Q1 2027 Columbus McKinnon Corp Earnings Call
Speaker #1: Conference and webcast. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press door 0 for the operator.
Speaker #1: I would now like to turn the conference call over to Kristine Moser. VP Investor Relations and Treasurer. Please go ahead.
Speaker #2: Thank you, and welcome everyone to our call. On today's call, we will be covering our first quarter, fiscal 2027, financial, and operational results. On the call with me today are David Wilson, our president and chief executive officer; and Jon Linker, our chief financial officer.
Speaker #1: Good morning, ladies and gentlemen. And welcome to the COLUMBUS MCKINNON Q4 2027 earnings teleconference and webcast. At this time, all lines are in a listen-only mode.
Speaker #2: Welcome, Jon. In a moment, Jon and David will walk you through our financial and operating performance for the quarter. The earnings release and presentation to supplement today's call are available for download on our investor relations website at investors.cmco.com.
Speaker #1: Following the presentation, we will conduct a Q&A session. If at any time during this call you require immediate assistance, please press door 0 for the operator.
Speaker #2: Before we begin our remarks, please let me remind you that we have our safe harbor statement on slide 2. During the course of this call, management may make forward-looking statements in regards to our current plans, beliefs, and expectations.
Speaker #1: I would now like to turn the conference call over to Kristine Moser. VP Investor Relations and Treasurer. Please go ahead.
Speaker #2: Thank you, and welcome everyone to our call. On today's call, we will be covering our first quarter, fiscal 2027, financial, and operational results. On the call with me today are David Wilson, our President and Chief Executive Officer; and John Linker, our Chief Financial Officer.
Speaker #2: These statements are not guarantees for future performance and are subject to a number of risks and uncertainties and other factors that can cause actual results and events to differ materially from the results and events contemplated by these forward-looking statements.
Speaker #2: Welcome, John. In a moment, John and David will walk you through our financial and operating performance for the quarter. The earnings release and presentation to supplement today's call are available for download on our Investor Relations website at investors.cmco dot com.
Speaker #2: I'd like to remind you that management will refer to certain non-GAAP financial measures. You can find reconciliations to the most directly comparable GAAP financial measures on the company's investor relations website and in its filings with the Securities and Exchange Commission.
Speaker #2: Please see our earnings release and our filings with the Securities and Exchange Commission for more information. Also on today's call, we will make references to pro forma metrics which adjust for both the key to Crosby acquisition and the divestiture of the legacy Columbus McKinnon U.S.
Speaker #2: Before we begin our remarks, please let me remind you that we have our Safe Harbor statement on Slide 2. During the course of this call, management may make forward-looking statements regarding our current plans, beliefs, and expectations.
Speaker #2: These statements are not guarantees for future performance and are subject to a number of risks and uncertainties and other factors that can cause actual results and events to differ materially from the results and events contemplated by these forward-looking statements.
Speaker #2: power chain hoist and chain operations as if each transaction had been completed prior to the beginning of the prior year period to improve the comparability of results across time spans.
Speaker #2: Today's prepared remarks will be followed by a question-and-answer session we respectfully ask that you limit yourself to one question and one follow-up. With that, I'll turn the call over to David.
Speaker #2: I'd like to remind you that management will refer to certain non-GAAP financial measures. You can find reconciliations to the most directly comparable GAAP financial measures on the company's investor relations website and in its filings with the Securities and Exchange Commission.
Speaker #3: Thank you, Kristine, and good morning, everyone. We are off to a strong start in fiscal 2027, Q1 was our first full quarter operating as a combined company following the key to Crosby acquisition and the team delivered a solid performance across orders, sales, profitability, and cash flow.
Speaker #2: Please see our earnings release and our filings with the Securities and Exchange Commission for more information. Also on today's call, we will make references to pro forma metrics which adjust for both the key to Crosby acquisition and the divestiture of the legacy COLUMBUS MCKINNON U.S.
Speaker #3: Pro forma sales grew 10%, with broad-based growth across all platforms. We continue to advance our strategic priorities, operational excellence, commercial effectiveness, and customer experience, and these initiatives are improving our competitiveness and strengthening our foundation for sustainable growth.
Speaker #2: Power Chain Hoist and chain operations as if each transaction had been completed prior to the beginning of the prior year period to improve the comparability of results across time spans.
Speaker #3: Volumes are building in the Americas and Asia-Pacific, while EMEA remains softer in the near term. Consistent with what we're seeing in PMI and industrial production data.
Speaker #2: Today's prepared remarks will be followed by a Q&A session. We respectfully ask that you limit yourself to one question and one follow-up. With that, I'll turn the call over to David.
Speaker #3: Thank you, Kristine, and good morning, everyone. We are off to a strong start in fiscal 2027. Q1 was our first full quarter operating as a combined company following the key to Crosby acquisition and the team delivered a solid performance across orders, sales, profitability, and cash flow.
Speaker #3: Our end market exposure is diversified, and we're seeing particular strength in targeted verticals including defense, infrastructure, energy, e-commerce, data center, shipbuilding, electrification, and pharma, as well as the broader automation and general industrial markets in North America.
Speaker #3: Pro forma sales grew 10%, with broad-based growth across all platforms. We continue to advance our strategic priorities, operational excellence, commercial effectiveness, and customer experience, and these initiatives are improving our competitiveness and strengthening our foundation for sustainable growth.
Speaker #3: We are also seeing increased activity in oil and gas, some of which is related to the conflict in the Middle East. Automotive demand has been spotty, and general industrial demand in pockets of EMEA remains soft as previously shared.
Speaker #3: Volumes are building in the Americas and Asia-Pacific, while EMEA remains softer in the near term. Consistent with what we're seeing in PMI and industrial production data.
Speaker #3: Our scaled platform, enhanced customer value proposition, and business initiatives are driving market share gains in targeted segments. This growth is also supported by ongoing commercial initiatives and early revenue synergy wins.
Speaker #3: Our end market exposure is diversified, and we're seeing particular strength in targeted verticals, including defense, infrastructure, energy, e-commerce, data center, shipbuilding, electrification, and pharma, as well as the broader automation and general industrial markets in North America.
Speaker #3: We continue to see elevated input costs given the macroeconomic and supply chain environment. Even so, our supply chain has remained resilient, and we've been effective in implementing pricing actions to offset unavoidable inflationary pressure.
Speaker #3: Over the long term, we've demonstrated consistent pricing discipline and we remain confident in our ability to secure price where required. Adjusted EBITDA of $111 million increased 242%, with adjusted EBITDA margin of 21%.
Speaker #3: We are also seeing increased activity in oil and gas, some of which is related to the conflict in the Middle East. Automotive demand has been spotty, and general industrial demand in pockets of EMEA remains soft as previously shared.
Speaker #3: Our scaled platform, enhanced customer value proposition, and business initiatives are driving market share gains in targeted segments. This growth is also supported by ongoing commercial initiatives and early revenue synergy wins.
Speaker #3: When normalizing for the impacts of the acquisition and divestiture in the prior year period, Q1 adjusted EBITDA margins expanded approximately 300 basis points. Adjusted EPS grew 11 cents to $61 from the prior year period on an as-reported basis.
Speaker #3: We continue to see elevated input costs given the macroeconomic and supply chain environment. Even so, our supply chain has remained resilient, and we've been effective in implementing pricing actions to offset unavoidable inflationary pressure.
Speaker #3: And we delivered positive Q1 free cash flow for the first time in 6 years versus what has been a typical seasonal cash outflow. Enabling us to reduce debt in the quarter.
Speaker #3: Over the long term, we've demonstrated consistent pricing discipline and we remain confident in our ability to secure price where required. Adjusted EBITDA of $111 million increased 242%, with adjusted EBITDA margin of 21%.
Speaker #3: Our top capital allocation priority. These results exceeded our expectations driven by strong execution, favorable demand dynamics, and some cost benefits specific to the quarter.
Speaker #3: I want to thank our more than 7,000 global team members for their dedication and disciplined execution throughout the quarter. Given our strong start to the year, today we are raising our sales, adjusted EBITDA, and adjusted EPS outlooks for fiscal 2027.
Speaker #3: When normalizing for the impacts of the acquisition and divestiture in the prior year period, Q1 adjusted EBITDA margins expanded approximately 300 basis points. Adjusted EPS grew 11 cents to 61 cents from the prior year period on an as-reported basis.
Speaker #3: We will talk you through those details shortly. Overall, we're pleased with the quarter and with how the team has remained nimble in the face of unique business conditions.
Speaker #3: And we delivered positive Q1 free cash flow for the first time in six years versus what has been a typical seasonal cash outflow. Enabling us to reduce debt in the quarter.
Speaker #3: We also remain encouraged by the opportunities in this market and focused on delivering to our near-term commitments while positioning the company for long-term success.
Speaker #3: Our top capital allocation priority. These results exceeded our expectations driven by strong execution, favorable demand dynamics, and some cost benefits specific to the quarter.
Speaker #3: Underlying demand signals, particularly in the U.S., support the durability of our momentum. Strong order growth and a healthy backlog position us well, however, our outlook continues to reflect a level of uncertainty given the environment in EMEA.
Speaker #3: I want to thank our more than 7,000 global team members for their dedication and disciplined execution throughout the quarter. Given our strong start to the year, today we are raising our sales, adjusted EBITDA, and adjusted EPS outlooks for fiscal 2027.
Speaker #3: On the integration front, we are making meaningful progress, bringing our teams together and aligning people, processes, and systems. Although we are still early in the journey, the combined organization is operating effectively as one team and we are moving quickly to capture synergies.
Speaker #3: We will talk you through those details shortly. Overall, we're pleased with the quarter and with how the team has remained nimble in the face of unique business conditions.
Speaker #3: We have executed initiatives that should position us to outperform our synergy target for the year, and these early wins reinforce our conviction for achieving and potentially exceeding our $70 million net annual run-rate cost synergy target over time.
Speaker #3: We also remain encouraged by the opportunities in this market and focused on delivering to our near-term commitments while positioning the company for long-term success.
Speaker #3: Underlying demand signals, particularly in the U.S., support the durability of our momentum. Strong order growth and a healthy backlog position us well. However, our outlook continues to reflect a level of uncertainty given the environment in EMEA.
Speaker #3: First-year cost synergies will be weighted towards SG&A driven by organizational realignment, the removal of redundancies, the elimination of duplicate third-party spend, and contract harmonization, as previously shared, we also see significant potential for future cost of goods sold synergies.
Speaker #3: On the integration front, we are making meaningful progress, bringing our teams together and aligning people, processes, and systems. Although we are still early in the journey, the combined organization is operating effectively as one team and we are moving quickly to capture synergies.
Speaker #3: We are advancing plans to capture revenue synergies and early wins give us confidence that this will be additive to organic growth. Fully realizing the opportunity will take time as we align resources and integrate technology and sales processes, but we continue to believe revenue synergies will be a meaningful tailwind over time.
Speaker #3: We have executed initiatives that should position us to outperform our synergy target for the year, and these early wins reinforce our conviction for achieving and potentially exceeding our $70 million net annual run-rate cost synergy target over time.
Speaker #3: We are demonstrating our ability to execute effectively and our value creation opportunities remain largely within our control. We are advancing our integration plans and building momentum to deliver sustained organic growth, capture synergies, generate cash, and reduce debt, unlocking substantial long-term value for all stakeholders.
Speaker #3: First-year cost synergies will be weighted towards SG&A driven by organizational realignment, the removal of redundancies, the elimination of duplicate third-party spend, and contract harmonization, as previously shared, we also see significant potential for future cost of goods sold synergies.
Speaker #3: Now, I'm pleased to introduce you to our new Chief Financial Officer, Jon Linker, who joined the company earlier this month. Jon is a proven leader with extensive financial leadership experience, expertise in global industrial manufacturing environments, and a consistent track record of delivering impactful results with a focus on profitable growth, operational performance, and successful integrations.
Speaker #3: We are advancing plans to capture revenue synergies and early wins give us confidence that this will be additive to organic growth. Fully realizing the opportunity will take time as we align resources and integrate technology and sales processes.
Speaker #3: But we continue to believe revenue synergies will be a meaningful tailwind over time. We are demonstrating our ability to execute effectively, and our value creation opportunities remain largely within our control.
Speaker #3: Since joining a few weeks ago, Jon quickly immersed himself in our business and began contributing meaningfully. We're excited to have Jon on board as we continue executing our value creation strategy on behalf of our shareholders, customers, and employees.
Speaker #3: We are advancing our integration plans and building momentum to deliver sustained organic growth, capture synergies, generate cash, and reduce debt, unlocking substantial long-term value for all stakeholders.
Speaker #3: With that, I'll turn the call over to Jon to walk us through our first quarter results.
Speaker #2: Thank you, David, and good morning, everyone. Before we get into our results, I'd like to take a moment to share some initial observations I'm thrilled to join the company as Chief Financial Officer and I'm pleased to be participating in my first earnings call at COLUMBUS MCKINNON.
Speaker #3: Now, I'm pleased to introduce you to our new Chief Financial Officer, John Linker, who joined the company earlier this month. John is a proven leader, with extensive financial leadership experience, expertise in global industrial manufacturing environments, and a consistent track record of delivering impactful results with a focus on profitable growth, operational performance, and successful integrations.
Speaker #2: Over the last several weeks, I've had the opportunity to meet with our leaders and board, engage with employees across the organization, spend time in our manufacturing facilities, and gain a deeper understanding of our strategy and culture.
Speaker #3: Since joining a few weeks ago, John quickly immersed himself in our business and began contributing meaningfully. We are excited to have John on board as we continue executing our value-creation strategy on behalf of our shareholders, customers, and employees.
Speaker #2: What has impressed me the most is the strength of our platform, our talented and engaged people, and an unrelenting focus on our customers that is visible throughout the organization.
Speaker #2: While I'm still very early in my tenure, my initial observations reinforce my confidence in the company's existing strategy discipline operating approach and long-term value creation potential.
Speaker #3: With that, I'll turn the call over to John to walk us through our first quarter results.
Speaker #2: Thank you, David, and good morning, everyone. Before we get into our results, I'd like to take a moment to share some initial observations I'm thrilled to join the company as Chief Financial Officer and I'm pleased to be participating in my first earnings call at COLUMBUS MCKINNON.
Speaker #2: The fundamentals of the business are strong, and I believe we are well-positioned to execute on our priorities, and deliver sustainable growth, margin expansion, and free cash flow generation, our capital allocation priorities remain unchanged, with a near-term focus on debt reduction and deleveraging.
Speaker #2: Over the last several weeks, I've had the opportunity to meet with our leaders and board, engage with employees across the organization, spend time in our manufacturing facilities, and gain a deeper understanding of our strategy and culture.
Speaker #2: I look forward to engaging with many of you in the investment community in the coming months and building strong relationships over time. Turning to the quarter, we delivered strong Q1 results, reflecting disciplined execution, results reflect the first full quarter following the close of the Quito Crosby acquisition on February 3rd and the divestiture of our U.S.
Speaker #2: What has impressed me the most is the strength of our platform, our talented and engaged people, and an unrelenting focus on our customers that is visible throughout the organization.
Speaker #2: While I'm still very early in my tenure, my initial observations reinforce my confidence in the company's existing strategy: discipline operating approach, and long-term value creation potential.
Speaker #2: power chain hoist and chain operations on March 4th. As I talk about our results and outlook today, I will touch on the impact of the acquisition, as well as the performance of our legacy business.
Speaker #2: The fundamentals of the business are strong, and I believe we are well-positioned to execute on our priorities, and deliver sustainable growth, margin expansion, and free cash flow generation, our capital allocation priorities remain unchanged, with a near-term focus on debt reduction and deleveraging.
Speaker #2: Please note that as we further integrate and realize synergies, we'll be focused on maximizing the performance of the consolidated business, and as a result, comparability of the legacy companies will become less relevant.
Speaker #2: Orders of $568.1 million increased $309.6 million or $120% from the prior year. Largely driven by the benefit of the Quito Crosby acquisition. Normalizing for the acquisition and divestiture, pro forma orders growth was approximately 9% and was broad-based across platforms, with particular strength in the Americas as well as in APAC.
Speaker #2: I look forward to engaging with many of you in the investment community in the coming months and building strong relationships over time. Turning to the quarter, we delivered strong Q1 results, reflecting disciplined execution. Results reflect the first full quarter following the close of the Quito-Crosby acquisition on February 3rd, and the divestiture of our U.S.
Speaker #2: power-chain hoist and chain operations on March 4th. As I talk about our results and outlook today, I will touch on the impact of the acquisition, as well as the performance of our legacy business.
Speaker #2: EMEA orders declined year over year, due to geopolitical and macroeconomic uncertainty, as well as a tough comp from strong orders in EMEA's rail business and the prior year.
Speaker #2: Please note that as we further integrate and realize synergies, we will be focused on maximizing the performance of the consolidated business, and as a result, comparability of the legacy companies will become less relevant.
Speaker #2: On the legacy CMCO side, U.S. orders grew in the low teens, driven by strength in automation, and short-cycle lifting products. Backlog grew 4% sequentially due to strong orders with a book-to-bill of $1.1 in the first quarter.
Speaker #2: Orders of $568.1 million increased $309.6 million or $120% from the prior year. Largely driven by the benefit of the Quito-Crosby acquisition. Normalizing for the acquisition and divestiture, pro forma orders growth was approximately 9% and was broad-based across platforms, with particular strength in the Americas as well as in APAC.
Speaker #2: We delivered net sales of $531.5 million which increased $295.5 million or $125% from the prior year. Driven by the acquisition of Quito Crosby, volume, pricing, and favorable currency translation, partially offset by the divestiture.
Speaker #2: EMEA orders declined year-over-year due to geopolitical and macroeconomic uncertainty, as well as a tough comp from strong orders in EMEA's rail business and the prior year.
Speaker #2: Sales growth was broad-based, with high single-digit percentage growth in the legacy Quito Crosby portfolio, and low teens growth in the legacy CMCO portfolio, normalizing for both the acquisition and divestiture, pro forma sales growth was 10%.
Speaker #2: On the legacy CMCO side, U.S. orders grew in the low teens, driven by strength in automation, and short-cycle lifting products. Backlog grew 4% sequentially due to strong orders with a book-to-bill of $1.1 in the first quarter.
Speaker #2: Sales growth was strongest in the Americas, with growth in both volume and pricing. EMEA grew sales as we executed on our backlog and took advantage of temporarily opened shipping lanes in the Middle East at the end of the quarter.
Speaker #2: We delivered net sales of $531.5 million which increased $295.5 million or $125% from the prior year. Driven by the acquisition of Quito-Crosby, volume, pricing, and favorable currency translation, partially offset by the divestiture.
Speaker #2: On a pro forma basis, project-related sales increased 12% and short-cycle sales increased 9%, with benefits from both pricing and volume growth from a favorable demand environment.
Speaker #2: Channel inventory levels are healthy, returning to near-normal levels, but remain slightly below historical averages. On the pricing side, the strongest realization was in the Americas, through the price increases implemented in fiscal 2026 to offset inflation and tariffs.
Speaker #2: Sales growth was broad-based, with high single-digit percentage growth in the legacy Quito-Crosby portfolio, and low teens growth in the legacy CMCO portfolio. Normalizing for both the acquisition and divestiture, pro forma sales growth was 10%.
Speaker #2: We've recently taken additional pricing actions across the combined business in multiple regions to offset inflation, and we expect a benefits of pricing to ramp up in the second half of the year.
Speaker #2: Sales growth was strongest in the Americas, with growth in both volume and pricing. EMEA grew sales as we executed on our backlog and took advantage of temporarily opened shipping lanes in the Middle East at the end of the quarter.
Speaker #2: Gross profit of $146.3 million increased 69 million or 89% versus the prior year on a gap basis, reflecting the Quito Crosby acquisition, pricing and volume, as well as benefits to material costs specific to the quarter.
Speaker #2: On a pro forma basis, project-related sales increased 12%, and short-cycle sales increased 9%, with benefits from both pricing and volume growth from a favorable demand environment.
Speaker #2: Partially offset by the $55.2 million non-cash inventory step-up expense, the impact of the divestiture, and inflation in COGS. On a gap basis, our gross margin was 27.5%, and on adjusted basis, our gross margin was 38.1%.
Speaker #2: Channel inventory levels are healthy, returning to near-normal levels, but remain slightly below historical averages. On the pricing side, the strongest realization was in the Americas, through the price increases implemented in fiscal 2026 to offset inflation and tariffs.
Speaker #2: Adjusted gross margin, which removes the impact of the inventory step-up and acquisition integration costs, improved 380 basis points year over year. Our SG&A expenses increased 64.5 million to $128.6 million on a gap basis, due to the addition of Quito Crosby, higher integration costs, and increased incentive compensation expense, partially offset by cost-saving synergies.
Speaker #2: We've recently taken additional pricing actions across the combined business in multiple regions to offset inflation, and we expect the benefits of pricing to ramp up in the second half of the year.
Speaker #2: Gross profit of $146.3 million increased 69 million or 89% versus the prior year on a gap basis, reflecting the Quito-Crosby acquisition, pricing and volume, as well as benefits to material costs specific to the quarter.
Speaker #2: Adjusted our SG&A, which excludes acquisition integration costs and other one-time expenses, increased by 57.1 million to $111.9 million, with a percentage of sales adjusted our SG&A declined 220 basis points to 21.1%, driven by scale benefits from the acquisition and cost synergy realization.
Speaker #2: Partially offset by the $55.2 million non-cash inventory step-up expense, the impact of the divestiture and inflation in COGS. On a gap basis, our gross margin was 27.5%, and on adjusted basis, our gross margin was 38.1%.
Speaker #2: Adjusted gross margin, which removes the impact of the inventory step-up and acquisition integration costs, improved 380 basis points year-over-year. Our SG&A expenses increased 64.5 million to $128.6 million on a gap basis, due to the addition of Quito-Crosby, higher integration costs, and increased incentive compensation expense, partially offset by cost-saving synergies.
Speaker #2: Adjusted EBITDA of $111.5 million increased 78.9 million or 242%, with an adjusted EBITDA margin of 21.0%. Adjusted EBITDA margin expanded 720 basis points year over year.
Speaker #2: Net loss in the quarter was $88.4 million or $2.05 per share on a gap basis, and the loss was primarily due to the non-cash inventory step-up amortization, interest expense, and integration costs.
Speaker #2: Adjusted our SG&A which excludes acquisition integration costs and other one-time expenses, increased by 57.1 million to $111.9 million, with a percentage of sales adjusted our SG&A declined 220 basis points to 21.1%, driven by scale benefits from the acquisition and cost synergy realization.
Speaker #2: Adjusted net income was $30.5 million or 61 cents a share up 11 cents from the prior year, primarily driven by operating profit increases already discussed, partially offset by higher interest expense, and a higher share count due to the inclusion of common shares issuable upon conversion of the preferred shares.
Speaker #2: Adjusted EBITDA of $111.5 million increased 78.9 million or 242%, with an adjusted EBITDA margin of 21.0%. Adjusted EBITDA margin expanded 720 basis points year-over-year.
Speaker #2: Free cash flow excluding deal costs in the quarter was 32.4 million up 49.7 million from the prior year, reflecting higher operating profit partially offset by higher cash interest.
Speaker #2: Net loss in the quarter was $88.4 million or $2.05 per share on a gap basis, and the loss was primarily due to the non-cash inventory step-up amortization interest expense and integration costs.
Speaker #2: Normalizing for the non-cash inventory step-up adjustment, working capital was a use of cash in the quarter as is typical for us in Q1. However, the use of cash was approximately $20 million better than the first quarter last year.
Speaker #2: We paid down 18.4 million in debt in the quarter, and reduced our credit agreement net leverage ratio by 0.2 times to 4.9 times. Debt reduction continues to be our priority for capital allocation.
Speaker #2: Adjusted net income was $30.5 million or 61 cents a share, up 11 cents from the prior year primarily driven by operating profit increases already discussed, partially offset by higher interest expense, and a higher share count due to the inclusion of common shares issuable upon conversion of the preferred shares.
Speaker #2: Our total liquidity remained strong at $567.1 million consisting of 98.4 million of cash and cash equivalents, and $468.7 million of availability on our evolving credit facility.
Speaker #2: Free cash flow excluding deal costs in the quarter was $32.4 million up 49.7 million from the prior year reflecting higher operating profit, partially offset by higher cash interest.
Speaker #2: Given our strong Q1 results and increasing confidence in the year, we are raising our outlook for fiscal 2027. Our revised guidance also reflects unfavorable foreign exchange movements impacting both sales and adjusted EBITDA, as well as continued near-term demand headwinds in EMEA.
Speaker #2: Normalizing for the non-cash inventory step-up adjustment, working capital was a use of cash in the quarter as is typical for us in Q1; however, the use of cash was approximately $20 million better than the first quarter last year.
Speaker #2: Our increased outlook for fiscal 2027 is net sales of $2.09 billion to $2.15 billion, adjusted EBITDA of $405 million to $420 million, and adjusted EPS of $1.90 to $2.10 per share.
Speaker #2: We paid down 18.4 million in debt in the quarter, and reduced our credit agreement net leverage ratio by 0.2 times to 4.9 times. Debt reduction continues to be our priority for capital allocation.
Speaker #2: Our total liquidity remains strong at $567.1 million consisting of 98.4 million of cash and cash equivalents, and $468.7 million of availability on our evolving credit facility.
Speaker #2: There have been no changes to our outlook assumptions around interest expense, amortization, depreciation, our normalized effective tax rate, and adjusted diluted share count. While we don't guide on a quarterly basis, I will call out a few points regarding the shape of the year.
Speaker #2: Given our strong Q1 results and increasing confidence in the year, we are raising our outlook for fiscal 2027. Our revised guidance also reflects unfavorable foreign exchange movements impacting both sales and adjusted EBITDA, as well as continued near-term demand headwinds in EMEA.
Speaker #2: First, we do not expect the cost benefits recognized in Q1 to continue through the rest of the year. Additionally, based on our backlog and the phasing of our project orders, we expect Q2 to be the low point for the year in sales and adjusted EBITDA.
Speaker #2: Our increased outlook for fiscal 2027 is net sales of $2.09 billion to $2.15 billion, adjusted EBITDA of $405 million to $420 million, and adjusted EPS of $1.90 to $2.10 per share.
Speaker #2: Following Q2, we expect margins to sequentially improve through the second half of the year as we realize the benefits of synergies operational efficiencies and pricing.
Speaker #2: I am encouraged by our recent results and progress on our integration, and I believe in our ability to deliver both customer and shareholder value as a scaled provider of intelligent motion solutions.
Speaker #2: There have been no changes to our outlook assumptions around interest expense, amortization, depreciation, our normalized effective tax rate, and adjusted diluted share count. While we don't guide on a quarterly basis, I will call out a few points regarding the shape of the year.
Speaker #2: Our strategy will unlock multiple avenues of growth, improve our margin profile, and generate significant free cash flow to fund debt reduction. Operator, we're now ready to take questions.
Speaker #2: First, we do not expect the cost benefits recognized in Q1 to continue through the rest of the year. Additionally, based on our backlog and the phasing of our project orders, we expect Q2 to be the low point for the year in sales and adjusted EBITDA.
Speaker #1: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, you may press 4 or 1 on your telephone keypad.
Speaker #1: Should you wish to withdraw your question, you may press 4 or 2. Once again, that is 4 or 1. Should you wish to ask a question, your first question is from Matt Summerville from DA Davidson.
Speaker #2: Following Q2, we expect margins to sequentially improve through the second half of the year as we realize the benefits of synergies operational efficiencies and pricing.
Speaker #1: Your line is now open.
Speaker #2: I am encouraged by our recent results and progress on our integration, and I believe in our ability to deliver both customer and shareholder value as a scaled provider of intelligent motion solutions.
Speaker #3: Yes. Thank you. A couple of questions. First, I'm realizing it may be a little bit of sensitivity here, but is there any way to frame up how we should be thinking about these sort of non-recurring or one-time benefits you had in the quarter, either the impact to growth margin, the impact to EBITDA?
Speaker #2: Our strategy will unlock multiple avenues of growth, improve our margin profile, and generate significant free cash flow to fund debt reduction. Operator, we're now ready to take questions.
Speaker #3: I would assume none of what you enjoyed in the quarter was contemplated in your guidance, so maybe ultimately the question could be, how much of the guide raise is really driven by those factors?
Speaker #1: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, you may press 4 or 1 on your telephone keypad.
Speaker #1: Should you wish to withdraw your question, you may press 4 or 2. Once again, that is 4 or 1. Should you wish to ask a question, your first question is from Matt Somerville from D.A. Davidson.
Speaker #3: And bearing that in mind, it'd be great to get some help as to how growth margins cadence relative to that low point in Q2 building through the rest of the year.
Speaker #1: Your line is now open.
Speaker #3: And then I have a follow-up.
Speaker #2: Thanks, Matt. Good morning. This is John speaking. Sure. I'll put some color around the material cost benefits first. And so there were some net benefits that we saw in the quarter.
Speaker #3: Yes, thank you. A couple of questions. First, I'm realizing there may be a little bit of sensitivity here, but is there any way to frame up how we should be thinking about these sort of non-recurring or one-time benefits you had in the quarter—either the impact to gross margin or the impact to EBITDA?
Speaker #2: Some of that was indeed IEPA refunds that came in very late in the quarter, so that was not contemplated or known at the time of our last call.
Speaker #3: I would assume none of what you enjoyed in the quarter was contemplated in your guidance, so maybe ultimately the question could be, how much of the guide raise is really driven by those factors?
Speaker #2: But there's also some other moving pieces in the material cost line this quarter. There were some other puts and takes in the reserves. All that did net to a benefit in the quarter we're not going to disclose the portion of the benefit related to the tariff refunds as we feel that's commercially sensitive.
Speaker #3: And bearing that in mind, it'd be great to get some help as to how growth margins cadence relative to that low point in Q2 building through the rest of the year.
Speaker #2: But what I will say is this: David said in his prepared remarks that the business on a pro forma basis expanded margins about 300 basis points year over year, so it normalizing for the acquisition and divestiture.
Speaker #3: And then I have a follow-up.
Speaker #2: Thanks, Matt. Good morning. This is John speaking. Sure, I'll put some color around the material cost benefits first. And so there were some net benefits that we saw in the quarter.
Speaker #2: And so if you exclude out sort of this benefit we got in Q1, the core business still expanded EBITDA margins by about 100 basis points in the quarter.
Speaker #2: Some of that was indeed IEPA refunds that came in very late in the quarter, so that was not contemplated or known at the time of our last call.
Speaker #2: So we're calling it about 200 basis points of the 300 was related to this one-time or the benefit-specific to the quarter, and as noted, we don't expect any more benefit from that and the rest of the year.
Speaker #2: But there's also some other moving pieces in the material cost line this quarter. There were some other puts and takes in the reserves. All that did net to a benefit in the quarter we're not going to disclose the portion of the benefit related to the tariff refunds as we feel that's commercially sensitive.
Speaker #2: In terms of there was some other pieces of your question there in terms of the cadence of the year. Do you want to comment on the guidance?
Speaker #3: I'll jump in.
Speaker #4: Good morning, Matt. So additionally, as we think about the guide and the raise, items driving the guidance raise include the fact that demand has been more encouraging than we originally anticipated when we gave the guidance.
Speaker #2: But what I will say is this: David said in his prepared remarks that the business on a pro forma basis expanded margins about 300 basis points year over year.
Speaker #2: So in normalizing for the acquisition and divestiture, and so if you exclude out sort of this benefit we got in Q1, the core business still expanded EBITDA margins by about 100 basis points in the quarter.
Speaker #4: We saw really strong short cycle demand through the end of the quarter. We also had the benefit in Q1 of the temporary opening of the Strait of Hormuz, which really helped us to move more product into the Middle East and stepped up our results in the quarter.
Speaker #2: So we're calling it about 200 basis points of the 300 was related to this one-time or the benefit-specific to the quarter, and as noted, we don't expect any more benefit from that and the rest of the year.
Speaker #4: And that obviously, we want to translate that into our full-year view. We are benefiting from improved execution and really, for the first time since the closing of the acquisition, got to see the benefits of synergy realization coming through in the P&L.
Speaker #2: In terms of there were some other pieces of your question there in terms of the cadence of the year. Do you want to comment on the yeah?
Speaker #4: And so that increased visibility gave us increased confidence in the way that we thought about our guide going forward. And then finally, as John said, those material cost benefits that were specific to the quarter weren't anticipated when we originally provided the guidance.
Speaker #4: Good morning, Matt. So additionally, as we think about the guide and the raise, items driving the guidance raise include the fact that demand has been more encouraging than we originally anticipated when we gave the guidance.
Speaker #4: And as we think about Q2 through Q4 and the progression with gross margins, just simply given the backlog and the phasing of the backlog as we think about composition and the period going forward, Q2 will be the low point for the year and we anticipate that margins will benefit as we go through the balance of the year from synergy improvements, synergy realization, both on the cost of goods line as well as in SG&A.
Speaker #4: We saw really strong short-cycle demand through the end of the quarter. We also had the benefit in Q1 of the temporary opening of the Strait of Hormuz, which really helped us to move more product into the Middle East and stepped up our results in the quarter.
Speaker #4: And that obviously, we want to translate that into our full-year view. We are benefiting from improved execution and really, for the first time since the closing of the acquisition, got to see the benefits of synergy realization coming through in the P&L, and so that increased visibility gave us increased confidence in the way that we thought about our guide going forward.
Speaker #4: And again, this year it'll be largely in SG&A benefit for the business. And then the benefits of pricing actions that we've put in place.
Speaker #4: And so a combination of those items and improved operational execution should result in a ramp as we go throughout the balance of the year, in gross margins, with that low point being Q2.
Speaker #4: And then finally, as John said, those material cost benefits that were specific to the quarter weren't anticipated when we originally provided the guidance. And as we think about Q2 through Q4 and the progression with gross margins, just simply given the backlog and the phasing of the backlog as we think about composition and the period going forward, Q2 will be the low point for the year and we anticipate that margins will benefit as we go through the balance of the year from synergy improvements, synergy realization, both on the cost of goods line as well as in SG&A.
Speaker #4: Does that answer the question, Matt?
Speaker #3: Yeah. Yeah. Yes. That's helpful. Just as a follow-up, maybe just talk a little bit more on how short cycle orders maybe cadence throughout the quarter what you're seeing in July, now that it's essentially in the books, and then how much price benefit we should expect you guys to see this year.
Speaker #3: Thank you.
Speaker #4: And again, this year, it'll be largely in SG&A benefit for the business, and then the benefits of pricing actions that we've put in place.
Speaker #2: Thanks, Matt. Yeah. So as far as the progression of short cycle orders, we did see an uptick in short cycle demand as we progressed throughout the quarter.
Speaker #4: And so a combination of those items and improved operational execution should result in a ramp as we go throughout the balance of the year, in gross margins, with that low point being Q2.
Speaker #2: And so demand on the short cycle side of the business was increasing as we went throughout the quarter. We did have some price increases that went into effect towards the end of the quarter, and we think there was some buying ahead of those price increases, which is a very normal phenomenon.
Speaker #4: Does that answer the question, Matt?
Speaker #2: Nothing that's outside of the normal range when you have a price increase, but that did drive incremental demand in the latter part of the quarter.
Speaker #3: Yeah. Yeah. Yes. That's helpful. Just as a follow-up, maybe just talk a little bit more on how short cycle orders maybe cadenced throughout the quarter.
Speaker #2: On a quarter-to-date basis, we are seeing demand in short cycle business up in the low single digits. On a quarter-to-date basis, so far this quarter, and then as it relates to pricing, and we think about pricing as we go forward through the balance of the year, we would anticipate that we'll be lapping some price benefits that we were getting last year, because we weren't we were seeing the late-stage benefits of those year-over-year increases.
Speaker #3: What are you seeing in July, now that it's essentially in the books, and how much price benefit should we expect you guys to see this year?
Speaker #3: Thank you.
Speaker #2: Thanks, Matt. Yeah. So as far as the progression of short cycle orders, we did see an uptick in short cycle demand as we progressed throughout the quarter.
Speaker #2: And so demand on the short-cycle side of the business was increasing as we went throughout the quarter. We did have some price increases that went into effect towards the end of the quarter, and we think there was some buying ahead of those price increases, which is a very normal phenomenon.
Speaker #2: But now that we're lapping those, those increases on a year-over-year basis go away, and then new increases are coming into effect. I would say that we would anticipate that they will progress as we move throughout the year.
Speaker #2: Nothing that's outside of the normal range when you have a price increase, but that did drive incremental demand in the latter part of the quarter.
Speaker #2: But putting a frame around that right now is not something that we're prepared to do. And I would anticipate for the year, we'll still see something on the 1 to 2 percent price increase total.
Speaker #2: On a seeing demand in short cycle business up in the low single digits. On a quarter-to-date basis, so far this quarter, and then as it relates to pricing, and we think about pricing as we go forward through the balance of the year, we would anticipate that we'll be lapping some price benefits that we were getting last year, because we weren't we were seeing the late-stage benefits of those year-over-year increases.
Speaker #3: Understood. Thanks, David.
Speaker #1: Thank you. And our next question is from Jon Tanwanteng from CJS Securities. Your line is still open.
Speaker #5: Hi. This is Will Umber John. Can you quantify or add some more color around the synergy realization you saw in the quarter and if your targets and speed of realization are increasing?
Speaker #2: But now that we’re lapping those, those increases on a year-over-year basis go away, and then new increases are coming into effect. I would say that we would anticipate that they will progress as we move throughout the year.
Speaker #2: Yeah. So we made good progress on a number of fronts. Organizational alignment, bringing the on a common set of organizational values and mission and vision, driving cultural alignment.
Speaker #2: But putting a frame around that right now is not something that we're prepared to do. And I would anticipate for the year, we'll still see something on the 1 to 2 percent price increase total.
Speaker #2: We also had good work that was done in the early stages of contract harmonization, and third-party cost savings. We're gaining traction on key initiatives that are maybe a little longer in terms of implementation timeframe, but we'll have meaningful impacts over time.
Speaker #3: Understood. Thanks, David.
Speaker #1: Thank you. And our next question is from John Tanwanteng from CJS Securities. Your line is still open.
Speaker #2: And as I said, really, for the first time, we were able to see as we're closing our first full quarter together, we're able to really see those benefits get measured in the P&L.
Speaker #5: Hi, this is Willumber John. Can you quantify or add some more color around the synergy realization you saw in the quarter, and if your targets and speed of realization are increasing?
Speaker #2: And it's one thing to action a synergy, and it's another thing to really see the financial benefits flowing through. And so we're really encouraged by what we're seeing and how things are flowing through.
Speaker #2: Yeah. So we made good progress on a number of fronts. Organizational alignment, bringing the teams together, getting really focused on a common set of organizational values and mission and vision, driving cultural alignment.
Speaker #2: As I said in my prepared remarks, we anticipate we'll be able to potentially outpace our plans. But we're not increasing our guidance at this point tied to synergy realization.
Speaker #2: Our current guidance would reflect what we would be prepared to offer in terms of what we'll see from those improved benefits. But certainly, our view of this is increasing in confidence as we think about our multi-year plans and what we'll deliver over time.
Speaker #2: We also had good work that was done in the early stages of contract harmonization and third-party cost savings. We're gaining traction on key initiatives that are maybe a little longer in terms of implementation timeframe, but will have meaningful impacts over time.
Speaker #3: And I'll just add that in terms of what we saw in the quarter, and then as the year progresses, most of these synergies so far are benefiting SG&A.
Speaker #2: And as I said, really, for the first time, we were able to see as we're closing our first full quarter together, we're able to really see those benefits get measured in the P&L.
Speaker #3: And so you can see that in some of the numbers I referenced in my remarks in terms of the year-over-year percent of sales. And so we're seeing some nice benefit on SG&A, and then we would expect sort of the COGS-related synergies to pick up steam as the execution continues and benefit later in the year and future years.
Speaker #2: And it's one thing to action a synergy, and it's another thing to really see the financial benefits flowing through. And so we're really encouraged by what we're seeing and how things are flowing through.
Speaker #2: As I said in my prepared remarks, we anticipate we'll be able to potentially outpace our plans. But we're not increasing our guidance at this point tied to synergy realization.
Speaker #5: That is very helpful. Thank you. And then just one more. You had some push-outs last quarter in the precision conveyance business. Did that revenue come in Q1, and what's the expectation going forward?
Speaker #2: Our current guidance reflects what we would be prepared to offer in terms of what we'll see from those improved benefits. But certainly, our view of this is increasing in confidence as we think about our multi-year plans and what we'll deliver over time.
Speaker #2: Right. No, the project-related delays that we mentioned at the end of last quarter did not materialize in shipments that we saw coming through in this quarter.
Speaker #3: And I'll just add that in terms of what we saw in the quarter, and then as the year progresses, most of these synergies so far are benefiting SG&A.
Speaker #2: And so those projects remain in backlog and are still opportunities for us as we advance throughout this year and into next.
Speaker #3: And so you can see that in some of the numbers I referenced in my remarks in terms of the year-over-year percent of sales. And so we're seeing some nice benefit on SG&A, and then we would expect sort of the COGS-related synergies to pick up steam as the execution continues and benefit later in the year and future years.
Speaker #5: Thank you.
Speaker #1: Thank you. And our next question is from James Kirby from JPMorgan. Your line is still open.
Speaker #3: Hey, good morning, guys. Thanks for the time. Just starting on the free cash flow side, clearly a significant step up over what the seasonal Q1 is.
Speaker #5: That is very helpful. Thank you. And then just one more. You had some push-outs last quarter in the precision conveyance business. Did that revenue come in Q1, and what's the expectation going forward?
Speaker #3: Can you just maybe talk about the working capital driver there? If that is sustainable and maybe if you can reconfirm the deleveraging timeline. Which was, I believe, under four by the end of year two.
Speaker #2: Right. No, the project-related delays that we mentioned at the end of last quarter did not materialize in shipments that we saw coming through in this quarter.
Speaker #2: Yes. Confirming that, we still feel very good about the deleveraging profile of the business. In terms of what we expect to see and the next few quarters and into fiscal 28, and yes, we continue to stay below 4X by fiscal 28.
Speaker #2: And so those projects remain in backlog and are still opportunities for us as we advance throughout this year and into next.
Speaker #5: Thank you.
Speaker #1: Thank you. And our next question is from James Kirby from JPMorgan. Your line is still open.
Speaker #2: In the quarter itself, we did see some as you're noting, some improved efficiencies on working capital year over year. Say most of that was on the inventory side.
Speaker #3: Hey, good morning, guys. Thanks for the time. Just starting on the free cash flow side—clearly, I'm seeing a step up over what the seasonal Q1 is.
Speaker #2: I still see opportunity on the DSO, DPO side. That's more to come, as opposed to in the numbers. Yeah, I'd say capex was maybe a little lighter than our original expectations for the quarter, and that helped the cash flow a bit.
Speaker #3: Can you just maybe talk about the working capital driver there? If that is sustainable and maybe if you could reconfirm the deleveraging timeline. Which was, I believe, under four by the end of year two.
Speaker #2: And then obviously, the benefit of some of these material costs that I referenced that benefited the P&L, some of that did flow through to cash as well given that there was some refund activity in the quarter.
Speaker #2: Yes. Confirming that, we still feel very good about the deleveraging profile of the business. In terms of what we expect to see and the next few quarters and into fiscal 28, and yes, we continue to stay below 4x by fiscal 28.
Speaker #3: Thanks, John. That's helpful. And then just looking at the standalone businesses, it looks like Columbus Continuing Grew low double-digit sales. Akito, from my math, grew high single digits.
Speaker #2: In the quarter itself, we did see, as you're noting, some improved efficiencies on working capital year over year. I'd say most of that was on the inventory side.
Speaker #3: Is that consistent with where you guys saw the businesses operating call it a quarter or two quarters ago, when you guys were contemplating kind of synergies here?
Speaker #2: I still see opportunity on the DSO and DPO side. That's more to come, as opposed to being in the numbers. Yeah, I'd say capex was maybe a little lighter than our original expectations for the quarter, and that helped the cash flow a bit.
Speaker #3: And is that more macro-driven or is there an operational improvement embedded in where you guys are operating at these levels right now?
Speaker #2: Yeah. Thanks, James. As you look back at the history of both companies, the neither company was growing on a combined basis or an individual basis at those same rates as we look back a couple of quarters or into the last couple of years.
Speaker #2: And then obviously, the benefit of some of these material costs that I referenced that benefited the P&L, some of that did flow through to cash as well given that there was some refund activity in the quarter.
Speaker #2: I do believe that the combination of our two businesses provides us with opportunities as we're looking at both cross-selling as well as market share opportunities, increasing share of wallet through better customer service, more streamlined approach.
Speaker #3: Thanks, John. That's helpful. And then just looking at the standalone businesses, it looks like Columbus Canyon grew low double-digit sales. Akito, from my math, grew high single digits.
Speaker #3: Is that consistent with where you guys saw the businesses operating? Let's call it a quarter or two quarters ago when you guys were contemplating kind of synergies here.
Speaker #2: And so I think there is an embedded value that the combination of the two businesses can realize. And I would say that our high degree of focus as we've talked about in the past is on customer experience and improving operational performance to support our customer outcomes.
Speaker #3: And is that more macro-driven or is there an operational improvement embedded in where you guys are operating at these levels right now?
Speaker #2: And we've remained both focused on our customers from an improvement within our own core operations perspective, but also from a customer-facing resources perspective doing everything we can to make sure that we're being responsive and being supportive and limiting the disruption on that front.
Speaker #2: Yeah, thanks, James. As you look back at the history of both companies, neither company was growing, on a combined basis or an individual basis, at those same rates as we look back a couple of quarters or into the last couple of years.
Speaker #2: I do believe that the combination of our two businesses provides us with opportunities as we're looking at both cross-selling as well as market share opportunities, increasing share of wallet through better customer service, more streamlined approach.
Speaker #2: And I think that that is starting to pay dividends. And we're encouraged by the demand environment that we're in right now. And notably in the Americas, and in Asia, with some continued softness in Europe.
Speaker #2: And we're hopeful that as the Middle East settles out, things will start to improve there and we'll have even more opportunity across the global landscape.
Speaker #2: And so I think there is an embedded value that the combination of the two businesses can realize. And I would say that our high degree of focus as we've talked about in the past is on customer experience and improving operational performance to support our customer outcomes.
Speaker #3: Got it. Thank you.
Speaker #1: Thank you, ladies and gentlemen. Once again, that is star one should you wish to ask a question. And your next question is from Steve Ferrazzani from CDOT.
Speaker #2: And we've remained both focused on our customers from an improvement within our own core operations perspective, but also from a customer-facing resources perspective doing everything we can to make sure that we're being responsive and being supportive and limiting the disruption on that front.
Speaker #1: Your line is still open.
Speaker #4: Good morning, David. Welcome, John. There's a lot of math here. I'm trying to work through David, and that's not my strong point. When I think about the 21% EBITDA margin, and you said you got about 100 basis points specific to the quarter, so that puts it around 20%.
Speaker #2: And I think that that is starting to pay dividends. And we're encouraged by the demand environment that we're in right now. And notably in the Americas, and in Asia, with some continued softness in Europe.
Speaker #4: If I take the midpoint of your adjusted EBITDA and sales guidance for the year, you're guiding for a full year in 19 and a half percent.
Speaker #2: And we're hopeful that as the Middle East settles out, things will start to improve there, and we'll have even more opportunity across the global landscape.
Speaker #4: But you've talked about the price increases, the synergy realization, why would it be lower full year?
Speaker #3: Got it. Thank you.
Speaker #3: Hey, Steve. As John, I'll jump in. I think your math is pretty good so far. So you're right. I mean, the midpoint of the guide is 19 and a half, and then we were at 21 in Q1.
Speaker #1: Thank you. Ladies and gentlemen, once again, that is star one should you wish to ask a question. And your next question is from Steve Verrazzoni from CDOT.
Speaker #3: So that would imply the year to go or rest of year is below that. So I think the math at the midpoint is around 18.9% for the rest of the year.
Speaker #1: Your line is still open.
Speaker #4: Good morning, David. Welcome, John. There's a lot of math here. I'm trying to work through David, and that's not my strong point. When I think about the 21% EBITDA margin, and you said you got about 100 basis points specific to the quarter, so that puts it around 20%.
Speaker #3: There are some moving pieces in there. There's some FX. I mentioned early in the call that relative to our last guide, that is a headwind.
Speaker #4: If I take the midpoint of your adjusted EBITDA and sales guidance for the year, you're guiding for a full year in 19 and a half percent.
Speaker #3: It's order of magnitude about 30 basis points of headwind. That we see for each quarter for the rest of the year relative to our last outlook.
Speaker #4: But you've talked about the price increases and the synergy realization. Why would it be lower for the full year?
Speaker #3: I'd say also the EMEA piece that we called out early in the call that the orders were down year over year in Q1. And so in Q2, we expect to see some sales softness in EMEA, which has sort of a knock-on effect of deleveraging on margin and unabsorbed overhead there.
Speaker #3: Hey, Steve. As John, I'll jump in. I think your math is pretty good so far. So you're right. I mean, the midpoint of the guide is 19 and a half, and then we were at 21 in Q1.
Speaker #3: So that would imply the year to go or rest of year is below that. So I think the math at the midpoint is around 18.9% for the rest of the year.
Speaker #3: So you got a little bit of pressure. And then we of course, as we mentioned, we got hopefully some pricing upside coming to the back half of the year.
Speaker #3: There are some moving pieces in there. There's some FX that I mentioned early in the call that relative to our last guide that is a headwind.
Speaker #3: And in general, I'd say we're we flowed through some of the benefits from the cost from Q1 into the full year guide. We hope that there's upside in all of this.
Speaker #3: And at this point in the year, we feel like we had a good quarter. And we want to wait and see how things progress a little bit and hopefully there'll be some upside to what we're talking about from a margin standpoint.
Speaker #3: It's order of magnitude about 30 basis points of headwind. That we see for each quarter for the rest of the year relative to our last outlook.
Speaker #3: I'd say also the EMEA piece that we called out early in the call that the orders were down year over year in Q1. And so in Q2, we expect to see some sales softness in EMEA, which has sort of a knock-on effect of deleveraging on margin and unabsorbed overhead there.
Speaker #4: Got it. That's helpful. Helpful that you restated the you're at leverage target. I'm just trying to think about as you've gotten a better handle on the Akito Crosby assets that you've acquired.
Speaker #4: When you're looking at them now, are there any portion of that that maybe you want to ramp up investments that might drive higher capex percentage of sales above traditional because you think some of those assets maybe are underinvested or there's improvements you can make?
Speaker #3: So you got a little bit of pressure. And then we of course, as we mentioned, we got hopefully some pricing upside coming in the back half of the year.
Speaker #3: And in general, I'd say we're we flowed through some of the benefits from the cost from Q1 into the full year guide. We hope that there's upside in all of this.
Speaker #2: Yeah, it's a good question, Steve. Good morning. And in terms of the investment profile, I would say that we still think that we're within our capex outlook for the year as we think about our capex spend as we anticipate progression throughout the balance of the year as John said, we were slightly underspent in the first quarter.
Speaker #3: And at this point in the year, we feel like we had a good quarter. And we want to wait and see how things progress a little bit and hopefully there'll be some upside to what we're talking about from a margin standpoint.
Speaker #2: And as we think about the balance of the year, we think we're within the guide. I do think there are productivity improvement opportunities in the portfolio.
Speaker #4: Got it. That's helpful. Helpful that you restated the you're in that leverage target. I'm just trying to think about as you've gotten a better handle on the Akito Crosby assets that you've acquired.
Speaker #2: And opportunities continue to expand margins, increase the efficiency of our operations, and our execution. Particularly as we look at product lines that are specifically targeted for growth and when I think about the entirety of the portfolio, that we have within the Akito Crosby business, there are a few really attractive areas that we see sustainable growth opportunities for.
Speaker #4: When you're looking at them now, are there any portions of that where maybe you want to ramp up investments that might drive a higher CapEx percentage of sales above traditional levels because you think some of those assets maybe are underinvested or there are improvements you can make?
Speaker #2: Yeah, it's a good question, Steve. Good morning. And in terms of the investment profile, I would say that we still think that we're within our capex outlook for the year as we think about our capex spend.
Speaker #2: And the hardware lifting hardware part of the business is an area where we have two sides to that portfolio, one that's a legacy Columbus McKinnon portfolio and one that is a Akito Crosby portfolio.
Speaker #2: As we anticipate progression throughout the balance of the year, as John said, we were slightly underspent in the first quarter and as we think about the balance of the year, we think we're within the guide.
Speaker #2: The synergy value of them operating more seamlessly in alignment and the capacity opportunities and automation opportunities around that business could be areas where we may want to put some capex and drive productivity.
Speaker #2: I do think there are productivity improvement opportunities in the portfolio, and opportunities to continue to expand margins, increase the efficiency of our operations, and improve our execution.
Speaker #2: Particularly as we look at product lines that are specifically targeted for growth. And when I think about the entirety of the portfolio, that we have within the Akito Crosby business, there are a few really attractive areas that we growth opportunities for.
Speaker #4: Right. Thanks, David. Thanks, John.
Speaker #1: Thank you. That concludes our question and answer session for today. I will now hand the call back over to Mr. Wilson for the closing remarks.
Speaker #2: Thank you, Jenny. And we appreciate everyone joining us today. We delivered a solid first quarter and are pleased with the early-stage progress as we advance the integration of Columbus McKinnon and Akito Crosby.
Speaker #2: And the hardware, lifting hardware part of the business is an area where we have two sides to that portfolio, one that's a legacy Columbus McKinnon portfolio and one that is a Akito Crosby portfolio.
Speaker #2: Our positive start to the year and the traction we were gaining with targeted commercial operational and synergy realization initiatives enabled us to raise our full year guidance.
Speaker #2: The synergy value of them operating more seamlessly in alignment and the capacity opportunities and automation opportunities around that business could be areas where we may want to put some capex and drive productivity.
Speaker #2: We are making meaningful progress in targeted areas and remain focused on what we can control. Unlocking margin expansion through identified growth opportunities and synergy realization and generating significant cash flow to reduce debt.
Speaker #4: Great. Thanks, David. Thanks, John.
Speaker #2: With improved scale and an enhanced competitive position, we are a stronger business and are more confident than ever in our ability to create value for our customers and shareholders.
Speaker #1: Thank you. That concludes our question-and-answer session for today. I will now hand the call back over to Mr. Wilson for the closing remarks.
Speaker #2: Thank you again for your time and interest in Columbus McKinnon. As always, please reach out to our investor relations team with any questions. Thank you.
Speaker #2: Thank you, Jenny, and we appreciate everyone joining us today. We delivered a solid first quarter and are pleased with the early-stage progress as we advance the integration of Columbus McKinnon and Akita Crosby.
Speaker #1: Thank you, ladies and gentlemen. That concludes our question and answer session for today. And also, a conference call. Thank you all for joining. We may now disconnect your line.
Speaker #2: Our positive start to the year and the traction we were gaining with targeted commercial operational and synergy realization initiatives enabled us to raise our full year guidance.
Speaker #2: We are making meaningful progress in targeted areas and remain focused on what we can control—unlocking margin expansion through identified growth opportunities and synergy realization, and generating significant cash flow to reduce debt.
Speaker #2: With improved scale and an enhanced competitive position, we are a stronger business and are more confident than ever in our ability to create value for our customers and shareholders.
Speaker #2: Thank you again for your time and interest in Columbus McKinnon. As always, please reach out to our Investor Relations team with any questions. Thank you.
