Allied Motion Technologies, Inc.

Greetings. Welcome to the Allied Motion Technologies, Inc. Third Quarter Fiscal Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Craig Mihalik, Investor Relations. You may begin.

Yeah, thank you, and good morning, everyone. We certainly appreciate your time today as well as your interest in Allied Motion. Joining me on the call are Dick Rosella, our Chairman, President, and CEO, and Mike Lee, Church and Financial Officer. Dick and Mike are going to review our third quarter 2021 results and provide an update on the company's strategic progress and outlook, after which we will open it up for Q&A. As part of today's Q&A, we do ask that you limit your questions to two or three in order to allow enough time for all participants, and you can certainly go back into the queue for additional follow-up. You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find it on our website at alliemotion.com, as well as we did send out a release this morning on another acquisition that went out around 9.30 a.m. Eastern Time that can also be found on our website. On the website, you'll also find the slides that accompany today's discussion. If you are reviewing those slides, please turn to slide two for the Safe Harbor Statement. As you are aware, we may make some forward-looking statements on this call during the formal discussion, as well as during the Q&A. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated on today's call. These risks and uncertainties and other factors are discussed in the earnings release, as well as with other documents filed by the company with the Securities and Exchange Commission. You can find these documents on our website or at FCC.gov. I want to point out as well that during today's call, we'll discuss the non-GAAP measures, which we believe will be useful in evaluating our performance. You should not consider the presentation of this additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings reliefs and slides. With that, please turn to slide three, and I'll turn it over to Dick to begin.

Dick?

Thank you, Craig. And welcome, everyone. Our third quarter results reflect strong execution from both a sales and operational perspective. Backlog grew by 9% sequentially to a record $186 million, with strong order input across the board. Total revenue grew 9% over last year's third quarter to $103.5 million, driven by continued strength across most of our served markets. but in particular, a strong recovery in our industrial markets, which were up 39%. This was primarily led by increased demand for our applications and solutions in automation, vehicle handling, electronics, and oil and gas projects. Our vehicle markets continue to outpace prior year comparisons as the third quarter was up 5%, largely driven by construction and truck demand. Power sports demand has still been very solid, though moderated some from its recent highs. The medical markets were down year over year given the exceptionally strong demand resulting from the onset of the pandemic last year, but did grow 4% sequentially as we have seen a return of more elective surgeries, as well as some uptick in COVID-related products and solutions given various variants that have developed around the world. A&D has continued to be challenged, though we are seeing new project activity levels increasing, which is encouraging. We are certainly not alone dealing with the unique factors of the current environment, including inflationary pressures, supply chain disruptions, and labor shortages. The effectiveness of the actions we have implemented to mitigate these factors is demonstrated under revenue growth, margin expansion, and increased profitability. In fact, On both a year-over-year and sequential basis, gross margin, operating margin, and adjusted EBITDA margins have improved. As a result, net income increased 49% over the prior year to $6 million, or 41 cents per diluted share. Even though we did have a fairly significant build in inventory levels, as a result of the global supply chain challenges, we did generate positive cash flow of $3.5 million from operations during the quarter, and this enabled us to reduce total debt and further advance our growth initiatives. On Tuesday this week, we announced the acquisition of Ormex Systems Corporation in Rochester, New York, where they develop and manufacture mission-critical electromechanical automation solutions and motion control products, including multi-axis controls, electronic drives, and actuators for the automation and aerospace industries. Details are provided on slide four. This bolt-on fits well strategically as it strengthens our technical expertise and adds a higher level of precision motion control systems and solutions to our offerings. Importantly, we believe we can build a scalable solution to accelerate growth by leveraging their electronic, software, and mechanical engineering expertise to create complete electromechanical solutions for custom automation applications. We look forward to a bright future together and welcome Dr. Edward Krasnicki, who will continue to lead the business as well as the entire ORMEC organization to the allied team. Additionally, this morning, we announced the acquisition of Allio Industries in Ervada, Colorado. I will refer you to the press release that crossed the wire this morning, and for those of you who may not have had a chance to see it, I will relay that to you now. In the PR, my quote stated, Allio is well recognized for their technology slash know-how and expertise in nanometer level positioning. And we are very excited to add such high-precision positioning and robotic technology solutions to our already powerful portfolio of motion solution offerings. Equally important is Alio's culture and passion for innovation, customer service, and product quality, all traits that align well with what we have built at Ally. We expect that the business can grow rapidly as we leverage our joint channels to market and bring scale to their operations. Rastris went on to say, founded a little bit about Allio, founded in 2001 and headquartered in Arvada, Colorado. Allio designs, engineers, and manufactures nanotechnology, motion systems for state-of-the-art applications in silicon photonics, microassembly, digital pathology, genome sequencing, laser processing, and microelectronics. Their expansive product line includes the patented hybrid hexapod, which provides for six-axis point precision repeatability, air-bearing systems, linear and rotary nano-precision systems with both mechanical and air-bearing guides, and systems customized for atmospheric cleanroom and ultra-high vacuum environments. We would like to welcome Mr. Bill Hennessy, the founder and president of Allio, We will continue on with the organization as well as the entire Allied organization to the Allied team. In addition, I would like to extend our appreciation to both the internal and external support teams at Allied in getting these opportunities over the finish line. As we move forward with record backlog and increasing order trends, we are confident in our initiatives and the strength of our business model. At the same time, we will continue to focus on what we are doing the markets we are serving, successfully progressing our product development efforts, and continuing to leverage our global footprint. With that, let me turn it over to Mike for a more in-depth review of the financials. Mike? Thank you, Dick. As a reminder, all share and per share information in our earnings release and slides reflect the three-for-two stock split completed in April. Starting on slide five, we provide some detail regarding our top line. Third quarter revenue increased 9% to $103.5 million. This is a record high and is the third consecutive quarter of achieving greater than $100 million, further demonstrating the success of our strategy and the benefit of the broad-based recovery underway in many of our served markets. In particular, demand was strong in industrial, improving 39% year over year, while vehicle markets improved 5%. On a sequential basis, industrial grew 4%, medical grew 4%, and vehicle was up 1%. The favorable impact of exchange rate fluctuations on revenue was $0.8 million in the quarter. Excluding FX, revenue was up 8.5%. Sales to U.S. customers were 56% in line with the prior year period, and the balance of sales were to customers primarily in Europe, Canada, and Asia Pacific. Slide 6 shows the change in our revenue mix by market for the trailing 12-month period. Total TTM revenue was up 11% and reflects the impact of our diversified business model. The economic impact of the pandemic, along with general program timing, is reflected in the reduced demand or orders deferrals within A&D. And though industrial faced significant headwinds from the pandemic last year, our actions and the ongoing improving market conditions are reflected in the 9% gain on a TTM basis. Note that on a go-forward basis, the ORMIC business will primarily be reflected in the industrial and A&D categories. As depicted on slide 7, our gross profit was up $3.9 million, or 14% to $32 million. Our gross margin expanded 120 basis points year-over-year and was up 20 basis points sequentially to 30.9%, reflecting strong volume levels, favorable mix, the impact of pricing, and the disciplined execution of our Lean Toolkit AST. While we are not immune to the supply chain and material cost constraints, as well as labor inflation, we believe that our team is managing those impacts well. Nonetheless, we expect some headwinds to continue for the near term, though, as we have stated, we anticipate growing our margins over the long term. Moving on to slide eight, third core operating income was $8.7 million, up $2.2 million from the 2020 third quarter, and up $2 million from the sequential second quarter. Operating margin of 8.4% expanded 160 basis points year-over-year and 180 basis points sequentially. We have continued to effectively manage our costs and leverage the higher volume. This more than offset increased incentive compensation, which was aligned with the revenue and net income growth and was largely in the G&A line. On slide 9, you can see our bottom line and adjusted EBITDA results. Net income increased to $6 million, or $0.41 per diluted share, up $0.13 from the third quarter of 2020. The effective tax rate for the quarter was 24.6%, compared with 25.4%. We expect the income tax rate for the fourth quarter of 2021 to be approximately 25%. Excluding the discrete tax benefit of $7.4 million recorded in the first quarter of 2021, the full year 2021 income tax rate is expected to be approximately 24%. Also, I'd like to point out that we continue to pursue tax planning strategies to help reduce our effective tax rate. Adjusted EBITDA for the quarter was $14.5 million, or 14% of sales, up 190 basis points over the prior year period. Sequentially, adjusted EBITDA was increased to $2.1 million and 180 basis points. We use adjusted EBITDA as an internal metric and believe it is useful in determining our progress and operating performance. Slides 10 and 11 provide an overview of our balance sheets and cash flow. We paid down $3 million of debt during the quarter, resulting in $109.3 million of total debt at the end of the period. Debt net of cash was about $90 million, and net debt to net capitalization was 35.7%, down 470 basis points from year end. At the end of the third quarter, our bank leverage was 2.22 times. After quarter end, we did utilize $23 million of our credit facility to fund our recent acquisitions. We paid $9 million for ORMEC, the majority of which was cash, with $385,000 equity component. We paid $20 million for ALIO, composed of $15 million in cash and $5 million in equity. There are potential earn-out payments over the next three years based on ALIO's achieving certain annual EBITDA targets. We've consistently demonstrated our ability to quickly de-lever our balance sheets following acquisitions, and it is our expectation that we will continue this strategy to reload for future growth opportunities. We generated solid cash flow from operations of 3.5 million in the third quarter, and a total of 19.9 million over the year-to-date period. Continued inventory build to mitigate supply chain issues was the primary reason as to why cash flow from operations was not stronger during the quarter. Third quarter CapEx was $3.9 million and largely focused on new customer projects as well as continued ERP implementation. We expect our fiscal 2021 CapEx to range between $12 and $15 million. Inventory returns were 3.6 times down from 2020. Our teams have been managing our inventory levels well as we work to meet increasing customer demand and combat sourcing and lead time challenges. Our DSO increased slightly to 49 days in the quarter. With that, I'll now turn the call back over to Dick. Thank you, Mike. Slide 12 highlights encouraging trends as customer demand and our strengthened market position again has resulted in record orders and backlog. We have now achieved five consecutive quarters of order growth since the low point during the onset of the pandemic last year, reaching 120 million in the third quarter. This represents a 35 percent increase over last year's third quarter. All of our major market channels are contributing, and our book-to-bill ratio was solid at 1.2. Backlog increased 9 percent sequentially over the second quarter and was up 50 percent over last year's third quarter to more than $185 million. Approximately 9 percent of our backlog 90% of our backlog is expected to convert to sales over the next three to nine months. We estimate that $3 to $5 million of our current backlog is a carryover due to the global supply and shipping challenges. Importantly, this level has remained relatively steady from last quarter as our teams have continued to do a great job meeting our customers' demands. As we look out, industrial and vehicle demand remains strong, and while most customers will accept everything we can deliver, shortages from other suppliers can and may impact our shipments as well. In the fourth quarter, we do expect some seasonality given typical holiday shutdowns and inventory adjustments, although we believe that impact could lessen if there is improvement related to the global supply chain challenge. Demand in our medical market is expected to still be solid with the ongoing recovery of elective surgeries and potential demand from the pandemic. While we continue to take a cautious approach with our A&D markets, we are seeing some increased quoting and project activity, and we further expect to benefit from ORMIC in this space in 2022 and beyond. From an inflation and supply chain perspective, we do not foresee any significant improvements in the near term. Nonetheless, we believe we can continue to leverage the strength of our supply chain management capabilities to help navigate this dynamic landscape. We're also focused on retaining our critical talent and keeping our team focused on several new project opportunities, as well as ensuring we meet our internal timelines to effectively launch several new growth-oriented product platforms. While we have announced a couple acquisitions in the last two days, our acquisition pipeline is still very active. and we believe we have the financial flexibility to execute opportunities that meet critical elements of our strategic filter. As always, we will be prudent with our capital allocation. Overall, we demonstrated strong execution by generating record levels of revenue, orders, and backlog, and we have further developed our one allied strategy. We have a high level of confidence that we have a platform that can deliver expanding margins over time and will continue to drive growth in the future. Now, before we turn it over to the operator for questions, I'm sure some of the questions are going to be around the acquisitions. And Mike has stated, given you some answers and questions as far as the amount we have paid for the acquisitions. What I will relate to you and do it in a kind of a general format here is that we do expect the combination of the two acquisitions to generate approximately $20 million plus in revenues next year. and with operating gross margins that are well above our current average gross margins. So I think as part of our strategy, we talked about expanding gross margins 1% year over year, and these two acquisitions combined certainly bring us close to achieving that goal for the coming year, as well as taking some other activities that we will be working on to continue to expand that gross margin. So with that, Operator, let's open the line for questions.

At this time, we will be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Greg Palm with Craig Hallam. Please proceed with your question.

Thanks for taking the questions. A lot of good stuff to unpack here. Maybe we'll start, and sorry if I missed this, but were you able to fulfill or ship the entirety of demand that you had in the quarter? Was there some impact from supply chains that maybe pushed a certain amount of revenue out to Q4 or beyond?

Yeah, there was definitely some impact, Greg, and I think what we mentioned is it's about $3 to $5 million in revenue, which was pretty much consistent with what we saw in the previous quarter, so there was some push.

And, I mean, what's your view of supply chains going forward? I mean, do we expect that that same sort of amount of revenue, you know, will end up getting pushed from Q4 to Q1? I mean, do you see any signs of easing, or do you think this is going to be with us for some time still?

Well, unfortunately, I think it's a challenge every single day, and it shows up in different places at different times. So I think we still will have these challenges moving forward, and I don't think there's any reason to expect that we're not going to see some delays in our ability to ship. What I've mentioned in my script may not have been very clear is that even if we have everything we need to ship product to a customer, Many of our customers have taken on a different approach to manufacturing where the single-piece flow, reduced inventory, just-in-time inventory, they're doing partial builds with the components they have and sub-assemblies that they can put together with the hope that as other components show up, they can complete their assemblies. So we're impacted by that as well, which is very hard for us to predict if and when that's going to happen. But I would say, Tia, that we have the demand there. Our customers will take almost all of them, anything we can ship them, and we are working very closely with them to ensure we're aligned in shipping the products that they need so they can ultimately get their product out the door. But I think those challenges are still ahead of us here, too. They're not going away.

Makes sense. And I guess if I could ask one more in sort of focus on this same subject, but, you know, I'm curious how you're viewing, you know, your own competitive positioning with everything going on. I mean, lots of talks about, you know, whether it's reshoring or secondary sourcing for supply chains. And, I mean, do you think that this is maybe an event that can drive more business to a company like Allied Motion, given all your capabilities?

Well, it's happening. I mean, we're getting, you know, we are receiving inquiries about, you know, for shipping products that their current suppliers are having difficulty meeting. And again, it depends on the product. It depends on What the components are, whether it's electronic components or whether magnetic components, whether it's mechanical components. I mean, in many cases, we are taking on some new business and satisfying those demands. And, you know, hopefully we can retain that long term. So we're doing the best we can to satisfy those. In some cases, though, it's, you know, you're locked and loaded with your existing backlog and existing customers. And you may not be able to meet their requirements. their needs, and so, but the challenges are there, the opportunities are there, and we are seeing them, and so hopefully they do convert long-term for some additional business for us. And to add, I think we're well positioned from a manufacturing footprint standpoint, Greg, right, to support the movement towards localization of supply that you see happening globally, right, with our expanded footprint. We have capabilities, as you alluded to, that allow us to support customers at any geographic locale. Yeah, and we'll add even further to that is that we talked about before the pandemic about strengthening our strategic sourcing team, and looking at localization of supply chain. So we were already down that path, and we've talked about that in the past, and we're continuing down that path. We believe, and I think clearly what's happened here is not just supply chain, but logistics channels and delays at ports and so forth. I think there's going to be an increased emphasis on localization, and we had already started down that path, and we're going to continue to accelerate that.

Got it. All right. Thanks for all the call. Best of luck going forward. Thanks, Greg.

Our next question is from Dick Ryan with Colliers. Please proceed with your question.

Thank you. Say, Dick, in the queue you mentioned your China facility had some shutdown due to their power rationing over there. Can you just refresh us the impact that You know, I mean, what China contributes from a revenue standpoint and how significant this issue could be going forward if that rationing continues next year?

Well, there's two things. I mean, we have two plants in China. One came as part of the dynamic controls acquisition that's in Suzhou, and we have the other plant in Changzhou. They do different things, and our plant in Chengzhou was less impacted, I'll say, from a rationing standpoint than our plant in Suzhou. Suzhou is primarily electronics and drives for the rehab market, and those products, well, some of those are delivered directly into the Asian market. Most of those are exported out to Europe and North America. As long as we understand when the rationing is going to occur and it just and they just don't hit you with that last minute i mean and there's work around so what they'll try to do is not necessarily you know they'll shut certain factories down on certain days so you may have to reschedule in order to fulfill demand and i think it's uh but if they come in and they say you're going to be shut down for a week then that has a much bigger impact and Just like the pandemic, I mean, there's not much you can do about it. You just got to work through it. And when the power comes back on, the lights come back on in the facility, you work overtime or whatever it takes to meet the demand. So from a revenue standpoint, I mean, the bulk of our business is in North America and in Europe and a relatively small portion of is shifting to Asia, but as I mentioned under our Suzhou plan, some of that is next for itself. We haven't seen, you know, we'll see a push out. We haven't seen anything that we're concerned about long term. We've dealt with this in the past. This isn't just new. This isn't new. They've had, you know, when they've had the Olympics over there, they would shut down factories. They put you on a schedule and roving schedule to reduce pollution and so forth. and our teams have been pretty effective in managing that. So I think once we understand what the outlook is going to be, we'll plan a way around it, and we'll keep supplying our customers.

Okay, thank you. Say, with the strong order flow, are you getting any sense that some of this might be double ordering, or is it just strength across all your end markets?

Well, if you ask our customers, they'll all tell you they need it. If you ask based on my experience in the business and what I've seen in the cycles, I think there's definitely some double ordering that's going on. How much? It's hard to tell, but, you know, I don't think it's – I mean, it's there. When will we feel the impacts and so forth, and will it adjust over time? I mean, some of that we're seeing already. For example, I mean, think about automotive, and they're unable to get to electronic components, so that demand is just being pushed out into the future. It's not going away. It's just being pushed out. So I think it's there, Dick, to answer your question, and it would be difficult to quantify But, you know, I think we will see it. And not necessarily it will all hit at once. We may see it differently based on different markets and different customers. But, again, we talk to our customers. They need it, and they need it now.

Okay. One last one if I can. On your large auto wins, you know, has anything in the supply chain impacted the outlook or the timing, how that will flow over the next several years? And can you refresh us? How much revenue have you delivered to date and how much is in backlog?

Well, I'd say it definitely has impacted the timing because they're not building as many vehicles. So we're seeing that being shifted out. Again, nothing's changing in the overall demand. It is a timing issue. And so, you know, if they start building more vehicles, they get the electronic components they need to build vehicles, we'll ramp up. And remember, as we talked about going into full rate production, we were talking about $40-plus million per year in revenue coming from there. Currently, the ramp up that we've seen, we've delivered maybe, you know, $5 million to $7 million in revenue so far. But we expect that to continue to increase and move forward, but we have seen some delays.

Okay, great. Thank you, and congratulations on continued strong execution.

Thank you, Dick. Appreciate it.

As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Our next question is from Jerry Sweeney with Roth Capital. Please proceed with your question.

Good morning, Mike and Dick. Thanks for taking my call, and nice quarter.

Morning, Gary.

Thank you. I wanted to talk about acquisitions and maybe from a higher level. I think over time, Allied Motion's gone from maybe components to solutions. I think you're looking at solutions with these recent acquisitions, maybe going to higher technical value-oriented opportunities. I'm curious, is this part of that You even alluded to it, I think, in your comments, but alluded to part of the close margin structure longer term, just getting into some higher value, more technical opportunities as you sort of develop your menu of technologies.

Sure, happy to talk about that. I mean, you're absolutely correct. I mean, as you've looked at the evolution of the company, as we've, you know, previous acquisitions, Component related, we would then take on the challenge internally of leveraging those components to come up with a more complete solution. Well, these two acquisitions take us to another level again. And what's important to understand is fundamental underneath the solutions that are being provided are exactly the same things, the electronics, the controls, the drives, the motors, But now, the software, customer interface, the control solutions, from an automation standpoint, as well as looking at, from Allio, let's say, for example, the stages that they manufacture so they can incorporate products that we make, as well as adding multiple axis of control together, and really sophisticated nano-precision positioning accuracy. Also, we talked about the Hexapod, and just encourage everybody to go look at the websites. That's pretty amazing technology what they have there, and repeatability is critical in those six-axis applications, and they have that. So you kind of consider that really a robotic solution. And as you see the miniaturization, also what you're seeing in genetic applications and so forth and life sciences, it requires this nano precision in order to do the job from an automation standpoint or from an analysis standpoint that they need to do and it requires this level of precision. So we're pulling through our base products. We are now at a higher level when we're looking at ORMEC, they're doing complete System design, very sophisticated system design. Again, multi-axis, many-axis. Their multi-axis controller, high-speed synchronization up to 72-axis. And many of their applications where they can do complete automation systems and build it, install it, write the software, support it long-term. And again, pulling through products that Allied manufactures. And I mentioned the gross margin profile. And we mentioned that we have stated that our goal is to improve gross margins by 100 basis points a year over the next 10 years. And this certainly gets us on target for 2022. And we think that, you know, given, and for an example, we said, you know, 20 million in revenues from these two is what we expect or potentially a little more. And gross margins, you know, at the high end of where we are today in our gross margins and what we've stated the market can achieve. So, really puts us on the path here to meet that one element, but also the system element in getting more and more involved in how all the company's products and strengths and system solutions come together here.

Perfect. That's a lot of great detail. I really appreciate that. Shifting gears, I didn't want to start with an inflation question, but obviously the topic is yours. So obviously there's a lot of levers that deal with inflation, right? I think internally, maybe externally, you can manage some pricing with your customers. You can maybe even pay over time internally, et cetera. And it feels like inflation is going to be here for a while. It could even increase. When you look at your toolbox of levers or however you want to describe it, How much opportunity do you still have left to manage some of these headwinds if they accelerate further or go on longer?

Well, that's such a tough question. I'm turning it over to Mike. Well, certainly the environment has been supportive of adjusting pricing, right? Given the current environment, I think it's so severe that, you know, even customers are more understanding, although that's certainly a challenge. As far as other levers go, right, we always focus on our lean tools, right, our AFT. and certainly we have opportunities that we've talked before about optimizing our manufacturing footprint we we talked about driving costs out of businesses whether that's in the manufacturing sites or whether it's you know through other operational expenses or even at our GMA line, so certainly that's a lever. And again, continuing to progress down that solutions or advanced systems sales channel away from components and continuing to move up the ladder in terms of precision and capabilities here as evidenced by the last two acquisitions. you know, will lead us down that path as well. So, you know, they get tougher the longer it goes. There's no doubt about that. But certainly, I think we are working aggressively, irrespective of the supply chain environment and inflation, to drive those things as our agenda.

Got it. I guess you can even say your previous work and focus and culture is sort of almost preparative for some of this as well. Correct.

And I would suggest that over time, that's even grown stronger, our commitment to that. As we've referenced before, even our investment in our global supply chain group has another lever, if you will, that moves us down the lean path, too.

Got it. Sorry. Go ahead. No, go ahead, Gary. No, I was just saying thank you. That's all. Okay.

Well, what I was going to say is just make sure that we're clear. You know, Allied does make custom or customized components that are really an integral part of our customer systems. And so I think when we talk about components, we're not moving away from components. We're looking at a way where we can leverage those components to a greater extent and also at the same time approaching it from, I'll call it the higher level system solution standpoint. So we are mission critical in a lot of our customer equipment with components that are designed specifically for them to meet their exacting needs. And we will continue down that path, not abandoning that at all. What the solution side does bring to us is if you go back in time and you'd say, okay, Allied was a motor company. Allied still does make a lot of motors and is a motor company. and we would approach the market from a motor standpoint. Now, we have the capabilities to approach the market from the top side as well, from the electronic standpoint, from the control standpoint, from a more complete system standpoint. And if you're looking at automation systems, where instead of our customers having to assemble all the individual components together, we are putting them together, and we are committing to a higher-level solution like nanopositioning. So just to make that clear, and I think it just opens up for us channels, new channels, new opportunities from opening the markets up from whether it's the electronic or control side, motor side, gearing side, whatever. Okay?

Got it. That's very helpful. I do appreciate that. Thank you.

We have reached the end of the question and answer session, and I will now turn the call over to management for closing remarks.

Well, again, thank you, everyone, for attending our shareholder conference call here, and we really appreciate your participation. I think there's exciting times here at Allied. Our team worked extremely hard to get a couple of these acquisitions, which are very strategic to us, and we're looking forward to our new partners coming on board, and we think there's a bright future ahead for Allied and our shareholders. So thanks again. We look forward to talking to you soon. Bye now.

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.