管理層發言
Greetings, and welcome to the Allient First Quarter Fiscal Year 2026 Financial Results Conference Call. Operator provided instructions. As a note, this conference is being recorded. I would now like to turn the call over to Craig Mychajluk, Investor Relations. Thank you, Craig. You may begin.
Thank you, and good morning, everyone. We certainly appreciate your time today as well as your interest in Allient. On the call today are Dick Warzala, our Chairman, President and CEO; and Jim Michaud, our Chief Financial Officer. Dick and Jim will review our first quarter 2026 results, provide a strategic and operational update and share our outlook. We'll then open the line for your questions. As a reminder, our earnings release and the accompanying slide presentation are available on our website at allient.com. If you're following along, please turn to Slide 2 for our safe harbor statement. During today's call, we will make forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated. These risks and factors are outlined in our SEC filings and in the earnings release. We'll also discuss certain non-GAAP measures, which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release as well as the slides. With that, please turn to Slide 3, and I'll turn it over to Dick to begin. Dick?
Thank you, Craig, and welcome, everyone. We entered 2026 from a much stronger position than we were in a year ago. Over the last several years, we have worked to improve the quality of the business, strengthening the balance sheet, driving structural cost improvements and continuing to reposition the portfolio toward higher-value motion, controls and power applications aligned with attractive long-term growth trends. Our first quarter results reflect continued progress on that strategy with growth in revenue, gross profit, operating income and earnings, along with strong bookings to start the year. What I want to emphasize this morning is that our performance is not simply about putting up another quarter of growth. It is about continuing to improve the profile of the company. That matters as it demonstrates that the operational work we have been doing is translating into better financial performance and stronger positioning as we move through 2026. From an end market standpoint, the market sales mix does have an impact on the overall gross margins generated in the quarter. I would note that regarding the mix, we continue to experience strength from Vehicle in the quarter, particularly in commercial automotive as demand carried over to some extent from the stronger-than-expected activity we discussed on our fourth quarter call. We are very encouraged by our progress in our industrial market, particularly industrial automation and power quality solutions supporting data center infrastructure. These are exactly the kinds of applications we are focusing our efforts on growing. They are aligned with durable sector drivers, they fit our technology strengths, and they tend to be more accretive to margins over time. So when we talk about improving the quality of growth, that is what we mean. We are also continuing to deepen our role as a solutions partner with OEM customers by focusing on higher-value engineered systems and platforms, not just individual components. That approach supports stronger customer engagement, better competitive positioning and importantly, a more favorable margin profile. On the demand side, orders were up 15% year-over-year and up 9% sequentially, resulting in a book-to-bill of 1.14x. This is an important indicator for us as it reflects improving momentum in key end markets and supports a constructive view as we move through the balance of 2026. At the same time, I would also note that the first quarter did not fully reflect the leverage potential of the business. We absorbed elevated operating costs, including carryover expenses associated from the Dothan transition, along with other targeted investments to support ongoing operations. While the Dothan transition represents a near-term cost headwind, the actions underway will simplify operations, improve quality and efficiency and enhance long-term profitability. This reflects our Simplify to Accelerate NOW initiatives, or STAN for short, in action from an operational standpoint. Less visible but equally important are the significant internal investments we are making in our core business, particularly in R&D and product development. Our objective is to strengthen our electronic stack, further leverage our electromagnetic technologies to address high-growth market opportunities and expand the use of our lightweighting capabilities to create a durable competitive advantage for both Allient and our customers. Our recent technology acquisitions have created a strong technology base, and we are now aligning them more tightly with our core business to capture the benefits of scale and compounding. This further demonstrates STAN in action as we reposition the company for sustained future success. One example is our initiative to bring state-of-the-art Allient intelligent controls products to market as quickly as possible. To enable this, we made a deliberate shift within one of our technology units, moving away from project-based one-time revenue opportunities towards scalable market-facing products aligned with our long-term strategy. While this decision resulted in a near-term reduction in revenue and profitability, we are confident the long-term value creation will be significantly greater. This reflects our willingness to bet on ourselves and make disciplined choices that drive enduring success. Another example is our effort to accelerate development of a full range of new motors and controls for the defense market. Historically, an initiative of this scope would have taken years. At Allient, we are compressing that timeline into months. To accomplish this, we are leveraging the expertise from another one of our recent acquisitions to lead the development, supported by existing technology units with proven ability to scale production. Again, this is STAN in action with a focus on speed, simplifying execution by concentrating resources within the highly experienced team that has delivered similar outcomes before. Using a sports analogy, we simplified the process by shortening the bench to utilize a highly experienced team that has been there and done it before. So stepping back, the first quarter was a solid start to the year. Bookings were strong. Our targeted growth areas remained healthy. We made significant investments in our platform development and the business continued to move in the right direction from a product portfolio, operational and a financial standpoint. While the environment is still not uniform across every market, we believe the portfolio is better aligned, the company is operating more efficiently, and we are positioned to keep building from here. With that, let me turn it over to Jim for an in-depth review of the financials.
Thank you, Dick, and good morning, everyone. Turning to Slide 4. First quarter revenue increased 5% to $138.9 million. On a constant currency basis, revenue grew 1% organically. Foreign currency translation provided a favorable impact of $5.1 million in the quarter. 50% of our Q1 revenue was generated in the U.S., with the balance coming primarily from Europe, Canada and Asia Pacific, consistent with our diversified geographic footprint. Looking at performance by major vertical, Industrial was again the primary growth engine, up 8% year-over-year, reflecting continued strength in industrial automation and in power quality solutions supporting data center infrastructure. Those applications remain particularly healthy and are aligned with secular trends in electrification, digital infrastructure and energy efficiency. Vehicle revenue increased 7% in the quarter, driven primarily by higher demand in commercial automotive. Medical revenue increased 2% with steady demand in surgical robotics and other precision motor applications, partially offset by softness in medical mobility. Aerospace and Defense declined 3%, as expected, driven by program timing and the previously announced M10 book of program cancellation rather than underlying pipeline weakness. Distribution, while a smaller part of the business portfolio, was down, reflecting normal variability in channel ordering patterns. The key takeaway from this slide is that we saw a broad participation across the portfolio with particular strength in Industrial and Vehicle and a mix of steady and timing-driven dynamics in the other end markets. Turning to Slide 5. We show the composition of revenue over the trailing 12 months and the year-over-year change by market. This slide reinforces how the business has evolved and why the mix matters for the margin and earnings durability we have been delivering. Industrial remains our largest vertical at roughly half of the trailing 12-month revenue and are increasingly anchored by higher-value applications, power quality for data center infrastructure, motion and controls tied to automation and solutions aligned with electrification. That's exactly where we've been directing engineering resources and capital. Vehicle represents about 18% of the trailing 12 months' revenue. While still an important part of the business, it is a smaller percentage of mix than it was several years ago. That's both market-driven and intentional as we have consciously shifted away from lower margin, more commoditized programs towards higher-value applications where our technology and systems content can support better returns. Medical remained steady at roughly 15% of revenue. Surgical instrument and other precision motion applications continue to be reliable contributors. Aerospace and Defense also represents roughly mid-teens of the mix and provides longer cycle visibility, even though quarterly shipments can be lumpy as programs ramp and pause. So the mix today is more margin accretive and more tightly aligned with long-term secular drivers than it was just a few years ago, and that mix shift is a key underpinning of our structural margin expansion. On Slide 6, we highlight gross profit and margin trends. First quarter gross margin expanded 50 basis points year-over-year to 32.7% on gross profit of $45.4 million. The improvement was driven by higher sales volume, improved product mix and continued operational benefits from our Simplify to Accelerate NOW initiative. The structural work we've done over the last several years and continue to undertake — consolidating overlapping operations, focusing resources where we have scale and advantage and driving lean disciplines — are being realized in our performance. Those actions are embedded in our manufacturing and supply chain processes and provide a more durable foundation as demand continues to move through their normal cycles despite experiencing more pressure from the evolving tariff policy. So while quarterly margins will always reflect some mix variability, the broader message is consistent. We are structurally improving the profitability of the business, and we continue to see opportunity to build on that over time. During the fourth quarter, U.S. trade policy underwent more changes. The Supreme Court determined that tariffs previously imposed under the International Emergency and Economic Powers Act, otherwise known as IEEPA, were not authorized and are subject to refund. While U.S. Customs has initiated an administrative process to facilitate the submission and payment of refund claims through a phased approach, we are currently evaluating our eligibility to recover previously paid tariffs and intend to submit refund claims after our review. The ultimate amount and timing of any such refunds remain uncertain and depend, among other factors, on processing timelines, claims validation and any unexpected administrative challenges that may come about. In addition, incremental tariffs were imposed on a broad range of products that are expected to expire in July unless extended or replaced through other legislative action. We have taken and continue to assess actions to mitigate these changes, including price adjustments, supplier negotiations and supply chain diversification. While we do not believe these increases have had a material impact to our operating performance to date, we are monitoring the evolution of the trade policy and the pressure it may have on margins should current measures stay in effect for an extended period or be expanded. Turning to Slide 7. Operating income increased to $9.3 million in the quarter or 6.7% of revenue. We delivered 10 basis points of operating margin expansion year-over-year even as certain cost items were elevated in the quarter. SG&A expense was 16.1% of sales, up 120 basis points year-over-year, primarily due to higher commissions and incentive compensation on stronger sales volume, increased trade show and commercial activity and elevated IT-related costs, including cloud-based subscription costs and infrastructure. We view those as investments to support growth and productivity. Restructuring and business realignment costs remain elevated as we continue to execute the Dothan transition and related optimization actions. We expect total restructuring and realignment costs of approximately $2 million to $3 million for the full year 2026. That's consistent with finishing the work that is already underway and completing additional changes that we expect to undertake. The way to summarize this slide is that we continue to expand operating margin year-over-year, even while absorbing near-term costs tied to Dothan and certain commercial and IT investments, and we are doing so from a structurally improved base. On Slide 8, you can see how the margin expansion translated into earnings. Net income increased 51% to $5.4 million or $0.32 per diluted share compared with $0.21 per diluted share in the prior period. Adjusted net income was $8.4 million or $0.50 per diluted share compared with $0.46 per share a year ago. Adjusted EBITDA was $17.3 million in the quarter or 12.4% of revenue, slightly below the prior period as elevated SG&A costs weighed on adjusted EBITDA even as the underlying margin structure continued to improve. Interest expense declined $1 million to $2.6 million, primarily due to lower average debt balance as we continue to delever. Our effective income tax rate for the quarter was 21%, and we continue to expect a full year tax rate in the 21% to 23% range. The key takeaway is that bottom line performance continues to benefit from a stronger operating model and a lower interest burden as leverage comes down. Moving to Slide 9. We focus on cash flow, working capital and capital deployment. Net cash provided by operating activities was $6.2 million in the quarter compared to $13.9 million in the prior period. The decrease was primarily driven due to timing differences and larger incentive payouts rather than underlying business performance; specifically, certain customer payments that typically would have been received prior to quarter end were collected shortly after the period close. We continue to prioritize inventory discipline while making strategic purchases to mitigate impacts to the ever-evolving trade policy. As such, inventory was modestly higher quarter-over-quarter. We've improved turns compared to where we were just two years ago, and our goal is to keep driving better performance over time. Days sales outstanding were roughly 61 days in the quarter compared with about 57 days for the full year 2025, and we expect some normalization as we move through the year. Capital expenditures in the quarter were $2.2 million. We are investing in capacity and productivity, notably in the areas tied to data center-related power quality, automation and other growth initiatives. For full year 2026, we expect CapEx of approximately $12 million to $15 million. Overall, Slide 9 is about staying disciplined, managing working capital, funding targeted growth and efficiency investments and supporting our deleveraging priority. Turning to Slide 10. Our balance sheet is in a stronger position than it was a year ago, and that matters for how we can support growth and navigate the external environment. At March 31, cash and cash equivalents were $41.2 million. Total debt was $177.3 million and net debt declined to $136.1 million. Total debt was down $3.1 million during the quarter, and our leverage ratio, defined as total net debt divided by trailing 12-month adjusted EBITDA, improved to 1.78x and is down significantly from where we were a couple of years ago. The bank leverage ratio as defined under our credit agreement and excluding foreign cash and certain other adjustments was 2.24x at quarter end, comfortably within covenant levels. We also had $158 million of unused capacity under our revolving credit facility, providing additional liquidity. So the story of Slide 10 is straightforward. Lower debt reduces financial risk and interest expense over time, and it also gives us more flexibility to support organic growth, new program launches and disciplined capital allocation from a stronger position. With that, if you advance to Slide 11, I will now turn the call back over to Dick.
Thank you, Jim. What we are seeing on the order side is encouraging and, in our view, reinforces the progress we are making in the business. First quarter orders were $158.1 million, an increase of 15% year-over-year and 9% sequentially. That produced a book-to-bill ratio of 1.14x, which is an important sign of positive momentum as we move further into the year. The strength was led primarily by Industrial and Vehicle. As we discussed earlier, Vehicle was supportive in the quarter, particularly in commercial automotive, and we did see some continuation of the stronger activity that emerged late in 2025. Industrial has continued its strength, especially industrial automation and power quality solutions supporting data center infrastructure, which are strategic growth areas for the company and attractive from a margin standpoint. We are also seeing steady underlying activity in Medical and Defense, even as individual programs may ramp and pause at different times. That diversification matters. It allows us to navigate variability in any one vertical while still building the overall business. Backlog ended the quarter at $251 million, up from year-end, and the majority of that backlog is expected to convert to revenue in three to five months, which is consistent with our historical conversion patterns. So we look at orders and backlog together, and we believe they support a constructive view of the business as we move through the balance of the year. More broadly, this is consistent with what we have been saying for some time. We continue to align the business around the markets, customers and applications where we believe we can create the most value, not just in terms of revenue, but in terms of mix, margin quality and long-term durability. The bookings profile we saw in the quarter is another sign that this repositioning is gaining traction. Turning to Slide 12. I would frame the outlook in a straightforward way. First, we believe we are positioned to build on the momentum we saw in the first quarter. Bookings were strong, backlog improved and our targeted growth areas remained healthy. Industrial automation and data center infrastructure continue to align the portfolio with attractive end markets, and we remain focused on deepening our role as a solutions partner through higher-value engineered systems and platforms for defense and medical applications where our technologies are tightly aligned with customer needs. Second, we are going to remain disciplined. We will keep emphasizing cash generation, disciplined capital spending and further deleveraging because that combination has clearly strengthened our financial position over the last several years. We worked hard to build a stronger balance sheet, improve the cost structure and operate the business more efficiently, and that work is continuing. Simplify to Accelerate NOW and our broader optimization efforts are not one-time initiatives. They are part of an ongoing effort to simplify the organization, improve throughput, eliminate waste, reduce cost and strengthen profitability over time. We still have work to do, including completing the Dothan transition and finishing the remaining structural actions that will continue to improve our gross and operating margin profile. Third, while we are constructive, we are also realistic. The macro environment is still uneven across certain end markets and geographies. Customer spending can move in phases and trade and policy remain part of the broader backdrop. We are monitoring these developments closely. And at the same time, we have taken proactive steps over the last several years to diversify our supply base, localize sourcing where appropriate and manage exposure through pricing and operational actions. What gives us confidence is what we control. Our cost structure is structurally better than it was a few years ago. Our capital allocation is disciplined. Our balance sheet is stronger. And through the internal investments we have been making, our portfolio is increasingly aligned around long-term secular drivers where Allient can add differentiated value, including electrification, automation, energy efficiency, increased defense spending and digital infrastructure. These are not short-cycle themes. They represent fundamental shifts in how energy is generated and used, how systems are automated and how critical infrastructure is designed and built. Our motion, controls and power technologies, combined with our systems-level engineering capabilities position us well to support those transitions. I would also like to note that we increased our dividend. This represents the confidence we have in our future and provides a return to our investors. Quarter 1 demonstrated that the foundation we have built is working. Our job now is to continue simplifying the organization, driving out cost, supporting our customers and investing in the right programs and capabilities so that we can convert that foundation to sustainable, high-quality growth and value creation over time. I view us as being in the early to mid earnings innings of our journey and STAN is key to our success as we move forward. It provides us a framework to execute our strategy and leverage our AST toolkit. Most importantly, though, it is the outstanding team here at Allient that truly makes it happen. With that, operator, please open the line for questions.
分析師問答
Operator provided instructions. Our first question is from the line of Gerard Sweeney with ROTH Capital Partners.
I wanted to start on the A&D side. Obviously, you highlighted and we knew about some headwinds, especially around the M10 Booker program, but also a lot of news out there in terms of replenishing certain munitions, et cetera, and some of our more high-end equipment per se. I was just curious as to how you play into that opportunity and what you're hearing from maybe some of the — in the background on opportunities as we go forward on that front?
Sure. Everything you're hearing about the replenishment that will be occurring is accurate; it has to occur. There's been a huge consumption of some Defense products that need to be replenished, and we are seeing progress in those areas. We had a very strong bookings first quarter. We've come out even stronger in April already. Now typically, we don't give forecast and guidance, but this is the actual. April has started out extremely strong, and we see continued progress in the areas that you've been discussing.
Got it. The other area that I think is an opportunity I wanted to discuss a little bit more is data centers. And I know it's a topic for sure, and it's come up everywhere. But especially power quality, which I think we play an important role in. And one of the aspects we're looking at is dollars are really starting to hit the ground in data centers, right? On the front end, you're seeing some huge upticks in backlog, especially on the construction companies. Obviously, Allient is a little bit later in this process because after the initial build-out. But how does this play out in an opportunity? Because if you think about it, AI started three years ago, it takes two years to build a data center, '25 investment is much larger than '24, '24 much larger than '23. So it would imply that there is a burgeoning opportunity for you in the next couple of years. I just want to get your thoughts on that front.
One hundred percent correct. It is part of the growth that we're seeing. It's part of the strength that we're seeing in our bookings and it did have an impact on our growth last year, and we think it will continue to grow and be more significant as we move forward this year and into the following years. So you're absolutely correct. It is happening. We are seeing it converted into orders and backlog. Another encouraging sign is that customers are looking for acceleration of delivery, which creates both opportunity and capacity challenges. We made investments in advance: acquiring a company in Oshkosh that had production capability in Mexico that we've been able to leverage and also an expansion of our facility in Milwaukee. Those investments are playing into these markets. We have made our investments in advance of the increasing demand, and we're prepared to deliver to it. We are seeing the positive benefits and impacts of that.
And one more question on that front. Would you be involved only in new builds? Or is there a retrofit opportunity?
That's a great question. I can't answer it with 100% confidence, but if the retrofit is intended to improve performance or throughput of existing data centers, they will need equipment like ours. If customers pursue retrofits to take advantage of current technology, they will likely leverage our products. We'll monitor developments and pursue retrofit opportunities where the business case fits.
Yes. I'm not sure either, to be honest with you. I've just been hearing more that some existing data centers are being retrofitted. That's just in the last couple of days.
Yes, it makes sense. You have the infrastructure there and you want to take advantage of current technology. If customers move in that direction, they'll likely use our equipment, and we'll evaluate each opportunity.
Our next question is from the line of Maxwell Michaelis with Lake Street Capital Markets.
First one for me, I want to go back to A&D. It sounds like you're seeing a lot of positive momentum here in Q2. I was curious to know if you're seeing a lot of that activity around drones or if it's just kind of a broad-based strength in the Defense space?
There is significant interest in drones, and we take it seriously. We feel we're in a great position. In past calls, we've talked about our capabilities and motors used in propulsion and the requirement that certain products convert to U.S.-made components for U.S. defense applications. We are well positioned to take advantage of that. Historically, we've been in high-end, more sophisticated drone applications beyond basic propulsion. We see opportunity in propulsion as well, given our experience with motor types and our ability to scale production. Having made millions of motors a year in other businesses, we can convert from design to full-scale production. We're leveraging one of our newer acquisitions for technology and design leadership combined with existing operations that know how to scale. That's what's required in the market, and we've been working to position ourselves to take advantage of it. We're making investments and moving very quickly.
Perfect. Now a couple more for me here. Secondly, you noted vehicle was strong as well in orders in Q1. Just curious to know if you're kind of turning away any sort of low-margin vehicle orders or if you're just accepting all now?
Great question. Vehicle encompasses more than just automotive; commercial automotive and other vehicle markets have been strong. Many of the opportunities we pursue are custom applications with better margin profiles. We've improved processes and added automation. We are not pursuing massive new low-margin commercial automotive programs where the primary competitive factor is price and the upfront CapEx and long design-in cycles create unattractive returns. We've shifted away from those long-term, high CapEx, high-risk programs. We're leveraging existing designs and capital equipment and focusing on higher-value applications where our technology and systems content support better returns. That is part of how we've improved operating margins.
Our next question comes from the line of Greg Palm with Craig-Hallum.
Can you maybe quantify some of these facility transition costs that you alluded to? I don't know how much that was in Q1, whether it gets better or worse in Q2. And just to be clear, is it sort of fully abate by second half? Anything lingering that we should be aware of?
Great question. In transitions there are always unknowns. Programs moved require customer support and requalification, so you can't simply move everything and be done. We're moving to a higher mix business, which adds complexity. In retrospect, could we have identified some of these challenges earlier? Yes. But we're correcting them and moving fast. We expect to drive out the costs we anticipated and improve efficiencies, and we will start to see the benefits in the second half of the year. We're stabilizing and working on the Dothan transition, and we expect that by the end of the third quarter it will be in a good place.
Yes. As we mentioned during the call, we expect to make some incremental investments of approximately $2 million to $3 million over the course of 2026. I would expect the second half of the year to show more concentration of that impact as we stabilize the transition with Dothan. Hopefully, by the end of the third quarter, that will be in a good place relative to our expectations.
Okay. Makes sense. Shifting gears to the bookings, which I think was an all-time record. Obviously, it stood out both on an absolute basis and year-over-year growth. I think you mentioned Vehicle, Industrial. Can you give us some sense, were there specific categories within that that drove it? And then in response to an earlier question, you talked about April trends. Was that specific to Defense? Or was that across the board? I didn't catch that comment.
In the first quarter we saw strength across the board, with significance in the key drivers we mentioned — Industrial and Vehicle. Jerry asked about defense replenishment; we did benefit from that and expect more. Regarding how we record bookings, if we have a firm production schedule for a multi-year commitment, historically we recorded the program-level booking at once. We've changed to be more conservative and book based on firm short-term schedules. Previously, we sometimes booked full program amounts based on forecast demand which then experienced pushouts. Starting the beginning of the year, we're booking on a shorter, more current basis — typically booking three to five months out (I should clarify three to six months) rather than the full program. That change makes our recorded bookings more conservative and current. If we had recorded some of the programs on a full-year basis as in the past, bookings could have been significantly higher. We are seeing bookings come in from defense and data center markets in Q1 and also strengthening into the second quarter. The business is strong and healthy; orders are coming and will continue to come, supporting improvement for the full year and beyond.
Okay. So just to be clear, bookings were up 15% on a year-over-year basis. So they were very strong. But you're saying they were actually understated because of this change in booking methodology you alluded to?
Yes. If we had recorded certain orders on a full-program basis as we have in the past, the bookings could have been significantly higher. We decided to be more conservative and book based on current, firm schedules in the nearer term, which results in a more level-loaded and realistic representation of demand.
Okay. Understood. So I guess my last question then, just in light of your comments, I mean I don't think 1% organic growth on a constant currency basis, which is what you reported in Q1, is necessarily a good representation of how you might view the year. I know you don't guide for the full year, but maybe would just appreciate any comments related to that?
I would agree with you. We are on a path to exceed that. Also remember that the fourth quarter had some pull-aheads which impacted what was available to ship in the first quarter. That created a balancing effect. When looking quarter to quarter, it might not fully convey the longer-term improvement occurring. We see positive growth trends when viewed over a longer horizon.
Our next question comes from the line of Tomohiko Sano with JPMorgan.
Could you talk about operating margins? That was 6.7% in Q1. But excluding one-time items and considering the impacts of the Simplify to Accelerate NOW program, what would you estimate as the underlying or normalized margin levels? Additionally, if you could talk about some operating margin outlook from Q2 onward, it would be appreciated.
Good question, Tomo. As we discussed, we're making investments in research and development and new product development to bring products to market faster. We expect continued strategic investments throughout the year to enable that. We also continue streamlining the business and completing the Dothan transition while seeking duplication reduction opportunities. Our Simplify to Accelerate NOW initiatives are embedded in the organization and are supporting ongoing margin improvement. That said, we will see some continued investment near-term as we execute strategy, and I would expect to see more of the benefits from simplification and Dothan optimization show up later in the year, particularly in the second half.
If I may follow up on the vehicle in terms of the order trends or revenue, that was a bit surprisingly solid. So Dick, if you could talk about the 8% plus commercial automotive and construction strength offset by the lower powersports and truck demand? How should we look at these customers' order trends over the next couple of quarters?
I think they will continue. We don't see signs this was unusual. We've seen a return to growth in some non-automotive vehicle markets, which is positive. Those applications are typically specialty used in trucks, buses, construction equipment and so forth. The powersports market has been a drain, moving toward more commoditized commercial automotive offerings. We've experienced competition from the automotive side in the past, but the quantities don't necessarily support it long-term. We're focused on providing more integrated total solutions versus commodity components. We realigned the business and are undertaking moves that cause near-term transition costs but will pay dividends long-term. Our internal targets reflect differing margin profiles by market, and we're structuring each business to generate operating profit and control variable costs. Vehicle specialty applications are getting better and stronger; we're leveraging existing designs and capital equipment and are willing to take on more of those opportunities, but not long-term, low-margin, high CapEx projects.
This does conclude our question-and-answer session. I'd like to turn the floor back over to management for closing comments.
Well, thank you, everyone, for joining us on today's call and for your interest in Allient. We will be participating in the Craig-Hallum Investor Conference in Minneapolis on May 28, and then the Virtual Northland Growth Conference on June 23. As always, please feel free to reach out to us at any time, and we look forward to talking to you all again after our second quarter 2026 results. Have a great day.
This concludes today's teleconference. Thank you very much for your participation. Please disconnect your lines, and have a wonderful day.