Earnings call transcript: Allient Inc. beats Q2 2025 expectations, stock surges

Allient Inc. (ALNT) reported strong financial results for Q2 2025, surpassing analysts’ expectations with an earnings per share (EPS) of $0.57 against a forecast of $0.48. Revenue reached $139.6 million, exceeding the projected $132.1 million. Following the announcement, Allient’s stock climbed 17.38% in premarket trading, reflecting investor confidence in the company’s performance and future prospects. According to InvestingPro data, the stock is currently trading above its Fair Value, following an impressive 68.92% return over the past year. The company maintains a solid financial foundation with liquid assets exceeding short-term obligations.

Key Takeaways

• Allient reported an 18.75% EPS surprise, significantly beating forecasts.
• Revenue grew by 3% year-over-year and 5% sequentially.
• The company achieved a record gross margin of 33.2%.
• Operating cash flow reached a record $24.5 million, a 76% sequential increase.
• Stock price surged 17.38% in premarket trading to $47.08.

Company Performance

Allient Inc. demonstrated robust performance in Q2 2025, with significant improvements in key financial metrics. The company continues to capitalize on growth opportunities in aerospace, defense, and industrial markets. Despite a challenging external environment, Allient’s strategic focus on electrification and automation has positioned it well against competitors.

Financial Highlights

• Revenue: $139.6 million (3% YoY increase, 5% sequential increase)
• Earnings per share: $0.57 (exceeding forecast by 18.75%)
• Gross margin: 33.2% (up 330 basis points YoY)
• Net income: $5.6 million ($0.34 per diluted share)
• Adjusted net income: $9.5 million ($0.57 per diluted share)
• Operating cash flow: $24.5 million (76% sequential increase)

Earnings vs. Forecast

Allient’s EPS of $0.57 outperformed the forecast of $0.48, representing an 18.75% surprise. Revenue also exceeded expectations, coming in at $139.6 million compared to the projected $132.1 million, marking a 5.66% surprise. This performance underscores the company’s effective cost management and strategic initiatives.

Market Reaction

Following the earnings release, Allient’s stock surged 17.38% in premarket trading, reaching $47.08. This movement reflects positive investor sentiment and confidence in the company’s growth trajectory. The stock’s performance sits near its 52-week high of $48.22, indicating strong market support.

Outlook & Guidance

Looking ahead, Allient expects Q3 sales to be sequentially lower due to a pull-forward in Q2. The company remains optimistic about long-term growth, driven by trends in electrification and automation. Allient is also exploring strategic mergers and acquisitions to bolster its market position. InvestingPro data supports this optimistic outlook, with analysts forecasting continued profitability and net income growth this year. The company’s 5-year revenue CAGR stands at 7%, demonstrating consistent historical growth.

Executive Commentary

"We continue to build momentum in the second quarter, delivering record gross margin, strong profitability, and exceptional cash generation," stated CEO Dick Rozella. He emphasized the operational foundation’s effectiveness in a dynamic environment and expressed confidence in the company’s market recovery and growth potential.

Risks and Challenges

• Supply chain constraints, particularly in rare earth materials, could impact production.
• Market saturation in certain sectors may limit growth opportunities.
• Macroeconomic pressures, including inflation and interest rates, could affect consumer spending.
• Regulatory changes in key markets may pose compliance challenges.
• Competition from emerging technologies could impact market share.

Q&A

During the earnings call, analysts inquired about the company’s rare earth magnet supply, to which Allient expressed cautious optimism. Questions also focused on demand for data center power solutions and the company’s capacity in the munitions sector, both of which were addressed positively, highlighting early signs of recovery in industrial automation.

Full transcript - Allient Inc (ALNT) Q2 2025:

Conference Operator: Good morning, and welcome to the Alliant Inc. Second Quarter Fiscal Year twenty twenty five Financial Results Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Craig Mihalik, Investor Relations.

Please go ahead.

Craig Mihalik, Investor Relations, Alliant Inc.: Yes, thank you, and good morning, everyone. We certainly appreciate your time today as well as your interest in Elliott. Joining me today are Dick Rozella, our Chairman, President and CEO and Jim Michaud, our Chief Financial Officer. Dick and Jim will walk through our second quarter twenty twenty five results, provide a strategic update and share our outlook. We’ll then open up the call for Q and A.

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 alliumt.com, along with the slides that accompany today’s discussion. If you’re reviewing those slides, please turn to Slide two for the Safe Harbor statement. As you are aware, we may make forward looking statements on this call during the formal discussion as well as during the Q and 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 sec.gov. I want to point out as well that during today’s call, we will discuss some 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 release as well as the slides.

So with that, please turn to Slide three, and I’ll turn it over to Dick to begin. Dick?

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Thank you, Craig, and welcome, everyone. We continue to build momentum in the second quarter, delivering record gross margin, strong profitability and exceptional cash generation. This performance reflects the consistent execution of our operational priorities and the alignment we are seeing across our markets, organization and strategic roadmap. Revenue increased 5% sequentially and 3% year over year, supported by solid demand in data center infrastructure, defense and select high value medical applications. While powersports within the vehicle market remained under pressure, we did see healthy sequential growth from that vertical.

It is worth noting that approximately 3,000,000 to $4,000,000 of revenue was pulled into the second quarter as customers accelerated shipments due to concerns around supply constraints and heavy rare earth materials. Gross margin reached a record 33.2, up 100 basis points sequentially and three thirty basis points from a year ago, driven by a favorable mix, higher volumes and continued improvement in operating discipline. This translated into meaningful EBITDA growth and a significant increase in profitability with net income up 58% from Q1 and nearly fivefold year over year. We also generated $24,500,000 in operating cash during the quarter, another record, which enabled us to further reduce debt and strengthen our balance sheet. Our Simplify to Accelerate Now program remains central to our performance, driving efficiency, aligning with evolving customer needs and enhancing responsiveness across our global operations.

The operational foundation we have built is delivering results even in a dynamic external environment, including tariff and material supply challenges, particularly in heavy rare earths where we are actively managing constraints. The initiatives we put in place are tracking well, both in terms of cost savings and operational agility. For example, our Dothan restructuring launched as a cornerstone of the 2025 effort is on track and expected to play a meaningful role in achieving the 6,000,000 to $7,000,000 in targeted annualized savings this year. Looking ahead, we remain focused on building on this momentum, executing with discipline, scaling the benefits of our transformation initiatives and advancing toward our long term financial and strategic objectives. With that, let me turn it over to Jim for a more in-depth review of the financials.

Jim Michaud, Chief Financial Officer, Alliant Inc.: Thank you, Dick, and good morning, everyone. Let’s begin with Slide five. Revenue for the second quarter was $139,600,000 a 3% increase year over year and up 5% sequentially. This growth was driven by continued strength in our aerospace and defense programs, industrial markets, especially HVAC and data center infrastructure and select medical applications. Revenue growth also benefited from a favorable foreign exchange impact of $2,400,000 Sales to U.

S. Customers accounted for 55% of total revenue, in line with last year. The geographic and end market diversification of our portfolio remains a key strength. Looking at our market performance, aerospace and defense grew 13%, reflecting program timing and strong execution. We continue to see a healthy pipeline of opportunities in the defense sector and believe this market will remain a solid contributor to growth as we move forward.

Medical was up 4% led by solid demand for surgical instruments. The industrial market increased 3%, driven by continued strength for HVAC and data center market applications where our power quality solutions are needed. We are also encouraged by early signs of recovery in industrial automation, where demand has been challenged over the past year given the inventory destocking. We are beginning to see more consistent activity and ordering trends. Vehicle revenue was down 7% due to ongoing softness in powersports, although we did see sequential sales improvement in the vehicle market.

Now turning to slide six for the composition of our revenue over the trailing twelve months, along with the key catalysts driving these changes. We have seen a meaningful shift in mix with growth in higher value industrial and aerospace defense solutions helping to offset ongoing pressure in the vehicle market. This evolution reflects not only external market dynamics, such as softness in recreational spend and volatility in automation, but also our deliberate effort to focus on more resilient margin accretive applications. The industrial sector is our largest market and reflects similar impacts as the recent quarter. Aerospace and defense continues to be a growth driver.

Meanwhile, our vehicle exposure has been intentionally refined. While near term demand in powersports remains soft, our proactive repositioning away from lower margin programs is helping to protect profitability. Overall, our revenue mix today is more diversified, more balanced, and better aligned with where we see long term opportunity, and that puts us in a strong position to manage near term headwinds while driving sustained performance. On slide seven, we are pleased to report a record gross margin of 33.2%, up three thirty basis points from last year and 100 basis points sequentially. This improvement marks our fourth consecutive quarter of expansion.

Key drivers included favorable mix, higher volumes, and ongoing implementation of lean manufacturing disciplines, as well as our Simplify to Accelerate Now program. Slide eight highlights our operating leverage. Operating income more than doubled to 11,700,000 with operating margin rising four eighty basis points year over year to 8.4% and improving 180 basis points sequentially. SG

Dick Rozella, Chairman, President and CEO, Alliant Inc.: and

Jim Michaud, Chief Financial Officer, Alliant Inc.: A was 14.7% of sales, down 60 basis points from last year, demonstrating cost discipline despite inflationary and incentive based pressures. Restructuring and business realignment costs were $1,100,000 in the quarter, supporting future margin improvement. Turning to slide nine. Net income increased to $5,600,000 or $0.34 per diluted share. On an adjusted basis, net income was $9,500,000 or $0.57 per diluted share, up from $0.46 per share in Q1 and $0.29 per share in the prior year.

Our effective tax rate for Q2 was 23.1%, as we continue to expect our full rate to land between 2123%. As for interest expense, we did see an increase despite lower debt levels. As we discussed last quarter, this was largely due to the expiration of two favorable interest rate swaps late last year, which were replaced at higher prevailing rates. While still competitive in today’s market, they are not as favorable as the prior arrangements. Additionally, our amended credit facility carries a modestly higher spread contributing to the increase.

That said, our overall interest burden remains manageable, and our strong cash flow is enabling continuing deleveraging. Adjusted EBITDA increased meaningful to $20,100,000 or 14.4% of revenue, driving strong conversion on higher volumes and a more favorable mix. This represents margin expansion of four twenty basis points year over year and 120 basis points sequentially. Turning to slide 10, we delivered record operating cash flow of $24,500,000 in the quarter, up 76% sequentially and nearly three times the level generated in the same period last year. On a year to date basis, operating cash flow now stands at 38,400,000 more than double what we achieved in the 2024.

This strong performance reflects both profit growth and disciplined working capital execution. Our inventory turns improved to 3.1 times, up from 2.7 at the end of the year. This was driven by tighter demand alignment, better planning and continued progress under our Simplify to Accelerate Now initiative. At the same time, our days sales outstanding improved, signaling stronger collections and more efficient conversion of sales into cash. We used a portion of our cash to reduce debt by $20,000,000 in the quarter, bringing us to the balance sheet discussion on slide 11.

We ended Q2 with nearly $50,000,000 in cash and lowered our net debt by $35,800,000 year to date, bringing our leverage ratio down to 2.3 times compared with three at the end of last year. Our bank defined leverage ratio, which excludes certain items like foreign cash, was 2.9 times, well within covenant levels. Capital expenditures were $3,200,000 through the first half of the year. We have refined our full year 2025 capital expenditures outlook to a range of 8,000,000 to $10,000,000 compared with the prior estimate of 10,000,000 to 12,000,000 Overall, we are executing well across all three of our financial priorities for 2025, improving inventory turns and working capital, maintaining cost discipline, and reducing debt. These efforts position us well to continue expanding profitability and create financial flexibility for strategic execution.

With that, if you advance to Slide 12, I will now turn the call back over to Dick.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Thank you, Jim. While our book to bill ratio was modestly below one at 0.97, Demand trends remain steady in key sectors like industrial, where our power quality solutions continue to perform well and in aerospace and defense, where we’re seeing continued traction with both legacy and new programs. Backlog ended the quarter at $236,600,000 down slightly from Q1 and prior year levels as customers continue to manage through inventory normalization. The majority of our backlog is still expected to convert within three to nine months, which is consistent with historical patterns. Importantly, we are seeing signs that the destocking cycle is largely behind us, especially in the Industrial Automation end markets.

Order activity is becoming more consistent and quoting volumes are improving in several key verticals, which gives us confidence heading into the second half. That said, we do expect third quarter sales to be sequentially lower due to the 3,000,000 to $4,000,000 in revenue that was pulled into Q2. While Europe is showing signs of stabilization, the region has not fully recovered and Q3 is typically a seasonally weaker period in Europe. As we look ahead, our strategy remains unchanged to drive sustainable, profitable growth while delivering lasting value to our customers, employees and shareholders. We continue to align the business around margin accretive technology forward solutions that meet the evolving needs of our customers in motion control and power.

The benefits of our Simplify to Accelerate Now program are clearly reflected in our performance, through margin expansion, operating leverage, improved working capital and stronger cash flow. We remain proactive in managing external risks, including tariffs and rare earth supply dynamics. Our mitigation strategies are proving effective and we are confident in our ability to protect both supply continuity and profitability. More broadly, we are encouraged by constructive signs across our served markets, supported by long term trends in electrification, automation, energy efficiency and precision control. This includes seeing early signs of recover in industrial automation and steady momentum in A and D.

The operational foundation we have built, the strength of our balance sheet and the momentum behind our core initiatives positions us well to execute through the second half and to drive long term value well beyond. With that, operator, let’s open the line for questions.

Conference Operator: Certainly. Will now begin the question and answer session. Today’s first question comes from Greg Palm with Craig Hallum Capital Group. Please go ahead.

Greg Palm, Analyst, Craig Hallum Capital Group: Hey, good morning. Thanks for taking the questions and congrats on the results.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Thank you, Craig. Good morning to you.

Greg Palm, Analyst, Craig Hallum Capital Group: So I just want to maybe understand, again, kind of what you’re seeing out there. So it sounds like you’re feeling good that the destocking is in the rearview mirror. You’re starting to maybe see some green shoots in industrial. Andy remains strong. Anything else you want to maybe call out or highlight?

Dick Rozella, Chairman, President and CEO, Alliant Inc.: No. I think you’ve hit the highlights.

Greg Palm, Analyst, Craig Hallum Capital Group: A and D specifically, what maybe remind us, number one, kind of what your major exposure areas are and just in terms of kind of visibility to the remainder of the year and even next, where are we at? How strong is the demand?

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Sure. Well, A and D certainly in some of the applications that we work on, we do get some good visibility, long term visibility and we work on longer term contracts. And we continue to do that. So we are seeing some very positive results. We’ve made some significant improvements in our operating capabilities.

Some of the restructuring we’ve talked about here that’s underway that solidifies operations and gives us and provides greater strength within certain facilities. I think that’s playing out well. We’re meeting with key customers on a regular basis. And I think from a legacy business standpoint and some of the applications we’re on, we do see that there is some opportunity to increase volumes and to hopefully expand margins as we’ve consolidated the operations. Some of the new applications with government programs or military programs, there’s usually risk and there’s no guarantee that those programs come to fruition.

We have seen a few cancellations. We’ve seen a few programs move to the right. We’re seeing other programs moving to the left, meaning accelerating. So it’s a mixed bag right now. We feel there’s a transition going on in terms of the way warfare is going to be fought and the types of vehicles or devices that are gonna be needed for that.

And I do believe that our team is well positioned to capitalize on it as we move forward. So there’ll be some minor bumps along the way, but we feel we’re on track and we’re in a good position to capitalize on those as they move forward.

Greg Palm, Analyst, Craig Hallum Capital Group: Okay, great. And then maybe lastly on the rare earth magnets, which I know we talked about a lot last quarter. I mean, a relative basis, given what’s happened in the last month, are you feeling better, worse, the same? What’s the risk profile there?

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Yes. Our team has worked extremely hard to stay on top of it and engage all of our operations. And I think we have a pretty good outlook what we feel is going to happen. We’ve seen some improvements. Although I just we have to be very cautious here and say that this is most of the materials that we’re talking about are coming out of China.

And there’s always a risk that things can change in the short term. But we’re starting to see some things loosen up, some of the licenses being approved. We still have some exposure. We talked before about the exposure. We see potentially for the remainder of the year, there’s somewhere between 1,000,003 in shipments that could be impacted by it.

But I would also say to you, because of that, I mentioned that we had an accelerated some accelerated shipments or pull ins into Q2. We believe that that was a reflection of the concern on the heavy rare earth and that our customers wanted to get some supply on hand to make sure that they were protected. So those were pull aheads. And as it was mentioned that that could have an impact on our third quarter shipments. I also would state that there’s no we don’t have enough visibility.

We don’t really know what all of our customers’ are. So while we’re saying there could be an impact, we’re also realizing that they could also pull ahead again. And as long as we had materials to supply that. And so we emphasize that Q2 was a little higher than what we would have expected based upon the pull aheads and that Q3 could be impacted because of that. But I would also say, Steve, that we are not 100% sure how our customers are going to react and what they’re going to do going forward here, if that’s just going to be inventory, they’re going to hold on hand and just continue the supply on a normalized basis with some safety stock in their possession.

So those are things that we’re seeing and it’s caused some of that. And but I think we are encouraged that there are some positive signs ahead. Things are loosening up and starting to get to a more normal state.

Greg Palm, Analyst, Craig Hallum Capital Group: Okay. Thanks for the color. Best of luck.

Ted Jackson, Analyst, Northland Securities: Thanks.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Thank you, Greg.

Conference Operator: Thank you. The next question is from Ted Jackson with Northland Securities. Please go ahead.

Ted Jackson, Analyst, Northland Securities: Hey, good morning and congratulations on a very nice quarter.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Good morning, Ted.

Oren Hirschman, Analyst, AIGH Investment Partners: Thank you.

Ted Jackson, Analyst, Northland Securities: I’ve got a few questions. Going back into the pull forward of revenue, just out of curiosity, within your reported segments, where was most of that pull forward coming from? Segments like industrial, medical, vehicle, etcetera.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Yeah, it’s two areas that we saw in medical. And what I’ll it’s related around the types of materials that are typically used in the high performance solution. So when we talk about heavy rare earth, that usually means higher performance solutions and higher performance comes from, let’s say, we look at from a motor perspective, smaller size but higher energy magnets to produce more power. So it’s either size constraints that are causing the need to use these higher performance or it’s really truly high performance that the only way to get there is from the use of this type of magnetic material. So I would tell you medical, some high end industrial, and some defense.

Also what I would like to state, and I stated this before, Ted, but just allow me to repeat this. Our company has taken an approach more than ten years ago. As I said before, we go through these cycles. It seems like every seven to eight years where magnet prices are under pressure and they get increased 300 to 400% and you have to work with your customers to get enough material supply their demand and pass along surcharges based upon those prices. In this case, we were challenged by the fact that we weren’t even going to be allowed to receive the material.

So that became a little bit more stressful for us. Because of this, what’s occurred in the past, our company has been very proactive in designing products where possible that don’t contain heavy rare earth. And we will continue to do so into the future to try to eliminate this risk as much as we possibly can off into the future. But we have already and had been for years taking actions to do that. And we have been successful.

Ted Jackson, Analyst, Northland Securities: Well, that would be great and then the fact of the matter is as these barriers to trade come in place, it’s driving the development of the domestic market, which over the longer term would probably be quite good for you. We’ll see how it plays out over the next decade or so. On the magnet supply, I mean, I know as all this came in place that you guys were on top of it and smart and did bring in some heavy earth, you know, high end product, you know, into inventory to be in front of it. So when you look at where you are with that, at what point would it become an issue if, God forbid, the Chinese just stop things again? I mean, do you have enough supply to get you through the remainder of this year?

I mean, do you have supply that would take you into ’26? And I’m not saying that you’re gonna run out of it. I’m just saying just kind of understanding, like, what level of safety stock you put in place in LA.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Well, varies. There’s multiple ways that we would be dealing with that. I’m going to let Jim talk a little bit about some of the things that we’ve done on the supply chain side and the actions that we’ve taken to ensure that we have material. But I say it varies because if in fact you have noticed that you’re just not going to receive it. And for example, the Chinese will not ship magnets or heavy rare earth materials to The US for defense applications.

US doesn’t want them and China won’t ship them. So that’s been out there for a while. And it’s opened up opportunities domestically. But what that will do is drive pricing and cost will go up. So the government has taken some actions to mitigate it in the future.

And we are on board and in the loop with what’s happening here. So it’s hard to give you a specific time frame because it’ll vary based upon products, the amount of safety stock we have for each, what the supply chain is looking like, our resourcing, and also identifying some redesign opportunities that worst comes to worst. If you can’t get product, then what are the alternatives from a design perspective that we can accelerate through and get approval from customers? Typically, once our products get designed into these types of applications, the redesign and approval process is a very long period of time. Just like we saw during COVID though, some of those roadblocks are removed because that you had no choice but to remove them and to accelerate the process itself.

So if that occurs, then we may be into that. Our engineering team, rather than focusing on new opportunities and developing opportunities, may be redeployed to work on sustaining and corrective actions. But like I said, we’re in the loop on everything that’s occurring. There are some good developments that are going to take time to come online. And maybe Jim, you want to talk about some of those a bit.

Jim Michaud, Chief Financial Officer, Alliant Inc.: Yeah, mean, think you saw an example of that in yesterday’s news where Apple announced that they’re making an investment in manufacturing here in The US and part of it had to do with the fact that the government is investing in putting in infrastructure related to our own exploration in rare earth materials and so forth. So I think we’re very encouraged by that. We’ve been in discussions with a lot of suppliers and as many are understanding who’s going to be a player, who’s going to be able to produce and when. So I think we’re well in tune with that. And I’m actually very encouraged that some of those opportunities are going to come online sooner than I think any of us expected.

And hopefully we’ll participate in that.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: You may want to mention you went to Washington and talked to the government officials.

Jim Michaud, Chief Financial Officer, Alliant Inc.: Yeah, yeah, I did have an opportunity to go to the Department of Commerce and met with several of the individuals involved in trade talks and so forth, and very informative. And as I mentioned, they are obviously helping many companies not dissimilar to ours in identifying opportunities to look at alternate sources and where those are and the like. So there’s a great collaboration I would tell you between companies and the Department of Commerce to ensure that companies like ours are being supported and we understand what the alternatives are.

Ted Jackson, Analyst, Northland Securities: Great, have two more questions. A quick one, hopefully in terms of an answer, but with all the scuttlebutt and momentum around kind of unmanned vehicles and drones and stuff. Just kind of curious what kind of exposure you have, if any, to the market and how much of that is based on commercial versus industrial? Just maybe there’s nothing even there, but it’s just it’s a hot topic right now. I’m just kind of curious.

And then I have one more after that.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: I’ll answer it very quickly. It’s a hot topic for us as well.

Ted Jackson, Analyst, Northland Securities: You guys are

Dick Rozella, Chairman, President and CEO, Alliant Inc.: You said short. If you wanted a quick answer, I’ll give you a quick answer. Yeah, we see it as you do. There’s definitely some opportunities and we’re well positioned to capitalize on some of this. And without getting into a lot of detail on it for competitive reasons, I mean, is something that’s on our radar.

Ted Jackson, Analyst, Northland Securities: Okay, I’ll leave it there. Then my last question is, as you all your efficiency stuff is coming to roost, you’re really doing a good job of driving margins, putting that in the business making the business stand up and deliver cash and deliver return to shareholders, you’re de leveraging the business, you’ve gotten your business down to, for lack of a better term, let’s call it targeted leverage ratios. Historically, you’ve always been acquisitive in terms of just building growth through acquisition. As you kind of exiting some of these strategic efforts in terms of realigning of the business, restructuring the business, making the business more efficient, getting debt paid down. What’s going on on the M and A strategy for you?

How active are you in the pipeline? Are you going to turn it back on? That’s my last question.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Yeah, we really from an investigation, from a grooming standpoint, from identifying opportunities for us in the marketplace, we never shut it down entirely. But what we did do is say it is a time period when we will be establishing communications with certain key opportunities for us in the future that we saw it was a really good strategic fit. So we’ve been doing that. And I would say to you that, we are not going to stop. We’ve got some great momentum going in terms of identifying efficiencies and changing the way we do business and that the streamlining will continue.

We just believe it’s a heck of a lot more efficient and it’s better and it’s we can do things faster. That’s stand simplified to accelerate now. It’s worked its way into the deep bowels and roots of the company. It’s not going to change. We’re going keep doing that.

It really is healthy and it aligns very well with our AST initiatives. So our lean toolkit and training and so forth. So I would say to you that, yes, we are getting well positioned that we could execute an acquisition. And we will certainly be very cautious and careful to make sure everything’s lining up properly, that it’s a great strategic fit and provide some continued increased value for what we’re doing. And that the value of our recent acquisitions have been in, as we mentioned, has been in certain technologies and market penetration that we were looking for as well as accretive to our average gross margin.

So anything we do would need to meet those criteria. I would say to you that, we’re looking. We’re paying attention to what’s going on and we’ve identified some opportunities that when the time is right, we’ll be looking to bring them on.

Ted Jackson, Analyst, Northland Securities: All right. Well, again, congratulations the quarter and I’ll step out of line.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Thank you, Ted.

Conference Operator: Thank you. The next question comes from Craig Cosgrove, Private Investor. Please go ahead. Mr. Cosgrove, your line is open.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: So Mr. Cosgrove used to be controller for us in one of our operations. I’m guessing maybe by mistake. He’s followed us very closely and has been a strong supporter since he’s left. So maybe he hit the button by mistake.

Conference Operator: Thank you. We’ll move on to our next question. It comes from Oren Hirschman with AIGH Investment Partners. Please go ahead.

Oren Hirschman, Analyst, AIGH Investment Partners: Hi. Congratulations on the results. Just a couple of random questions.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: In terms of the sorry. In terms of

Oren Hirschman, Analyst, AIGH Investment Partners: the data center business, just one question. Is the is the power conditioning more to protect the servers? Is it protect the the cooling equipment? Is it for both? And then a follow-up on that on the data center side.

You know, I don’t remember exactly the number. I don’t have it in front of me, but maybe you almost doubled year over year. Please correct me if I’m wrong. You know, could the business be up that much this year again? Do you have enough capacity even if there was enough to meet that type of demand?

And then I have one follow-up on that.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Okay. So the first question you’re asking about what the addition of, I think if I understand it correctly, the addition of our equipment, what it does, how it impacts the data center itself. So you talked about cooling. Yes, cooling is one of the things that we’re on applications for cooling. But I’d say more importantly, is about the quality of the power and the efficiency that it brings.

So as these, we’ve talked about this in the past where we have a very high performance and high power solution that we can bring to the marketplace and we do bring to the marketplace. And any improvements in power quality that you can make are very substantial in terms of a return. So two things there.

Oren Hirschman, Analyst, AIGH Investment Partners: The customer does the customer get that? Like is that the customer is just enough to understand that if there’s a 1% improvement in that quality of power, how much that means to them?

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Well, I can’t speak for the customers, but I can directly for all the customers. But I think they certainly do understanding that with the demands for power and the infrastructure that has to go into place and someone that has a more efficient and more, you know, operation absolutely would probably have an edge.

Oren Hirschman, Analyst, AIGH Investment Partners: And part B and C on that question, if I may.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: So you’re talking about the demand and do we have capacity? You know, yes, we’re definitely increasing. And as you know, we don’t break that out as a specific pathway. We do talk about HVAC. And HVAC is definitely growing for us.

And it’s in the industrial, under the industrial sector. The capacity, it’s a demand is continuing to go up and we see it continuing out into the future based upon the forecasted growth of data centers and the needs for our type of equipment. And we will be doing another expansion in our main facility that produces this type of product. We also have been able to leverage the acquisition we made last year in January with its electromagnetic capabilities in Mexico as well as in also in Wisconsin. So I think we were that the synergies that we realized, they were very important and positioned us well to be able to satisfy the demand.

But we are and have already invested and we will continue to invest to increase capacity.

Oren Hirschman, Analyst, AIGH Investment Partners: Okay. Two other questions, if I may, just jumping around. Just in terms of the automation side, you know, there was some clear signs of a bounce back. I think it’s your largest or one of your largest customers had a positive book to bill. Just give us some qualitative talk through on what that means to you on the automation side.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Sure. In the past we gave quite a bit of detail on a specific operating unit and what the impact on our performance was as we went through supply chain crisis and then as it opened up and how it improved our demand and how has it dropped out again as there was an overstocking situation. We do expect that we have turned the corner there and we’re getting to a position of normalization. And that will have a very nice positive effect or impact as we move forward. So it is definitely improving.

And we’re expecting to see the results as we move throughout the year. And all signs are in that direction.

Oren Hirschman, Analyst, AIGH Investment Partners: Did you see some of that already in this past quarter?

Dick Rozella, Chairman, President and CEO, Alliant Inc.: We saw an improvement. So we’ve seen gradual improvement sequentially in Q1 over Q2. So we did see improvement, but we’re continuing to see more improvement as we move ahead to get us to the point of normalization. So yes, a little bit, but we expect more coming forward.

Oren Hirschman, Analyst, AIGH Investment Partners: Okay. My last question, which I think someone else alluded to, just on the munitions side, you know, there’ve been a number of companies that have indicated that they’re capacity constrained. You know, I’ve even heard of one of the majors, one of the majors, know, like Northrop Grumman or Rockville, that type of major offering to pay for capacity expansion for a vendor. And I’ve seen two cases like that recently. I guess my question is, you know, is business, I’m assuming that business is continuing to ramp for you.

Are you capacity constrained there as well?

Dick Rozella, Chairman, President and CEO, Alliant Inc.: No. We mentioned the restructuring that we did to consolidate some operations several years ago, I’d say three, four years ago, we the main operation for munitions, well there’s two main operations for us for munitions applications. And those are being consolidated together. But we decided to increase our size of our facility and to allow us to grow into it. And that has put us in a really good position to answer your question.

We are not capacity constrained.

Oren Hirschman, Analyst, AIGH Investment Partners: Okay. Are you seeing the same as other vendors in terms of the desire from your What we’ve seen customers to

Dick Rozella, Chairman, President and CEO, Alliant Inc.: what we’ve seen, there’s certainly in the supply chain side of it, there can be some concern. But we haven’t, we’ve been working on sourcing for a while here. When you go back to when the conflicts broke out and then the initial inquiries on what the projected demand might be. And over time, don’t Orin, I’m not sure that you had invested in us yet, but we had talked about that, that the inquiry level was quite high. But we hadn’t seen any POs from that to increase the capacity.

We now have seen that. We have seen the orders come to fruition, and we now are beginning to ship at higher levels. And so we were prepared. We went out and we did quite a bit of work in advance of this because we were getting quotation requests for some significantly higher volume. So we were preparing our supply base as well as preparing ourselves.

And that is coming to fruition.

Oren Hirschman, Analyst, AIGH Investment Partners: Okay, great. Let’s see. That’s pretty much it. Those are my questions. Thank you so much.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Okay, thank you.

Conference Operator: Thank you. This concludes our question and answer session. I I would now like to turn the call back to management for closing remarks.

Dick Rozella, Chairman, President and CEO, Alliant Inc.: Thank you, everyone, for joining us on today’s call and for your interest in Alliant. As always, please feel free to reach out to us at any time, and we look forward to talking to you all again after our third quarter twenty twenty five results. Have a great day.

Conference Operator: The conference has now concluded. Thank you for your participation. You may now disconnect your lines.

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