Altra Industrial Motion (AIMC) Tops Q1 EPS by 8c, Revenues Beat; Reiterates FY19 EPS/Revenue Outlook

Altra Industrial Motion (NASDAQ: AIMC) reported Q1 EPS of $0.80, $0.08 better than the analyst estimate of $0.72. Revenue for the quarter came in at $482.8 million versus the consensus estimate of $478.53 million.

Financial Highlights

• First-quarter 2019 net sales were $482.8 million, up 101% from $240.4 million in the first quarter of 2018. Organic sales growth was 1.6% for the combined business on an unaudited pro forma basis, compared to the first quarter of 2018.*
• First-quarter net income was $35.2 million, or $0.55 per diluted share, compared with $9.0 million, or $0.31 per diluted share, in the first quarter of 2018. Non-GAAP net income in the first quarter of 2019 was $51.7 million, or $0.80 per diluted share. This is compared with non-GAAP net income of $21.2 million, or $0.72 per diluted share, in the first quarter of 2018.*
• Non-GAAP adjusted EBITDA in the first quarter of 2019 was $105.0 million, or 21.7% of net sales.*
• Operating income margin in the first quarter of 2019 was 13.8% compared to 8.2% in the first quarter of 2018. Gross profit margin in the first quarter of 2019 was 36.2%, a 530 basis point increase over 30.9% in the first quarter of 2018. Non-GAAP operating income margin in the first quarter of 2019 was 18.2%, a 630 basis point increase from 11.9% in the first quarter of 2018.*
• Cash flow from operations for the first quarter 2019 of $39.3 million led to free cash flow of $25.3 million, compared with negative free cash flow of $3.3 million for the first quarter of 2018.*

Strategic Highlights

• Integration of the A&S business advancing on track with tactical stage of integration successfully completed.
• Relocated shared facility in China on time and on budget, and announced closure of significant facility in the Northeast (production to be relocated to three U.S. facilities).
• Launched sales team collaboration program.
• Advanced strategic supply chain initiative to identify indirect and direct savings.
• On track to achieve $10.0 million to $12.0 million of synergies in 2019 and deliver a total of $52.0 million of synergies by year four.
• Paid down $15.0 million of debt in Q1 2019.

Management Comments

“We began the year with a strong first quarter that reflects the financial and strategic benefits of the A&S business combination and the new Altra,” said Carl Christenson, Altra’s Chairman and CEO. “First-quarter revenues of $482.8 million were more than double the prior-year quarter as a result of the merger and the continued positive performance of both businesses. Operationally, the business continues to perform well as we delivered solid margins across the board, including gross profit margin of 36.2%, non-GAAP adjusted operating income margin of 18.2% and non-GAAP adjusted EBITDA margin of 21.7%. Our focus on cash management yielded $25.3 million of free cash flow in what is seasonally our lowest quarter for free cash flow.*

“The integration of the A&S business and Altra continues to advance exceptionally well,” said Christenson. “With the completion of essentially all the integration activities behind us, our focus has shifted to advancing our strategic initiatives to drive the synergies. In the first quarter, we launched our sales collaboration program, made meaningful progress with our supply chain optimization efforts and continued to integrate our world class business systems across the combined organization.

“First quarter revenues were in line with our expectations as growth in the industrial economy has moderated. Additionally, many of the economic indicators that were negative in the fourth quarter of last year and early in the first quarter of this year have improved resulting in an improved outlook for the overall global economy, including an improved outlook in China and Germany, which are key geographies for Altra. Based on this and our ongoing success with the A&S integration, we are confident in our ability to deliver continued sales, earnings and free cash flow growth in 2019,” concluded Christenson.

GUIDANCE:

Altra Industrial Motion sees FY2019 EPS of $3.02-$3.18, versus the consensus of $3.17. Altra Industrial Motion sees FY2019 revenue of $1.92-1.95 million, versus the consensus of $1.93 million.

For earnings history and earnings-related data on Altra Industrial Motion (AIMC) click here.

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