ALLIENT INC (ALNT)·Q4 2015 Earnings Summary

Executive Summary

• Q4 2015 revenue declined 17.9% YoY to $50.8M; diluted EPS fell to $0.07 versus $0.53 in Q4 2014 as Vehicle market push-outs and FX pressure weighed on volumes and margins .
• Adjusted EBITDA contracted to $5.5M from $9.4M YoY; operating income margin fell to 5.0% from 11.0% in Q4 2014; non-GAAP adds back stock comp and business development costs .
• Full-year cash generation remained solid ($20.1M) and net debt was reduced by $14.2M to $47.5M, providing flexibility to pursue solution-based growth and acquisitions (Heidrive closed Jan 2016; revenue to contribute starting Q1 2016) .
• Management expects positive organic growth in 2016 and signs of normalization in Vehicle demand later in the year; bookings/backlog were relatively stable adjusted for FX, with new multi-product wins moving into production .
• Street consensus (S&P Global) for Q4 2015 EPS/revenue was unavailable at time of request; beat/miss vs estimates cannot be assessed. Values from S&P Global were unavailable due to request limits.

What Went Well and What Went Wrong

What Went Well

• Strong cash generation and deleveraging: 2015 cash from operations was $20.1M; net debt fell by $14.2M to $47.5M, improving financial flexibility .
• Strategic momentum in integrated solutions: “Gaining traction with solution-based, integrated offerings,” with continued investment in engineering and development to drive growth .
• Full-year gross margin expansion: FY2015 gross margin improved 20 bps to 29.6% due to mix and efficiency gains via Allied Systematic Tools .
  • CEO quote: “We believe we are successfully demonstrating that Allied Motion is a formidable player in the motion industry… we expect another year of solid progress as we continue to drive the One Allied approach” .

What Went Wrong

• Volume and FX headwinds: Q4 revenue down 17.9% YoY to $50.8M; excluding FX, revenue was $53.2M (-14.0% YoY) as Vehicle market orders were pushed out of Q4 into 2016 .
• Profitability compression: Q4 operating income fell to $2.5M (5.0% margin) from $6.8M (11.0% margin) YoY; net income declined to $0.7M and diluted EPS to $0.07 .
• Adjusted EBITDA deterioration: Q4 Adjusted EBITDA decreased to $5.5M from $9.4M YoY; bookings fell 4.9% YoY to $54.2M, with backlog down to $71.0M from $75.1M (FX-adjusted backlog relatively consistent) .

Financial Results

Sequential Performance (Q2 2015 → Q3 2015 → Q4 2015)

Year-over-Year (Q4 2014 vs Q4 2015)

KPIs and Operating Metrics

Versus Estimates

• S&P Global consensus EPS and revenue for Q4 2015 were unavailable at time of request due to API request limits; therefore, beat/miss versus Street cannot be assessed. Values from S&P Global were unavailable.

Guidance Changes

Note: No specific numeric ranges for revenue, margins, tax rate, or segment guidance were disclosed in Q4 2015 materials .

Earnings Call Themes & Trends

(Transcript not available in repository; MarketScreener hosts the Q4 2015 call transcript.)

Management Commentary

• Strategy and positioning: “We made great progress in 2015 advancing our strategy… to create fully-integrated motion control systems… which can outpace what the competition has to offer” — Dick Warzala, Chairman & CEO .
• 2016 outlook: “We expect another year of solid progress… While some of our end markets will remain challenged, we expect to drive positive organic growth and also benefit from the recent Heidrive acquisition” .
• Vehicle market normalization: “The push-out of demand within our Vehicle market appears to be subsiding… we could potentially see orders return to normal levels later this year” .
• Long-term thesis: “Our expanded global operation provides… a larger platform… We will continue to focus on a combination of organic growth and acquisitions… to design innovative motion solutions that change the game” .

Q&A Highlights

• The Q4 2015 earnings call transcript is hosted externally and not available within our document repository; therefore, specific Q&A themes and clarifications cannot be extracted or verified from primary sources at this time. See MarketScreener transcript link for full Q&A content:

Estimates Context

• Wall Street consensus (S&P Global) estimates for Q4 2015 EPS and revenue were unavailable due to request limits; as a result, a beat/miss assessment versus Street is not possible at this time. Values from S&P Global were unavailable.
• Given reported results (revenue -17.9% YoY; EPS down to $0.07), Street models likely need to reflect ongoing Vehicle demand normalization timing, FX sensitivity, and margin compression in Q4, even as FY cash generation and Heidrive contribution support the 2016 outlook .

Key Takeaways for Investors

• Near-term pressure: Q4 2015 showed significant YoY declines in revenue and EPS, with margin compression tied to Vehicle market push-outs and FX; caution warranted on short-term trading until demand normalizes .
• Cash flow/Balance sheet support: Strong FY cash generation ($20.1M) and net debt reduction ($14.2M) position Allient to invest through-cycle and fund growth initiatives/acquisitions .
• Strategic mix shift: Integrated solutions and efficiency (Allied Systematic Tools) are improving structural margins (FY gross margin +20 bps), underpinning medium-term earnings power .
• Pipeline and backlog: FX-adjusted backlog held relatively consistent; multiple new multi-product solution wins moving into production in 2016 provide visibility despite macro/FX headwinds .
• M&A catalyst: Heidrive adds complementary products, customers, and competencies; expect incremental revenue starting Q1 2016 and strategic benefits across European markets .
• Watch Vehicle end-market: Management sees subsiding push-outs and potential order normalization later in 2016; monitor bookings velocity and backlog conversion for confirmation .
• Estimates caution: Street consensus unavailable; re-basing models to reflect Q4 margin dynamics and FX sensitivity is prudent ahead of 2016 integration and organic growth trajectory. Values from S&P Global were unavailable.