Q2 2025 Kadant Inc Earnings Call
Good day, and thank you for standing by. Welcome to the second quarter, 2025 Kaden earnings conference call. At this time. All participants are in a listen only mode.
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I would now like to hand the conference over to your speaker today. Michael McKenney, Executive, Vice President and Chief Financial Officer. Please go ahead.
Thank you, Daniel.
Good morning everyone and welcome to Cadence second quarter 2025 earnings call.
With me on the call today is Jeff. Paula, our President and Chief Executive Officer. Before we begin, let me read our Safe Harbor statement.
Various remarks that we may make today about Cadence, future plans and expectations, financial and operating results, and prospects are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to known, and unknown risks, and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation. And those discussed Under The Heading risk factors in our annual report on form. 10K for the fiscal year, ended December 28th, 2024 and subsequent filings with the Securities and Exchange Commission.
In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today.
While we may elect to update forward-looking statements at some point in the future, we specifically, disclaim any obligation to do. So even if our views are estimates change,
During this webcast, we refer to some non-gaap Financial measures. These non-gaap measures are not prepared in accordance with generally accepted accounting principles. A Reconciliation of the non-gaap financial measures to the most directly comparable. Gaap measures is contained in our second quarter, earnings press release and the slides presented on the webcast and discussed in the conference call which are available in the investor section of our website at caden.com.
Finally, I want to note that when we refer to GAAP earnings per share or EPS and adjusted EPS, on this call we are referring to each of these measures as calculated on a diluted basis.
With that, I'll turn the call over to Jeff Paul who will give you an update on Cadence's business and future prospects.
Following just remarks, I'll give an overview of our financial results for the quarter and we will then have a Q&A session.
Jeff. Thanks. Mike.
Yes, sir. Business outlook for the second half of 2025.
I'll begin by reviewing our operational highlights. I'm pleased to report that we had solid demand for aftermarket parts and a healthy increase in Capital Equipment orders during the second quarter.
Overall market demand, particularly in North America was near a historical high in second quarter across all our operating segments and our commercial teams did an excellent job at winning new business and a challenging environment. This performance against a backdrop of continued, trade policy uncertainty and global trade tension is noteworthy.
And I want to congratulate our management teams around the globe on their strong performance.
Our operations continue to focus on meeting our customers' needs and implementing process improvements to increase productivity.
As we will discuss this morning, our strong gross margin performance in the quarter is a result of these efforts.
Turning next to slide 6, I'd like to review our Q2 financial performance.
Bookings in the second quarter increased 7% to 269 million, led by strong capital performance and stable demand for aftermarket parts.
The capital project bookings were particularly encouraging to see as economic environment remains at a high level uncertainty.
Revenue decreased 7% compared to the record Revenue achieved in the second quarter of 2024.
This decline was largely the result of softer capital orders in the back half of 2024, which led to fewer capital shipments in the first half of this year.
Based on our high level of project activity, we expect sequential improvements in the coming quarters.
Adjusted divaa was 52 million down, 15% from the then record and the prior year period, our adjusted e EPS was 2.31 down. 18% compared to the second quarter of 2024.
We have a growing backlog and expect strong bookings. In the second half of 2025 Capital project activity remains good but I want to note that the timing of these orders is less certain this uncertainty is Amplified by evolving us trade policies in the ever-changing Tariff environment.
I'll provide more details on that when I read your operating segments.
I'll begin with our flow control segment.
As you can see in slide 7, our flow control segment had solid bookings in the second quarter of 2025.
We benefited from strong aftermarket demand while Capital project activity was softer compared to the prior year period.
Revenue in the second quarter, increased 4% to 96 million even as weaker manufacturing activity in Europe and China dampened our results.
Our aftermarket revenue remains strong in the second quarter and made up 75% of total revenue.
Solid operating performance led to an adjusted debit on margin of 28.9%.
As we look ahead to the second half of 20125, we expect demand to improve as the year progresses that said the frequently changing global trade discussions and tariff targets may impact capital investment activity.
Before leaving this segment, I wanted to share that the integration of Dynamic Sealing Technologies, which was acquired in June of 2024, is now complete. We are pleased to have this leading producer of fluid rotary unions and related flow control products fully integrated.
The diversity they bring to Cadant in terms of new markets and access to new customer segments greatly expands our opportunities as we pursue growth within our flow control operating segments.
In our industrial processing segment. New Order activity was up 9% compared to the same period last year to 105 million.
This booking performance was led by a significant increase in capital orders for our wood processing equipment. From our from 3, North American Producers of engineered wood products.
Revenue decreased 16% compared to the record Revenue achieved in the second quarter of 2024. This decline was due entirely to weaker Capital shipments as our aftermarket parts business was up 7% compared to the second quarter of last year.
Adjusted ibaa and adjusted ibaa margin, declined, due to lower Revenue volume, and the lack of operating Leverage.
Looking ahead to the second half of 2025, we expect Capital project activities to strengthen in this segment. Particularly within our fiber processing product line, where a number of large capital projects are in the pipeline,
Turning now to our Material Handling segment. We had excellent bookings performance in the second quarter of 71 million
The 16% increase over the prior year period, was led by our bulk Material, Handling product line and we had solid growth from our Belair product line.
And revenue of the second quarter.
Business activity remained high with a number of larger capital projects under discussion, although the timing can be uncertain as to when these projects are executed.
As I conclude my prepared remarks, I want to emphasize how pleased I am with our operations teams as they continue to execute the strategic initiatives to create and capture more value.
Looking ahead to the second half of 2025, We Believe industrial demand will strengthen relative to the first half of the Year, especially once the global trade issues get worked out.
Our backlog is improving, and we are well positioned to capitalize on new opportunities that may emerge as the air unfolds due to our ability to generate strong cash flows.
And with that said, I'm pleased to announce that shortly after the close of the quarter, we acquired Babini, a small company in Italy that manufactures water and equipment for the food and paper industry.
We were a licensee for their technology for our our upcycling business and we are excited to have them, join the kit and family.
I'll now turn the call back over to Mike for a review of our financial performance in Q2 and our guidance outlook for the remainder of the year.
Mike.
Thank you. Jeff I'll start with some key financial metrics from our second quarter.
Our second quarter Revenue was 255.3 Million.
Included, record after markets, Parts revenue of $181.8 million.
Gross margin was 45.9% in the second quarter 25.
Up, 150, basis points compared to 44.4% and the second quarter 24.
Despite the impact from incremental tariffs, our gross margin was close to 46% for the second quarter in a row.
This increase is primarily associated with a higher overall percentage of aftermarket parts which represented 71% in the second quarter of 25 compared to 63% in the prior year.
SG&A expenses as a percentage of revenue increased to 299% in the second quarter of 2025 compared to 25.5% in the prior year period.
Sgna expenses, increased 3.9 million, or 6% to 73.9 million in the second quarter of 25, compared to 70 million in the second quarter of 24.
The weakening of the U.S. dollar resulted in a $1.9 million increase in SG&A expenses, including a $1.2 million impact resulting from the change from foreign currency gains in the prior period to losses in the current period, and a $7 million unfavorable effect of foreign currency translation.
in addition, we had incremental sgna expense of 1.8 million related to our acquisitions
Our GAAP EPS decreased 17% to $2.22 in the second quarter, and our adjusted EPS decreased 18% to $2.31.
The second quarter of 25 adjusted, EPS exceeded the high end of our guidance range by 31 cents.
Due to higher revenue, and better growth margin than forecast.
The higher revenue in the second quarter was driven by our record aftermarket departure revenue.
All of our segments had higher than expected, gross margin due to the mix of aftermarket parts in the period.
In addition to the revenue beat and gross margin performance, we had strong cash flow performance in the quarter which I'll discuss further and further detail on the next slide.
Adjusted EBITDA decreased 15% to $52.4 million compared to $61.8 million.
Which led to reduced ibida performance.
As a percentage of Revenue adjusted ibida was 20.5% compared to 22.5% in the second quarter of 24.
As outlined in the chart, our cash flow increased significantly compared to both the first quarter of 25 and the prior year period.
Operating cash flow, increased 44% to 40.5 million in the second quarter of 25. Compared to 2 8. 1, 2 4.
Free cash flow increased 58% to $36.5 million in the second quarter of 2025 compared to $23.1 million in the second quarter of 2024.
Non-operating uses of cash in the second quarter of 25 included 34 million of repayments on our debt.
4 million for Capital expenditures and 4 million for dividends on our common stock.
Let me turn next to our EPS results for the quarter.
Our adjusted EPS decreased 50 cents from $2.81. In the second quarter of 24 to $2.31 in the second quarter 25.
This included decreases of 506 cents due to lower Revenue.
26 Cents from higher operating expenses 2 cents due to higher non-controlling interest expense and 1 cent due to higher weighted average shares outstanding
These decreases were partially offset by increases of 21 cents due to a higher gross margin percentage.
12 cents due to lower net, interest expense, and 2 cents from a lower effective tax rate.
There was no foreign currency translation effect on net income in the second quarter as the weakening of the US dollar cause foreign currency exchange rates to more closely. Align with the prior period exchange rates.
Looking at our liquidity metrics on slide 15.
our cash conversion days which we calculate by taking days and receivables, plus days and inventory and subtracting days and accounts, payable
Decreased to 128 at the end of the second quarter, 25 compared to 130 at the end of the first quarter 25.
Working capital is a percentage of Revenue was 17.7%.
In the second quarter, 25% compared to 18% in the second quarter of 24.
We continue to remain focused on paying down debt, as efficiently as possible.
Our net debt, that is debt less cash, was 151.7 million in the second quarter, decreasing 31 million sequentially and over 100 million compared to the second quarter of 24.
Our leverage Ratio calculated in accordance with our credit agreement decreased to 0.86 at the end of the second quarter, 25 compared to 0.95 at the end of the second quarter of 25.
At the end of the second quarter 2025, we had $162 million available under our revolving credit facility and an additional $200 million of uncommitted bond capacity.
now, or if you are guidance for 25,
For the second quarter in a row, our booked-to-bill ratio is over 1.
And the strong bookings in the second quarter led to an ending backlog of $299 million.
For 16% over the end of 24.
The majority of the large Capital, bookings relate to projects, which will be recognized as revenue from 26.
While there has been some clarity on Country, specific terrorists customers would large capital projects, remain cautious as they evaluate how the terrorists will be applied. And whether certain tariff costs can be mitigated.
The estimated impact from incremental, tariffs remains largely unchanged from our prior forecast.
The most significant tariff impact, Cadence relates to tariffs on the Imports of Steel, which encouraged domestic suppliers to increase their prices.
And on product sourced from our facilities in China.
The Trump administration eliminated prior exemptions and applied a uniform 25% tariff on all U.S. steel imports in February, increasing this tariff to 50% on June 4th.
We believe we will be able to mitigate a large portion of the impact of the steel price increase by working with our suppliers and communicating with our customers.
There was a reduction to the recently announced China tariffs from 145% to 30%, effective in the middle of May.
We will continue to pursue opportunities to reduce the impact of these costs, by finding alternative suppliers through cost sharing and in some cases making Investments to change our manufacturing capabilities and Manufacturing components at different Caden facilities.
While there has been some clarification on certain tariffs, newly announced tariffs continue to create unease and resulting uncertainty in the market.
Which has impacted our customers' decision-making process for our capital equipment.
We have a very healthy level of quote activity for our capital equipment.
however, if customers have flexibility with the timing for their equipment purchases, some are delaying placing the order until there is more certainty and stability in the markets, they serve
This environment has made it extremely difficult for our operations to forecast the timing of capital orders, requiring significant judgment on order timing, revenue recognition, and future material costs.
We'll continue to monitor these tariff changes and will provide further updates as the year progresses and there is more clarity.
New trade policies.
We are maintaining our full year 25, we continue to expect Revenue.
Of.
1 billion 2020 million to 1,040 million in 25 and adjusted. EPS of $9.05 to $9.25 which excludes 16 cents of acquisition related costs.
Revenue and EPS performance in 25.
We expect that the second half of the year will be stronger than the first half.
Our revenue guidance for the third quarter of 2025 is $256 million to $263 million, and our adjusted EPS guidance for the third quarter is $2.13 to $2.23, which excludes 1% of acquisition-related costs.
We now anticipate gross margins for 25 will be 44.8 to 45.3%.
As a percentage of Revenue. We now anticipate sgna will be approximately 27.8 to 28.3%
For 25, we now anticipate slightly, lower, net, interest expense of approximately, 11.5, to 12 million.
And we continue to expect our recurring tax rate will be approximately 26% to 27%.
That concludes my review of the financials, and I'll now turn the call back over to the operator for our Q&A session. Daniel.
As a reminder, to ask a question, please press star, 1 1 1 on your telephone and wait for your name to be announced.
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Our first question comes from Ross, sparin black with William Blair. Your line is open.
Hey, good morning, guys.
Morning, Ross.
Hey, just touching on the domain environment. Uh, forgive me, but I believe you said you guys are expecting sequential order improvement from here.
Yes. Yep.
So now that's called parse out. Yeah.
That's, you know, we're really talking first half versus back half, but we are looking at both a strong third and fourth quarter.
Okay, so we think, you know, closer to 90 million of equipment orders in the second quarter is that kind of the new run rate, something we did have a benefit from the OSB of 18 million that was announced in May. And it feels like run rate was roughly flat just from a demand perspective. Uh, so when you talk to your customers, you get the sense that you know, maybe the Tariff uncertainties invading and just the natural maintenance needs are finally catching up.
I, I would say, um,
That it's, you know, as we talked earlier enough, uh, industrial processing was the, uh, segment that we thought we'd have the strongest bookings growth in. And now we've seen some of that in wood processing, and we think that in the back half it won't be at the second quarter level, but it'll still be, uh, good on the capital side. But really, where we anticipate, uh, strong activity is in the fiber processing, uh, product line. There are, uh, a number of, uh, large projects actually throughout the world that, um, we have our eyes on, and we hope that the customers will let those orders, uh, in the third and fourth quarter.
Okay, and then, just on a particular symbols, uh, you know, the recent strength there. Do you believe that's been restocking? Is that still just the elevated age of the installed base, or is this kind of 180 million Revenue sustainable on a quarterly basis? Going forward?
Yeah, we think, um, that it's really that, you know, it's a, it's due to the age of the installed base and that, um, we're anticipating, although I'd say maybe a modest movement down because of the summer months here in the third quarter, but very modest, but kind of continuing as we've seen
Okay, so I Capital Equipment will start to take up and you guys deliver. What's the sensitivity? We should expect the the parking symbols down mid single digits as the installed base. You know?
Catches up.
Talking about when the equipment gets installed and what kind of impact that'll have now, you're you're out to 26. Also, I would say that that typically happens as the overall operating rates start to increase, you know, as the economy improves. So you, you know, we wouldn't expect to see any any noticeable drop off. And, and the aftermarket because the overall operating rates will increase. Um, you know, as you know, as they get more confident, start to, to make the investments, in the new equipment and bring that online. It's normally because, you know, the, the economic conditions have improved and so we would expect operating rates to be up.
That's very helpful. Thank you, guys. I'll jump back to you.
Thank you.
Our next question comes from Gary Prestipino with Barington. Your line is open.
Uh good morning. Mike and Jeff. Um just want to get some numbers here. Um
Uh, Mike, do you have about the current assets and current liabilities where a quarter end?
Um, sure. Okay here.
He's pulling out his trusty notebook here so just give us back. Give me a second.
Okay. As an absolute, current assets were approximately $475 million and current liabilities were approximately $200 million.
Okay, thank you for that and then could we could I just get some more numbers surrounding the parts and consumables um it was uh in flow control. It was 75%. This quarter versus what was it last year at this time?
Uh 72 and I'll just go through them. Uh Gary so flow control 75 this quarter 72 last year uh industrial processing. 76, this quarter 59%. Last year and in Material Handling 58% this quarter 57% last year. So then overall, as we mentioned 71%, uh, this year, this quarter and 63% in the comparing quarter,
Should should we?
given the, um,
The fact that a lot more of the orders now are capital equipment.
And um, you're going to start seeing that come into the into the the mix when in in 2026 really or is it starting back after the year?
Well we're we're anticipating it to come in uh for Capital uh Revenue to pick up in the back half of the year. Um and as I as I just was mentioning to Ross
You know that is really what we're focused on there is um in in the industrial processing segment in fiber processing there are some uh meaningful projects.
Uh, both North America, Europe, and Asia. So, um, we, and you know, if you recall, Gary and fiber processing for those capital projects, those are largely recognized on an overtime basis. So once we get the orders in, we will start to recognize revenue. So we really...
Really need to see those in the back half. Unlike wood processing where I made a note, uh, in my, uh, call that, you know, those orders, uh, that we got in the second quarter and, and, uh, wood processing. That will be Revenue in 26 because that is going to be a point in time, essentially, when it ships versus overtime, uh, for the fiber processing.
I guess. Yeah, okay that's helpful that just kind of thinking out loud here would
Because you're getting more capital equipment into the mix, would you expect to see that percentage of aftermarket parts?
As a part percentage of Revenue jumped down sequentially in, you know, yes it will it will not, it will moderate. And, uh, they'll there also should be, uh, an impact on the gross margins. It will moderate gross. Margins. Also so we won't be, you know we won't be running at 46% gross margins. I would kind of anticipate those drop down into the 44 is actually if we get if the mix comes in as as anticipated.
And can you can you maybe just I don't know an optimized the call here but just can you maybe just talk about some of the bookings that you're seeing? Is is is it? You know what what percentage of it is is
Replacement.
Capital what percentage of it is new.
Capital to you in terms of new business.
Greenfield projects in Eastern Europe, the Middle East, and Asia, you know, outside some outside of China.
Uh, and then there are some, you know, there are, uh, there are conversions that are taking place where people are converting, maybe, uh, you know, modernizing a plant and putting our technology in replacing a competitor's technology with ours. So, we benefited from that. Um, a little bit. Uh, the last quarter. Uh, you know, I would say the, the 1 area in the capital that is, as, as we people have heard us say, over the last many years, really for the last 10, to 12 years. That's kind of overperformed as an engineering Woodside. Engineering Woodside continues to, to perform. Well, they're just finding, uh, newer and newer opportunities for for the engineered products. And so, that's, you know, kind of the fastest growing sector of the of the wood business, and it happens to be 1 that we're very strong in. So, we've really benefited over the years from that, the orders, we mentioned that we received this quarter.
Uh those big orders were all in the engineered wood side. So you know that's 1 that probably um you know has probably some of the the best growth opportunities has and will going forward.
Okay, and just 1 last question in terms of all this.
New Capital Equipment, be a replacement or, you know, a new customer. Is there anything inherent with the newer equipment that would cause, um, any kind of a, um, lessening of the need of, uh, the, uh, aftermarket
Business uh, from running these these uh, this equipment.
in terms of the parts is still kind of
It depends a little bit on the equipment. If you think on the engineering wood side as they put, this new equipment in almost airbags using our new knife design, our new knife technology, which really increases the the, uh, which really increases the aftermarket component of that. Uh, on some of the others, you know, we're constantly trying to innovate our, our products to give, you know, the customer better performance in some cases longer life. Now, there's a, you know, kind of total cost of ownership calculation that goes in that. But generally speaking, we would not expect to see any significant drop off in the parts, consumables relative to the new technology, You Know, It uh uh while we're continually trying to improve the performance of it, you know, it it these are very harsh, rugged environments that our equipment operates. And, and so you're not going to see a significant change in the, you know, in in the life of that equipment even though that it's we constantly try to
Thank you very much.
Thank you as a reminder to ask a question. Please press star, 1 1 1 on your telephone again, that is star 1, 1 1 to ask a question,
Our next question comes from Addie Madan with da Davidson your line is open.
Hi, thank you. It's Addie on for good. Yin, good today, and just a couple of questions from me going off the wood processing. Uh, question. So, obviously very encouraging news on that front, but outside of wood processing, how would you characterize the underlying demand for capital equipment? Bookings. And, uh, how are the conversations with customers going? Are you seeing customers more confident in placing orders?
Well, we so we've you know, going into this year, you know, kind of towards the end of last year and end of the beginning of this year, there were a lot of discussions and we had a lot of projects on the board. And what's what's happened is they as we, as we said last quarter uh, you know, many of them were delayed or or paused because of all the craziness associated with primarily with the tariffs, you know, the tariffs really uh created a tremendous amount of uncertainty globally. And so a lot of people um you know, said we're going to uh we're just going to, you know, sit on the sidelines here until this stuff clears up. Now, as is always the case with these things, there's a winner and a loser. So we have some customers that will be winners associated with this, these tariffs particular our our us customers, you know, that won't be subject to the same pricing pressures from foreign competitions. So some of our, some of our markets, some of our customers will benefit from these and others will be impacted by them. Um, but I, I think what's happened, um, is that you, there's
26 and 27 in particular. Um, and so, you know, I think people just really want to see that we put the, whatever these trade negotiations are, we put them behind us and everybody says, "Okay, this is what I have to work with now," and we go forward, you know, under those conditions.
Okay. Got it. Yeah, that makes sense. So going off that so are you seeing big pockets of strength or uh weakening demand across the portfolio? Whether by Geographic, or, by any customer says that you can give us any color on.
Well, I would say, as I mentioned, if you mentioned ago, you know, we we could continue to see uh, strength in certain parts of of our Wood Group in particular, the engineered wood group continues to, um, you know, to perform well and if you talk to the industry, uh, you know, um, Executives out there. They, they are quite optimistic about, you know, the next many years, what the engineer would business is going to look. Like, they just continue to find more and more applications for it. The probably the, you know, the our slowest Market is is China. You know, the other parts of Asia are doing a little better, but China, you know, is, is quite slow right now and there's a fair amount of uh, of you know, I would say uh you know, economic um you know uh challenges that they're dealing with right now there um North America is the strongest. Um and then of course, Europe is kind of sitting in between, um, it'll be interesting to see what happens in Europe because they've agreed to increase their deficit spending. They've agreed to increase their military, spending by quite a bit, and that should spur, you know, um, you know, a lot of the ENT
Base over there. But you know, we're in the very early stages of that. So it's too early to know what kind of impact that will have on the markets.
Got it. Uh, that makes sense. And in the context of the babini and GPS acquisition, can you give us an update on the current full year guide assumptions versus the prior, as it relates to, uh, like tariff impact, FX, organic growth, and uh, acquisition contributions to sales.
Uh, just specific to. You're talking just babini Addie.
Leini and GPS. Yeah, yeah. So, you know, uh, babini, uh, Revenue in 249 million us. Um, so it's, it's small. It's a smaller transaction. Um, you know, in terms of you know, we we completed it actually early here in the uh third quarter. So I actually didn't uh bake it into the guidance. It'll have a small impact on the top line and I would anticipate uh the gate here that it'll be diluted of. We'll probably be diluted of a few cents and uh the third quarter, maybe also on the fourth
Yeah, this acquisition was very strategic for us and that we've, we've used our, we've Incorporated our technology into our, our upcycling business, uh, which is processing, uh, the waist and rejects from industrial processes in particular on the paper side and so, uh, they have probably the world's best technology for for dewatering. Uh, and so we really, and we've had great success. We licensed it a few years ago and we've had great success with that technology. Uh, and so when the family decided they, they wanted to the, the, uh, owner passed away and his children decided they wanted to, um, divest of, of all their businesses including papini. Uh, it really made a lot of sense for us to to bring that into the company because it's a, it's a key technology and we actually think it has a broader. You know, they principally focus on the food side, that's where they started. Uh and uh but we think there are opportunities in other dewatering areas. So it was a, you know, it's a very small acquisition but we think strategically it'll be a nice addition.
Got it. That makes sense. And last question for me, how would you characterize your margin profile in the backlog and uh current bookings related to the growth margin? We've seen over the last few quarters.
Yeah. I, you know, Eddie I think what's most important there is
um,
You know, in the first two quarters, we had, uh, very strong parts and consumer mix, which helped drive the gross margin to 46%. In the back half of the year, we're expecting, uh, the mix to, you know, moderate, and I would say, um, you know, uh, the parts and consumables probably be, you know, say.
Mid to mid 60s, 66, 67. So we'll have more capital in the back half of the year. And that will weigh on the gross margins. And that's what I was mentioning to Gary. I'd say, you know, I'm looking at kind of in the 44 range in the back half of the year on margins with the capital mix we're anticipating.
Awesome. Thank you for your time, and good luck here in the back office.
Thank you. Thank you.
Thank you. Our next question comes from Ross Sparing, Black with William Blair. Your line is open.
Hey gentlemen, just a couple of follow-ups. If, uh, we have a second here, uh, you kind of ran through some of the moving Parts on tariffs. Uh, can you just help us like about that? And, uh, and the framework of your prior guidance for around 35 cents as of the first quarter?
Yeah, it's, uh, you know, Ross, we really, it’s amazingly, frankly. From the standpoint of when we're doing that guidance, that we're the guidance is essentially, it's the same. We're looking at kind of that 5 to 6 million, 32 to 39 cents.
um,
You know? So I mean it we're really I'm I was frankly I was quite amazed when we rolled it up that the folks did such a good job at uh pegging where to land
Okay, and that's just aluminum, offsetting lower China rates, presumably lower China rates.
Yeah, I mean you you you know, the rates have come down a little bit in China, but you've got, you know, obviously now you heard or talking about 15% up for all of Europe, we had the steel tariffs double for and so, you know, we've we've had puts and takes here, uh, but unfortunately, when you add it all up, it hasn't changed much.
Okay, uh, and then just uh, sgna. I mean, it looks like it's taking a little ahead of uh the informal guidance for 2025. Uh, I know we have m&a coming in there too. So, can you maybe just give us a sense of where that should take out? Is that closer to 28% of sales now?
Um, I think, uh, in my, in the
strange, I gave, you know were I said uh,
That will come in at uh, 278 to 283.
So yeah, 28% is probably a good marker there, Russ.
Perfect. And then just any sense on the uh TNC mix of the acquisitions.
Sorry, what was that? What, what, what? Uh, the parts, I think it's Google's mix. I mean, last year you guys had some pretty phenomenal deals that were highly accretive. It seems like that's been this.
This one is really going to be more towards the capital side.
Okay.
Of course, when we now that now that we have it, we'll work hard to build that parts and consumables business.
Absolutely. All right. Thanks guys.
Thank you. Our next question comes from Walter Lipic with Seaport Research. Your line is open.
Hi thanks. Uh, good morning guys.
Um, I wanted to ask, uh, you had a, you had a nice, uh, report for this quarter and it was above your, your own guidance. And, uh, I think I know that was, uh, you know why that happened? But I wonder if you could talk about what went well, this quarter that, uh, that put you above guidance,
yeah, the uh really
the primary driver was the continued strength in the parts and consumable business and it it actually beat our forecasts. So the the Top Line beat was driven by parts and consumables and of course that drove a strong mix mix towards parts and consumables which drove a strong gross margin performance. So that at the end of the day that was really what? What drove that EPS be
Okay. And is it uh is was it uh a market related thing or is this you know, your people uh out there to go get, you know, more parts and sales market share uh would you attribute it to
Yeah. I mean as you know, we, you know, that's a key focus of ours. So we're you know every day our guys get up and their primary job is to go out and Chase that after market. So, you know, we're constantly trying to prove that, but I would say also that you know, as we said last quarter, the the aftermarket is really kind of over performing the operating rates out there, uh, relative to where, you know, you would expect them to be. And, and we think that's the result of of not making investments in equipment for the last, you know, 2 plus years, you know, it's just like you drive an automobile. You drive it 2 years. Pass is used for life. You can put, you got to put a lot more parts in to keep it running. And so I think it's a combination of both, you know, our guys out there, working hard, trying to capture every dollar they can find uh, and and having some success in doing that, but also it's just that there's, there's, there's more to chase out there because, um, you know, the, the equipment that's running is, is is really getting old and that's why we think there's going to be a capital buying cycle that has to, you know, we had a, a good start this quarter, uh, but we think that, you know, there there's there should be a
A, you know, a pretty lengthened capital buying cycle, you know, whether it continues this year or trips into next year, they're going to have to start making investments because they haven't for a few years now.
I think that makes sense just because of the, you know, maybe more capital projects, um, shipping but did you factor in in the third quarter like a
um,
a deceleration in part sales.
It's it's was very, it's very modest. Well and it's really a attribute it to summer summer people, take vacation, they don't buy it. It's it's very, it's very modest. Exactly in Europe in Europe, you know, there's they they take those extended summer vacations and so there's nobody there to place orders.
Okay.
Okay, good. Um, okay, I appreciate it. Thank you.
Thank you.
As a reminder to ask a question. Please press star 1 1 again, that is star 1. 1 to ask a question.
Our next question comes from Addie Madan with D.A. Davidson. Your line is open.
Hey just wanted to follow up on uh the contributions You're Expecting from a G from GPS acquisition as well for 2025 like you broke out for babini.
Any color on that.
Yeah, so really when we save a beanie, you know that we're kind of talking about both of those GPS is a small uh, manufacturer of of gear boxes that they primarily Supply to biniyam.
Um, we just call it Babini.
Got it. Thank you for that.
Thank you. I'm showing no further questions at this time. Oh, now I'd like to turn it back to Jeffrey Powell for closing remarks.
Thank you, Danielle. So, before wrapping up the call today, I just wanted to leave you, as I always do, with a few takeaways. Despite the weaker economies in certain areas of the world and the global trade uncertainties, the second quarter was strong in terms of capital order activity and relatively stable with respect to our aftermarket demand.
Uh, solid execution by our operations teams led to excellent gross margin performance.
Uh, and our commercial teams were very successful in winning key projects during the quarter.
We have strong market positions and expect strengthening demand as the second half of the year progresses, with project activity gaining momentum.
And with that, we want to thank you for joining us today and we look forward to updating you next quarter.