Good morning and welcome to Columbus McKinnon First Quarter Fiscal 2025 Earnings Conference Call. My name is Renju and I will be your conference operator today. As a reminder, this call is being recorded. I would now like to turn the conference over to Kristy Moser, Vice President of Investor Relations.

Thank you. Good morning and welcome, everyone, to Columbus McKinnon's first quarter fiscal '25 earnings conference call. The earnings release and presentation are available for download on our Investor Relations website at investors.cmco.com. On the call with me today are David Wilson, our President and Chief Executive Officer; and Greg Rustowicz, our Chief Financial Officer. In a moment, David and Greg will walk you through our financial and operating performance for the quarter. 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. 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. I'd also like to remind you that Management will refer to certain non-GAAP financial measures. You can find reconciliations of the most directly comparable GAAP financial measures on the company's Investor Relations website and at its filings with the Securities and Exchange Commission. Please see our earnings release and our filings with the Securities and Exchange Commission for more information. Today's prepared remarks will be followed by a question and answer session. With that, I'll turn the call over to David.

Thank you Kristy, and good morning, everyone. Columbus McKinnon delivered a solid quarter to start the fiscal year, achieving 2% sales growth, which was at the midpoint of our guidance range and adjusted EPS of $0.62, which was at the top end of our guidance range. Areas of strength included precision, conveyance and lifting, which were up 10% and 3%, respectively. Short cycle sales remained healthy and the project business was up mid-single-digits. Adjusted gross margin expanded by 110 basis points year-over-year to 38%, a record first quarter and the second highest quarterly result in company history as we remain focused on performance improvement and 80/20. And we delivered adjusted EBITDA margin of 15.6% even as we absorbed $1.2 million of unique costs related to launching regional strategic partner conferences in Europe and the Americas that are aligned with our commercial and customer experience initiatives. These results are underpinned by the hard work and continued execution by our 3,600 Columbus McKinnon team members as we navigate a dynamic macroeconomic environment and leverage commercial initiatives to advance in vertical markets that are experiencing secular growth and benefiting from megatrends. We are growing, generating cash with normal seasonality and accelerating debt repayment. These actions are adding capacity to reinvest in our growth framework. We have multiple levers to drive more scale and further enhance our position as a leader in intelligent motion solutions for material handling with a carefully curated offering for our customers. We believe that increasing scale will become a compounding advantage as we execute our strategy over time. Advancing to Slide 4, we delivered mid-single-digit order growth across most areas of our business, with the exception of our crane automation business where we saw softness and are lapping a strong prior-year-comparable period. Precision conveyance orders were up 5%, driven…

Thank you, David. Good morning, everyone. Turning to Slide 6, we delivered first quarter net sales of $239.7 million, up 2% from the prior-year period. This was in line with the guidance we provided last quarter of low single-digit growth. We delivered $2.1 million of organic growth or 0.9%, with realized pricing gains more than offsetting a slight volume decline. Montratec revenue in April and May contributed $2.7 million to sales or 1.1% of the increase. As the acquisition date was May 31st, beginning in June, their results are no longer included as acquired revenue. As a reminder, Montratec revenue has variability from period to period, given the project nature of the business. Foreign currency translation was unfavorable this quarter by $600,000 or 0.2%. Sales growth in the quarter was largely driven by precision conveyance which was up 10% from the prior year. As David discussed, we are encouraged with our pipeline of opportunities for this platform as we have significant opportunities on the horizon with both our U.S. precision conveyance business as well as Montratec. Our project business also contributed to sales growth in the quarter as it was up 4%, driven by strength in our STAHL branded product with sales into the oil and gas vertical. Offsetting this growth was our short-cycle business which was down 2%, although I would point out that short-cycle orders were up 3% in the quarter as we advanced customer experience initiatives and captured market share. In the U.S., sales were up slightly in the quarter with price offsetting lower volume as we benefited in the prior year from backlog reduction. Outside of the U.S., sales increased by 5% on a constant currency basis. This was primarily the result of Montratec acquired revenue and organic growth which contributed 3% and 2% of sales…

[Operator Instructions] The first question comes from the line of James Kirby with JPMorgan Chase. Please go ahead.

Hi, good morning guys. Just wanted to start with the second quarter guidance. In the context of the full year guidance, is it safe to say that the second quarter will be the lowest point of the year, or is it too early to tell kind of what the back half holds?

No, that's what we expect, James.

Got it. And I guess off the same question, you mentioned the moderating benefit from pricing. What is embedded in the second half of the year. I assume we take another step down, maybe next quarter in 2Q. But is there anything in the back half of the year that gives you confidence that pricing might return to strength?

I would say, James, that we have a position of strength as it relates to pricing, typically, and that we do outpace inflationary costs with our price adjustments. And so I don't believe we're in a position of weakness relative to pricing. I just think that the point that we're making is that pricing has moderated in terms of the impact relative to the lower inflationary environment that we're in. And so while I don't expect pricing to have a material impact on the second half of the year, we do believe that it'll be outpacing the impact of in the inflationary pressures that we would see.

And James, I would just add that in our North American lifting business, our price increases took effect in the month of June, and so there's backlog still priced at old pricing. So we do expect pricing, as we alluded to, at the end of the fourth quarter to moderate as inflation has come down, but we would expect it to be in that 1% to 2% range for the year. So we would see it modestly higher going forward as the price increases take effect.

Got it. That makes sense. I appreciate it, Greg. Thanks.

Thank you. Next question comes from the line of Matt Summerville with D.A. Davidson. Please go ahead.

A couple questions. So I guess first, with the second quarter dynamic, I guess maybe you weren't sure which quarter this was going to happen 90 days ago, but I guess why not get out in front and articulate that the second quarter was going to be a little bit of an air pocket on the move? And then similarly, that implies a pretty big and uncharacteristically big second half of the year. So help us get comfortable that the full year guide on the bottom line is still achievable.

Yes, absolutely, Matt, fair enough. And in terms of the timing, we're managing the business. We have employees that we need to be sensitive to. Obviously, we can't get out ahead of that with that communication and articulate that detail until we're ready to do it. It has implications on notifications that we need to make relative to the WARN act and other related filings. So we communicate that when we're ready to do so. We've been very clear about the fact that we're marching towards a multi-action plan that results in 200 basis points of expansion. And so the second half of the year now obviously has a ramp relative to the first half, but it's well within the range of what we think is achievable. It's a 6% growth with a modest gross margin expansion. And we have, as we indicated in our previous discussions, an elevated backlog and order rates that we think will support that outcome. And so, as we expect backlog to moderate or normalize over the balance of the year and the order rates that we referenced in our prepared remarks earlier, we think that we'll be positioned to execute on that plan for the rest of the year.

And Matt, just to add on from an EPS perspective, we will benefit from interest expense savings as we've repriced our Term Loan B back in March, and we've been very aggressive in paying down debt. We would also expect incremental gross margin expansion. We do expect that by the fourth quarter, we should start to benefit from the facility consolidation that we announced today. So we feel very confident with our guidance overall.

As I think about the second quarter, can you maybe articulate what the top and bottom line impact, the stuff you can't non-GAAP out associated with this move? Is there a way to parse out the financial impact on the P&L in the quarter from this? I'm just going to generally generically call it sort of disruption, if you will.

Yes. So it's really a top line issue for us, Matt, from a duplicate cost, from a moving cost restructuring cost, all of those costs, asset impairments, and we've laid out a number of those in the 8-K that was filed this morning. Those will all get adjusted out. And it's really the top line impact with just disruption from a facility where people were notified very recently that their jobs are going to end here. And so that's going to have an impact potentially on productivity and our ability to maintain our typical delivery performance. And we're obviously going to try to do better on that. But it's just we would expect, and I guess we're being prudent with the idea that there is going to be some amount of disruption.

Got it. Thanks, Greg.

Thank you. Next question comes from the line of Steve Ferazani with Sidoti & Company. Please go ahead.

Hi, good morning, everyone. This is Kyle May on for Steve. Just wondering if you could talk about any updates on cross selling of new acquisitions and if you found traction for the Montratec outside of its previous core markets.

Yes, absolutely. So, Kyle, good morning. We've had good success at training our workforce around the world to represent the broader precision conveyance portfolio. And we've been building a nice pipeline of opportunities beyond geographies that that business has serviced as well as we expect to as we go forward. And so we've got a funnel of opportunities that are quoted and active. That is around $5 million in the U.S. right now for that product line. We did close an opportunity with a prescription fulfillment service provider that we communicated last quarter. That was a nice large order, and it's one of several that could come that are not included in the number that I just gave you, that could come over time. And so we're broadening their reach into areas from a footprint perspective and market perspective that go beyond where they've been able to play. And most recently, what we're really excited about is that we've really begun to demonstrate our specific application advantages related to the battery production market with Montratec. And so that led to the PowerCo order that we referenced in the prepared remarks. And there's a nice runway of opportunity for those expansion investments that they'll be making over time, as well as others related to that very attractive end market.

Got it. That's helpful. And my next question, cash conversions topped 100% for the last four quarters. Is that something that you can maintain at or above 100%.

We think we can, Kyle and it's because, we are a CapEx light company, and just with the cash generation capability of the company, we should be 100% and north of 100%.

Okay, great. Thanks for the time.

Thanks, Kyle.

Thank you. Next question comes from the line of Jon Tanwanteng with CJS Securities. Please go ahead.

Hi. Good morning. Thank you for taking my questions. Greg, I was wondering if you could give a little bit more specificity as to the revenue impact from the move in Q2. Also, were there any poll ins in the Q1 to the extent you anticipated the move, and how much do you think is pushing out to Q3 and beyond. I guess what I'm trying to get at is what the normalized run rate is expected to be, assuming things go as planned.

Yes. So, John, we would expect that there will be some disruption. We've put a lot of effort into planning for this, but nonetheless, we do think there is going to be some impact. It's in the order of magnitude of probably a couple million dollars, we would expect.

Okay. And do you expect that pent up demand, I guess, to be served in Q3 pretty quickly, or does that customer go away, I guess, to a different provider if they can't get it?

Now, John, this is David. We'd expect that to be made up for in Q3 or at worst case, in Q4 and come back in the year. And we obviously are maintaining a close proximity to our customers and communicating with them related to these changes and ensuring that we have the right kind of service levels with all the pre planning work that we've done both in Mexico and at our existing facility. This is prudent as we plan and think about the impact that could come from these moves. We're confident in the plan that we're executing, but obviously, we have to be sensitive to the fact that there could be some disruption in the period. And then there's a level of backlog phasing that impacts the revenue profile of the second quarter based on the order rates and the timing of orders that came in in the first quarter. And so our project backlog phasing has an impact on the top line in the second quarter as well as we're advancing through this quarter.

Got it. That's helpful. My second question just, I think you had previously talked about your book-to-bill, likely to be below 1 for the year. Just as you burned off backlog, it was above 1 this quarter. It looks like it's going to be above 1 in Q2 with the revenue down and orders-to-date being better. Just wondering how you're thinking about the rest of the year beyond that, and if there's anything that's different from what you expected.

We remain really encouraged with the funnel of activity that we're managing and the opportunities that we think are realistic for us to close on. We're obviously maintaining a focus, as I said in my prepared remarks, on what we can control. So we're executing on our commercial initiatives and our customer experience initiatives. We feel like that is resulting in some attractive opportunities and thus far we've had a level of success with that. We remain encouraged, but we're maintaining the guidance that we set at the beginning of the year and as I said earlier, remain cautiously optimistic in our ability to achieve those.

Okay, great. Thank you guys.

Thanks, John.

Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Mr. Wilson for closing comments.

Thank you, everyone, for joining us today. Our team continues to execute our strategic plan, improve our customers' experience, and make significant progress on our simplification initiatives. I'd like to extend my personal thanks to our entire team for their dedication and the relentless execution that enabled us to begin fiscal '25 with strong results. In our first quarter, we delivered year-over-year sales growth, expanded gross margin, secured new customer wins, increased backlog with a book-to-bill ratio in excess of 1, and accelerated debt repayment. We also announced the continuation of our footprint simplification plan and the consolidation of our North American Linear Motion facility into our Monterrey, Mexico Manufacturing Center of Excellence. This is an important next step along our journey to deliver 200 basis points of gross margin expansion by fiscal year '27. Finally, our team remains focused on the prioritized initiatives that will enable us to achieve our growth and financial performance objectives. We're encouraged by the pipeline of opportunities we see in our funnel, continue to be optimistic about our prospects, and are reiterating our full year guidance. Thanks for investing your time with us today. As always, please reach out to Kristy if you have any questions.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.