Altra Industrial Motion (AIMC) Tops Q2 EPS by 29c, Revenues Beat; Offers FY20 EPS/Revenue Guidance Above Consensus

Altra Industrial Motion (NASDAQ: AIMC) reported Q2 EPS of $0.60, $0.29 better than the analyst estimate of $0.31. Revenue for the quarter came in at $400.8 million versus the consensus estimate of $368.01 million.

Q2 Financial Highlights

• Second-quarter 2020 net sales were $400.8 million compared with $466.5 million in the second-quarter of 2019. Second-quarter 2020 organic sales were down 12.5% compared with the second-quarter of 2019. Excluding the impact of foreign currency translation, Power Transmission Technologies (PTT) segment sales were down 14.9% and Automation & Specialty (A&S) segment sales were down 10.3% compared with the prior year.*
• For the second-quarter of 2020, the Company reported net income of $21.7 million, or $0.34 per diluted share, which compares with net income of $29.0 million, or $0.45 per diluted share, in the second-quarter of 2019.
• Non-GAAP Net Income in the second-quarter of 2020 was $38.6 million, or $0.60 per diluted share. This is compared with Non-GAAP Net Income of $45.6 million, or $0.71 per diluted share, in the second-quarter of 2019.*
• Non-GAAP Adjusted EBITDA in the second-quarter of 2020 was $88.9 million, or 22.2% of net sales, compared with $95.5 million, or 20.5% of net sales, in the second-quarter of 2019.*
• Operating income margin in the second-quarter of 2020 was 13.0%, compared with operating income margin of 12.2% in the second-quarter of 2019. Non-GAAP Operating Income Margin in the second-quarter of 2020 was 17.8%, compared with 16.9% in the second quarter of 2019.*
• Cash flow from operations for the second-quarter of 2020 was $38.8 million, compared with cash flow from operations of $56.8 million in the second-quarter of 2019. Non-GAAP Free Cash Flow was $29.7 million compared with Non-GAAP Free Cash Flow of $46.7 million in the second-quarter of 2019. Non-GAAP Adjusted Free Cash Flow, which excludes the impact of the interest rate swap termination payment was $64.4 million in the second-quarter of 2020.*
• Paid down $24.0 million on the Company’s outstanding term loan in Q2 and ended the quarter with leverage of 3.8x total net debt to LTM non-GAAP adjusted EBITDA on an unaudited basis. At the end of the second-quarter, Altra’s cash balance and availability under the revolving credit facility totaled approximately $514.9 million.*

Management Comments

“Altra’s second-quarter execution was outstanding as we exceeded our expectations for both revenue and profitability and demonstrated our ability to perform well in a downturn,” said Carl Christenson, Altra’s Chairman and Chief Executive Officer. “The broad diversity of our end markets as a result of the merger has clearly helped mitigate the financial impact of the current economic crisis. Sales were higher than expected due to the outperformance of select markets – including the Class 8 truck and wind turbine markets in China – and better-than-anticipated overall demand during a tough macro-economic environment. Our aggressive actions to reduce costs led to the excellent bottom-line performance as well as strong cash flow generation and debt reduction.

“I am beyond proud of the Altra team around the globe as they continue to strive to keep fellow employees healthy by vigilantly maintaining safety protocols, while at the same time sustaining business continuity and positioning Altra for success in the post-pandemic world,” said Christenson. “We expect that certain of our markets will benefit as we move beyond COVID-19, such as factory automation, robotics, medical equipment and food processing.

“While visibility in the second half of the year remains limited due to the uncertainty around COVID-19, we believe we are well positioned to deliver on our new guidance assuming that we maintain current order rates. Against a challenging backdrop, we have demonstrated the incredible resilience of our business model and our team’s ability to take actions very quickly to maintain good cash flow and continue to reduce debt during a downturn. We are controlling what we can control in the short-term while protecting the necessary resources to drive growth and thrive as a premier industrial company for the long term when the global economy recovers,” concluded Christenson.

GUIDANCE:

Altra Industrial Motion sees FY2020 EPS of $2.05-$2.30, versus the consensus of $1.87. Altra Industrial Motion sees FY2020 revenue of $1.58-1.64 billion, versus the consensus of $1.57 billion.

While it is difficult to predict the severity and duration of the pandemic, Altra is updating its guidance to reflect management’s best estimate and practical assessment of the financial impact of COVID-19 to the Company’s business at this time. The guidance assumes that order levels remain steady. Management is closely monitoring the situation and is prepared to implement further cost-reduction measures should topline demand decelerate.

Altra is updating guidance for full year 2020 as follows:

• Full-year 2020 sales in the range of $1,580 million to $1,640 million.
• GAAP diluted EPS in the range of a loss of $1.16 to a loss of $0.94.
• Non-GAAP diluted EPS in the range of $2.05 to $2.30.*
• Non-GAAP adjusted EBITDA in the range of $305.0 million to $330.0 million.*
• Tax rate for the full year of approximately 21% to 23% before discrete items, capital expenditures in the range of $40 to $45 million, and depreciation and amortization in the range of $124 to $127 million.
• Non-GAAP Adjusted Free cash flow in the range of $160 million to $200 million.*

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

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