Business
Allient Reports Third Quarter 2024 Results; Simplify to Accelerate NOW Initiatives Drive Sequential Margin Expansion
Third quarter performance: Revenue was $125.2 million with a gross margin of 31.4% and net income of $2.1 million Improved margins sequentially: Gross margin
About this update from Allient Inc.
Third quarter performance: Revenue was $125.2 million with a gross margin of 31.4% and net income of $2.1 million Improved margins sequentially: Gross margin up 150 basis points to 31.4%, operating margin up 170 basis points to 5.3%, and adjusted EBITDA margin rose 130 basis points to 11.5% Strong cash flow: $29.5 million of cash generated from operations year-to-date and ended the quarter with $37.1 million of cash Cost reductions: Additional Simplify to Accelerate NOW efforts implemented, bringing total annual cost reductions to $10 million BUFFALO, N.Y. --(BUSINESS WIRE)-- Allient Inc. (Nasdaq: ALNT) (“Allient” or the “Company”), a global designer and manufacturer of precision and specialty Motion, Controls and Power products and solutions for targeted industries and applications, today reported financial results for its third quarter ended September 30, 2024 . “Our focus on improving margin and operational efficiencies has driven solid sequential improvements, even as we navigate softer demand in key industrial and vehicle markets,” said Dick Warzala , Chairman and CEO. “The initial steps we have taken to streamline our operations and reduce costs through our Simplify to Accelerate NOW initiatives are yielding results, with improved margins and operational flexibility. We remain confident in our ability to align with market conditions and unlock further growth as we head into 2025.” Mr. Warzala added, “As we look ahead, we expect the inventory adjustments by the majority of our customers to be substantially complete by early 2025, allowing for a return to more normalized run rates by mid-year. While we anticipate typical year-end seasonality and continued rebalancing in the fourth quarter, our strategic focus on operational improvements positions Allient to navigate near-term challenges and capitalize on future growth opportunities.” Simplify to Accelerate NOW Initiatives Allient continues to make significant progress with its Simplify to Accelerate NOW program, aimed at streamlining operations and driving sustainable cost reductions. The initiatives have already delivered measurable savings and is expected to contribute further to Allient’s financial and operational performance. $10 Million in Annualized Savings: To date, Allient has implemented $10 million in total annualized cost savings. The initial $5 million in savings were enacted in the late second quarter, with the remainder implemented since June 30, 2024 . Operational Efficiencies: The program’s focus on refining the organizational structure, eliminating redundancies, and optimizing production processes has led to initial margin improvements, bolstering overall profitability. Enhanced Agility: By simplifying its operations, Allient aims to improve its speed to market, enhance customer service, and strengthen its competitive positioning across targeted industries. Future Cost Rationalization: Beyond the current $10 million in savings, Allient is actively identifying further opportunities to rationalize its cost structure in 2025, ensuring continued alignment with evolving market conditions and customer demands. These initiatives are expected to position Allient to emerge from the current macroeconomic environment and industrial headwinds with stronger earnings power, improved operational flexibility, and enhanced capacity to capitalize on future growth opportunities. Restructuring and related charges of $0.5 million were recognized in the third quarter of 2024, and $1.9 million have been recognized year to date. The total costs of the cost reduction efforts implemented to date are expected to be between approximately $1.9 million and $2.4 million . The charges are primarily cash and are related mostly to severance costs. Third Quarter 2024 Results (Narrative compares with prior-year period unless otherwise noted) Revenue decreased 14%, or $20.1 million , to $125.2 million . The impact of foreign currency exchange rate fluctuations was favorable by $0.6 million . Sales to U.S. customers were 56% of total sales compared with 61% in the third quarter 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. Sales in the Vehicle markets decreased 38% largely due to an accelerated decline in demand for powersports. Industrial markets sales were down 9% as strengthened power quality sales, largely to the HVAC/data center market, and incremental sales from the recent acquisition were more than offset by lower demand in industrial automation due to significant inventory destocking by the Company’s largest customer. Medical market revenue decreased 6%, with surgical instrument demand unable to offset lower demand in fluid pump markets and continued softness in medical mobility. Aerospace & Defense sales declined 8%, reflecting the timing of certain programs within the industry. Gross margin was 31.4%, down 130 basis points from the prior-year period, which reflected lower volume and expected margin dilution from the most recent acquisition. Sequentially, gross margin improved 150 basis points largely due to an improved mix. Operating costs and expenses were 26.1% of revenue, up 160 basis points, of which 40 basis points was attributable to restructuring and business realignment costs of $0.5 million . As a result, operating income was $6.6 million , or 5.3% of revenue, compared with $11.9 million , or 8.2% of revenue. Sequentially, operating costs and expenses as a percent of revenue improved 20 basis points given the Company’s implemented reduction efforts at the end of the second quarter, partially offset by the restructuring costs. The effective income tax rate was 22.6% and 23.0% for the third quarter of 2024 and 2023, respectively. The Company expects its income tax rate for the full year 2024 to be approximately 21% to 23%. Net income was $2.1 million , or $0.13 per diluted share, compared with $6.7 million , or $0.41 per diluted share, in the prior-year period and $1.2 million , or $0.07 per diluted share, in the sequential second quarter. Adjusted net income, which excludes amortization of intangible assets related to acquisitions, business development costs and other non-recurring items, was $5.1 million , or $0.31 per diluted share. This compared with $10.0 million , or $0.61 per diluted share, in the third quarter of 2023 and $4.9 million , or $0.29 per diluted share, in the second quarter of 2024. 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, foreign currency gains/losses, and restructuring and business realignment costs (“Adjusted EBITDA”) was $14.4 million , or 11.5% of revenue, compared with $20.8 million , or 14.3% of revenue. Sequentially, Adjusted EBITDA increased 4%, or $0.5 million , and as a percent of revenue was up 130 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 $37.1 million compared with $31.9 million at year-end 2023. Cash provided by operating activities was $29.5 million year-to-date, up 9%. Capital expenditures totaled $6.9 million for the first nine months of 2024, primarily supporting new customer projects. The Company has continued to refine its capital allocation priorities, focusing on higher-return projects. As a result, it has lowered its expected 2024 capital expenditures to a range of $8 million to $11 million , from the previous guidance of $11 million to $13 million . Total debt of $231.4 million was down $5.5 million from the sequential second quarter. The increase in debt from year-end 2023 reflected the SNC acquisition. Debt, net of cash, was $194.3 million , or 41.6% of net debt to capitalization. The Company’s leverage ratio, as defined in its credit agreement, was 3.53x at quarter-end. On October 22, 2024 , the Company amended its 2024 Amended Credit Agreement. The amendment allows for an increased maximum leverage ratio of 4.5:1.0 for the quarters ending March 31, 2025 , and June 30, 2025 , followed by 4.0:1.0 for the quarter ending September 30, 2025 , before reverting to 3.75:1.0 for the remainder of the agreement. Additionally, the amendment permits the inclusion of certain acquisition, business retention, restructuring, integration, and realignment costs, up to $4.0 million , as an add-back in the consolidated EBITDA calculation, as defined in the agreement. With these amendments, the Company’s leverage ratio stands at 3.32x as of September 30, 2024 . Orders and Backlog Summary ($ in thousands) Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2023 Orders $ 102,631 $ 137,373 $ 122,127 $ 105,162 $ 154,908 Backlog $ 238,492 $ 259,002 $ 258,130 $ 276,093 $ 309,636 Third quarter orders decreased sequentially due to the continued impacts of changes in customer order patterns in reacting to elevated inventory levels. Additionally, the Company has experienced delays in the launch of certain projects, which may be a result of the election and expected decrease in interest rates. Foreign currency translation had a favorable $0.7 million impact on third quarter orders compared with the prior-year period. The decline in backlog reflects the recent order softness as well as continued improvements within the supply chain, which has enabled the reduction of long-lead times for industrial market projects. 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, November 7, 2024 , at 10:00 am ET . During the conference call, management will review the financial and operating results and discuss Allient’s corporate strategy and outlook. A question-and-answer session will follow. To listen to the live call, dial (412) 317-0535. In addition, the webcast and slide presentation may be found at: allient.com/investors . A telephonic replay will be available from 2:00 pm ET on the day of the call through Thursday, November 14, 2024 . To listen to the archived call, dial (412) 317-6671 and enter replay pin number 10193002 or access the webcast replay via the Company’s website. A transcript will also be posted to the website once available. About Allient Inc. Allient (Nasdaq: ALNT) is a global engineering and manufacturing enterprise that develops solutions to drive the future of market-moving industries, including medical, life sciences, aerospace and defense, industrial automation, robotics, semi-conductor, transportation, agriculture, construction and facility infrastructure. A family of globally responsible companies, Allient takes a One-Team approach to “Connect What Matters” and provides the most robust, reliable, and high-value products and systems by utilizing its core Motion, Controls, and Power technologies and platforms. Headquartered in Buffalo, N.Y. , Allient employs more than 2,500 team members around the world. To learn more, visit www.allient.com . Safe Harbor Statement The statements in this news release 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 savings from restructuring and simplifying actions, the cost of implementing such actions, operating results, preliminary financial results, expectations for the level of sales for the next several quarters, 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, commercial activity and demand across our and our customers’ businesses, global supply chains, 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 ALLIENT INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited) For the three months ended For the nine months ended September 30 , September 30 , 2024 2023 2024 2023 Revenue $ 125,213 $ 145,319 $ 407,958 $ 437,637 Cost of goods sold 85,949 97,821 280,641 298,328 Gross profit 39,264 47,498 127,317 139,309 Operating costs and expenses: Selling 6,323 6,021 19,283 18,354 General and administrative 13,856 14,642 42,438 43,624 Engineering and development 9,056 10,702 30,416 31,041 Business development 278 1,194 2,204 1,791 Amortization of intangible assets 3,135 3,075 9,381 9,226 Total operating costs and expenses 32,648 35,634 103,722 104,036 Operating income 6,616 11,864 23,595 35,273 Other expense, net: Interest expense 3,435 3,164 10,207 9,309 Other expense, net 468 42 405 187 Total other expense, net 3,903 3,206 10,612 9,496 Income before income taxes 2,713 8,658 12,983 25,777 Income tax provision (612 ) (1,992 ) (2,830 ) (6,027 ) Net income $ 2,101 $ 6,666 $ 10,153 $ 19,750 Basic earnings per share: Earnings per share $ 0.13 $ 0.42 $ 0.61 $ 1.24 Basic weighted average common shares 16,574 15,979 16,513 15,940 Diluted earnings per share: Earnings per share $ 0.13 $ 0.41 $ 0.61 $ 1.22 Diluted weighted average common shares 16,605 16,237 16,581 16,198 ALLIENT INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) September 30, December 31 , 2024 2023 Assets Current assets: Cash and cash equivalents $ 37,118 $ 31,901 Trade receivables, net of provision for credit losses of $1,239 and $1,240 at September 30, 2024 and December 31, 2023 , respectively 82,549 85,127 Inventories 117,605 117,686 Prepaid expenses and other assets 13,582 13,437 Total current assets 250,854 248,151 Property, plant, and equipment, net 68,396 67,463 Deferred income taxes 7,663 7,760 Intangible assets, net 104,593 111,373 Goodwill 134,390 131,338 Operating lease assets 23,627 24,032 Other long-term assets 6,912 7,425 Total Assets $ 596,435 $ 597,542 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 28,894 $ 39,129 Accrued liabilities 32,292 56,488 Total current liabilities 61,186 95,617 Long-term debt 231,415 218,402 Deferred income taxes 4,078 4,337 Pension and post-retirement obligations 2,735 2,679 Operating lease liabilities 19,343 19,532 Other long-term liabilities 4,811 5,400 Total liabilities 323,568 345,967 Stockholders’ Equity: Common stock, no par value, authorized 50,000 shares; 16,840 and 16,308 shares issued and outstanding at September 30, 2024 and December 31, 2023 , respectively 110,278 95,937 Preferred stock, par value $1.00 per share, authorized 5,000 shares; no shares issued or outstanding — — Retained earnings 174,497 165,813 Accumulated other comprehensive loss (11,908 ) (10,175 ) Total stockholders’ equity 272,867 251,575 Total Liabilities and Stockholders’ Equity $ 596,435 $ 597,542 ALLIENT INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the nine months ended September 30 , 2024 2023 Cash Flows From Operating Activities: Net income $ 10,153 $ 19,750 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 19,248 18,956 Deferred income taxes (45 ) 122 Stock-based compensation expense 3,382 4,165 Debt issue cost amortization recorded in interest expense 379 225 Other 3,248 987 Changes in operating assets and liabilities, net of acquisitions: Trade receivables 6,012 (14,357 ) Inventories 5,500 (1,344 ) Prepaid expenses and other assets 142 (1,553 ) Accounts payable (12,259 ) 2,871 Accrued liabilities (6,302 ) (2,689 ) Net cash provided by operating activities 29,458 27,133 Cash Flows From Investing Activities: Consideration paid for acquisitions, net of cash acquired (25,231 ) (11,004 ) Purchase of property and equipment (6,903 ) (7,850 ) Net cash used in investing activities (32,134 ) (18,854 ) Cash Flows From Financing Activities: Proceeds from issuance of long-term debt 76,898 11,000 Principal payments of long-term debt and finance lease obligations (61,333 ) (22,325 ) Payment of contingent consideration (2,450 ) — Payment of debt issuance costs (2,329 ) — Dividends paid to stockholders (1,505 ) (1,348 ) Tax withholdings related to net share settlements of restricted stock (1,596 ) (1,827 ) Net cash provided by (used in) financing activities 7,685 (14,500 ) Effect of foreign exchange rate changes on cash 208 (556 ) Net increase (decrease) in cash and cash equivalents 5,217 (6,777 ) Cash and cash equivalents at beginning of period 31,901 30,614 Cash and cash equivalents at end of period $ 37,118 $ 23,837 ALLIENT 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. Business development costs include acquisition and integration related costs as well as restructuring and business realignment costs. 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 fully 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. Organic revenue is reported revenues adjusted for the impact of foreign currency and the revenue contribution from acquisitions. 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 and nine months ended September 30, 2024 is as follows: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2024 Revenue as reported $ 125,213 $ 407,958 Foreign currency impact (641 ) (155 ) Revenue excluding foreign currency exchange impacts $ 124,572 $ 407,803 The Company’s calculation of organic revenue for the three and nine months ended September 30, 2024 is as follows: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2024 Revenue decrease year over year (13.8%) (6.8%) Less: Impact of acquisitions and foreign currency 7.7% 7.1% Organic revenue (21.5%) (13.9%) The Company’s calculation of Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 is as follows: Three months ended Nine months ended September 30 , September 30 , 2024 2023 2024 2023 Net income as reported $ 2,101 $ 6,666 $ 10,153 $ 19,750 Interest expense 3,435 3,164 10,207 9,309 Provision for income tax 612 1,992 2,830 6,027 Depreciation and amortization 6,447 6,421 19,248 18,956 EBITDA 12,595 18,243 42,438 54,042 Stock-based compensation expense 1,098 1,354 3,382 4,165 Acquisition and integration-related costs (1) (201 ) 389 256 686 Restructuring and business realignment costs 479 805 1,948 1,105 Foreign currency loss 461 58 380 257 Adjusted EBITDA $ 14,432 $ 20,849 $ 48,404 $ 60,255 (1) Includes a Q3 2024 fair value measurement reduction of $270 due to acquisition-related contingent consideration ALLIENT 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 and nine months ended September 30, 2024 and 2023 is as follows: For the three months ended September 30 , Per diluted Per diluted 2024 share 2023 share Net income as reported $ 2,101 $ 0.13 $ 6,666 $ 0.41 Non-GAAP adjustments, net of tax (1) Amortization of intangible assets – net 2,401 0.14 2,355 0.15 Foreign currency loss – net 353 0.02 44 — Acquisition and integration-related costs – net (2) (154 ) (0.01 ) 298 0.02 Restructuring and business realignment costs – net 367 0.02 617 0.04 Non-GAAP adjusted net income and adjusted diluted earnings per share $ 5,068 $ 0.31 $ 9,980 $ 0.61 (1) Applies a blended federal, state, and foreign tax rate of approximately 23% applicable to the non-GAAP adjustments. (2) Includes a Q3 2024 fair value measurement reduction of $270 due to acquisition-related contingent consideration. For the nine months ended September 30 , Per diluted Per diluted 2024 share 2023 share Net income as reported $ 10,153 $ 0.61 $ 19,750 $ 1.22 Non-GAAP adjustments, net of tax (1) Amortization of intangible assets – net 7,339 0.44 7,067 0.44 Foreign currency loss – net 291 0.02 197 0.01 Acquisition and integration-related costs – net 196 0.01 525 0.03 Restructuring and business realignment costs – net 1,492 0.09 847 0.05 Non-GAAP adjusted net income and adjusted diluted earnings per share $ 19,471 $ 1.17 $ 28,386 $ 1.75 (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. View source version on businesswire.com : https://www.businesswire.com/news/home/20241106611543/en/ Investor Contacts: Deborah K. Pawlowski / Craig P. Mychajluk Alliance Advisors IR 716-843-3908 / 716-843-3832 [email protected] / [email protected] Source: Allient Inc.