Allied Motion Reports Strong Operating Leverage on Record Revenue of $145.5 Million in First Quarter 2023

• Revenue grew 27% to a record $145.5 million, driven by strong demand in Industrial and Aerospace & Defense markets; Organic growth was 25% on a constant currency basis

• Gross margin expanded 230 basis points to 31.5% on higher volume and accretive acquisitions

• Operating income grew 167% to $11.4 million with a margin of 7.8%, which was up 410 basis points due to strong operating leverage

• Net income more than doubled to $6.3 million or $0.39 per diluted share

• Adjusted net income per share was $0.55, up 53% for the quarter

AMHERST, N.Y., May 03, 2023--(BUSINESS WIRE)--Allied Motion Technologies Inc. (Nasdaq: AMOT) ("Allied Motion" or "Company"), a designer and manufacturer of precision and specialty controlled motion products and solutions for the global market, today reported financial results for its first quarter ended March 31, 2023. Results include the acquisitions completed during the second quarter of 2022.

"We delivered record sales in the quarter as our global team continued to execute our strategy and drive strong organic growth. This level of performance speaks to the ability of our entire team to execute at a very high level, and to our market diversification, particularly within industries that demand precision controlled motion solutions," commented Dick Warzala, Chairman and CEO. "These results translated into margin expansion and operating leverage, despite ongoing macro challenges, and a measurably strengthened bottom line with solid cash generation, which helped offset what is typically a higher cash consumption quarter.

"2023 is off to a strong start, and while we are seeing some pockets of weakness, especially in Europe, our overall demand outlook is positive with a healthy backlog to continue to support our growth. We expect our investments in technology and solutions, as well as the further integration, rationalization and leveraging of recent acquisitions, to continue to yield results we anticipated and, over time, support an enhanced margin profile."

First Quarter 2023 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue increased 27%, or $30.8 million, to a record $145.5 million and reflected higher demand across most target markets and incremental revenue from recent acquisitions. Excluding the unfavorable impact of foreign currency exchange rate fluctuations on revenue of $3.3 million, revenue was up 30%, including organic growth of 25%. Sales to U.S. customers were 56% of total sales for the first quarter of 2023 and 2022, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific. See the attached table for a description of non-GAAP financial measures and reconciliation of revenue excluding foreign currency exchange rate fluctuations.

Aerospace & Defense revenue grew 125% due to organic growth, defense program timing, and incremental demand from acquisitions. Revenue from Industrial markets was up 38%, benefiting from strong end market demand within industrial automation, oil & gas, HVAC, and material handling. Medical market revenue was up 11% due to higher demand within surgical-related markets and medical mobility. Sales in the Vehicle markets were down 5%, as higher commercial automotive demand was more than offset by lower demand within agricultural vehicles. Sales through the Distribution channel increased 10%.

Gross margin was 31.5%, up 230 basis points from the prior-year period as higher volume, margin accretive acquisitions, and pricing more than offset remaining supply chain disruptions and higher material and labor costs.

Operating costs and expenses were 23.7% of revenue, down 170 basis points, which reflected the operating leverage obtained from strong revenue growth. As a result, operating income increased to $11.4 million compared with $4.3 million, and as a percent of revenue was 7.8%, up 410 basis points.

Net income increased 152% to $6.3 million, or $0.39 per diluted share, from $2.5 million, or $0.16 per share, in the prior-year period. Adjusted net income, which excludes amortization of intangible assets related to acquisitions, business development costs and other non-recurring items, increased to $8.9 million, or $0.55 per diluted share, compared with adjusted net income of $5.7 million, or $0.36 per diluted share. The effective tax rate was 23.2% in the first quarter of 2023, which reflected discrete tax benefits in the period. The Company expects its income tax rate for the full year 2023 to be approximately 25% to 27%. See the attached tables for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses ("Adjusted EBITDA") was $19.0 million, up $6.1 million, or 47%. As a percentage of sales, Adjusted EBITDA was 13.1%, up 190 basis points. The Company believes that, when used in conjunction with measures prepared in accordance with U.S. generally accepted accounting principles, Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance. See the attached table for a description of non-GAAP financial measures and reconciliation table for Adjusted EBITDA.

Balance Sheet and Cash Flow Review

Cash and cash equivalents were $25.1 million compared with $30.6 million at year-end 2022. The change largely reflects a $6.25 million deferred payment made during the quarter for a prior acquisition.

Cash provided by operating activities was $3.6 million compared with cash usage of $13.4 million in the prior-year period, which reflected higher net income and lower levels of inventory. Capital expenditures were $3.6 million and largely focused on new customer projects. The Company expects 2023 capital expenditures to be in the range of $18 million to $23 million.

Total debt of $236.5 million was up $1.1 million from year-end 2022. Debt, net of cash, was $211.4 million, or 47.9% of net debt to capitalization. The Company’s leverage ratio, as defined in its credit agreement, was 3.30x at quarter-end.

Orders and Backlog Summary ($ in thousands)

			Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022
Orders		$	123,198		$	145,564		$	126,158		$	139,209		$	155,295
Backlog		$	308,635		$	330,078		$	310,186		$	323,873		$	289,295

Foreign currency translation had an unfavorable $3.3 million impact on first quarter orders compared with the prior-year period. The first quarter orders represented a book-to-bill ratio of 0.85x.

Backlog was up 7% over the prior year period, but decreased from the sequential fourth quarter of 2022 reflecting the loosening of some supply chain constraints. The time to convert the majority of the backlog to sales is approximately three to nine months.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, May 4, 2023 at 10:00 am ET. During the conference call, management will review the financial and operating results and discuss Allied Motion’s corporate strategy and outlook. A question and answer session will follow.

To listen to the live call, dial (412) 317-5185. In addition, the webcast and slide presentation may be found at: www.alliedmotion.com/investor-relations.

A telephonic replay will be available from 1:00 pm ET on the day of the call through Thursday, May 11, 2023. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 10177270 or access the webcast replay via the Company’s website. A transcript will also be posted to the website once available.

About Allied Motion Technologies Inc.

Allied Motion (Nasdaq: AMOT) designs, manufactures and sells precision and specialty-controlled motion products and solutions that are used in a broad range of applications within the Industrial, Vehicle, Medical, and Aerospace & Defense Markets. Headquartered in Amherst, NY, the Company has global operations and sells into markets across the United States, Canada, South America, Europe and Asia-Pacific.

Allied Motion is focused on controlled motion applications and is known worldwide for its expertise in electro-magnetic, mechanical, and electronic controlled motion technologies. Its products include nano precision positioning systems, servo control systems, motion controllers, digital servo amplifiers and drives, brushless servo, torque, and coreless motors, brush motors, integrated motor-drives, gear motors, gearing, incremental and absolute optical encoders, active (electronic) and passive (magnetic) filters for power quality and harmonic issues, Industrial safety rated I/O Modules, Universal Industrial Communications Gateways, light-weighting technologies, and other controlled motion-related products.

The Company’s growth strategy is focused on becoming a leading global controlled motion solution provider in its selected target markets by further developing its products and services platform to utilize multiple Allied Motion technologies which create increased value solutions for its customers. The Company routinely posts news and other important information on its website at www.alliedmotion.com.

Safe Harbor Statement

The statements in this news release and in the Company’s May 4, 2023 conference call that relate to future plans, events or performance are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements. Examples of forward-looking statements include, among others, statements the Company makes regarding expected operating results, anticipated levels of capital expenditures, the Company’s belief that it has sufficient liquidity to fund its business operations, and expectations with respect to the conversion of backlog to sales. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations and assumptions regarding the future of the Company’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. The Company’s actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the pace of bookings relative to shipments, the ability to expand into new markets and geographic regions, the success in acquiring new business, the impact of changes in income tax rates or policies, the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses, and on global supply chains; our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic objectives, the ability to attract and retain qualified personnel, the ability to successfully integrate an acquired business into our business model without substantial costs, delays, or problems, and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. The Company has no obligation or intent to release publicly any revisions to any forward looking statements, whether as a result of new information, future events, or otherwise.

FINANCIAL TABLES FOLLOW

ALLIED MOTION TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited)
		For the three months ended
		March 31,
		2023				2022
Revenue		$	145,549			$	114,785
Cost of goods sold			99,715				81,325
Gross profit			45,834				33,460
Operating costs and expenses:
Selling			6,032				5,031
General and administrative			14,820				11,496
Engineering and development			10,387				9,385
Business development			197				848
Amortization of intangible assets			3,009				2,434
Total operating costs and expenses			34,445				29,194
Operating income			11,389				4,266
Other expense, net:
Interest expense			2,983				1,038
Other expense, net			187				45
Total other expense, net			3,170				1,083
Income before income taxes			8,219				3,183
Income tax provision			(1,904	)			(679	)
Net income		$	6,315			$	2,504
Basic earnings per share:
Earnings per share		$	0.40			$	0.17
Basic weighted average common shares			15,872				15,096
Diluted earnings per share:
Earnings per share		$	0.39			$	0.16
Diluted weighted average common shares			16,137				15,599

ALLIED MOTION TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)
		March 31,				December 31,
		2023				2022
Assets
Current assets:
Cash and cash equivalents		$	25,145			$	30,614
Trade receivables, net of provision for credit losses of $1,122 and $1,192 at March 31, 2023 and December 31, 2022, respectively			87,043				76,213
Inventories			116,229				117,108
Prepaid expenses and other assets			13,432				12,072
Total current assets			241,849				236,007
Property, plant, and equipment, net			69,127				68,640
Deferred income taxes			3,984				4,199
Intangible assets, net			116,027				119,075
Goodwill			126,567				126,366
Operating lease assets			23,432				22,807
Other long-term assets			9,947				11,253
Total Assets		$	590,933			$	588,347
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	41,151			$	39,467
Accrued liabilities			45,722				48,121
Total current liabilities			86,873				87,588
Long-term debt			236,506				235,454
Deferred income taxes			5,817				6,262
Pension and post-retirement obligations			2,823				3,009
Operating lease liabilities			19,186				18,795
Other long-term liabilities			9,547				21,774
Total liabilities			360,752				372,882
Stockholders’ Equity:
Common stock, no par value, authorized 50,000 shares; 16,293 and 15,978 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively			92,435				83,852
Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding			—				—
Retained earnings			149,488				143,576
Accumulated other comprehensive loss			(11,742	)			(11,963	)
Total stockholders’ equity			230,181				215,465
Total Liabilities and Stockholders’ Equity		$	590,933			$	588,347

ALLIED MOTION TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
		For the three months ended
		March 31,
		2023				2022
Cash Flows From Operating Activities:
Net income		$	6,315			$	2,504
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization			6,145				5,657
Deferred income taxes			(290	)			826
Stock-based compensation expense			1,267				1,349
Debt issue cost amortization recorded in interest expense			75				35
Other			395				530
Changes in operating assets and liabilities, net of acquisition:
Trade receivables			(10,587	)			(17,648	)
Inventories			1,340				(8,713	)
Prepaid expenses and other assets			(1,115	)			1,407
Accounts payable			1,548				2,113
Accrued liabilities			(1,507	)			(1,456	)
Net cash provided by (used in) operating activities			3,586				(13,396	)
Cash Flows From Investing Activities:
Consideration paid for acquisitions, net of cash acquired			(6,250	)			185
Purchase of property and equipment			(3,554	)			(2,478	)
Net cash used in investing activities			(9,804	)			(2,293	)
Cash Flows From Financing Activities:
Proceeds from issuance of long-term debt			4,000				13,674
Principal payments of long-term debt and finance lease obligations			(3,116	)			(3,316	)
Tax withholdings related to net share settlements of restricted stock			(146	)			(137	)
Net cash provided by financing activities			738				10,221
Effect of foreign exchange rate changes on cash			11				(76	)
Net decrease in cash and cash equivalents			(5,469	)			(5,544	)
Cash and cash equivalents at beginning of period			30,614				22,463
Cash and cash equivalents at end of period		$	25,145			$	16,919

ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands)
(Unaudited)

In addition to reporting revenue and net income, which are U.S. generally accepted accounting principle ("GAAP") measures, the Company presents Revenue excluding foreign currency exchange rate impacts, and EBITDA and Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses), which are non-GAAP measures.

The Company believes that Revenue excluding foreign currency exchange rate impacts is a useful measure in analyzing organic sales results. The Company excludes the effect of currency translation from revenue for this measure because currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The portion of revenue attributable to currency translation is calculated as the difference between the current period revenue and the current period revenue after applying foreign exchange rates from the prior period.

The Company believes EBITDA and Adjusted EBITDA are often a useful measure of a Company’s operating performance and are a significant basis used by the Company’s management to evaluate and compare the core operating performance of its business from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense, business development costs, foreign currency gains/losses on short-term assets and liabilities, and other items that are not indicative of the Company’s core operating performance. EBITDA and Adjusted EBITDA do not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with GAAP.

The Company’s calculation of Revenue excluding foreign currency exchange impacts for the three months ended March 31, 2023 is as follows:

		Three Months Ended
		March 31, 2023
Revenue as reported		$	145,549
Foreign currency impact			3,252
Revenue excluding foreign currency exchange impacts		$	148,801

The Company’s calculation of Adjusted EBITDA for the three months ended March 31, 2023 and 2022 is as follows:

	Three Months Ended
	March 31,
	2023			2022
Net income	$	6,315		$	2,504
Interest expense		2,983			1,038
Provision for income tax		1,904			679
Depreciation and amortization		6,145			6,435
EBITDA		17,347			10,656
Stock compensation expense		1,267			1,349
Foreign currency loss		214			50
Business development costs		197			848
Adjusted EBITDA	$	19,025		$	12,903

ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of GAAP Net Income and Diluted Earnings per Share to
Non-GAAP Adjusted Net Income and Adjusted Diluted Earnings per Share
(In thousands, except per share data)
(Unaudited)

The Company’s calculation of Adjusted net income and Adjusted diluted earnings per share for the three months ended March 31, 2023 and 2022 is as follows:

		Three Months Ended
		March 31,
		2023			Per diluted share			2022			Per diluted share
Net income as reported		$	6,315		$	0.39		$	2,504		$	0.16
Non-GAAP adjustments, net of tax (1)
Amortization of intangible assets - net			2,305			0.14			2,460			0.16
Foreign currency gain/ loss - net			164			0.01			38			0.00
Business development costs - net			151			0.01			650			0.04
Adjusted net income and adjusted diluted EPS		$	8,935		$	0.55		$	5,652		$	0.36
Weighted average diluted shares outstanding						16,137						15,599

_______________________________

(1)

Applies a blended federal, state, and foreign tax rate of approximately 23% applicable to the non-GAAP adjustments.

Adjusted net income and diluted EPS are defined as net income as reported, adjusted for certain items, including amortization of intangible assets and unusual non-recurring items. Adjusted net income and diluted EPS are not a measure determined in accordance with GAAP in the United States, and may not be comparable to the measure as used by other companies. Nevertheless, the Company believes that providing non-GAAP information, such as adjusted net income and diluted EPS are important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year’s net income and diluted EPS to the historical periods’ net income and diluted EPS.

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Contacts

Investor Contact:
Deborah K. Pawlowski / Craig P. Mychajluk
Kei Advisors LLC
716-843-3908 / 716-843-3832
dpawlowski@keiadvisors.com
cmychajluk@keiadvisors.com