Allient Inc. — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 5, 2024. Dollar amounts are in thousands unless stated otherwise. Allient designs and manufactures motion, controls, power, and related technologies for industrial, vehicle, medical, and aerospace and defense markets. The company changed its name from Allied Motion Technologies Inc. and its ticker from AMOT to ALNT in August 2023, reflecting its shift from component products toward integrated solutions.
Financial performance and position
| Metric | FY 2023 | FY 2022 | Change |
|---|---|---|---|
| Revenue | $578,634 | $502,988 | +15% |
| Gross profit / margin | $183,683 / 31.7% | $157,259 / 31.3% | Margin +0.4 percentage points |
| Operating income / margin | $42,314 / 7.3% | $31,656 / 6.3% | +34% operating income |
| Net income | $24,097 | $17,389 | +39% |
| Diluted EPS | $1.48 | $1.09 | +36% |
| Cash from operations | $45,038 | $5,596 | +$39,442 |
| Cash and equivalents, year-end | $31,901 | $30,614 | +$1,287 |
| Bookings / year-end backlog | $520,275 / $276,093 | $566,226 / $330,078 | Bookings −8%; backlog −16% |
- Revenue mix: Industrial revenue rose to $257,004 from $193,290; aerospace and defense revenue rose to $78,175 from $70,193. Vehicle revenue was $133,488 versus $130,436, while medical revenue was $84,515 versus $85,113.
- Margins and expenses: Gross margin improved with higher volumes of higher-margin Industrial and aerospace and defense products, pricing, and acquisitions; higher material and labor costs tempered gains. Operating expenses increased 13% to $141,369. Interest expense increased 61% to $12,383, principally reflecting higher interest rates.
- Taxes and supplemental measures: The effective tax rate was 18.9%, compared with 26.6%. Management reported adjusted net income of $37,458 and adjusted diluted EPS of $2.30, and adjusted EBITDA of $77,184; these are non-GAAP measures and should be considered alongside GAAP results.
- Cash flow and investment: Investing activities used $22,607, including $11,004 for acquisitions and $11,603 for property and equipment. Financing activities used $21,317, including $28,395 of debt principal payments. The company expects 2024 capital expenditures of approximately $16,000–$20,000.
- Debt and liquidity: Year-end long-term debt, including finance leases and net of issuance costs, was $218,402; revolving-facility borrowings were $210,120. Cash less reported long-term debt was $186,501 net debt. The company reported $69,880 of unused revolving capacity, subject to covenant-based availability. Current assets were $248,151 and current liabilities $95,617. The company said available cash, expected operating cash flows, and financing were sufficient for ordinary needs over the next 12 months.
- Working capital and concentration: Inventory was $117,686, approximately 20% of total assets. One customer represented 12% of 2023 revenue and another 10%; the latter customer also represented 15% of year-end trade receivables.
Material changes versus FY 2022
- Revenue growth reflected a 15% volume increase, particularly in Industrial and aerospace and defense, and some normalization of supply constraints. Acquisitions completed in 2022 and 2023 contributed $10,057 of incremental 2023 revenue; reported organic growth was 13.1%.
- Bookings and backlog declined as customer orders and lead times normalized after pandemic-era supply disruptions, with additional softness in some European markets. Management cautioned that backlog is not a reliable indicator of future sales; the majority is expected to convert in approximately three to nine months.
- Operating income and net income increased, but higher financing costs partly offset the benefit of revenue and gross-margin growth. Cash from operations improved substantially, primarily with increased earnings and improved working capital, especially receivables and inventory.
- Net debt declined by $18,339 year over year. The company paid $28,395 of debt principal in 2023, while also borrowing to fund acquisition activity.
Outlook, commentary, risks, and unusual items
- Outlook: Management gave no quantified 2024 revenue or earnings forecast. It described continued investment in engineering, integrated solutions, selected markets, operating efficiency, working-capital turns, margin improvement, and free cash flow, while citing uncertainty and continued pressure on material and labor costs.
- Acquisitions and financing after year-end: On January 11, 2024, Allient acquired SNC Manufacturing and Acutran de Mexico for $20 million cash, subject to working-capital adjustments. On March 1, 2024, it amended and extended its $280 million revolving facility to March 1, 2029, with a $50 million accordion feature, and established a $150 million private shelf facility with no borrowings reported to date. The new agreements include financial covenants.
- Acquisition-related items: The September 2023 Sierramotion acquisition had a preliminary purchase price of $8.4 million; its revenue and earnings contribution in 2023 was not material. A $1,890 increase in estimated contingent consideration for the ALIO acquisition was recorded in business development costs. The filing states that $7,720 of contingent consideration was paid in January and February 2024.
- Key risks: Exposure includes supply constraints and reliance on limited or sole-source suppliers; inflation in materials and labor; customer and market concentration; order volatility and backlog conversion; integration and execution of acquisitions; foreign exchange and variable interest rates; debt covenants and refinancing; cybersecurity and IT disruption; competition, product quality, and recruiting technical talent; and geopolitical, energy, regulatory, and environmental uncertainties.
- Contingencies and controls: Management said ordinary-course legal matters were not expected to have a significant adverse effect. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting. The inventory valuation estimate was identified as a critical audit matter. Management excluded Sierramotion from its internal-control assessment because it was acquired late in 2023.
- Cybersecurity: The company disclosed one known ransomware incident, in June 2021, which did not materially affect results for 2021–2023. It warned that future incidents could have a material impact.
Most important facts for investors to verify
- Whether the decline in bookings and backlog stabilizes, and how much backlog converts to revenue on expected timing and margins.
- Whether gross-margin improvement can continue despite material and labor cost pressure, and whether growth in Industrial and aerospace and defense offsets weakness elsewhere.
- Debt availability and covenant headroom under the March 2024 credit agreements, as well as refinancing, interest-rate, and acquisition-funding needs.
- Inventory quality and working-capital trends: inventory is material to assets, and management estimates obsolescence using demand forecasts; inventory valuation was the audit’s critical audit matter.
- Integration, purchase accounting, and realized returns from acquisitions, including SNC and the contingent consideration payments.
- Customer concentration, cybersecurity exposure, and the effect of geopolitical and supply-chain developments on orders, costs, and operations.