Allied Motion Reports 13% Revenue Growth and Record Orders and Backlog in First Quarter 2022

• Revenue grew 13% to $114.8 million, with organic growth of 5.3%
• Gross margin was 29.2%, up 50 basis points over the sequential 2021 fourth quarter, despite ongoing supply chain disruptions as well as material and labor inflation
• Record orders of $155.3 million drove a book-to-bill ratio of 1.4x
• Record backlog of $289.3 million, up 16% sequentially on strong demand

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, 2022. Results include the acquisitions of ORMEC Systems Corp. on November 2, 2021, ALIO Industries on November 4, 2021, and Spectrum Controls, Inc. on December 30, 2021.

“Our first quarter sales performance was solid as we continue to successfully execute to meet robust customer demand despite ongoing supply chain disruptions. Industrial market sales increased 46% from new solution offerings, both organically developed and acquired, and our recent acquisitions also contributed to growth in our Aerospace & Defense market,” commented Dick Warzala, Chairman and CEO.

“Our long-term success will continue to be driven by our discipline and focus on the execution of our strategy. Through acquisitions and organic investments, we have strengthened our competitive position in several target markets, and we are working hard to leverage these investments as quickly as possible. Each of our recent acquisitions is accretive to our gross margin profile, has expanded our technology base and capabilities, and further enhanced our system selling opportunities to create additional value for our customers. Similar to our base business, our acquisitions are not immune from the daily supply chain disruptions and inflationary pressures that impact the efficiency of all businesses. As we work through these challenges, we remain highly confident in our ability to enhance both our top and bottom-line performance in the future. The profile of Allied Motion is rapidly evolving in a very positive manner, and we remain committed to executing our strategy and fully realizing our potential to emerge as an even larger and stronger enterprise in the future.”

First Quarter 2022 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue increased 13% to a record $114.8 million and reflected higher demand across most markets and incremental revenue from acquisitions completed in the fourth quarter. Excluding the unfavorable impact of foreign currency exchange rate fluctuations on revenue of $3.2 million, revenue was up 16%. Sales to U.S. customers were 56% of total sales compared with 51% in the same period last year, 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.

Industrial markets were up 46% in the quarter, benefitting from new solutions offerings and continued economic recovery in a number of verticals, including material and vehicle handling, pumps, oil & gas, industrial automation and electronics solutions for motor control and instrumentation, as well as contributions from our recent acquisitions. The recent acquisitions also contributed to the Aerospace & Defense growth of 27%. Partially offsetting were lower sales in the Vehicle markets of 5% largely due to broad supply chain challenges within commercial automotive, and Medical markets which declined 8% due to the lapping of a strong prior-year period that was still benefiting from pandemic related sales.

Gross margin was 29.2%, down 40 basis points as higher volume and improved mix were more than offset by continued global supply chain disruptions and rising material and labor costs, as well as non-cash acquisition costs. Despite these challenges, gross margins improved 50 basis points from the sequential 2021 fourth quarter.

Operating costs and expenses as a percent of revenue were 25.4%, up 230 basis points, of which 140 basis points was attributable to higher engineering and development costs, largely attributable to the three acquisitions completed during the fourth quarter of 2021. Also contributing to the operating expense increase was higher business development costs of $0.8 million, or 70 basis points as a percent of revenue, in support of M&A activity, as well as activities in optimizing our global manufacturing footprint. As a result, operating income was $4.3 million, or 3.7% of sales, compared with $6.6 million, or 6.5%, in the first quarter of 2021.

Net income was $2.5 million, or $0.16 per diluted share, compared to $11.9 million, or $0.83 per share, in the prior year period, which had benefitted from a net discrete tax benefit of $7.4 million relating to new legislation enacted in New Zealand. Adjusted net income, which excludes business development costs and other non-recurring items, was $3.8 million, or $0.24 per diluted share, compared with adjusted net income of $4.6 million, or $0.32 per diluted share, in the comparable period of 2021. The effective tax rate was 21.3% in the first quarter of 2022 due to discrete tax benefits in the period. The Company expects its income tax rate for full year 2022 to be approximately 24% to 26%. 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 $12.9 million, up $0.9 million, or 8%. As a percent of sales, Adjusted EBITDA was 11.2%, down 60 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 $16.9 million compared with $22.5 million at year-end 2021. The Company used $13.4 million in net cash from operating activities, which reflects higher levels of inventory to combat supply chain challenges. Capital expenditures were $2.5 million and largely focused on new customer projects. The Company expects 2022 capital expenditures to be approximately $15 million to $20 million.

Total debt of $178.6 million was up $19.7 million from year-end 2021. Approximately half of the debt increase was attributable to a new finance lease for a manufacturing facility expansion in Germantown, WI to support continued growth. Debt, net of cash, was $161.7 million, or 45.5% of net debt to capitalization. The Company’s leverage ratio, as defined in its credit agreement, was 3.49x at quarter-end.

Orders and Backlog Summary ($ in thousands)

Orders of $155.3 million were up 35% sequentially and year-over-year, and represent a book-to-bill ratio of 1.4x. Foreign currency translation had an unfavorable $3.9 million impact on first quarter orders compared with the prior-year period.

Backlog increased 16% over the sequential fourth quarter and 90% over the prior-year period to a record $289.3 million. The time to convert the majority of 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 5, 2022 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: 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 12, 2022. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 13728803 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 controlled motion products and solutions used in a broad range of applications within the Vehicle, Medical, Aerospace & Defense, Electronic, and Industrial 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 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 www.alliedmotion.com.

Safe Harbor Statement

The statements in this news release and in the Company’s May 5, 2022 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.

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)

(Unaudited)

ALLIED MOTION TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

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, 2022 is as follows:

The Company’s calculation of Adjusted EBITDA for the three months ended March 31, 2022 and 2021 is as follows:

*2022 includes $778 of acquisition inventory step-up amortization

ALLIED MOTION TECHNOLOGIES INC.

Reconciliation of GAAP Net Income and Diluted Earnings per Share to

Non-GAAP Adjusted Net Income 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 months ended March 31, 2022 and 2021 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 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220504006140/en/