Allient (ALNT) 8 Aug 202020 Q2 Earnings call transcript

Greetings, and welcome to the Allied Motion Technologies Second Quarter Fiscal Year 2020 Financial Results. [Operator Instructions] A brief question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Craig Mychajluk, Investor Relations. Thank you, Craig.

You may begin.

Yes. morning, good and you, everyone. Thank your We your as as today in certainly Allied appreciate interest Motion. well time

Joining me on we'll Financial for on President the and after review call are Dick which XXXX quarter strategic and Mike going results Leach, Q&A. progress our and outlook, second and an Warzala, up Mike our Company's Dick open Chief update it Officer. provide are to the CEO; our Chairman, and

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measures turn accompanying Dick? release of With non-GAAP please begin. substitute slide additional We've reconciliations with results comparable turn accordance in to to I'll slides. You it GAAP prepared GAAP. and consider should isolation or of not Dick for and in as the a presentation three, information that, the tables over this provided to earnings the to in

resilience the and environment have incredible challenging would of through Craig, and COVID-XX steer acknowledge opportunities efforts, welcome, like to the steady and of job continued to conditions an helping have presented who has ever-changing I everyone. done unique these respond a dedication you, excellent Allied to our themselves. the employees Thank course pandemic. us that

was integration of generate the results. we the continued Allied perspective, driving From successfully up low well, the success operate, support solid strategy. increased a the navigated pandemic. effectively base, short, our a and mobilize of Our customers. our All to of gross execution organic COVID-XX for I second that market during with market various to our ability of what in we combating lean our second was point held decline, revenue The flex with solid was team all we our Tools, Allied facilities and of and able of from significant to diversification pandemic. our impressed demand continued Controls or believe Dynamic are medical us at forefront our and operations. from to AST up played this engage role many came cash our in and toolkit, quarter was performance sales Despite customers, profitability particularly which One Systematic we the the the margin quarter for demonstrated relatively achieved and

hardest. the as Dynamic industrial medical basis. that declines In slowed In since market has trends increased some deferrals. particular, our There vehicle hit gains, give encouraging year-over-year activity due includes up. our from to which shutdowns the end doubled medical and picked are broad optimism in on Controls, has as us fact, market was nearly experienced a market, sales contributions demand and we Outside demand activity the market

for develop to solutions I the exchange not to major awards award the million. the Adjusted value are vehicle in will award new for market's to demonstrates be announced released we approximately remind highly of of Europe backlog, to $XXX additional is reliable the controlled our them market when awards these you ability vehicle our Asia. vehicle global reflect and opportunities, fourth project in a total team market. solutions recently backlog included the solutions We is for leading current kept market and to and our value rates, of in recognition only strategy of provide our recognize motion This have several also XXXX focused since provider on which further that they our the production. these reflected solutions validates

been to strong cash maintaining discipline cost cost. conservation, our structure on and variable focused fixed we quickly over changes, with have also We align while adjusted market

of cash managed result the to reduce million a during nearly total million quarter. $X $XX almost and generate that we by enabled us to these As in efforts, operations, from debt

and our structure. recovers. I would and Given also flexibility leadership that the be to expand current confident have address and liquidity our on to remain economy organization offensive we announcement the situation to our the actions, prudent the we to as realign on financial the recent touch like

a will cohesion where boundaries to broader leverages leadership and improve grown have crosses This the the and in of as support in organization. is profitability entire growth our size long-term Company future. meet the and with and creates objectives consistent initiative strategy base we our ensure and geographic and structure of We it technology across greater capabilities and a the new

proven further will groups of and breadth new as and business of side we leverage who three we wide drive strategic technologies improve business, profitability as to the and geographic look opportunities reach. the our have created growth individuals leaders. On three the themselves operations promoted have Each

industry and goal growth improve continuing system In addition, capabilities to with of exceed of our growth the we breadth the team normal levels. expanded organic through innovation engineering global drive to solution

accelerate the efficiencies finally, in further strategic future. to ensure key our our formerly development a and focus been we also and we drive across and the opportunities we element And our have drive strategy and a M&A business ensure implementation elevated We of growth role success, have acquisitions to added past innovation growth as continue organization. improve and to AST entire to continue consummate

me ensure long-term the strategic allows shareholder the more are greater goals while intently recession, of on and Allied. drive increased times objectives realignment value, Despite meet this bandwidth to also we COVID-induced to focus the these exciting me Company. providing initiatives Lastly, for to

more in implement We continue families. the turn initiatives are remain vigilant measures and of and review required their Mike financials. to me over of our the a our to to will model, strength the the let and we business of all of it employees for our and and confident safety With in-depth that, ensure health

Dick. an Thank top line provide of our you, Slide We overview X. on

customers down X% FX and was Dynamic in our of shutdowns COVID-XX for headwind the $X.X acquired Controls, and million. As included million we in a The XXXX. the the pandemic $XX.X Revenue $X of include or an industrial much from million, of quarter. vehicle our March in which reminder, extended second results markets impact created many quarter

June doubled, those XX% Dynamic Controls. for growth shift from period of market can and However, in sales Controls months sales The the and partially by market $X.X the U.S. from XX% prior of change Slide included a the of significant almost reflects balance this mix Sales markets, helping our for to down to in geographic the in each of offset the million Dynamic Controls ended with customers quarter, year mix Canada and Asia. found accounts growth business in The Europe, our to were the primarily be XX% declines. in medical XX. to which the X revenue second piece shows trailing within addition market. Dynamic the in XX Medical customers

our strategy markets our an broaden to we've discussed and and important profile. margin scope element Medical of the to A&D As enhance and are our diversification of demonstrated, and growing the business

While TTM most within due sales drop-off double-digit decline. in high to verticals, we to trailing XX% XX-month growth is vehicle single COVID-XX reflected the have in in the demand

on margin just our year points was XX.X%, for X, from highlighted the Slide gross As quarter period. XX basis prior the down

percentage given of of efforts favorable from and including the market the Vehicle. mostly cost in medical the mix, Dynamic Our impact improved impact sales management volume greater offset decline the

Our performance on Slide operating is X.

the operating the of expenses be incremental of While negative percent largely quarter as prudent were for leverage on still due given COVID-XX-related to we gain reflected with Operating revenue maintaining and the which costs expense to that are we expenses and sales. incremental important business basis health to revenue points, XXX note overall with side, related safety. consider reduction continue a associated market and our capabilities, It's engineering development to growth Dynamic, key to performance higher employee continued up ensuring the future vital we costs share. drive some to

income $X.X Net million you see adjusted results. X, $X.XX was million share per per quarter bottom the with $X.X prior Slide diluted year for EBITDA to in Turning share period. diluted or the line our $X.XX compared and can or

per income business was Excluding costs, diluted share. $X $X.XX development net or adjusted million

from were and the million. as a or current tax Adjusted of was with quarter effective we part We million adjusted generated flow. range of is XX capitalization. effective by rate XX% cash XXXX, in with debt $XX and and useful liquidity Dynamic cash year-end of metric an was XXXX -- internal the total tax in Cash of million in headwinds, We and to $X.X percent believe debt Debt between our to the free was pay was rate to debt. ended an balance XX.X% of Controls the progress sales primarily net end Slides XX%. it quarter, our of pay the EBITDA up second to EBITDA demonstrate was at X sufficient acquisition. million in XX.X%. we total operating XXXX. quarter $X.X was and a reduced we full determining debt sheet to capabilities. which XX.X%, as of cash-generating the $XXX.X million, flow, provide net to Compared amount anticipate and performance. debt cash our use end Despite million used due resulting quarter as continue and fiscal to for $XXX.X considerable down $XX The We equivalents overview up cash

Our was at quarter X.XX bank end. ratio times leverage

given debt-to-EBITDA million. capital were leverage flexibility. level, While is X.X paying we $X.X uncertainty, down this focus coverage maximum financial covenant times, at our ratio that are on Recall reflecting continue we near-term debt. comfortable to Year-to-date expenditures solid

We XXXX to between range our fiscal and key projects continue move $XX $XX while to million will CapEx which enable to lower-priority deferring million, activities. forward, expect

and chain times, down inventory inventory customer to times from year-end. quarter X.X At face with levels continue this base. times pushouts extended to higher turns our customer we Second to at leading supply broader X.X time, lead an uncertain environment support were

deterioration the of collections was receipts was also due at elevated days DSO timing to Our and not XX to quality. due in credit of

quality In metrics past the first accounts. credit fact, actually of quarter levels due sequential with lower since improved

debt pleased downturn. me reiterate reduce Let we with that generate to are our cash ability this during very and

to over strong navigate that, well back us ahead. I'll continued positions flow Dick. allocation strategy turn successfully expect capital believe With to our conditions cash the We now generation and the call

Thank Mike. you,

were and As depicted orders reflected in million down million quarter X% end of $X.X approximately million, unfavorable on XX, the slide at quarter than more sequentially. $XXX was Backlog $XX FX.

mentioned earlier, a backlog reported awards numbers. a secured provide As another nominal solution award to just in is currently for a market, nomination of included and we our our I of these Vehicle amount customer-specific

shipments first of the the four While we year. levels for have production begun the pandemic through slowed ramp-up at low of COVID-XX the remainder the these awards, projects has very for the

term, on markets look we highly the the near mixed the of end signals dependent continue the as we remain uncertainty As environment COVID-XX serve. of cautious to the given be demand current vitality we to and

that while markets there uncertainties due different recovery be macro ongoing stabilizing are may visibility that In and to development be a trends. reflected limited particular, encouraging can in are verticals pandemic, from we efforts, impacted that our Ultimately, rates high elements on we Some to for priority. or other showing by is product the are which the focused new us, continue control. provide

of that new forefront We markets. solutions the track target meet several to create continue at our are to to emerging on the needs and we ensure stay exciting served products and

business demonstrated our to and firmly are resilience, has we outstanding critical Our talent. retaining committed

to will customers it As measures unprecedented we safely. essential through our these and to we enhance our a and technology/know-how-driven very taken confident Overall, allow company, difficult to operate supplement our the I'm engineering continue organization that support is continue that times. to have capabilities

culture, customers' open prioritize line required, results the Allied and term. that, guiding long-term as our superior operator, of execution questions. long principles for deliver the needs through With adjust One let's the disciplined of our strategy the over will and We and our

with We'll first from Thank line your Palm now Our the of proceed Instructions] Craig-Hallum. [Operator a session. with you. question-and-answer conducting question Please Greg comes be question.

Thanks. everything everyone. to you Nice on morning, results, going square some Great. start here. maybe Wanted Good especially comments with, made, with that Dick.

point low hit think I clear it said pretty You the that in that was QX. you

your is sort like trends bit there. seeing of, a of, market. encouraging point, in was in which cautiousness You're same sounded some largest it Yet Vehicle, little at the there

seeing bit looking So, what I half and here? second more a in you're viewing detail know, don't of July on the how maybe sort or you're little

delays, market, work With market and schedules the we talk back to people, Vehicle and the delays did in vehicle-type on-road getting and so coming see and forth. some updated I'll companies

expectations and XX% we what And where XX% improving it's where the on I and an in we side, that So see back, saw then regard and the the have yes, off-road demand it's did and year, would say strong. at the pickup visibility point vehicles, were With impact the now we're original quarter. through on expect it that. we of strong clearly remainder a to very quarter, to continue on-road here second to beyond second we it coming our very have of

some So markets. while the in our those, in positive in we very see we're signs do vehicle cautious vehicle, here,

about know was that basis. clearly a contributor. up a Dynamic I about was little segment on revenue even a quite it a you And year-over-year bit But main you medical? still what back out, as bit I talked a standout. mean, And if

about talk what largest the in contributors were just maybe of there? So some

ventilator, Sure. also the very of and that into dialysis and auxiliary they as Yes. and hospital ventilation, respirator, market, tick-up demand, rooms facilities expanding we the saw we goes staffing forth. were in other which that equipment all hospital machines, the The for environments some so serve, number strong

and had very occur. was that some that's think future. We continued There's we that's in facilities. modernization strong we to think there also that So into saw that catch-up equipment there, a I, And there of we'll a demand see continuing. the demand

to the and well future. have to North we're America for that able sourcing be capitalize encouraging addition from, of with positioned those In think that, some think for of opportunities very America, out us this regard North in some come I are product there on I to to in opportunities

performance, high We certified that applications products medical are facilities. have in of a a number fairly and we're our

see quite through opportunities we for the do I some demand us future. area in the strong that bright. some see We and think So for the third quarter, future continuing is

think be some customer there the opportunities the to some is new it opportunities. where market It of right maybe way sounded were you by mean, alluding was forward? strength versus like share maybe overall growth some that I QX how going driven And much customer to about gains? could new

Yes.

can mean, is approval too, Let And typically, process. in because -- you types was already that approval and customers saw that go as me that and based through existing in these we're times, we already clarify little process the -- designed upon we bit, on. while had that be products accelerated the know, a we of they being used. demand the an I approved

produce So our to medical design products are and America. we share in going in new we leverage number significant on for the addition to fact North we're that, think opportunities and certainly working the opportunity to I take that gain, of

the customer reflected increased out demand base So the into beyond future. with quarter second existing

opened have the customers that secure feel opportunities we that new way. we're and some to We share going confident up new gain along very

Okay. the leadership Good. then organizational changes, the And on color structure. I the appreciate

could were objectives makes provide what the detail I you know, that around be bit to to a of gets mean, than maybe, long-term of goals why helpful these additional leadership some, or what now the, relates better think the your some optimistic if faster moves. of there, some you and thinking of it Company. before? on it'd changes you the as And I of get you don't timing I color little maybe,

first perception want in them defensive did we planned be changes off, first I we're that making moves. delayed that there and you we offensive a Well, because tell -- are a the to have not and the second quarter, These basis. these Sure. were out on to

was delayed course. of not behind get we timing got the So us, I'm we this until we've -- -- saying

some some going to the were the in markets. But there's As great be we -- detail. instability discussed changes mentioned, still structural be of in

goals I horsepower our success our going nicely to and it's going and think to growth company, team ever continue the has to of resources And to it. do been. stronger I think it's additional this and are than and really developed take be

used hit team, which on we made, that -- call So better our very we We we there, aspect groups, if it's modeling we strengthened operational complete creating of much would standpoint notice a -- exciting these across we've change and allow engineering hit all We hit stuff. now you from and side. that. the all global further standpoint. global on an platforms. electronics We efficiency means every these job leverage the called technology and to are on team, It's us capabilities, simulating which what leverage an to doing solution subtle operating

the here, the have capabilities So there what major to strategic speed, pull gives our global in I is the and market able now that internally do play engineering and reason been we've to offensive to that objectives and team because of together that a for excitement focus. that the way our around market, greater speed a our

Geoff mechatronics Rob, efficiency. opportunities well we us to standpoint, Rondeau, So the leverage as the keep has call steps point American and a Rob had think that's growth to Company. for is about And together. been throughout and operating innovation partner I and that the North AST. in what think as significant and these in side nicely. from we both we're Maida strong additional as very motors AST some been who mechatronics there's to AST, as picked And the responsibilities forward. And coming, We where building in, positive we up we talked making it's an merged at operating used

we've individual regard base, have have the there. retiring He's et cetera, And the we we did manager is for okay, can and to year. place. supplier that's again, looked operations Europe, and we we, at He the within And in we one who end of is to that our another recruited of in developing has synergies, one there's, what the us a had, now of we've Europe. toward have things been been with onboard. began So align general channels, In while. quite done the the

they've an that go think theme. opportunities you the have part And in you also of past, here, good So And been years I of synergies and as feel the leverage we clearly to won't have, the knows, we to the from we the us pipeline we success we single formula develop. to make we out road. I foundation have full. acquisitions. our Greg one. It's know, just, but we're these there's going acquisitions, get and everyone standpoint, every get lots But the for create else sometimes theme there keep that the into for you down operating sure to a think And with take future

and to the road. road, those, five down So the have have years reap we're to the planting the from four, seeds, who three, rewards down continue the we to ability two, knows

to specific drivers all now positioned have for help in certainly through questions? this, Okay? getting has well compliment the it's all the the them future. So as and stuff. can't growth well worked how on that's, Does further team positive. together It's more here and the leadership each I other good do hit here. they've that out trying And growth excelled, you really enough Or help? pandemic We're us all as

ROTH Our line Sweeney next with of the question comes Gerry from Capital.

a your you the of think Controls, that, be some elective And dig the of also, that especially a my a Obviously, can on How on bit on I Dynamic I some press to of some Medical little for just lots dialysis, the ramp and about still surgery this is anecdotal could then transitory? I'm checks juxtaposed But of slowdown just production. on lot up catch-up on that last more then Vehicle on Thanks Obviously, maybe demand. side. efforts there. and that, equipment on and lots ventilators, playing slowdown talked the ventilators, question maybe some indicated, side. about And taking Medical side. to much in little answers of call.

it those what in could more little Looking as puts-and-takes, insight at look the how seeing both give on you're bit to at we medical from that and you market going perspective? us a

Sure.

in is, now equipment. into was our was, I there get there's going equipment hospitals, also spike There think, demand obviously is demand big of marketplace, And and it get correct. that for to that into need that an that products I not customers you're right talking some occurred to a was the take to that's transitory. a increased there on it's there's our And based but modern upon of recognition peak go away. demand, what to

a see continued So to I in in. investment think you're going investment an and

people short are to that the So going future. in caught get

the was there continued There put equipment sure make in as to upgrade that demand be a anything But combat this future. to yes, their they're we So spike. the product was there's into think a and like going positioned market. to going are better people

So going it's expect next unless go we sort demand of going hits year. not next but away into some another to year, soften the that would immediately, should crisis into going

other did to surgeries. see demand, that some knowing that's back. point excellent we're supplier you right but a on drop marketplace. You're come here the in the elective that We push-outs And up was point obviously, brought an and at,

and the all market that at you the if stages, is studies And beginning it. on so, really read

are well So for that positioned we in think market, there's some growth we that in and opportunities for future. the strong

that since too. was So not with COVID, seeing well, can equipment, you're an what you saying there, cycle upgrade essentially, medical COVID, almost for only as say, you but, catalyst the are and a

Correct.

channel checks, right mean are look off-road, the gears, shutdowns XQ, Yes. And I now. then out switching at in The dealers vehicles. you on-road,

is and inventory low. So,

And your point, because you customers? bought normal one. an car Or at efforts, the are XXX dealership. apparently, going ancillary to are I weekend back As So would have restocking been Are seeing up this the expect production sold ramping I they on-road, we they cars maybe, a level needed again? what from off-road?

crazy demand there right now. out there's So

So, but curious.

think, mean April look to those quickly. excellent happened I see it. Gerry, mean bounced devastated. back from we we Yes, fairly Well, coming what see points. they We were And demand it. I if at and again, markets, I us it in

that you I market. demand in would the on-road previous I market, We, as to exceeding mentioned So we're I that. XX%, the tell think XX%, of that, off-road earlier, going we're XX%

So also clearly, off-road some I And you, And products. process it our to think, tell to there you production increased installed get team and build and is demand. able delivering through I have here, another Mexico. had line to up to definitely we there that say this in the implemented market, products down was was and for it running

kept team. kudos still again, thing, So these make and forward. to going our accelerated They meet of delivery for And the and delivery the demands demands. we're to us all make Through happen projects able it to this.

again, So and align. what's is, I I what think, think seeing, your occurring we're of that perception they market in

unabsorbed And rebound How bit model? go do little headwinds. some like that look how see as at Do at looking much excess in was, transitory it could maybe, much overhead? say, gears way was, a or to maybe potentially that COVID when some we're we costs, which revenue? costs, of Switching then a we'll OpEx Okay. we well. the How of

expense that volume, an just comes is really you just was and, And relatively volume, that certainly associated manufacturing basis From some costs the is with fixed of well some standpoint, as it's certainly, the it being stable. there right, I expenditures. there'll So revenues, flexing of with lower unabsorbed than lower as percentage the operating and our back. down, not we'd an standpoint, be reflective think as again, with reflective margin right, gross leveraging and Again, sales adding from had that Controls saw total with that a costs increase sales. tailwinds more if point Dynamic I that is think costs there incremental a of as imbalance

of moderate COVID come an So COVID-related or actual that right? I that should in it breaks, accommodate right? standpoint, efficiency, like, will. matter It's relates times were adjust a if or productivity, whether cleanings you costs to it arrival lost supplies would like the shifts to social from feel the then things expenditure Where you as really, is though, costs, distancing, that's tell and lunch And that. to Having you back. employees of

things. relaxed certainly, we so more that well and those get to safety And maintaining in two, over become if diligent margins that'll help those processes. with And being time, things obviously, and are as we accustomed practiced add when our

So that time. for continue some may

Thank next question Ryan comes proceed Instructions] Colliers. you. [Operator line of the question. with with Dick Our Please your from

Thank you.

of all looks competitive has into a from that owner there question Dick, on the like, guys. specifically. you It obviously, Dynamic, good if thing I So this But boxes recall, checked the some a was previous for X accurate you've about demand what Dynamic if acquisition kind issues were had running to of it? general talk you you away? since summary own you're market seeing just for this months, can some growth? now has that that there. for now the that's gone not sure if issue But And I'm Dynamic in limit

Sure.

in by Dynamic major patient marketplace. Dick, player You're for and owned the here. rehabilitation mobility and the thanks question correct, a was

limited to owned or sell by being the ability product to company, the obviously, So competitors. it their parent solutions provide

So the that make that the was particular one one allowed of be that go -- they're is company and we Dynamic reasons to great now felt we that tied if a to not I they're will restricted a parent has some compete were to given and -- sell just before, companies go, manners. ownership or relationship, other direction. And to certainly, established an while think, to in allowed over restrictive they acquisition who

we solution is start the bringing and And our approach to other the gone. now And so players the process doing. that's and are marketplace in forward which

Dynamic of the In the electronic it, control and and had brings addition and the Allied the the to that, motors gearing. side

the the build working continues come had that's really we're customers. in a to and leverage solution perfect on past on. a And technologies it's the of being for just And our a very, successes what So solution. it we've to up with

volume unit common it's medical addition vehicle-type the it's in markets, mass material forth. They're handling because core Dynamic issues. with with safety for of They're that, additional significant whether dealing dealing electronic interface dealing applications, control and automated that's that or all they're area, traction. our to So but so and in mobility the with has patient in

we're market So at some we are opportunities that serving capability think into and that looking new I for us. expanding markets already

and So lost into that's come a But only We not in we're talent solution of COVID but about it. sell the our and about board the other kind mentioned, got capabilities, we're really unfortunately, markets. they hitting. quite leverage process of the on excited excited ability here medical the to

So backlog, of cancellations when or deliveries. there the any you look at been has deferrals

three You to indicated but a or it's month flow-through, deferrals? anything six the there below surface, been cancellation has probably

but think if in We could quickly. demand at deferrals. haven't fairly market, that we seen And seen you the look change total have now cancellations, definitely I

your don't we've we in completed, but answer a intake. question, have color about deferrals. is our we tick bookings, order give So, normally, yes, to will, had, since July what's much saw in up happened. seen But I nice we

are that your defense now the, we did here, was are and saw released. some a industrial nice to answer also demand on in that these area we getting bit question, some But And things see you tell hope and continues little but sector. accelerate, we an that level that with work, I push-outs. would a to things we is in yes, come that through. of very had have People to wins back working at it So some been that

you. Thank

closing questions the We like I'd over to have comments. at to back floor this time. turn further management for no

interest Thank everyone, thank operator. today's us you, for on call your for Motion. in and joining And Allied you,

all talking a to and your quarter we again to safe, any of for participation. out our free day. feel you forward please and always, the Stay And that'll operator. look after reach to you us Thank conclude at third results. with As time, great have call,

This does today's conclude teleconference.

You your participations have day. disconnect and may now. Thank your wonderful a you lines for