Good day, and welcome to the Allied Motion Technologies First Quarter Fiscal Year 2023 Financial Results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Craig Mychajluk, Investor Relations. Please go ahead. Yeah, thank you, and good morning, everyone. We certainly appreciate your time today as well as your interest in Allied Motion. Joining me on the call are Richard Warzala, our Chairman, President, and CEO, and Michael Leach, our Chief Financial Officer. Dick and Mike are gonna review our first quarter of 2023 results and provide an update on the company's strategic progress and outlook. After which, we'll open up 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 alliedmotion.com along with the slides that accompany today's discussion. If you're reviewing those slides, please turn to 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. 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. Find these documents on our website or at sec.gov. I wanna point out as well that during today's call, we'll 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 have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release and slides. With that, please turn to slide three, and I'll turn it over to Dick to begin. Dick? Thank you, Craig, and welcome everyone. We delivered record sales in the quarter, further strengthened our margin profile, and achieved a measurably improved bottom line. This level of performance speaks to the ability of our entire team to execute our strategy at a very high level, as well as our market diversification, particularly within industries that demand precision-controlled motion solutions. First quarter revenue of $145.5 million was up 27% and reflected higher demand across most targeted markets, along with impressive organic growth of 25%, the highest level in recent history. Of note was the strength within our industrial vertical, with strong end market demand in industrial automation, oil and gas, HVAC, and material handling. Aerospace and Defense markets also grew substantially during the quarter due to organic growth, incremental demand from acquisitions and defense program timing. Our medical market saw double-digit growth from higher demand within surgical-related markets and medical mobility. Equally important was the continued strengthening of our gross margin, which reflects the higher volume, including more technology solutions-based sales and margin accretive acquisitions. This translated into strong operating leverage as operating income increased 167% and net income more than doubled over last year's first quarter. On an Adjusted Basis, our earnings per share were $0.55, up 53% from $0.36 per share last year. Given the strong earnings performance, we generated solid cash from operations, which helped offset what is typically a higher cash consumption quarter. Our orders and backlog were both down sequentially, which was not unexpected given the improving supply chain and macro environment. I will talk to this performance later in the presentation. Overall, 2023 is off to a strong start. We expect our investments in technology and solutions to continue to yield results and over time, drive an enhanced margin profile. With that, let me turn it over to Mike for a more in-depth review of the financials. Mike? Thank you, Dick. As a reminder, our results include the acquisitions completed during the second quarter of 2022. Starting on slide four, we provide some details regarding our top line. First quarter revenue increased 27% from $30.8 million - $145.5 million. The unfavorable impact of exchange rate fluctuations on revenue was $3.3 million in the quarter. Excluding FX, revenue was up 30%, and organic revenue growth was 25%. As highlighted, Aerospace and Defense grew 125%. Industrial market sales were up 38%, and medical was up 11% in the quarter. Dick reviewed the specific end market drivers behind each of these growth markets. Sales to the distribution channel were about 4% of total and increased 10% during the quarter. The one market that declined was vehicle, as higher commercial automotive demand was more than offset by lower demand within agricultural vehicles. Powersports is still the largest component within vehicle and saw modest growth year-over-year. Slide five shows the change in our revenue mix by market on a trailing 12-month basis and the drivers behind that change. Industrial continues to be strong and remains our largest market, making up 40% of our total TTM sales. Solid organic growth and contributions from recent acquisitions contributed to this performance, as well as the A&D and medical growth. Vehicle market growth was up slightly on a trailing twelve-month basis as truck and commercial automotive demand more than offset the weaker agricultural vehicle demand. As highlighted on slide six, our first quarter gross margin was 31.5%, up 230 basis points from the prior year period. Higher volume, margin accretive acquisitions, and pricing more than offset remaining global supply chain constraints and higher material and labor costs. Consistent with our stated objectives, you can see the progress we are making by executing our strategy in the annualized chart on the right as we achieve the trailing 12-month gross margin level of 31.8%, up from 30% in 2021. Moving on to slide seven. The first quarter operating income more than doubled to $11.4 million or 7.8% of sales, which was up 410 basis points. Operating costs and expenses as a percent of revenue were 23.7%, down 170 basis points, which reflected the operating leverage obtained from strong revenue growth, along with consistent utilization of AST, our lean toolkit in all aspects of our business. On slide eight, we present GAAP net income and Adjusted Net Income, along with our Adjusted EBITDA results. Our net income and diluted EPS have been adjusted for certain items, which we believes provides a better understanding of our earnings power, inclusive of adjusting for the non-cash amortization of intangible assets, which reflects the company's strategy to grow through acquisition as well as organically. Net income increased 152% to $6.3 million or $0.39 per diluted share. On an Adjusted Basis, net income was $8.9 million or $0.55 per diluted share, up 53%. The effective tax rate was lower in the quarter at 23.2% due to discrete tax benefits. We expect our income tax rate for the full year 2023 to be approximately 25%-27%. Adjusted EBITDA increased 47% to $19 million or 13.1% of revenue, which was up 190 basis points from the first quarter of 2022. We use Adjusted EBITDA as an internal metric and believe it is useful in determining our progress and operating performance. Slides nine and 10 provide an overview of our balance sheet and cash flow. In the first quarter, we made a $6.25 million deferred payment for a prior acquisition, which was reflected in our cash position at quarter end. Total debt was approximately $237 million, up $1 million from year-end 2022. Debt net of cash was about $211 million or 47.9% of net debt to capitalization. Our bank leverage ratio was 3.3 x. We generated $3.6 million of cash from operations, which reflected higher net income and lower levels of inventory. The first quarter is typically a higher cash consumption period. We are pleased with our cash generation, which compares with the cash usage of $13.4 million in the prior year. Based on our cash flow projections, we expect to continue to drive strong cash flow this year, consistent with historical trends. First quarter capital expenditures were $3.6 million and were largely focused on new customer projects. We expect 2023 CapEx to range between $18 million-$23 million. Inventory turns improved to 3.2 x in the first quarter compared with 2.9 x last year. Our teams continue to manage our inventory to meet customer demand while combating sourcing and lead time challenges. Our DSO saw a slight bump up to 55 days. This is largely due to timing and mix of customers. With that, I'll now turn the call back over to Dick. Thank you, Mike. Slide 11 shows our orders and backlog levels. First quarter orders of approximately $123 million resulted in a book-to-bill ratio of 0.85 x and backlog of approximately $309 million. We are seeing some pockets of weakness in Europe, our overall demand outlook is positive with a healthy backlog to support our growth. Our backlog was up 7% over the prior year period. Decreased from the sequential fourth quarter of 2022, given the loosening of some supply chain constraints. Given the improvements in supply chain, we are making good inroads to reduce our lead times and our backlog as we accelerate shipments of several long lead products. Over the next couple quarters, we do expect our backlog to decline slightly as our book-to-bill ratio stabilizes around one. The time to convert the majority of backlog to sales is still within the next 6-9 month window. Turning to slide 12 for our outlook. We remain well positioned for success through a wide range of economic environments. Demand is expected to continue at relatively strong current levels within our industrial markets, which should continue to benefit from our increased market presence around industrial automation and material handling, as well as oil and gas. We are making solid inroads with defense applications and expect our overall A&D business to benefit as we further leverage recent acquisitions. Medical markets have trended away from the pandemic-related sales to a more normalized sales environment focused on surgical and instrumentation-related end markets. Lastly, we are anticipating modest growth within our vehicle markets as the supply chain improves and demand schedules from our automotive customers continue to firm up for 2023 and beyond. An area of focus beyond our margin objectives is driving cash conversion and paying down debt this year as we look to reload for future opportunities. We are still actively grooming potential acquisitions and building out our M&A pipeline as a key element of our overall growth strategy. We started the year on a strong note, and while a heightened level of uncertainty remains, we believe we can continue to execute our strategy and capitalize on the many growth opportunities and tailwinds within our targeted markets. With that, operator, let's open the line for questions. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Greg Palm with Craig-Hallum Capital Group. Please go ahead. Morning, everybody. Thanks for taking the questions. I guess maybe just starting off with the commentary around, you know, pockets of weakness. It'd be helpful just to get a little bit more color on, you know, whether that's, you know, certain customer-driven, whether it's certain end markets, whether it's kind of, you know, broad-based across the geographies you mentioned. We'll start there. Thanks. I think it's fairly broad-based, Greg. Where we do see it, I guess, a little more predominantly, and again, this is on the orders basis that we're talking about, is in Europe. It's a little more pronounced in the industrial markets in Europe, you know, particularly like in Germany. I would tell you it's mostly macroeconomic-driven. Obviously, we do have some specific customers that have been impacted by the Ukraine conflict as well, that we've seen flow through. I would also describe it as sporadic. I think, you know, we'll bounce from one month being really strong, surprising orders, and then one month being, you know, quite low. That you compare that to six months ago, 12 months ago, I think mostly supply chain driven, right? We were seeing a lot more, a lot higher orders just because of that. What we've got going on is also a compression of those supply chain lead times. Again, our expectation, we've talked about this over time, that we expect to see this book-to-bill flip a little bit simply driven by lead times improving. Do you get the sense on whether it's, you know, maybe destocking units, you know, for, you know, inventory normalization purposes? I guess, have you seen cancellations altogether as part of that, you know, softness in orders? I think the first part of that's more correct, more accurate in that you are seeing some adjustments. Again, people had built in longer lead times through the supply chain issues, and now as the lead times are starting to come back to more normal levels and materials are flowing, you are seeing some adjustments of some schedules. Okay? We fully expected that. And it is occurring. I would emphasize what Mike said. In Europe, there has been some remaining instability based upon Ukraine crisis, the impact on, let's call it, the energy cost, the impact on planned product sales and releases into that Eastern Europe market. Overall, it, we are holding up quite well in many areas. While we hear about expected reductions, we continue to see some strength as well. Yeah. Cancellations are rare. Okay. Makes sense. You know, just in terms of the kind of the capital allocation strategy, you know, big year, you know, for acquisitions in 2022. I know we've talked about a, you know, a robust pipeline. Does the current environment and your, you know, I guess, desire to pay down, you know, debt here, does that change your thinking around, you know, M&A, you know, in the near term? Does an environment like this maybe, you know, mean there's some opportunities that could come out just based on valuations coming in? Yeah, I think you're absolutely correct. I mean, we always have to be, you know, ready because their valuations have come down, and we are seeing some opportunities. We do have to be ready because there are some strategic areas out there that we felt, that we're looking at and we would like to add in the, in the future here. Some things are opening up. Valuations are, you know, have declined. While we expect strong cash flow and the ability to pay down debt this year, we also feel that we're in a position to be selective, pick these acquisitions that really enhance our value to us strategically, and that's where we are. We're really looking at it from a strategic standpoint. If you asked us if we were seeing something major come across that maybe changes what we would like to do, we would have to be creative and figure out a way to get it done. Right now, I think we're in a good spot. We're focused on paying down debt. We're also focused on a couple opportunities that are out there that we think would add some good strategic value to our overall, you know, portfolio and platform. Understood. I will leave it there. Best of luck. Thanks. Thank you, Greg. As a reminder, if you would like to ask a question, please press star then one to be joined into the question queue. Your next question comes from Ted Jackson with Northland Securities. Please go ahead. Thank you. Dick, my congratulations on a very solid quarter. Thank you, Ted. Thanks, Ted. I have a few questions, more around the financials. Starting with gross margins, you know, you comment in your presentation that your long-term goal is to see about a percentage point increase in margin. On an annualized basis, at least relative to my expectations, the first quarter margin was a little more robust than I might have expected. Is it fair to assume that you would see that kind of 1% increase across the year for 2023, and that we would be looking for your gross margin for the full year to be somewhere north of 32%? Well, yes. A couple things just wanna make a comment about here, and I, and I think, you know, we made some statements, and we followed them up in conference calls to talk about, the gross margin and overall operating profit improvements. You know, yes, we are focused on both. We are focused on the gross margin improvement. I think and the bigger picture, we're really looking at this as a combination of, gross margin and operating margin improvement. And, and we do feel comfortable that the actions that we are taking right now will allow us to achieve what we have stated, okay? I think. I do wanna put it in context that I'll keep repeating it so to make sure that it's not confused and that we may have added to the confusion, but it's really about the combination of those two. You know, AST brings us several opportunities. There are some synergies that we can certainly realize that we're working on. In addition to that, you know, we are very focused on the solution set sales and leveraging the opportunities we have to bring in new orders with higher gross margins that will actually allow us to realize what we stated in our goals. I hope that helps. Sure. Second question. You know, the revenue was, to my eye, quite strong in the first quarter. Should we expect to see you build upon that in the second quarter? Are we gonna see a sequential, you know, some sequential growth on the top line in second quarter versus first? Yeah. Yeah. Yeah, good question. A couple things occurred. As you noticed, that's a very strong increase from over first quarter of last year. We've had a backlog that's increased substantially. We've had supply chain constraints. We've had long lead times that we've been dealing with. We had some, I'll call it some pent-up demand and past due items that we needed to clean up here as supply chain started to flow, and we did see some of that in Q1. I'd say to set expectations in the proper manner is that we would normally see a nice crescendo from Q1 to Q2 and so forth. We think Q1 represents some of the cleanup, I'll call it, and Q2 will not build off of that Q1 cleanup, let's call it, and then result it in the sales. We do expect that we'll be solid, we'll be strong, but I wouldn't go back to his, you know, historical data and say, "Well, you guys really jumped from Q1 to Q2 and Q3." I think we've seen. Mm-hmm you know, Q1, we picked up and cleaned up some things that, because of supply chain constraints, we were able to do so. If I'm listening to you. I'm sorry, I interrupted. Go on. I was just gonna say, I don't think the crescendo will be as steep as it traditionally is from a seasonality standpoint, right? I think we've enjoyed some of that already here in Q1, and while we do expect benefit of some seasonality, I just don't think it'd be as pronounced as it's been in the past, Ted. Is it fair to maybe think of, you know, taking second quarter and putting it sort of into more of a normalized, I mean, for lack of a better... I'm not putting these words in your mouth, but I'm recognizing that. I'm not expecting you to agree with them. Like, you know, basically kind of reset a second quarter to what would be, you know, a normalized level and then let the rest of the year kind of flow through from that. Is that the way to think about sort of the remainder of the year? I think maybe the better way to look at it, you know, although that's fine, I think it's the adjustment of the first quarter revenues for the past due catch-up, that if you, if you were to factor those out and say, where would they have fallen? Some of those would have fallen in Q2. Q1, we enjoyed some success there because as I said, some loosening of supply chain and demand still there and strong. It's more about adjusting Q1 and saying some of Q2 sales were accelerated into Q1, and Q1 was a little bit higher based upon some cleanup. That's helpful. Would be the best way to look at it. I have two more questions then I'm gonna get out of line. They all are just about financials. You know, you did have a little bit higher on the G&A than I might have thought. Is there anything in there that I should be aware about? Is there anything in there that's maybe one-off-ish or, you know, that was pushed there because of the strength in the top line in the first quarter that I should take into account as I think about the rest of the year? I think first I would point to incentive compensation, and the performance in Q1 certainly impacts that. That's probably the largest driver of G&A being up. That'll obviously be dependent on performance for the rest of the year as well in terms of that trend continues. Yeah. There's, you know, a couple other things that we're accruing for. We do have an Investor Day planned for the first time here in August, and we're beginning to accrue for those expenses we're gonna see there. We've had a little bit more active trade show participation this year. Again, we're recognizing on an, you know, on an annualized basis and not just expensing it that when it occurs. Those some of those things that are in Q1 that we're preparing for events that we know are gonna be happening through the rest of the year. As Mike stated that, plus I would tell you some of these other planned events that are coming that, you know, bigger push on the marketing side of it and some expansion in that area, trade show opportunities, and Investor Day. Okay. My last kind of topic of questioning is just a quick discussion with regards to, you know, your forward view with regards to working capital and kind of how you see, you know, your working capital trending as we kind of roll through this year. You know, I guess what I'm getting at is, you know, how should we think about, you know, your receivable levels, your inventory, your payables? You know, I mean, it's not like there's anything in there that jumped out with regards to the first quarter. I just kind of want to circle back to it 'cause, you know, I mean, it's a driver of your operating cash flow and hence your Free Cash Flow. Sure. Certainly it's a focus of the organization this year. I think we've talked about that in the past from a, from a critical issue standpoint. Q2 and Q3 usually is about working capital conversion for us, right? As, you know, seasonality drives consumption and turns tend to improve. Again, I think we saw part of that in Q1, given the higher volume. Again, you know, just by the fear or the mere fact that we intend to generate a fair amount of cash this year, it's gonna be driven by, you know, continued improvement in those working capital term turns and, you know, managing that closely. I think the supply chain environment allows us to do that much better than it has the past couple of years. Again, I would call it, you know, stable with improvement is how I would look at that for Q2 and Q3 to support the higher levels of businesses. I was very, very encouraged by the improvement in inventory terms, right? To me, that's the key item. Well, funny that that's what I was gonna ask is, you know, you had a really nice, you know, turn and, you know, pick up or improvement in the turns. Is that something that we would expect to see as we roll through this year and going forward? Is there a chance that, you know, we could see turns get back towards sort of pre-pandemic levels, maybe not this year, but by next year? Yeah, I think that that's certainly the intent and what we're trying to drive. The move from 2.9 - 3.2 is a good portion of that, though, right? If we sustaining that and gonna continue to drive it, leveraging the higher volume gets us a lot of the way there relative to, I think we've talked in the past about those pre-pandemic levels. Again, it's also driven by what markets are more heavy than others in terms of the nature of what we're producing, whether they're lower volume products or higher volume products. There's a lot that go into that. Certainly we're not out of the woods from the supply chain standpoint. We're certainly describing it as better. The reality is, right, we're still fighting battles and there's an inflationary aspect as well from a cost standpoint that'll be headwinds to that as well. Yeah, I can add some more to that, Ted. I think it's a great area to focus on. I can tell you that, we had a, one of our, all-hands-on-deck GM meetings this year. It certainly was a strong emphasis and focus, and our entire team is focused on it. We have some great tools on our AST toolkit that provides some opportunities to it. Most importantly, Mike's mentioned it, and I'll just re-emphasize it, is supply chain. As the supply chain crunches occurred in the past, it only took a couple parts that drove your inventory up, a couple parts missing that would drive your inventory up. As those, you know, parts start to flow, then we're able to consume the rest of that inventory that was sitting there, that couldn't move because of a few parts that were stragglers and getting them in. Again, that had a lot to do with being able to ship past dues as well. I would say, real focus on the company. There's huge emphasis on that area. We realized that there's quite a bit of capital tied up, and our entire team knows that and is working on it. Supply chain is improving. It's clearly improving, and lead times are coming down, and that's all very encouraging signs. To get back to where we were, it's a very significant improvement, and I think anybody can do the calculation in our working capital terms and what it does for our ability to generate cash and pay down that debt and put us in a position to continue the growth story here and do those strategic acquisitions that have been certainly helpful on our top line margin expansion as well as, you know, giving us the ability to create more strategic solutions. I would tell you we're excited about it. There's great opportunities ahead. Our team is well-focused, understands the opportunity, and just would love to see us get back to a normal operating environment where we can just do what we get paid to do, so rather than scramble. All right? A great question. I think it is a focus. We will be focused on it, and we will see continued improvement. Great. Again, I'm done with questions. It was a really, really nice quarter. Congratulations on it. Thanks again, Ted. Thanks, Ted. Once again, if you would like to ask a question, please press star then one to be joined into the question queue. This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Well, thank you, everyone, for joining us on today's call and for your interest in Allied Motion. For those of you that are interested, we will be participating in person at the Craig-Hallum Institutional Investor Conference in Minneapolis on Wednesday, May 31st. Otherwise, as always, please feel free to reach out to us at any time, and we look forward to talking with all of you again after our second quarter 2023 results. Thank you for your participation, and have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.