Greetings, and welcome to the Allied Motion Technologies Inc. First Quarter 2019 Financial Results Conference Call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Craig Mychajluk, Investor Relations. Please go ahead.

Yes. Thank you, and good morning, everyone. 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 are going to review our first quarter 2019 results and provide an update on the Company's strategic progress and outlook, after which, we'll open it up for Q&A. You should have a copy of the financial results that we released yesterday after the market close. If not, you can find it on our website at alliedmotion.com. On the website, you'll also find slides that accompany today's discussion. If you're reviewing those slides, please turn to Slide 2 for the safe harbor. 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 provided 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'll 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've provided reconciliations of non-GAAP to comparable GAAP measures in the tables accompanying the earnings release and slides. With that, please turn to Slide 3, and I'll turn it over to Dick to begin. Dick?

Thank you, Craig, and welcome, everyone. We kick off the year on a healthy note as revenue grew 13% organically and 23% overall to a new record level despite FX headwinds that reduced our reported revenue by 3%. Additionally, incoming orders hit a new record at $94 million. Adjusted EBITDA was up 20%, and earnings per share were up 7% year-over-year. Earnings in the quarter were somewhat muted in relation to the revenue increase as we continued to make the necessary investments in internal resources and CapEx to support our strategical growth objectives for the future. There were also a few atypical items that dampened profitability and resulted in our gross margin percent being unchanged. One of the items was an unexpected price increase from a supplier of electronic assemblies that decided to continue -- discontinue certain operation, and consequently, raise pricing on assemblies they produce for us. We expect to reduce this impact later in the year. We gained market share and expanded sales in many of our served markets as well as realizing the benefit from positive secular trends around factory automation and specialized robotics. While there are some market outliers, on average, our served markets in total have historically grown in the GDP-plus range. It is our internal objective to deliver above-market growth, and organic growth rate in the quarter is a testament to solid execution by our team. Our newest acquisition, TCI, performed as expected and resulted in a positive impact on both gross margin and EPS for the quarter. Moving forward, we will be working to maximize TCI's long-standing distributor relationships and to expand our geographic reach by utilizing the global footprint of Allied Motion. Overall, we believe there is significant potential for long-term growth from this acquisition. And last but not least, our One Allied approach continues to gain traction as we work on leveraging our strong technical capabilities by investing in key resources at our global electronics team to further drive integration of solutions for our served markets. While the concerted commitment to focus on key strategic developments and opportunities, we believe the potential to continue growth and expand margins over time has never been better. With that, Mike, let me turn it over to you for a more in-depth review of the financials.

Thank you, Dick. We provide an overview of our top line on Slide 4. As a reminder, our results include the first full quarter of TCI, which we acquired in December 2018. We hit a record level of $94 million despite an FX headwind of $3.1 million. Demand was broad based, and growth in all of our major served markets were seen. As Dick mentioned, our organic growth was nearly 13%, excluding an unfavorable FX impact, and we saw a particularly strong organic growth within A&D and Medical during the quarter. Sales to U.S. customers edged up slightly to 54% of total sales with the balance of sales to customers primarily in Europe. Slide 5 shows the change in our revenue mix by market and the growth of each market for the trailing 12 months ended March 31. Keep in mind that the TCI business is recognized in the industrial and distribution numbers which explains the 44% growth in distribution. Our A&D market has performed very well with 32% TTM growth and reflects higher sales across a number of submarkets, which include defense, commercial aviation and space, also notable was the 24% growth in vehicle, fueled by the rebound and the power sports market, as well as industrial, which continues to benefit from factory automation and a lift from TCI. Slide 6 provides detail on gross margin, which was unchanged at 29.5%. TCI was accretive to our gross margin. Though as Dick mentioned, there were notable unfavorable impact elsewhere in the business which were estimated at approximately 90 basis points. The largest related supplier who is discontinuing operations and subsequently increased their prices for any new orders without notice. We are working on lessening this impact as we develop and negotiate with and qualify other suppliers. At this time, we…

Thank you, Mike. We'll now turn to Slide 10. With continued strong demand in end markets, the first quarter orders grew 16% year-over-year and 10% sequentially to a record $94 million. Absent unfavorable FX, orders would have been about $97 million, up 20% year-over-year. Backlog at quarter end was at a near record level of $131 million, which included about $5.5 million from TCI. As a reminder, TCI is more of a book-to-bill type business and their typical book to ship time is measured in just days and not weeks. About 80% of our backlog is expected to convert in the next 6 months and 95% over the next 12 months. As we have previously discussed, just a nominal amount of the $225 million in the several vehicle market awards we announced previously are included in our reported backlog numbers. Also, as a reminder, we are currently investing in these programs and we expect to begin shipments at very low levels towards the end of this year. We will begin ramping shipments in 2020 to full weight production by the end of 2021, which will then continue for the following 6 to 7 years. Executing our business operating system. Allied Systematic Tools is key to future margin enhancement as we focus on quality, delivery, innovation and cost. While we have a strong AST team and we have enhanced those capabilities over the past year -- this past year, it is also important to note that we will continue to invest in our strategic areas of excellence, especially around electronics and software, as we further build out our integrated solution offerings. While we may -- we remain cautious and flexible around the global economic environment, we have strong confidence in our future as we remain steadfast in the execution of our long-term growth strategy to expand our multi-technology solution opportunities and to further penetrate our target markets. With that, operator, let's open the line for questions.

[Operator Instructions] And our first question comes from the line of Greg Palm with Craig-Hallum.

So I guess starting with the organic growth rate, 13%, I mean, that's really fantastic, in my opinion, in this environment, I mean, even if I assume a few points that were driven by push outs from Q4 to Q1. I'm just not aware of too many other industrial-related companies that are putting up this type of growth in the macro environment. So love a little bit more color. I mean, is it new customers? Is it existing and just being attached to the right ones? Can you help us kind of understand what's going on?

Greg, I think, it's a little bit all of the above. So I think we continue to win new customers along with gaining continued share with existing customers. We've talked about some of the gains we've had in certain markets this past year, and again, I think, it's a little bit of a carryforward to that kind of how we indicated it at the year-end as well.

I would concur with what Mike just said. I mean that's exactly what it is.

And based on the Q1 results, I mean, presumably, that makes the Q4 results, which were a little bit more disappointing, probably gives you more confidence that, that was just sort of a onetime kind of inventory adjustment kind of thing, kind of an anomaly. Is that fair to say?

Yes. I think as we said after the year-end conference call that we gave a little more color at that point because we felt that, that was just a blip. And we expressed our, at least, our thoughts because we're so far down the road here, and with the facts and data we had, that it would bounce right back. And I think it just shows that, it did bounce right back. And I think you are correct. There's certain inventory adjustments and holdbacks that occurred at year-end. That did account for some of the increase in sales that we saw over year-over-year for first quarter. So I think that is correct.

In terms of gross margins, the associated drag from what you call the atypical items, I mean, I guess, should we expect sequential improvement in Q2? It sounded like maybe some improvement started in Q3, but maybe you can kind of walk us through some additional color there.

Sure. I think there will be a little bit of sequential improvements where we talk about the pass-through of tooling and prototypes. While we do encounter that from time to time and do see some fluctuations, that was sizable in Q1 and I don't think it will repeat. And so that nature, again, at least in Q2. The issue we've mentioned relative to pricing from the discontinued production from a supplier, that will take a little bit of time to recover from in a sense that it was a sole source position and replacing that supplier and getting that supplier through a qualification process will take a little bit of time. So I don't think we expect to see a partial recovery from that until probably some time, I think, Q3.

Okay. That sounds like you've got your head wrapped around the near-term impact there. And to be clear, the impact from the tooling and prototype samples that you mentioned, that's related to the previously announced vehicle when that's ramping later this year, or is that something new?

No, that's -- it's predominantly that.

Okay. Shifting gears to TCI. Kind of curious now that you've owned it for another 1.5 months since the last call, I'm curious if you can give us some more commentary on the potential gross strategy there and some of the associated revenue synergies that you're looking at.

Sure. I think nothing much has changed in what we've discussed here in the last 1.5 months other than gaining some additional understanding of the business and some of the market opportunities for us. TCI is -- we acquired it. We are looking at a diversification strategy into some other more stable markets. Oil and gas is our major market for TCI. And I think, as we look at those markets, we also see opportunities that we're -- we can leverage other products within Allied Motion. So we're quite excited about that and we're undertaking a project now as TCI already had it on its radar and was beginning to -- its efforts to work on it that we're also looking at how can we pull along some of the other products that Allied already makes. So I think we're very encouraged that there will be additional synergies to be realized. And we'll be active and have the opportunity to become competitive in certain areas where we hadn't been in the past. And that's using the footprint of Allied. As we look at the market, what's interesting in the market from a market perspective is that, TCI is primarily North America and both the European and Asian markets are bigger than the North American market for their products. So it just kind of gives you the -- it puts it in perspective what the potential opportunity is here. And we think it's substantial. We will be working on further leveraging of capabilities within both companies as we talk about the distribution channel and we talk about our global footprint. All the things that we can control internally, we will be working on here.

And is there potential to start manufacturing and distributing their product globally at some point this year? Or is that a longer-term opportunity?

I say it's longer term, but we are absolutely already underway and looking at that and getting product designs up to speed and identifying and addressing how we can utilize the footprint to take advantage of that. So it started pretty quickly. But we will not see an impact -- we will see an impact this year, Greg.

Okay. Last one for me on TCI, and then I'll hop back in the queue. I know they've got, call it, outsized exposure to oil and gas so I'm curious what you've seen maybe, end of March, April, on the bounce of crude price. Any sort of difference in the order rates for that business?

I would say to you that it's pretty stable right now. I mean, we -- it's interesting you can definitely see the impact. But when you look at it, first quarter, for example, we did have a slight downtick, but we ticked right back up here. So it's pretty stable right now. And I don't think we can expect much change here as we move forward in the year.

[Operator Instructions] Our next question comes from the line of Dick Ryan with Dougherty & Company. Please proceed with your question.

Say, there's a couple on the supplier issue since they were sole source. Was this just pricing or were volumes from them impacted that may have worked its way down through your ability to deliver to your customers? Or is that a threat over the next quarter or 2?

Well, we will give you a little bit more color on that. So it is a fairly significant impact on us and it came as a surprise. There was no advance warning that there was any indication that they may be considering discontinuing the operation that supplies us. And we're just basically told either pay additional money or you won't get product, and that's not an option. So we are paying additional money and it's impacting our profitability because of that. And of course, we are, as Mike mentioned, working on alternative suppliers. We're well down on the path, but you don't just -- in the markets that we serve, you don't just change suppliers and just start shipping from the new supplier. You do have to go through a qualification process. That's why it's going to be -- it's going to continue for a certain period of time. It's unusual. I mean, in all the years that I've been in business, this is a rare occurrence where something like this happens, but it just indicates that they have no intention or any desire to be serving those markets anymore. That's what we faced.

Are you concerned on volume availability for the near term? And how readily can you bring on a new supplier? Is this something that's more of a custom sort of assembly or there are other options available?

There are several options. This is really -- this is the assembly of the circuit board itself, okay? So we control the components and the supply chain for that, so that's good. What I have to -- as I've mentioned, though, there's still -- if you change a supplier, and even if it's just an assembly, we have to go back through a requalification process. So that's -- it's not a concern. We have other suppliers that we use and we absolutely have already the processes well down the path of being proven so forth, but it still takes qualification at the customer level. So that's really what we're working through right now. And I'd say the -- we have very limited concern. We were -- the alternative supplier is world-class and we're moving forward and we're confident that, as we get into the third quarter, things will be transferred and everything will be fine.

Okay great. So you talked about new customer wins and solution wins in the discussion on orders. Really, where is that occurring, either in the verticals or is it U.S versus European?

Yes. In the verticals, I think, as Mike did mention here is when you're comparing our -- the first quarter versus the prior year. Aerospace & Defense had a nice uptick. And that was -- those were wins that we had in the volume ramping up, okay? And so most of our defense work is done in North America. We classified some other things in Aerospace & Defense, such as commercial aviation and so forth, but really the big win there, the big uptick that occurred for us was in, what we'll call, Aerospace & Defense. There's also -- we did see in Medical, and again, volume increases, new customers coming on board, but volume increases in existing customer base as well. So I think it's a very positive sign. It's -- we talk about how we continue to invest in solutions and -- that's certainly impacting our margins, but we -- our overall operating profit when I'm -- so I'm going to say margins here in this case. But it's -- we see it as absolutely necessary. We have a -- it's a long designed-in wind cycle, but once we get in, it's solid. And we're an integrated solution and it says pretty sticky. So we continue to see and we'll invest as well in platform solutions that we can leverage into many areas. I did mention investments in electronics and software, that's a really big push within the Company. And in the first quarter, we brought in a leader for that group. And we are a -- we're a decentralized electronics group and the management of that is a challenge. And -- but I think we're getting our hands on it and we are going to continue to invest in that area, Dick, because that is really sticky and those -- and that's what helps us come up with unique solutions and really create value for our customers.

Yes. I think you've mentioned in the past the kind of shortage of qualified talent out there. Are you losing any to competitors? Or is it more a question of just hiring the right talent?

Well, I think we've been pretty fortunate. Again, mentioning that we have a decentralized approach to the engineering, which create some challenges in itself, but establishing a framework that they can work within and making sure they're cooperating, so forth, and that's what new leadership is really focusing and concentrating on. And I would have to say to you, our internal resources where they actually work for us, we have used contractors in the past to fill the gap where we haven't been able to recruit fast enough, but we are not losing internal resources. And we're continuing to add and build and we're working with several universities. We're going to continue to expand that to bring in some bright young talent. We've got a great senior team providing strong leadership and direction. And we're also supplementing that with some talent right out of school. And -- so I think the mix is good, you're going to continue to grow there, we have not lost people in that area. So it's saying, obviously, it's a great place to work, if anyone is listening and needs a job and it's -- and I think we're very pleased and happy with the way our employees do work together here certainly in that area.

Our next question comes from the line of Brett Kearney with GAMCO Investors. Please proceed with your question.

Just want to ask, as you're looking to build out your electronics and software solutions, as you just discussed, started to invest in it this quarter a bit more recently. Is that something you see yourselves doing primarily organically? Or are there also inorganic components to effectuate that strategy?

Sure. Well, I would say to you this. We have actively been pursuing and looking at opportunities to acquire a base of business and talent along the way. And I would say to you that what we found is the cost of acquiring companies in that space is very expensive and has been very expensive. And while building it organically and growing it organically may take a little bit longer, we feel very comfortable that we're controlling our destiny, we're building a solid platform that meets emerging needs of the marketplace. We're not introducing another variable to the subset or subset of products that we're building for different markets and different solutions. So I think there is -- we continue to look, but we are not waiting for or -- that right opportunity to fall in our laps. We are taking control of our destiny. We are investing and we're going to continue to invest. And if you had listened to calls, and I go back 5, 6, 7 years, we talk about a transition of the Company, moving away, and you heard us say that we're not a motor company, we're not just a motor company anymore, we are really a solution provider. And that's exactly what you're seeing here. And our wins are occurring in that area. And they are sticky, and so we are going to continue to invest and it's going to be organic, may take longer, but it's, in our opinion, it's stronger and more secure. And we control all the IP and we control the continuation of the platform development and making sure all the pieces work together without introducing another variable which could take some time to figure out how to integrate. So you will see more of this in the future from us.

Our next question comes from the line of Edison Chu with G2 Investment Partners. Please proceed with your question.

This is Josh Goldberg, for Edison. I had a questions. I guess I'll start with how much did TCI contribute in the quarter in revenue?

Again, we don't -- we actually don't break the numbers out by individuals, but I can say that, in this case here, it's consistent with what our pro forma showed for the prior year.

Consistent in terms of it was flat year-over-year or it was up?

Yes, it was flat.

TCI revenue was flat. Okay. So if I look at your business then, outside of TCI and your biggest customer, your growth is very strong in the quarter. I calculated it north of 30%. Is that accurate?

I'll let Mike answer that. Your calculator is faster than mine. 30% without TCI, you're saying? I think we are...

And your biggest customer.

Oh, and our biggest customer. I don't know how you would split that out. I mean, generically speaking, I'd say that customer is relatively consistent year-over-year and their volumes maybe up a little bit. So I -- that 30% seems rich to me, Josh. I mean, I think, we talked about 13% organically without FX. I would not suggest that we saw significant decreases and/or increases out of our largest customers.

Okay. Well, so take that one offline then. Can you talk a little bit about the growth rates that you're seeing outside of your biggest customer in vehicle? And I just want to know how much the Maval acquisition is helping you gain more design wins in that area?

Okay. So I think you had two questions or is it -- if we take the last, what I heard, the Maval acquisition and whether it's helping us with design wins. I'll address that first. That was our strategy in buying Maval. And looking at that, we were -- we had the ability to take our target markets and our served markets here to provide an integrated solution. And as we've talked and discussed in the past, to start design -- the design process to win the design, to prototype and get into production is normally about a two to three year period of time. So I would say to you, we are making good progress, we are absolutely working on designs and we feel confident that, in the next few years, that we will be selected in certain programs and that we will turn it in production. But if we did not have, it's not one of those items that had an immediate impact and it's continuing to run stable, but there is no major growth occurring from there at this time. But we are on our design programs right now.

Okay. And if it's okay, another one. Almost four months into the year and you guys have not given rate visibility yet into these vehicle programs that you have. Can you give us a little bit sense of the timing of it now? I mean, you've been very vague about it, but maybe we can get a better sense of the timing so that people aren't either too far ahead or too far behind with what you're expecting. Because I know originally said mid- to late '19, now you're saying late '19, more modest revenue. Is there any changes in those relationships? Or what's causing changes in that time line?

Well, okay. I think if I -- we are talking about ramping up later in the year having no really any -- very little impact on revenues, okay, and/or earnings. We will be starting here later this year, and all the activities that are going on right now to get lines in place and running off of live parts and live lines is ongoing. So we are starting to ramp. Now there's multiple programs. So that's what I think you have to -- we have to take in consideration here that there's some -- there are multiple programs that we are ramping up and each of them will ramp up at different times. So we start this year. We will have additional programs starting to ramp next year, and as I think I've mentioned in the conference call portion of it, that we see ourselves in full production in the 2021 timeframe and then continuing for the next 6 to 7 years. And that's $225 million in awards that we talked about that we either have received or we've been awarded. And we're working on others. We continue to work on others. But that's kind of what you can expect, is that if you talk about the ramp-up periods and it's typically a very slow process to ramp, but full production by 2021, $225 million over 6 years, there's your number.

Okay. So the point is that by spending so much time and effort and money this year, it actually might hurt your earnings this year as you start ramping the program and then you might -- it might be accretive to your earnings next year. But right now, you're spending ahead of the ramp.

We are spending ahead of the ramp. A lot of it is CapEx, a lot of it is...

Can you quantify that a little bit? Can you quantify that a little bit for us? The sense of how much you see expenses here...

On the CapEx?

CapEx or OpEx, whatever you have.

Mike, do you want to jump in on that?

Again, I think CapEx last year was in the $15 million range, we're expecting it to be in the similar range this year. I would tell you that how -- I'm looking here. 50% of that spend is probably associated with these vehicle market wins. Again, let's be careful too when we talk about vehicles, right? Our offer of ATV-type vehicles are -- we're investing in it as well for next generation, but you're right, that doesn't relate to the commercial automotive contract wins.

Last one for me, obviously, consistent with what Greg Palm brought up before. Going to these conferences you'll hear that the industrial space is having a difficult -- more difficult '19 than '18. I think some of the industry forecast are growing mid-single-digits and you guys have outperformed that so far. And I just want to get a little more color in terms of do you see that continuing? Is -- or are you happy with how March and April played out? It sounds like there's a bounce back in January. But is there a good cadence to your orders now? And does the pipeline look strong?

I think, as we talked about 6 weeks ago or so, we mentioned that we felt good about the way the year was starting off and continuing, and we felt confident about the first quarter. In terms of the run rates that we were seeing and the volumes we were seeing, and then I think it is continuing. But again, we're only 4 months into the year, and we're 1 month or 6 weeks past when we talked to you before, but it is continuing. And it is encouraging. And I think Greg did ask the questions about which markets and so forth we talked about it's -- Aerospace & Defense has been strong for us. Medical has been strong for us. And those are markets that take a long time to get design wins and -- but then they're pretty stable for a long period of time too. So that is very encouraging. I would tell you, and I think you may have said this when you first started the -- your question or series of questions about our largest customer and so forth. There -- even though the volumes, may increase in there, there is a continued pressure on price. So I would caution us to think about, if you -- even if you hear those volumes are going up, we've been very innovative in working on next-generation products so that we could retain the business, but when there are price backs that are -- get backs that are in pricing that we had seen. So you may -- we may look at it's flat from a revenue standpoint, but the unit volume will actually have gone up and margin protection is certainly "yes by design". We have to work on that. And this contract manufacturing issue that we had is absolutely impacted and weeded. And that's one of the areas here that we -- as we mentioned, we feel that within third quarter and so forth will be behind us.

And I'm just going to add to that, I think, the statement in the Q, when we talk about customer concentration, I think, which is probably what you're driving your math from, Josh, is, I think, it's more about the diversification away from that customer with the addition of TCI that is driving that number than anything.

Yes. I mean, I would just add in terms of following the Company for a couple of years, you know the fact that when you bought Globe Motors, that was big, big customer of yours, the vehicle market was so important and now you've been able to diversify away with One Allied approach to really kind of become more of a global supplier of motors. And I think that, that's something, I think, is little bit underappreciated by people who follow the Company.

It's a very, very, very good point. And again, I'm going to stress it again. The investments we're making in electronics and software we believe is going to pay big dividends down the road, and that's the path of margin improvement.

Our next question comes from the line of Mike Morales with Walthausen & Co.

In the slide deck you called out 90 basis points of the gross margin impact from the atypical events. Could you break that down between the supplier impact and the tooling impact to give us a sense of how this progresses through the year if that works out?

Yes. I think the supplier impact is about two third of that.

Okay, okay. And then shifting gears maybe a little bit. It's been on the headlines a little bit more, the USMCA. I'm curious on how you guys are thinking about that impacting the vehicle side of your business, if that would be a headwind or a tailwind for you guys and how's that's going into planning the business looking forward?

Well, I think there's a couple of factors that come into play there. And one, we absolutely see as a positive if North American content requirements go up, that I think it plays right into helping us. So that's one area. I mean -- and again, we have a -- we're in a situation where if we can provide benefit to our customers who have to work to meet those contact requirements then, I think, that's absolutely plays into our hands. Other than that, Mike, if vehicle sales and all the other things get impacted by it, we will be also.

Our next question comes from the line of Tim Madey with White Pine Capital. Please proceed with your question.

As you know, I'm pretty new to the story, so I might have some rudimentary questions here that you've already answered or can't. But on the $225 million in new business, could you just characterize that a little bit? What business type is that and kind of how it ramps over time and then how the margin profile kind of looks as you ramp that out to [round up] maybe corporate growth or EBITDA?

Sure. Yes. And no problem, I think it's probably a good time to refresh everyone's memory on what those project wins were. If you go back to when we acquired Globe, we talked about end of life of contracts. That was something we were certainly aware of when we acquired Globe that they had certain contracts and certain customers that were going to run out to completion of the contracts. And there was a gap in replacing those contracts to sustain the revenue stream. I can say that when we can get enough volume into what we'll call our automotive-type facilities, that is, from an operating profit standpoint, it's consistent with the operating profit that we see in other operations. When it's running at a lower level, it certainly has an impact. It's -- it will have a gross margin impact, so the gross margin is lower. But again, from an operating profit standpoint, we can leverage that, the high volume, the higher volumes we have there, and it will be consistent with an operating profit level. The ramp-up of these wins, you get the win, you get the contract for it. And there's several deliverables that have to occur after you get notification of that. There is a -- they're time-phased, and that's basically what you go through and getting the equipment in place and shipping product off of production equipment, getting it into the field test and so forth. So there's a -- the timing that it takes to ramp it up is barely significant, and that's really what you're seeing here. So we announced the wins, we don't include it in our backlog, and that's the important other note. And the reason we don't is, only things that we include in our backlog, even though we have…

So over time, you could see another $20 million roughly added to backlog when you start to get more of the full production ramp?

Yes, yes. I'll say to you, yes, at some point when we have visibility on what the actual releases will be and production dates will be, it will rolling into the backlog, so you're correct.

That's kind -- it get segues into the next kind of question. Looking at your organic growth and I know it's a -- the macro environment is changing all the time. But how do you think about organic growth kind of going forward over the next few years, especially with this type of unrecognized backlog, if you will, already present there in the model? That's a tough one, I know. Maybe you guys don't...

Well, I was trying to -- I'm trying to make sure I'm answering your question. So how do we...

How's organic growth going to look like you may over the next 12 months versus the next couple of years? How do you think about the organic side of the business?

Well, all I could say to you is that we watch it very closely here and we pay close attention to what the macro market is doing and what the impact it could have on us. We have an internal target that we set for ourselves that -- and if you look at our industry, and again, and giving you some color about what this industry has done historically. We've seen 3% to 4% growth rates historically. And we had exceeded that. And that's -- we work very hard to ensure that we're developing the next-generation products/platforms that -- for the markets that we're serving and to continue to have above-market growth rates. So I mean, that's our goal. I can't sit here and tell you that, that's absolutely guarantee we're going to do that, but I think it's -- we have a track record and that is our internal goal and we focus hard on it, and we will continue to focus on it.

But to your point, certainly, those contract wins in the vehicle market will provide a tailwind to that organic growth rate.

And just the last thing on the -- building out the platform with software, electronics, et cetera, how do you think about the right capital structure for the Company? Your acquisitions, do you think going forward mostly tuck-ins? Or they as large as your most recent one? And you use a combination of debt or stock or cash, or generally, I know you can't show your hand too much, but generally, how do you think about the capital structure in these acquisitions?

Yes. I'll speak and then I'll let Mike add to whatever I miss here. But I think we have the shelf in place, which gives us quite a bit of flexibility going forward in the future. And I think that should indicate that we intend to continue to grow and we'll access whatever markets are necessary, the capital markets necessary to facilitate the growth. And I think our key here is pay the right price, don't get seduced with the wrong acquisitions. I said the wrong acquisitions, those are going to be -- put the Company at risk or the price is just too high without any strategic -- no strategic benefit to justify it. And we're going to stay disciplined in doing that. And we are fortunate that we have -- we feel capital market is available to us to go ahead and continue to support the growth necessary. So Mike, you might want to add something to that.

Yes. Just -- I would just add that our continued growth in size and strength certainly helps us with increasing flexibility, even as it relates to the debt markets above and beyond what Dick talked about in the equity markets. So again, I think, there's some continued flexibility there, hopefully in the future. Again, we have other tools, as Dick just mentioned, that we chase to fund future growth as well. And that's not to say that we have a new stock in the balance as well. I would just add that it hasn't been a major component of deals, but we always like to use the small component stock in the deals we do, whether that's to retain talent or to create organizational buy-in with key stakeholders and things to. So I think it's more just a continuation of that mentality from capital structure standpoint.

I gave you some more color too as we talked about in the previous question too about are we going to continue investing in electronics engineering and software engineering, and the answer is yes. It's a key element. It integrates everything that we do as the Company here and it gives us the opportunity to provide some fairly unique solutions for our customers. It increases reliability, it drives down costs. It's -- there's so many positive sides to that. In addition to that, when we look at companies in that space, the multiples that they were commanding and they were getting were not multiples we felt comfortable with. And I'm talking 15, 16x EBITDA. And that's not something we feel comfortable playing in. We felt more comfortable that we're here -- we're long-term people. We have a long-term strategy. We're going to invest in our people and in our strategy. And that's better for our shareholders, and that's really the approach we've taken.

With the EBITDA running last year around $40 million or maybe close to $50 million this year, I mean, what kind of long-term -- how do you think about the long-term debt returns on EBITDA that you would be able to take?

Go ahead, Mike.

I mean our current facility keeps us within 3.5 terms with an acquisition holiday. Like I said, I think, as we continue to grow in shape and size, that there may be some more flexibility allowed us, at least, that's my thinking, in that regard. And certainly as we approach $50 million EBITDA and above, there's potentially other debt market avenues that we can start thinking about depending on our future trajectory as well. So again, I think it's about flexibility, I think we have tools or arrows and the quiver that we haven't used in the past, and I think our continued growth is going to continue to add to that in terms of our flexibility.

Our next question comes from the line of John Sturges with Oppenheimer & Co. Please proceed with your question.

Roughly 4 years ago, you'd start -- is my understanding, you started down the solution path. And I'm just curious what percentage changes have you seen in terms of your revenue stream?

Sure, it's a good question. I would say to you, John, we started talking about it 4 years ago, but we actually started doing it well before then in different levels where -- when Allied was formed as what we know as Allied Motion today, go back 16, 17 years ago now, it really was a motor company. And we acquired additional motor companies and then we added some gearing capability, we added some feedback capability, we added some -- and along the way we've added some electronics capabilities by small acquisitions and a small acquisition, in particular, internal development that we started as well as getting pieces of it with a number -- small pieces of with a number of acquisitions. So that's developed before -- it started before sooner than four years ago. But I would say to you in the last three to four years is where it's really starting to take some traction and the integrated solutions are taking hold and the thing -- and the items that we're working on for the future business level, for the future business is greater than 50%. So that's -- it's quite encouraging. It's -- and it's going to go on. It's absolutely going to go up, and I think the value of the Company when you look at it from the stickiness in the applications in the software and electronic side of it that is integrating piece that we use here and our commitment to continue to invest is what's key.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.

Well, thank you everyone for very lively call with many questions. I think it's probably a record this time. So we thank you for your interest in Allied Motion. For those of you who are interested, we will be attending the Craig-Hallum Conference in Minneapolis on May 29 and the KeyBanc Industrial Conference in Boston on May 30. And new for us, we're going to go international, at the ROTH Conference in London, England on June 18 to 19. We hope you can join us there. 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 second quarter results. Thank you for your participation, and have a great day.

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