.94 for 2019.
- Monitor TCI purchase-accounting finalization, the supplier issue, customer concentration, backlog conversion, and planned 2019 capital expenditures.
- Assess debt refinancing needs before the October 2021 facility maturity and sensitivity to floating interest rates and foreign exchange.