Q2 2024 Allient Inc Earnings Call

August 8, 2024

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Operator: Greetings and welcome to the Allient in second quarter fiscal year 2024 financial results conference call. At this time, all participants are in the list and only mode. A question and answer session will follow the formal presentation.

Greetings and welcome to the Allient, Inc. Second Quarter Fiscal Year 2024 Financial Results Conference Call.

At this time, all participants are in a listen-only mode.

Operator: If anyone should require upper ear assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

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.

Deborah Pawlowski: I would now like to turn the conference over to your host, Deborah Pawlowski, of Investor Relations for Allient. Please go ahead.

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Deborah Pawlowski, of Ministerial Relations for Allient. Please go ahead.

Deborah Pawlowski: I would now like to turn the conference over to your host, Deborah Pawlowski of Investor Relations for Allient. Please go ahead.

Deborah Pawlowski: Thank you, Joe.

Unknown Executive: Thank you, Joe. And good morning, everyone. We certainly appreciate your time today, as well as your interest in Allient. Joining me on the call are Dick Warzala, our Chairman, President, and CEO, and Jim Michaud, our Chief Financial Officer. In fact, join me in welcoming Jim to his first earnings call with us, as he just joined Allient on June 3rd this year. Nick and Jim are going to review our second quarter 2024 results and provide an update on the company's strategic progress and outlook, after which we will open up the lines for Q&A.

Deborah Pawlowski: And good morning, everyone. We certainly appreciate your time today, as well as your interest in Allient.

Deborah Pawlowski: Thank you, Joe, and good morning, everyone. We certainly appreciate your time today, as well as your interest in Allient.

Deborah Pawlowski: Joining me on the call are Dick Warzala, our Chairman, President, CEO, and Jim Michaud, our Chief Financial Officer. In fact, joining me in welcoming Jim to his first earnings call with us as he just joined Allient on June 3rd this year.

Speaker Change: Joining me on the call are <expletive> Warzala, our Chairman, President, CEO , and Jim Michaud, our Chief Financial Officer. In fact, join me in welcoming Jim to his first earnings call with us, as he just joined Allient on June 3rd this year.

Deborah Pawlowski: Dick and Jim are going to review our second quarter 2024 results and provide an update on the company's strategic progress and outlook, after which we will open up the lines for Q&A. You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find it on our website at Allient.com. Along with, also posted there will be the slides that accompany today's discussion.

Speaker Change: Nick and Jim are going to review our second quarter 2024 results and provide an update on the company's strategic progress and outlook, after which we will open up the lines for Q&A.

Unknown Executive: You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find them on our website at Allient.com. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

Unknown Executive: You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find them on our website at Allient.com, along with the slides that accompany today's discussion.

Unknown Executive: You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find it on our website at Allient.com.

Unknown Executive: Along with, also posted there will be the slides that accompany today's discussion.

Deborah Pawlowski: If you are reviewing those slides, please turn to slide two and save harbor statements. As you are aware, we may make overlooking statements on this call during the formal discussion, as well as during the Q&A. These statements apply to future of them, there's subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated on state's call. These risks and uncertainties and other factors are discussed in the earnings release, as well as with other documents filed by the company with the Securities and Exchange Commission. You can find these documents on our website for at SEC.com.

Unknown Executive: If you are reviewing those slides, please turn to slide 2 for the Safe Harbor statement. As you are aware, we may make oversight statements on this call during a formal discussion as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated on today's call. These risks and uncertainties and other factors are discussed in the earnings release, as well as in other documents filed by the company with the Securities and Exchange Commission.

Unknown Executive: If you are reviewing those slides, please turn to slide 2 for the Safe Harbor Statement.

Unknown Executive: As you are aware, we may make overlooking statements on this call during a formal discussion as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated on today's call.

Unknown Executive: These risks and uncertainties and other factors are discussed in the earnings release, as well as with other documents filed by the company with the Securities and Exchange Commission.

Unknown Executive: You can find these documents on our website or at sec.gov. I want to point out as well that during today's call, we will discuss some 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've provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release, as well as the slides. For that, please turn to slide three, and I will turn it over to Dish to begin.

Deborah Pawlowski: I want you to point out as well that during today's call we will discuss some non-GAAP measures which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information and isolation for the substitute for results prepared in accordance with GAAP. We've provided recommendations of non-GAAP to comparable GAAP measures in the tables, accompanying the earnings release as well as the slides.

Unknown Executive: You can find these documents on our website or at sec.gov.

Unknown Executive: I want to point out as well that during today's call we will discuss some non-GAAP measures which we believe will be useful in evaluating our performance.

Unknown Executive: You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP.

Unknown Executive: We've provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release as well as the slides.

Deborah Pawlowski: So that, please turn to slide three, and I will turn it over to this to begin.

Dick Warzala: Thank you, Debbie, and welcome, everyone. Before we delve into this quarter's discussion, I'm excited to be on the call with our new CFO. As Deb mentioned, Jim has been with us now for just over two months. During this time, Jim has been intimately engaged with our team to gain an understanding of our process, to support the advancement of our Simplify to Accelerate Now strategy, especially given his experience.

Unknown Executive: For that, please turn to slide three and I will turn it over to Dick to begin.

Richard Warzala: Thank you, Debbie, and welcome everyone. Before we delve into this quarter's discussion, I'm excited to be on the call with our new CFO. As Deb mentioned, has been with us now for just over two months. During the time Jim has been intimately engaged with our team to gain an understanding of our processes and to support the advancement of our Simplify to Accelerate Now strategy, especially given his experience with similar types of initiatives in his previous roles. As a financial leader in both multinational public and private companies, Jim brings an extensive background of establishing high performing finance operations and transforming organizations, which makes him a valuable addition to our team.

Dick Warzala: Similar types of initiatives in his previous role, as a financial leader in both multinational public and private companies. Jim Briggs has an extensive background in establishing high-performance finance operations and transforming organizations, which makes him a valuable addition to our team. We're confident that Jim's contributions will be instrumental in helping to assure and achieve our strategic goal.

Unknown Executive: Thank you, Debbie, and welcome everyone.

Speaker Change: Before we delve into this quarter's discussion, I'm excited to be on the call with our new CFO, who, as Deb mentioned, has been with us now for just over two months.

Unknown Executive: During this time, Jim has been intimately engaged with our team to gain an understanding of our processes.

Unknown Executive: And to support the advancement of our Simplify to Accelerate Now strategy, especially given his experience with similar types of initiatives in his previous roles.

Unknown Executive: As a financial leader in both multinational public and private companies.

Unknown Executive: Jim Briggs and extensive background of establishing high-performing finance operations and transforming organizations.

Richard Warzala: For competent that Jim's contributions will be instrumental in helping to assure we achieve our strategic goal.

Unknown Executive: which makes him a valuable addition to our team.

Unknown Executive: We're confident that Jim's contributions will be instrumental and healthy to assure.

Richard Warzala: Well, we got into the quarter. I am proud of the efforts of our team to address the market headwinds that we've had to face. While the quarter started off decently, we saw a significant shift in demand in June. This decline was broadly evident across most of our serve markets, but was felt most acutely in industrial automation, where destocking continues, as well as the power sports market, which reflects every reduction in consumer demand. As you may have noticed, several public companies in similar markets have already reported their end market demand challenges and ultimately a reduction in year-over-year revenue.

Dick Warzala: Moving on to the quarter, I am proud of the efforts of our team to address the market headwinds that we've had to face. While the quarter started off decently, we saw a significant shift in demand in June. This decline was broadly evident across most of our served markets, but was felt most acutely in industrial automation, where de-stocking continues, as well as the power sports market, which reflects a reduction in consumer demand.

Unknown Executive: We achieve our strategic goals.

Speaker Change: willll be gone throughto the quarter i' m proud of the efforts of our team to address the market headwinds that we've had to face

Speaker Change: While the quarter started off decently, we saw a significant shift in demand in June .

Speaker Change: This decline was broadly evident across most of our served markets, but was felt most acutely in industrial automation, where destocking continues, as well as the power sports market, which reflects a reduction in consumer demand.

Dick Warzala: As you may have noticed, several public companies in similar markets have already reported their end market demand challenges and ultimately a reduction in year over year revenue. I should also note that we believe the push-out in orders is the result of inventory adjustments. The Extended Level of Higher Interest, especially with apparent reductions in the not-so-distant future, combined with political uncertainty. However, our diversification does help somewhat as we continue to benefit from the macro trends of electrification, energy conservation, and automation. Nonetheless, our actions to simplify could not be more timely.

Unknown Executive: As you may have noticed, several public companies in similar markets have already reported their end market demand challenges and ultimately a reduction in year over year revenue. Reorganize to be more productive and drive stronger earnings power, and given current market conditions, our approximately five million in annualized savings realized to date are even more relevant. As noted on slide four, our Simplify to Accelerate Now plan is even more meaningful given the current market conditions.

Richard Warzala: I should also note that we believe the push out in orders is the result of inventory adjustments. The extended level of higher interest rates, especially with apparent reductions in the not-so-distant future, combined with political uncertainty. Our diversification does help somewhat as we continue to benefit from the macro trends of electrification, energy conservation, and automation.

Unknown Executive: I should also note that we believe the push out in orders is the result of inventory adjustments.

Unknown Executive: The Extended Level of Higher Interest Rates.

Unknown Executive: Especially with apparent reductions in the not-so-distant future, combined with political uncertainty.

Unknown Executive: Our diversification does help somewhat as we continue to benefit from the macro trends of electrification, energy conservation, and automation.

Richard Warzala: Nonetheless, our actions to simplify to accelerate now could not be more timely. As we have discussed, we run an accelerated path to reorganize to be more productive and drive stronger earnings power, and given current market conditions, are approximately five million in annualized savings realized the date are even more relevant. Our decremental margin and reflex top-line softness, unfavorable mix, and inventory reserves. The mixed impact included the replacement of higher margin incremental industrial automation sales with lower margin sales from our most recent acquisition. We expect our simplification process, combined with the implementation of our integration plans and the capacity gained with the acquisition of SNC, will drive and improve margin profile in the future.

Unknown Executive: Nonetheless, our actions to simplify to accelerate now could not be more timely.

Dick Warzala: As we have discussed, we are on an accelerated path to reorganize to be more productive and drive stronger earnings power, and given current market conditions, our approximately $5 million in annualized savings realized to date are even more relevant. Our decremental margin reflects top-line softness, unfavorable mix, and inventory reserve. The mixed impact included the replacement of higher-margin incremental industrial automation sales. Lower Margin Sales from our most recent acquisition. We expect our simplification process, combined with the implementation of our integration plans and the capacity gained with the acquisition of SNC, will drive an improved margin profile in the future.

Unknown Executive: As we have discussed, we are on an accelerated path.

Unknown Executive: To reorganize, to be more productive, and drive stronger earnings power, and given current market conditions, our approximately $5 million in annualized savings realized to date are even more relevant.

Unknown Executive: Our decremental margin reflects top-line softness, unfavorable mix, and inventory reserves.

Unknown Executive: The mixed impact included the replacement of higher-margin incremental industrial automation sales.

Unknown Executive: With lower margin sales from our most recent acquisition.

Unknown Executive: We expect our simplification process combined with the implementation of our integration plans and the capacity gained with the acquisition of SNC.

Richard Warzala: As noted on slide four, our simplified to accelerate now plan is even more meaningful given the current market conditions. As we mentioned, we executed five million in annualized cost reductions in the second quarter, and we were working on implementing an additional five million in annualized cost savings in the second half of 2024. A key focus of the restructuring involves transferring specific production activities from various U.S. operations to our existing lower cost facilities in Mexico. Additionally, we have reduced our workforce across most global operations to align with expected demand. GM will further discuss the restructuring charges and inventory adjustments in the quarter related to these actions.

Dick Warzala: As noted on slide four, our Simplify to Accelerate Now plan is even more meaningful given the current market conditions. As we mentioned, we executed $5 million in annualized cost reductions in the second quarter, and we're working on implementing an additional $5 million in annualized cost savings in the second half of 2024. A key focus of the restructuring involves transferring specific production activities from various U.S. operations to our existing lower-cost facilities and back. Additionally, we have reduced our workforce across most global operations to align with expected demand.

Unknown Executive: We'll drive an improved margin profile in the future.

Unknown Executive: As noted on slide four, our Simplified to Accelerate Now plan is even more meaningful given the current market conditions.

Unknown Executive: As we mentioned, we executed $5 million in annualized cost reductions in the second quarter and we're working on implementing an additional $5 million in annualized cost savings in the second half of 2024.

Unknown Executive: A key focus of the restructuring involves transferring specific production activities from various U.S. operations.

Unknown Executive: to our existing lower-cost facilities in Mexico.

Unknown Executive: additionally we have reduced our workforce across most global operations to align with expected demand

Unknown Executive: Jim will further discuss the restructuring charges and inventory adjustments in the quarter related to these actions.

Richard Warzala: While we are moving decisively to reduce our cost structure, we continue to implement programs aimed at driving future growth. We are moving confident in our long-term strategy and the fundamental strength of our value proposition.

Dick Warzala: Jim will further discuss the restructuring charges and inventory adjustment in the quarter related to these actions. While we are moving decisively to reduce our cost structure, we continue to implement programs aimed at driving future growth. We remain confident in our long-term strategy and the fundamental strength of our value proposition. With that, I will turn it over to Jim for a more in-depth review of the financials. Thank you, Derek.

Unknown Executive: While we are moving decisively to reduce our cost structure, we continue to implement programs aimed at driving future growth.

Unknown Executive: A key focus of the restructuring involves transferring specific production activities from various U.S. operations in the quarter related to these actions. We remain confident in our long-term strategy and the fundamental strength of our value proposition. With that, let me turn it over to Jim for a more in-depth review of the financials.

Jim: We remain confident in our long-term strategy and the fundamental strength of our value proposition.

James Michaud: With that, let me turn it over to Jim for a more in-depth review of the financials.

Unknown Executive: With that, let me turn it over to Jim for a more in-depth review of the financials.

Jim: Thank you, Derek, and good morning, everyone. During the quarter, our vehicle markets experienced a 17% decline in sales, primarily driven by reduced demand for power sports and continued weakness in the agricultural vertical. In the aerospace and defense sector, sales declined primarily due to program timing within the space industry. The Industrial Vertical maintained its position as our largest market, accounting for 46% of the total trailing month's sales, a notable expansion of 500 basis points. Vehicle market revenue remained flat on a trailing 12 month basis, with higher demand for commercial vehicles offset by lower demand for power sports and agriculture.

Jim Michaud: Thank you, Dick, and good morning, everyone. As this is my first earnings call with the company, I want to start by expressing my gratitude for the warm welcome I received from the team and for the opportunity to work with such a talented group. In my short time here, I've been impressed by the dedication and resilience of our team. I'm excited to be part of Allient and to contribute to our ongoing success.

James Michaud: Thank you, Dick, and good morning, everyone. As this is my first earnings call with a company, I want to start by expressing my gratitude for the warm welcome I received from the team and for the opportunity to work with such a talented group. In my short time here, I have been impressed by the dedication and resilience of our team. I am excited to be part of Allian and to contribute to our ongoing success.

Jim: Thank you, Derek, and good morning, everyone.

Speaker Change: As this is my first earnings call with the company, I want to start by expressing my gratitude for the warm welcome I received from the team and for the opportunity to work with such a talented group.

Speaker Change: In my short time here, I've been impressed by the dedication and resilience of our team. I'm excited to be part of Allient and to contribute to our ongoing success.

James Michaud: Today I'll provide an overview of our financial performance for the quarter, including key highlights in areas where we are focusing our efforts. Starting on slide five, second quarter revenue of 136 million was down a year over year by 7 percent. The impact of foreign currency exchange rate fluctuations was nominally unfavorable by 700,000. During the quarter, our vehicle markets experienced a 17 percent decline in sales, primarily driven by reduced demand in power sports and continued weakness in the agricultural vertical. These impacts were partially offset by increased demand in commercial automotive, thanks to the ramp up of new programs that we have won over the years.

Jim Michaud: Today, I'll provide an overview of our financial performance for the quarter, including key highlights and areas where we are focusing our efforts. Starting on slide 5, second quarter revenue of $136 million was down year over year by 7%, and the impact of foreign currency exchange rate fluctuations was nominally unfavorable by $700,000.

Speaker Change: Today, I'll provide an overview of our financial performance for the quarter, including key highlights and areas where we are focusing our efforts.

Jim: Starting on slide 5, second quarter revenue of $136 million was down year over year by 7%. The impact of foreign currency exchange rate fluctuations was nominally unfavorable by $700,000.

Jim Michaud: During the quarter, our vehicle markets experienced a 17% decline in sales, primarily driven by reduced demand for power sports and continued weakness in the agricultural vertical. These impacts were partially offset by increased demand for commercial vehicles thanks to the ramp-up of new programs that we have won over the years. The industrial market saw a 3% decrease despite strengthened power quality sales, notably to the HVAC and data center market, and additional sales from our recent acquisition.

Jim: During the quarter, our vehicle markets experienced a 17% decline in sales, primarily driven by reduced demand in power sports and continued weakness in the agricultural vertical.

Jim: These impacts were partially offset by increased demand in commercial automotive thanks to the ramp-up of new programs that we have won over the years.

James Michaud: The industrial markets saw a 3 percent decrease, despite strengthened power quality sales, notably to the HVAC and data center market, and additional sales from our recent acquisition. These bright spots were counterbalanced by lower demand and industrial automation, as Dick noted, and within our pumps and material handling markets. Our medical markets also saw a decline, which was broad base but primarily due to the persistent softness in medical mobility products and solutions, a trend that has persisted over the past few years. The bankruptcy of a large customer in the space has also had an impact on demand.

Jim: The industrial market saw a 3% decrease despite strengthened power quality sales, notably to the HVAC and data center market, and additional sales from our recent acquisition.

Jim Michaud: These bright spots were counterbalanced by lower demand in industrial automation, as Dick noted, and within our pumps and material handling market. Our medical markets also saw a decline, which was broad-based but primarily due to the persistent softness in medical mobility products and solutions, a trend that has persisted over the past few years. The bankruptcy of a large customer in the space industry has also had an impact on demand. In the aerospace and defense sector, sales declined primarily due to program timing within the space industry. However, we are seeing positive movement on the defense side, with several notable opportunities that we are working on.

Speaker Change: These bright spots were counterbalanced by lower demand in industrial automation, as <expletive> noted, and within our pumps and material handling markets.

Jim: Our medical markets also saw a decline, which was broad-based, but primarily due to the persistent softness in medical mobility products and solutions, a trend that has persisted over the past few years. The bankruptcy of a large customer in this space has also had an impact on demand.

James Michaud: In the aerospace and defense sector, sales declined primarily due to program timing within the space industry. However, we are seeing positive movement on the defense side with several notable opportunities that we are working.

Jim: In the aerospace and defense sector, sales declined primarily due to program timing within the space industry. However, we are seeing positive movement on the defense side with several notable opportunities that we are working.

James Michaud: Slide 6 highlights the shift in our revenue mix across markets over the trailing 12 months, along with the catalyst for each change. The industrial vertical maintained its position as our largest market, accounting for 46 percent of the total trailing months' sales, a notable expansion of 500 basis points. The 14 percent growth in the space industry reflects strong demand for power quality. On a trailing 12 month basis, industrial automation had benefited from supply chain environment improvements but has recently fallen back as the industry resets within inventory levels. The vehicle market revenue remained flat on a trailing 12-month basis with higher demand in commercial automotive offset by lower demand in power sports and agriculture.

Jim Michaud: Slide 6 highlights the shift in our revenue mix across markets over the trailing 12 months, along with a catalyst for each change. The Industrial Vertical maintained its position as our largest market, accounting for 46% of the total trailing month's sales, a notable expansion of 500 basis points. The 14% growth in the space industry reflects strong demand for power quality.

Jim: Slide 6 highlights the shift in our revenue mix across markets over the trailing 12 months, along with a catalyst for each change.

Jim: The Industrial Vertical maintained its position as our largest market, accounting for 46% of total trailing months sales, a notable expansion of 500 basis points.

Jim: The 14% growth in the space industry reflects strong demand for power quality. On a trailing 12-month basis, industrial automation had benefited from supply chain environment improvements but has recently fallen back as the industry resets with inventory levels.

Jim Michaud: On a trailing 12-month basis, industrial automation had benefited from supply chain environment improvements, but it has recently fallen back as the industry resets with inventory levels. Vehicle market revenue remained flat on a trailing 12-month basis, with higher demand in commercial automotive offset by lower demand in power sports and agriculture. Both medical and aerospace and defense saw a decrease on a trailing 12-month basis, reflecting the same impacts as the past quarter.

Jim: vehicle market revenue remained flat on a trailing twelve month basis with higher demand in commercial automotive offset by lower demand inempowerw boards and agriculture

James Michaud: Both the medical and aerospace and defense saw a decrease on a trailing 12-month basis, reflecting the same impacts as the past quarter. Lastly, sales through the distribution channel, a small component of total sales, accounted for 4 percent of the trailing 12-month period.

Jim: Both the medical and aerospace and defense saw a decrease on a trailing 12-month basis reflecting the same impacts as the past quarter. Lastly, sales through the distribution channel, a small component of total sales, accounted for 4% of the trailing 12-month period.

Jim Michaud: Lastly, sales through the distribution channel, a small component of total sales, accounted for 4% of the trailing 12-month period. As detailed on slide 7, gross profit was $40.7 million, and gross margin was 29.9%. The 140 basis point decline was primarily due to underabsorption on lower volume, an unfavorable mix including the expected margin dilution from the S&C acquisition, and $1.2 million in non-cash inventory reserves. Half of the inventory write-down was related to the bankruptcy I mentioned earlier, and the rest was mostly due to changes. Projected Demand. We believe our underlying business can command a higher margin. Profile, but we have to work in order to get there.

James Michaud: As detailed on slide 7, gross profit was 40.7 million, and gross margin was 29.9 percent. The 140 basis point decline was primarily due to underabsorption on lower volume, an unfavorable mix including the expected margin dilution from the SNC acquisition, and 1.2 million in non-cash inventory reserves. Half of the inventory write down was related to the bankruptcy I mentioned earlier, and the rest was mostly due to changes in projected demand. We believe our underlying business can command a higher margin profile, but we have to work in order to get there. On Slide 8, you can see the lower gross profit, 1.5 million of restructuring and business realignment costs, and higher engineering expenses impacted operating income, resulting in income of 4.9 million and operating margin of 3.6%.

Jim: As detailed on slide 7, gross profit was $40.7 million and gross margin was 29.9%.

Jim: The 140-basis point decline was primarily due to underabsorption on lower volume, an unfavorable mix including the expected margin dilution from the S&C acquisition, and $1.2 million in non-cash inventory reserves.

Speaker Change: Half of the inventory write-down was related to the bankruptcy I mentioned earlier, and the rest was mostly due to changes in projected demand.

Speaker Change: We believe our underlying business can command a higher margin profile, but we have to work in order to get there.

Jim Michaud: On slide 8, you can see the lower gross profit, $1.5 million of restructuring and business realignment costs, and higher engineering expenses impacted operating income, resulting in an income of $4.9 million and an operating margin of 3.6%. However, costs related to the restructuring were primarily separate. Operating costs and expenses were 26.3% of revenue, an increase of 320 basis points, of which 110 basis points were attributable to the restructuring costs. We are intensely focused on improving our profitability despite market conditions.

Speaker Change: on slide eight you can see the lower gross profit one point five million of restructuring and business realignment cost and higher engineering expenses impacted operating income resulting in income of four point nine million

James Michaud: Costs related to the restructuring were primarily severance. Operating costs and expenses were 26.3% of revenue, an increase of 320 basis points, of which 110 basis points were attributable to the restructuring cost. We are intensely focused on improving our profitability despite market conditions.

Jim: Operating Margin of 3.6%. Costs related to the restructuring were primarily severance.

Jim: Operating costs and expenses were 26.3% of revenue, an increase of 320 basis points of which 110 basis points were attributable to the restructuring costs. We are intensely focused on improving our profitability despite market conditions.

James Michaud: Slide 9 shows net income was 1.2 million and earnings per diluted share was 7 cents. Adjusted net income of 4.9 million or 29 cents per diluted share adjusts for the non-cash amnesty of intangible assets to address the accounting requirements of an innovative and acquisitive company. The effective tax rate for the quarter was 20.6%. We anticipate our income tax rate for the full year 2024 to be approximately 21 to 23%.

Jim Michaud: Slide 9 shows net income of $1.2 million, and earnings per diluted share was $0.07. Adjusted net income of $4.9 million, or $0.29 per diluted share, adjusts for the non-cash amortization of intangible assets to address the accounting requirements of an innovative and acquisitive company. The effective tax rate for the quarter was 20.6%.

Jim: Slide 9 shows net income of $1.2 million, and earnings per diluted share was $0.07. The effective tax rate for the quarter was 20.6%. We anticipate our income tax rate for the full year 2024 to be approximately 21 to 23%. Consequently, we have revised our 2024 capital expenditure forecast to a range of $11 to $15 million, down from our previous expectation of $13 to $17 million. As defined in our credit agreement, our bank leverage ratio was 3.29 times. Our financial priorities are to strengthen cash conversion and reduce debt. With that, if you advance to slide 12, I will now turn the call back over to Dick.

Speaker Change: slide nine shows net income was one point two maye and earnings per dilutic share with seven cents

Speaker Change: adjusted net income of four point nine mmain or twenty nine cents per diluted share adjust for the nonc ash amortization of intangible assets to address the accounting requirements of an innovative and acquisitive company

Operator: If anyone should require upper ear assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Jim Michaud: We anticipate our income tax rate for the full year 2024 to be approximately 21 to 23%. We use adjusted EBITDA as an internal metric to gauge our progress and operating performance. Given margin pressures, Adjusted EBITDA came in at $13.9 million, or 10.2% of revenue. We believe this should be a mid-teens Adjusted EBITDA margin business, and our simplification actions are intended to get us there on a more consistent basis. Let me talk about cash generation and our balance sheet on slides 10 and 11.

Deborah Pawlowski: I would now like to turn the conference over to your host, Deborah Pawlowski, of Investor Relations for Allient. Please go ahead. Thank you, Joe. And good morning, everyone. We certainly appreciate your time today as well as your interest in Allient. Joining me on the call are Dick Warzala, our chairman, president, CEO, and Jim Michaud, our chief financial officer.

Jim: The effective tax rate for the quarter was 20.6%. We anticipate our income tax rate for the full year 2024 to be approximately 21 to 23%.

James Michaud: We use adjusted EBITDA as an internal metric to gauge our progress in operating performance. Given margin pressures, adjusted EBITDA came in at 13.9 million, or 10.2% of revenue. We believe this should be a mid-teen adjusted EBITDA margin business, and our simplification actions are intended to get us there on a more consistent basis.

Jim: We use adjusted EBITDA as an internal metric to gauge our progress and operating performance.

Speaker Change: given margin pressures adjusted ebitda c in at thirteen point nine million or ten point two percent of revenue we believe this should be a midteen adjusted even a margin business and our simplification actions are intended to get us there on a more consistent basis

Deborah Pawlowski: In fact, joining me in welcoming Jim to his first earnings call with us as he just joined Allient on June 3rd this year. Dick and Jim are going to review our second quarter 2024 results and provide an update on the company's strategic progress and outlook, after which we will open up the lines for Q&A. You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find it on our website at Allient.com.

James Michaud: Let me talk to cash generation and our balance sheet on slides 10 and 11. Year today, cash from operations was 17.4 million, and improved over the prior year's working capital efficiencies and non-cash adjustment helped to offset lower net income. Capital expenditures for the first six months total 5.3 million. While we continue to invest in several growth opportunities, we are fine-tuning our plans to concentrate on high-potential, high-value projects. Consequently, we have revised our 2024 capital expenditure forecast to a range of 11 to 15 million, down from our previous expectation of 13 to 17 million. Inventory turns declined at 2.9 from year end, while our days sales outstanding state flat at 56 days. Total debt of approximately 237 million increased from year end 2023 due to the SNC acquisition.

Speaker Change: let me talk to cash generation and our balance sheet on slidide to ten and eleven year - -today cash from operations with seventeen point four may improved over the prior year as working capital efficiencies and not onuncash adjustment helpped to offset lower net income

Jim Michaud: Here today, cash from operations was $17.4 million, improved over the prior year as working capital efficiencies and a non-cash adjustment helped to offset lower net income. Capital expenditures for the first six months totaled $5.3 million. While we continue to invest in several growth opportunities, we are fine-tuning our plans to concentrate on high potential, high value projects. Consequently, we have revised our 2024 capital expenditure forecast to a range of $11 to $15 million, down from our previous expectation of $13 to $17 million. Inventory turns declined to 2.9 from year end, while our day sales outstanding stayed flat at 56 days.

Deborah Pawlowski: Along with also posted there will be the slides that accompany today's discussion. If you are reviewing those slides, please turn to slide two and save harbor statements. As you are aware, we may make overlooking statements on this call during the formal discussion as well as during the Q&A. These statements apply to future of them, there's subject to risks and uncertainties as well as other factors that could cause actual results to different materially from what is stated on state's call.

Speaker Change: Capital expenditures for the first six months total $5.3 million. While we continue to invest in several growth opportunities, we are fine-tuning our plans to concentrate on high-potential, high-value projects.

Jim: Consequently, we have revised our 2024 capital expenditure forecast to a range of $11-$15 million, down from our previous expectation of $13-$17 million.

Deborah Pawlowski: These risks and uncertainties and other factors are discussed in the earnings release as well as with other documents filed by the company with the Securities and Exchange Commission. You can find these documents on our website for at SEC.com. I want you to point out as well that during today's call we will discuss some non-gap measures which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information and isolation for the substitute for results prepared in accordance with gap. We've provided recommendations of non-gap to comparable gap measures in the tables, accompanying the earnings release as well as the slides.

Speaker Change: Inventory turns declined to 2.9 from year-end, while our day's sales outstanding stayed flat at 56 days.

Jim Michaud: Total debt of approximately $237 million increased from year-end 2023 due to the S&C acquisition. We paid down $3.3 million in the quarter. That net of cash was about $206 million, representing 43.6% of net debt to capitalization. As defined in our credit agreement, our bank leverage ratio was 3.29 times. Our financial priorities are to strengthen cash conversion and reduce debt. With that, if you advance to slide 12, I will now turn the call back over to Dick.

Speaker Change: total debt of approximately two hundred and thirty-seven may increased from year end two thousand and twenty three due to the snc acquisition

James Michaud: We pay down 3.3 million in the quarter. That net of cash was about 206 million, representing 43.6% of net debt to capitalization. As defined in our credit agreement, our bank leverage ratio was 3.29 times. Our financial priorities are to strengthen cash conversion and reduce debt.

Jim: We paid down $3.3 million in the quarter.

Speaker Change: debt net of cash was about two hundred and six million

Jim: representing 43.6% of net debt to capitalization.

Jim: as defined in our credit agreement our bank leverage ratio was three point to nine times our financial priorities are to strengthen cash conversion and we do to the step with that if you advance to slide twelve i will now turn the call back over to dick

Richard Warzala: With that, if you advance to slide 12, I will now turn the call back over to Dick.

Richard Warzala: So that, please turn to slide three and I will turn it over to this to begin. Thank you, Debbie and welcome everyone. Before we delve into this quarter's discussion, I'm excited to be on the call with our new CFO. As Deb mentioned has been with us now for just over two months. During the time Jim has been intimately engaged with our team to gain an understanding of our processes and to support the advancement of our simplify to accelerate now strategy, especially given his experience with similar types of initiatives in his previous roles.

Richard Warzala: Thank you, Jim. Orders increased 12% sequentially in the quarter, driven by power quality projects and the ramp up of our commercial automotive programs. A sequential improvement in demand is somewhat encouraging, although there is an impact on orders as their customers continue to reduce inventory levels.

Dick Warzala: Orders increased 12% sequentially in the quarter, driven by power quality projects and the ramp-up of our commercial automotive program. A sequential improvement in demand is somewhat encouraging, although there is an impact on orders as our customers continue to reduce inventory levels. Additionally, we are experiencing delays in the launch of certain projects, which may be a result of the upcoming election and expected decrease in interest rates. Importantly, while we are getting some order pushouts, order cancellations are minimal and are being addressed appropriately.

Dick: you jim

Speaker Change: Orders increased 12% sequentially in the quarter driven by power quality projects and the ramp-up of our commercial automotive programs.

Speaker Change: A sequential improvement in demand is somewhat encouraging, although there is an impact on orders as our customers continue to reduce inventory levels.

Unknown Executive: Additionally, we are experiencing delays in the launch of certain projects, which may be a result of the upcoming election and expected decrease in interest rates. The decline in backlog is attributed to continued improvements within the supply chain as lead times were reduced, and we shipped products that were in our backlog as a result of the previous market conditions. We are taking decisive steps to align our business with current market conditions.

Richard Warzala: of the upcoming election and expected decrease in interest rates. Importantly, while we are getting some order pushouts, order cancellations are minimal and being addressed appropriately.

Unknown Executive: additionally we are experiencedingin delays in the launch of certain projects which maybe a result while the upcoming election and expected decrease in interest rates

Richard Warzala: As a financial leader in both multinational public and private companies, Jim brings an extensive background of establishing high performing finance operations and transforming organizations, which makes him a valuable addition to our team. For competent that Jim's contributions will be instrumental in helping to assure we achieve our strategic goal. Well, we got into the quarter. I am proud of the efforts of our team to address the market headwinds that we've had to face.

Unknown Executive: Importantly, while we are getting some order pushouts, order cancellations are minimal and being addressed appropriately.

Richard Warzala: We expect to slow down; we'll extend through this year and into 2025. The decline in backlog is attributed to continued improvements within the supply chain as lead times were reduced, and we ship products that were in our backlog as a result of the previous market conditions.

Dick Warzala: We expect the slowdown will extend through this year and into 2025. The decline in backlog is attributed to continued improvements within the supply chain as lead times were reduced, and we shipped products that were in our backlog as a result of the previous market condition. Our outlook is outlined on slide 13. We are taking decisive steps to align our business with current market conditions. We anticipate the challenging environment to persist through the second half of 2024, with our annualized revenue run rate expected to fall below $500 million over the next few quarters.

Unknown Executive: We expect the slowdown will extend through this year and into 2025.

Unknown Executive: The decline in backlog is attributed to continued improvements within the supply chain as lead times were reduced and we shipped products that were in our backlog as a result of the previous market conditions.

Richard Warzala: Our outlook is outlined on Slide 13. We are taking decisive steps to align our business with current market conditions. We anticipate the challenging environment to persist through the second half of 2024, with our annualized revenue run rate expected to fall below 500 million over the next few quarters. This projection reflects substantial inventory rebalancing by our customers as the supply chain returns to normal, some market erosion, and a relatively weak industrial automation environment.

Unknown Executive: Our outlook is outlined on slide 13.

Unknown Executive: we are taking decisive steps to align our business with current market conditions

Richard Warzala: While the quarter started off decently, we saw a significant shift in demand in June. This decline was broadly evident across most of our serve markets, but was felt most acutely in industrial automation where destocking continues as well as the power sports market which reflects every reduction in consumer demand. As you may have noticed, several public companies in similar markets have already reported their end market demand challenges and ultimately a reduction in year-over-year revenue.

Unknown Executive: we anticipate the challenging environment to persist through the second half of two thousand and twenty four with our annualized revenue run rate expected to fall below five hundred million over the next few quarters

Dick Warzala: This projection reflects substantial inventory rebalancing by our customers as the supply chain returns to normal, some market erosion, and a relatively weak industrial automation environment. We expect that the reduction of uncertainty, the settlement of lower interest rates, and normalized inventory should get us back to stronger revenue sometime in mid-2025. As we streamline our operations, we believe we can enhance customer service and strengthen our long-term competitors. Our goal is to make Allient easier to do business with and accelerate our speed to market with new product innovation.

Unknown Executive: this projection reflects substantial inventory rebalancing by our customers and the supply chain returns to normal

Richard Warzala: We expect that the reduction of uncertainty, settling of lower interest rates, and normalized inventory should get us back stronger revenue sometime in mid 2025. As we streamline our operations, we believe we can enhance customer service and strengthen our long-term competitiveness. Our goal is to make Allient easier to business with and accelerate our speed to market with new product innovations. The strategy is also expected to position us to better handle the current macroeconomic environment and industrial challenges.

Unknown Executive: some markettingerosion and a relatively weak industrial automation environment

Unknown Executive: We expect that the reduction of uncertainty, settling of lower interest rates, and normalized inventory should get us back to stronger revenue sometime in mid-2025.

Unknown Executive: as we streamlinein er operations we believe we can enhance customer service and strengthen our long-term competitiveness

Unknown Executive: Our goal is to make Allient easier to do business with and accelerate our speed to market with new product innovations.

Dick Warzala: The strategy is also expected to position us to better handle the current macroeconomic environment and industrial challenges. We aim to achieve our target of $10 million in annualized savings this year and to identify and execute further actions beyond this target to ensure we emerge as a stronger, more resilient enterprise with higher earnings power. With that operator, let's open the line for questions.

Unknown Executive: The strategy is also expected to position us to better handle the current macroeconomic environment and industrial challenges.

Richard Warzala: We aim to achieve our target of 10 million in annualized savings this year and to identify and execute further actions beyond this target to ensure we merge as a stronger, more resilient enterprise with higher earnings power.

Richard Warzala: Nonetheless, our actions to simplify to accelerate now could not be more timely. As we have discussed, we run an accelerated path to reorganize to be more productive and drive stronger earnings power, and given current market conditions are approximately five million in annualized savings realized the date are even more relevant. Our Decremental Margin and Reflex top-line softness, unfavorable mix, and inventory reserves. The mixed impact included the replacement of higher margin incremental industrial automation sales with lower margin sales from our most recent acquisition. We expect our simplification process, combined with the implementation of our integration plans and the capacity gained with the acquisition of SNC, will drive and improve margin profile in the future.

Unknown Executive: We aim to achieve our target of $10 million in annualized savings this year and to identify and execute further actions beyond this target to ensure we merge as a stronger, more resilient enterprise with higher earnings power.

Operator: With that operator, let's open the line for questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad, and a confirmation phone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment and maybe necessary to pick up your handset before pressing the star keys.

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

Operator: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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. And our first question comes from the line of Greg Palm with Craig Allen. Please proceed.

Speaker Change: Thank you. Ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Operator: You may press star 2 if you would like to remove your question from the queue. And our first question comes from the line of Greg Palm with Craig Callum. Please proceed.

Operator: You may press star 2 if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys.

Danny Eggerichs: And our first question comes from the line of Greg Palm with Craig Allen. Please proceed. Yeah, thanks.

Operator: And our first question comes from the line of Greg Palm with Craig Allen. Please proceed.

Danny Eggerichs: Yeah, thanks. This is Danny Eggerich on for Greg today.

Richard Warzala: This is Danny Egerton for Greg today. I guess maybe just digging into more what you saw and what you're seeing. June, the kind of significant fall off in demand. You said that was kind of weighted towards industrial automation and power sports. I guess as we've moved through July now and into early August, I guess how has that changed? Are you seeing some of that weakness spread across the other end markets? Or I guess just anything more you can give on, you know, end market geography while you're seeing, you know, quarter to date so far. I'm sure, Danny.

Operator: Yeah, thanks. This is Danny Eggert, John for Greg today.

Greg Palm: I guess maybe just digging into more...

Richard Warzala: As noted on slide four, our simplified to accelerate now plan is even more meaningful given the current market conditions. As we mentioned, we executed five million in annualized cost reductions in the second quarter, and we were working on implementing an additional five million in annualized cost savings in the second half of 2024. A key focus of the restructuring involves transferring specific production activities from various U.S, operations to our existing lower cost facilities in Mexico.

Greg Palm: What you saw and what you're seeing, you know, June .

Greg Palm: The kind of significant fall off in demand, you said that was kind of weighted towards

Greg Palm: You know, industrial automation and power sports, I guess is...

Greg Palm: As we've moved through July now and into early August , I guess, how has that changed? Are you seeing some of that weakness spread across the other end markets? Or I guess, just anything more you can give on, you know, end market, geography, what you're seeing, you know, quarter to date so far.

Richard Warzala: I would say to you that we see a continuation of what we experienced in June. And I think just to be clear, you know, we had mentioned that we started the quarter quite well. April and May were relatively solid, and then June was a significant drop-off.

Speaker Change: I'm sure, Danny. I would say to you that we see a continuation of what we experienced in June , and I think just to be clear, you know,

Richard Warzala: Additionally, we have reduced our workforce across most global operations to align with expected demand. GM will further discuss the restructuring charges and inventory adjustments in the quarter related to these actions. While we are moving decisively to reduce our cost structure, we continue to implement programs aimed at driving future growth. We are moving confident in our long-term strategy and the fundamental strength of our value proposition.

Greg Palm: We had mentioned that we started the quarter quite well.

Speaker Change: april in may were relatively a solid and june was a significant drop-off

Richard Warzala: We do expect that that will continue, as we mentioned here, through the remainder of the year and potentially into 2025. Looking at the incoming order rates, and as you're asking to look out in what has occurred in July and so forth, there were some mixed signals. We did see a couple encouraging signs that maybe things will come back, but it's hard to gauge based on one month, and I would caution us to not get carried away; that we did see a couple positive signs there, and that things were going to change drastically. Sticking with what we've stated here, the industrial automation, the repalancing that we saw for inventories and the impact it had especially on us, and the other markets.

Unknown Executive: We do expect that that will continue, as we mentioned here, through the remainder of the year and potentially into 2025, looking at TakeCost out to become a more profitable company based on a lower cost base. That's really our focus and will continue to be our focus this year and into next year.

Unknown Executive: We do expect that that will continue, as we mentioned here, through the remainder of the year and potentially into 2025.

James Michaud: 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.

Danny Eggerichs: I guess maybe just digging into more what you saw and what you're seeing, you know, June, the kind of significant fall off in demand. You said that was kind of weighted towards, you know, industrial automation and power sports, I guess, as we've moved through July now and into early August. I guess how has that changed? Are you seeing some of that weakness spread across the other end markets? Or, I guess, just anything more you can give on, you know, end market geography while you're seeing, you know, quarter to date so far?

Unknown Executive: looking at

Speaker Change: at the incoming order rates and as you're asking to look out in what has occurred in julyance of worth

Dick Warzala: I'm sure Danny, I would say to you that we see a continuation of what we experienced in June. And I think, just to be clear, you know, we had mentioned that we started the quarter quite well.

Dick Warzala: April and May were relatively solid, and then June was a significant drop-off. We do expect that that will continue, as we mentioned here, through the remainder of the year and potentially into 2025, looking at the incoming order rates and as you're asking to look out for what occurred in July and so forth.

James Michaud: As this is my first earnings call with a company, I want to start by expressing my gratitude for the warm welcome I received from the team and for the opportunity to work with such a talented group. In my short time here, I have been impressed by the dedication and resilience of our team. I am excited to be part of Allian and to contribute to our ongoing success, today I'll provide an overview of our financial performance for the quarter, including key highlights in areas where we are focusing our efforts.

Speaker Change: You know, there were some mixed signals. We did see a couple encouraging signs that maybe things will come back, but it's hard to gauge based on one month. And I would caution us.

Unknown Executive: to not get carried away that you know we did see a couple of positive signs there and that things we're going to change drastically so you know sticking with what

Dick Warzala: There were some mixed signals. We did see a couple of encouraging signs that maybe things would come back, but it's hard to gauge based on one month to not get carried away that, you know, we did see a couple of positive signs there and that things were going to change drastically. So, you know, sticking with what was stated here: the industrial automation, the rebalancing that we saw for inventories and the impact it had, especially on us. And the other markets, we didn't talk much about geographic markets, but certainly, Europe was impacted. And... again, some mixed signals.

Unknown Executive: we've stated here

Speaker Change: the industrial automation the rebalancing that we saw offered inventories and the impact that had especially on us and the other markets we didn't talk much about geographic markets but certainly europe was impacted

James Michaud: Starting on slide five, second quarter revenue of 136 million was down a year over year by 7 percent. The impact of foreign currency exchange rate fluctuations was nominally unfavorable by 700,000. During the quarter, our vehicle markets experienced a 17 percent decline in sales, primarily driven by reduced demand in power sports and continued weakness in the agricultural vertical. These impacts were partially offset by increased demand in commercial automotive thanks to the ramp up of new programs that we have won over the years.

Richard Warzala: We didn't talk much about geographic markets, but certainly Europe was impacted. Again, some mixed signals.

Dick Warzala: So for us right now, our emphasis is going to be on getting the business adjusted, readjusted, and aligned. We will continue to take costs out to become a more profitable company based on a lower cost base. That's really our focus, and it will continue to be our focus this year and into next year.

Richard Warzala: For us right now, our emphasis is going to be on getting the business adjusted, readjusted, and aligned to take costs out to become a more profitable company based on a lower cost base. That's really our focus, and it will continue to be our focus this year and in the next year. I guess it's based on that kind of mixed signals, and it sounds like maybe some uncertain visibility. I mean, the 500 million run rate through the second half, and I think it even kind of said maybe over the next several quarters, but there's also a chance that maybe the inventories start returning in early 2025 before maybe normal run rates in mid 2025.

Unknown Executive: and

Unknown Executive: Again, some mixed signals, so for us right now, our emphasis is going to be on getting the business adjusted, readjusted, and aligned.

Unknown Executive: To take costs out to become a more profitable company based on a lower cost base. That's really our focus and it'll continue to be our focus this year and into next year.

James Michaud: The industrial markets saw a 3 percent decrease despite strengthened power quality sales notably to the HVAC and data center market and additional sales from our recent acquisition. These bright spots were counterbalanced by lower demand and industrial automation as Dick noted and within our pumps and material handling markets. Our medical markets also saw a decline which was broad base but primarily due to the persistent softness in medical mobility products and solutions, a trend that has persisted over the past few years.

Danny Eggerichs: Yeah, I guess it's just based on that kind of mixed signals, and it kind of sounds like maybe some uncertain visibility. I mean, the 5 million or 500 million run rate through the second half, and I think it even kind of said maybe over the next several quarters, but there's also a chance that maybe the inventories start returning, you know, in early 2025 before maybe normal run rates in mid 2025.

Unknown Executive: Yeah. I guess it's just based on that kind of mixed signals, and it kind of sounds like maybe some uncertain visibility. I mean, the 500 million run rate through the second half, and I think it even kind of said maybe over the next several quarters, but there's also a chance that maybe inventories start returning in early 2025 before maybe normal run rates in mid 2025. So I guess looking out into 2025, should we kind of expect gradual improvement starting early in the year before getting to more normalized levels? Or do you expect kind of that 500 million run rate to last into Q1 next year as well before starting to really pick up?

Unknown Executive: Yeah.

Unknown Executive: I guess it's just based on that kind of mixed signals and...

Unknown Executive: And it kind of sounds like maybe some uncertain visibility, I mean...

Unknown Executive: the five million or five hundred million run rate through through the second half and i think it even kind of said maybe over the next several quarters but but there's also a chance that maybe

Unknown Executive: kind of the inventories return start returning you know in in early 2025 before maybe normal run rates in mid 2025. So I guess looking out into 2025 should we kind of expect

Danny Eggerichs: So, I guess looking out into 2025, should we kind of expect gradual improvement starting early in the year before getting to, you know, more normalized levels, or do you expect kind of that 500 million run rate to last into Q1 next year as well before starting to really improve?

Richard Warzala: So I guess looking out into 2025, should we kind of expect gradual improvement starting early in the year before getting to more normalized levels, or do you expect kind of that 500 million run rate to last in the Q1 next year as well before starting to really improve? Yeah, I would say based on what we know today, I would expect that to continue in the Q1. And certainly if something changes there, we see some, the dynamics of the markets start to change, we certainly will keep everybody arrested. But saying that and running the business with I think the anticipation that that would be the case, 500 million annualized run rate, it just makes it more important for us to continue to streamline, to reorganize, to make sure that we take the cost out, and that's our focus, and that'll continue to be our focus.

James Michaud: The bankruptcy of a large customer in the space has also had an impact on demand. In the aerospace and defense sector, sales declined primarily due to program timing within the space industry. However, we are seeing positive movement on the defense side with several notable opportunities that we are working. Slide 6 highlights the shift in our revenue mix across markets over the trailing 12 months, along with the catalyst for each change. The industrial vertical maintained its position as our largest market, accounting for 46 percent of the total trailing months sales, a notable expansion of 500 basis points.

Speaker Change: You know, gradual improvement starting early in the year before getting to, you know, more normalized levels, or do you expect kind of that 500 million run rate to last into Q1 next year as well before starting to really improve?

Unknown Executive: Yeah, I would say, based on what we know today, I would expect that to continue in the queue. So, we mentioned also, I would just say to you here, we talked about in the second half of 2024, the additional five million, and I will tell you that's substantially already identified and will be fully executed very early here in the second half. So, adjustment, realigning the business, just to be, just, you know, not to take things too seriously. Yes, I guess the market swings and the uncertainties we talked about could change things, and they could change pretty rapidly if certain things fall into place, but we're not running our business in that manner. We're running our business that will take control of what we can control, and we'll get there.

Dick Warzala: Yeah, I would say based on what we know today, I would expect that to continue in Q1. And certainly, if something changes there, we see some, you know..., the dynamics of the market start to change, we certainly will keep everybody abreast of it. So, running the business with, I think the anticipation that that would be the case, the 500 million annualized run rate, it just makes it more important for us to continue to streamline, to reorganize, to make sure that we take the cost out, and that's our focus, and that'll continue to be our focus.

Unknown Executive: Yeah, I would say based on what we know today, I would expect that to continue in the Q1 and certainly if something changes there We see something, you know

Unknown Executive: the dynamics of the market start to change, we certainly will keep everybody abreast of it.

Unknown Executive: Running the business with

James Michaud: The 14 percent growth in the space industry reflects strong demand for power quality. On a trailing 12 month basis, industrial automation had benefited from supply chain environment improvements but has recently fallen back as the industry resets within inventory levels. The vehicle market revenue remained flat on a trailing 12 month basis with higher demand in commercial automotive offset by lower demand in power sports and agriculture. Both the medical and aerospace and defense saw a decrease on a trailing 12 month basis reflecting the same impacts as the past quarter.

Unknown Executive: I think the anticipation that that would be the case, the 500 million annualized run rate, it just makes it more important for us to continue to streamline, to reorganize, to make sure that we take the cost out. And that's our focus, and that'll continue to be our focus.

Dick Warzala: So we mentioned also, I would just say to you here, we talked about in the second half of 2024 the additional five million, and I will tell you that's substantially already identified and will be fully executed very early here in the second half. So, adjustments, realigning the business, just to be, just, you know, not to take things too seriously. Yeah, I guess the market swings and the uncertainties we talked about, things could change, and they could change pretty rapidly if certain things fall into place, but we're not running our business in that manner. We're running our business on the premise that we'll take control of what we can control, and we'll get it.

Richard Warzala: So we mentioned that also, I would just say to you here, we talked about in the second half of 2024, the additional five million, and I will tell you that's substantially already identified and we'll be fully executed very early here in the second half. Yeah, I guess realigning the business just to be, you know, not to take, yeah, I guess the market swings and the uncertainties we talked about. Things could change, and they could change pretty rapidly if certain things fall into place, but we're not running our business in that manner. We're running our business that we'll take control of what we can control, and we'll get it done.

Unknown Executive: So, we mentioned also, I would just say to you here, we talked about in the second half of 2024, the additional five million, and I will tell you that's substantially already identified and will be fully executed very early here in the second half.

James Michaud: Lastly, sales through the distribution channel, a small component of total sales accounted for 4 percent of the trailing 12 month period. As detailed on slide 7, gross profit was 40.7 million and gross margin was 29.9 percent. The 140 basis point decline was primarily due to underabsorption on lower volume, an unfavorable mix including the expected margin dilution from the SNC acquisition and 1.2 million in non-cash inventory reserves. Half of the inventory right down was related to the bankruptcy I mentioned earlier and the rest was mostly due to changes in projected demand.

Unknown Executive: So, adjustment, I guess, realigning the business, you know, just to be, just, you know, not to take...

Unknown Executive: Yeah, yeah, I guess they

Unknown Executive: The market swings and the uncertainties we talked about, things could change and they could change pretty rapidly if certain things fall into place, but we're not, we're not running our business in that manner. We're running our business that will take control of what we can control and we'll get it done.

Richard Warzala: Sure, and on that, you know, added, you know, 5 million, now 10 million of cost takeouts. I know you mentioned you're still looking for additional opportunities. You feel like there's some more levers to pull if things continue to worsen or stay at this kind of level for longer than you're expecting. Is there more cost takeouts just to kind of, you know, but we some, some of that profitability? Yes, and it'll have nothing to do on whether markets continue to worsen or not.

Danny Eggerichs: Sure. And on that, you know, added $5 million, now $10 million of cost takeouts. I know you mentioned you're still looking for additional opportunities. Do you feel like there are some more levers to pull if things continue to worsen or stay at this kind of level for longer than you're expecting? Are there more cost takeouts just to kind of buoy some of that profitability?

Unknown Executive: Sure, and on that, you know...

Speaker Change: Added $5 million, now $10 million of cost takeouts. I know you mentioned you're still looking for additional opportunities. Do you feel like there's...

Speaker Change: There's some more levers to pull if things continue to worsen or stay at this kind of level for longer than you're expecting. Is there more cost takeouts just to kind of, you know, buoy some of that profitability?

James Michaud: We believe our underlying business can command a higher margin profile but we have to work in order to get there. On Slide 8, you can see the lower gross profit, 1.5 million of restructuring and business realignment costs and higher engineering expenses, impacted operating income, resulting in income of 4.9 million and operating margin of 3.6%. Costs related to the restructuring were primarily severance. Operating costs and expenses were 26.3% of revenue, an increase of 320 basis points, of which 110 basis points were attributable to the restructuring cost.

Dick Warzala: And it'll have nothing to do with whether markets continue to worsen or not. I mean, we've taken a really hard look at everything and in terms of structure and so forth. And there are definitely some additional opportunities identified. It's just a matter of how much we can execute and get implemented in a short period of time.

Unknown Executive: Yes.

Danny Eggerichs: I mean, there are, we've taken a really hard look at everything and the structural wise and so forth, and there are definitely some additional opportunities to identify. It's just a matter of how much can we execute and get implemented, you know, in the short period of time. Okay, great, I will leave it there, thanks.

Unknown Executive: And it'll have nothing to do on whether markets continue to worsen or not. I mean, we've taken a really hard look at everything structure-wise and so forth, and there were definitely some additional opportunities identified. It's just a matter of how much can we execute.

Unknown Executive: get implemented, you know, in a short period of time. Okay.

Unknown Executive: Get implemented, you know, in the short period of time.

Danny Eggerichs: Okay, great. I will leave it there. Thanks.

Brett Kearney: Thank you, Danny. And the next question comes from one of Brett Coney with American Legal Opportunity Partners. Please proceed.

Speaker Change: Okay, great. I will leave it there. Thanks.

Danny: Thank you, Danny.

Operator: And the next question comes from the line of Brett Kearney with American Rebirth Opportunity Partners. Please proceed.

Operator: so

Operator: And the next question comes from the line of Brett Kearney with American Rebirth Opportunity Partners. Please proceed.

James Michaud: We are intensely focused on improving our profitability despite market conditions. Slide 9 shows net income was 1.2 million and earnings per diluted share was 7 cents. Adjusted net income of 4.9 million or 29 cents per diluted share adjusts for the non-cash amnesty of intangible assets to address the accounting requirements of an innovative and acquisitive company. The effective tax rate for the quarter was 20.6%. We anticipate our income tax rate for the full year 2024 to be approximately 21 to 23%.

Richard Warzala: Hi, Dick and Jim. Good morning. Thanks for taking my question. Morning, Brett. I'd great to hear some of the new commercial vehicle awards ramping up. Curious, you know, what the puts and takes in the global economy, what you're hearing from customers and some of the other recent new vehicle programs you've won and kind of what customers are looking for in kind of pushing forward with those ramps as well. Well, it's interesting is that there has been, and I think it's been in the news about the EV side of the electric vehicle side of it, and most of our solutions are agnostic to what the, you know, if it's a combustion engine or electric engine, it doesn't, we're agnostic to that.

Brett Kearney: Hi Dick and Jim. Good morning. Thanks for taking my question.

Unknown Executive: Morning, Brett.

Brett Kearney: Morning, Brett. Great to hear some of the new commercial vehicle awards ramping up. Curious, you know, with the puts and takes in the global economy, what you're hearing from customers and some of the other recent new vehicle programs you've won, and kind of what customers are looking for in kind of pushing forward with those ramps as well.

Hi, <expletive> and Jim. Good morning. Thanks for taking my question.

Brett: Morning, Brett.

Brett Kearney: Great to hear some of the new commercial vehicle awards ramping up. Curious, you know, with the puts and takes in the global economy, what you're hearing from customers on some of the other recent new vehicle awards.

Brett Kearney: Programs you've won and kind of what customers are looking for in kind of pushing forward with those ramps as well

Dick Warzala: Well, you know, it's interesting that there has been, and I think it's been in the news about the EV side of it, the electric vehicle side of it, and most of our solutions are agnostic to what the, you know, if it's a combustion engine or an electric engine, we're agnostic to that. So we did see that there had been a downshift in demand, and we experienced So it was essentially a push out of one quarter.

James Michaud: We use adjusted EBITDA as an internal metric to gauge our progress in operating performance. Given margin pressures, adjusted EBITDA came in at 13.9 million or 10.2% of revenue. We believe this should be a mid-teen adjusted EBITDA margin business and our simplification actions are intended to get us there on a more consistent basis.

Brett Kearney: Well, you know, it's interesting is that there has been

Speaker Change: And I think it's been in the news about the electric vehicle side of it.

Speaker Change: Most of our solutions are agnostic to...

Speaker Change: What the you know, if it's a combustion engine or electric engine, it doesn't we're agnostic to that So we did see

Richard Warzala: So we did see that there had been a downshift in demand, and we experienced that in the second quarter. So it was essentially a push out of one quarter. I'm sorry, one month. And so I think it's been it they've adjusted for it, and going forward, we should see steady demand there. I wouldn't suggest that it's going to increase beyond where we are today, but we do have some other programs that we're working on that should not this year, but we'll wrap in the ramp up next year as well. But, so there was an impact there.

Unknown Executive: that there had been a downshift in demand, and we experienced that in the second quarter. So it was essentially a push out of one quarter. Sorry, one month.

Unknown Executive: that there had been a downshift in demand and we experienced that in the second quarter. So

James Michaud: Let me talk to cash generation and our balance sheet on slides 10 and 11. Year today, cash from operations was 17.4 million and improved over the prior years working capital efficiencies and non-cash adjustment helped to offset lower net income. Capital expenditures for the first six months total 5.3 million. While we continue to invest in several growth opportunities, we are fine tuning our plans to concentrate on high potential high value projects.

Unknown Executive: it was a essentially a pushout of one quarter i'm sorry one month and so i think it's been theyav been adjusted for it and going forward we should see steady demand there i wouldn't suggest that

Unknown Executive: And so I think they've adjusted for it, and going forward, we should see steady demand there. It's going to increase beyond where we are today, but we do have some other programs that we're working on that should, you know, not this year, but we'll ramp up and ramp up next year as well. But so there was an impact there, although it was relatively short, and hopefully, that's all been adjusted for and we are moving forward.

Dick Warzala: I'm sorry, one month. And so I think they've adjusted for it, and going forward, we should see steady demand there. But I wouldn't suggest that.

Dick Warzala: It's going to increase beyond where we are today, but we do have some other programs that we're working on that should, you know, not this year, but we'll ramp up and ramp up next year as well. But so there was an impact there, although it was relatively short, and hopefully that's all been adjusted for and moving forward. We'll see steady-state demand. The big challenge was some inventory adjustments at key customers where, you know, it was go, go, go, go, go, ship, ship, ship, everything you've got. And all of a sudden, hold on, we've got some challenges here, we're going to have to adjust, and they were quite significant.

Unknown Executive: it's going to increase beyond where we are today but we do have some other programs that we're working on that should you know' not this year but we'll ramp in ramp up next year as well but so there was an impact there

James Michaud: Consequently, we have revised our 2024 capital expenditure forecast to range of a 2A range of 11 to 15 million down from our previous expectation of 13 to 17 million. Inventory turns declined at 2.9 from year end while our days sales outstanding state flat at 56 days total debt of approximately 237 million increased from year end 2023 due to the SNC acquisition. We pay down 3.3 million in the quarter. That net of cash was about 206 million representing 43.6% of net debt to capitalization. As defined in our credit agreement, our bank leverage ratio was 3.29 times.

Richard Warzala: Although it was relatively short and hopefully that's all been adjusted for and moving forward, we'll see the steady state demand. The big challenge was some inventory adjustments that at key customers where, you know, it was go, go, go, go, go, go, ship, ship, ship, everything you've got and not all of a sudden hold on. We've got we've got some challenges here. We're going to have to adjust. And they were quite significant. Excellent, very helpful.

Unknown Executive: Although it was relatively short and hopefully that's all been adjusted for and moving forward we'll see the steady state demand. The big challenge was

Unknown Executive: We'll see steady-state demand. The big challenge was some inventory adjustments at key customers where, you know, it was go, go, go, go, go, ship, ship, ship, everything you've got. And all of a sudden, hold on, we've got some challenges here, we're going to have to adjust.

Unknown Executive: Some inventory adjustments at key customers where it was go, go, go, go, go, ship, ship, ship. Everything you've got and all of a sudden, hold on, we've got some challenges here we're going to have to adjust. And they were quite significant.

Brett Kearney: Excellent, very helpful. And then, if I could just ask one more on A&D. I'm just curious, as you look out the next year or two, what you're seeing, I guess, both in the space market as well as traditional defense opportunities for the company.

Unknown Executive: Excellent, very helpful. And then, if I could just ask one more on A&D. I'm just curious, as you look out the next year or two, what you're seeing, I guess, both in the space market as well as traditional defense opportunities for the company.

Richard Warzala: And then, if I could just ask one more on A&D, just curious, as you look out the next year or two, what you're seeing, I guess both space market as well as traditional defense opportunities for the company. Yeah, very, very encouraging. We have mentioned in the past that we've been, you know, we've worked on several applications, and at some point, they had to ramp up. And I think, you know, some of the projects were pushed to the right and decision making, and so forth. But there's a significant number of projects. We are starting to see a slow ramp up in demand in some of the areas that we would have expected to already seen that.

Speaker Change: Excellent, very helpful. And then if I could just ask one more on A&D. Just curious, as you look out the next year or two, what you're seeing, I guess both

Speaker Change: Space Market, as well as traditional defense opportunities for the company.

Dick Warzala: Yeah, very, very encouraging. We have mentioned in the past that we've been, you know, working on several applications. At some point, they had to ramp up, and I think some of the projects were pushed to the right in decision-making and so forth, but there are a significant number of projects. We are starting to see a slow ramp-up in demand in some of the areas that we would have expected to have already seen. So A&E is a bright spot, as well as medical. We see some good opportunities in medical. Terrific. Thanks.

James Michaud: Our financial priorities are to strengthen cash conversion and reduce debt.

Speaker Change: Yeah, very, very encouraging. We have mentioned in the past that we've been, you know, we've worked on several applications, and

Richard Warzala: With that, if you advance to slide 12, I will now turn the call back over to Dick. Thank you, Jim. Orders increased 12% sequentially in the quarter, driven by power quality projects and the ramp up of our commercial automotive programs. A sequential improvement in demand is somewhat encouraging, although there is an impact on orders as their customers continue to reduce inventory levels, of the upcoming election and expected decrease in interest rates. Importantly, while we are getting some order pushouts, order cancellations are minimal and being addressed appropriately.

Speaker Change: At some point, they had to ramp up, and I think some of the projects were pushed to the right in decision-making and so forth, but there's a significant number of projects. We are starting to see

Unknown Executive: a slow ramp up in demand in some of the areas that we would have expected to have already seen that. So A&E is a bright spot as well as medical. We see some good opportunities in medical too.

Richard Warzala: So A&D is a bright spot. As well as medical, we see some good opportunities in medical too.

Brett Kearney: Perfect, thanks so much, Dick.

Brett Kearney: Terrific. Thanks so much, Dick.

Unknown Executive: Terrific. Thanks so much, Dick.

Ted Jackson: Thank you, Rick. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star one on yourself and keep that. And the next question comes from the line of Ted Jackson, with no important securities. Please proceed. Thanks. I was a little concerned. I wasn't getting recognized by your system for the question. Thank you. I see you around there, too. You're there. I'm out there. I pay attention, Dick.

Dick: rific thanks much deick

Ber: thank you ber

Operator: Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star one on your cell phone keypad.

Operator: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your cell phone keypad. And the next question comes from the line of Ted Jackson with Northland Security.

Speaker Change: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star 1 on your cell phone keypad.

Richard Warzala: We expect to slow down, we'll extend through this year and into 2025. The decline in backlog is attributed to continued improvements within the supply chain as lead times were reduced and we ship products that were in our backlog as a result of the previous market conditions.

Ted Jackson: Thanks, I was a little concerned I wasn't getting recognized by your system for the question queue. I see you around there, Ted. You're there. I'm out there. I pay attention, Dick.

Operator: And the next question comes from the line of Ted Jackson with Northland Securities. Please proceed.

Speaker Change: Thanks, I was a little concerned I wasn't getting recognized by your system for the question queue.

Richard Warzala: Our outlook is outlined on slide 13. We are taking decisive steps to align our business with current market conditions. We anticipate the challenging environment to persist through the second half of 2024, with our annualized revenue run rate expected to fall below 500 million over the next few quarters. This projection reflects substantial inventory rebalancing by our customers as the supply chain returns to normal, some market erosion and a relatively weak industrial automation environment.

Operator: I see you around there, Ted. You're there. I'm out there. I pay attention, Dick.

Ted Jackson: So, I wanted to welcome Jim on board, although I think he missed the boat and went straight into the water. But, hopefully, it'll all, you know, it'll all turn around. You're getting in at the bottom, Jim. You're getting in at the bottom. That's what I'm going to say. Nowhere to go. So my questions are a couple things. First of all, on the $5 million cost savings that you've already done and the $5 million that's coming, how should we think about how that rolls through the model in regards to OPEX and gross margins?

Ted Jackson: So I wanted to welcome Jim aboard, although I think he missed the boat and went straight into the water. So, but hopefully it'll all turn around. You're getting in at the bottom, Jim. You're getting in at the bottom. That's what I'm going to say. I have nowhere to go but up.

Operator: So, I wanted to welcome Jim aboard, although I think he...

Speaker Change: missed the boat and went straight into the water.

Operator: So, but hopefully it'll all, you know, it'll all turn around. You're getting in at the bottom, Jim. You're getting in at the bottom. That's what I'm going to say. Nowhere to go but up.

Unknown Executive: So my questions are a couple things. First of all, on the $5 million cost savings that you've already done and the $5 million that's coming, how should we think about how that rolls through the model in regards to OPEX and gross margins?

Richard Warzala: So my questions are a couple things. First of all, on the 5 million cost savings that you've already done and the 5 million that's coming, how should we think about how that rolls through the model in regards to kind of topics and gross margins? Primarily, we focused on fixed costs. And so there is; there are some, maybe Jim can answer this a little more granularity as far as the fixed manufacturing costs that were reduced, but also primarily it's an op-ex. And that's where our focus was. I mean, in that cost, I mean, needless to say, as volumes reduce, the variable costs were reduced as well.

Unknown Executive: So my questions are a couple of things. First of all, on the $5 million cost savings that you've already done and the $5 million that's coming, how should we think about how that rolls through the model with regards to kind of OPEX and gross margins?

Richard Warzala: We expect that the reduction of uncertainty, settling of lower interest rates and normalized inventory should get us back stronger revenue sometime in mid 2025. As we streamline our operations, we believe we can enhance customer service and strengthen our long-term competitiveness. Our goal is to make Allient easier to business with and accelerate our speed to market with new product innovations. The strategy is also expected to position us to better handle the current macroeconomic environment and industrial challenges.

Dick Warzala: primarily, we focused on you know, fixed costs, and so there are some Maybe Jim can answer this a little more granularity as far as the fixed manufacturing costs that were reduced, but also, primarily, it's an op-ex. And that's where our focus was.

Unknown Executive: Eric

Speaker Change: primarily we focused on on fixed cost and so there is there are some

Unknown Executive: Maybe Jim can answer this a little more granularity as far as the fixed manufacturing costs that were reduced, but also primarily, it's an op-ex. I mean, in that cost, needless to say. As far as, is your question beyond that as far as the timing?

Unknown Executive: Maybe Jim can answer this a little more granularity as far as the fixed manufacturing costs that were reduced, but also primarily it's an OPEX.

Dick Warzala: I mean, at that cost, needless to say, as volumes reduced, the variable costs were reduced as well. So we don't, that's not a number we're reporting. We're strictly reporting what we saw was incremental savings, although we did take. The differential in direct labor costs between U.S. labor and Mexican labor is part of that, but that was a relatively small portion. Most of it has been in operating expenses, and certainly, there's been some fixed manufacturing overhead as well. As far as timing is concerned, is your question beyond that as far as that is concerned?

Speaker Change: And that's where our focus was.

Richard Warzala: So we don't; that's not a number we're reporting. We're strictly reporting what we saw was incremental savings, although we did take the differential and direct labor costs between U.S. labor and Mexican labor as part of that. But that was a relatively small portion. If most of it has been in the operating expenses, and certainly there's been some fixed manufacturing overhead as well. As far as, is your question beyond that as far as the timing? Well, that was kind of the next part of how would we think about it? Well, I mean, you sound like your 5 million is already kind of done.

Speaker Change: As volumes reduced, the variable costs were reduced as well. So we don't, that's not a number we're reporting. We're strictly reporting what we saw with incremental savings, although we did take it.

Speaker Change: The differential in direct labor costs between U.S. labor and Mexican labor is part of that, but that was a relatively small portion.

Operator: With that operator, let's open the line for questions. Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad and a confirmation phone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment and maybe necessary to pick up your handset before pressing the star keys.

Speaker Change: if most of it has been in the operating expenses and certainly there's been some fi manufacturing r as well far is your question beyond that as far as the timing

Ted Jackson: That was kind of the next part, how would we think about it? I mean, it sounds like your five million is already kind of done, so we can think about that, you know, coming to play in the second half of this year. And then the next five million sounds like we'll we'll see maybe some of that in the fourth or first quarter. I mean, it's kind of what I interpreted, but some color on that would be great, too, Dick.

James Michaud: So we can think about that, you know, coming to play in the second half of this year. And then the next 5 million sounds like we'll see maybe some of that in fourth or first quarter. I mean, it's kind of what I interpreted, but some color on that would be great too. Yeah, I mean, you're absolutely correct in the first five. It's already in, and we've taken the charges against it, and we'll be experiencing, you know, realizing the benefit of that immediately. The next five million that we talked about, some of it has already been implemented here, in the second half, and I would tell you, most of it will be done in, uh, pervy in the second half.

Speaker Change: That was kind of the next part, is how would we think about it. I mean, it sounds like your $5 million is already kind of done. So we can think about that, you know, coming to play in the second half of this year. And then the next $5 million sounds like we'll see maybe some of that in fourth or first quarter. I mean, it's kind of what I interpreted. But some color on that would be great too, Dick.

Danny Eggerichs: And our first question comes from the line of Greg Palm with Craig Allen. Please proceed. Yeah, thanks.

Dick Warzala: Yeah, I mean, you're absolutely correct on the first five; it's already in, and, you know, we've taken the charges against it, and we'll be experiencing, you know, realizing the benefit of that immediately. The next $5 million that we talked about, some of it has already been implemented here in the second half, and I would tell you most of it will be done early in the second half. So we will start to see some benefits of that as well.

Richard Warzala: This is Danny Egerton for Greg today. I guess maybe just digging into more what you saw and what you're seeing. June, the kind of significant fall off and demand. You said that was kind of weighted towards industrial automation and power sports. I guess as we've moved through July now and into early August, I guess how was that changed? Are you seeing some of that weakness spread across the other end markets? Or I guess just anything more you can give on, you know, end market geography while you're seeing, you know, quarter to date so far.

Speaker Change: Yeah the I mean you're absolutely correct in the first five it's already in and you know we've taken the charges against it and we'll be experiencing and realizing the benefit of that immediately.

Speaker Change: the next five million that we talked about some of it has already been implemented here

Unknown Executive: early in the second half. So we will start to see some benefit of that as well. Going into next year, we'll have the full benefit of the $10 million in cost reductions.

Jim: in the second half and I would tell you most of it will be done

James Michaud: So we will start to see some benefit of that as well. Following the next year, we'll have the full benefit of the 10 million in cost reductions.

Unknown Executive: early in the second half. So we will start to see some benefit of that as well. Going into next year, you'll have the full benefit of the $10 million in cost reductions. And as we mentioned, there's other

Unknown Executive: And as we mentioned, there's other things too.

Dick Warzala: Going into next year, we'll have the full benefit of the $10 million in cost reductions. And as we mentioned, there's other, You know, there are other actions that we can take. It's just that we need a little bit more time and make sure that we execute them in a proper manner, but there's more to come.

James Michaud: And as we mentioned, there's other, you know, there's other actions that we and take. It's this that the, the, we need a little bit more time and make sure that we execute them in a proper manner, but there's more to come. Okay.

Richard Warzala: I'm sure Danny. I would say to you that we see a continuation of what we experienced in June. And I think just to be clear, you know, We had mentioned that we started the quarter quite well. April and May were relatively solid, and then June was a significant drop off. We do expect that that will continue, as we mentioned here, through the remainder of the year and potentially into 2025. Looking at the incoming order rates, and as you're asking to look out in what has occurred in July and so forth, there were some mixed signals.

Speaker Change: You know, there's other actions that we can take if we need a little bit more time and make sure that we execute them in a proper manner, but there's more to come.

Richard Warzala: My next question is just going into revenue mix, excuse me, and, uh, and guidance. I mean, you saw weakness pretty much across the business. I mean, generally speaking, with, you know, the ones that really stood out for you being industrial automation and, you know, let's call it, you know, recreational vehicles. When you look at your outlook, this, you know, 500 million run rate that we are to expect to see for the next several quarters, can you provide some color with regards to, uh, where that weakness will be concentrated from an end market perspective. I'm going to assume it's the markets that have already been addressed, but I want to make sure.

Ted Jackson: My next question is just going into revenue mix, excuse me, and guidance. You saw weakness pretty much across the business, I mean, generally speaking, with, you know, the ones that really stood out for you being industrial automation and, you know, let's call it, you know, recreational vehicles. When you look at your outlook, this, you know, 500 million run rate that we are expected to see for the next several quarters.

Unknown Executive: Okay.

Speaker Change: My next question is just going into revenue mix and in guidance. I mean you saw weakness pretty much across the business. I mean generally speaking with you know the

Speaker Change: The ones that really stood out for you being industrial automation and, you know, let's call it, you know, recreational vehicles.

Speaker Change: When you look at your outlook, this, you know, 500 million run rate that we are to expect to see for the next several quarters,

Ted Jackson: Can you provide some color with regard to where that weakness will be concentrated? From an end market perspective, I'm going to assume it's the markets that have already been addressed, but I want to make sure. And then from a geographic perspective, where that weakness might be. And if you can kind of tie all that together, that'd be great.

Richard Warzala: We did see a couple encouraging signs that maybe things will come back, but it's hard to gauge based on one month, and I would caution us to not get carried away, that we did see a couple positive signs there, and that things were going to change drastically. Sticking with what we've stated here, the industrial automation, the repalancing that we saw for inventories and the impact it had especially on us, and the other markets.

Speaker Change: Can you provide some color with regards to where that weakness will be concentrated?

Unknown Executive: from an end market perspective. I'm going to assume it's the markets that have already been addressed, but I want to make sure. And then from a geographic perspective, where that weakness might be. And if you can kind of tie all that together, that'd be great.

Unknown Executive: from an end market perspective. I'm going to assume it's the markets that have already been addressed, but I want to make sure and then from a geographic perspective, where that weakness might be. And if you can kind of tie all that together, that'd be great. Thanks.

Richard Warzala: And then, from a geographic perspective, where that weakness might be, and if you can kind of tile that together, that'd be great. Thanks. So, power sports, what we would expect, I mean, and again, we pay attention to what our customers are saying in the market and what they see, the trends and the future trends coming. I would say to you that that's certainly one that we expect to have weaker demand from. Okay, and it's pretty much across the board. The industrial piece is the wild card. That, we're taking a caution area approach here for planning our business that it's not going to come back rapidly, but what I'd say to you, it has the potential as we get into fourth quarter of this year to return to a, certainly, a much better level for us.

Dick Warzala: So power sports, we would expect, and again, we pay attention to what our customers are saying in the market and what they see the trends and the future trends coming. So I would say to you that that's certainly one that we expect to have weaker demand for. Okay. And it's, it's pretty much across Lee, the industrial piece is the wild card.

Unknown Executive: So, power sports, we would expect, I mean, and again, we...

Richard Warzala: We didn't talk much about geographic markets, but certainly Europe was impacted. Again, some mixed signals. For us right now, our emphasis is going to be on getting the business adjusted, readjusted, and aligned to take costs out to become a more profitable company based on a lower cost base. That's really our focus, and it will continue to be our focus this year and in the next year. I guess it's based on that kind of mixed signals and it sounds like maybe some uncertain visibility.

Speaker Change: to what our customers are saying in the market and what they see the trends and the future trends coming. So I would say to you that that's certainly one that we expect to have weaker demand from, okay? And it's pretty much across the board.

Unknown Executive: industrial piece is the wild card. That. We're planning our business, that it's not going to come back rapidly. We're planning cautiously and we're acting aggressively to make sure that the foundation just gets stronger and it needs to get stronger to achieve the goals that we're not forgetting about that we've established for ourselves in the past of margin improvement. The geographic side of it, yes, Europe has seen a significant, And I have to be careful because, as you know, Ted, we play in pockets and niche markets and so forth, and while the overall market, But as I said, I'll just repeat myself, we're going to plan cautiously and we're going to react, you know, really aggressively to get the cost structure in line where it should be to achieve the margins we said we were going to achieve, you know, we've been talking about for the last couple of years.

Unknown Executive: The industrial piece is the wild card.

Dick Warzala: We're taking a cautious approach here. We're planning our business so that it's not going to come back rapidly. But what I'd say to you, it has the potential, as we get into the fourth quarter of this year, to return to a much better level for us.

Unknown Executive: That...

Unknown Executive: We're taking a cautionary approach here.

Unknown Executive: We're planning our business, that it's not going to come back rapidly, but what I'd say to you, it has the potential, as we get into the fourth quarter of this year, to return to certainly a much better level for us.

Richard Warzala: And as far as the other markets go, I think, uh, yes, the overall, we see, you know, a decrease, but we mentioned already that the aerospace and defense space applications seeing an uptick there and seeing medical. So, you know, we're planning cautiously and we're acting aggressively. Make sure that the foundation just gets stronger, and it needs to get stronger to achieve the goals that we're not forgetting about that we've established for ourselves in the past, of margin improvement. The geographic side of it, yes, Europe has seen a significant. And I have to be careful because, as you know, Ted, we play in pockets in niche markets and so forth.

Dick Warzala: Yeah, as far as the other markets go, I think, yes, the overall we see, you know, a decrease, but we mentioned already that the aerospace and defense space application is seeing an uptick there and medical. So. You know, we're planning cautiously, and we're acting aggressively to make sure that the foundation just gets stronger, and it needs to get stronger to achieve the goals that we're not forgetting about that we've established for ourselves in the past through margin improvement.

Richard Warzala: I mean, the 500 million run rate through the second half, and I think it even kind of said maybe over the next several quarters, but there's also a chance that maybe the inventories start returning in early 2025 before maybe normal run rates in mid 2025. So I guess looking out into 2025, should we kind of expect gradual improvement starting early in the year before getting to more normalized levels, or do you expect kind of that 500 million run rate to last in the Q1 next year as well before starting to really improve?

Unknown Executive: and

Unknown Executive: As far as the other markets go, I think, yes, overall, we see a decrease, but we mentioned already that the aerospace and defense space applications

Speaker Change: Seeing an uptick there and seeing medical.

Unknown Executive: so

Unknown Executive: yilke

Unknown Executive: We're planning cautiously and we're acting aggressively to make sure that the foundation just gets stronger and it needs to get stronger to achieve the goals that we're not forgetting about that we've established for ourselves in the past of margin improvement.

Dick Warzala: The geographic side of it, yes, Europe has seen a significant, and I have to be careful because, as you know, Ted, we play in pockets and niche markets and so forth. And while the overall market can be classified as industrial, you really have to look at the specifics of what we do in the industrial or vehicle sectors, because, as we mentioned, it's not automotive, it's agricultural, and you can see the information out there and the downturn and, you know, the agricultural equipment markets and so forth.

Richard Warzala: Yeah, I would say based on what we know today, I would expect that to continue in the Q1. And certainly if something changes there, we see some, the dynamics of the markets start to change, we certainly will keep everybody arrested. But saying that and running the business with I think the anticipation that that would be the case, 500 million annualized run rate, it just makes it more important for us to continue to streamline, to reorganize, to make sure that we take the cost out, and that's our focus, and that'll continue to be our focus.

Unknown Executive: um

Unknown Executive: The geographic side of it, yes,

Unknown Executive: And I have to be careful because, as you know, Ted, we play in pockets and niche markets and so forth, and while the overall market

Richard Warzala: And while an overall market can be classified as industrial, you really got to look at the specifics of what is it that we do in industrial or vehicle, because, as we mentioned, it's not automotive, it's agricultural. You can see the information out there in the downturn and the agriculture equipment markets and so forth. So I think as we look at that and you say geographic, other than where we've had some strength and new programs kicking in and or the acceleration of some others, the general market in Europe is down, and it's down 8 to 10%.

Unknown Executive: It can be classified as industrial. You really got to look at the specifics of what is it that we do in industrial or vehicle, because as we mentioned, it's not automotive. It's agricultural. And you can see the information out there and the downturn and the agricultural equipment markets and so forth. So I think

Dick Warzala: So, I think. As we look at that, you say geographic. Other than where we've had some strength and new programs kicking in, and or the acceleration of some others, the general market in Europe is down, and it's down eight to 10%. And that reflects some while we have some increases, we have, you know, further decreases that go beyond the 8 to 10% in some specific markets. But we do, again, I would say this to you that.

Ted: As we look at that, you say geographic.

Richard Warzala: So we mentioned that also, I would just say to you here, we talked about in the second half of 2024, the additional five million, and I will tell you that's substantially already identified and we'll be fully executed very early here in the second half. Yeah, I guess realigning the business just to be, you know, not to take, yeah, I guess the market swings and the uncertainties we talked about, things could change and they could change pretty rapidly if certain things fall into place but we're not running our business in that manner, we're running our business that we'll take control of what we can control and we'll get it done.

Ted: Other than where we've had some strength and new programs kicking in and or the acceleration of some others, the general market in Europe is down and it's down eight to ten percent.

Richard Warzala: And that reflects some; while we have some increases, we have further decreases that go beyond the 8 to 10% in some specific markets. But we do, again, I would say this to you that we're starting to see some mixed signals there that perhaps it's coming back. But as I just repeat myself, we're going to plan cautiously, and we're going to react really aggressively to get the cost structure in line where it should be to achieve the margins we said we were going to achieve. We've been talking about for the last couple of years.

Unknown Executive: and

Ted: That reflects some while we have some increases we have you know further decreases that go beyond the 8 to 10 percent in some specific markets.

Dick Warzala: We're starting to see some mixed signals there that perhaps... is coming back. But as I said, I'll just repeat myself, we're going to plan cautiously, and we're going to react really aggressively to get the cost structure in line where it should be to achieve the margins we said we were going to achieve. You know, we've been talking about for the last couple.

Unknown Executive: But we do, again, I would say this to you, that...

Ted: We're starting to see some mixed signals there that perhaps it's coming back.

Unknown Executive: But as I said, I'll just repeat myself, we're going to plan cautiously and we're going to react really aggressively to get the cost structure in line where it should be to achieve the margins we said we were going to achieve, you know, we've been talking about for the last couple of years.

Richard Warzala: Sure, and on that, you know, added, you know, 5 million, now 10 million of cost takeouts, I know you mentioned you're still looking for additional opportunities, you feel like there's some more levers to pull if things continue to worsen or stay at this kind of level for longer than you're expecting, is there more cost takeouts just to kind of, you know, but we some, some of that profitability Yes, and it'll have nothing to do on whether markets continue to worsen or not.

Richard Warzala: Okay, my final question, and just kind of probably makes logical sense, but given you a full plate right now with challenging macro backdrop, a fair amount of business restructuring going on, is it fair to assume that the growth, the M&A side of the growth strategy is going to be set aside while you kind of get the ship right, right sized, and things batting down? Or is it like, are you still keeping the, you know, keeping a pretty active effort on that front? And that's my last question. It's fair to say that. I mean, we're focused on cash; we're focused on getting to that bay down and so forth.

Unknown Executive: Okay, my final question, which probably makes logical sense but, you know, kind of giving you a full plate right now with, you know, a challenging macro backdrop, you know, a fair amount of, you know, business restructuring going on. Is it fair to assume that, you know, the growth, the M&A side of the growth strategy is going to be set aside while you kind of get the ship right, right sized, and, you know, things battened down? Or is it like, are you still keeping, you know, the You know, keeping a pretty active effort on that front? And that's my last question.

Ted Jackson: Okay, my final question, which probably makes logical sense but, you know, kind of giving you a full plate right now with, you know, a challenging macro backdrop, you know, a fair amount of, you know, business restructuring going on. Is it fair to assume that, you know, the growth, the M&A side of the growth strategy is going to be set aside while you kind of get the ship right, right sized, and, you know, things battened down? Or is it like, are you still keeping, you know, the same, keeping a pretty active effort on that front? And that's my last question.

Unknown Executive: Okay my final question and just kind of probably makes logical sense but you know kind of giving you a full plate right now with you know challenging macro backdrop you know a fair amount of you know

Unknown Executive: Business Restructuring going on. Is it fair to assume that you know the growth the M&A side of the growth strategy is going to be set aside while you kind of you know get the ship right right sized and you know things battened down or is it like are you still keeping you know the

Richard Warzala: I mean, there are, we've taken a really hard look at everything and the structural wise and so forth and there are definitely some additional opportunities to identify, it's just a matter of how much can we execute and get implemented, you know, in the short period of time Okay, great, I will leave it there, thanks. Thank you, Danny.

Dick Warzala: It's fair to say that, I mean, we're focused on cash, we're focused on getting the debt paid down, you know, and so forth. So yes, I mean, we continue to identify and groom opportunities for the future. It's just the short term here.

Unknown Executive: you know keeping a pretty active effort on that front and that's my last question.

Speaker Change: It's fair to say that, I mean, we're focused on cash, we're focused on getting the debt paid down.

Richard Warzala: So yes, I mean, we continue to identify and groom opportunities for the future. It's in the short term here. We will; it would have to be something totally exceptional. We'd have to go after it in a different way than what we've done in the past. So our focus is on internal operations, continue to groom for the long term, the acquisitions. But in the meantime, you know, we're not aggressively going after things and open in the market right now.

Brett Kearney: And the next question comes from one of Brett Coney with American Legal Opportunity Partners. Please proceed. Hi, Dick and Jim. Good morning. Thanks for taking my question. Morning, Brett.

Speaker Change: and so forth. So yes, I mean, we continue to identify and groom

Unknown Executive: opportunities for the future. It's the short term here.

Dick Warzala: We will, but it would have to be something totally exceptional. We'd have to go after it in a different way than what we've done in the past. So our focus is on internal operations, continuing to groom for the long term. The acquisitions, but in the meantime, you know, we're not aggressively going after things that are opening in the market right now. Okay. All right.

Speaker Change: opportunities for the future. It's in the short term here. We will

Richard Warzala: I'd great to hear some of the new commercial vehicle awards ramping up, curious, you know, what the puts and takes in the global economy, what you're hearing from customers and some of the other recent new vehicle programs you've won and kind of what customers are looking for in kind of pushing forward with those ramps as well. Well, it's interesting is that there has been and I think it's been in the news about the EV side of the electric vehicle side of it and most of our solutions are agnostic to what the, you know, if it's a combustion engine or electric engine, it doesn't, we're agnostic to that.

Unknown Executive: It would have to be totally exceptional. We'd have to go after it in a different way than we have done in the past. So our focus is on internal operations, continuing to groom for the long term.

Speaker Change: It would have to be something totally exceptional and we'd have to go after it in a different way than what we've done in the past. So our focus is on

Unknown Executive: internal operations continue to room for the long term the acquisitions but in the meantime we're not a aggressively going after things and openened in the market right now

Ted Jackson: Okay. All right. Thanks for taking my questions. I'll talk to you guys soon.

Ted Jackson: OK, all right, thanks for taking my questions. I'll talk to you guys soon.

Speaker Change: Okay. All right. Thanks for taking my questions. I'll talk to you guys soon.

Operator: Thank you, Ted. Thank you.

Operator: Thank you. This concludes our question and answer session. I'd like to turn the call back to Dick Warzala for his closing remarks.

Speaker Change: Thank you, Ted.

Richard Warzala: This concludes a question and answer session.

Richard Warzala: I'd like to turn the call back to Dick Warzola for closing remarks. Thank you, everyone, for joining us on today's call and for your interest in all. You, as always, please feel free to reach out at any time. And we look forward to talking with all of you again after our third quarter 2020, 2024 results in November.

Operator: Thank you. This concludes our question and answer session. I'd like to turn the call back to Dick Warzala for closing remarks.

Dick Warzala: Thank you, everyone, for joining us on today's call and for your interest in Allient. As always,

Dick Warzala: Thank you, everyone, for joining us on today's call and for your interest in Allient. 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 third quarter 2020-2024 results in November. Thank you for your participation, and have a great day.

Dick Warzala: Thank you everyone for joining us on today's call and for your interest in Allient. 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 third quarter 2020-2024 results in November .

Richard Warzala: So we did see that there had been a downshift in demand and we experienced that in the second quarter. So it was essentially a push out of one quarter. I'm sorry, one month. And so I think it's been it they've adjusted for it and going forward, we should see steady demand there. I wouldn't suggest that it's going to increase beyond where we are today, but we do have some other programs that we're working on that should not this year, but we'll wrap in the ramp up next year as well.

Operator: Oliver.

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

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

Speaker Change: This concludes today's conference. You may now disconnect your lines.

Richard Warzala: But so there was an impact there. Although it was relatively short and hopefully that's all been adjusted for and moving forward, we'll see the steady state demand. The big challenge was some inventory adjustments that at key customers where, you know, it was go, go, go, go, go, go, ship, ship, ship, everything you've got and not all of a sudden hold on. We've got we've got some challenges here. We're going to have to adjust, and they were quite significant. Excellent, very helpful.

Richard Warzala: And then if I could just ask one more on A&D, just curious, as you look out the next year or two, what you're seeing, I guess both space market as well as traditional defense opportunities for the company. Yeah, very, very encouraging. We have mentioned in the past that we've been, you know, we've worked on several applications and at some point they had to ramp up. And I think, you know, some of the projects were pushed to the right and decision making and so forth. But there's a significant number of projects. We are starting to see a slow ramp up in demand in some of the areas that we would have expected to already seen that.

Brett Kearney: So A&D is a bright spot. As well as medical, we see some good opportunities in medical too. Perfect, thanks so much, Dick. Thank you, Rick. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star one on yourself and keep that.

Ted Jackson: And the next question comes from the line of Ted Jackson with no important securities. Please proceed. Thanks, I was a little concerned. I wasn't getting recognized by your system for the question. Thank you. I see you around there, too. You're there. I'm out there. I pay attention, Dick.

Richard Warzala: So I wanted to welcome Jim aboard, although I think he missed the boat and went straight into the water. So, but hopefully it'll all turn around. You're getting in at the bottom, Jim. You're getting in at the bottom. That's what I'm going to say. I have nowhere to go but up.

Richard Warzala: So my questions are a couple things. First of all, on the 5 million cost savings that you've already done and the 5 million that's coming, how should we think about how that rolls through the model in regards to kind of topics and gross margins? Primarily, we focused on fixed costs. And so there is, there are some, maybe Jim can answer this a little more granularity as far as the fixed manufacturing costs that were reduced, but also primarily it's an op-ex.

Richard Warzala: And that's where our focus was. I mean, in that cost, I mean, needless to say, as volumes reduce, the variable cost were reduced as well. So we don't, that's not a number we're reporting. We're strictly reporting what we saw was incremental savings, although we did take the differential and direct labor costs between US labor and Mexican labor as part of that. But that was a relatively small portion. If most of it has been in the operating expenses and certainly there's been some fixed manufacturing overhead as well.

Richard Warzala: As far as, is your question beyond that as far as the timing? Well, that was kind of the next part of how would we think about it? Well, I mean, you sound like your 5 million is already kind of done. So we can think about that, you know, coming to play in the second half of this year. And then the next 5 million sounds like we'll, we'll see maybe some of that in fourth or first quarter.

Richard Warzala: I mean, it's kind of what I interpreted, but some color on that would be great too. Yeah, I mean, you're absolutely correct in the first five. It's already in, and we've taken the charges against it, and we'll be experiencing, you know, realizing the benefit of that immediately. The next five million that we talked about, some of it has already been implemented here, in the second half, and I would tell you, most of it will be done in, uh, pervy in the second half. So we will start to see some benefit of that as well. Following the next year, we'll have the full benefit of the 10 million in cost reductions.

Richard Warzala: And as we mentioned, there's other, you know, there's other actions that we and take, it's this that the, the, we need a little bit more time and make sure that we execute them in a proper manner, but there's more to come. Okay.

Richard Warzala: My next question is just going into revenue mix, excuse me, and, uh, and guidance. I mean, you saw weakness pretty much across the business. I mean, generally speaking with, you know, the ones that really stood out for you being industrial automation and, you know, let's call it, you know, recreational vehicles. When you look at your outlook, this, you know, 500 million run rate that we are to expect to see for the next several quarters, can you provide some color with regards to, uh, where that weakness will be concentrated from an end market perspective.

Richard Warzala: I'm going to assume it's the markets that have already been addressed, but I want to make sure. And then from a geographic perspective, where that weakness might be, and if you can kind of tile that together, that'd be great. Thanks. So, power sports, what we would expect, I mean, and again, we pay attention to what our customers are saying in the market and what they see the trends and the future trends coming.

Richard Warzala: I would say to you that that's certainly one that we expect to have weaker demand from. Okay, and it's pretty much across the board. The industrial piece is the wild card. That, we're taking a caution area approach here for planning our business that it's not going to come back rapidly, but what I'd say to you, it has the potential as we get into fourth quarter of this year to return to a, certainly, a much better level for us.

Richard Warzala: And as far as the other markets go, I think, uh, yes, the overall, we see, you know, a decrease, but we mentioned already that the aerospace and defense space applications seeing an uptick there and seeing medical. So, you know, we're planning cautiously and we're acting aggressively, make sure that the foundation just gets stronger, and it needs to get stronger to achieve the goals that we're not forgetting about that we've established for ourselves in the past, of margin improvement.

Richard Warzala: The geographic side of it, yes, Europe has seen a significant And I have to be careful because, as you know, Ted, we play in pockets in niche markets and so forth. And while an overall market can be classified as industrial, you really got to look at the specifics of what is it that we do in industrial or vehicle, because as we mentioned, it's not automotive, it's agricultural. You can see the information out there in the downturn and the agriculture equipment markets and so forth.

Richard Warzala: So I think as we look at that and you say geographic, other than where we've had some strength and new programs kicking in and or the acceleration of some others, the general market in Europe is down and it's down 8 to 10%. And that reflects some while we have some increases, we have further decreases that go beyond the 8 to 10% in some specific markets. But we do, again, I would say this to you that we're starting to see some mixed signals there that perhaps it's coming back.

Richard Warzala: But as I just repeat myself, we're going to plan cautiously and we're going to react really aggressively to get the cost structure in line where it should be to achieve the margins we said we were going to achieve. We've been talking about for the last couple of years.

Richard Warzala: Okay, my final question and just kind of probably makes logical sense but given you a full plate right now with challenging macro backdrop, a fair amount of business restructuring going on, is it fair to assume that the growth, the M&A side of the growth strategy is going to be set aside while you kind of get the ship right, right sized and things batting down or is it like are you still keeping the, you know, keeping a pretty active effort on that front and that's my last question. It's fair to say that.

Richard Warzala: I mean, we're focused on cash, we're focused on getting to that bay down and so forth. So yes, I mean, we continue to identify and groom opportunities for the future. It's in the short term here. We will, it would have to be something totally exceptional. We'd have to go after it in a different way than what we've done in the past. So our focus is on internal operations, continue to groom for the long term, the acquisitions. But in the meantime, you know, we're not aggressively going after things and open in the market right now.

Ted Jackson: OK, all right, thanks for taking my questions. I'll talk to you guys soon. Thank you, Ted. Thank you.

Richard Warzala: This concludes a question and answer session. I'd like to turn the call back to Dick Warzola for closing remarks. Thank you, everyone, for joining us on today's call and for your interest in all you as always, please feel free to reach out at any time. And we look forward to talking with all of you again after our third quarter 2020, 2024 results in November. Oliver.

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

Q2 2024 Allient Inc Earnings Call

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