Altra Industrial Motion Corp.

Q2 total sales were up 1.9% year over year; pro forma sales were up 12.7%; organic sales were up 3.1% reported and 13.8% pro forma. Pro forma non-GAAP gross profit was 35.3% versus 37.1% a year ago; pro forma non-GAAP operating income was $81.2 million versus $73.3 million. Pro forma non-GAAP operating income margin was 17.4% excluding surcharge impact, up 60 basis points, while reported pro forma operating margins were down 30 basis points due to zero-margin surcharge initiatives. Non-GAAP adjusted free cash flow was $34.3 million versus $56 million last year, capex was $12.8 million, and cash was $192.9 million. For full-year 2022, including JVS, guidance is sales of $1.932 billion to $1.972 billion, GAAP diluted EPS of $2.33 to $2.42, adjusted EPS of $3.35 to $3.50, and adjusted EBITDA of $388.5 million to $403.5 million. Excluding JVS, guidance is sales of $1.88 billion to $1.92 billion, GAAP diluted EPS of $2.31 to $2.40, adjusted EPS of $3.22 to $3.37, and adjusted EBITDA of $378.7 million to $393.7 million. Full-year adjusted free cash flow guidance was lowered to $100 million to $125 million, with capex expected at $50 million to $55 million and D&A at $95 million to $100 million. Management said it expects to exit 2022 at roughly 2.0x to 2.25x net leverage.

Carl Christenson emphasized that Altra is executing its long-term strategy well despite supply chain, labor, and inflation headwinds. He pointed to strong demand, broad CapEx activity, especially in automation and late-cycle markets, and a record backlog as evidence the business is healthy. His tone was confident and constructive, with repeated references to margin expansion, cash generation, and the company’s ability to navigate uncertainty.

Todd Patriacca detailed the quarter’s growth and margin mechanics, noting that price added 390 basis points while FX was a 400-basis-point headwind on a pro forma basis. He said surcharges totaled about $25 million in the quarter and about $30 million year to date, with roughly 200 basis points of gross profit impact and about 100 basis points of OP and EBITDA margin impact in Q2 because they are passed through at zero margin. He also highlighted a strong liquidity position with $192.9 million of cash, 2.3x net debt leverage, and an expected year-end leverage exit rate of about 2.0x to 2.25x, while keeping capex at $50 million to $55 million and lowering adjusted free cash flow guidance to $100 million to $125 million.

Analysts focused on how much of the raised sales outlook reflected pricing, demand, backlog conversion, FX, and surcharges. Management said unit demand was just over 500 basis points year to date and should continue at a similar pace, while FX has become a $15 million to $20 million headwind versus last quarter; they also said the guidance excludes uncertain surcharge pass-throughs because they are flow-through items. Questions also probed margin volatility and possible demand weakening, and management pointed to electronics and copper-related surcharges, some inventory-driven softness in Turf and Garden and medical shipments, plus lumpy defense, but said backlog is stabilizing rather than collapsing.