Allied Motion delivers record annual gross margin
Allied Motion Technologies Inc., a designer and manufacturer of precision and specialty controlled motion products and solutions for the global market, reported annual revenue up 25% to a record $503.0 million, driven by strong demand in Industrial and Aerospace & Defense markets and incremental sales from acquisitions.
Other highlights from its financial results for its fourth quarter and full year ended December 31, 2022 include:
- Organic growth was 12.0% for the year on a constant currency basis
- Fourth quarter revenue grew 35% to $131.1 million, with organic growth of 18.3% on a constant currency basis
- Annual gross margin expanded 130 basis points to a record 31.3% on higher volume and accretive acquisitions; Fourth quarter gross margin expanded 240 basis points to 31.1%
- Achieved annual net income of $17.4 million, or $1.09 per diluted share; Adjusted net income per share was $1.88, up 18% for the year
- Fourth quarter net income more than doubled to $3.7 million, or $0.23 per diluted share; Adjusted net income per share for the quarter was up 43% to $0.43
- Fourth quarter orders of $145.6 million drove a book-to-bill ratio of 1.1x and record backlog of $330.1 million at year-end
“Our fourth quarter and full year results were strong and speak to the consistent and focused efforts of the entire Allied team to execute our strategy and deliver strong organic growth and create new growth opportunities through selective acquisitions,” said Dick Warzala, chairman and CEO. “The fourth quarter provided several highlights, which included impressive organic growth of 18%, the strengthening of our margin profile, and robust order levels which were broad-based across many of our targeted markets. For the year, we continued to demonstrate our ability to manage our business effectively despite the challenging macro conditions as we crossed a revenue milestone of more than $500 million and achieved our stated goal of gross margin expansion, reaching a record 31.3%.
“While heightened levels of macroeconomic and geopolitical uncertainty remain, we believe we are in a strong position and are confident we can continue to execute our strategy by capitalizing on the many growth opportunities and positive underlying demand trends within our targeted markets," Warzala added. "Equally important, we will continue to drive a higher level of continuous improvement in all areas of our business to enable margin expansion and long-term profitability.
“We entered 2023 with momentum on our side, a record level of backlog, significantly broadened scope of expertise and solutions, and an enhanced value proposition for our customers.”
Fourth Quarter 2022 Results (compared with prior-year period unless noted)
Revenue increased 35% to $131.1 million and reflected higher demand across each of the Company’s target markets, as well as incremental sales from acquisitions. Excluding the unfavorable impact of foreign currency exchange rate fluctuations on revenue of $6.7 million, revenue was up 42%, including organic growth of 18.3%. Sales to U.S. customers were 57% of total sales compared with 54% 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.
Aerospace & Defense revenue grew 197% due to organic growth, defense program timing, and incremental demand from acquisitions. Revenue from Industrial markets was up 46%, benefitting from strong end market demand within industrial automation, material handling and electronics. Vehicle market sales growth of 8% reflected higher demand from trucks, powersports and commercial automotive, while Medical markets were up slightly as surgical related markets and medical pumps offset lower pandemic related sales. The Distribution market, while a small component of total revenue, increased 22%.
Gross margin was 31.1%, up 240 basis points from the fourth quarter of 2021 as higher volume, margin accretive acquisitions, and pricing more than offset continued global supply chain disruptions, and rising material and labor costs.
Operating costs and expenses were 24.8% of revenue, up 30 basis points, which reflected an increase in engineering and development costs and intangible amortization expense, largely due to the second quarter M&A activity, partially offset by lower business development costs. As a result, operating income was $8.2 million compared with $4.0 million, and as a percent of revenue was 6.2%, up 210 basis points.
Full Year 2022 Results (compared with prior-year period unless otherwise noted)
Revenue of $503.0 million increased $99.5 million, or 25%, reflecting strong demand in Industrial and Aerospace & Defense markets, including incremental sales from acquisitions. The impact of FX fluctuations was unfavorable by $22.3 million. On a constant currency basis, revenue was up 30% for the year, which included 12.0% organic growth. Sales to U.S. customers were 58% of total sales compared with 54% for 2021, with the balance of sales to customers primarily in Europe, Canada, and Asia-Pacific.
Gross margin was 31.3%, up 130 basis points, and reflected similar impacts as the fourth quarter of 2022. Operating costs and expenses as a percent of revenue were 25.0%, up 140 basis points largely due to M&A activity, which resulted in higher engineering and development costs, intangible amortization expense and business development costs. As a result, operating income was $31.7 million, or 6.3% of sales, compared with $26.0 million, or 6.4% of sales.
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