Q4 2024 Allient Inc Earnings Call
Speaker Change: Good day and welcome to the Alien Inc. fourth quarter fiscal year 2024 financial results call.
Speaker Change: All participants will be in listen-only mode. Should you need assistance, please signally conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may request star, then one on a touchstone stone. To withdraw your question, please press star, and then two.
Speaker Change: Please note this event is being recorded. I would now like to turn the conference over to Craig Maholik, Investor Relations. Please go ahead.
Craig Mychajluk: Yeah, thank you, and good morning everyone. We certainly appreciate your time today as well as your interest in Allient. Joining me on the call are <expletive> Warzala, our chairman, president, and CEO , and Jim Lee Show, our Chief Financial Officer.
Craig Mychajluk: <expletive> and Jim are going to review our fourth quarter and full year 2024 results and provide an update on the company's strategic progress and outlook after which we'll open up the line for Q&A.
Craig Mychajluk: 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 the slides at a company today's discussion.
Craig Mychajluk: If you're reviewing those slides, please turn slide two for the Safe Harbor Statement. As you are aware, we may make forward-looking statements on this call during the formal discussion as well as during the Q&A.
Craig Mychajluk: 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 with other documents filed by the company with the Securities and Exchange Commission.
Craig Mychajluk: You can find these documents on our website or at scc.gov.
Craig Mychajluk: You should not consider the presentation of this additional information in isolation, or as a substitute for results prepared in accordance with Gap.
Craig Mychajluk: We have provided reconciliations of non-GAAP , two comparable GAAP measures in the tables accompanying mirroring's release as well as the slides. With that, please turn the slide three and I'll turn it over to <expletive> to begin.
Thank you. Thank you.
Thank you, Craig, and welcome everyone.
Speaker Change: As we conclude, 2024, I want to acknowledge our team's resilience and commitment to execution and what has been a dynamic and at times challenging market environment.
Speaker Change: Despite headwinds and key industrial and vehicle markets, we continue to execute with discipline, driving operational efficiencies, and positioning Allient for sustained long-term growth.
Speaker Change: In the fourth quarter, we delivered 122 million in revenue, with a sequentially improved gross margin of 31.5% even as volume remains soft.
Speaker Change: Importly, orders increase 15% sequentially, resulting in a book to bill ratio of nearly one.
largely driven by strengthening demand, outward quality, and defense.
Speaker Change: For the whole year, revenue totals $530 million, reflecting the anticipated demand softness largely due to inventory rebalancing and customer utilization of excess inventory in the channel.
However, we remain focused on financial discipline.
Speaker Change: Generating nearly 42 million in operating cash flow and ending the year with 36 million in cash.
Speaker Change: Total debt reached approximately 240 million. At the end of the first quarter of 2024, following our acquisition of S&C.
Speaker Change: Since then, we have been committed to reducing debt, lowering our total by 16 million over the year.
Speaker Change: On a nut that basis, given our stronger cast position, we are essentially back to where we were at the end of 2023 despite adding SNC.
S&C has progressed as expected.
Speaker Change: It is a well-established company and their offerings have complemented our current power quality capabilities.
Speaker Change: This was our first target acquisition in support of our Power Technology pillar, and we are excited about the synergies developing as a result.
Speaker Change: A drive with our margin of improvement has been our simplified to accelerate now initiatives, as highlighted on slide 4.
Speaker Change: This program has been instrumental in refining our organizational structure, reducing redundancies, and optimizing production processes.
Speaker Change: In 2024, it delivered 10 million in annualized savings, improving our cost structure and overall agility.
Speaker Change: By simplifying operations, we are enhancing our responsiveness, leading to faster time to market, improved customer service, and stronger competitive positioning across key industries.
Speaker Change: Our goal is to drive an additional six to seven million in annual savings in 2025.
Speaker Change: Building on this momentum, in early February , we announced the expansion of machining capabilities at our Delta and Alabama facility.
An initiative that is expected to support our goal.
Speaker Change: While there will be some one-time implementation costs, the investment is expected to pay for itself within a year.
Speaker Change: We anticipate realizing the initial benefits by late 2025, further strengthen your operational efficiency and cost structure.
Speaker Change: Jim will provide additional details on the associated restructuring changes and charges.
Thank you for watching. Please subscribe. See you next time.
Speaker Change: Leveraging advanced machining techniques, our dose and facility will focus on producing complex fabricated parts that are strategically aligned with the needs of our key markets and customers.
Additionally, we will transition current assembly operations from doping.
Speaker Change: Consolidate to skip the booties into our facilities in Tulsa, Oklahoma, and Reno to Mexico, where final assembly, integration, and testing are core competencies.
Speaker Change: This realignment will sharpen our business focus and optimize our global footprint, enabling us to deliver high precision system solutions for demanding applications across the diverse sectors, including aerospace and defense, medical, and electronic tests on the Sunday
Speaker Change: While he transitions involved complexities and require focused execution, we are competent in the long term efficiencies they will create.
And I'll be right back.
Speaker Change: Looking ahead, we are actively identifying new opportunities to drive efficiency, innovation and growth, ensuring we remain aligned with evolving market conditions and customer demands.
Speaker Change: By continuously optimizing our operations and making strategic investments, we are strengthening
Enhancing Operational Flexibility and Unlocking Greater Earnings Potential
Speaker Change: This forward-thinking approach is critical to maintaining our competitive edge and delivery sustained value to our stakeholders.
Speaker Change: With that, let me turn it over to Jim for a more in-depth review of the financials.
Jim Michaud: Thank you, <expletive> , and good morning, everyone. In the fourth quarter, we reported revenue of 122 million, a decrease from the same period last year, aligning with our expectations.
Jim Michaud: The impact of foreign currency exchange rate fluctuations was nominally unfavorable by 300,000.
Jim Michaud: Our geographic sales mix shifted with U.S. customer accounting for 54% of total sales, down from 59% in the fourth quarter of the previous year.
Jim Michaud: The percentages were similar to full-year sales mix as well. This change reflects demand challenges including lower industrial automation sales and softness within our vehicle markets.
Jim Michaud: Breaking down our results further, let's take a closer look at how each of our key market
Jim Michaud: Aerospace and Defense Sales were a bright spot, increasing 20 percent due to the timing of certain defense and space programs. We are actively pursuing several promising opportunities in the defense sector, which we anticipate will contribute to growth in the future.
Jim Michaud: Medical Market Revenue also increased up 5% driven by solid demand for surgical instruments and respiratory and breathing equipment.
The sales and vehicle markets continue to face headwind.
Decreasing 46% .
Jim Michaud: This decline was primarily driven by reduced demand for power sports as the market had struggled to rebound following the surge in demand driven by the pandemic. Additionally, our strategic decision to focus more on margin-enhancing applications contributed to the overall decrease.
Jim Michaud: Industrial market sales declined 11%, despite its strong performance and power quality sales, particularly to the HVAC and data center markets.
We also saw incremental sales from the SNC acquisition.
Jim Michaud: However, these gains were more than offset by reduced demand in industrial automation.
Primarily due to significant inventory destocking by our largest customer.
Jim Michaud: by six illustrates the shift in our Revenue Amix across markets over the full-year period, highlighting the key catalysts driving these chains.
Jim Michaud: The industrial sector remained our largest market, contributing 47% of the trailing 12 month sales.
Jim Michaud: This market was primarily driven by strong demand and power quality as well as growth in vehicle handling and semi-conductor equipment.
Jim Michaud: While industrial automation initially benefited from supply chain improvements earlier in the year, sales and this sector slowed significantly as inventory levels have reset across the industry.
Jim Michaud: In the vehicle market, we experienced increased demand in commercial automotive driven by ramp-up of several new model programs. However, this was offset by shifting recreational spend trends in power sports and soccer domain in the agricultural sector.
Jim Michaud: While we saw stronger sales and surgical products, our medical market experience ongoing weakness in medical mobility solutions.
Jim Michaud: Harold Space and Defense Annual Sales reflect variability driven by Contractor Ward and Government Budget Cycles combined with long lead times.
Jim Michaud: That said, Defense has seen positive growth offset by declines within the space industry due to program timing.
Jim Michaud: Finally, our distribution channel, Wild Smaller, showed modest growth, representing 5% of total sales over the trailing 12-month period.
Jim Michaud: As shown on slide 7, Gross Propert for the Quarter was 38.4 million, resulting in a gross margin of 31.5%. Gross margin remained flat year over year, despite the top line softness and expected margin dilution from our most weak recent acquisition.
Jim Michaud: The ten basis point sequential increase in margin was primarily driven by a favorable product mix, as well as the continued implementation of our lean tool kit across the organization.
Jim Michaud: Notably, from the low margin point of 29.9% in the second quarter, we have seen a 160 basis point improvement in gross margin, reflecting a strong sequential recovery.
Jim Michaud: We have been closely evaluating the potential impacts of evolving tariff policies, assessing our options in this highly fluid environment.
Jim Michaud: With Manufacturing Operations in Canada, Mexico, and China, we recognize tariffs may affect our supply chain.
Jim Michaud: leading to increased costs. As the situation continues to develop, we will consider changes and trade policies through our pricing strategies and continuous operational improvements.
Jim Michaud: We remain confident in our ability to pass most, if not all, of the potential tear of impact onto customers, ensuring operational stability while maintaining the quality and value our markets expect.
Jim Michaud: Looking ahead, our ongoing supplication initiatives coupled with the integration of S&C and its added capacity position us well to drive continued margin improvement over time.
Jim Michaud: Despite current market challenges, we remain focused on improving profitability and driving operational efficiency.
Jim Michaud: As highlighted on slide 8, we reported operating income of 6.4 million, resulting in an operating margin of 5.3%, which was an increase of 30 basis points year-over-year and was flat sequentially.
Jim Michaud: In the fourth quarter, we incurred minimal restructuring charges, bringing the fillier total to $2 million. These charges will primarily cast base and largely tied to severance expenses.
Jim Michaud: As <expletive> mentioned, our Simplified to Accelerate Now program is well underway and we are actively implementing additional cost-saving measures.
Jim Michaud: During 2025, we are targeting an incremental 6-7 million reduction in annualized costs with initial benefits expected later in the year.
Jim Michaud: One-time implementation costs of the Doathe Initiative are estimated to be approximately 4 to 5 million dollars and are expected to be substantially incurred in 2025 and are anticipated to reduce a full payback within a year.
Jim Michaud: Slide 9 highlights are bottom line results showing continued sequential improvements.
Jim Michaud: For the quarter, that income reached $3 million, translating to earnings for diluted share of $0.18.
Jim Michaud: Adjusted net income was $5.2 million, or $31 cents for a diluted share, which excludes non-tash amnesty of entangial assets as well as business development, restructuring, and
Jim Michaud: Our effective tax rate for the quarter was 22.2%, the prior year's fourth quarter tax benefit of 400,000 reflected realization of certain NOLs and R&D credits and incentives.
Jim Michaud: For the full year 2025, we expect our effective tax rate to range between 21 and 23 percent.
Jim Michaud: Internally, we use adjusted EBITDA as a key metric to measure our operational performance and progress.
Jim Michaud: Adjusted EBITDA for the quarter was 14.1 million, or 11.6% of revenue. We are targeting further improvement in EBITDA margin through our ongoing simplification efforts.
Jim Michaud: Sequentially our adjusted EBITDA margin rose by 10 basis points, demonstrating the effectiveness of these initiatives.
Jim Michaud: Turning to cash generation and our balance sheet on slides 10 and 11, we remain disciplined in managing working capital while continuing to invest in strategic priorities.
Jim Michaud: For the full year, cash from operations reached 41.9 million, reflecting strong working capital efficiencies and non-cash adjustments that help offset lower net income.
Jim Michaud: At year end, Cash and Cash equivalent increased 13% to 36.1 million, further reinforcing our financial flexibility.
Jim Michaud: Capital expenditures for the year total, 9.7 million, compared with 11.6 million last year as we refined our capital allocation strategy to focus on high value, high return projects.
Jim Michaud: In 2025, we anticipate moderate capex growth with spending projected between 10 and 12 million aligned with our targeted investment priorities.
Jim Michaud: R.D. sales outstanding increased to 60 days, primarily due to customer mix and timing.
Jim Michaud: Inventory management remained a top priority. Inventory turns remained flat sequentially at 2.7 times.
Jim Michaud: Throughout 2024, we navigated the impact of extended supplier lead times, receiving inventory for orders placed up to a year earlier.
Jim Michaud: As a result, inventory levels remained elevated, but we are actively aligning stock levels with current demand. Encouragingly, total inventory declined 5% year over year, and excluding F&C was down approximately 11%.
on the Deaf Reduction Plan.
Jim Michaud: Total debt stood at 224 million at year end, reflecting the FNC acquisition. However, we remained committed to de-leveraging, reducing debt by 7.2 million in the fourth quarter.
Jim Michaud: NetDeath finished the year at 188 million, representing a net death decapitalization ratio of 41.5%, which was lower than year end 2023.
Jim Michaud: To enhance financial flexibility, we amended our 2024 credit facilities in the fourth quarter, securing less restrictive governance and expanded able to add back to support long-term planning.
Jim Michaud: Our year end leverage ratio, as defined in our credit agreement, was 3.43 times. Additionally, to mitigate
Jim Michaud: At the end of the quarter, we entered into a new three-year interest rate swap, hedging 50 May and of death, providing stability amidst slowing rate fluctuations.
Jim Michaud: These actions, reducing debt, optimizing capital allocations, and managing financial risks reinforce our ability to execute or simplify to accelerate now strategy with discipline.
Jim Michaud: Looking ahead to 2025, our financial priorities remain clear and focused.
Jim Michaud: First, we are committed to reducing inventory and strengthening working capital management. We have already made progress in aligning inventory with current demand conditions, and this will remain a key area of focus to further improve cash conversion.
Jim Michaud: Second, we will continue to drive cost reductions through operational efficiencies.
Jim Michaud: Our Simplified to Accelerate Now program is in full execution mode and we are implementing additional initiatives to streamline operations and enhance profitability.
Jim Michaud: and finally, we are dedicated to reducing debt as we remain disciplined in capital deployment and tax management.
We had already begun de-leveraging following the S&C acquisition.
Jim Michaud: and we will continue to take strategic actions to strengthen our financial position. With that, if you advance to slide 12, I will now turn the call back over to <expletive> .
Thank you, Jim.
The underlying fundamentals of our business remain strong.
Ford, order rates, demonstrated solid momentum, increasing 15% sequentially.
Jim Michaud: Growth was primarily driven by strength and power quality and defense.
Jim Michaud: All orders also rose 12% year-over-year, benefiting from similar and market tailwinds and contributions from our recent acquisition.
Jim Michaud: Although BackWalk has declined due to shifting customer orderly patterns, we remain focused on positioning the business for sustained demand recovery and the normalization of run rates.
Jim Michaud: Our diversified portfolio is well aligned with key macro trends, including data center expansion, electrification.
Energy Efficiency, Automation, [inaudible]
Jim Michaud: and the electric hybridization of all types of vehicles including those in the defense sector.
Jim Michaud: We are actively engaged in several promising new program opportunities at our Doomy Ford Allient Defense Solutions Unit.
Jim Michaud: which we announced at a press release in the fourth quarter of 2024.
Jim Michaud: We are also continuing the strategic realignment within our company to support the significant opportunities available to Allient in this sector as well in some of our other targeted verticals.
Jim Michaud: Our outlook is outlined on slide 13. We anticipate a moderated pace of orders across most markets through the first half of 2025, but expect continued strike in areas benefiting from long-term backup trends, particularly data center expansion.
Jim Michaud: Custom Radio and Adjustments appear to be nearing completion, and as we move forward for mid-year, we expect greater stability in order flow, supporting a strong return to revenue levels that improved operating margins as we capitalize on emerging growth opportunities.
Jim Michaud: As part of this open transition, we expect some near-term inefficiencies, including dual production light and temporary inventory build-up across multiple locations.
Jim Michaud: However, these are necessary steps to ensure a smooth transition and position us for long-term operational improvements.
Jim Michaud: Ultimately, these initiatives reflect our commitment to building a more efficient, agile, and sustainable foundation for future growth.
Jim Michaud: At Allient, we are actively driving innovation and efficiency through target investments
Jim Michaud: Our Focus on Operational Excellence, exemplified by our Simplified to Accelerate Now Program.
It ensures we remain agile and competitive in our dynamic environment.
Jim Michaud: by optimizing our cost structure, streamlining operations, leveraging our global prep list, we are strengthening our ability to deliver high precision solutions that meet the emerging needs of our customers.
Jim Michaud: I am proud of what we have accomplished this past year and remain optimistic about our path forward.
Jim Michaud: Our strategic initiatives combine with our team's dedication, position Allia, well for the future.
With that operator, let's open the library questions.
Speaker Change: He will now begin the question in the interview session to ask a question to me, press star then one on your touch-tone phones.
Jim Michaud: If at any time your question has been addressed then you would like to withdraw your question, please press star and then two.
Speaker Change: Our first question comes from Greg Palm with Craig Hallum Capital Group. Please go ahead.
Hey, more everybody, thanks for taking the questions and-
Speaker Change: You know, Congrats on a better end of the year, some improved execution for sure.
Thank you, Gerard.
If we could just-
Speaker Change: Start at maybe a high level, <expletive> just, you know, give us a little bit more color on kind of what you're seeing out there across geographies and markets.
Speaker Change: You know, anything that you think is worth noting and, you know, maybe how that relates to, you know, A sort of the potential to return the growth for the year and maybe the cadence of how you think 2025 plays out.
I am.
Good.
Now let's start with the geography.
Speaker Change: I would say to you that, you know, North America continues to strengthen. I think what's, uh,
Speaker Change: What we're looking for there is for the industrial sector to come back to life and get back to normal rates and growth.
Speaker Change: We do see some challenges continuing in the power sports area, the inventory levels that the dealers are seeing to be pretty high and so forth, so we don't expect that to return to the COVID days where it just went through the roof here.
As far as-
Speaker Change: Europe goes, I would tell you that in Europe , the driven, certainly by Germany, they still have some softness and it's expected to persist into mid-year. They have an administration change they're going to be going through.
Speaker Change: So depending on what happens there in the policies that we see implemented there hopefully that they'll also see some return emphasis on automation and growth in the industrial sector as well.
The...
Speaker Change: Global and primarily progressive interest. It is North America where we see the benefits of the data center expansion and our capabilities to support that are very encouraging. That's the continuing.
Speaker Change: to have some pretty strong tailwinds, and we expect that it will continue throughout the year and to be a pretty good beneficiary of that.
Defend Sector.
Speaker Change: You know, these are programs that we're working on and so we look at defense, we call it the-
Speaker Change: We created a new business unit that we announced last year and talked about a little bit here. There's many new programs that we're working on and we believe we have a product set in the solution set that makes us kind of unique in the space.
Speaker Change: And it's gaining tremendous traction. We've put resources in that have proven track records of growth and expansion. And we're really emphasizing that this is going to be a strong area for us and opportunities in the future based upon these new programs.
Speaker Change: We had the pastor talked about the traditions and how the inquiries went up based upon the complex that we're occurring.
Speaker Change: What we have been seeing in Christa Man while we have seen Christa Man there, so that the man is going up and I think we'll see that demand continuing to expand into the future here.
There's other areas that we've... [inaudible]
When we talk about our...
Speaker Change: Simplifies to accelerate now strategy. I think many people relate that to say, well, you stream lighting operations, you're creating operating efficiencies, you're reducing costs.
Speaker Change: and that's really what's generating fixed cost reductions that we're going through, but I will tell you, even more so than that, is the ability to respond quickly.
to get these organizations aligned much closer to customers.
Speaker Change: So that we can support them better and we can move very quickly on. So yes, we have the benefit of simplifying our reducing.
Speaker Change: The amount of overhead that sits in some of these silos and but making them more effective by working closely together with our customers and we think it improves our responsiveness.
Speaker Change: to our customer, which ultimately leads to a growth in business. So that's pretty quick, highlight of the market. We don't see, I didn't discuss Asia as you know, that's not a significant part of our business, but it still remains stable.
Speaker Change: Yep, that makes sense. I'm curious, you know, you're specifically giving, you know, recent news there, you know, proposed stimulus, kind of a, you know, almost like a whatever it takes.
Speaker Change: Moment, I mean, I know that's been a challenging market Germany specifically where you have a lot of exposure, but you know probably tourally to tell now, but do you feel like there could be any green shoots that that that emerges at more of a let's you know wait and see mode and see how that kind of the year shapes up. [inaudible]
Speaker Change: I would say it's a wait and see, well, great. I don't think we have enough information.
Speaker Change: Yes, there's been discussions on their stock, but in our area on the ground in Europe tell us that they're continuing to hold the line, the expenditures and looking at operational efficiencies and so forth and focusing on.
Speaker Change: New product development and programs that they think will kick off, but they're still thinking mid-year and beyond before we start to realize that these are those benefits.
Yep, okay, make sense.
Speaker Change: And then just lastly, you talked about it a couple of times about data center exposure and some of the strength there. Can you just kind of remind us exactly from like a revenue exposure standpoint and just in terms of growth rates? What did you see last year?
https://www.youtube.com.au
Thank you. Thank you.
Yeah, well, I think...
Speaker Change: Certainly, from our perspective, one of the advantages that we have that we feel will help us.
Speaker Change: Outpaced the industry in the growth is that we do have some higher power solutions that are quite unique in the marketplace.
That does give us a competitive edge.
Speaker Change: and have the ability to take advantage of that. From an overall standpoint, we're looking at a pretty significant growth that we've had year over year and a 40% range.
Speaker Change: and we do expect that that opportunity, maybe not at that level, but has the ability to continue well into the future.
Okay. Alright, I'll leave it there. Best of luck, thanks.
Thank you, Brett.
Copyright © 2020, New Thinking Allowed Foundation
Speaker Change: The next question comes from Ted Jackson with Northland Securities. Please go ahead.
Thanks. Good morning.
Good morning.
Speaker Change: <expletive> , I'd like to talk about both power sports and actually medical as well to start with. If you look at those businesses, the medical business, I know there's a lot of moving parts underneath it, but the medical business seems to have stabilized it around.
Speaker Change: You know, it's called $20 million, you know, for the last two years, and when, you know, is that kind of a sort of a base level run rate, can you just sort of, you know, talk a little bit about what's going on underneath the covers? Okay, let's do it.
Speaker Change: You know, I mean it just seems to me that that business is based out and then exactly a similar thing with regards to the power sports which also seems to have kind of based out around $20 million on a run rate basis for the last, you know, caught two quarters.
Speaker Change: and is that a way to think about this business? Is these two business lines for you that are flatlining along the kind of...
Speaker Change: Found their floors, and what we had to wait for is those markets to stabilize and turn around.
It's my first question [inaudible]
Here, so looking at medical first, I mean,
Speaker Change: You know, when we talked about medical and I've mentioned this before that we look at the applications in a more finite level internally, we call them Apple Ways or Field of Applications.
Speaker Change: and we look at our medical and basically group them and love them in two different parts. One would be medical mobility and the second would be instrumentation. Instrumentation being
Speaker Change: You know, treatment equipment, we're surgical robotics, and other types of diagnostic equipment, instrumentation type.
Speaker Change: Yeah, the other time we talked about the medical mobility and or patient handling, you're looking at wheelchairs, patient beds, rehab, and we also have other applications in there that
Speaker Change: In the past, for example, respiratory breathing during COVID times, obviously, that wasn't way up.
Speaker Change: and we saw that come back down to levels below what we saw in the past, so I think it's kind of leveling out now and stabilizing, but then we have other applications that are in various different types of pumps.
Applications. So, I would tell you that…
Speaker Change: Areas that we think will have some continued growth well into the future, you know, surgical robotics and instrumentation and diagnostic and test equipment, you know, higher end equipment that in the innovation that's occurring there, that's not going to go down, that's only going to increase.
Speaker Change: and it's as it starts to expand its reach into the world market, we think that there's definitely some opportunities there and we're investing there.
The other markets are going down here, I mean, these...
Insulin Pumps and the Blood Pumps and all their types of...
I'll call it more home-care or-
Speaker Change: Individual Care. I don't think those are going down. I think there's definitely going to be a growing market but maybe not as fast as and maybe from our standpoint it doesn't have the same technology that we would see in the higher level robotics and instrumentation markets.
Thank you very much. Thank you.
Speaker Change: As far as respiratory and breathing, I think that will be stable. I don't, you know, unless we have some change that occurs and-
Speaker Change: in the environment here. That's probably going to stabilize. So, we see, you know, for us, our emphasis is there on.
Speaker Change: providing the higher and higher level solution, continue to expand in there, expand our beach in there. And as we look at the vertical, we do, as I mentioned to you, we do look at it in two different ways. One is a more competitive.
Speaker Change: Different type of structure for handling and some of the other individual products, consumer type products as well, but the instrumentation and surgical robotics and so forth requiring, continuing to require.
Speaker Change: Higher and faster, better solutions, that we think will have some continued growth out into the future.
So you asked about, is it stabilized?
Speaker Change: I think we have some room to return it to a growth level that we haven't seen yet, but that I do think we have growth opportunities there and it's one of the key verticals for us.
Power Sportship, same questions for that?
Yep.
I think it's going to be a challenge.
Speaker Change: If you take a look at the market, can you take a look at the, you know, the-
Speaker Change: Major Players in the industry and so forth, I think they're all talking the same way that the...
It's a challenge market. It's also...
Speaker Change: The dynamics of that market have certainly changed over the years, I mean, clearly when we're one of the innovators in power steering, selling it to the market to buy and it's gone up tremendously.
You see, you know, the...
Speaker Change: Change of the retail chain that's being sold in the big box stores and whether it's sporting
Speaker Change: You know, the warehouses you've seen that as well as you still have the dealers and I think there's a there's a squeeze going on.
Speaker Change: What's the barge in potential? And as the vies have gone up, you've seen some competition outside of North America, which claims to be taking some market share. So I do see that.
Speaker Change: into the future as definitely a challenging market in our customers. So they've got battles on their hands to retain share, to drive costs out and figure out how to work with the. [inaudible]
Speaker Change: New channels and the cost reductions that they're seeing in their end products. And that's where we have to support them.
Speaker Change: Jerome, sort of pre-biper EPA regulations and such. So when you think about the vehicle segment and aggregate to those balance each other out, or do you think you can actually grow it?
I'm sorry. I'm sorry. I'm sorry. I'm sorry.
You know, I would say to you that...
Speaker Change: We have, there has been an offset that's occurred there for us. We do have growth in the commercial vehicle market, but I also
Speaker Change: I want to repeat what I've seen to be saying in every one of our conference calls.
Speaker Change: that we look at this market as the opportunity to sell into the automotive or vehicle markets itself and mostly automotive from the buy-in standpoint gives us some critical mass and coordinated buy-in.
Speaker Change: that we can leverage into other markets, not just other vehicle markets, but also some other markets within the company. That, in itself, we have enough volume there now where we feel...
Speaker Change: We can take advantage of that, and we can leverage that, but it is not for us, in fact, to...
Speaker Change: We are looking at and we've already made the decision internally that we want more than each application. We're not interested in mainstream, we're not interested in competing with people who will do this thing to run their businesses at extremely low margins, if any at all.
Speaker Change: So the challenges are going to be there. Unfortunately for us, we are positioned at some reach applications. It's grown. It's profitable. And we can leverage that into other areas. It has offset some of the drop.
Speaker Change: that we've seen in the power sports, but not all of it. I mean, power sports is everyone
Speaker Change: You know, our biggest customer was in that space no longer, our largest customer, in fact no longer.
Speaker Change: is in a reporting requirement for us. So that's good and it's bad. From the standpoint of we've always worked on very diligently on diversifying our business and the other sectors which we've done. And so the goal was, you know...
Speaker Change: to reduce the volume there and grow it everywhere else. The goal was to maintain the volume and grow our business elsewhere. For the most part we've done that. So we're going to have to spend some offset but not enough to cover the power sports drive.
Speaker Change: Okay, I've got one more bigger question than a couple little tiny ones for Jim. I want to move over to the inventory stuff than your largest customer. So when Rock will put out their quarterly stuff, they did actually pretty much put a flag on the ground saying that they had...
Speaker Change: I've seen a lot of the inventory within the segment, kind of pushed the normal, and so with that in mind, obviously it's not a one-for-one in terms of timing.
Speaker Change: You know, the caves of the year that you see that the inventories within that channel being normalized by a time we get into say like the third quarter of the year and then I got two just real quick ones for Jeff
Speaker Change: Gerard, so what I have to caution everyone on is that the...
Speaker Change: You know, again, we talk about broader markets, when we talk about automotive, we talk about, you know, industrial, we talk about, you know, medical and so forth, that.
Speaker Change: You know, we do focus and I mentioned this to you that we have these FOAs that we feel that we gain some competitive advantage there and then we look to leverage that into any all the opportunities that are out there for the same type of solution.
from the industrial automation standpoint, and I can appreciate that.
Speaker Change: You know, Rockwell has talked about that they're a game momentum and they're kind of cleaning out the channel and getting their inventory level suggested and that is great because we have suffered from that. It was a big headwind for us this year.
Speaker Change: It was over-weighted, that it was a situation where we had a pretty strong backlog based upon long-leaped
Speaker Change: of component parts, mostly electronic component parts that we had to go out and secure Rockwell also was supporting that effort to get out and get these component secured. And when we got them, and we were able to produce, they were taking everything we could produce.
Speaker Change: But there was something that I would tell you that must have been off in the planning system because it hit a cliff and it dropped.
Speaker Change: So, it tells me, and it's being totally open about it, it tells me that...
Speaker Change: We probably had a higher level of inventory in their channel than some of their other customers might have seen and that perhaps we would...
Speaker Change: to have a longer climb out of the, you know, for as they return to improving automation projects and utilization of our products. So, you're staying bit about, are we seeing improvement, the answer is yes.
Speaker Change: Is it going to continue to improve month after month quarter after quarter? Yes. When will it return to what we will call a normal state?
I will say to you that... [inaudible]
Speaker Change: I don't expect that to occur until later in the year. That's based upon the improving demand that we're seeing, indicating to that grub that we're seeing. I'll also caution us that...
Speaker Change: We had a surge last year, a very strong surge and we talked about a $40 million that we would have coming into the year based upon the surge.
Speaker Change: So, that level of business that we did have last year...
We don't see that repeating.
Speaker Change: in the near future. We see that it's going to be that was pent up demand and it was a surge demand based upon a lot of, you know, inability to get product and now that that's freed up and it's flowing, inventories are being consumed.
Speaker Change: We will return to a some type of normal demand, but it will be below the surge that we saw last year, so that's one of the headwinds that we will face going forward.
Is that answer to your question?
It does. Thanks very much.
Speaker Change: My last two questions, which are really kind of short. And so the one is with the, what's it? The Delta Thumbnail.
Speaker Change: You know, restructuring in the cost, you know, it's called four and a half million dollars, it's going to come through in 25. Are you going to break that out and how are you going to structure the breakout if you are within your financial statement?
Thank you for joining us.
Speaker Change: Break it out, but what I would tell you is, is that-
You know, it's under- Um...
Speaker Change: That's all underway, the effort. We know that it's quite candidly. I'd love to be able to tell you that it's going to be rateably...
Speaker Change: I think it's going to be a little lumpy Ted, and I would tell you it's probably going to be more...
Speaker Change: towards the back half of the year when we start seeing the greater costs. I mean, we are going to incur costs in the first half of the year but I think it's going to be weighted towards the second half.
Speaker Change: You won't even show that within. And we normally put our restructuring and business development.
Speaker Change: Okay, just making sure. So, so we will see it in there, but we'll be able to, you know, I mean, you won't call it out individually, but we'll see it in there in terms of the line, in terms of the line I hadn't understand what it is.
Yeah.
Speaker Change: And then my last question just to make sure, I think I have the rate down, but what is the interest rate for your swap that you put in that 60 million? I think I have 3.2, is that correct?
Speaker Change: That sounds about right but I'll confirm that up for you.
Speaker Change: Okay, that's it for me. Thanks for the patience for my questions.
Thank you, Ted.
Speaker Change: Again, if you have a question, please press star and then one.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
subs by www.zeoranger.co.uk
Speaker Change: Well, thank you, everyone, for joining us on today's call and for your interest in Allient.
Speaker Change: We will be participating in the Roth Conference on March 17th in Data Point, California.
Speaker Change: Otherwise, as always, please feel free to reach out to us at any time, and we look forward to talking to you all again after our first quarter 2025 results.
Thank you for your participation and have a great day.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now. This can happen.