Allied Motion Reports Operating Income up 47% on Revenue Growth of 25% in First Quarter 2018

Allied Motion Technologies Inc. (NASDAQ: AMOT) ("Company”), a designer and manufacturer that sells precision motion control products and solutions to the global market, today reported financial results for the first quarter ended March 31, 2018. Reported results include the acquisition of the original equipment steering business of Maval Industries, LLC ("Maval”) in January 2018.

• First quarter revenue increased 25% to a record $76.6 million driven primarily by organic growth
• Operating income grew $2.0 million, or 47%, to $6.4 million; Operating margin expanded 130 basis points to 8.4%
• Net Income rose 58% to $4.2 million; Earnings per share increased $0.16 to $0.45
• Orders increased 33% over the prior year; Backlog grew 7% sequentially to a new record level of $107.3 million
• Acquired the original equipment ("OE”) steering business of Maval Industries, LLC enabling Allied to provide a fully integrated steering system solution to its customers

"Building market momentum, the traction gained in our targeted markets, and our recent acquisition contributed to record sales in the first quarter,” commented Dick Warzala, Chairman and CEO of Allied Motion. "We are laser-focused on executing our strategy for growth while streamlining the organization and emphasizing continuous improvement in quality, delivery, cost and innovation as we drive the One Allied approach and expand our value proposition for our customers.”

Mr. Warzala concluded, "We continue to be excited about our future and are well positioned to take share in our served markets, many of which are also experiencing a lift from the improved economic environment. We are also encouraged with the prospects of our latest acquisition, and although the gross margin contribution is lower than our typical technology based solutions, it enhances our value proposition, deepens customer relationships and is expected to be neutral to slightly accretive to earnings in 2018.”

First Quarter 2018 Results (Narrative compares with prior-year period unless otherwise noted)

Record revenue of $76.6 million was up $15.2 million, or 25%. The increase was due to growth across all of the Company’s served markets, and reflects significantly higher sales to the Industrial/Electronics and Vehicle markets. Excluding the favorable effects of foreign currency exchange (FX), first quarter revenue was $72.5 million, up 18%. Sales to U.S. customers were 53% of total sales for the quarter compared with 54% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia.

Gross profit rose $4.9 million, or 27%, to $22.6 million, while gross margin improved 60 basis points to 29.5%. The expansion in gross margin was due to more favorable mix and higher volume, somewhat offset by a lower margin contribution from the recent acquisition and a lack of leverage from FX revenue expansion.

Operating costs and expenses were up $2.8 million to $16.1 million. General and administrative expense as a percent of sales increased 30 basis points to 9.7% primarily due to higher incentive compensation and additional personnel to support the Company’s growth. Engineering and development ("E&D”) was $5.0 million, up 18%, though as a percent of revenue, E&D decreased 30 basis points to 6.5%. The $151 thousand in business development costs in the 2018 first quarter was primarily from the Maval acquisition.

Operating income was up 47%, or $2.0 million, to $6.4 million, and operating margin expanded 130 basis points to 8.4%.

Interest expense increased $91 thousand to $0.6 million as the Company took on additional debt to fund part of the Maval acquisition.

The effective tax rate for the quarter was 26.2% compared with 31.0% in the prior-year period. The Company anticipates its effective tax rate for 2018 to range from 22% to 26%. Net income increased 58% to $4.2 million, or $0.45 per diluted share, from $2.7 million, or 0.29 per diluted share.

Earnings before interest, taxes, depreciation, amortization, stock compensation expense and business development costs ("Adjusted EBITDA”) was $9.7 million, up $2.5 million or 34%. As a percent of sales, Adjusted EBITDA was 12.7% compared with 11.9% in the prior-year period. The Company believes that, when used in conjunction with measures prepared in accordance with U.S. generally accepted accounting principles, Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance. See the attached table for a description of non-GAAP financial measures and reconciliation table for Adjusted EBITDA.

Balance Sheet and Cash Flow Review

Allied Motion purchased substantially all of the operating assets associated with the original equipment steering business of Maval Industries, LLC on January 19, 2018. The acquisition was funded with debt, cash generated from operations and cash on hand. Cash and cash equivalents at the end of the first quarter were $13.0 million compared with $15.6 million at the end of 2017. Total debt was $63.4 million at the end of the first quarter, up $10.3 million from year-end 2017. Debt, net of cash, was $50.4 million, or 34.6% of net debt to capitalization, up from 30.1% at the end of 2017.

Capital expenditures of $2.2 million included productivity and growth initiatives. The Company continues to expect to invest $13 million to $16 million in capital expenditures during fiscal 2018. The higher level of capital expenditures when compared with 2017 reflects success based expenditures in support of the significant recent project wins announced over the last year.

Orders and Backlog Summary ($ in thousands)

The year-over-year increase in orders and backlog reflect strength across all of the Company’s served markets as well as the Maval acquisition. The impact on orders from FX fluctuations was favorable $4.1 million year-over-year.

Backlog was up 38% over the prior year period and increased nearly 7% since fourth quarter 2017. The time to convert the majority of backlog to sales is approximately three to six months. Not included in the backlog are previously announced new business awards of $225.0 million that were received over the last year and will start shipping in 2019.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, May 3, 2018 at 11:00 am ET. During the conference call, management will review the financial and operating results and discuss Allied Motion’s corporate strategy and outlook. A question and answer session will follow.

To listen to the live call, participants can call (778) 327-3988. In addition, the call will be webcast live and may be found at: http://www.alliedmotion.com/investors

A telephonic replay will be available from 2:00 pm ET on the day of the call through Thursday, May 10, 2018. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 10004596 or access the webcast replay via the Company’s website. A transcript will also be posted to the website once available.

About Allied Motion Technologies Inc.

Allied Motion (NASDAQ: AMOT) designs, manufactures and sells precision and specialty motion control components and systems used in a broad range of industries within our major served markets, which include Vehicle, Medical, Aerospace & Defense, and Industrial/Electronics. The Company is headquartered in Amherst, NY, has global operations and sells into markets across the United States, Canada, South America, Europe and Asia.

Allied Motion is focused on motion control applications and is known worldwide for its expertise in electro-magnetic, mechanical and electronic motion technology. Its products include brush and brushless DC motors, brushless servo and torque motors, coreless DC motors, integrated brushless motor-drives, gear motors, gearing, modular digital servo drives, motion controllers, incremental and absolute optical encoders, and other associated motion control-related products.

The Company’s growth strategy is focused on becoming the motion solution leader in its selected target markets by leveraging its "technology/know how” to develop integrated precision motion solutions that utilize multiple Allied Motion technologies to "change the game” and create higher value solutions for its customers. The Company routinely posts news and other important information on its website at http://www.alliedmotion.com/.

Safe Harbor Statement

The statements in this news release and in the Company’s May 3, 2018 conference call that relate to future plans, events or performance are "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the word "believe,” "anticipate,” "expect,” "project,” "intend,” "will continue,” "will likely result,” "should” or words or phrases of similar meaning. Forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from the expected results described in the forward-looking statements. The risks and uncertainties include those associated with: the domestic and foreign general business and economic conditions in the markets we serve, including political and currency risks and adverse changes in local legal and regulatory environments; the introduction of new technologies and the impact of competitive products; the ability to protect the Company’s intellectual property; our ability to sustain, manage or forecast its growth and product acceptance to accurately align capacity with demand; the continued success of our customers and the ability to realize the full amounts reflected in our order backlog as revenue; the loss of significant customers or the enforceability of the Company’s contracts in connection with a merger, acquisition, disposition, bankruptcy, or otherwise; our ability to meet the technical specifications of our customers; the performance of subcontractors or suppliers and the continued availability of parts and components; changes in government regulations; the availability of financing and our access to capital markets, borrowings, or financial transactions to hedge certain risks; the Company's ability to realize the annual interest expense savings from its debt refinancing; the ability to attract and retain qualified personnel who can design new applications and products for the motion industry; the ability to implement our corporate strategies designed for growth and improvement in profits including to identify and consummate favorable acquisitions to support external growth and the development of new technologies; the ability to successfully integrate an acquired business into our business model without substantial costs, delays, or problems, including the ability to carve out, relocate and separate the Maval OE business; our ability to control costs, including the establishment and operation of low cost region manufacturing and component sourcing capabilities; and other risks and uncertainties detailed from time to time in the Company’s SEC filings. Actual results, events and performance may differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements as a prediction of actual results. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. The Company has no obligation or intent to release publicly any revisions to any forward looking statements, whether as a result of new information, future events, or otherwise.

FINANCIAL TABLES FOLLOW

ALLIED MOTION TECHNOLOGIES INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands)

In addition to reporting net income, a U.S. generally accepted accounting principle ("GAAP”) measure, the Company presents Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, stock compensation expense, and business development costs), which is a non-GAAP measure. The Company believes Adjusted EBITDA is often a useful measure of a Company’s operating performance and is a significant basis used by the Company’s management to evaluate and compare the core operating performance of its business from period to period by removing the impact of the capital structure (interest), tangible and intangible asset base (depreciation and amortization), taxes, stock-based compensation expense, business development costs related to acquisitions, and other items that are not indicative of the Company’s core operating performance. Adjusted EBITDA does not represent and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure for determining operating performance or liquidity that is calculated in accordance with generally accepted accounting principles.

The Company’s calculation of Adjusted EBITDA for the three months ended March 31, 2018 and 2017 is as follows:

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