• For the Quarter, revenue grew 19% to $87.9 million and net income grew 32% to $3.5 million
• For the Quarter, achieved gross margin of 30.1%, a 90 basis point improvement driven by lean manufacturing improvements, enhanced mix and higher volume, while strong operating leverage drove a 200 basis point expansion in operating margin.
• For the Year, revenue grew 19% to a record level of $371.1 million, supported by 9% organic growth, and margin expansion delivered record net income of $17.0 million, or $1.80 per diluted share.
• For the Year cash generated from operations nearly doubled to $34.5 million

AMHERST, N.Y.--(BUSINESS WIRE)-- Allied Motion Technologies Inc. (Nasdaq: AMOT) (“Allied Motion” or “Company”), a designer and manufacturer that sells precision and specialty controlled motion products and solutions to the global market, today reported financial results for its fourth quarter and full year ended December 31, 2019. Results include the TCI, LLC (“TCI”) acquisition that was completed December 6, 2018.

“We delivered an excellent year in 2019 as our focused investments and One Allied approach continued to drive solid organic growth with measurable share gains in many of our served markets. The advancement of our sales team and our strategy to focus on diversification into targeted verticals has been instrumental in our success. Concurrently, we have enhanced our margin profile by furthering our Allied Systematic Tools throughout the organization, focusing on continuous improvement and realizing the full-year benefit of TCI,” commented Dick Warzala, Chairman and CEO.

He added, “While there are some headwinds to contend with, such as softness in Europe, we believe that solid execution of our strategy, including a healthy pipeline of organic and acquisition opportunities, enables us to more than offset the challenges and supports our confidence moving forward into 2020.”

He concluded, “Our most recent acquisition, Dynamic Controls Group, is further testament to our strategy of expanding our electronics and software capabilities to create unique, solutions for our markets. With Dynamic, we have furthered our position in the medical market and we will leverage the talent and know-how of the Dynamic team across other targeted market verticals as well.”

Fourth Quarter 2019 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue of $87.9 million was up $14.0 million, or 19%, and reflects double-digit growth in Aerospace & Defense and Vehicle, and contributions from TCI. Excluding foreign currency translation, which had a $1.1 million unfavorable impact on revenue, revenue grew 20%. Organic revenue grew 10%, driven by new customers and applications, as well as strong macroeconomic drivers in the U.S. Sales to U.S. customers were 58% of total sales for the quarter compared with 52% from the fourth quarter last year, with the balance of sales to customers primarily in Europe, Canada and Asia. Revenue excluding the effect of foreign currency translation is a non-GAAP measure. The Company believes this measure is useful for analyzing organic sales results. See the attached table for a description of non-GAAP financial measures and reconciliation of Revenue to Revenue excluding foreign currency translation.

Gross margin expanded 90 basis points to 30.1%, in large part due to productivity, higher volume and improved mix across a number of served markets, including the favorable impact of TCI.

Operating costs and expenses as a percent of revenue were down 100 basis points to 23.6%, as past investments in the Company’s infrastructure are now leveraged on higher volume. General and administrative expenses declined 40 basis points to 10.5% of revenue, while engineering and development expense decreased 50 basis points to 6.7%. As a result, operating income increased 70% to $5.7 million and operating margin expanded 200 basis points to 6.5%.

Fourth quarter net income increased to $3.5 million, or $0.37 per diluted share, compared with $2.6 million, or $0.28 per diluted share. The 2019 fourth quarter effective tax rate was 16.7% reflecting additional R&D tax credits.

Earnings before interest, taxes, depreciation, amortization, stock compensation expense, business development costs and non-income based tax assessment (“Adjusted EBITDA”) was $10.0 million, up $2.2 million or 29%. As a percent of sales, Adjusted EBITDA was 11.4%, up 90 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.

Full Year 2019 Results (Narrative compares with prior-year period unless otherwise noted)

Strong demand in the Aerospace & Defense and Medical markets, along with the incremental TCI business, resulted in record revenue of $371.1 million, up $60.5 million, or 19%. The impact of FX fluctuations was unfavorable $7.8 million for the full year period. Sales to U.S. customers were 57% of total sales compared with 53% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia.

Gross profit increased 23% to $112.6 million and gross margin was up 90 basis points to 30.3%, largely due to higher volume and favorable mix, including TCI.

Operating costs and expenses as a percent of revenue were 22.4%, up 50 basis points. However, operating margin increased 40 basis points to 7.9%.

The effective tax rate for the year increased 560 basis points to 28.6%, and reflects a $433 thousand increase in the income tax provision in the third quarter of 2019 related to tax assessments in a foreign jurisdiction for a previous acquisition. Additionally, the 2018 effective tax rate benefited from the impact of the Tax Cuts and Jobs Act of 2017. The Company expects its effective tax rate for 2020 to range from 27% to 29%.

Net income increased 7% to a record $17.0 million, or $1.80 per diluted share, in 2019. Excluding atypical tax items and business development costs, adjusted net income for the full year 2019 was $17.9 million, up 10%, or $1.89 per diluted share. See the attached table for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share.

Full year Adjusted EBITDA was up 24% to $47.5 million and as a percent of sales was 12.8%, up 40 basis points. See the attached table for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income.

Balance Sheet and Cash Flow Review

Cash provided by operations was $34.5 million, an increase of $17.1 million, or 98%. Cash generated was used to reduce debt and fund expansion initiatives to support new customers. Capital expenditures for the year were $14.9 million. Cash and cash equivalents at year end were $13.4 million compared with $8.7 million at the end of 2018.

The Company expects 2020 capital expenditures to be approximately $15 million to $18 million. Primarily expansion capital, investments will be for new customer projects, completion of the large, previously-announced Vehicle market project wins and next-generation off-road vehicle steering capabilities.

Total debt was $109.8 million as of December 31, 2019, down $12.8 million from the end of 2018. Debt, net of cash, was $96.3 million, or 44.7% net debt to net capitalization. On February 12, 2020, Allied Motion announced a new $225 million senior secured, revolving credit facility with an accordion feature allowing expansion up to $300 million. At current debt and leverage levels, annual net interest expense is expected to be reduced approximately $0.25 million on a pre-tax basis.

Orders and Backlog Summary ($ in thousands)

Foreign currency translation had an immaterial impact on fourth quarter orders compared with the prior-year period.

The time to convert the majority of backlog to sales is approximately three to six months. A nominal amount of previously announced new Vehicle market awards is currently included in backlog. The Company has begun shipments at very low levels for the first of three seven-year awards totaling $225 million. Allied Motion expects production for these projects to ramp up through this year and through 2021.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, March 12, 2020 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 (201) 689-8263. In addition, the webcast and slide presentation may be found at: https://www.alliedmotion.com/investor-relations/

A telephonic replay will be available from 1:00 pm ET on the day of the call through Thursday, March 19, 2020. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13697523 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 used in a broad range of industries within our major served markets, which include Vehicle, Medical, Aerospace & Defense, and Industrial. Headquartered in Amherst, NY, the Company has global operations and sells into markets across the United States, Canada, South America, Europe and Asia.

Allied Motion is focused on controlled motion applications and is known worldwide for its expertise in electro-magnetic, mechanical and electronic motion technology. Its products include brush and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gear motors, gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, active (electronic) and passive (magnetic) filters for power quality and harmonic issues, and other controlled motion-related products.

The Company’s growth strategy is focused on being the controlled motion solutions leader in its selected target markets by leveraging its “technology/know how” to develop integrated precision solutions that utilize multiple Allied Motion technologies to “change the game” and create higher value solutions for its customers. The Company routinely posts news and other important information on its website at http://www.alliedmotion.com/.

Safe Harbor Statement

The statements in this news release and in the Company’s March 12, 2020 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, expectations regarding income tax rates 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 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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

ALLIED MOTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

ALLIED MOTION TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

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

In addition to reporting net income, a U.S. generally accepted accounting principle (“GAAP”) measure, the Company presents Revenue excluding foreign currency exchange impacts and Adjusted EBITDA (earnings before interest, income taxes (benefit), depreciation and amortization, stock compensation expense, business development costs and non-income based tax assessment), which are non-GAAP measures.

The Company believes that Revenue excluding foreign currency exchange 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 Adjusted EBITDA is often a useful measure of a Company’s operating performance and is 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 related to acquisitions, and other items that are not indicative of the Company’s core operating performance. Adjusted EBITDA does 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 generally accepted accounting principles.

The Company’s calculation of Revenue excluding foreign currency exchange impacts for the three and twelve months ended December 31, 2019 is as follows:

The Company’s calculation of Adjusted EBITDA for the three and twelve months ended December 31, 2019 and 2018 is as follows:

ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of GAAP Net Income and Diluted Earnings per Share to
Non-GAAP Adjusted Net and 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 and twelve months ended December 31, 2019 and 2018 is as follows:

Adjusted net income and diluted EPS are defined as net income as reported, adjusted for unusual non-recurring items. Adjusted net income and diluted EPS are not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200311005760/en/

Company Contact:
Sue Chiarmonte
Allied Motion Technologies Inc.
Phone: 716-242-8634 x602
Email: sue.chiarmonte@alliedmotion.com

Investor Contact:
Deborah K. Pawlowski
Kei Advisors LLC
Phone: 716-843-3908
Email: dpawlowski@keiadvisors.com

Source: Allied Motion Technologies Inc.