Q1 2024 Allient Inc Earnings Call

[music].

Greetings and welcome to our first quarter fiscal year 'twenty 'twenty four financial results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator: Greetings and welcome to Alliant's first quarter fiscal year 2024 financial results conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Craig Mychajluk, Director of Investor Relations. Thank you. You may begin.

Craig Mychajluk: Only one should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to turn the call over to your host Craig Mahalik Investor Relations. Thank you you may begin.

Craig Mychajluk: And good morning, everyone. Thank you for your time today as well as your interest in Alliant, Inc. and Margaret Warzala, President and CEO, and Jackson Trostle, our corporate controller.

Craig Mychajluk: And good morning, everyone.

Craig Mychajluk: Take your time today as well as your interest in alien Inc.

Craig Mychajluk: Our deck, where Zyla press.

Craig Mychajluk: President and CEO of Jackson, Trostle, our corporate controller.

Craig Mychajluk: We're going to review our first quarter 2024 results and provide an update on the company's strategic progress and outlook, after which we'll open up for Q&A. The financial results that were released yesterday after the market closed can be found on our website at Allient.com, along with the slides that accompany today's discussion. No slides; please turn to slide two for the Safe Harbor Statement. We may make forward-looking statements on this call during the formal discussion as well as during the Q&A, at a future event that are subject to certainties, as well as other factors that could cause actual results to differ materially from what is stated on today's call.

Craig Mychajluk: I'm going to review, our first quarter 2024 results and provide an update on the company's strategic progress and outlook after which we'll open up for Q&A.

Craig Mychajluk: Via the financial results that were released yesterday after the market close if not you can find it on our website at Allianz Dot com along with the slides that accompany today's discussion.

Craig Mychajluk: No slides, please turn to slide two for the Safe Harbor statement.

Craig Mychajluk: There we may make forward looking statements on this call during the formal discussion as well as during the Q&A.

Craig Mychajluk: I had a future events that are subject to it.

Craig Mychajluk: Certainties as well as other factors that could cause actual results to differ materially from what is stated on today's call.

Craig Mychajluk: Certainties and other factors are discussed in the earnings release.

Craig Mychajluk: Certainties, and other factors are discussed in the Orange Relief, documents filed by the company with the Securities and Exchange Commission. Documents on our website or at scc.gov. As well as that during today's call, we will discuss some non-GAAP measures, which we believe will be useful in evaluating our performance for the presentation of this additional information in isolation. Substitute for results prepared in accordance with GAS by the Reconciliations of NONGAP. Measures in the tables accompanying the earnings release and slides.

Craig Mychajluk: The documents filed by the company with the Securities and Exchange Commission.

Craig Mychajluk: That's on our website or at S. P Dot Gov.

Craig Mychajluk: As well that during today's call, we will discuss some non-GAAP measures, which we believe will be useful in evaluating our performance.

Craig Mychajluk: Third the presentation of this additional information in isolation.

Craig Mychajluk: Substitute for results prepared in accordance with GAAP.

Craig Mychajluk: Finally reconciliations of non-GAAP.

Craig Mychajluk: That measures in the tables accompanying the earnings release and slides.

Craig Mychajluk: Three and I'll turn it over to Dirk to begin.

Craig Mychajluk: Three, and I'll turn it over to Dick to begin.

Craig Mychajluk: Okay.

Dick: Thank you Craig and welcome everyone.

Dick: Thank you, Craig, and welcome, everyone. Before delving into the quarterly discussion, I'd like to provide an update on our ongoing search for a new CFO. The process has been productive, yielding a pool of high-caliber candidates, and we anticipate welcoming an external candidate on board very soon. Given the timing, Mike graciously agreed to extend his tenure as CFO into the end of June, which will facilitate a smooth transition of his duties. Due to prior plane commitments, Mike couldn't join us on today's call, and Jackson Trostle will be filling in for him.

Dick: Before delving into the quarter discussion I'd like to provide an update on our ongoing search for a new CFO.

Dick: The process has been productive yielding a pool of high caliber candidates.

Dick: And we anticipate welcoming an external candidate onboard very soon.

Dick: Given the timing Mike graciously agreed to extend his tenure as CFO until the end of June which will facilitate a smooth transition of his duties.

Dick: Due to prior plan commitments why couldn't join us on today's call and Jackson Trostle will be filling in for him.

Dick: We'd like to take the small but to extend my heartfelt wishes to Mike as he embarks on his retirement.

Dick: I would like to take this moment to extend my heartfelt wishes to Mike as he embarks on his retirement. Throughout his tenure, Mike has been an outstanding partner and has played a key role in establishing the framework necessary for us to support the levels of growth we've achieved over the years. Under his leadership, he has also cultivated a strong supporting team, laying a solid foundation for our continued success in the future.

Dick: Throughout his tenure Mike has been an outstanding partner and has played a key role in establishing the framework necessary for us to support the levels of growth we've achieved over the years.

Dick: Under his leadership is also cultivated a strong supporting team laying a solid foundation for our continued success in the future.

Dick: I would also like to express gratitude to two other individuals for their guidance and support over the years.

Dick: I would also like to express gratitude to two other individuals for their guidance and support over the years. Jim Dannis, a director since 2014, has chosen not to stand for re-election, resulting in a reduction in our board size to six members after yesterday's annual meeting.

Dick: Jim Dennis a director since 2014 as chosen not to stand for reelection.

Dick: <unk> and a reduction of our board size the six members after yesterday's annual meeting.

Dick: Jim steadfast dedication insightful guidance and invaluable contributions of left an indelible mark on our company's trajectory.

Dick: Jim's steadfast dedication, insightful guidance, and invaluable contributions have left an indelible mark on our company's trajectory. Similarly, I extend sincere appreciation to Joe Kabar for his over 12 years of service to Allient, including as secretary and corporate counsel. Joe has been a constant force over the years, and his guidance has been instrumental in supporting our needs as we executed numerous acquisitions and realized excellent organic growth over the years. On behalf of the entire Allient family, I extend our sincerest thanks to these three individuals for their unwavering commitment and contribution.

Dick: Some are a little early I extend sincere appreciation to joke a bar for his over 12 years of service as the Elliot, including a secretary and corporate counsel.

Dick: You've always been a constant for us over the years and his guidance has been instrumental in supporting our needs as we executed numerous acquisitions and realized excellent organic growth over the years.

Dick: Yeah.

Dick: On behalf of the entire Elliot family I extend our sincerest. Thanks to these three individuals are.

Dick: Their unwavering commitment and contributions.

Dick: Now, let's turn our focus to the results.

Dick: Now, let's turn our focus to the results. The past quarter has been a testament to our resilience and adaptability. Moreover, our commitment to operational excellence and cost management has bolstered our margins and fueled bottom-line growth along with strong cash flow generation. Given improved lead times, customer order patterns are normalizing to a pre-pandemic environment, and excess supply is being taken out of the channel, which has had an impact on our order rates, which I'll review later in the presentation. Demand from our end markets was mixed, reflecting the various states of supply normalization within each market, with some pockets of weakness in Europe.

Dick: The past water has been a testament to our resilience and adaptability.

Dick: Moreover, our commitment to operational excellence and cost management as bolstered our margins and bottom line growth along with strong cash flow generation.

Dick: Given improved lead times customer order patterns are normalizing to a pre pandemic environment and excess supply is being taken out of the channel, which has had an impact on our order rates, which I'll review later in the presentation.

Dick: Demand from our end markets was mixed reflecting the various states of supply normalization within each market with some pockets of weakness in Europe.

Dick: Our topline came in at nearly $147 million for the quarter.

Dick: Our top line came in at nearly $147 million for the quarter. On the plus side, our vehicle markets, which continued to benefit from the ramp of automotive programs, and industrial markets, which have increased at least double digits for each of the last 12 straight quarters, largely driven by industrial automation projects and power quality solutions. This market has also benefited from the improved supply chain and acquisition. We reviewed the acquisition of S&C Manufacturing on our last earnings call as we completed the transaction in early January.

Dick: On the plus side was our vehicle markets, which continued to benefit from the ramp of automotive programs and industrial markets, which has increased at least double digits for each of the last 12 straight quarters, largely driven by industrial automation projects and power quality solutions.

Dick: This market has also benefited from the improved supply chain and acquisitions.

Dick: We reviewed the acquisition of S. N C manufacturing on our last earnings call as we completed the transaction in early January.

Dick: S&C is a well-established company with locations in the U.S., Mexico, and China, and their offerings are complementary to our current power quality capability. Additionally, S&C has some medical and A&D business. The vast majority of their revenue will show up within our industrial bucket. As a reminder, this was our first Tuckin acquisition in support of our Power Technology Pillar. We are excited about the synergies that are developing as a result. We saw margin expansion across the board, with gross margin up 80 basis points, operating margin up 40 basis points, and adjusted EBITDA margin up 60 basis points.

Dick: He is a well established company with locations in the U S, Mexico and China.

Dick: And our offerings are complementary to our current power quality capabilities.

Dick: Well as said she has some medical and A&D business.

Dick: Vast majority of their revenue will show up within our industrial bucket.

Dick: As a reminder, this was our first tuck in acquisition in support of our power technology pillar.

Dick: We are excited about the synergies that are developing as a result.

Dick: Okay.

Dick: We saw margin expansion across the board.

Dick: With gross margin up 80 basis points operating margin up 40 basis points and adjusted EBITDA margin up 60 basis points.

Dick: Overall net income per diluted share increased 8% to 42 cents a share and on an adjusted basis net income per share was 58 cents up 5% for the quarter.

Dick: Overall, net income per diluted share increased 8% to 42 cents a share, and on an adjusted basis, net income per share was 58 cents, up 5% for the quarter. Stronger earnings combined with improved working capital led to cash generation of $9.2 million, a record level for the first quarter. With that, I will turn it over to Jackson for a more in-depth review of the financials.

Jackson: Stronger earnings combined with improved working capital led to cash generation of $9 2 million a record level for our first quarter.

Dick: With that let me turn it over to Jackson.

Jackson: Our in depth review of the financials.

Dick: <expletive>.

Edward Randolph Jackson: Starting on slide four, we highlight our top line. First quarter revenue increased 1%, or $1.2 million, to $146.7 million. The impact of foreign currency exchange rate fluctuations was favorable, 0.2 million. Sales in our vehicle markets increased 12% during the quarter, driven by the anticipated escalation of certain automotive programs. Partially offsetting this growth was the continued decline in demand for agricultural vehicles given the softness in Europe stemming from geopolitical tensions, notably the Ukrainian conflict.

Jackson: Starting on slide four we highlight our top line.

Edward Randolph Jackson: First quarter revenue increased 1% or $1 2 million to $146 7 million.

Edward Randolph Jackson: The impact of foreign currency exchange rate fluctuations was favorable 0.2 million.

Edward Randolph Jackson: Sales in our vehicle markets increased 12% during the quarter driven by the anticipated escalation of certain automotive programs.

Edward Randolph Jackson: Partially offsetting this growth was the continued decline in demand for agricultural vehicles, given the softness in Europe stemming from geopolitical tensions, notably the Ukrainian conflict.

Edward Randolph Jackson: Industrial markets were up 10% lifted by recent acquisitions and heightened end market demand weakness in industrial automation electronics and power quality solutions.

Edward Randolph Jackson: Industrial markets were up 10%, lifted by recent acquisitions and heightened end market demand within industrial automation, electronics, and power quality solutions, particularly those for the HVAC market. A&E sales saw a decline of 22%, primarily attributed to the timing of certain space industry initiatives. We did see an uptick in defense demand throughout the quarter, which helped to somewhat mitigate the impact of this time. Medical markets also saw a decline, primarily due to the persistent softness in medical mobility products and solutions, a trend that has persisted over the past few years.

Edward Randolph Jackson: Particularly those for the HVAC markets.

Edward Randolph Jackson: A&D sales saw a decline, 22% primarily attributed to the timing of certain space industry initiatives.

Edward Randolph Jackson: We did see an uptick in defense demand throughout the quarter, which helped to offset somewhat mitigate the impact of this timing.

Edward Randolph Jackson: Medical markets also saw a decline primarily due to the persistent softness in medical mobility products and solutions a trend that has persisted over the past few years.

Edward Randolph Jackson: Slide five shows the shifting our revenue mix across markets over the trailing 12 months and the catalysts for each change.

Edward Randolph Jackson: Slide five shows the shift in our revenue mix across markets over the trailing 12 months and the catalysts for each change. Industrial maintained its position as our largest market and was 45% of TTM sales, a noteworthy expansion of 500 basis points. The robust 25% growth in the industrial vertical mirrors the trends from the recent quarter and reflected the improvements in the supply chain environment, which facilitated the delivery of long-lead projects. Vehicle market revenue was up 7% on a TTM basis and reflected the same demand drivers as the recent quarter and also included higher demand for power sports.

Edward Randolph Jackson: Industrial maintained its position as our largest market and was 45% of TTM sales.

Edward Randolph Jackson: Noteworthy expansion of 500 basis points.

Edward Randolph Jackson: The robust 25% growth in the industrial vertical mimics the trends from the recent quarter and reflected the improvements in the supply chain and buyer sentiment.

Edward Randolph Jackson: Which facilitated the delivery of long lead projects.

Edward Randolph Jackson: Vehicle market revenue was up 7% on a TTM basis and reflected the same demand drivers as the recent quarter.

Edward Randolph Jackson: And also included higher demand for power sports.

Edward Randolph Jackson: Similarly, aerospace and defense as well as medical sales demand also had similar drivers as the first quarter.

Edward Randolph Jackson: Similarly, aerospace and defense, as well as medical sales demand, also had similar drivers as the first quarter. Lastly, sales through the distribution channel, which is a small component of total sales, were up 4% for the TTM period. As highlighted on slide 6, gross margin expanded 80 basis points to 32.3% for the quarter on higher volume, favorable mix, and pricing, along with the continued emphasis and usage of our Lean Toolkit throughout the organization. These impacts are more than offset by elevated raw material costs and remaining supply chain disruption.

Edward Randolph Jackson: Lastly, sales through the distribution channel, which are a small component of total sales were up 4% for the TTM period.

Edward Randolph Jackson: As highlighted on slide six gross margin expanded 80 basis points to 32, 3% for the quarter on higher volume favorable mix and pricing along with a continued emphasis and usage of our lean toolkit throughout the organization.

Edward Randolph Jackson: These impacts were more than offset that.

Edward Randolph Jackson: Elevated raw material costs and remaining supply chain disruptions.

Edward Randolph Jackson: Moving to slide seven for our operating performance you will notice we had an increase in <unk> and in engineering and business development costs for the quarter, which largely reflected recent M&A activity.

Edward Randolph Jackson: Moving to slide seven for our operating performance, you will notice we had an increase in engineering and business development costs for the quarter, which largely reflected recent M&A activity. Helping partially offset this was lower general and administrative costs, which were 40 basis points lower as a percentage of sales year over year. Overall, operating income increased 6% to $12.1 million, or 8.2% of revenue, a 40 basis-point improvement. On slide eight, we present Gap Net Income and Adjusted Net Income, which we believe provides a better understanding of our earnings power, inclusive of adjusting for the non-cash amortization of intangible assets, which reflects the company's strategy to grow through acquisitions as well as organic growth.

Edward Randolph Jackson: Helping partially offset this was lower general and administrative costs, which were 40 basis points lower as a percentage of sales year over year.

Edward Randolph Jackson: Overall operating income increased 6% to $12 1 million or eight 2% of revenue a 40 basis point improvement.

Edward Randolph Jackson: On slide eight we present GAAP net income and adjusted net income, which we believe provides a better understanding of our earnings power inclusive of adjusting for the noncash amortization of intangible assets, which reflects the company's strategy to grow through acquisitions as well as organically.

Edward Randolph Jackson: First quarter net income increased 9% to $6 9 million or <unk> 42 cents per diluted share.

Edward Randolph Jackson: First quarter net income increased 9% to $6.9 million, or $0.42 per diluted share, and on an adjusted basis was up 7% to $9.5 million, or $0.58 per diluted share. The effective tax rate was 21.8% in the first quarter of 2024. We expect our income tax rate for the full year 2024 to be approximately 21% to 23%.

Edward Randolph Jackson: On an adjusted basis was up 7% to $9 5 million or 58 cents per diluted share.

Edward Randolph Jackson: The effective tax rate was 21, 8% in the first quarter of 2024.

Edward Randolph Jackson: We expect our income tax rate for the full year 2024 to be approximately 21% to 23%.

Edward Randolph Jackson: We use adjusted EBITDA as an internal metric and believe it is useful in determining our progress and operating performance.

Edward Randolph Jackson: We use adjusted EBITDA as an internal metric and believe it is useful in determining our progress and operating performance. Adjusted EBITDA increased 5% to $20.0 million, or 13.7% of revenue, up 60 basis points. Slides 9 and 10 offer a snapshot of our cash flow and balance sheet. Notably, we experienced a robust cash-generating quarter, amounting to $9.2 million of operating cash flow, marking a significant increase from the $3.6 million in the prior year's first quarter.

Edward Randolph Jackson: Adjusted EBITDA increased 5% to 20.0 million or.

Edward Randolph Jackson: 13, 7% of revenue up 60 basis points.

Edward Randolph Jackson: Slides nine and 10 offer a snapshot of our cash flow and balance sheet.

Edward Randolph Jackson: Notably, we experienced a robust cash generating quarter amounting to $9 2 million of operating cash flows.

Edward Randolph Jackson: Marking a significant increase from the $3 6 million in the prior year's first quarter.

Edward Randolph Jackson: This achievement is particularly noteworthy considering that the first quarter is traditionally a higher operating cash consumption period.

Edward Randolph Jackson: This achievement is particularly noteworthy considering that the first quarter is traditionally a higher operating cash consumption period. The year-over-year increase was attributed to elevated net income and enhanced working capital management. Our projections indicate a sustained momentum in driving strong cash flows, aligning with our historical trend. Capital expenditures for the quarter were $3.0 million, and largely focused on new customers. We expect 2024 capital expenditures to be in the range of $13 to $17 million.

Edward Randolph Jackson: The year over year increase was attributed to elevated net income and enhanced management of working capital.

Edward Randolph Jackson: Our projections indicate a sustained momentum and driving strong cash flows.

Edward Randolph Jackson: Aligning with our historical trends.

Edward Randolph Jackson: Capital expenditures for the quarter were 3.0 million and largely focused on new customer projects.

Edward Randolph Jackson: We expect 2020 for capital expenditures to be in the range of $13 million to $17 million.

Edward Randolph Jackson: Increase in cash utilized for investing activities during the quarter first quarter of 2024 was primarily attributed to the acquisition of Essent and see it.

Edward Randolph Jackson: The increase in cash utilized for investing activities during the first quarter of 2024 was primarily attributed to the acquisition of S&C. Additionally, the investing activities from both the first quarters of 2024 and 2023 included a deferred payment of $6.25 million related to a prior acquisition. Inventory turns were 3.0 times, and our DSO was at 55 days for the quarter. Total debt was approximately $240 million, up from year-end 2023 due to the SNC acquisition, and net of cash was about $209 million, or 43.9% of net debt to capitalization. Our bank leverage ratio was 2.89 times. Reducing debt remains at the top of our priorities regarding the use of capital.

Edward Randolph Jackson: Additionally, the investing activities for both the first quarters of 2024 and 2023 included a deferred payment of $6 two 5 million related to a prior acquisition.

Edward Randolph Jackson: Inventory turns were 3.0 times and our DSO was at 55 days for the quarter.

Edward Randolph Jackson: Total debt was approximately $240 million up from year end 2023, due to the S. N C acquisition.

Edward Randolph Jackson: Debt net of cash was about $209 million or 43, 9% of net debt to capitalization.

Edward Randolph Jackson: Our bank leverage ratio was 2.89 times.

Edward Randolph Jackson: Reducing debt remains at the top of <unk>.

Edward Randolph Jackson: Our priorities regarding the use of capital.

Edward Randolph Jackson: Last week, we recently extended the maturity of our existing $280 million revolving credit facility for five years to 2029.

Dick: Lastly, we recently extended the maturity of our existing $280 million revolving credit facility for five years to 2029. Borrowings for the revolving facility bear interest on a sliding scale rate based on leverage of 1.25% to 2.5% over SOFR. In addition, for added flexibility and to lock in favorable rates, we entered into a $150 million fixed rate private shelf facility, under which $50 million of borrowings occurred on March 21, 2024. The fixed rate $50 million debt bears interest at 5.96% and will mature in March 2031. With that, I will now turn the call back over to Dick.

Dick: Borrowings for the revolving facility bear interest on a sliding scale rate based on leverage of 1.25% to two 5% over sulfur.

Dick: In addition.

Dick: Added flexibility and to lock in favorable rates.

Dick: Entered into a 150 million fixed rate private shelf facility under which 50 million of borrowings occurred on March 'twenty, one 'twenty three 'twenty four.

Dick: The fixed rate $50 million debt bears interest at 596% and will mature in March 2031.

Dick: With that I will now turn the call back over to <expletive>.

Dick: Okay Jackson.

Dick: Slide 11 shows our orders and backlog levels.

Dick: Slide 11 shows our orders and backlog level. As discussed on previous calls, the shift in our backlog reflects ongoing enhancements to our supply chain environment. These improvements have facilitated the shipment of several long-lead industrial projects.

Dick: As discussed on previous calls the shift in our backlog reflects ongoing enhancements with our supply chain environment.

Dick: These improvements have facilitated the shipment of several long lead industrial projects as demand returns to a more normalized pre pandemic level with customer ordering patterns and adjusting accordingly.

Dick: As demand returns to a more normalized pre-pandemic level, with customer ordering patterns adjusting accordingly, as reflected in our book to build, the year ahead will undoubtedly pose challenges as we continue to adapt to these evolving dynamics. However, this presents an opportunity to optimize our working capital and bolster cash flow. It is also important to stress that there are exciting initiatives on the horizon as we progress through 2024. And we are strategically positioning our organization to capitalize on significant opportunities across our targeted verticals. That leads to the actions on slide 12.

Dick: As reflected in our book to Bill.

Dick: Youre ahead will undoubtedly posed challenges as we continue to adapt to these evolving dynamics. However, this presents an opportunity to optimize our working capital and bolster cash flow.

Dick: It is also important to stress that our exciting initiatives.

Dick: Horizon as we progress through 2024.

Dick: And we are strategically positioning our organization to capitalize on significant opportunities across our targeted verticals.

Dick: That leads to the highlighted actions on slide 12.

Dick: Our strong commitment to our strategy guides all of our key decisions.

Dick: Our strong commitment to our strategy guides all of our key decisions. With the unveiling of our new strategic model, Simplify to Accelerate Now, we embark on a journey aimed at refining our organizational structure, eliminating redundancies, and optimizing our operation. In pursuit of sustained earnings growth and increased cash generation, our teams have identified key strategic actions for this year and into 2025. Realigning and rationalizing our footprint represents the largest opportunity, but also the most complex. This includes the consolidation of our brands under the Allient banner to include our motion controls and power technology.

Dick: With the unveiling of our new strategic bottle simplify to accelerate now we embarked on a journey aimed at refining our organizational structure.

Dick: Eliminating redundancies and optimizing our operations.

Dick: In pursuit of sustained earnings growth and increased cash generation. Our teams have identified key strategic actions for this year and into 2025.

Dick: Realigning and rationalizing our footprint represents the largest opportunity but also the most complex.

Dick: This includes the consolidation of our brands under the Elliott banner to include our motion controls and power technologies.

Dick: By doing so, we ensure a more cohesive approach to foster improved market and customer alignment, enhance market clarity, and focus teams that can better serve our diverse global customers. Our commitment to simplicity extends to customer interactions with dedicated selling units and solution centers offering specialized expertise and Comprehensive System-Level Solutions. We must eliminate complexity in processing orders and transactions and focus on speed of play to win new business. As a result, we aim to centralize customer entry points and leverage cutting-edge systems to automate processes to reduce transactional costs wherever possible.

Dick: By doing so we ensure a more cohesive approach to foster improved market and customer alignment enhanced market clarity.

Dick: And focused teams that can better serve our diverse global customers.

Dick: Our commitment to simplicity extends to customer interactions with dedicated selling units and solution centers offering specialized expertise and comprehensive system level solutions.

Dick: We must eliminate complexity and processing orders and transactions and focus on speed of play to win new business.

Dick: As a result the.

Dick: Aimed to centralized customer entry points and leverage our cutting edge systems to automate processes.

Dick: Reduced transactional costs wherever possible.

Dick: Internally, we want to foster a common business language facilitated by a S. T R lean tool kit.

Dick: Internally, we want to foster a common business language facilitated by AST, our Lean Toolkit, ensuring seamless collaboration across all levels by defining and supporting the needs of the business as a whole, driving out redundant costs and strengthening our foundation for future growth. And last, accelerating our pace and reducing our product development time to market, expected to deliver tangible value and stands as a top priority. This means reducing the complexity of a design by taking smaller, incremental steps and adapting as we move forward. By doing so, we enhance agility, responsiveness, and, ultimately, customer satisfaction. These initiatives are being implemented in phases, and some are still being fully vetted.

Dick: During seamless collaboration across all levels.

Dick: By defining and supporting the needs of the business as a whole, we're driving out redundant costs and strengthening our foundation for future growth.

Dick: And lastly, elevating our pace and reducing our product development time to market as.

Dick: As expected to deliver tangible value and stands as a top priority.

Dick: This means reducing the complexity of designs by taking smaller incremental steps and adapting as we move forward.

Dick: By doing so we enhance agility responsiveness and ultimately customer satisfaction.

Dick: These initiatives are being implemented in phases, and some are still being fully about it.

Dick: While we expect benefits in 2020 for ongoing improvements will be realized over the next two plus years and will be offset by certain one time cost to implement.

Dick: While we expect benefits in 2024, ongoing improvements will be realized over the next two plus years and will be offset by certain one-time costs to implement. Ultimately, we expect our executed actions to result in a more cost-effective leveraging of our resources and to provide us with a 10 million plus million dollars. Effective improvement in EBITDA over this time frame as actions are implemented and gain traction. We believe our efforts and actions are consistent with and will support our goal of achieving a 100 total basis point improvement in annual margin, which will come from a combination of both gross margin expansion and operating expense reduction.

Dick: Ultimately, we expect our executed actions to result in a more cost effective leveraging of our resources and to provide us with a 10 million plus million dollar.

Dick: Effective improvement in EBITDA over this timeframe.

Dick: As actions are implemented and gain traction.

Dick: We believe our efforts and actions are consistent with and will support our goal of achieving 100 total basis point improvement of annual margin.

Dick: Which will come from a combination of both gross margin expansion and operating expense reduction.

Dick: During 2023 is important to note that we enjoyed elevated shipments in certain markets as the supply chain normalized and our customers accepted shipments for orders placed during the height of when lead times, where being extended.

Dick: During 2023, it is important to note that we enjoyed elevated shipments in certain markets as the supply chain normalized, and our customers accepted shipments for orders placed during the height of when lead times were being extended. In 2024, we expect this normalization to have a 30 to $40 million headwind on our top line, which will be mostly offset by the SNC acquisition. While the S&C acquisition will help offset the top line, it will not fully offset the pull-through incremental margin we had enjoyed as a result.

Dick: In 2024, we expect this normalization to have a $30 million to $40 million headwind on our top line.

Dick: Which will be mostly offset by the SMC acquisition.

Dick: While the S&P acquisition will help offset the top line it will not fully offset the pull through incremental margin.

Dick: <unk> as a result.

Dick: Ultimately, the impact of our cost reduction and profit-enhancing activities will help offset the bottom-line pressures that are expected to persist for the near term. In support of our strategic goals as a company, we will aggressively and proactively adjust the organization as required to ensure we establish a sound and strong foundation for the future. In closing, I want to reiterate our unwavering enthusiasm and confidence in the trajectory of our company. As we look ahead, we are energized by the myriad of opportunities that lie before us, with a firm commitment to innovation, new product development, and operational excellence.

Dick: Ultimately the impact of our cost reduction and profit enhancing activities will help offset the bottom line pressures that are expected to persist for the near term.

Dick: In support of our strategic goals as a company, we will aggressively and proactively adjust the organization as required to ensure we established a solid and strong foundation for the future.

Dick: Closing I want to reiterate our unwavering enthusiasm and confidence in the trajectory of our company.

Dick: As we look ahead, we are energized by the myriad of opportunities that lie before us.

Dick: With a firm commitment to innovation, new product development and operational excellence, we are primed to capitalize on these projects and further elevate our performance over the long term.

Dick: We are primed to capitalize on these projects and further elevate our performance over the long term. As we embark on the journey ahead, rest assured that our vision, strategy, and determination will continue to drive our success in the coming year and beyond. With that operator, let's open the line for questions. Thank you.

Dick: As we embark on the journey ahead.

Dick: Rest assured that our vision strategy and determination, we will continue to drive our success in the coming year MBR.

Dick: With that operator, let's open the line for questions.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.

Dick: <unk>.

Speaker Change: At this time, we'll be conducting a question and answer session if you'd like to ask a question.

Operator: Please press star one on your telephone keypad.

Operator: A confirmation tone will indicate your line is in the question queue. You May press star two if he like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the darkies one moment. Please while we poll for questions.

Operator: One moment, please, while we poll for questions. Our first question comes from Greg Palm with Craig Hallam Capital Group. Please proceed with your question. Thanks.

Operator: Our first question comes from Greg Palm with Craig Hallum Capital Group. Please proceed with your question.

Gregory William Palm: Thanks, John Good morning, everyone. Congrats.

Gregory William Palm: Thanks, good morning everyone, congratulations on a lot of progress here in the quarter, so job well done. Thank you, Greg. I guess I'd start off with a little bit more kind of color on, you know, what you're seeing out there in various end markets, geographies, is it stable relative to where we were at a couple months ago? Any notable changes you want to, you know, highlight or call out?

Gregory William Palm: Congrats on a lot of progress here in the quarter, so a job well done.

Speaker Change: Thank you Greg.

Gregory William Palm: I guess, starting off with a little bit more color on you know what you're seeing out there in various end markets geography is is it stable relative to where we were at a couple of months ago. Any notable changes do you want to you know highlight or call out.

Gregory William Palm: Yes.

Greg: Yeah, well I would say to you that there's more clarity.

Dick: Yeah, well, I would say to you that there's more clarity on what we expect to see here in the coming months. And I think, certainly, we pay very close attention to the performance of our customers. And as we've seen, and are hearing from them, they're expecting that organic growth rates will be down, which certainly would reflect on our organic growth. I mean, the impact would be relatively pretty similar to what we see there.

Dick: On what we expect to see here in the coming.

Dick: Ah months ahead, and I think.

Dick: Certainly we pay very close attention to the performance of our.

Dick: Customers and as we've seen in our hearing from them. There. They are expecting that our organic growth rates will be down, which certainly would it would reflect on our organic growth I mean it.

Dick: The impact would be.

Dick: A relatively pretty similar to what we see there. So I would say to you that yes that there are certain markets that are.

Dick: So I would say to you that, yes, there are certain markets that are having some challenges. I do think it's still a part of the normalization of demand, as commitments to orders that were placed months ago are being fulfilled, and inventories are full, panels are full, and now we'll have to see when that will start to return to a full normalization, meaning that the consumption is increasing or at least leveling out to the point where those inventory reserves are being consumed and then replenished. And I'll say that it's primarily in the industrial markets, Greg. Okay, go ahead. If you have a question, go ahead. Well, I was just gonna...

Greg: Or having some challenges I do think it's still a part of the normalization of demand.

Greg: As commitments to.

Speaker Change: For orders that had been placed a months ago are being fulfilled and inventories are full and is full and now we'll have to see what it when that will start to return to a full normalization, meaning that the consumption is.

Dick: <unk> is increasing or at least leveling out to the point of where those inventory reserves are being consumed and then replenished.

Speaker Change: And I'll say, that's primarily in the industrial markets Greg.

Speaker Change: The Okay. Go ahead you have a question go ahead.

Gregory William Palm: Well, I was just going to ask, you mentioned inventory levels. Do you have a sense of where those levels are? I mean, I know it varies across, you know, customer bases, but just in general, and should we just assume that, you know, book-to-bill is going to run, you know, below one in the near term as a result of what you're saying?

Greg: Well I was just going to I was just going to ask you you mentioned inventory levels do you have a sense on where inventory levels are I mean, I know it varies across customer basis, but just in general it should we just assume that your book to Bill is going to run below one in the near term as a.

Gregory William Palm: Salt of what you're saying.

Gregory William Palm: Yeah. It may.

Dick: be below one in the near term, but I think we're going to see that that gap is closing. We're starting to see some encouraging signs that there is business now. Orders are being released that hadn't been released for a while, which was resulting in the negative book to bill. But I would say to you that there's definitely improvement in that area. So there are some encouraging signs coming in the near term. Yep, yep.

Gregory William Palm: Be below one in the near term, but I think we're going to see that that that gap is closing.

Dick: We're starting to we are starting to see some encouraging signs that there is business that is now orders are being released that hadn't been released for a while which was resulting in a negative book to bill, but I would say to you that there's definitely improvement in that area.

Dick: So there is some encouraging signs coming in the near term Yep Yep makes sense.

Gregory William Palm: And then, I guess just lastly, thinking about some of the operational improvements that you're making specifically around the Simplify to Accelerate Now strategy, do you feel like you got some of that benefit in Q1, or is that still to come, and can you give us any more color around the timing? I know you mentioned $10 million when it's all said and done, but when should we see it?

Speaker Change: And then I guess, just just lastly, thinking about some of the operational improvements that you're making specifically around the simplified to accelerate now strategy do you feel like you got some of that benefit in in Q1 or is that still to come in can you give us any more color around the <unk>.

Gregory William Palm: And I know you mentioned 10 million when it's all set and done but you know what when should we see that sort of full run rate of of cost improvements.

Dick: Okay, for your first question, have we seen any impact of that in the first quarter? The answer would be no.

Gregory William Palm: Okay. So for your first question have we seen any impact of that in the first quarter the answer would be no.

Gregory William Palm: When will we start to see it? There's been a very comprehensive review of all operations, looking at all areas of cost and so forth and expenses, and we are working through the details, and we've identified certainly some major opportunities for us that will begin very shortly. So I would say to you, without providing any more details, it's a complete rationalization of where we are. I'm moving forward on actions that I would have said to you that without COVID, we would have seen some optimization already and the supply chain crisis.

Dick: When will we start to see it.

Gregory William Palm: There has been a very concept a comprehensive review of all our operations.

Gregory William Palm: Looking at all areas of cost and so forth on expenses.

Gregory William Palm: And we are working through the details and we've identified certainly some major opportunities for us that will.

Gregory William Palm: We will begin very shortly so I would say to you without providing any more details. It's a complete rationalization of where we are.

Gregory William Palm: Move.

Gregory William Palm: Moving forward on actions that.

Gregory William Palm: I would have said to you that without Covid, we would have seen some optimization already and the supply chain crisis. So we are beginning to move forward.

Gregory William Palm: So we are beginning to move forward. Our part of the process is not just to look at reducing costs, but how can we align much better to service our customers? I think that's critical because we've built the basis of business in different markets and we think we can better service those markets and gain additional market share. So there are opportunities to increase the EBITDA generation and profit generation from Sweeney, Michael Leach, Richard Warzala, Manoj Mehta, Simon Rees, Allient in Q2 and will continue throughout the year.

Gregory William Palm: Part of the process is not just to look at reducing cost, but how can we align much better to service our customers I think that's key.

Gregory William Palm: It's critical because we've built the basis of business in different markets and we think we can better service those markets and gain additional market share so there's opportunities to increase the.

Gregory William Palm: The EBITA generation profit generation from improved business levels by leveraging the synergies we have in place there.

Gregory William Palm: There's also opportunities by restructuring and realigning to be more focused on.

Gregory William Palm: Markets that we serve and create a an expertise that better services our customers those will start.

Gregory William Palm: And in Q2 and will continue throughout the year, that's what I would say to you.

Gregory William Palm: That's what I would say to you. Again, with some of the actions, there will be some one-time costs. We'll be very clear, you know, on what those are as we identify and relay them to the marketplace. But I think that's about as much as I can cover right now without giving you more specifics, which we're still working on.

Gregory William Palm: Again with some of the actions there will be some one time costs.

Gregory William Palm: I will be very clear on what those are and as we identify and we relate to the marketplace, but I think that's about as much as I can cover right now without giving you more specifics, which we're still doing that.

Speaker Change: Yeah understood no. That's helpful. As it is I will I'll leave it there. Thanks.

Gregory William Palm: Yeah, understood. No, that's helpful as it is. All right, we'll leave it there. Thanks.

Speaker Change: Thank you Greg.

Gregory William Palm: Our next question is from Gerry Sweeney with Roth Capital markets. Please proceed with your question.

Operator: Our next question is from Jerry Sweeney with Roth Capital Markets. Please proceed with your question. Hey Dick, how are you doing? Thanks for taking my call.

Gerard J. Sweeney: Hey, How're you doing thanks for taking my call.

Gerard J. Sweeney: Good Jerry how are you good.

Gerard J. Sweeney: Good, Jerry. How are you? Good. Not quite a repeat of Greg's question, but curious as to demand, how much of it is, I think, order normalization versus maybe fiscal tightness, in the U.S. and in certain other countries. I'm not sure the economy is slowing down. I'm just curious if you would have any thoughts.

Gerard J. Sweeney: Good.

Gerard J. Sweeney: Not quite of a repeat of that Greg's question, but.

Gerard J. Sweeney: Curious as to.

Gerard J. Sweeney: Demand how much of it is I think order normalization versus maybe fiscal tightening.

Gerard J. Sweeney: In the U S and in certain other countries I'm not sure the economy slowing down I'm just curious if you would have any thoughts.

Gerard J. Sweeney: On delineating between the two.

Jerry: Yeah, I would say to you that our as we've watched the book to Bill ratio, we've watched our backlog.

Dick: Yeah, I would say to you that, you know, as we've watched the book to bill ratio, we've watched our backlog, and we've looked at the markets, both geographic and, you know, the vertical markets. It wasn't unexpected.

Dick: And look at the markets well.

Dick: Geographic and <unk>.

Dick: Vertical markets.

Dick:

Dick: It wasn't unexpected I think we've talked about it for we've talked about for several quarters that yeah yeah.

Dick: I think we've talked about it for several quarters, that it really was going to happen. And I think... Typically, as I look at our business, and we pay attention to what's happened with our customers, okay, we typically lag. Where we've seen some reduction in demand for our end customers, we held up, and as we're looking at what their forecast and projections are for the near term, I think we're modeling in that we're going to follow that.

Dick: That it really wasn't going to what's going to happen and I think.

Dick: Typically as I look at our business.

Dick: And we pay attention to what's happened with our customers. Okay, we typically lag that.

Dick: And where we've seen some reduction in demand for our end customers.

Dick: We held up.

Dick: As we're looking at what their forecast and projections are for the near term I think we were modeling in that we're going to we're going to follow that.

Dick: But as I said, I wanted to make the point that that gap of the negative book-to-bill ratio is closing, and we've seen some encouraging signs where certain projects and certain, you know, where we've expected to begin resuming deliveries on certain projects are happening. Europe is still a question mark, especially Germany where they're talking about, you know, major reductions in demand and so forth throughout the, you know, economy. That's the one area that we're still watching closely.

Dick: But as I said I wanted to make the point.

Dick: That that gap of the negative book to Bill ratio was closing and we've seen some encouraging signs where.

Dick: Certain projects and certain.

Dick: Where we've expected to begin resuming deliveries on certain projects it is happening.

Dick: Europe.

Speaker Change: Is it still a question Mark there.

Dick: Especially Germany, where they're talking about major rich.

Dick: Reductions in demand and so forth throughout the economy.

Dick: It's that's the one area that we're still watching closely.

Dick: Although we'll have to say other parts of Europe, we're again starting to see that same trend, where the order patterns or delivery, I'll say shipments, patterns are improving. It's going to be pretty telling here in the next couple of quarters. Have we bottomed out? Have we normalized inventories? Are we now starting to supply to real demand, not filling channels and so forth.

Dick: Although we will have to say other parts of Europe, where again starting to see that same trend.

Dick: The order per order patterns or a delivery also say shipments patterns are improving.

Dick: No.

Dick: It's gonna be pretty telling here. The next couple of quarters or are we bottomed out and we normalized inventories and we now starting to supply.

Dick: Supply to real demand not filling channels and so forth.

Dick: Got it. And I do know that you spoke about order normalization for some quarters. And it sounds as though it's tracking as expected, but there are some pockets that it's still a little bit of a wait-and-see. Is that a fair assumption?

Speaker Change: Got it.

Dick: I do know that you had spoken about.

Dick: About border normalization for some for some quarters and it sounds as though.

Dick: It's tracking as expected but.

Dick: There were some pockets, but it's still a little bit of wait and see is that a fair summation.

Speaker Change: It is in and again as I mentioned in the conference call here, So the headwind that we faced.

Dick: It is. And, you know, and again, as I mentioned in the conference call here, the headwind that we faced, I mean, that was a real, it's a real interesting one because we received orders and multiple-year orders where the supply chain could not supply key components. And I know our customers honored the deliveries. When the supply chain opened up, we were able to get components. It certainly elevated shipments from last year, which were depressed from the prior year, and will have an impact on this year, as I mentioned.

Dick: It was a real it's a real interesting one because the.

Dick: We received orders in multiple year orders, where supply chain could not supply of key components.

Dick: And I know our customers honored the deliveries when the supply chain opened up we were able to get components.

Dick: It certainly elevated the shipments from last year.

Dick: Which.

Dick: We're depressed from the prior year and we will have an impact into this year as I mentioned.

Dick: So if we think about that demand, and as the questions I can anticipate may be coming here, we said that we had this headwind of top line, and that was incremental top line based upon the existing base of business, and offset by the acquisition of SNC, which of course comes in as a full company with fully loaded expenses and operating costs and so forth. So it's not the same. Profit Generation, from an incremental standpoint, right? We've got a full business; we're bringing that same level of business through, but the profits can't be expected to be the same because of incremental demand.

Dick: So and we think about that demand and it is the questions I can anticipate maybe coming here.

Dick: As we said that we have this headwind of topline.

Dick: And that was incremental topline based upon existing base of business.

Dick: Offset by the acquisition of S. N C, which of course comes in as a focused company with fully loaded expenses and operating costs and so forth. So it's not the same.

Dick: Profit generation.

Dick: From an incremental standpoint, right, we've got a full business, where we're bringing that same level of business through but it's the profits there can't be expected to be the same because of an incremental demand.

Speaker Change: Sure understood.

Gerard J. Sweeney: Sure. Just one more for me, then I'll jump in line.

Speaker Change: Just one more for me then I'll jump in line inventories turnovers dsos.

Edward Randolph Jackson: Inventories, turnovers, and DSOs. What is the target, or what would be more of a normalized level? I know it's, yeah, in the slide deck, it was 22, 23, and I think 24. But, you know, we had COVID, and you also have, We've done a bunch of acquisitions since that timeframe. I'm just curious if you sort of have a target where you want to take this and what sort of working capital you need. We'll let Jackson answer that.

Jackson: What is the target of what would be more of a normalized level I know it's.

Jackson: Yet in the slide deck. It was 22 23, and I think 24, but.

Jackson: You know, we had COVID-19 and.

Jackson: You also have.

Edward Randolph Jackson: A bunch of acquisitions since that timeframe I'm just curious if you sort of have a target where you want to take that we're sort of working capital I'll, let Jackson answer that okay.

Edward Randolph Jackson: Yeah.

Edward Randolph Jackson: I would say it wouldn't be accurate to say we'll revert back to exactly where we were pre-COVID. Because, you know, a portion of the business has changed along with our acquisition since then. In the DSL range, I'd say, based on our cost customer mix, there should be improvement, but I wouldn't expect it to be below 50 in the near term. And inventory turns, you know, we're driving towards Say, in the 3.5 range at the end of this year into the first quarter of next year would be our, our, our expectation and certainly driving to, Find opportunities to even exceed that internally where we can.

Jackson: I would say it wouldn't be accurate to say well, we'll revert back to you.

Edward Randolph Jackson: Who exactly where we were pre COVID-19 because different wealth crane or a portion of the business has changed along with our acquisition since then.

Edward Randolph Jackson: And the DSO range I'd say based on our customer mix, there should be improvement, but I wouldn't expect it to be.

Edward Randolph Jackson: Below 50 in the near term.

Edward Randolph Jackson: And inventory turns.

Edward Randolph Jackson: We're driving towards let's say in the.

Edward Randolph Jackson: Three five range at.

Edward Randolph Jackson: At the end of this year into the first quarter of next year would be our R.

Edward Randolph Jackson: Our expectation and certainly driving to.

Edward Randolph Jackson: Okay.

Edward Randolph Jackson: Find opportunities even exceed that internally, where we can.

Speaker Change: Got it.

Speaker Change: I appreciate it thank you very much.

Gerard J. Sweeney: I appreciate it. A pleasure meeting you, Jackson. Thank you, Gerard.

Speaker Change: Pleasure meeting of Jackson, Thank you Gerry.

Gerard J. Sweeney: Yeah.

Gerard J. Sweeney: Our next question comes from Ted Jackson with Northland Securities. Please proceed with your question.

Operator: Our next question comes from Ted Jackson with Northland Securities. Please proceed with your question.

Edward Randolph Jackson: Thanks, Good morning.

Edward Randolph Jackson: Good morning Jed.

Edward Randolph Jackson: Dick, I want to delve into, you know, kind of the efforts you're making with regard to, you know, kind of, you know, restructuring, you know, operations and business. I have a few questions around that.

Edward Randolph Jackson: Vic I Wonder Auger into you know kind of the efforts youre, making with regards to you know kind of.

Edward Randolph Jackson: No.

Edward Randolph Jackson: Restructuring operations and business I have a few questions around that.

Edward Randolph Jackson: I want to start with the brand consolidation. So my my if I understood. You correct. You are going to are you eliminating all the different.

Edward Randolph Jackson: Brands from the various acquisitions and everything's going to Holly yet and then am I understanding that you're going to centralize a lot of operations for that.

Edward Randolph Jackson: Across those businesses and so.

Edward Randolph Jackson: And I want to start with brand consolidation. So my question is, if I understand you correctly, are you going to eliminate all the different brands from the various acquisitions, and everything's going to Allient? And then am I understanding that you're going to centralize a lot of operations for that, for that, you know, across those businesses? The reason I ask that is, you know, going back into your M&A, in the past, it seemed to me that the strategy for Allient was to, you know, buy great, small, smaller companies that, you know, kind of fit within your world, give them the resources to grow their businesses, usually kind of keep the management team in place, and really kind of let them run them.

Edward Randolph Jackson: The reason I asked that as well as us going back into your M&A you know in the past it seem to me that the strategy for Allianz was to buy great small smaller companies that you know kind of fit within your world.

Edward Randolph Jackson: Give them the resources to grow their businesses, usually kind of keep the management team in place and really kind of let them run it and when I listen to what Youre doing and I'm not criticizing it because honestly.

Edward Randolph Jackson: And, you know, when I listen to what you're doing, and I'm not criticizing it, because, honestly, I actually approve of it, but, you know, is it a change in kind of strategy? And how do you see that impacting your ability to bring in some of the, you know, acquisitions? Because I would think that for many of your targets, if they can, you know, have you own them, and they still get to run them, that that's kind of an attractive proposition for them. So that's my first question.

Edward Randolph Jackson: A proof of it but is.

Edward Randolph Jackson: Is it a change in kind of the strategy and how do you see that impacting your ability to bring in some of that to bring in acquisitions, because I would think that for many of your targets. If they can have you owned them and they still get a run at that that's kind of an attractive proposition for them. So that's my first question I have a couple more behind it.

Edward Randolph Jackson: Sure.

Dick: There's there's a lot of questions in that first question, Ted. So, let me, let me, go ahead, and Yeah, all right.

Speaker Change: There's a lot of questions in that first question Ted So let me let me let me go ahead and historic tax automobile.

Dick: So first off, the parent company is named Allient. Ted, you've joined in as an analyst for us within the last two to three years. If you go back in time,

Speaker Change: Yeah, all right. So first off the parent company named Elliot.

Speaker Change: Uh huh.

Dick: Ted you start you've joined in as an analyst for us within the last two to three years. If you go back in time.

Dick: When we began the roll-up in the motion side of the business and how we handled brands under allied motion, you will see that we took a logical and pragmatic approach to. We are changing the names over time, and so there are some that have been fully changed. And we're, you know, companies with separate names, but smaller, not necessarily, they had some brand recognition, but it was a limited customer base. So they were rolled into Allied Motion and basically Allied Motion at a location, for example, Tulsa, Stockholm, Dordrecht, etc.

Dick: When we began the roll up in the motion side of the business and how we handled brands under Allied motion.

Dick: You will see that we took a logical and approach too.

Dick: We are changing the names overtime and so there are some that have been fully changed than we're.

Dick: Companies with separate names with smaller not necessarily they had some brand recognition, but it was a limited customer base. So they were rolled into <unk>.

Dick: Allied motion and basically Allied motion in a location for example, Tulsa, Stockholm, Dordrecht et cetera.

Dick: As we.

Dick: As we move forward, there were certain reasons as we acquired other companies to maintain the individual brand a little longer. We do realize, as a company, that we want to compete as a company, and that's our strength, and by coming out with a new brand, a new name, Allient, say connecting what matters. Leveraging all of our pillars.

Dick: Moved forward there were certain reasons as we acquired other companies to maintain the individual brands.

Dick: A little longer.

Dick: We do realize as a company that we want to compete as a company and that's our strength and by coming out with a new brand a new name Allianz se connecting what matters.

Dick: Leveraging all of our pillars.

Dick: We've been working hard to identify opportunities within the vertical markets, and that gets into some of the realignment that I'm talking about; we'll discuss further. The opportunity to bring multiple technologies from the different pillars into the vertical markets as a solution as one company. There are many reasons for doing that.

Dick: We've been working hard.

Dick: Identify within the vertical markets and that gets into some of the realignment that I'm talking about.

Dick: We will discuss further.

Dick: The opportunity to bring multiple technologies from the different pillars into the vertical markets as the solution as one company.

Dick: There's many reasons for doing that.

Dick:

Dick: But if you don't do that then.

Dick: But if you don't do that, then what happens is each entity gets treated as an individual company. And if you want to get qualified with larger customers and open up the door to multiple products, it becomes very difficult and very restrictive. So, having a company, not just a name, but a company that has a quality management system, that has an outlook on all of the corporate initiatives that's consistent with what we're portraying as a corporation, which creates an image of a more powerful, more capable company that is going to focus on the verticals that can truly drive growth and provide better support. That's the reason.

Dick: What happens is each entity gets treated as an individual company and if you want to get qualified with larger customers and opened up the door for multiple products it becomes very difficult and very restrictive.

Dick: So having a company not just a name, but a company that has a quality management system.

Dick: That has an outlook on all of the corporate initiatives, that's consistent with what we're portraying corporation, which creates an image for a more powerful and more capable company.

Dick: That has got a focus on the verticals that can truly drive growth and provide better support. That's then that's the reason and.

Dick: It will still be a logical approach; it's not an overnight change. But as you'll see, we're introducing the parrot at trade shows. We're changing our literature.

Dick: It will still be a logical approach, it's not an overnight change.

Dick: And as you'll see we're introducing the parent.

Dick: At Tradeshows, we're changing literature, we're changing websites, we're doing all of that work behind the scene, but it's a slower it's a slow migration to ultimately get it to Elliot.

Dick: We're changing websites. We're doing all of that work behind the scenes, but it's a slow migration to ultimately get it to Allie, with regard to the individuals within the company. You're absolutely correct.

Dick: With regard to the individuals within the companies.

Dick: One of the first questions I receive at every single acquisition and post-acquisition meeting is, "What's going to happen to our name?", and we basically say that we will keep the brand. But for us, in order to be more cost-effective and from the operating expense standpoint, we need to merge some of this together in terms of having all these individual entities, having tax returns, having all, you know, the reporting that's necessary, the audits that are necessary if you keep these independent.

Dick: Youre absolutely correct one of the first questions I receive every single acquisition post acquisition meeting is what's going to happen to our name.

Dick: And we basically say that we will keep our brand.

Dick: But for us in order to be more cost effective and how it's already operating expense standpoint, we need to merge some of this together in terms of having all these individual entities, having tax returns having all the reporting that's necessary. The audits that are necessary. If you keep these independent we're bringing them together and we're doing that.

Dick: We're bringing them together, and we're doing that now. So we're putting logical groups of companies together. We're retaining management, and we're retaining key individuals. But what we're doing, though, is saying, hey, listen, there's a better way to operate as a combined entity to get the power and the strength of the corporation out there to leverage that and to bring everything we have that is possible to bring a more complete solution to the verticals and satisfy our customers.

Dick: Now so we're putting a logical groups of companies together, we're retaining management, we're retaining key individuals.

Dick: While we're doing though is saying hey, listen there's a better way to operate.

Dick: As a combined entity to get the power and the strength of the corporation out there to leverage that and to bring everything we have.

Dick: It is possible to bring a more complete solution into the verticals and satisfy our customers do it with a higher level of a higher level of expertise and focus so I see no issue.

Dick: Do it with a higher level of expertise and focus. So I see no issue with us. Acquiring companies, you know, in looking at our brand strategy over time, we'll have brands as products, but we'll have a company, one company that will support and service multiple brands. Okay, product brands, product lines, not companies. So we can simplify that whole side of our business. I think I've answered all your first questions.

Dick: With us.

Dick: Acquiring companies.

Dick: And looking at our brand strategy over time.

Dick: Brands as products, but will have a company one company that will support and service multiple brands okay.

Dick: Product brands product lines not companies. So we can simplify that whole side of our business.

Dick: I think I've answered all your first question.

Edward Randolph Jackson: Yep, yep. I mean, you get where I was going with this.

Dick: Yep Yep, I mean, you get where I was going with it. It's just it sounds like there is a shifted here you're going to you know.

Edward Randolph Jackson: Basically centralize a lot of you know kind of behind the scenes stuff you know with regards to.

Edward Randolph Jackson: It's just, it sounds like there is a shift here. You're going to, you know, basically centralize a lot of, you know, kind of behind the scenes stuff, you know, with regard to You know, like you said, like, you know, basically a lot of the stuff in the GNA. I am curious about it. How does it play?

Speaker Change: You know like you said like you know basically a lot of the stuff in the G&A I am curious with it how does it play I mean, a lot of the.

Dick: I mean, a lot of the, you know, different sort of entities within Allient had, you know, independent, you know, standalone sales efforts. Where are you doing on that front? Or is it too early to ask that question?

Edward Randolph Jackson: Different sort of entities within Alley had independent.

Dick: Standalone sales efforts, where what are you doing on that front or is it too early to ask that question.

Dick: No, that's certainly a fair question. That's one of the things that we leverage very, very quickly, is that we have, there isn't just one Alliant Salesforce. There will not be one Alliant Salesforce. So I'll make that very clear. I think while we can leverage many of the products in a solution in certain markets to certain customers, we're still going to have that demand that comes from discrete products to certain customers in certain markets. By pillars.

Speaker Change: So that's that's a certainly a fair question, that's one of the things that we leverage.

Dick: Very very quickly.

Dick: Is too we have it there isn't one Eliot sales force there will not be one allianz salesforce.

Dick: So make that very clear that it is.

Dick: While we can leverage.

Dick: Many of the products in a solution to certain certain markets certain customers were still going to have that demand that comes from discrete products to certain customers in certain markets by pillars. So we have that that structure is already in place. What we're doing is enhancing that what I say in here.

Dick: So we have that structure already in place. What we're doing is enhancing it. When I say enhancing it, I mean, for example, if we take, you know, the defense vehicles, okay? We sit there and we go through, you know, our strategy session, and we determine, okay, what are we selling into this market? Okay, what applications and how many different applications are we servicing within, let's just call it, a defense vehicle.

Dick: I mean for example, if we take that.

Dick: Defense vehicles okay.

Dick: We sit there and we go through our strategy session and we determined okay.

Dick: What are we selling into this market, okay, what applications and how many different applications are we servicing within let's just call. It a defense vehicle and we find that it's at.

Dick: And we find that, you know, it's very significant and things that, you know, maybe the team wasn't aware of, but now we can, now we're better prepared to have a customer-facing team that's totally knowledgeable about everything we can bring to bear, have the support, engineering support, application engineering support, and they can reach into the company, take an order from a customer for everything we're going to supply at one time. That's where the opportunity really lies.

Dick: It's very significant and things that you know maybe the teamed it wasn't aware of but now we can now we're better prepared to have a customer facing team. That's totally knowledgeable of everything we can bring to bear and the support engineering support application engineering support and they can reach into the company taken order from a customer.

Dick: <unk> four and everything we're going to supply in one time, that's where the opportunity really lies and then if you think about.

Dick: And then if we maintain the way we did it in the past, customers are placing individual orders at different locations. They all have to be entered, they all have to be invoiced, they all have to be tracked, and so forth, and it becomes complicated to do business with us. It's like dealing with not one company but multiple companies. And that's the one complaint that we would hear. You're, you know, yes, you're calling yourself one name, but you're not acting like one name.

Dick: If we maintained the way we did it in the past as customers are placing individual orders at different locations. They all have to be entered the off to be invoicing all have to be tracked and so forth.

Dick: And becomes complicated to do business with us, it's like dealing with not one company, but multiple companies and that's the one complaint that we would hear your yes, you're calling yourself one name, but youre not acting as one night and that's part of the change so from a transactional standpoint, the changes that we're looking at and say, okay internally getting.

Dick: And that's part of the change. So from a transactional standpoint, the changes that we're looking at are, internally, getting the IT systems in place that can support a structure: an order comes in, it's placed for an end user part number, let's call it X. And that X has many different components and sub assemblies coming from multiple locations within Allient. Take that order.

Dick: The it systems in place that can support a structure and order comes in it's place for end user part number let's call it X and that X as many.

Dick: Components and sub assemblies coming from multiple locations within Elliot.

Dick: You take that order, we drive demand one time throughout the company be satisfied we ship ultimately ship the product we invoice once and we have one receivable and we drive the revenue recognition and the the profit recognition back into this specific to us so.

Dick: We drive demand one time throughout the company. Satisfied, we ultimately ship the product, and we invoice once. And we have one receivable, and we drive, you know, the revenue recognition and the profit recognition back into the specific to use. So it sounds like. It's a very tremendous simplification of the duplicative process we have to deal with one customer shipping many products, different customer service, you know, facing units facing the customer, and all the transactional processing we have to go through.

Dick: So it sounds like.

Dick: It's a it is a very a tremendous simplification of the duplicative.

Dick: The process, we have to deal with one customer shipping many products with different customer service.

Dick: Facing.

Dick: Units facing to the customer and all the transactional processing, we have to go through so that's some of that simplification we're talking about.

Dick: So that's some of that simplification we're talking about. But it's also a true alignment of the expertise and digging deeper into those applications and supporting them with everything we have available. Okay, so there's work to be done. We talked about systems in order to be able to do this, connecting those systems. Not everybody's on the same computer system, but that process continues to move forward. When that happens, it really simplifies things, and it's a transaction that occurs electronically, not manually, each time, as some of it is today.

Dick: It's also a true alignment of the expertise and digging deeper into those applications and supporting it with everything we have available.

Dick: Hey.

Dick: So theres work there.

Dick: We talked about systems in order to be able to do this connecting those systems not everybody's on the same computer system, but that process continues to move forward, but when that occurs it really simplifies and it's a transaction that occurs electronically not manually each time as some of it is today.

Speaker Change: Well, Matt I think you answered one of my next questions, which was you know it sounds like with this reorganization if you would've process that that there is.

Edward Randolph Jackson: Well, Nat, I think you answered one of my next questions, which was, you know, sounds like with this, you know, reorganization, if you would, a process that there is, that you'll be going through a consolidation of kind of back office systems and such, and as I assume this involves, like, you know, possibly a new ERP, like a standardized ERP and, and CRM systems and things along those lines, and And I clearly, having gone through that in my operational days, it's clearly a multi-year project to, you know, kind of map that out and get it in place and get it into your solutions. You have got to be really careful with it. I mean, is that what I'm hearing from you?

Edward Randolph Jackson: Did that you'll be going through a consolidation of kind of back office systems and such.

Edward Randolph Jackson: That assumed this involves like possibly new ERP like a standardized ERP.

Edward Randolph Jackson: And.

Edward Randolph Jackson: CRM systems and things along those lines in the or the process of kind of mapping that out.

Edward Randolph Jackson: I haven't gone through that in my operational days is clearly a multiyear project to kind of map that out and get it in place and get it into your secure solutions you got to be really careful with it I mean to me says that what I'm hearing from you.

Dick: We need to be clear. We've been doing that. Okay.

Speaker Change: I'll, let lutz.

Dick: Need to be clear, we've been doing that okay. That's been ongoing for multiple years now and we have converted the vast majority of the acquisitions onto a common system the vast majority.

Dick: That's been ongoing for multiple years now, and we have converted the vast majority of the acquisitions onto a common system.

Dick: It's the, you know, some of the smaller ones, I think, where the real benefit is to be derived because we're adding capabilities that didn't even exist. So that process has been ongoing, and it will continue, and we have a really good team. That was how I started my career in that area. And we have a really good team that, from starting a project to executing and getting it implemented in a very short period of time, and it's been done successfully over and over and over.

Dick: It's the.

Dick: Some of the smaller ones I think is where the real benefit is to be derived through as we're adding capabilities that didn't even exist. So that process has been ongoing is continue so we have a really good team.

Dick: That was how I started my career in that area and we have a really good team that.

Dick: From the starting of the project to executing and getting it implemented as a very short period of time and it's been done successfully over and over and over so we're we're not starting now we're well along the way and we're completing I'll say, we're in the final phases of completing the conversion and the cutover.

Dick: So we're not starting now. We're well along the way, and we're completing, I'll say we're in the final phases of completing the conversion and the cutover to a common system. And that won't be all. I do have to be clear, we do operate very well internally here using Hyperion or HFM to consolidate and create business reports for us, because there are systems that are deeply rooted in certain companies that you just can't rip out.

Dick: To a common system and it won't be all.

Dick: I do have to be clear, we do operate very well internally here using hyperion or H F M to consolidate in due.

Dick: Create business reports for us.

Dick: Because there are deeply systems that are deeply rooted in certain number of certain companies that you just can't rip out so where we can and we've already are well down that path.

Dick: So where we can, and we're already well down that path, have been doing it, and it's been done successfully. I'll call it in the later innings here where we're at the point of getting close to getting, you're never done, but getting close to the point of getting the identified systems up and converted and running as a company.

Dick: I've been doing it and it's been done successfully and we're I'll call. It in the later innings here of where we're at the point of getting close to getting they've never done, but getting close to the point of getting.

Dick: The identified systems up and converted and running as a as a company.

Dick: Well I think it's going to be our exciting journey.

Edward Randolph Jackson: Well, I think it's going to be an exciting journey. And I, you know, I've been through some of that stuff before. And I will tell you, it's pretty interesting, you know, beyond your stuff you're doing to organize the business to be more effective with regard to customer service, you know, when you get in and you start getting into, you know, cost improvements and cost-saving stuff. You know, it's much easier to make a dollar by saving a dollar than it is by going out and selling stuff to make a dollar, if that makes sense to you

Edward Randolph Jackson: <unk> been through some of that stuff before I will tell you. It's pretty interesting you know beyond your stuff youre doing to organize the business to be more effective with regards to customer facing when you get in and you start getting into.

Edward Randolph Jackson:

Edward Randolph Jackson: Cost improvements and cost savings stuff.

Edward Randolph Jackson: It's much easier to make a dollar by saving a dollar than it is by going and selling stuff to make a dollars that makes sense to you and I I applaud you for going at it and I look forward to hearing about the progress in the years to come and I will step out of line.

Edward Randolph Jackson: And I applaud you for going at it, and I look forward to hearing about the progress in the years to come. I'll step out of line. Thank you. That was great. Thanks, Ted.

Dick: Yeah, and I think just to add to the back end of that is that the reasons for doing this are also to establish the foundation for the next level of growth in the company. And we feel that the time is right. We've had several and many acquisitions. We did a fast-paced, one at a time, to bring those together and to establish this really strong base and foundation so we can move into the next level of growth that we expect within the company. So that's that's the other important part of this as well. But thanks for all your comments and questions. I appreciate it.

Speaker Change: That was great. Thanks Ted.

Edward Randolph Jackson: That was great. Thanks, Ted.

Edward Randolph Jackson: I think just to add to the backend of that is.

Edward Randolph Jackson: The reasons for doing this is also to establish the foundation for the next level of growth in the company and we feel that the time is right.

Edward Randolph Jackson: <unk> had several and many acquisitions, we did it hit a fast pace.

Edward Randolph Jackson: Time to bring those together into established this really strong base and foundation. So we can move into the next level of growth that we expect within the company.

Speaker Change: The other important part of this as well, but thanks for all your comments and questions I appreciate it.

Edward Randolph Jackson: Our next question comes from Brent Kearney with American Rebirth opportunity partners. Please proceed with your question.

Operator: Our next question comes from Brent Kearney with American Rebirth Opportunity Partners. Please proceed with your question.

Brett Kearney: Hi, good morning, Dick and Jackson. Thanks for all the insights you've shared thus far on this morning's call. Now, good morning. I had a question on your growing power technology pillar. Can you help us think about, you know, either the magnitude or potential runway you're seeing for some of your solutions there going into the fast evolving data center market as well as your ability to supply that I think the FNC manufacturing acquisition unlocks for the TCI business?

Brett Kearney: Hi, Good morning, <expletive> and Jackson, Thanks for all the insights you've shared thus far on the call. This morning.

Speaker Change: Yes, good morning.

Brett Kearney: I had a question on your growing power technology pillar.

Brett Kearney: Help us think about either magnitude or potential runway, you're seeing for some of your solutions they are going into.

Brett Kearney: The fast evolving data center market as well as your.

Brett Kearney: Our ability to supply I think that's an see manufacturing acquisition unlocks the PCI business.

Speaker Change: Yeah, that's a great question and I want to talk about one of the exciting opportunity areas for us and highlights I mean, you've identified it.

Dick: Yeah, that's a great question. And you want to talk about one of the exciting opportunity areas for us and the highlights. I mean, you've identified the combination of TCI and SNC and the opportunity for us with the management teams to look at the true synergies that these combined entities can bring. It's extensive and exciting, and you hit it as far as data centers and the ongoing demand and need for that. Certainly, that's not going away.

Dick: The combination of TCA in S N C and the opportunity for us with the management teams to look at the true synergies that these combined entities can bring.

Dick: It's extensive and it's exciting.

Dick: And you hit it as.

Dick: As far as data centers, and the ongoing demand and need for that.

Dick: That will continue to explode over the years ahead. So the second thing you asked about or you mentioned was the ability to supply. Certainly, anyone following the industry has seen lead times have extended. They still have supply chain issues in that market for certain materials, which have caused orders that can be placed for 12 or 24 months out still. For us, the expanded footprint that these operations bring together, the Mexican facility that's well established for SNC, that's something that's being leveraged immediately, and it is resulting in our ability to service customers and supply. So we were capacity constrained.

Dick: Certainly that's not going away that will continue to explode over the years ahead. So the second thing. Your question you asked about you mentioned.

Dick: Was the ability to supply.

Dick: Anyone following the industry has seen lead times have extended.

Dick: They still have supply chain issues in that market for certain materials, which have caused orders that can be placed for 12 or 24 months out still.

Dick: For us.

Dick: The.

Dick: The expanded footprint that these operations bring together.

Dick: The Mexican facility, that's well established for S. N C is that's something that's being leveraged immediately.

Dick: And it is resulting in our ability to service customers and supply.

Dick: So we were capacity constrained that's been unleashed and it's happening quickly and I can only say a compliment.

Dick: That's been unleashed, and it's happening quickly. And I can only say I compliment the teams in Wisconsin and Mexico and China and so forth for their efforts here to ensure that this happens as quickly and efficiently as possible. And that's actually happening right now. So that's a great question. One of the bright spots and bright opportunities for the future. The synergies there are extensive, and literally the opportunity to create this one company approach to the market exists with the combination of those two. Excellent

Dick: The teams in Wisconsin in Mexico, and China, and so forth where their efforts here to ensure that happens as quickly and as efficiently as possible and thats actually happening. So that's a great question one of the bright spots in bright opportunities for the future. The synergies there are extensive and literally the opportunity.

Dick: To create this one company approach to the market exists with the with the combination of those two.

Speaker Change: Excellent. Thanks, so much.

Brett Kearney: Excellent. Thanks so much, Jack.

Brett Kearney: Okay.

Jack: Thank you Brad.

Speaker Change: We have reached the end of the question and answer session I'd now like to turn the call back over to management for closing comments.

Dick: We've reached the end of the question and answer session. I'd now like to turn the call back over to management for closing comments.

Speaker Change: Thank you everyone for joining us on today's call and for your interest in alien.

Dick: Thank you everyone for joining us on today's call and for your interest in Allient. We will be participating in the Craig Hallam Investor Conference on May 29 in Minneapolis. Otherwise, as always, please feel free to reach out to us at any time, and we look forward to talking with all of you again after our second quarter 2024 results. Thank you for your participation, and have a great day.

Dick: We will we will be participating in the Craig Hallum Investor Conference on May 29 in Minneapolis.

Dick: Otherwise as always please feel free to reach out to us at any time and we look forward to talking with all of you again after our second quarter 2024 results.

Dick: Thank you for your participation and have a great day.

Speaker Change: This concludes today's conference you may disconnect your lines at this time.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Operator: You for your participation.