ALLIENT INC Q1 FY2025 earnings call

• Started 2025 with sequential growth in revenue, margins, EBITDA, earnings, and cash generation. - Simplify to Accelerate NOW program is a key driver of transformation, driving efficiency and scaling. - Navigating global landscape with focus on operational flexibility, including supply chain reinforcement and geopolitical risk mitigation. - Operating cash flow was $13.9 million, up 52% year-over-year; net debt decreased by $13.6 million; leverage ratio improved. - Total orders up 17% sequentially, book-to-bill ratio 1.04x, backlog up 3% sequentially.

First quarter revenue was $132.8 million, down 9% year-over-year but up 9% sequentially. Gross margin was 32.2%, up 70 basis points sequentially. Operating margin rose 130 basis points sequentially to 6.6%. Adjusted EPS increased nearly 50% from quarter four to $0.46 per share. Aerospace and defense saw a 25% year-over-year increase. Medical was steady but down 2% trailing 12 months due to pump-related softness. Industrial had mixed results with power quality growing but industrial automation down. Vehicle revenue declined 34% year-over-year. Distributor channel showed 5% trailing 12-month sales growth.

• Targeting $6 million to $7 million in annualized cost reductions by end of 2025. - Mitigating tariffs and rare-earth magnet restrictions through localizing supply chains, export licensing, safety stock, and advancing motor technologies. - Expecting greater demand stability and improved order flow mid-year, supported by emerging growth opportunities and long-term macro trends.

• Geopolitical risks including tariffs and rare-earth magnet sourcing restrictions from China. - Supply chain challenges related to China's export restrictions on high-performance magnets. - Demand volatility in vehicle and industrial markets, and consumer spending caution affecting certain segments.

Q: Greg Palm asked about demand, tariffs, and positioning vs competitors A: Dick Warzala noted positive demand signs, ongoing mitigation of tariffs, and confidence in Allient's position due to global footprint and localization efforts Q: Gerry Sweeney inquired about the vehicle business shift A: Dick Warzala explained shift away from high-investment, commoditized automotive applications to specialty, higher-margin opportunities Q: Orin Hirschman asked about rare-earth elements and recreational vehicles A: Dick Warzala discussed mitigation strategies for rare-earth magnets and the mix of industrial/commercial vs consumer in recreational vehicle business Q: Robert Van Voorhis asked about operating leverage and SG&A A: Dick Warzala mentioned focus on Simplify to Accelerate NOW program and strategic allocation of cash flow