Allient (ALNT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis of Allient Inc.'s financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of Allient Inc., including the balance sheets, statements of income and comprehensive income (loss), statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the accounting policies, significant transactions, and financial instrument disclosures Condensed Consolidated Balance Sheets – Unaudited This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $49,915 | $36,102 | | Total current assets | $253,938 | $237,580 | | Total Assets | $588,064 | $575,781 | | Total current liabilities | $67,816 | $57,377 | | Long-term debt | $202,218 | $224,177 | | Total liabilities | $299,002 | $310,927 | | Total stockholders' equity | $289,062 | $264,854 | - Total assets increased by $12.283 million from December 31, 2024, to June 30, 2025, primarily driven by an increase in cash and cash equivalents[9] - Total liabilities decreased by $11.925 million, mainly due to a reduction in long-term debt[9] Condensed Consolidated Statements of Income and Comprehensive Income (Loss) – Unaudited This statement details the company's revenues, expenses, net income, and comprehensive income over specific reporting periods Condensed Consolidated Statements of Income and Comprehensive Income (Loss) (in thousands, except per share data) | Metric (in thousands, except per share data) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $139,578 | $136,032 | $272,381 | $282,745 | | Gross profit | $46,356 | $40,676 | $89,108 | $88,053 | | Operating income | $11,677 | $4,879 | $20,456 | $16,979 | | Net income | $5,617 | $1,150 | $9,174 | $8,052 | | Basic earnings per share | $0.34 | $0.07 | $0.55 | $0.49 | | Diluted earnings per share | $0.34 | $0.07 | $0.55 | $0.49 | | Comprehensive income (loss) | $16,851 | $(539) | $23,644 | $1,877 | - Net income for the three months ended June 30, 2025, significantly increased to $5,617 thousand from $1,150 thousand in the prior year, a 388% increase[11] - For the six months ended June 30, 2025, revenues decreased by 4% year-over-year, while net income increased by 14%[11] Condensed Consolidated Statements of Stockholders' Equity – Unaudited This statement outlines changes in the company's equity accounts, including net income, dividends, and other comprehensive income Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Total Stockholders' Equity | $264,854 | $289,062 | Key Changes (December 31, 2024 to June 30, 2025): * Net income: $9,174 (cumulative for six months) * Stock-based compensation expense: $1,755 * Dividends to stockholders: $(1,000) * Foreign currency translation adjustment: $15,506 (gain) * Unrealized loss on cash flow hedges: $(641) * Amounts reclassified from AOCI: $(755) - Total stockholders' equity increased from $264,854 thousand at December 31, 2024, to $289,062 thousand at June 30, 2025, primarily driven by net income and foreign currency translation gains[13] Condensed Consolidated Statements of Cash Flows – Unaudited This statement reports the cash generated and used by the company's operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $38,435 | $17,377 | | Net cash used in investing activities | $(3,189) | $(30,559) | | Net cash (used in) provided by financing activities | $(24,286) | $13,314 | | Effect of foreign exchange rate changes on cash | $2,853 | $(741) | | Net increase (decrease) in cash and cash equivalents | $13,813 | $(609) | | Cash and cash equivalents at end of period | $49,915 | $31,292 | - Net cash provided by operating activities significantly increased to $38,435 thousand for the six months ended June 30, 2025, from $17,377 thousand in the prior year, an increase of $21,058 thousand[16][140] - Net cash used in investing activities decreased substantially to $3,189 thousand in 2025 from $30,559 thousand in 2024, primarily due to lower acquisition-related payments in the current period[16][142] - Net cash used in financing activities was $24,286 thousand in 2025, a shift from $13,314 thousand provided in 2024, mainly due to debt payments and no new significant debt issuance[16][144] Notes to Condensed Consolidated Financial Statements – Unaudited This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. Basis of Preparation and Presentation This note describes the accounting principles, policies, and methods used in preparing the financial statements - Allient Inc. designs, manufactures, and sells precision motion, control, power, and structural composites for industrial, vehicle, medical, and aerospace and defense markets globally[18] - The company translates foreign subsidiary assets and liabilities using end-of-period exchange rates, with translation adjustments included in accumulated other comprehensive loss[20] - The company is assessing the impact of new accounting standards: ASU 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024) and ASU 2024-03 (Expense Disaggregation Disclosures, effective after Dec 15, 2026)[24][25] 2. Acquisitions This note details the company's recent acquisition activities, including purchase prices and allocation of acquired assets and liabilities - On January 11, 2024, Allient Inc. acquired SNC Manufacturing Co., Inc. for $20,000 thousand in cash, a designer and manufacturer of electrical transformers[26][27] Acquired Assets (SNC) (in thousands) | Acquired Assets (SNC) | Fair Value (in thousands) | | :-------------------- | :------------------------ | | Cash and cash equivalents | $881 | | Trade receivables | $3,467 | | Inventories | $8,600 | | Property, plant, and equipment | $4,258 | | Intangible assets | $2,900 | | Goodwill | $2,955 | | Net purchase price | $19,724 | - Goodwill from the SNC acquisition, totaling $2,955 thousand, is related to the assembled workforce, expected synergies, and integrated system solutions, and is not tax deductible[29][30] - The final deferred acquisition payment for Spectrum Controls, Inc. of $12,500 thousand (50% cash, 50% stock) was paid on January 3, 2024[30] 3. Revenue Recognition This note explains the company's policies for recognizing revenue from contracts with customers, including disaggregated revenue data - The Company generally recognizes revenue at a single point in time when control of products transfers to the customer, typically upon shipment[32][33] - Allient Inc. designs, manufactures, and sells precision motion, control, power, and structural components, including motors, drives, gears, and filters, to industrial, vehicle, medical, and aerospace & defense markets[35] Revenue by Target Market (in thousands) | Target Market (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Industrial | $65,455 | $63,484 | $127,881 | $133,078 | | Vehicle | $26,721 | $28,662 | $49,694 | $63,316 | | Medical | $20,045 | $19,235 | $39,147 | $38,321 | | Aerospace & Defense | $20,961 | $18,477 | $41,997 | $35,295 | | Distribution and Other | $6,396 | $6,174 | $13,662 | $12,735 | | Total | $139,578 | $136,032 | $272,381 | $282,745 | Revenue by Geography (in thousands) | Geography (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $92,352 | $91,920 | $178,625 | $191,623 | | Europe | $40,983 | $37,145 | $81,047 | $77,805 | | Asia-Pacific | $6,243 | $6,967 | $12,709 | $13,317 | | Total | $139,578 | $136,032 | $272,381 | $282,745 | 4. Inventories This note provides a breakdown of inventory components and changes over the reporting period Inventory Components (in thousands) | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Parts and raw materials | $78,219 | $78,725 | | Work-in-process | $12,161 | $12,274 | | Finished goods | $16,168 | $20,518 | | Total Inventories | $106,548 | $111,517 | - Total inventories decreased by $4,969 thousand from December 31, 2024, to June 30, 2025, primarily due to a reduction in finished goods[44] 5. Property, Plant and Equipment This note details the company's property, plant, and equipment, including additions, disposals, and depreciation Property, Plant and Equipment, Net (in thousands) | PP&E Component (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Land | $1,797 | $1,770 | | Building and improvements | $29,798 | $29,161 | | Machinery, equipment, tools and dies | $118,706 | $110,194 | | Construction in progress | $1,918 | $2,856 | | Furniture, fixtures and other | $26,057 | $25,270 | | Less accumulated depreciation | $(114,329) | $(103,566) | | PP&E, net | $63,947 | $65,685 | - Depreciation expense was $3,276 thousand for the three months ended June 30, 2025, and $6,464 thousand for the six months ended June 30, 2025[45] 6. Goodwill This note outlines the company's goodwill balance and any changes, primarily due to foreign currency translation Goodwill (in thousands) | Goodwill (in thousands) | June 30, 2025 | | :---------------------- | :------------ | | Beginning balance | $131,789 | | Effect of foreign currency translation | $2,821 | | Ending balance | $134,610 | - Goodwill increased by $2,821 thousand for the six months ended June 30, 2025, primarily due to the effect of foreign currency translation[46] 7. Intangible Assets This note provides information on the company's intangible assets, their amortization periods, and estimated future amortization expense Intangible Assets Net Book Value (in thousands) | Intangible Asset (in thousands) | Weighted Average Amortization Period | June 30, 2025 Net Book Value | December 31, 2024 Net Book Value | | :------------------------------ | :----------------------------------- | :--------------------------- | :------------------------------- | | Customer lists | 14.1 years | $63,171 | $66,272 | | Trade name | 13.7 years | $7,073 | $7,326 | | Design and technologies | 10.5 years | $24,651 | $26,073 | | Total | | $94,895 | $99,671 | - Total net intangible assets decreased from $99,671 thousand at December 31, 2024, to $94,895 thousand at June 30, 2025[47] Estimated Amortization Expense (in thousands) | Year ending December 31, | Estimated Amortization Expense (in thousands) | | :----------------------- | :-------------------------------------------- | | Remainder of 2025 | $6,276 | | 2026 | $12,454 | | 2027 | $12,011 | | 2028 | $11,247 | | 2029 | $9,608 | | Thereafter | $43,299 | | Total | $94,895 | 8. Stock-Based Compensation This note describes the company's stock-based compensation plans, including awards granted, vesting, and related expenses - For the six months ended June 30, 2025, 148,590 shares of unvested restricted stock were awarded at a weighted average market value of $23.68, with 71,326 shares having performance-based vesting conditions[50] Restricted Stock Activity (shares) | Restricted Stock Activity (shares) | Six months ended June 30, 2025 | | :--------------------------------- | :----------------------------- | | Outstanding at beginning of period | 236,340 | | Awarded | 148,590 | | Vested | (120,219) | | Forfeited | (5,579) | | Outstanding at end of period | 259,132 | - Stock-based compensation expense, net of forfeitures, was $835 thousand for the three months ended June 30, 2025, and $1,755 thousand for the six months ended June 30, 2025[52] 9. Accrued Liabilities This note details the components of accrued liabilities, including compensation, warranty reserves, and restructuring accruals Accrued Liabilities (in thousands) | Accrued Liability (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Compensation and fringe benefits | $14,850 | $13,134 | | Warranty reserve | $2,301 | $1,966 | | Income taxes payable | $387 | $1,472 | | Operating lease liabilities – current | $5,370 | $5,088 | | Finance lease obligations – current | $466 | $448 | | Contract liabilities | $3,094 | $2,292 | | Restructuring related accruals | $1,610 | $0 | | Other accrued expenses | $6,496 | $5,821 | | Total Accrued Liabilities | $34,574 | $30,221 | - The company initiated a 'Simplify to Accelerate NOW' strategy in Q1 2025, creating a Machining Center of Excellence in Dothan, Alabama, and merging assembly operations into Tulsa, Oklahoma, and Reynosa, Mexico[53] - Restructuring costs are estimated at $4 to $5 million, primarily for employee severance, with $1,610 thousand accrued as of June 30, 2025[54] 10. Debt Obligations This note provides information on the company's debt, including credit facilities, notes payable, and compliance with financial covenants Debt Obligations (in thousands) | Debt Obligation (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Revolving Credit Facility | $146,962 | $168,962 | | Note Payable | $50,000 | $50,000 | | Unamortized debt issuance costs | $(2,663) | $(2,945) | | Finance lease obligations – noncurrent | $7,919 | $8,160 | | Long-term debt | $202,218 | $224,177 | - The company entered into a $280 million revolving credit facility (maturing March 1, 2029) and a $150 million fixed-rate private shelf facility in March 2024, with $50 million borrowed under the latter[56] - Financial covenants require a minimum interest coverage ratio of 3.0:1.0 and a leverage ratio not exceeding 3.75:1.0 (with temporary increases allowed after material acquisitions), and the company was in compliance as of June 30, 2025[58][145] - As of June 30, 2025, the unused Revolving Facility was $133,038 thousand, and amendments in October 2024 temporarily increased the maximum Leverage Ratio and adjusted interest rates on the Revolving Facility and Series A Notes[62][63][146][147] 11. Derivative Financial Instruments This note describes the company's use of derivative instruments to hedge foreign currency and interest rate exposures - The company uses foreign currency contracts with notional amounts of $35,579 thousand at June 30, 2025, to hedge short-term balance sheet exposure in various currencies[65][152] - Interest rate swaps are used to stabilize interest expense and manage exposure to variable-rate debt, with notional amounts of $40,000 thousand (maturing Dec 2026) and $50,000 thousand (maturing Sep 2027)[66][154] Derivative Financial Instruments Fair Value (in thousands) | Derivative Type (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :----------------------------- | :----------------------- | :--------------------------- | | Foreign currency contracts (asset) | $105 | $0 | | Interest rate swaps (asset) | $1,133 | $2,575 | | Foreign currency contracts (liability) | $0 | $137 | - The company estimates that $1,017 thousand will be reclassified as a decrease to interest expense over the next twelve months related to its interest rate derivatives[69] 12. Fair Value This note explains the company's fair value measurements for financial instruments, categorized by a three-level hierarchy - The company classifies fair value measurements into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[75][76] Financial Instrument Fair Value (in thousands) | Financial Instrument (in thousands) | June 30, 2025 (Level 1) | June 30, 2025 (Level 2) | December 31, 2024 (Level 1) | December 31, 2024 (Level 2) | | :---------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Pension plan assets | $6,430 | $0 | $6,164 | $0 | | Deferred compensation plan assets | $4,900 | $0 | $4,647 | $0 | | Foreign currency hedge contracts, net | $0 | $105 | $0 | $(137) | | Interest rate swaps, net | $0 | $1,133 | $0 | $2,575 | 13. Income Taxes This note details the company's effective income tax rates and the impact of recent tax legislation Effective Income Tax Rate | Period | Effective Income Tax Rate | | :----- | :------------------------ | | Q2 2025 | 23.1% | | Q2 2024 | 20.6% | | YTD 2025 | 22.0% | | YTD 2024 | 21.6% | - The effective income tax rate increased in Q2 2025 compared to Q2 2024, primarily due to the impact of discrete tax costs on share-based awards[80][116][128] - The company is evaluating the financial implications of the 'One Big Beautiful Bill Act' (OBBBA), signed into law on July 4, 2025, which modifies income tax treatment of R&D expenses, bonus depreciation, and international tax regimes[81][104] 14. Leases This note provides information on the company's operating and finance leases, including cash flow impacts and maturity schedules Lease Cash Flow Information (in thousands) | Cash Flow Information (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Cash paid for operating leases | $3,367 | $3,185 | | Cash paid for interest on finance lease obligations | $195 | $205 | | Assets acquired under operating leases | $1,385 | $858 | Lease Maturity (in thousands) | Lease Maturity (in thousands) | Operating Leases (Total Undiscounted Cash Flows) | Finance Leases (Total Undiscounted Cash Flows) | | :---------------------------- | :----------------------------------------------- | :--------------------------------------------- | | Remainder of 2025 | $3,234 | $416 | | 2026 | $6,048 | $848 | | 2027 | $5,284 | $867 | | 2028 | $3,966 | $886 | | 2029 | $2,735 | $906 | | Thereafter | $5,836 | $6,977 | | Total undiscounted cash flows | $27,103 | $10,900 | - The company has operating leases for facilities from companies where a member of management is a part owner, with future fixed minimum lease payments of $6,956 thousand as of June 30, 2025[86] 15. Accumulated Other Comprehensive (Loss) Income This note details the components of accumulated other comprehensive income (loss) and changes during the period Accumulated Other Comprehensive (Loss) Income (in thousands) | AOCI Component (in thousands) | At December 31, 2024 | At June 30, 2025 | | :---------------------------- | :------------------- | :--------------- | | Defined Benefit Plan Liability | $131 | $131 | | Cash Flow Hedges | $2,522 | $1,126 | | Tax Effect of Cash Flow Hedges | $(547) | $(186) | | Foreign Currency Translation Adjustment | $(25,289) | $(9,783) | | Total AOCI | $(23,183) | $(8,712) | - Accumulated Other Comprehensive Loss improved from $(23,183) thousand at December 31, 2024, to $(8,712) thousand at June 30, 2025, primarily due to a significant foreign currency translation gain of $15,506 thousand[87][88] 16. Dividends Per Share This note reports the quarterly dividends declared per share for common stockholders - The company declared a quarterly dividend of $0.03 per share in the first and second quarters of both 2025 and 2024[89] 17. Earnings Per Share This note provides the calculation of basic and diluted earnings per share, including weighted average shares outstanding Weighted Average Shares Outstanding (in thousands) | Shares (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic weighted average shares outstanding | 16,687 | 16,567 | 16,639 | 16,480 | | Diluted weighted average shares outstanding | 16,713 | 16,583 | 16,671 | 16,540 | - Anti-dilutive common shares excluded from diluted EPS calculation were 55,000 and 64,000 for the three and six months ended June 30, 2025, respectively[91] 18. Segment Information This note clarifies that the company operates as a single reportable segment and provides revenue concentration details - The company operates as a single reportable segment focused on the manufacture and marketing of specialty-controlled motion products and solutions[92] - For the three months ended June 30, 2025, 55% of revenue was shipped to U.S. customers, with the remainder to foreign customers primarily in Europe, Canada, and Asia-Pacific[94] - No single customer accounted for a material concentration of revenue or accounts receivable for the three and six months ended June 30, 2025[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including an overview of the business, recent strategic initiatives, the impact of the global environment, detailed analysis of operating results for the quarter and year-to-date, and a discussion of liquidity and capital resources Forward-Looking Statements This section highlights the inherent uncertainties and risks associated with forward-looking statements in the report - The report contains forward-looking statements subject to known and unknown risks and uncertainties, including domestic and foreign economic conditions, global pandemics, geopolitical conflicts, new technologies, intellectual property protection, growth management, customer success, supply chain issues, IT system failures, government regulations, financing availability, personnel retention, and acquisition integration[97] Overview This section provides a general description of Allient Inc.'s business, market focus, and strategic direction - Allient Inc. is a global company specializing in designing, manufacturing, and selling precision motion, control, power, and structural composites for industrial, vehicle, medical, and aerospace and defense markets[99] - The company is refining its strategy to expand vertical market focus and leverage three technology pillars: Motion, Controls, and Power, reflected in its new brand 'Allient' (short for Allied Nexus Technologies)[100] Recent Events This section discusses key recent strategic initiatives, including operational realignment and the impact of new tax legislation - The company is executing its 'Simplify to Accelerate NOW' program in 2024-2025 to realign manufacturing footprint and streamline operations for enhanced efficiency and profitability[101] - As part of this strategy, Allient is creating a Machining Center of Excellence in Dothan, Alabama, and merging assembly operations into facilities in Tulsa, Oklahoma, and Reynosa, Mexico[102] - One-time costs for this realignment are estimated at $4 to $5 million, primarily for employee severance, with expected annualized cost savings of $6 to $7 million in 2025[103] - The company is evaluating the financial implications of the 'One Big Beautiful Bill Act' (OBBBA), signed July 4, 2025, which modifies income tax treatment for R&D expenses, bonus depreciation, and international tax regimes[104] Global Environment This section addresses the company's response to global economic uncertainties, trade policies, and geopolitical conflicts - The company is monitoring and adjusting operations due to proposed and implemented foreign trade policies, tariffs, and reciprocal trade restrictions, which may impact its manufacturing in Mexico, China, and Europe[105] - Geopolitical conflicts are causing economic uncertainty, increased volatility in energy prices, interest rates, supply chain disruptions, and changes in customer ordering patterns, which the company is actively managing[106] Operating Results This section analyzes the company's financial performance, including revenues, gross profit, and net income, for the reported periods Three months ended June 30, 2025 compared to three months ended June 30, 2024 This section compares the company's financial performance for the second quarter of 2025 against the same period in 2024 Operating Results (in thousands, except per share data) | Metric (in thousands, except per share data) | June 30, 2025 | June 30, 2024 | Variance $ | Variance % | | :------------------------------------------- | :------------ | :------------ | :--------- | :--------- | | Revenues | $139,578 | $136,032 | $3,546 | 3% | | Gross profit | $46,356 | $40,676 | $5,680 | 14% | | Gross margin percentage | 33.2% | 29.9% | | | | Operating income | $11,677 | $4,879 | $6,798 | 139% | | Net income | $5,617 | $1,150 | $4,467 | 388% | | Diluted earnings per share | $0.34 | $0.07 | $0.267 | 386% | | Bookings | $135,032 | $137,373 | $(2,341) | (2)% | | Backlog | $236,586 | $259,002 | $(22,416) | (9)% | - Revenue increased by 3% in Q2 2025, driven by growth in Medical, Industrial, and Aerospace and Defense markets, partially offset by a decrease in Vehicle, with organic revenue up 0.9% and foreign currency impact of 1.8%[107] - Gross margin improved to 33.2% from 29.9% due to higher sales volume, improved product mix, and operational improvements from the 'Simplify to Accelerate NOW' strategy[109] - Operating expenses decreased by 3%, reflecting cost reduction actions from the 'Simplify to Accelerate NOW' strategy, particularly in selling and engineering and development expenses[107][110][112] Six months ended June 30, 2025 compared to six months ended June 30, 2024 This section compares the company's year-to-date financial performance for 2025 against the same period in 2024 Operating Results (in thousands, except per share data) | Metric (in thousands, except per share data) | June 30, 2025 | June 30, 2024 | Variance $ | Variance % | | :------------------------------------------- | :------------ | :------------ | :--------- | :--------- | | Revenues | $272,381 | $282,745 | $(10,364) | (4)% | | Gross profit | $89,108 | $88,053 | $1,055 | 1% | | Gross margin percentage | 32.7% | 31.1% | | | | Operating income | $20,456 | $16,979 | $3,477 | 20% | | Net income | $9,174 | $8,052 | $1,122 | 14% | | Diluted earnings per share | $0.55 | $0.49 | $0.060 | 12% | | Bookings | $272,655 | $259,500 | $13,155 | 5% | | Backlog | $236,586 | $259,002 | $(22,416) | (9)% | - Revenues decreased by 4% year-to-date 2025, primarily due to decreases in Vehicle and Industrial markets, elevated shipments in prior year as supply chains normalized, and elevated inventory/slowing demand in the current period[119] - Bookings increased by 5% year-to-date 2025, reflecting steady demand in the Industrial market and continued strength in Aerospace & Defense[120] - Gross margin improved to 32.7% from 31.1% due to improved product mix and operational improvements from the 'Simplify to Accelerate NOW' strategy, despite lower sales volume[121] Non-GAAP Measures This section presents financial measures not prepared in accordance with GAAP, providing additional insights into operational performance - The company provides non-GAAP measures (Organic revenue, EBITDA, Adjusted EBITDA, Adjusted net income, Adjusted diluted EPS) to offer supplemental information for evaluating operating results, excluding items not indicative of ongoing operations[131][134][135] Non-GAAP Financial Metrics (in thousands) | Non-GAAP Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EBITDA | $17,255 | $11,249 | $31,631 | $29,843 | | Adjusted EBITDA | $20,067 | $13,931 | $37,539 | $33,971 | | Adjusted net income | $9,525 | $4,857 | $17,118 | $14,403 | | Adjusted diluted earnings per share | $0.57 | $0.29 | $1.03 | $0.87 | Organic Revenue Calculation | Organic Revenue Calculation | Three months ended June 30, 2025 | Six months ended June 30, 2025 | | :-------------------------- | :------------------------------- | :----------------------------- | | Revenue change over prior year | 2.6% | (3.7)% | | Less: Impact of acquisitions and foreign currency | 1.7% | 0.6% | | Organic revenue | 0.9% | (4.3)% | Liquidity and Capital Resources This section discusses the company's cash position, cash flow activities, debt, and ability to meet future financial obligations - Cash and cash equivalents increased by $13,813 thousand to $49,915 thousand at June 30, 2025, from December 31, 2024[139] - Net cash provided by operating activities increased by $21,058 thousand to $38,435 thousand for the six months ended June 30, 2025, driven by improved inventory management and higher net income[140][141] - Net cash used in investing activities decreased significantly by $27,370 thousand, primarily due to lower acquisition-related payments in 2025 compared to 2024[140][142] - The company expects capital expenditures to be between $8,000 thousand and $10,000 thousand for the full year 2025[143] - The company believes its existing cash, anticipated operating cash flows, and available financing under the Amended Credit Agreement are sufficient to meet cash needs for the next twelve months[149] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, specifically foreign currency exchange rate fluctuations and interest rate movements, and outlines the strategies employed to mitigate these risks Foreign Currency This section describes the company's exposure to foreign currency exchange rate fluctuations and its hedging strategies - The company has international operations in various countries, exposing it to foreign currency exchange rate fluctuations in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona, Mexican pesos, British Pound Sterling, and New Zealand dollar[150] - A hypothetical 10% change in the U.S. dollar's value would impact sales by approximately $4,880 thousand for the six months ended June 30, 2025, and foreign net assets by approximately $18,294 thousand as of June 30, 2025[150][151] - The company uses foreign currency contracts with notional amounts of $35,579 thousand at June 30, 2025, to hedge short-term balance sheet exposure, recording gains of $1,193 thousand and $1,070 thousand for the three and six months ended June 30, 2025, respectively[152] Interest Rates This section details the company's exposure to interest rate movements on its debt obligations and its use of interest rate swaps - The Series A Notes bear a fixed interest rate of 5.96% (6.46% from Oct 1, 2024, through Sep 30, 2025) and mature on March 21, 2031[153] - Interest rates on the Credit Facility are variable, based on Term SOFR plus a margin of 1.25% to 2.50% (2.50% at June 30, 2025)[154] - The company uses interest rate swaps to manage variable-rate debt exposure, hedging $90,000 thousand of the $146,962 thousand outstanding under the Revolving Facility as of June 30, 2025[154][155] Item 4. Controls and Procedures This section provides management's conclusions on the effectiveness of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Conclusion regarding the effectiveness of disclosure controls and procedures This section states management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[156][158] Changes in internal control over financial reporting This section reports on any material changes in the company's internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[159] PART II. OTHER INFORMATION This section includes additional information not covered in Part I, such as risk factors, equity sales, and exhibits Item 1A. Risk Factors This section refers to the risk factors previously disclosed in the company's annual report, noting no material changes except for factual updates within the current Form 10-Q - There have been no material changes to the risk factors disclosed in the Company's Form 10-K for the year ended December 31, 2024, except as updated by factual information in this Form 10-Q[160] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the company's equity security transactions, specifically detailing shares withheld to satisfy tax withholding obligations related to restricted stock vesting Shares Purchased to Satisfy Tax Withholding Obligations | Period | Number of Shares Purchased (1) | Average Price Paid per Share | | :----------------- | :----------------------------- | :--------------------------- | | 04/01/25 to 04/30/25 | 43,465 | $22.00 | | 05/01/25 to 05/31/25 | — | — | | 06/01/25 to 06/30/25 | — | — | | Total | 43,465 | $22.00 | (1) These shares were withheld by the Company to satisfy tax withholding obligations in connection with the vesting of stock - The company did not have an authorized stock repurchase plan in place as of June 30, 2025[161] Item 5. Other Information This section confirms that no directors or executive officers engaged in or terminated Rule 10b5-1 trading arrangements during the reported quarter - None of the company's directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[162] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer, and various XBRL taxonomy documents - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[165] - The filing also includes various Inline XBRL Taxonomy Extension documents (Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, Presentation Linkbase) and the Cover Page Interactive Data File[165]