COLUMBUS MCKINNON CORP Q4 FY2025 earnings call

• Fiscal '25 saw record orders, up 4% constant currency, driven by 8% growth in project-related orders and strength in precision conveyance. Q4 order momentum was up 4% constant currency.
• Net sales in fiscal '25 were down 4% constant currency due to mix shift in business. Backlog increased 15% due to more project-related business.
• Operational improvements: top-tier TRIR of 0.54 in safety, improved customer lead times and on-time delivery, and European, Middle East, Africa businesses saw a 10-point increase in net promoter score.
• Strength in end markets like battery production, life sciences, e-commerce, food and beverage, aerospace, and defense. Potential early benefits from industries impacted by tariffs to maximize productivity in US facilities.
• Progress on Kito Crosby acquisition: 13 of 14 regulatory and financial approvals received, working towards closing by end of calendar year, with integration planning underway.

In fiscal 2025, net sales were $963 million, down 4% on a constant currency basis. Fourth quarter sales were $246.9 million, down 5% on a constant currency basis. Backlog was $322.5 million, a $41.7 million or 15% increase versus the prior year. Gross profit was $79.8 million, down from the prior year. On an adjusted basis, gross margin was 35.2%, adjusted operating income was $24.1 million, and adjusted EPS was $0.60. Net sales in fiscal 2025 were in line with guidance, impacted by short-cycle order softness and timing of project-related orders. The backlog increase was due to strength in project-related orders, particularly precision conveyance.

• Fiscal 2026 guidance: net sales flat to slightly up year-over-year, adjusted EPS flat to slightly up year-over-year.
• Tariffs expected to be a headwind in first half of fiscal 2026, with goal of achieving gross profit dollar neutrality on tariffs by second half of fiscal 2026 and margin neutrality in fiscal '27.
• Guidance does not include financial results from Kito Crosby acquisition. Interest expense expected to increase due to expiration of an interest rate hedge, amortization expense $30 million, effective tax rate 25%, diluted average shares outstanding 29 million.
• Unmitigated tariff exposure has an EBITDA impact of approximately $40 million, with mitigation measures like surcharges, pricing, supply chain management in place.

• Macro environment uncertainty and volatility related to US policy landscape.
• Short-cycle orders sensitive to channel dynamics, policy uncertainty, and macroeconomic environment.
• Tariff volatility and potential impact on margin and adjusted EPS.
• Regulatory uncertainties related to the pending Kito Crosby acquisition, including Hart-Scott-Rodino Act filing approval process.

Q: What is the tariff rate embedded and how does the Kito Crosby acquisition impact tariff mitigation?

A: Tariff rate is factored as 145% on China tariffs and 10% on EU tariffs currently. With Kito Crosby, integration planning is underway for day one readiness, identifying synergies and cash generation commitments to delever rapidly.

Q: How did short-cycle sales trend through April and early June, and how does Kito Crosby relate?

A: Short-cycle sales improved in latter part of Q4, flat year-over-year for the quarter but improved vs Q3. On Kito Crosby, can't comment on their results but anticipate similar activity. First half of current quarter sees growth in order demand.

Q: Detail tariff mitigation and underlying demand assumption for flat to up revenue?

A: Tariff mitigation includes surcharges, pricing, supply chain management. Demand environment is uncertain with tariff volatility. Revenue guide contemplates flat to slightly up results, impacted by surcharges, tariffs, and potential volume reductions from price increases.

Q: Comment on e-commerce end market and precision conveyance backlog timing?

A: E-commerce end market has seen increased opportunities with business development efforts. Precision conveyance backlog includes project and short-cycle, with short-cycle being book and ship, and montratec projects influenced by construction phasing and trade uncertainty, with revenue recognition over time reducing lumpiness.