COLUMBUS MCKINNON CORP Q3 FY2025 earnings call

• Third quarter financial results: Net sales of $234.1 million, down 8% Y/Y; adjusted EPS was $0.56. Gross profit decreased due to factors like factory closure expenses, higher product liability expense, lower sales volume and mix. - Business combination with Kito Crosby: Creates a scaled intelligent motion platform with over $2 billion in sales, expected to deliver ~$70 million of net cost synergies by year 3. Enhances scale, market position, and financial profile. - Factory consolidation: Consolidating two smaller precision conveyance factories into the largest U.S. precision conveyance manufacturing facility, with operations to cease at discontinued locations in Q1 '26. - Market dynamics: Choppy demand, orders down 4% Y/Y driven by short-cycle order decline; backlog healthy but short-cycle demand soft; project funnel healthy with strong precision conveyance and linear motion.

In the third quarter, precision conveyance grew by 16% and linear motion was up 8% from the prior year. Net sales were $234.1 million, down 8% from the prior year. Short-cycle sales decreased by 9%, while project-related sales were down 7%. Precision conveyance contributed significantly to the growth, with its 16% increase, and linear motion also showed positive growth of 8%. Revenue contribution from precision conveyance and linear motion was notable in driving segment performance.

• Fiscal '25 guidance: Assumes mid-single-digit sales decrease Y/Y, resulting in low teens decline in adjusted EPS. - CapEx for full year ranges between $18 million to $22 million. - Net leverage ratio is expected to remain approximately three times at the end of fiscal '25.

• Tariff impacts: 25% tariff on Mexico and Canada, 10% tariff on China could impact less than 5% of trailing 12-month sales, with matching retaliatory actions potentially affecting another 3% of sales. - Macroeconomic challenges: Continued short-term macroeconomic pressures affecting demand. - Regulatory issues: Potential antitrust or other regulatory challenges related to the acquisition of Kito Crosby.

Q: Any early prioritizations for the $70 million in cost savings?

A: Categories include supply chain optimization, enhancing purchasing power, operational efficiencies, and duplicative structural expenses. Also, revenue synergy opportunities like cross-selling to existing customers and leveraging global footprint present upside.

Q: How does Kito fit into the current simplification strategy?

A: Fits squarely in the strengthening and growing categories of the framework, enabling expansion and reimagining as debt is paid down with superior cash generation. Aligns with the 80/20 strategy, with existing consolidation plans continuing.

Q: Blended interest expense or rate expectation once financing is completed?

A: Expected to be below 8%.

Q: Anticipated regulatory issues to closing the acquisition?

A: Low risk, will file as required, with most significant overlap in power chain hoist category, working closely to assess and proceed through filing process.