管理層發言
Greetings, and welcome to the Allient Inc. Second Quarter Fiscal Year 2026 Financial Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Craig Mychajluk, Investor Relations. Thank you. Please go ahead.
Yes. 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 second quarter 2026 results, provide a strategic and operational update and share our outlook. We'll then open the line for questions. As a reminder, our earnings release and the accompanying slide presentation are available on our website at allient.com. If following along, please turn to Slide 2 for our safe harbor statement. During today's call, we may 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 will 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.
Thank you, Craig, and welcome, everyone. We delivered an excellent second quarter and, more importantly, one that further demonstrates the earning power of the model when stronger demand, improved mix and disciplined execution come together. The quality of the quarter was evident across the P&L with strong top line growth, record gross margin and a significant increase in earnings. We also saw excellent order activity with record bookings in the quarter and in the period that resulted in a 1.31x book-to-bill ratio. That gives us improved visibility into the second half of the year and supports a constructive view as we move through 2026. What stands out is not just the magnitude of the quarterly improvement, but the quality of it. We saw broad-based demand across key targeted markets, especially industrial automation, data center and other infrastructure, Aerospace & Defense and Medical applications. At the same time, the operating work we have been doing throughout the organization is increasingly showing up in better margins, better leverage and better earnings conversion. This quarter also reinforces the value of the portfolio we have been shaping. We have intentionally positioned Allient toward higher-value motion, controls and power applications where our engineering content is deeper, our customer relationships are stronger and the margin profile is more attractive over time. That strategy is helping us improve not only growth, but also the quality and durability of that growth. If you look at the end market mix, the portfolio continues to align well with long-term secular drivers. Industrial remains an area of particular encouragement for us, especially where our technologies support automation, electrification, energy efficiency and digital infrastructure. Those are markets where we believe our capabilities are differentiated and where the opportunities continue to expand. Data center and other infrastructure have become an increasingly meaningful contributor within our Industrial business. As we indicated previously, we plan to provide investors with more visibility into this market given its growth profile and strategic importance to the portfolio. In the second quarter, sales tied to data center and infrastructure applications were $16.3 million or 10.6% of total revenue, up 60% from the prior year period. On a trailing 12-month basis, sales were $57.1 million or 9.9% of total sales, up 69% year-over-year. This opportunity is centered on the power quality layer of the data center, where our Allient Power portfolio brings deep domain expertise. Through active and passive harmonic filters, line reactors and related solutions, we help customers reduce harmonics, stabilize and clean the electrical waveform and meet stringent power quality standards, including IEEE 519 compliance. The result is more reliable and efficient power for increasingly compute-dense data center environments, stronger protection for critical equipment and a strong fit with the challenges operators face as AI and other high-power applications increase load and complexity. So stepping back, the second quarter was about more than just strong reported results. It was another proof point that the actions we have taken to reposition the company, simplify the organization and drive better execution are translating into stronger financial performance and a more resilient operating model. Turning to Slide 4, I want to spend a moment on Simplify to Accelerate NOW, or STAN, because it is an important part of why the organization is performing better. STAN is driving better decision-making, execution, margin and responsiveness. But the key point is that it is not a single initiative or short-term program. It is a company-wide mindset that shapes how we think, make decisions, solve problems, collaborate across teams and serve customers every day. In simple terms, STAN is how we work. At its core, STAN is designed to unleash more of the organization's potential by empowering our teams to act with urgency, ownership and accountability. The now in STAN matters. It reinforces a get-it-done mentality, removing obstacles, moving forward and delivering results faster rather than waiting for things to happen. It is also supported by a practical tool set. That includes our Allient Systematic Tools, or AST, which helps standardize, simplify and continuously improve how we work. It also includes digital and IT tools that reduce manual processes and redundancy as well as AI and other enabling technologies where they can improve decision-making, productivity and execution. What matters most, though, is the result. In the second quarter, operational improvements under STAN contributed to record gross margin through better mix, execution and cost discipline. We are seeing faster decision-making, stronger accountability and better responsiveness across the company, and those improvements are helping create a more scalable and more profitable operating model. The annualized savings figures on the slide, $10 million in 2024 and $6 million in 2025, are a reflection of this broader effort. But I want to emphasize that STAN is bigger than cost takeout. It is about building a culture that continuously improves the business and positions Allient to move faster and serve customers better over time. So when we talked about improved margin, better leverage and stronger earnings power, STAN is one of the foundational reasons that it is happening. With that, let me turn it over to Jim for a more in-depth review of the financials.
Thank you, Dick, and good morning, everyone. Please turn to Slide 5. Revenue increased 10% year-over-year to $153.8 million. On a constant currency basis, revenue grew 9% organically with foreign currency translation providing a favorable tailwind of approximately $1.3 million in the quarter. Fifty-four percent of second quarter sales were to U.S. customers with the balance primarily in Europe, Canada and Asia Pacific, continuing to reflect the benefit of our diversified geographic footprint. Looking at the verticals, Industrial revenue increased 17%, driven by continued strength in industrial automation and power quality solutions supporting data center infrastructure. Aerospace & Defense increased 16%, reflecting strong defense-related demand and program activity. And notably, that growth came despite the previously announced M10 Booker program cancellation. Medical increased 9% on broad-based demand, including surgical robotics and other precision motion applications. The Vehicle market declined 7% due primarily to lower powersports demand. Overall, this slide reinforces both the breadth of demand in the quarter and the continued alignment of the portfolio with higher-value applications. Turning to Slide 6. The trailing 12-month market mix continues to support a more resilient and more margin-accretive business profile. Industrial represented 49% of trailing 12-month revenue at the end of the second quarter, up from 47% a year ago, while Medical remained steady at 15%, Vehicle was 17%, Aerospace & Defense was 15% and Distribution was 4%. The bigger takeaway here is that the portfolio is increasingly aligned around attractive growth verticals and higher-value applications, including motion and controls tied to automation, power quality for data center infrastructure, precision medical applications and defense-related programs. That mix matters because it supports both growth and profitability. That also helps explain why we continue to see structural improvement in the business as we move forward. Please turn to Slide 7. Gross margin expanded 170 basis points year-over-year to a record 34.9% in the quarter, with gross profit increasing to $53.6 million. The primary drivers were higher volume, favorable mix and operational gains tied to STAN, lean tools and broader productivity initiatives. We have said the margin opportunity at Allient is structural, and this quarter is a good example of that. The simplification of work, lean disciplines, footprint actions and productivity improvements across the business are creating a more scalable margin profile, and that gives us confidence the progress is durable over time. Mix also played an important role in the quarter and mix can be lumpy. So while we are encouraged by the gross margin performance, we would expect some quarter-to-quarter variability as those structural gains continue to build. On the tariff front, the team also continued to do a very good job mitigating exposure. Across the last year, we have taken a disciplined approach that includes pricing actions where appropriate, supplier negotiations, strategic buys, sourcing adjustments and broader supply chain diversification. Those actions helped keep tariff-related pressure from becoming a more significant drag on performance. With respect to the IEEPA-related tariff refunds, the company has submitted or expects to submit claims for refunds of approximately $1.3 million. Due to uncertainties regarding the timing and ultimate amount of any recovery, no receivable has been recorded as of the end of the quarter. Turning to Slide 8. Operating income increased to $15.6 million from $11.7 million in the prior period, and operating margin improved to 10.2% from 8.4%. While that is not an all-time record for the company, it is the highest operating margin level in roughly a decade. Operating costs were 24.7% of revenue, improving 10 basis points year-over-year despite higher commissions, incentive compensation and growth-related spending. Restructuring and business realignment costs were $600,000 in the quarter, down from the prior year, but remain elevated due to costs associated with the Dothan transition. We continue to expect restructuring and realignment costs of approximately $2 million to $3 million for the full year 2026. So the message on this slide is that we are seeing the leverage benefits of a stronger operating model while still funding the business appropriately and continuing to work through remaining transition-related costs. Please turn to Slide 9. Earnings growth accelerated meaningfully in the quarter as the margin improvements flowed through the P&L and lower interest expense provided an additional tailwind. Net income increased 85% to $10.4 million or $0.61 per diluted share. Adjusted net income increased 42% to $13.5 million or $0.80 per diluted share, and adjusted EBITDA increased 18% to $23.7 million or 15.4% of revenue. Interest expense declined by approximately $1 million year-over-year to $2.5 million due to the lower average debt balance. The effective tax rate was 20.2% for the quarter. We continue to expect a full year tax rate in the range of 21% to 23%. The bottom line takeaway is straightforward. Stronger mix, higher gross margin, improved operating leverage and lower interest expense combined to produce substantially stronger earnings. Moving to Slide 10. Net cash provided by operating activities was $14 million in the quarter and $20 million for the first six months of the year. The year-over-year change in operating cash flow primarily reflects accounts receivable timing and investments in inventory to support our rapid growth and strategic buys of critical materials. Inventory turnover was 3.1x compared to 3.2x for the full year 2025. We continue to focus on inventory discipline, strengthening working capital management and taking out cost while also making disciplined investments to support growth and protect the supply chain where appropriate. The broader point is that the working capital profile reflects both growth and intentional actions. We have been willing to make selective inventory investments where that supports customer service and helps mitigate supply and tariff-related uncertainty while still keeping a sharp focus on cash conversion over time. Capital expenditures were $7.1 million for the first six months of 2026. We are investing in capacity and productivity, notably in areas tied to data center-related power quality, automation and other growth initiatives. For full year 2026, we expect capital expenses of approximately $12 million to $15 million. Please turn to Slide 11. Continued deleveraging remains an important part of the financial story. Total debt ended the quarter at $173.3 million, down $7.1 million since year-end 2025. Net debt was $131.2 million. Leverage improved to 1.63x and the bank leverage ratio improved to 2.07x, which is defined under our credit agreement and excludes foreign cash and certain other adjustments. We also ended the quarter with approximately $42 million of cash and $162 million of unused revolver capacity. This continues to strengthen our financial flexibility. A stronger balance sheet lowers interest expense, supports disciplined investment in the business and provides capacity to pursue value-creating opportunities while remaining well within our covenant requirements. With that, if you advance to Slide 12, I will now turn the call back over to Dick.
Thank you, Jim. Orders increased 49% year-over-year and 27% sequentially to a record $201.3 million, resulting in a book-to-bill ratio of 1.31x. Backlog ended the quarter at $298 million, and most of that backlog is expected to convert to revenue within three to nine months, which is consistent with our historical conversion patterns. That order strength was led by Industrial and Aerospace & Defense, and it gives us improved visibility into the second half of 2026. So when we put together the strong second quarter results, the continued margin progress and the strength in orders and backlog, we believe the company is entering the back half of the year with solid momentum. As we look ahead, the message is that Allient is executing with discipline while continuing to position the business for growth. First, our portfolio remains aligned with attractive growth verticals, including industrial automation, data center and other infrastructure, Aerospace & Defense programs and Medical applications. These are areas where customer demand remains healthy and where our technologies and engineering capabilities can create differentiated value. We also continue to make encouraging progress in the drone and unmanned systems market. While this is not a major revenue driver for us today, we do see a meaningful opportunity to expand our presence over time, and we are making strong strides in building a viable off-the-shelf offering for commercial and defense-oriented applications. We expect that portfolio to continue taking shape during the second half of this year. This builds on capabilities we have already discussed publicly, including COTS propulsion motors and the broader expansion of our motion control and power solutions for unmanned applications. Second, the company is operating with more discipline and better responsiveness. STAN and our broader optimization actions continue to support margin expansion, and we remain focused on cash generation, disciplined capital spending and continued deleveraging. Those are not temporary initiatives. They are central to how we are running the business and improving the quality of our financial performance. Third, we believe the company is positioned for continued growth. Stronger demand, record orders and increased backlog support improved visibility, and we are building momentum with improving earnings power. While the macro and trade environment remains dynamic, our diversified end markets, global operations and proactive mitigation actions help support resilience. What gives us confidence is what we control. We have built a stronger operating model. We have a healthier balance sheet, and we have continued to align the portfolio around long-term secular drivers, which we believe Allient is well positioned to benefit from over time. With that, operator, please open the line for questions.
分析師問答
Our first question today is coming from Max Michaelis of Lake Street Capital.
Congrats on really the solid quarter. I kind of want to jump into the orders here, really strong order growth, especially in Industrial as well. I mean, you shared the data center revenue number, I think it was up 60% in the quarter. Is that sort of in line with the order growth you're seeing as well? Or is that ahead or below? Anything you could share there would help.
I'd say it's in line.
Okay. And that has continued kind of into Q3?
You're asking a good question. We're one month into Q3, but we do see it continuing. Order intake is strong and shipments remain strong as well.
Okay. Great. And then you touched a little bit on drones. Is there any extra information you can give us around orders? I know it's not a huge part of revenue in the Aerospace & Defense sector yet, but have you started to see a pickup in orders related to drones and autonomous systems?
Sure. As we've said in the past, we see this as a significant opportunity for us. We're well positioned and suited for applications in the drone and unmanned vehicle markets. We've invested heavily internally over the last six to nine months, and you'll start seeing product announcements rolling out. The team has done an excellent job. They're launching a complete product line of COTS, off-the-shelf propulsion motors. Where our strength has always been in the drone and unmanned vehicle markets is in what we call custom critical solutions. While there are companies supplying off-the-shelf products, few can do what we can do for very specific applications that require design expertise. A preview: we will be announcing and releasing some products to the marketplace. There is a ground-based vehicle engineering show next week in Novi, Michigan, where we'll be displaying some products we've never displayed before, and we'll preview what's to come, leading up to AUSA in October, where you'll see a full launch of not only the motor products, but also electronic products and our composites. While results are improving, we continue to invest. We're leveraging our engineering talent in electromagnetics, electronics and lightweighting for defense markets. Drones and unmanned vehicles are a key focus area.
The next question is coming from Greg Palm of Craig-Hallum.
Yes. Congrats on the results. I frankly don't know where to start because there's just a lot of things that stood out. Maybe we can go back to the orders commentary because I think I heard you say there wasn't anything unusual in terms of timing that wouldn't translate into revenue over the next three to nine months, but were there certain large projects or orders within that? And to be clear, based on your backlog activity right now and that likelihood that these flow to revenue at a similar timeline as the past, it implies a pretty significant step-up over the revenue level you just reported. I'm just asking in light of what normal seasonality trends would be.
Great question. We announced in the last quarter that we changed how we record orders and bookings for larger, more significant blanket orders. We do not book them into backlog unless they are within one year, within scheduled lead times and moved into production. So there are orders sitting out there that haven't been converted into bookings yet that we have visibility on. As they progress and are released into production, they'll show up in backlog. This smooths some of the lumpiness we had from large orders in the past, which is positive because those are not reflected in current backlog. Lead times have expanded and we have been encouraging customers to place orders earlier because supply chain lead times have lengthened. We are seeing some orders coming in quicker than before due to lead time expansion; there is some acceleration. The $200 million in bookings is significant, but there is no one area that is outside the usual lead time parameters. It's continued increase in demand in the areas we focus on, and that demand is flowing through. We are a month into Q3 and the pace has continued strong.
Makes sense. Gross margin was another standout. I'm not sure how much of that strength is just due to more positive mix versus reaching a revenue level where you're better able to absorb fixed costs. Was anything driving margin higher than normal? Or is this a more normalized rate if revenue continues to scale?
Both points you mentioned are true. Absorption from higher volume against our fixed cost base is clearly driving margin improvement, and mix is improving over time. We've been transitioning the company toward higher-margin opportunities where integrated solutions and higher engineering content drive better margins. Additionally, our cost improvement programs, STAN and other initiatives, continue to reduce costs. Last quarter we incurred extra costs due to a production transition that didn't go as planned; we put a full-court press on it. It's improving and we see additional opportunities to streamline and reduce costs as we gain more scale and learnings.
Appreciate the updated metrics on data center. As we sit here today, what is your total capacity level? And as you think about potential changes to data center architecture, does your solution play into those changes over the coming years?
We have been expanding capacity and expect to be ready late this quarter or early next quarter. The expansion is well underway; I viewed it recently and we are well positioned to handle increased demand. The acquisition we made a few years ago and leveraging our Mexican operations have helped expand capacity by relocating high labor content products and concentrating sophisticated assembly and technician work in other facilities. From an equipment standpoint, our active filter is the highest power active filter in the marketplace today, which helps footprint and reduces the need to daisy chain multiple units. We need to stay ahead of the curve and we are doing so. Regarding the value per megawatt, it's not a simple number since it depends on the design and the range of equipment supplied. On the low end, a simple line reactor might be a couple thousand dollars per megawatt. For a more complete solution including communications gateways, filters, reactors and other equipment, value can exceed $40,000 per megawatt. We expect to continue to grow faster than our company average in the data center market.
Makes sense. I appreciate all the increased disclosures. Really helpful.
The next question is coming from Ted Jackson of Northland Securities.
I have a clarification question and then a couple of follow-ups. One: when you gave the data center numbers, you mentioned trailing 12-month sales of $57.1 million and you provided a year-over-year growth rate for that. I missed the growth rate number. Could you say that again, please?
Ted, I think we lost the connection for a moment. Let me pull that up to confirm.
The trailing twelve-month growth rate was 69% year-over-year.
Got it. Thanks. Let's move to some other verticals. First, the Vehicle market. Historically a big component has been powersports, which you've been deemphasizing. The business itself has performed well. Could you lay out the different end markets within Vehicle—how much is automotive, commercial vehicle, construction, marine, ATVs, rail, trucks—and what you're seeing in those mixes?
When we talk about Vehicle, our goal has been to keep it managed at less than 10% of overall revenues as we reposition the company. Vehicle includes automotive, buses, construction vehicles, marine vehicles, the ATV and UTV markets, rail and truck. Year-over-year this segment has remained relatively steady and the one growth area we see is automotive. We prefer not to provide granular breakout beyond that, but the transition away from heavy dependence on powersports has been intentional. We still see value in powersports, especially industrial and commercial utility vehicles; it leverages our steering expertise. But it no longer drives our business as it did 10 to 12 years ago.
When you say automotive, you mean passenger vehicles, not Class 5–8 trucks, correct?
Correct. Automotive refers more to passenger vehicles. Our steering expertise is agnostic to whether a vehicle is internal combustion or electric.
Historically powersports was a significant component. Where does that stand relative to three years ago?
We haven't provided that granularity publicly, but I can say it's steady. Powersports includes both ATVs and UTVs; one is for utility/commercial use, the other for individual passenger use. We've focused more on industrial and commercial applications. We're not exiting the market; it still leverages our steering expertise and applies to other vehicle markets and automated material handling. We've transitioned the business and expect to maintain a certain level, but it's no longer a primary driver.
Shifting to Aerospace & Defense—my model shows a record quarter. What's driving that? Any particular programs or dynamics we should know about, and what's the outlook?
Aerospace & Defense is accelerating. We've talked for many quarters about increasing inquiries and quotes, and that pipeline is converting to orders. Defense-related demand continues and is not slowing. Alongside that, our drone initiatives are starting to contribute. We are launching a state-of-the-art product line and have invested significant resources. We are selective; we won't chase everything, but we are positioned to support higher-volume defense applications and custom critical solutions. We have alpha and beta customers for our electronics and other components, and we are leveraging technologies across drones, defense and industrial markets. The team has stepped up and we're seeing new opportunities convert into revenue.
Last question from me: as you roll into any quarter, how much of a typical quarter is driven by near-term book-and-ship business versus backlog conversion? Any rule of thumb?
It depends on the mix and what we're shipping. For larger contracts we receive blanket orders and then get releases. Some orders require quick delivery—72 hours—so you need inventory and a flexible product design to support that. As a rule of thumb, I'd tell you roughly 20% to 25% of quarterly business is book-to-bill, with the remainder coming from backlog and scheduled shipments.
Thanks for the clarity. Always a pleasure to listen to you talk about the business. Congrats on the quarter.
The next question is coming from Tomo Sano of JPMorgan.
Could you talk about STAN's annualized savings? You had $10 million in 2024 and $6 million in 2025. What is your expectation for this year and what are the next levers for incremental savings?
For 2026, we targeted an amount similar to 2025, roughly $5 million to $7 million. We're still working on that and believe it is achievable. Going forward, as we complete initiatives we often uncover additional opportunities. Given our size and the opportunities we've identified, I would say we have a runway of two to three more years where we can continue to realize $5 million to $7 million of cost takeouts and optimizations annually.
Could you update us on the Dothan transition? How are ramp quality, delivery and incremental costs? When do you expect normalization?
Significant improvement was made in the second quarter. We could have shipped more earlier if the transition had gone smoother; the team focused on root causes and improved efficiency and productivity, and we're cutting into past-due orders. Dothan is a long-standing operation with high mix and sometimes low volume, which adds complexity. We're addressing supply chain issues and making investments to accelerate improvement. We expect continued improvement throughout the year and will incur some continued restructuring costs as we make investments in both Dothan and our Reynosa facility to achieve the desired results.
If I may squeeze one more: high-level, could you discuss the current factory automation environment? We saw a sense of urgency around factory automation at the Automate Show and your booth. How do you see the environment broadly?
From our perspective, Europe has seen some improvement—steady, not gangbusters—and North America has also shown improvement. We're heavily invested with customers in the automation market and seeing encouraging signs and pent-up demand for certain projects. We're focused on developing niche products dedicated to automation that change the margin profile, moving away from competing on standardized, off-the-shelf items. Our strategy is to integrate technologies, use electronics to enhance solutions, and sell integrated offerings. These efforts are showing traction and are encouraging.
The next question is coming from Gerry Sweeney of ROTH Capital Partners.
Congratulations on a nice quarter. Two questions on data center work: one, is there an opportunity to expand into adjacencies around your current work? Two, how much of revenue would you feel comfortable having related to data centers as a percentage?
Great questions. On percentage, I'm comfortable with as much as we can capture. Major data center customers have assessed our facilities and capacity, and they see we've been proactive in addressing capacity and labor needs. We want to be a meaningful supplier and support large programs. I won't give a specific forecast number, but in terms of capture rate, we're not uncomfortable with thinking about capture rates in the 20% to 30% range in the markets we target, depending on the opportunity and how it develops. For adjacencies, yes—our solutions apply to other infrastructure projects such as wastewater treatment plants and other large applications that require similar power quality and protection solutions; those are opportunities for expansion.
Got it. And finally, is there an opportunity for repair, replacement, refurbishment or upgrading of existing data center facilities over time, or is it too early to tell?
There definitely is. Some regions or localities may push back on new builds, and existing facilities with infrastructure in place could be upgraded and expanded. Companies focused on upgrading existing sites will need solutions, and we can play in both new build and upgrade markets.
At this time, I'd like to turn the floor back over to management for any additional or 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 Lake Street BIG10 Conference in New York City on September 10. 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 third quarter 2026 results. Have a great day. Thank you, operator. That will conclude it.
Thank you. Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.