Earnings Call Transcript - ALNT Q1 2020

Operator, Operator

Good day, and welcome to the Allied Motion Technologies First Quarter Fiscal Year 2020 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Operator provided instructions on the question-and-answer procedure. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Deborah Pawlowski. Please go ahead.

Deborah Pawlowski, Investor Relations

Thanks, Daisy, 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 Warzala, our Chairman, President and CEO; and Mike Leach, our Chief Financial Officer. Dick and Mike will discuss actions we have taken to address the COVID-19 pandemic, review our results for the first quarter of 2020, and update you on our current situation. Then, we will open the call for questions. You should have a copy of the financial results that were released yesterday after the market closed. If not, you can find them on our website at alliedmotion.com. On the website as well, you'll find the slides that accompany today's discussion. If you are reviewing those slides, please turn to slide 2 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 in other documents filed by the company with the Securities and Exchange Commission. You can find these documents on our website or at sec.gov. I want to point out that during today's call, we'll discuss some non-GAAP financial 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've provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release and slides. So with that, if you'd turn to slide 3, I'll turn it over to Dick to begin. Dick?

Dick Warzala, Chairman, President & CEO

Thank you, Deborah, and welcome everyone. Before we begin, we would like to thank everyone on this call for your interest and support. I hope that you and those close to you are all safe and healthy. We are truly in unprecedented times. As we began to feel the impact of COVID-19, our global management team quickly prioritized our efforts and all our employees adapted with great agility. Our first and foremost commitment was to the health and safety of our workforce. In fact, very early in March, we implemented restrictions on travel and increased utilization of virtual meetings. In addition, processes were modified to meet social distancing requirements and additional cleaning and sanitizing protocols were implemented as well. We are following local health and public safety regulations, along with the Centers for Disease Control guidelines, and all employees who can work from home are doing so. Our global operations worked closely together to ensure we responded quickly to the rapidly evolving situation. We qualified as an essential supplier because Allied produces products that are used to support critical industries, including Medical, Defense and Agriculture. As a result, all our manufacturing facilities remain operational at this time. We believe our One Allied approach has simplified interaction with customers and enabled seamless continuity for receiving orders and requests for quotes in all regions. We adjusted our staffing levels to align with production volumes to meet both the increased demand for several of our products in the Medical market and the reduced demand overall in our Vehicle markets. To ensure we are prepared in the event of disruptions either from the necessity to temporarily close facilities or lapses in the supply chain, we have built inventory in some facilities to maintain responsive delivery to our customers. I note that we have, fortunately, refinanced our lending agreement and we closed on our acquisition of Dynamic Controls just as the impact of COVID-19 was being realized in the U.S. With more than $20 million in cash at the end of the quarter, our strong cash generation capability and the prudent actions we are taking provide us with confidence that we have the financial flexibility to address the situation while not losing sight of the long term. Looking at slide 4, our first quarter performance was relatively solid as we benefited from the acquisition of Dynamic Controls and the diversity of the markets we serve, as the impact of the pandemic really did not affect us until the last few weeks in March. Excluding unfavorable foreign exchange, 2020 first quarter revenue was comparable to the prior-year period. We are seeing varying impacts on the demand of our products which is closely related to the markets and applications where they are being used. As a result, our Vehicle market has been the hardest hit, our Defense market has been stable, and our Industrial markets were up. While we had an uptick in oil and gas in the quarter, given the current state of that industry we do not expect that to repeat in the near term. In the Medical market, the demand for our products used in ventilators, respiratory equipment and mobile medical carts have been strong, while the elimination of elective surgeries has slowed demand somewhat in other medical applications. Our sales in this market did receive the benefits from the Dynamic Controls acquisition. The strategic rationale behind the acquisition of Dynamic Controls is very compelling as it brings a significant influx of critical engineering resources to Allied, which we expect to leverage across some of our other target markets. We are excited about our future together and on behalf of the entire Allied team, I would like to take this opportunity to welcome all the employees of Dynamic Controls to Allied Motion. The margin profile of Dynamic combined with the further expansion and execution of our business operating system, Allied Systematic Tools or AST, led to a 90 basis point gross margin expansion in the quarter. Let's look at slide 5, and I'll review our priorities for the near term and long term as we navigate these challenging conditions while not losing sight of achieving our long-term goals. For the near term, we are focusing on cash conservation and we are adjusting our variable cost structure to align with market changes, while also maintaining strong discipline over fixed cost. We do expect our second quarter to be impacted by a significant slowdown in some of our markets as a result of the shelter-in-place efforts in the U.S. and Europe. Importantly, we are firmly committed to execute our strategy and retain our critical talent, especially our engineering resources, to ensure the long-term strength and growth of our company. We are also 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 this pandemic will change how we operate in the future, I believe we will come out of this crisis stronger and better than ever as we operate within the guiding principles of our One Allied culture and the focus provided by our long-term strategy. With that, Mike, let me turn it over to you for a more in-depth review of the financials.

Mike Leach, Chief Financial Officer

Thank you, Dick. We provide an overview of our top line on slide 6. As a reminder, our results include about three weeks of operations from Dynamic Controls. Revenue in the first quarter was $92.4 million, but when excluding an FX headwind of $1.4 million, revenue would have been in line with the prior-year period. Organic revenue declined 2.8% in the quarter. As Dick already mentioned, the COVID-19 pandemic started having a negative impact on sales in March, primarily related to a decline in demand in Vehicle markets. However, growth in Industrial and Medical, which included contributions from Dynamic Controls, partially offset those results. Sales to U.S. customers were consistent year-over-year at 53% of total sales, with the balance of sales to customers primarily in Europe, Canada and Asia. Our operations in China were back to full production capacity by early March. Supply chain in China has mostly recovered as well and currently the supply chains in the U.S. and Europe are functioning adequately. Slide 7 shows the change in our revenue mix by market and the growth of each market in the trailing 12 months ended March 31. As we've talked about in the past, growing our Aerospace & Defense and Medical markets are an important element of our strategy to broaden the scope and diversification of the business. Revenues from the recently acquired Dynamic Controls business can be found within Medical. While we've achieved double-digit trailing 12-month growth in most verticals, the drop off in demand within Vehicle due to COVID-19 has reflected in a 2% trailing 12-month sales decline. As depicted on slide 8, our gross margin expanded 90 basis points for the quarter to 30.4%. This increase largely reflects our continued productivity initiatives and improved mix, including the favorable impacts from Dynamic Controls. As we've discussed on previous calls, the supplier ratio issue that impacted us during 2019 had some lingering impact into the beginning of 2020. However, we exhausted the remaining inventory related to this issue in the first quarter. We estimate that the first quarter impact on gross margin to be approximately 30 basis points. As a reminder, we only expect to get back around half of this negative impact given the pricing terms of the new supplier. Moving on to slide 9, operating income for the first quarter was $6.7 million or 7.3% of total sales compared with 7.8% in the prior-year period. The decline in operating margin reflects a 140 basis point increase of operating expenses as a percent of revenue due in part to the incremental expenses related to Dynamic and associated business development cost. We are aligning variable costs with demand. We've instituted a freeze on hiring and wages and are tightly controlling discretionary spending. It is very important to note that we are maintaining key engineering capabilities, which we consider vital to our future success, and a significant number of personnel that joined us from Dynamic are experienced electronics and software engineers. Turning to slide 10, you can see our bottom line results. Net income for the quarter was $4.0 million, or $0.42 per diluted share, compared with $4.5 million, or $0.48 per diluted share in the prior year period. Excluding business development costs, adjusted net income was $4.2 million, or $0.44 per diluted share. The 2020 first quarter effective tax rate was 28% and we anticipate the effective tax rate for fiscal 2020 to range between 27% to 29%. Adjusted EBITDA was $11.4 million and as a percent of sales was 12.4%, roughly in line with last year. We use adjusted EBITDA as an internal metric and believe it is useful in determining our progress on operating performance. Slides 11 and 12 provide an overview of our balance sheet and cash flow. We are being proactive in conserving cash during this downturn, while preserving the talent and infrastructure needed to drive future growth and continue to gain market share. Cash and cash equivalents at quarter-end were $20.4 million, up $7 million from the end of 2019. Total net debt increased $20 million during the quarter, of which Dynamic accounted for approximately $15 million. Debt net of cash was $116 million, or 48.8% net debt to net capitalization. As touched upon on our last quarter's call, we announced in February that we secured a new $225 million senior secured revolving credit facility with an accordion feature, allowing expansion up to $300 million. This refinancing expanded our borrowing capacity nearly 30% and reduces our cost of debt. Additionally, an increase in our leverage coverage ratio of debt to EBITDA by 0.5 times to 3.5 times enhances our flexibility. At the end of the quarter, our bank leverage ratio was just in that 2.65 times. Capital expenditures were $1.7 million for the quarter. We adjusted our previous expectation of fiscal 2020 CapEx from $15 million to $18 million, down to $10 million to $12 million. This new level enables key projects to move forward and defers lower priority activities. First quarter 2020 inventory turns were 4.1 times, in line with the year end 2019 results, as we continue to do a good job balancing our sales pipeline along with tight supply chain. Our DSO was elevated at 52 days due to the timing of collection of receipts and was not due to a deterioration in credit quality. Before I hand it back to Dick, let me reiterate that we've demonstrated that our business is capable of generating significant cash from operations. Given our current cash and available liquidity, as well as actions we are taking to adjust for the changing environment, we believe that we have the financial flexibility to navigate through these uncertain times. With that, I'll now turn the call back over to Dick.

Dick Warzala, Chairman, President & CEO

Thank you, Mike. As depicted on slide 13, orders were nearly $93 million. In absence of unfavorable FX of $1.3 million, orders would have been up over last year. Backlog at quarter end was approximately $133 million. About 85% of our backlog is expected to convert in the next six months and most of the remaining over the next 12 months. As a reminder, just a nominal amount of the $225 million of Vehicle market awards we previously announced are included in our reported backlog numbers. While we have begun shipments at very low levels for the first of the three awards, we believe the COVID-19 pandemic will likely slow down production ramp up for these projects through the remainder of this year. As we started the second quarter, we have seen an increased negative impact on our Vehicle markets, while we expect our Medical markets to experience additional growth due to COVID-19. We are managing our costs and protecting our balance sheet against the current reality of volatility in our markets. Looking ahead, our focus will continue to be on the health and safety of our global employees and supporting our customers' needs. While our visibility is somewhat limited due to the rapidly evolving environment, we've run various scenarios and we will continue to respond in an appropriate manner in the short term. In addition, we strongly believe we are well-positioned as we continue to advance our strategy and we remain focused on achieving our long-term goals and objectives. With that, operator, let's open the line for questions.

Operator, Operator

Thank you. We will now be conducting a question-and-answer session. Operator provided instructions on the question-and-answer procedure. Our first question comes from Greg Palm with Craig-Hallum. Please go ahead.

Greg Palm, Analyst (Craig-Hallum)

Thanks. Good morning. Nice job on the quarter and hope you all are doing okay.

Dick Warzala, Chairman, President & CEO

Thank you, Greg.

Greg Palm, Analyst (Craig-Hallum)

So, I guess, just starting with kind of visibility Dick, can you give us any sense of what you're seeing here in April? You mentioned significant slowdown in certain segments. Can you help define what that really means?

Dick Warzala, Chairman, President & CEO

The slowdown primarily is a result of the shelter-in-place orders and the shutdown of certain manufacturing facilities. Our Vehicle market is very broad-based. Automotive is a small segment of that but it also includes agricultural vehicles, construction vehicles, trucks, buses, and so forth. What we saw in automotive, primarily our automotive business today is in Europe and some in Asia. The European companies were pretty much shut down. In Asia, they started back up, so that business was back up and running. We have seen various degrees of shutdown and companies are now starting to come back online with schedules for beginning of May, mid-May and onward. We expect those businesses will start shipping again. So that was in April probably one of the big impacts, as well as the power sports market which slowed down to a crawl as well. Medical was continuing. We sell motors to the critical pieces of equipment, especially those dealing with the coronavirus: ventilators, respirators, and pumps used for lung cleansing and fluid removal. So that market is going to be strong and we expect it to continue. Regarding Aerospace and Defense, most of our business in there is Defense. We do have some commercial aviation related business but most of it is defense, so we don't expect a huge impact there. Our Industrial markets have one of the areas where we expect to see a slowdown is oil and gas. Until the oil price recovers and CapEx comes online, we do expect that will have an impact on us. Overall, coming out of April, that was one of our major concerns because of the uncertainty and volatility that we were seeing. I think our team did a great job of flexing the workforce, reconfiguring our operations to ensure we had the proper PPE and social distancing requirements being met, and starting up. With all of that inefficiency, our team came through extremely well. Given the severity of what happened, I would say the company is going to be fine.

Greg Palm, Analyst (Craig-Hallum)

That's most important, so good to hear there. It might be too early, but any indications from your customers in robotics and automation applications that you might see accelerated demand coming out of this crisis? Curious if you would think that will be a key theme and maybe just remind us of your positioning in those markets.

Dick Warzala, Chairman, President & CEO

In the surgical robot space, some companies were shut down for a couple of weeks but they quickly came back online and production has resumed where the custom automation is concerned. I think we are going to see quite a bit of that in the future. The demand was stable. I wouldn't say that we saw anything accelerate, but as automation becomes a bigger part of the competitive landscape, we certainly expect to see benefits. That will be more project-based and not necessarily standard product deliveries to certain OEMs. So there is definitely an opportunity there in the future.

Greg Palm, Analyst (Craig-Hallum)

Makes sense. Regarding the supply chain disruptions we've heard about across the world, you've been building out solutions capabilities presumably so your customers can reduce exposure to a supplier. Did that become an even bigger focus going forward? Any thoughts on the broader supply chain and how you might fit in competitively?

Dick Warzala, Chairman, President & CEO

One of our strengths is our global footprint. Our team responded quickly to issues and helped resolve them very quickly, regardless of location. We've minimized supplier disruption; of course there were some factory shutdowns causing delays, but as those came back online our team minimized disruptions. Solutions is a direction the company will continue to pursue. Several new projects and product platforms are based around solutions. It makes it simpler for customers to place an order with one company that includes multiple elements of the solution in the package. We've also been working on localization of the supply chain for years, looking at total cost including long lead times and inventory requirements. If demand is in North America, our preference is to build it in North America; in Europe, build in Europe; in Asia, build in Asia. We're well suited to do that, though you cannot do everything at every facility. We will continue to focus on localization and that should help going forward.

Greg Palm, Analyst (Craig-Hallum)

That makes sense. Last one: maybe for Mike, although Dick you can chime in too. Comfort level in the balance sheet at this point — presumably there will be M&A opportunities that emerge from all of this. How do you rate that versus the focus on deleveraging at this point?

Dick Warzala, Chairman, President & CEO

I'll jump in first and then Mike can take care of the details. As Mike mentioned, we have a strong focus on cash and are considering CapEx timing and important project decisions. We actually improved our cash position at the end of April. That focus will help us move forward. Regarding acquisitions, we are always in the market and working on opportunities, but many things were put on hold while dealing with short-term impacts and understanding what will happen. Slowly, opportunities will come back into focus and we will pursue them if appropriate. I'll let Mike speak more about the balance sheet and financing.

Mike Leach, Chief Financial Officer

To answer your question directly, Greg, we feel good and comfortable regarding our balance sheet, our cash position and our credit facilities. The timing of our refinancing provided extra flexibility in this period and we are opportunistic from a timing perspective. We've always demonstrated fairly strong cash generation. Coming out of Q1, we typically have a working capital build from a seasonality standpoint, and that is reflected in our balance sheet at the end of March. I'll note that 40% to 50% of that build you see in the balance sheet was a result of the Dynamic acquisition. I think the team did a great job of managing working capital in a normally peak period. Lastly, we issued cash management guidelines early in the process covering CapEx prioritization, maintaining and monitoring inventory levels aggressively, managing receivables, being careful with credit, and ensuring we act appropriately within our payables so that we don't become an expanded banking facility for our customers. We feel good about where we are heading into the balance of the year.

Greg Palm, Analyst (Craig-Hallum)

Great. Thanks for all the color and good luck going forward.

Dick Warzala, Chairman, President & CEO

Thank you, Greg.

Operator, Operator

Our next question comes from Gerry Sweeney with ROTH Capital. Please go ahead.

Gerry Sweeney, Analyst (ROTH Capital)

Yeah, good morning, Rick and Mike, thanks for taking my call.

Dick Warzala, Chairman, President & CEO

Good morning, Gerry.

Mike Leach, Chief Financial Officer

Good morning, Gerry.

Gerry Sweeney, Analyst (ROTH Capital)

On the Medical side, obviously lots of talk around respirators and ventilators. Is there any way you could, in a broad-brush fashion, give us an idea how much of your business is toward that market versus more on the robotic side?

Dick Warzala, Chairman, President & CEO

We don't break out applications like ventilators and respirators specifically. We also have a significant pump market and we don't break pumps down by end market — pumps can go into Industrial or Medical. Often we sell to pump manufacturers who then sell into different industries, so we don't always know the final application. We are in ventilators, respirators, dialysis machines, analyzing equipment, and lung cleansing applications for fluid removal. We saw quick increases in demand on applications where we were already designed in. We also received requests from many companies attempting to fulfill ventilator demand, including some less sophisticated designs. We were careful and focused on opportunities where we were already designed in because those offered the best chance to increase our business. Regarding robotics, that was more impacted by a couple weeks shutdown, but production came back online and is moving forward. Also, Dynamic Controls came on board on March 7 and Dynamic is 100% Medical. Dynamic's products include rehabilitation equipment and oxygen regulators, so breathing apparatus, which saw an uptick in demand.

Gerry Sweeney, Analyst (ROTH Capital)

That’s helpful, especially the focus on current customers where you're designed in. On the Vehicle side, I know the larger auto contracts represent a small amount of revenue and backlog for this year. Any chance the rollout gets pushed back a year or two with these shutdowns, or are these projects long enough lead time that you expect them to keep rolling?

Dick Warzala, Chairman, President & CEO

Typically, in startups, companies will want to keep projects moving forward so they can be ready when demand shifts to new products. There will definitely be some delay because factories were shut down. How much is hard to say. The factor will be how quickly OEMs come online and whether demand returns. Automotive is a relatively small portion of our overall Vehicle market — automotive is about 20% or less of Vehicle sales. Vehicle is much broader and includes agricultural, construction, and other segments, so while some areas are impacted, others will keep moving along.

Gerry Sweeney, Analyst (ROTH Capital)

Got it. That’s helpful. I appreciate you taking my call. Thank you.

Dick Warzala, Chairman, President & CEO

Thank you, Gerry.

Operator, Operator

Next question comes from Dick Ryan with Dougherty. Please go ahead.

Dick Ryan, Analyst (Dougherty)

Thank you. So, Dick, when you look at the strong order pattern, have you had to be sensitive on price? Is there any gross margin impact you anticipated with some of this new business coming in?

Dick Warzala, Chairman, President & CEO

There were companies that immediately reached out to their entire supplier base to reduce prices when the pandemic began. Some even asked for retroactive price reductions to January 1, which we believe is unrealistic because prices were already committed and product delivered. Going forward, if costs decline due to oil or decreased demand, customers may expect price reductions and we would respond appropriately, but our focus has been on meeting and satisfying demand. Our markets are always cost sensitive and we continually work on ways to reduce overall cost, not just material cost. So yes, we expect to face pricing pressure, and we'll respond realistically.

Dick Ryan, Analyst (Dougherty)

Okay. Then on new growth initiatives and new platforms, can you give us a sense which markets you might roll out initially and what those applications might be?

Dick Warzala, Chairman, President & CEO

Dynamic Controls is exciting because they sell electronic controls to the mobility and rehabilitation markets. Bringing Dynamic's electronics and software capabilities together with Allied's electromechanical platforms creates opportunities. We're already seeing demand for system solutions, which we can deliver as a single supplier. Material handling is another area of focus, and we've been working on solutions for multiple years that we are excited about. The increase in electronics capabilities that we built organically, combined with Dynamic's resources, positions us strongly to offer system-oriented solutions for automation, material handling, and rehabilitation markets, and helps our Industrial markets as well. On the Medical side, we have continued work on integrating gearing and mechanical solutions with motor platforms. Overall, this is an acceleration of strategic opportunities and platform development to meet emerging market needs.

Dick Ryan, Analyst (Dougherty)

So, virtually everyone in your end markets has a variety of puts and takes. As you stress test the near term, can you give us a sense of your assumptions? Are you assuming sub-10% year-over-year impacts or something greater? Some sense of your near-term assumptions would be helpful.

Dick Warzala, Chairman, President & CEO

We've run sensitivity analyses across various scenarios and it is very market-specific and submarket-specific. We can't use April alone as guidance for the next months because April reflected the initial shock. Over the next two to three weeks we expect more clarity as factories and companies return to business and provide demand visibility. For example, oil and gas remaining depressed will impact our sales in that market. Power sports slowed dramatically but we see encouraging signs of recovery. Automotive factories are going back into production. I would hesitate to equate April to expectations for May and June; I think it will be better than April. We finished April and from a financial standpoint we were pleased with how the company performed.

Dick Ryan, Analyst (Dougherty)

Okay, great. Thank you and congratulations.

Dick Warzala, Chairman, President & CEO

Thank you, Dick.

Operator, Operator

Next question comes from Jeff Geygan with Global Value Investment Corp. Please go ahead.

Jeff Geygan, Analyst (Global Value Investment Corp.)

Hey, good morning, gentlemen. Thank you for taking my questions.

Dick Warzala, Chairman, President & CEO

Hi Jeff.

Mike Leach, Chief Financial Officer

Hi Jeff.

Jeff Geygan, Analyst (Global Value Investment Corp.)

Can you please share your observations about your Chinese production in light of COVID-19 as well as the tariffs issues from last year?

Dick Warzala, Chairman, President & CEO

Regarding our Chinese operations, we acquired a second China operation with Dynamic Controls. Our existing operation supported the rest of the company strongly, including sourcing protective equipment and addressing component issues. They implemented procedures we emulated across our operations which helped protect our workforce. They came back up to speed quickly and are running at full production rates now, including our Suzhou operation from Dynamic. On tariffs, they absolutely had impacts on us and our customers and some impacts continue. We've applied for exemptions in some cases and have been approved in some but not in others. We must pay close attention and make business decisions on how to operate given the potential for tariffs to persist or worsen. That also supports our localization strategy, which makes operating sense and helps protect us and our customers going forward.

Jeff Geygan, Analyst (Global Value Investment Corp.)

Specific to the COVID-19 slowdown and using China as a proxy since they loosened up in early March, how does your experience there impact your thinking for other geographies you operate in?

Dick Warzala, Chairman, President & CEO

We implemented a taskforce that met every morning to engage with operations around the world. We still meet frequently and get reports on local facilities, regulations, and any cases. We have nearly 2,000 employees and had three confirmed cases, all in Europe, which did not impact operations and were isolated. We implemented temperature checks early, hand sanitizing, social distancing, and mask use. In some cases employees were stopped from coming to work due to temperature and fortunately they did not end up having COVID-19. We have operations in Sweden, the Netherlands, the U.K., New Zealand, Portugal, Germany, and China, and we receive frequent input on how they are coming back online and handling the situation locally. Both of our China facilities are over 300 miles from Wuhan and had no reported confirmed cases; the entire workforce came back within a couple of weeks and was back up and running. We used split shifts and controlled entry which was inefficient but effective, and we've tailored procedures to become more efficient as we move forward. Where business dried up we adjusted accordingly. We have protected our engineering and technical resources — that is core to our strategy. Once we had control over the situation, we refocused on growth opportunities. I can't say enough about our team’s response and I believe the future is bright.

Operator, Operator

Next question comes from Brett Kearney with Gabelli Funds. Please go ahead.

Brett Kearney, Analyst (Gabelli Funds)

Hi, guys. Good morning. Thanks for taking my question.

Dick Warzala, Chairman, President & CEO

Good morning, Brett.

Mike Leach, Chief Financial Officer

Good morning, Brett.

Brett Kearney, Analyst (Gabelli Funds)

With all the work you've done the last couple years on the supply chain and the One Allied approach, are you seeing anything within the competitive set where others who weren't as well prepared allowed you incremental market gain opportunities in any of your markets or applications due to your ability to maintain continuity of supply and operations throughout this crisis?

Dick Warzala, Chairman, President & CEO

Our One Allied approach enabled teams to help each other when there were shortages of electronic or mechanical components and to leverage internal production capabilities to satisfy demand. In the medical area with ventilators and respirators, several companies rushed to bring products to market and we received requests from companies concerned about their supply. While many customers are single-sourced, in emergency situations sourcing changes can occur and we were able to respond in some cases. I wouldn't say we took broad market share in the short term, but we are now in front of some companies we weren't before and they are testing and evaluating our products or solutions. Whether we won short-term business or not, we are encouraged about possible long-term opportunities.

Brett Kearney, Analyst (Gabelli Funds)

Terrific. Thank you guys, and I hope you and the entire Allied team stay safe and healthy.

Dick Warzala, Chairman, President & CEO

Thank you.

Mike Leach, Chief Financial Officer

Thank you.

Operator, Operator

There are no further questions. I would like to turn the call over to Dick for closing comments.

Dick Warzala, Chairman, President & CEO

Thanks everyone for joining us on today's call and for your interest in Allied Motion. As always, please feel free to reach out to us at any time and we look forward to talking with all of you again after our second quarter results. Thank you for your participation. Stay safe and have a great day. Madam, conclude the call.

Operator, Operator

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