Allied Motion reports 60% operating income growth
Allied Motion Technologies Inc., a designer and manufacturer of precision and specialty controlled motion products and solutions for the global market, reported its second quarter revenue increased 20%, or $24.0 million, to a record $146.8 million and reflected higher demand across most target markets and incremental revenue from acquisitions completed during last year’s second quarter.
“Driving overall margin improvement continues to be an emphasis within Allied and while we did experience a slight contraction in our gross margin, primarily due to mix, our operating leverage improvements delivered record operating income of $12.0 million and a 210 basis point improvement for the quarter," said Chairman and CEO Dick Warzala. "Once again, we delivered record sales and strong organic growth of 17% for the quarter. industrial markets were up 39% over last year’s second quarter, largely driven by industrial automation projects and power quality solutions. Solid demand from our other target market verticals also contributed to our overall sales growth in the quarter.”
He added, “While we have experienced positive improvements in the supply chain, which has helped to reduce our backlogs, we do expect some near-term challenges with macro-economic softness in parts of Europe. For the long term, we still see tremendous opportunities for growth and value creation across our global platform. Ultimately, we have confidence that we can continue to successfully execute our proven strategy well into the future.”
Industrial markets sales were up 39% in the quarter, benefiting from strong end market demand within industrial automation, material and vehicle handling, oil & gas, and HVAC. Aerospace & defense sales increased 11%, which reflected incremental contributions from acquisitions. Sales in the vehicle markets increased 7%, as higher commercial automotive and powersports demand more than offset lower demand within agricultural vehicles. Medical market revenue was up 3% due to higher demand for medical mobility. Sales through the distribution channel increased 17%.
Gross margin was 31.3%, down 110 basis points from the prior-year period as higher volume was more than offset by unfavorable mix and continued raw material pricing increases.
Operating costs and expenses were 23.2% of revenue, down 310 basis points, which reflected the operating leverage obtained from strong revenue growth, including the successful integration of recent acquisitions. As a result, operating income increased 60% to $12.0 million compared with $7.5 million, and as a percent of revenue was 8.2%, up 210 basis points.
Net income increased 48% to $6.8 million, or $0.42 per diluted share, from $4.6 million, or $0.29 per share, in the prior-year period. Adjusted net income, which excludes amortization of intangible assets related to acquisitions, business development costs and other non-recurring items, increased to $9.5 million, or $0.58 per diluted share, compared with adjusted net income of $7.7 million, or $0.48 per diluted share. The effective tax rate was 23.9% in the second quarter of 2023, which reflected discrete tax benefits of 1.6% in the period. The company expects its income tax rate for the full year 2023 to be approximately 24% to 26%. See the attached tables for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share.
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