• Revenue of $101.5 million, up 17% over the prior-year period, driven by recovery in Vehicle and Industrial markets
• Gross margin of 30.7% expanded 20 basis points quarter-over-quarter and 110 basis points sequentially on higher volume and improved mix
• Achieved net income of $4.6 million, or $0.32 per diluted share, up 60%
• Record orders of $119.0 million, up 4% sequentially
• Record backlog of $170.4 million, up 12% sequentially
• Paid down $7.6 million of debt in the quarter

Allied Motion Technologies Inc. (Nasdaq: AMOT) (“Allied Motion” or “Company”), a designer and manufacturer of precision and specialty controlled motion products and solutions for the global market, today reported financial results for its second quarter ended June 30, 2021. All share and per share information reflect the April 30, 2021 3-for-2 stock dividend.

“The second quarter was highlighted by double-digit organic growth, margin expansion and strengthened earnings,” commented Dick Warzala, Chairman and CEO. “While the economic recovery has accelerated demand in our Vehicle and Industrial markets, we also attribute our growth to strong execution around the roll out and ramping of new projects and solutions. We are still facing significant supply chain challenges resulting in stretched lead times and higher material costs. The One Allied team has managed this ever-changing environment well as evidenced by our improved operating performance.

“As we look forward, we believe we have a platform to drive strong growth and, given the emergence and the realization of a more stable environment, we are optimistic that we can continue to generate growth in the future.”

Second Quarter 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue increased 17% to $101.5 million, driven by strong demand in the Vehicle and Industrial markets. The Vehicle market, which was particularly soft in the 2020 second quarter given the onset of the pandemic, improved 82%. Strong execution and continued economic recovery within the Industrial markets resulted in 20% year-over-year and 8% sequential growth. Excluding the favorable impact of foreign currency exchange rate fluctuations on revenue of $4.1 million, revenue was up 12.4%. Sales to U.S. customers were 55% of total sales compared with 50% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific. See the attached table for a description of non-GAAP financial measures and reconciliation of revenue excluding foreign currency exchange rate fluctuations.

Gross margin was 30.7%, up 110 basis points from the sequential 2021 first quarter, and up 20 basis points from the second quarter of 2020. The increases were largely attributable to strong volume and improved mix, partially offset by supply chain challenges and rising material costs.

Operating costs and expenses as a percent of revenue were 24.1%, down 60 basis points compared with the prior-year period. Operating income was $6.7 million, or 6.6% of sales, up from $5.1 million, or 5.8%, in the second quarter of 2020. Higher volume drove operating leverage, which more than offset increased incentive compensation which was aligned with the revenue and net income growth.

The effective tax rate was 21.9% compared with 29.9% in the prior-year period. The lower tax rate was aided by higher discrete income tax benefits related to share-based awards. The Company expects its income tax rate for the remaining quarters of 2021 to range between 26% to 28%.

Second quarter net income was $4.6 million, or $0.32 per diluted share, up from $2.9 million, or $0.20 per diluted share. Excluding business development costs and foreign currency gains/losses, adjusted net income was $4.8 million, or $0.33 per diluted share, compared with $3.1 million, or $0.22 per diluted share, in the prior-year period. See the attached table for a description of non-GAAP financial measures and reconciliation table for Adjusted Net Income and Diluted Earnings per Share.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses (“Adjusted EBITDA”) was $12.4 million, up $2.3 million or 22%. As a percent of sales, Adjusted EBITDA was 12.2%, up 50 basis points. 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.

Year-to-Date (YTD) 2021 Results (Narrative compares with prior-year period unless otherwise noted)

Revenue of $203.2 million increased $24.2 million, or 14%, reflecting strong demand in Vehicle, Industrial, and Medical markets as economic conditions continued to recover from the impact of the COVID-19 pandemic. The impact of FX fluctuations was favorable $8.4 million for the year-to-date period. Sales to U.S. customers were 53% of total sales compared with 52% for the same period last year, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific.

Gross margin was 30.2% compared with 30.4% in the prior-year-period. The margin change reflects increased costs given the tight supply chain and the proactive decision to incur incremental costs to ensure on time deliveries to customers, partially offset by improved productivity and mix.

Operating costs and expenses as a percent of revenue were 23.6%, down 30 basis points. Operating income was $13.3 million, up from $11.8 million. Operating margin was unchanged at 6.6%.

Net income was $16.6 million, or $1.14 per diluted share, compared with $6.9 million, or $0.49 per diluted share. The increase reflects a net discrete tax benefit of $7.4 million recorded in the first quarter of 2021 relating to new legislation enacted in New Zealand. Excluding the discrete tax benefit, business development costs and foreign currency gains/losses, adjusted net income was $9.3 million, or $0.65 per diluted share, compared with $7.4 million, or $0.52 per diluted share, in the comparable period of 2020. Adjusted EBITDA increased to $24.4 million from $21.7 million, and as a percent of sales was 12.0%.

Balance Sheet and Cash Flow Review

Cash and cash equivalents were $23.4 million compared with $23.1 million at year-end 2020. Year-to-date net cash provided by operations was $16.5 million and was primarily used to fund capital expenditures of $5.9 million and debt repayment of $7.6 million. The capital investments were largely focused on new customer projects and ERP implementations. The Company expects 2021 capital expenditures to be approximately $12 million to $15 million.

Total debt was $112.4 million compared with $120.1 million at year-end 2020. With cash of $23.4 million, debt, net of cash, was $89.0 million, or 36.0% of net debt to capitalization. The Company’s leverage ratio, as defined in its credit agreement, was 2.44 at quarter-end.

Orders and Backlog Summary ($ in thousands)

Orders of $119.0 million reached a record level, increasing 48% over the 2020 second quarter and 4% sequentially. Foreign currency translation had a favorable $4.1 million impact on second quarter orders compared with the prior-year period. Backlog increased 12% over the sequential first quarter and 33% quarter-over-quarter to a record $170.4 million. The time to convert the majority of backlog to sales is approximately three to six months.

Conference Call and Webcast

The Company will host a conference call and webcast on Thursday, August 5, 2021 at 10:00 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, dial (412) 317-6026. In addition, the webcast and slide presentation may be found at: www.alliedmotion.com/investor-relations.

A telephonic replay will be available from 1:00 pm ET on the day of the call through Thursday, August 12, 2021. To listen to the archived call, dial (412) 317-6671 and enter replay pin number 10158260 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 controlled motion products and solutions used in a broad range of industries within our major served markets, which include Vehicle, Medical, Aerospace & Defense, and Industrial. Headquartered in Amherst, NY, the Company has global operations and sells into markets across the United States, Canada, South America, Europe and Asia-Pacific.

Allied Motion is focused on controlled motion 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, active (electronic) and passive (magnetic) filters for power quality and harmonic issues, and other controlled motion-related products.

The Company’s growth strategy is focused on being the controlled motion solutions leader in its selected target markets by leveraging its “technology/know how” to develop integrated precision 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 www.alliedmotion.com.

Safe Harbor Statement

The statements in this news release and in the Company’s August 5, 2021 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. Examples of forward-looking statements include, among others, statements the Company makes regarding expected operating results, anticipated levels of capital expenditures, the Company’s belief that it has sufficient liquidity to fund its business operations, and expectations with respect to the conversion of backlog to sales. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on the Company’s current beliefs, expectations and assumptions regarding the future of the Company’s business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company’s control. The Company’s actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company's customers and suppliers, competitor responses to the Company's products and services, the overall market acceptance of such products and services, the pace of bookings relative to shipments, the ability to expand into new markets and geographic regions, the success in acquiring new business, the impact of changes in income tax rates or policies, the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of businesses’ and governments’ responses to the pandemic on our operations and personnel, and on commercial activity and demand across our and our customers’ businesses, and on global supply chains; our inability to predict the extent to which the COVID-19 pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position, the prices of our securities and the achievement of our strategic objectives and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. 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)

(Unaudited)

In addition to reporting revenue and net income, which are U.S. generally accepted accounting principle (“GAAP”) measures, the Company presents Revenue excluding foreign currency exchange rate impacts, and EBITDA and Adjusted EBITDA (earnings before interest, income taxes, depreciation and amortization, stock-based compensation expense, business development costs, and foreign currency gains/losses), which are non-GAAP measures.

The Company believes that Revenue excluding foreign currency exchange rate impacts is a useful measure in analyzing organic sales results. The Company excludes the effect of currency translation from revenue for this measure because currency translation is not under management’s control, is subject to volatility and can obscure underlying business trends. The portion of revenue attributable to currency translation is calculated as the difference between the current period revenue and the current period revenue after applying foreign exchange rates from the prior period.

The Company believes EBITDA and Adjusted EBITDA are often a useful measure of a Company’s operating performance and are 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, foreign currency gains/losses on short-term assets and liabilities, and other items that are not indicative of the Company’s core operating performance. EBITDA and Adjusted EBITDA do 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 Revenue excluding foreign currency exchange impacts for the three and six months ended June 30, 2021 is as follows:

The Company’s calculation of Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020 is as follows:

ALLIED MOTION TECHNOLOGIES INC.

Reconciliation of GAAP Net Income and Diluted Earnings per Share to

Non-GAAP Adjusted Net Income and Diluted Earnings per Share

(In thousands, except per share data)

(Unaudited)

The Company’s calculation of Adjusted net income and Adjusted diluted earnings per share for the three and six months ended June 30, 2021 and 2020 is as follows:

Adjusted net income and diluted EPS are defined as net income as reported, adjusted for unusual non-recurring items. Adjusted net income and diluted EPS are not a measure determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP, and may not be comparable to the measure as used by other companies. Nevertheless, the Company believes that providing non-GAAP information, such as adjusted net income and diluted EPS are important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current year’s net income and diluted EPS to the historical periods’ net income and diluted EPS.

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