Allied motion reports 23% revenue growth in first quarter 2019
Amherst, n.y.--(business wire)--allied motion technologies inc. (nasdaq: amot) (“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 first quarter ended march, 31, 2019. results include the tci, llc (“tci”) acquisition that was completed december 6, 2018. “our one allied approach continues to prove effective, driving strong organic growth and record orders as we expanded our market share in many of our served markets. further, our acquisition of tci is meeting our expectations as it has expanded our offerings, brought excellent talent and broadened our markets. tci’s new projects and customers complemented our organic growth to drive total revenue up 23%,” commented dick warzala, chairman and ceo. “gross margin was unchanged as we increased our investment in r&d and other key resources to facilitate growth opportunities. there were also some atypical impacts to gross margin in the quarter, including increased costs for certain electronic assemblies that we are focusing on reducing over the next several months. with our focus on allied systematic tools (ast), we expect to drive improvements in all areas of our business to make further inroads into desirable end markets and to continuously improve quality, delivery, innovation and cost.” first quarter 2019 results (narrative compares with prior-year period unless otherwise noted) record revenue of $93.9 million was up $17.3 million, or 22.6%. the increase was due to growth across all of the company’s served markets. the increase reflects organic growth of 12.8%, when excluding a $3.1 million unfavorable impact of changes in foreign currency exchange. the company believes that revenue excluding foreign currency exchange impacts, which is a non-gaap measurement, is a useful measure in 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 exchange impacts. sales to u.s. customers were 54% of total sales for the quarter compared with 53% from the first quarter last year, with the balance of sales to customers primarily in europe, canada and asia. gross margin was unchanged at 29.5%. the recent acquisition of tci was margin accretive, but that benefit was offset by two atypical items, which negatively impacted gross margin by a total of approximately 90 basis points. the first relates to a supplier who is discontinuing operations and subsequently increased their prices for any new orders. the second item was the timing of investment into tooling and prototype samples related to new vehicle market programs. both impacts are expected to moderate over the coming quarters. operating costs and expenses as a percent of revenue were up 60 basis points to 21.7% largely due to additional personnel and engineering to support the company’s growth, higher stock compensation expense and incremental intangible asset amortization of $562 thousand related to the tci acquisition. general and administrative expense as a percent of revenue decreased 20 basis points to 9.5%, and engineering and development as a percent of revenue decreased 30 basis points to 6.2%. operating income increased 14% to $7.3 million. operating margin was 7.8% compared with 8.4%. lower operating margin reflected the impact of atypical items on gross margin, investments in growth and higher amortization expense from the tci acquisition. interest expense increased $566 thousand to $1.2 million on higher debt balances that funded acquisitions. the effective tax rate was 27.5% compared with 26.2% in the prior-year period. net income increased to $4.5 million, or $0.48 per diluted share, compared with $4.2 million, or $0.45 per diluted share. the company anticipates its effective tax rate for fiscal 2019 to be in the range of 26% to 29%. earnings before interest, taxes, depreciation, amortization, stock compensation expense and business development costs (“adjusted ebitda”) was $11.7 million, up $2.0 million or 20%. as a percent of sales, adjusted ebitda was 12.5%, down 20 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 $10.2 million compared with $8.7 million at the end of 2018. total debt was $129.1 million as of march 31, 2019, up $6.5 million from year-end 2018. debt, net of cash, was $118.9 million, or 52.7% of net debt to capitalization. capital expenditures were $2.5 million and included investments for productivity improvement and growth initiatives. the company expects to invest $15 million to $18 million in capital expenditures during fiscal 2019. most of the capital expenditures are to support the significant vehicle market project wins that will begin ramping by year-end, off-road vehicle steering capabilities and incremental investments related to the addition of tci. orders and backlog summary ($ in thousands) q1 2019 q4 2018 q3 2018 q2 2018 q1 2018 130,646 the year-over-year increase in orders and backlog reflect recent acquisitions and strength across all the company’s served markets. foreign currency translation had an unfavorable $2.9 million impact on the first quarter compared with the prior-year period. backlog was up 22% over the prior-year period and down slightly from a record level in the sequential fourth quarter of 2018. the time to convert the majority of backlog to sales is approximately three to six months. not included in the backlog are previously announced new business awards of $225.0 million that are expected to begin shipping in late 2019. conference call and webcast the company will host a conference call and webcast on thursday, may 2, 2019 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, participants can call (201) 689-8263. in addition, the call will be webcast live and may be found at: http://www.alliedmotion.com/investors. a telephonic replay will be available from 1:00 pm et on the day of the call through thursday, may 9, 2019. to listen to the archived call, dial (412) 317-6671 and enter replay pin number 13689434 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. the company is headquartered in amherst, ny, 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 may 2, 2019 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, and may contain the word “believe,” “anticipate,” “expect,” “project,” “intend,” “will continue,” “will likely result,” “should” or words or phrases of similar meaning. forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from the expected results described in the forward-looking statements. the risks and uncertainties include those associated with: the domestic and foreign general business and economic conditions in the markets we serve, including political and currency risks and adverse changes in local legal and regulatory environments; the introduction of new technologies and the impact of competitive products; the ability to protect the company’s intellectual property; our ability to sustain, manage or forecast its growth and product acceptance to accurately align capacity with demand; the continued success of our customers and the ability to realize the full amounts reflected in our order backlog as revenue; the loss of significant customers or the enforceability of the company’s contracts in connection with a merger, acquisition, disposition, bankruptcy, or otherwise; our ability to meet the technical specifications of our customers; the performance of subcontractors or suppliers and the continued availability of parts and components; changes in government regulations; the availability of financing and our access to capital markets, borrowings, or financial transactions to hedge certain risks; the ability to attract and retain qualified personnel who can design new applications and products for the motion industry; the ability to implement our corporate strategies designed for growth and improvement in profits including to identify and consummate favorable acquisitions to support external growth and the development of new technologies; the ability to successfully integrate an acquired business into our business model without substantial costs, delays, or problems; our ability to control costs, including the establishment and operation of low cost region manufacturing and component sourcing capabilities; and other risks and uncertainties detailed from time to time in the company’s sec filings. actual results, events and performance may differ materially. readers are cautioned not to place undue reliance on these forward-looking statements as a prediction of actual results. 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 and comprehensive income(in thousands, except per share data)(unaudited) allied motion technologies inccondensed consolidated balance sheets(in thousands, except per share data)(unaudited) march 31, 2019 december 31,2018 december 31, 2018, respectively 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 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, depreciation and amortization, stock compensation expense, and business development costs), 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 months ended march 31, 2019 is as follows: the company’s calculation of adjusted ebitda for the three months ended march 31, 2019 and 2018 is as follows:
