Ted Jackson : Kind of just sort of a macro question, maybe around industrial. I mean, Rockwell reported this morning, I haven’t gone through the release stocks down. So clearly, there was some happiness with something that came out of those numbers. And then they clearly, Rockwell, most of the bigger kind of integrators like that, Rockwell and Emerson and such. I wouldn’t say that the last quarters for them were home runs either. I mean we’re definitely in an area, and you’re highlighting it yourself, Dick, that people are — I mean every company I listen to everything I pay attention to, everyone’s cautious with regards to 2024. But if I think about, say, like a Rockwell and Emerson of companies like that, is it fair for me to infer from kind of their commentary that it’s part and the same in terms of kind of what’s impacting their business is headwinds for you as well, and it’s a fair inference that you — I guess what I’m saying is that you’re kind of, for better or for worse, you’re tied to them?
Like how do I think about that in terms of a relationship between those companies like that and Allient?
Richard Warzala : Well, first off, a conscious effort that we made many years ago was to diversify our business. And we think that diversification has served us well so that I’d love to see the day when everything is firing on full cylinders here, and we’re seeing everything growing and expanding in a very positive manner, but that’s not the reality. We always see that there is — while we see certain of our markets that are growing and expanding and exhibiting certain successes and even go back to coma. I mean, our medical markets and some of the instrumentation that we provided, we saw consistency that many other companies didn’t. While you saw others that were really heavily focused on that grow fast, but they dropped just this fast.
So I think we take great pride in our efforts to diversify our business and to minimize the impact of anyone. We’ve set our goal, if we could set a goal here for the four key markets we identified all being 25% each year, we’d be very happy. So that’s 25% each maybe over a long term may occur, but we still have additional investments to make in some of those markets to increase our share. while not necessarily decreasing our top line in the other markets, but growing the business in order to achieve that. So yes, as our major customers feel impacts, I mean, we will certainly feel it as well. But I will say to you that it’s because of our diversification that we feel more confident that we can ride through some of these downturns in any one individual market.
Ted Jackson : I agree with all of that. Sticking on kind of individual market things and just going over to the vehicle market, you had an important customer in that area, and they’re clearly facing their own macro headwinds. They also, though, are seeing — they have had a bunch of new product launches as well and kind of given the give and take that kind of the aggregate market and kind of the sports vehicle market, if you would, is weak, but here’s a new product going out there. How do we think about that vertical as it relates to Allient?
Michael Leach : I think from the standpoint of looking at that particular market, we have to mention that when we talk about sports utility vehicles and so forth, much of that is used in the industrial marketplace or in commercial applications. So there’s the consumer side of it, and then there’s the business side, let’s call it. So I do think, depending on the sentiments that you might see some downturn in consumers, the larger share of that business for us is really driven around the commercial and industrial end uses. So I would tell you that, yes, we don’t see any significant impact there. We see pretty stable year-over-year. And that’s maybe for a couple of reasons, continue to expand our reach into that market, to expand our customer base, as well as the emphasis to focus more on the commercial or industrial product versus the consumer product.
So that’s another one. Of course, we can be impacted by it. We will be impacted by it. We’re not driving the demand in the end market. But is the diversification of our business and the impact that it could have today versus let’s go back 10 years ago, it’s a much smaller percentage of our business today than it was back then. And to answer some part of your question specifically, I mean we have been and continue to be active participants on new product launches with those customers.
Ted Jackson : I got two more for you, and they’re a lot more fun. One is you have this new defense win, and congratulations on that. And I think a lot of investors have wondered if you’re going to see some pickup in activity within aerospace and defense with all the conflicts going on in the world. And just to the extent that you can, I mean, I guess, could you provide a little more color in terms of the application that drove that win? And then are you seeing further pick up strengthening in terms of activity projects within that vertical that could prove to provide some growth or strength as we think about kind of the coming quarters or year?
Richard Warzala : Sure. So first off, we’ll talk about in the coming quarters and year and sit there and say that we mentioned increased quoting and activity. And part of that increased quoting and activity, not just the quantity of those, but the volumes that we’re seeing. That win was in editions, okay? So munitions are being consumed at a pretty high rate, and we are on many of those programs. So we fully expect that this will continue with other programs. I mean they’re being consumed and they need to be replenished. Yes, there were stockpiles, which surprised us is how big the stockpiles have been and been able to reach in with the stockpile, but they do have to be replenished. So from a munition standpoint, we are designed into many applications, and we fully expect that over the coming quarters and year, we’ll see some increased activity in some orders that need to get replenished.
What we are hearing as well is the — what’s perhaps delaying some of those orders is not because of our ability to deliver. We’re faster than other suppliers can be for the end product. So what’s delaying some of this is the inability for the other suppliers of other content to provide their products and the solution. So as that catches up, and we will see. We fully expect to see that the demand will continue to increase and the volumes will increase. And these are long-term programs that we’ve been designing for years. It’s not a matter of if it’s a matter of when. On the other side, let’s call it the other side of the defense business. And some of the trends that are occurring there that are longer term, but we do see some acceleration and we think we’re very well positioned.
We acquired FPH in Canada. Their key core technology is composite lightweighting products and technologies as well as the ability to do application engineering and assembly of electromechanical systems. So the combination of electromechanical systems with lightweighting technologies is especially now driven towards the electrification of the vehicles, and we’ve become a major element of that. We’re well positioned. And we’re seeing some activity there. We’re seeing programs that, quite frankly, we’re moving along at a snail’s pace, which is not unusual for those programs starting to accelerate. So we might see some short-term activity, but longer term, we believe we are very well positioned to capture a decent share of that market. And it’s one of those markets where we’re strongly emphasizing and investing in internally, and we do see some excellent long-term growth there as well.
So we’re uniquely positioned as a company to provide not only the composite lightweighting and structural side of it. This is where we focus and emphasize as well as the electromagnetic and mechanical solutions as well as all the other technologies that Allient could bring to bear. And this is one of the areas where I highlighted at the house of Allient and said, here’s our key technology pillars and motion controls and power. And we talked about the further emphasis of certain verticals and bringing the power of Allient to that market, and that’s one of them. So I would tell you that I would fully expect that we’re going to see a ramp-up in munitions side of the business, and we’re also going to see a slower but very strong growth opportunities into the future here longer term beyond the one year in the electrification of ground-based defense vehicles.