Columbus McKinnon Corporation Q4 FY2026 earnings call

### Strategic Transformation & Transaction Completion - Completed two high-priority strategic transactions: the Keto Crosby acquisition closed on February 3, 2026, and the divestiture of legacy U.S. power chain operations closed March 4, 2026, transforming the company's portfolio and positioning it for long-term growth. - Implemented a unified organizational structure for the combined company on day one of acquisition close, with teams aligned to capture synergies and integrate systems/processes quickly.

### Financial Performance Highlights - Full year fiscal 2026 delivered 20% total order growth and 16% adjusted EBITDA growth year-over-year. Excluding the divestiture, legacy CMCO net sales grew 7%, and the pro forma combined company grew 6% for the full year. - Fourth quarter 2026 orders increased 68% year-over-year, largely driven by the Keto Crosby acquisition, with modest growth from legacy CMCO operations. Entering fiscal 2027, the company holds a total backlog of $520 million, including $320 million from legacy CMCO and $200 million from Keto Crosby. - Adjusted EBITDA for Q4 2026 was $69 million, a 93% year-over-year increase, with adjusted EBITDA margin expanding 130 basis points to 15.7% on acquisition-related scale benefits.

### Synergy & Integration Progress - Management remains highly confident in hitting the target of $70 million in annualized net cost synergies by year three post-acquisition, and early progress creates potential to exceed this target over time. - Early synergy wins have already been captured from organizational realignment and third-party spend savings, including insurance consolidation and harmonized vendor contracts. $14 million of in-year cost synergies are targeted for fiscal 2027.

### Capital Allocation & Liquidity - Post-acquisition, total liquidity increased $321 million to $561 million, comprised of $97 million in cash, $459 million in revolving credit capacity, and $6 million in AR securitization availability. - The company's top capital allocation priority is debt reduction to lower leverage, with free cash flow generation targeted to support rapid deleveraging.

For full fiscal 2026, Columbus McKinnon delivered total record net sales of $1.2 billion, a 24% year-over-year increase. The Keto Crosby acquisition contributed $188 million in revenue, while the divestiture of legacy U.S. power chain hoist and chain operations reduced revenue by $14 million. By product platform: 1) Linear motion: Delivered 25% full year sales growth, driven by post-production transition recovery at the Monterey facility and successful footprint simplification; 2) Automation: Delivered 8% full year sales growth, with strong order growth for the legacy CMCO business; 3) Lifting: Delivered solid full year growth, supported by the Keto Crosby acquisition, favorable foreign exchange, and tariff-related price increases. By region: The Americas saw encouraging demand, particularly for short cycle products, while EMEA demand remained challenged by worsening geopolitical conditions and slower order conversion, partially offset by foreign exchange tailwinds. For the fourth quarter of fiscal 2026, total net sales were $438 million, a 77% year-over-year increase, with double-digit short cycle sales growth for the legacy CMCO business.

- **Fiscal 2027 Net Sales Guidance:** $2.05 billion to $2.12 billion, which reflects a 1% to 4% pro forma organic growth range; no revenue synergies are included in this guidance, creating upside potential if integration outperforms expectations. - **Fiscal 2027 Adjusted EBITDA Guidance:** $390 million to $410 billion, including the targeted $14 million in 2027 cost synergies from the Keto Crosby integration, representing an approximate 19% EBITDA margin at the midpoint of guidance. - **Fiscal 2027 Adjusted EPS Guidance:** $1.70 to $1.90 per share, based on assumed interest expense of $185 million to $190 million, amortization of $135 million to $140 million, depreciation of $75 million to $80 million, a 25% effective tax rate, and 52 million diluted adjusted shares outstanding. - **Leverage Target Guidance:** Management expects to reach a net leverage ratio of 4.0x or lower within two years post-acquisition, supported by strong free cash flow generation and debt repayment. - **Seasonality Expectation:** Fiscal 2027 results are expected to be back half-weighted, with margin expansion accelerating as synergies are realized and price increases take effect through the year.

- Geopolitical uncertainty in EMEA and the Middle East has slowed large project decision-making, leading to delayed order conversion, weaker near-term demand, and unfavorable volume/mix impacts on margins. Prolonged conflict in the Middle East creates continued risk of delayed project awards and secondary inflationary pressures from higher energy and input costs. - Tariff impacts created margin headwinds in fiscal 2026, contributing an estimated 50 basis point drag on adjusted gross margins in the fourth quarter. - Transient margin headwinds from the divestiture included short-term U.S. sales force distractions, unfavorable product mix (a higher share of lower-margin backlogged shipments contracted before recent inflation/tariff increases), and the divested business had higher historical margins that created a 50 basis point drag on Q4 2026 adjusted gross margin. - Sustained inflation across key input costs (metals, transportation, oil-derived components, labor) creates pressure that could outpace current planned price increases if not offset by vendor savings or further pricing actions. - Higher debt levels from the Keto Crosby acquisition have increased interest expense, pressuring near-term net income.

Q: Analyst asks for drivers of the mid-single-digit pro forma sales growth in guidance, whether revenue synergies are included, and what secondary impact prolonged Middle East conflict could have. / A: No revenue synergies are included in guidance, which assumes 1% to 4% pro forma organic growth. Pricing increases are planned to offset inflationary pressures, and U.S. short-cycle demand remains strong. Direct Middle East revenue is ~$50 million total, with ~$20-24 million of potential annualized run-rate disruption if conflict continues, mostly from delayed project decision-making in Europe and the region. Inflationary input cost increases are expected to be passed through to customers.\n\nQ: Analyst asks for free cash flow expectations and confirmation of leverage target timelines, plus details on early synergy actions and the potential to exceed targets. / A: Management does not provide explicit free cash flow guidance, but expects substantial free cash flow generation that will be prioritized for debt repayment, and confirms a target of reaching 4.0x net leverage or lower within two years. Early synergy progress has come from organizational realignment and third-party spend harmonization and consolidation, which has already delivered early savings. Management is on track to hit the 2027 synergy target of $14 million, with potential for faster realization over the full three-year synergy timeline.\n\nQ: Analyst asks for a breakdown of factors that weighed on Q4 2026 adjusted gross margin. / A: The Keto Crosby acquisition was accretive, adding ~200 basis points to margin, but this was offset by multiple headwinds: the divestiture created a 50 basis point drag, tariffs added another 50 basis point drag, unfavorable mix in the Americas added a 75 basis point drag from higher share of lower-margin historical backlog shipped after operational improvements, and delayed shipments in EMEA from customer project delays created additional impact. U.S. sales force distraction from the divestiture also hurt performance. All these factors are mostly transient, and margins are expected to normalize moving forward.\n\nQ: Analyst asks for the split of volume versus price in 2027 guidance, and expectations for inflation-driven COGS increases. / A: Pricing accounts for just over half of the 1% to 4% organic growth guidance, with no revenue synergies included. Significant inflationary pressure across metals, transportation and oil-based components is expected, with cost increases likely matching or exceeding planned price increases; the company will adjust pricing further if needed. The combined company's larger scale is being leveraged to negotiate better vendor pricing to offset inflation, which has already delivered early savings in some categories.