Allient Inc. Q3 FY2025 earnings call

• Allient delivered strong quarter with double-digit revenue growth, record gross margin, and balance sheet deleveraging. • Healthy demand in key end markets: industrial verticals (power quality for data centers, automation), defense programs, medical growth (surgical instruments), and vehicle improvement (commercial automotive, construction). • Profitability highlights: record gross margin, operating leverage driving improvement, mix shift to higher-value programs, and cost discipline. • Cash generation and balance sheet: higher operating cash flow, debt reduction, lower leverage ratio, and strong liquidity. • Simplify to Accelerate Now program delivered $10M in annualized savings in 2024 and on track for $6M-$7M in 2025 through footprint optimization, etc.

Allient had strong Q3 2025 results with double-digit revenue growth. Industrial market revenue advanced 20%, led by power quality solutions for data centers and improving automation. Aerospace and defense increased to 15% of revenue, medical accounted for 15% with growth in surgical instruments, and vehicle represented 17% with improvement in commercial automotive and construction. Gross profit reached $46.2 million with gross margin expanding to a record 33.3%, up 190 basis points year-over-year.

• Narrowed full year CapEx forecast to $6.5M-$8.5M from prior $8M-$10M. • Continued deleveraging with net debt at $150.8M and leverage ratio at 2.1x. • Focus on strategic initiatives: margin expansion, working capital discipline, and investment in technology for higher-value solutions.

• Policy and tariff risk, supply normalization, and cost volatility influencing capital deployment. • Cancellation of M10 Booker tank program by U.S. Army impacted Allient. • Rare earth supply challenges despite agreement with China, requiring multipronged strategy for supply chain security.

Q: About orders and backlog, how view quality and visibility? And any concerns?

A: Overall pleased, quality good. Power quality, defense, industrial strong. M10 Booker cancellation affected, but without it book-to-bill ratio would be above 1.

Q: Elaborate on Simplify to Accelerate Now initiatives progress and future potential for 2026?

A: Dothan facility transition, cost optimization, front end focus on margin-capable markets, plenty of cost savings and margin opportunities ahead.

Q: Industrial segment, details on data center activity?

A: Selling power quality equipment into data centers, facility expansion, demand uptick not slowing soon. Automation side seeing step-up in run rates. Europe industrial picking up, defense (drone, munitions) active, medical surgical good.

Q: Bookings impact on M10 program and drone space timeline?

A: Bookings hit $5M this quarter, longer-term backlog $7M/year. Drone activity stepping up next year.

Q: Vehicle market mix, powersports impact?

A: Powersports business down due to dual sourcing, below 10% of revenue. Commercial automotive performing well, vehicle mix includes large trucks, rail, marine, construction, etc.