COLUMBUS MCKINNON CORP Q2 FY2025 earnings call

• Orders increased 16% YOY with a book-to-bill ratio of 1.08, driven by strength across geographies and product platforms, including 42% growth in precision conveyance. • Sales were down YOY due to linear motion factory move to Mexico, phasing of automation project backlog, and EMEA project revenue timing, but were in line with guidance. • Profitability was impacted by items like a $23M non-cash pension settlement, $12M related to linear motion facility closure, and $4M start-up costs for Mexico move. • Began leveraging share repurchase program, completing $5M repurchases in September and another $5M under 10b5-1 plan. • Received multiple orders from PowerCo for battery production gigafactories, with an expected nine-figure opportunity. • Customer experience remains a priority, and margin expansion initiatives are expected to deliver 200 basis points of improvement over time.

Net sales for Q2 were $242.3 million. Orders increased 16% year-over-year with a book-to-bill ratio of 1.08. Precision conveyance saw a 42% increase in orders, driven by Montratec and other precision conveyance platforms up over 20% YOY. Automation had 24% order growth year-over-year. On a GAAP basis, gross margin was 30.9%, while adjusted gross margin was 36.3%. US sales were down 9% due to various factors, while EMEA and APAC were down 3%.

• For fiscal year 2025, updated guidance to flat to low single-digit sales growth year-over-year, mid-single-digit growth in adjusted EPS. • CapEx for full year expected to range between $20 million to $25 million. • Net leverage ratio expected to decline to 2.3x by end of fiscal year 2025. • Q3 expected sales growth and adjusted EPS to be flat to prior year.

• Macro-economic uncertainties including destocking pressures, delays in decision making. • Impact of hurricanes Helene and Milton on plant closures and productivity disruptions. • Project timing issues affecting revenue recognition and backlog phasing.

Q: Any chance we can get a little bit more quantification of the impact of the hurricanes in Q2? And are there any lingering issues heading into Q3?

A: The hurricane resulted in closure of Damascus, Virginia facility for about five days and disrupted other facilities. Impact was approximately $4 million of delayed sales, with EPS impact of $0.03 per share. Lingering issues include phasing of backlog and ramp-up of Monterrey facility.

Q: Industrial and especially EU, German end markets are weakening. Where are you seeing kind of offsetting strength?

A: Offsetting strength seen in battery production, oil and gas, defense, ag, aerospace, and utility markets in the US post-hurricanes.

Q: Can you guys maybe parse out what sort of impact you would have had on the top line? Is it related to the manufacturing relocation of Mexico, the timing you talk about with respect to kind of some things moving around from a project standpoint?

A: Linear motion footprint consolidation impacted sales by ~$4M, which is expected to ship in Q3. Automation impacted shift by ~$5M, precision conveyance by ~$3M, and linear motion in Europe by ~$3M.

Q: What could the aggregate opportunity ultimately look like for you guys between those three factories in terms of orders and therefore ultimately revenue if things sort of break your way?

A: Characterized as a nine-figure opportunity, with potential for significant orders and revenue over next two to three years.

Q: I wonder if you could just help us understand a little bit about – we've done a lot. Maybe just review what we've done so far in Monterrey. And what's the next step?

A: Monterrey facility was announced in January, with consolidation of Charlotte linear motion. Next steps involve ramping up and planning for further consolidation, aiming for 200 basis points of gross margin improvement.

Q: I wonder if you can provide a little bit more detail on the short-cycle business. Was it stable across the board in the geographic regions?

A: Short-cycle business was largely stable, with pockets of weakness in US due to destocking pressures and Europe in lifting distribution. Orders up mid-single digits in first few weeks of Q3.

Q: I just had a quick follow-up on capital allocation. You did highlight that the modest share repurchases in 2Q and already in 3Q. Given that second half of the year is typically stronger for cash flow generation easily covers those $30 million you've guided for in debt repayments any thoughts on becoming a more aggressive repurchaser?

A: See share repurchases as an appropriate tool, with favorable interest rates and stock price, but focus remains on debt repayment and capital allocation balance.