ALLIENT INC

Previous wording

The current geopolitical conflicts, the condition of sovereign finances, and the outcome of the U.S. Presidential election are creating higher levels of economic uncertainty and increased volatility with respect to energy prices, interest rates, our supply chain, and certain customer ordering patterns. We have been closely monitoring the developments and continue to adjust our production platform to react to changing customer ordering patterns and realize efficiencies. The ordering patterns of our aerospace and defense customers have been particularly impacted by changes in sovereign governments priorities and budgets. The impact of the conflicts on our operational and financial performance will depend on future developments that cannot be predicted.

Current wording

The current geopolitical conflicts are creating higher levels of economic uncertainty and increased volatility with respect to energy prices, interest rates, our supply chain (in particular, with respect to changes and proposed changes to tariffs and trade policies), and certain customer ordering patterns. We are closely monitoring the developments and continue to adjust our production platform to react to changing customer ordering patterns and realize efficiencies. The impact of the conflicts on our operational and financial performance will depend on future developments that cannot be predicted.

Previous wording

REVENUES: The decrease in revenues during the third quarter 2024 reflects decreases in each of the target markets, most significantly within Vehicle and Industrial markets. Decreases in revenues compared to the prior year period are largely impacted by elevated shipments during the prior year period as supply chains normalized, combined with elevated inventory levels and slowing demand at our customers which began in the second quarter of 2024 and continued into the current period, partially offset by revenue contributed from the 2023 and 2024 acquisitions. Our revenue for the third quarter of 2024 was comprised of 56% to U.S. customers and 44% to customers primarily in Europe, Canada, and Asia-Pacific. The overall decrease in revenue was primarily due to a 14.3% volume decrease slightly offset by a foreign currency increase of 0.4%. The acquisitions completed in 2023 and 2024 contributed an incremental $10,473 of revenue in the three months ended September 30, 2024. Organic revenue decreased 21.5% during the third quarter 2024.

Current wording

REVENUES: The decrease in revenues during the first quarter 2025 reflects decreases in several target markets, most significantly within Vehicle and Industrial markets, partially offset by increases in Aerospace and Defense. Decreases in revenues compared to the prior year period are largely impacted by elevated shipments during the prior year period as supply chains normalized, combined with elevated inventory levels and slowing demand at our customers which began in the second quarter of 2024 and continued into the current period. Our revenue for the first quarter of 2025 was comprised of 52% to U.S. customers and 47% to customers primarily in Europe, Canada, and Asia-Pacific. The overall decrease in revenue was primarily due to a 8.2% volume decrease and a foreign currency decrease of 1.2%. Organic revenue decreased 9.1% during the first quarter 2025.

Previous wording

ORDER BOOKINGS AND BACKLOG: Bookings decreased in the third quarter 2024 compared to 2023, due primarily to a 34.2% decrease in volume slightly offset by a 0.5% increase in foreign currency impact. The decrease in bookings from the prior year quarter is in large part due to a large $31 million order in the defense market received during the third quarter of 2023, as well as continued impacts of changes in customer order patterns in reacting to elevated inventory levels and customer demand.

Current wording

ORDER BOOKINGS AND BACKLOG: Bookings increased in the first quarter 2025 compared to 2024, due to a 14.1% increase in volume, slightly offset by a 1.2% decrease in foreign currency impact. The increase in bookings from the prior year quarter is reflective of a return to more normalized customer order patterns.

Previous wording

GROSS PROFIT AND GROSS MARGIN: Gross profit decreased to $39,264 in the third quarter of 2024 from $47,498 in the third quarter of 2023 driven by lower sales volume, and gross margins decreased to 31.4% for 2024, compared to 32.7% for 2023. The decrease in gross margin percentage was driven by lower fixed cost absorption on lower sales volumes, as well as the gross margin impact of our most recent acquisition.

Current wording

GROSS PROFIT AND GROSS MARGIN: Gross profit decreased to $42,752 in the first quarter of 2025 from $47,377 in the first quarter of 2024, and gross margins decreased slightly to 32.2% for 2025, compared to 32.3% for 2024. Gross profit and gross margin percentage were impacted unfavorably by lower sales volume, offset partially by improved product mix.

Previous wording

SELLING EXPENSES: Selling expenses increased 5% during the third quarter of 2024 compared to 2023 primarily due to increased costs in connection with our recently completed acquisitions and to the mix of sales with commissions. Selling expenses as a percentage of revenues were 5% and 4% in the three months ended September 30, 2024 and 2023, respectively.

Current wording

SELLING EXPENSES: Selling expenses decreased 5% during the first quarter of 2025 compared to 2024, reflecting cost reduction actions taken as part of our Simplify to Accelerate NOW strategy and lower commissions driven by lower sales volumes. Selling expenses as a percentage of revenues were 5% and 4% in the three months ended March 31, 2025 and 2024, respectively.

Previous wording

GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses decreased 5% during the third quarter 2024 compared to 2023 due primarily to lower incentive compensation as well as cost reduction actions taken reflecting our Simplify to Accelerate NOW strategy. As a percentage of revenues, general and administrative expenses were 11% and 10% in the three months ended September 30, 2024 and 2023, respectively.

Current wording

GENERAL AND ADMINISTRATIVE EXPENSES: General and administrative expenses decreased 4% during the first quarter 2025 compared to 2024 due primarily to lower incentive compensation, as well as cost reduction actions taken reflecting our Simplify to Accelerate NOW strategy. As a percentage of revenues, general and administrative expenses were 10% in each of the three months ended March 31, 2025 and 2024.

Previous wording

ENGINEERING AND DEVELOPMENT EXPENSES: Engineering and development expenses decreased by 15% in the third quarter of 2024 compared to 2023. The decrease reflects the cost reduction actions taken as part of our Simplify to Accelerate NOW strategy. As a percentage of revenues, engineering and development expenses were 7% for each of the three months ended September 30, 2024 and 2023.

Current wording

ENGINEERING AND DEVELOPMENT EXPENSES: Engineering and development expenses decreased by 14% in the first quarter of 2025 compared to 2024. The decrease reflects the cost reduction actions taken as part of our Simplify to Accelerate NOW strategy. As a percentage of revenues, engineering and development expenses were 7% and 8% for the three months ended March 31, 2025 and 2024, respectively.

Previous wording

INTEREST EXPENSE: Interest expense increased in the third quarter of 2024 compared to 2023 due to higher average debt balances and, to a lesser extent, higher interest rates compared to the prior year period. The increase in interest expense is partially offset by reductions to interest expense realized through our interest rate swaps.

Current wording

INTEREST EXPENSE: Interest expense increased in the first quarter of 2025 compared to 2024 due to higher interest rates compared to the prior year period, partially offset by lower average debt balances. The increase in interest expense is partially offset by reductions to interest expense realized through our interest rate swaps.

Previous wording

INCOME TAXES: For the nine months ended September 30, 2024 and 2023, the effective income tax rate was 21.8% and 23.4%, respectively. The effective tax rate for the nine months ended September 30, 2024 includes net discrete tax costs of 1.2%, primarily related to share-based awards, provision to return adjustment, offset partially by the reversal of prior year uncertain tax positions. The effective tax rate for the nine months ended September 30, 2023 includes net discrete tax benefits of (1.5%), primarily related to share-based awards and the reversal of prior year uncertain tax positions.

Current wording

INCOME TAXES: The effective income tax rate was 20.2% and 21.8% for the three months ended March 31, 2025 and 2024, respectively. The effective tax rate for the three months ended March 31, 2025 and 2024 includes net discrete tax benefits of (3.0)% and (2.3)%, respectively, primarily related to the reversal of foreign uncertain tax positions. The Company expects its income tax rate for the full year 2025 to be approximately 21% to 23%.

Previous wording

NET INCOME AND ADJUSTED NET INCOME: Net income decreased during the third quarter of 2024 compared to 2023, primarily relating to lower sales volume, including adecrease in organic revenue, partially offset by a decrease in operating expenses, reflecting the actions in our Simplify to Accelerate NOW strategy. Adjusted net income for the quarters ended September 30, 2024 and 2023 was $5,068 and $9,980, respectively. Adjusted diluted earnings per share for the third quarter of 2024 and 2023 were $0.31 and $0.61, respectively. Adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See information included in “Non–GAAP Measures” below for a discussion of the non-GAAP measure and reconciliation of net income to adjusted net income and diluted earnings per share to adjusted diluted earnings per share.

Current wording

NET INCOME AND ADJUSTED NET INCOME: Net income decreased during the first quarter of 2025 compared to 2024, primarily relating to lower sales volume, including adecrease in organic revenue, partially offset by a decrease in operating expenses, reflecting the actions in our Simplify to Accelerate NOW strategy. Adjusted net income for the quarters ended March 31, 2025 and 2024 was $7,593 and $9,546, respectively. Adjusted diluted earnings per share for the first quarter of 2025 and 2024 were $0.46 and $0.58, respectively. Adjusted net income and adjusted diluted earnings per share are non-GAAP measures. See information included in “Non–GAAP Measures” below for a discussion of the non-GAAP measure and reconciliation of net income to adjusted net income and diluted earnings per share to adjusted diluted earnings per share.

Previous wording

EBITDA AND ADJUSTED EBITDA: EBITDA was $12,595 for the third quarter of 2024 compared to $18,243 for the third quarter of 2023. Adjusted EBITDA was $14,432 and $20,849 for the third quarters of 2024 and 2023, respectively. EBITDA and Adjusted EBITDA are non-GAAP measures. EBITDA consists of income before interest expense, provision for income taxes, and depreciation and amortization. Adjusted EBITDA also excludes stock-based compensation expense, foreign currency gain/loss and certain other items. Refer to information included in “Non-GAAP Measures” below for a discussion of the non-GAAP measure and a reconciliation of net income to EBITDA and Adjusted EBITDA.

Current wording

EBITDA AND ADJUSTED EBITDA: EBITDA was $14,376 for the first quarter of 2025 compared to $18,594 for the first quarter of 2024. Adjusted EBITDA was $17,472 and $20,042 for the first quarters of 2025 and 2024, respectively. EBITDA and Adjusted EBITDA are non-GAAP measures. EBITDA consists of income before interest expense, provision for income taxes, and depreciation and amortization. Adjusted EBITDA also excludes stock-based compensation expense, foreign currency gain/loss and certain other items. Refer to information included in “Non-GAAP Measures” below for a discussion of the non-GAAP measure and a reconciliation of net income to EBITDA and Adjusted EBITDA.

Previous wording

The Company also believes that Adjusted EBITDA provides helpful information about the operating performance of its business. Adjusted EBITDA excludes stock-based compensation expense, as well as 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.

Current wording

The Company also believes that Adjusted EBITDA provides helpful information about the operating performance of its business. Adjusted EBITDA excludes stock-based compensation expense, as well as acquisition and integration-related costs, restructuring and business realignment 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.

Previous wording

The Company’s calculation of organic revenue for the three and nine months ended September 30, 2024 is as follows:

Current wording

The Company’s calculation of organic revenue for the three months ended March 31, 2025 is as follows:

Previous wording

The Company’s calculation of EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 is as follows (in thousands):

Current wording

The Company’s calculation of EBITDA and Adjusted EBITDA for the three months ended March 31, 2025 and 2024 is as follows (in thousands):

Previous wording

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 (in thousands except per share amounts):

Current wording

The Company’s calculation of Adjusted net income and Adjusted diluted earnings per share for the three months ended March 31, 2025 and 2024 is as follows (in thousands except per share amounts):

Previous wording

The Company’s liquidity position as measured by cash and cash equivalents increased by $5,217 to a balance of $37,118 at September 30, 2024 from December 31, 2023.

Current wording

The Company’s liquidity position as measured by cash and cash equivalents increased by $11,651 to a balance of $47,753 at March 31, 2025 from December 31, 2024.

Previous wording

Of the $37,118 of cash and cash equivalents at September 30, 2024, $27,224 was located at our foreign subsidiaries and may be subject to withholding tax if repatriated back to the U.S.

Current wording

Of the $47,753 of cash and cash equivalents at March 31, 2025, $38,087 was located at our foreign subsidiaries and may be subject to withholding tax if repatriated back to the U.S.

Previous wording

During the nine months ended September 30, 2024, the increase in cash provided by operating activities is due to improved cash inflows on collections on accounts receivable, and cash used/provided by inventory, offset by increase in cash used in accounts payable and accrued liabilities, as well as lower net income.

Current wording

During the three months ended March 31, 2025, the increase in cash provided by operating activities is due to improved cash used/provided by inventory and decrease in cash used in accounts payable and accrued liabilities, offset by decrease in cash inflows on collections on accounts receivable and lower net income.

Previous wording

The increase in cash used in investing activities in the nine months ended September 30, 2024 relates to $20 million in cash paid for the acquisition of SNC. For the year to date 2024 and 2023, $6,250 of cash was paid relating to the 2022 Spectrum acquisition. Cash used in investing activities in the nine months ended September 30, 2024 includes $6,903 for purchases of property and equipment compared to $7,850 during the nine months ended September 30, 2023. Capital expenditures are expected to be between $8,000 and $11,000 for the full year 2024.

Current wording

The decrease in cash used in investing activities in the three months ended March 31, 2025 relates to $20,000 in cash paid for the acquisition of SNC, as well as $6,250 of cash paid relating to the 2022 Spectrum acquisition in the first quarter of 2024. Cash used in investing activities in the three months ended March 31, 2025 includes $1,060 for purchases of property and equipment compared to $2,973 during the three months ended March 31, 2024. Capital expenditures are expected to be between $10,000 and $12,000 for the full year 2025.

Previous wording

The increase in cash provided by financing activities during the nine months ended September 30, 2024 is primarily due toborrowings of $20,000 to fund the SNC acquisition. Debt payments of $9,500 were made during the nine months ended September 30, 2023. The $50,000 Notes issued in March 2024 were used to pay down the Revolving Facility. As of September 30, 2024, we had $175,962 of obligations under the Revolving Facility, excluding deferred financing costs.

Current wording

The decrease in cash used/provided by financing activities during the three months ended March 31, 2025 is primarily due toborrowings of $20,000 to fund the SNC acquisition during the first quarter of 2024. Debt payments of $2,110 were made during the three months ended March 31, 2025. The $50,000 Notes issued in March 2024 were used to pay down the Revolving Facility. As of March 31, 2025, we had $166,962 of obligations under the Revolving Facility, excluding deferred financing costs.

Previous wording

As of September 30, 2024, the unused Revolving Facility was $104,038. The amount available to borrow may be limited by our debt and EBITDA levels, which impacts our covenant calculations. The Revolving Facility matures March 1, 2029. The Series A Senior Notes, under the 2024 Note Payable Agreement, are due March 21, 2031.

Current wording

As of March 31, 2025, the unused Revolving Facility was $113,038. The amount available to borrow may be limited by our debt and EBITDA levels, which impacts our covenant calculations. The Revolving Facility matures March 1, 2029. The Series A Senior Notes, under the 2024 Note Payable Agreement, are due March 21, 2031.

Previous wording

The Company declared dividends of $0.09 per share during the nine months ended September 30, 2024 and $0.085 per share during the nine months ended September 30, 2023. The Company’s working capital, capital expenditure and dividend requirements are expected to be funded from cash provided by operations and amounts available under the Amended Credit Agreement.

Current wording

The Company declared dividends of $0.03 per share during each of the three months ended March 31, 2025 and 2024. The Company’s working capital, capital expenditure and dividend requirements are expected to be funded from cash provided by operations and amounts available under the Amended Credit Agreement.

Previous wording

We believe our diverse markets, our strong market position in many of our businesses, and the steps we have taken to strengthen our balance sheet, such as retaining cash to support shorter term needs and amending our revolving credit facility leaves us well-positioned to manage our business. We continually assess our liquidity and cash positions taking geopolitical and other market uncertainties into consideration. Based on our analysis, we believe our existing balances of cash, our currently anticipated operating cash flows, and our available financing under agreements in place will be more than sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months.

Current wording

We believe our diverse markets, our strong market position in many of our businesses, and the steps we have taken to improve operational efficiency and strengthen our balance sheet, such as retaining cash to support shorter term needs and amending our revolving credit facility leaves us well-positioned to manage our business. We continually assess our liquidity and cash positions taking geopolitical and other market uncertainties into consideration. Based on our analysis, we believe our existing balances of cash, our currently anticipated operating cash flows, and our available financing under agreements in place will be more than sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months.