ALLIENT INC

Allient Inc. is a global company that designs, manufactures and sells precision and specialty controlled motion components and systems used in a broad range of industries, including Industrial, Vehicle, Medical, and Aerospace & Defense (A&D). The company is headquartered in Amherst, NY, and has global production operations and sells to markets across the United States, Canada, South America, Europe and Asia-Pacific. The controlled motion market is highly fragmented with many competitors, some of which are substantially larger and have greater resources than Allient.

The company's primary competitors named in the filing include Ametek, Inc., Parker Hannifin Corporation, and Regal Rexnord, along with other smaller competitors. Allient believes its competitive advantages include its electro-magnetic, mechanical and electronic controlled motion expertise, the breadth of its motor technologies, its ability to integrate these technologies with encoders, gearing, power electronics, digital control technologies and network/feedback communications capabilities, as well as its global presence. Unlike many competitors, the company is unique in its ability to provide custom-engineered controlled motion solutions that integrate the products it manufactures such as embedded or external electrical control solutions with its motors.

Allient generates revenue by selling component and integrated controlled motion solutions to end customers and OEMs through its own direct sales force and authorized manufacturers' representatives and distributors. The company's products include nano precision positioning systems, servo control systems, motion controllers, digital servo amplifiers and drives, brushless servo, torque, and coreless motors, brush motors, integrated motor-drives, gear motors, gearing, incremental and absolute optical encoders, active (electronic) and passive (magnetic) filters for power quality and harmonic issues, Industrial safety rated input/output Modules, Universal Industrial Communications Gateways, light-weighting technologies, and other controlled motion-related products. The company's strategy emphasizes a combination of technologies to create enhanced products, solutions, and value, evolving from an individual component provider to a solutions provider utilizing multiple company technologies in a system solution approach.

The company's target markets include Industrial, Vehicle, Medical, and Aerospace & Defense. In the Industrial market, products and solutions are used in factory automation, specialty equipment, material handling equipment, commercial building equipment, power quality products, nano technology motion systems, and PLC manufacturers and distributors. In the Vehicle market, products are used in electronic power steering, drive-by-wire applications, traction/drive systems, actuation systems, HVAC systems, and alternative fuel systems for various vehicle types including off- and on-road construction and agricultural equipment, trucks, buses, boats, and recreational vehicles. In the Medical market, products are used in surgical robots, prosthetics, electric powered surgical hand pieces, programmable pumps, nuclear imaging systems, radiology equipment, automated pharmacy dispensing equipment, kidney dialysis equipment, respiratory ventilators, heart pumps, and patient handling equipment. In the Aerospace & Defense market, products are used in inertial guided missiles, mid-range smart munitions systems, weapons systems, unmanned vehicles, security and access control, camera systems, and light-weighting vehicle technologies.

For the year ended December 31, 2025, Industrial revenue was $268,394 ¹, Vehicle revenue was $97,015 ², Medical revenue was $81,687 ³, Aerospace & Defense revenue was $81,337 ⁴, and Distribution and Other revenue was $26,045 ⁵. For the year ended December 31, 2024, Industrial revenue was $248,281 ⁶, Vehicle revenue was $102,701 ⁷, Medical revenue was $77,959 ⁸, Aerospace & Defense revenue was $75,183 ⁹, and Distribution and Other revenue was $25,844 ¹⁰. The company's engineering and development expenditures for the years ended December 31, 2025 and 2024 were $38,836 ¹¹ and $39,761 ¹², respectively, or 7% ¹³ and 8% ¹⁴ of sales in 2025 and 2024, respectively.

During 2024, the Company commenced the Simplify to Accelerate NOW program, including initiatives to realign the Company's manufacturing footprint and streamline the organization to enhance operational efficiency and drive profitability. On February 6, 2025, the Company announced it will expand upon current capabilities to create a state-of-the-art Machining Center of Excellence at its facility in Dothan, Alabama, transferring current assembly operations from Dothan and merging these capabilities into its facilities in Tulsa, Oklahoma and Reynosa, Mexico. One-time costs required to implement the changes in 2025 were approximately $4 million ¹⁵, primarily related to employee severance and other personnel related expenses, and have been substantially incurred and paid during 2025. The initiative supported the goal in driving over $6 million ¹⁶ in additional annualized cost savings. On January 11, 2024, the Company acquired 100% of the interest in SNC Manufacturing Co., Inc., a privately-owned premier designer and global manufacturer of electrical transformers. On September 22, 2023, the Company acquired 100% of the interest in Sierramotion Inc., a privately-owned company specializing in designing and engineering turn-key motion components and mechatronic solutions. The Company declared and paid a dividend of $0.03 ¹⁷ in each quarter of 2025 and 2024, pursuant to its quarterly dividend program, with dividends to shareholders for 2025 and 2024 each being $0.12 ¹⁸ per share.

Revenue was $554,478 ¹⁹ for 2025 compared with $529,968 ²⁰ in 2024, an increase of 5% ²¹. Gross profit was $181,709 ²² for 2025, a 10% ²³ increase from $165,691 ²⁴ in 2024, with gross margin increasing 150 basis points to 32.8% ²⁵ in 2025 from 31.3% ²⁶ in 2024. Operating income was $43,985 ²⁷ for 2025 compared with $30,038 ²⁸ for 2024, or 7.9% ²⁹ and 5.7% ³⁰ of revenue in 2025 and 2024, respectively. Net income was $22,034 ³¹ for 2025, or $1.32 ³² per diluted share, compared with $13,166 ³³, or $0.79 ³⁴ per diluted share, for 2024, representing a 70% ³⁵ increase in net income and a 70% ³⁶ increase in earnings per diluted share. Bookings were $550,864 ³⁷ for 2025 compared with $480,031 ³⁸ for 2024, an increase of 15% ³⁹. Backlog as of December 31, 2025 was $232,925 ⁴⁰, an increase of 1% ⁴¹ from $230,788 ⁴² at year end 2024. Debt of $180,389 ⁴³, net of cash of $40,705 ⁴⁴, decreased by $48,391 ⁴⁵ to $139,684 ⁴⁶ at December 31, 2025 from debt of $224,177 ⁴⁷, net of cash of $36,102 ⁴⁸ of $188,075 ⁴⁹ at December 31, 2024.

Management stated that in 2025, the company successfully executed on its strategic initiatives, delivering improved margins, stronger cash flow, and enhanced balance sheet flexibility. As the company looks into 2026, while remaining mindful of macroeconomics variability in certain end markets, its diversified portfolio, improved cost structure and enhanced financial flexibility support disciplined growth and long-term value creation.The company's growth strategy is focused on becoming a leading global controlled motion solution provider in its selected target markets by further developing its products and services platform to utilize multiple Allient technologies. The company continues to build a pipeline of exciting market-based application opportunities, though sales cycles are long and the time from being selected for solution development to full rate production can be longer. The company expects its recent acquisitions of SNC and Sierramotion will further drive its success, and it continues to invest in applied and design engineering resources.

The company's strategic focus includes product line platform development and rationalization to meet the emerging needs of its target markets, emphasizing a combination of technologies to create increased value solutions for customers while seeking operating efficiencies. The company has set growth targets and will focus and align its resources to meet those targets, with the majority of critical issues focused on growth and profitability initiatives. The company believes this approach will allow it to provide increased value to customers and improved margins.

The Simplify to Accelerate NOW program included initiatives to realign the Company's manufacturing footprint and streamline the organization to enhance operational efficiency and drive profitability. These initiatives are expected to position Allient to emerge from the current challenging macroeconomic environment and industrial headwinds with stronger earnings power, improved operational flexibility, and enhanced capacity to capitalize on future growth opportunities. The initiative supported the goal in driving over $6 million ⁵⁰ in additional annualized cost savings.

The company expects 2026 capital expenditures to be approximately $10,000 to $12,000 ⁵¹. The company's working capital, capital expenditure and dividend requirements are expected to be funded from cash provided by operations and amounts available under the Amended Credit Agreement. The company believes its diverse markets, strong market position in many of its businesses, and steps taken to strengthen its balance sheet leave it well-positioned to manage its business.

Engineering and development expenditures for the years ended December 31, 2025 and 2024 were $38,836 ⁵² and $39,761 ⁵³, respectively, or 7% ⁵⁴ and 8% ⁵⁵ of sales in 2025 and 2024, respectively. The company believes E&D is critical to its ongoing success and expects to continue to invest at similar levels in the future. The company expects 2026 capital expenditures to be approximately $10,000 to $12,000 ⁵⁶. At December 31, 2025, the Company did not have an authorized stock repurchase plan in place ⁵⁷. The Company declared and paid a dividend of $0.03 ⁵⁸ in each quarter of 2025 and 2024, and while it is the current intention to pay regular quarterly cash dividends, any decision to pay future cash dividends will be made by the Board and will depend on earnings, financial condition and other factors.

The company faces headwinds from inflation which has negatively impacted input costs and pricing, primarily for labor and materials, and the company, its customers, and its suppliers have experienced the effect of a higher interest rate environment. The current geopolitical conflicts are creating higher levels of economic uncertainty and increased volatility with respect to energy prices, interest rates, the supply chain (in particular, with respect to proposed changes to tariffs and trade policies), and certain customer ordering patterns. The U.S. government has proposed and implemented certain updates to existing foreign trade policies, including new and increased tariffs on a wide range of products and goods imported to the U.S., and certain countries have responded with reciprocal tariffs and/or trade restrictions, with the company having manufacturing operations in Mexico, China, and Europe that may be impacted by these policy changes.

The company faces structural headwinds including the challenge of accurately aligning its capacity with demand, having experienced capacity constraints and longer lead times in times of growing demand and idle capacity as economies slow or demand declines. The company also faces risks from foreign currency exchange rate fluctuations, with a hypothetical 10% change in the value of the U.S. dollar in relation to its most significant foreign currency exposures having an impact of approximately $24,126 ⁵⁹ on 2025 sales. Additionally, the company estimates that foreign currency exchange rate fluctuations increased sales in 2025 compared to 2024 by approximately $6,481 ⁶⁰.

The company's global sales and operations are subject to a variety of economic, market and financial risks, including political and economic instability, imposition of trade or foreign exchange restrictions, trade protection measures such as the imposition of or increase in tariffs and other trade barriers, and unexpected changes in regulatory requirements. A hypothetical 10% change in the value of the U.S. dollar in relation to the company's most significant foreign currency exposures would have had an impact of approximately $24,126 ⁶¹ on 2025 sales. The company relies on suppliers for equipment, components and services, and certain materials and components are required and qualified to be sourced from a single or a limited number of suppliers, creating risks of short supply, limited availability, and increased costs. The company faces competition from larger competitors such as Ametek, Inc., Parker Hannifin Corporation, and Regal Rexnord, which may have greater financial, operational, and marketing resources. The company's indebtedness may limit its operations and use of cash flow, with financial covenants requiring a minimum interest coverage ratio of at least 3.0:1.0 ⁶² and a maximum Leverage Ratio of 3.75:1.0 ⁶³ as of the end of any fiscal quarter thereafter, and the company had $124,962 ⁶⁴ outstanding under the Amended Revolving Facility at December 31, 2025.

Management's message emphasizes that in 2025, the company successfully executed on its strategic initiatives, delivering improved margins, stronger cash flow, and enhanced balance sheet flexibility. Strength in industrial automation and power quality solutions supporting data center infrastructure, combined with the disciplined execution of structural cost and margin improvements from the Simplify to Accelerate NOW program, have yielded durable margin expansion. Management states that Allient is an applied technology/know-how company, and to grow, it will continue to invest in the technical resources to ensure it can execute on its mantra to 'create game changing solutions that adds tangible value for our customers'. As the company looks into 2026, while remaining mindful of macroeconomics variability in certain end markets, its diversified portfolio, improved cost structure and enhanced financial flexibility support disciplined growth and long-term value creation.