Columbus McKinnon Corporation Q2 FY2026 earnings call

• Net sales increased 8% to $261 million, with growth across all product platforms. Adjusted EPS improved to $0.62. - Margins improved sequentially due to higher volumes and tariff mitigation, though year-over-year adjusted margins were down due to tariffs and sales mix. - Orders were $254 million, down 3% year-over-year, with U.S. orders up 11%. Backlog was $352 million, up $34 million or 11% versus prior year. - Made progress on operational improvement, tariff mitigation, and integration preparedness for Kito Crosby acquisition. Established Integration Management Office (IMO) for acquisition integration.

Net sales increased 8% year-over-year to $261 million. Gross profit was $90.2 million, up $15.4 million or 21% versus the prior year on a GAAP basis. Adjusted EPS improved $0.12 sequentially to $0.62 in the second quarter. Adjusted gross margin was 35.3%. Sales growth was broad, with volume growth in the U.S. and EMEA, the two largest regions. Lifting and linear motion platforms led sales growth.

• Increased net sales guidance to low to mid-single digits growth for fiscal 2026, up from prior flat to slightly up guidance. - Reaffirmed adjusted EPS guidance of flat to slightly up year-over-year. - Expects tariffs to be a net $10 million headwind to operating profit in fiscal year, now targeting tariff cost neutrality by end of fiscal '26 and margin neutrality by end of fiscal '27. - Fiscal Q3 is seasonally low for sales and margins due to holiday season.

• Tariff landscape is constantly evolving, making it difficult to precisely calculate net tariff impacts. - Weaker economic landscape in EMEA and APAC resulting in slower conversion for project orders. - Regulatory risks related to the pending acquisition of Kito Crosby, though progress is being made to address these.

Q: A couple of questions. You obviously ported the sales goodness you saw in the quarter through the guide for the remainder of the year, but you didn't do the same for earnings. Can you talk about kind of the pluses and minuses that didn't allow that sales goodness to kind of flow through? And maybe the answer is the magnitude of pull forward, it sounds like you may have had into the quarter. And if that would be the case, can you help us kind of understand and quantify that?

A: Sure. Yes, Matt. And you kind of hit the nail on the head. We had revenues that were pulled forward from Q3 into Q2. And as you know, Q3 tends to be a seasonally low quarter and then Q4 a seasonally high quarter. And so typically, first half, second half tends to approximate one another in terms of top line, but we do have the tariff total of $10 million that we talked about as a net impact to the year still being the amount that we anticipate for the year and a portion of that, probably a few million dollars translating into Q3. And so the combination of the pull forward, the tariff impact in Q3 and the roughly 20% increase in second half versus first half EPS kind of is why we didn't raise the EPS guide on the slightly higher revenue. And so while we anticipate that we continue to make progress throughout the year, and certainly, we're laser-focused on doing so, realizing those improvements and then making that progress, we thought it was prudent to de-risk the second half of the year with the beat in the first half and focus on executing to deliver on the full year guide.

Q: This is Willem on for Jon. Can you talk to the sustainability of the improved short order activity in the U.S.?

A: Sure. We were pleased to see that activity come back as we were forecasting. We knew that we had some disruption in our fourth and first quarters as I think our channel partners leaned on their inventory and the kind of unsettled trade relation scenarios played out. But we did see the rebound happen in this quarter. It was robust, and we were pleased with that. And we do anticipate that, that will continue as we advance through the third and fourth quarters. We don't see any reason at this point that, that would go in a wrong direction. We do have some seasonal impacts in that in the fourth quarter with a lot of customers having year-ends that are measured in December. They may manage inventory in a way that manages that down towards the end of the year. But if you look at the second half, first half scenarios, I think that we'd see reasonable and continued level of demand for short cycle through the balance of the year.

Q: I did want to ask about the timing of the Kito Crosby closing. It sounds like you now think it's going to be 3 months later. You've pushed it off before. I think all you had was HSR to clear. Any reason to be concerned? Any thoughts on the delay?

A: Right. Yes. No reason to be concerned. We've substantially complied with the DOJ's second request, and we're working towards closing. We're trying to do so as expeditiously as possible, and we've made progress from a financing, integration planning and regulatory standpoint. As you know, we've secured fully committed financing and completed the syndication of the bridge facility, including the $500 million revolver, and we'll pursue permanent financing as we advance toward closing. And we're taking full advantage of the time that we have between now and close to make sure that we're preparing for day 1 readiness. And so we've established a full-time dedicated integration management office. We've established a governance structure with our Board around oversight. And we're working with a group of external resources to make sure that we're wrapping the expertise around this that is necessary to allow for us to accelerate delivery of synergies and de-lever rapidly post close, but also to make sure that we have good business continuity, and we don't disrupt the core business and enable the resources that are focusing there to remain as focused there as can be possible during this transition. So nothing to be worried about there, just working through the process and anticipate closing by the end of our fiscal year.

Q: Most of my guidance questions have already been asked. But just following up on some of the questions on the U.S. Obviously, a really strong quarter with orders and sales up double digits. You mentioned some industries in the prepared remarks, David, aerospace, energy, but just wanted to dig deeper there. Are there any subsectors you're seeing particular strength or weakness in the U.S.? And how are we looking into September and October here?

A: Yes, James, we're seeing robust demand across most end markets as we look at the U.S. Certainly, heavy equipment, steel playing a significant role in driving demand. Aerospace is strong. The Department of Defense is strong. And even automotive is picking up, I think, as there's a little bit of rebalancing in terms of ICE engine versus e-vehicle as well as tariff-impacted production plans. And so we provide solutions into that space that are picking up as well. So feeling good about the level of demand that we're seeing here and anticipate that as we go forward, the tailwinds around labor scarcity, the need for improved production or productivity, automation as well as some of the trade-related impacts will play a benefit, play a role in helping drive demand in the U.S.

Q: Maybe for our second question, maybe a high-level one on what you're seeing in lifting in North America and especially as it relates to the competitive environment. Just broadly speaking, I assume peers are doing the same things you guys are doing with price surcharges. So maybe you could just speak high level on the dynamic in the U.S. in the lifting space.

A: Yes. Certainly, we are obviously focused on executing our strategy, and we have been disciplined about improving customer experience, improving our operational performance to meet customer expectations. We continue to make progress there, and we'll continue to do so through the balance of our year and as we head into combining with Kito Crosby. The competitive landscape is one where our competitors are disciplined, and they tend to follow a similar path to the path that we're following. We try to be leaders in the space. But obviously, we compete against good companies. And they're taking similar actions, as you had indicated, relative to tariff mitigation plans, relative to making sure that we're looking at our supply chains. We're looking at tariff codes. We're looking at the opportunities to rebalance production where we can. And I think that we're in a position where we're clearly focused on doing what we can to execute well, earn more of our customers' business and grow our share in the space. And we continue to remain focused on that as we head into the balance of the year.