Thanks. Appreciate it, Kevin.
We'll pass it on to David for opening remarks.
Okay, perfect. Really glad you're here. Thanks for your interest in Columbus McKinnon. I have a few brief slides that I want to just walk you through from an introductory standpoint, and of course, we'll go through some Q&A with Kevin, and I'm sure we'll open it up to the audience for questions as well. Just in terms of safe harbor statement, we've got one here, but a little bit of information on Columbus McKinnon. We are a leader in the provision of intelligent motion solutions for material handling. We do that through providing lifting, conveyance, automation and linear motion products into critical applications for our customers.
We help customers move materials, help them manufacture materials, and if you think about an environment where labor scarcity, on-shoring, the need for more automation and productivity tools is increasing, we're in a position where we're providing support to manufacturers who are making products that people want to buy. That ranges across a number of industries. Some very highly secular, growth-oriented, and some that might be a little bit more cyclical. With the addition of the acquisition we just completed with Kito Crosby, we've added a much more consumables-based portion of the portfolio that is more resilient and drives, we think, a better portfolio overall. From a scale perspective, we're about $2 billion in revenue, a little bit above that. We have about 19% EBITDA margins in the portfolio. Last year, we generated $68 million of cash flow, and we are a very cash flow-oriented business.
Obviously, we're focused on debt repayment at this stage, given the work that we've done to bring our strategic portfolio together. We serve a $35 billion total addressable market across some very attractive platforms. First is lifting hardware and consumables. This is the piece of the business that is low ASP, highly consumable, about $7.1 billion of TAM. Hoist and cranes, also part of our what we call lifting solutions portion of the portfolio at $14.5 billion. Precision conveyance, highly attractive set of products that are tied to more secular growth markets. We serve pharmaceutical, food and beverage, e-commerce, general industrial and automation markets. A $6.1 billion TAM. Automation, more broadly, to automate everything within the portfolio. $4.6 billion of TAM. Linear motion. Think about linear indexing or positioning, high precision.
We do everything from helping railways service rail cars and rail depots to helping to position the anti-missile defense systems that exist around the world. You can imagine in this environment, there's really good demand for those type of solutions that require our products. As you have read, we're advancing our strategic plan. We acquired Kito Crosby in February, and in parallel with that, secured permanent financing at very attractive and flexible terms. We have fixed rates for about 76% of our total debt, and we've, since the acquisition, realigned our leadership team, established a blended organization with a team of people that are highly motivated and organized in a way that's executing on our synergy attainment goals, which we've actioned a number of, and we're very confident in the delivery of our total set of objectives. We continue to integrate the go-to-market strategy.
We've given guidance for the year that is out now, and we'll talk a little bit more about that, but it's at roughly $2.1 billion, at the center point, $400 million of EBITDA and an adjusted EBITDA margin of 19.2%. There's tremendous synergy realization potential for the business. I won't cover this chart, but our strategy is focused on being market-led, operationally excellent, customer-focused, by realizing synergies and integrating our portfolio, we believe we're going to create outsized returns for our investors. I mentioned some tailwinds to the market. This summarizes some of those as well. These slides are out on the website if you wanted to go back and access them. I think this slide is important for me to pause on for a second and just talk about the investment thesis for the company.
This is a company that's well-positioned to deliver outsized revenue growth. I think from a margin expansion perspective, we have an incredible runway of opportunity through synergy realization, as well as through organic initiatives within the portfolio to drive continued margin expansion. We have great cash flow characteristics, and we have a history of repaying debt on an accelerated basis and de-levering rapidly, which is what we're heavily focused on right now. If I go to the final page, you can see this is a slide that highlights our de-levering profile and what we've done over the past several years as we've made acquisitions, and how we've accelerated debt reduction. We're not just talking about doing something. It's what we've repeatedly done in each one of the debt raises we've gone through and how we've handled things in the subsequent quarters and years.
With that, I'll hand it back to Kevin, and I'm happy to take some questions.
Great.
Thank you.
Now that you're about four months past the closing of the Kito Crosby acquisition, has there been any surprises or new opportunities?
We're generally very pleased with how things have been going. We're making great traction at bringing the organizations together. We set up a day one organizational structure. We've done a lot of work around culture. For example, we have 7,000 employees. We surveyed 1,700 employees. We've established cultural pillars at which we're integrating and moving the business forward to harmonize our cultures. We've established new mission vision values based on a lot of work by a cross-functional team at all levels of the company, rolling that out as we speak. I've been incredibly pleased with the engagement across the team of people that I lead every day to drive the integration results that we're beginning to realize. Really pleased with things overall. I'd say surprises would be, I guess, the overall enthusiasm of the engagement, higher than I would've expected.
I think there's more synergy opportunities than we originally anticipated, and some of which are tied to the legacy portfolio companies that we acquired just amongst themselves. Kito and Crosby in their integration work, there's more opportunity there than we had originally anticipated. Not a lot to talk about beyond that, just really feel good about where we are. We're chopping the wood. We realize that this is a bit of a show me story, and we're prepared to show our investor base what we're doing.
Got it. You talked about the synergy piece, maybe double-clicking on that, have there been any early wins that you could share on achievement of cost synergies? Are there largely SG&A, or should there be benefits to COGS also?
Yeah. We'll expect to see benefits to both. The SG&A values will come sooner than the COGS improvements. Both are material. On the SG&A front, we established a day one org structure and realigned the leadership team, and there were a lot of costs that are exiting the business tied to that. We've also done next wave actions relative to realignment of resources within the business, we're seeing early stage value that is being generated through SG&A cost reductions there. We've also harmonized a number of contracts. You can think about cost to the business that you have duplicate costs across two different companies that when you put them together, you can harmonize and get scale benefits.
Insurance cost premiums, healthcare costs related to 401(k) plans, costs related to IT licensing fees, things that are benefits that we could get relatively quickly and we've negotiated, those are starting to come into the business. More broadly, we launched RFP processes day one for materials and freight and other costs that run through the business. As you get those new contracts in place tied to the RFP process, we end up in a position where we have to work through inventory, reduce the inventory we have on hand, and then get to the benefit over time. Those are a little bit longer in terms of the timeframe to hit the P&L. Those are well underway. Also, factory footprint consolidations are a big part of the opportunity here, and we probably have 20% of our footprint that presents an opportunity for simplification.
As we look at and phase those over time in a thoughtful way, not to be disruptive to our execution or to our customer experience, we're going to see those benefits out over the course of the next two to three years in a way that will meaningfully impact our COGS.
You've said that there'd be likely upside potential from revenue synergies. How should we think about the primary drivers of the synergies, and what's the rough sizing?
We are not sharing a size profile at this point. We want to be careful about being too specific as it relates to competitive dynamics in the market. We want to preserve our position in the market. I would say that we're very encouraged. We've got a number of examples that we've already realized in terms of revenue synergies, all of which are upside to our plan, none of which are baked into the targets that we've communicated externally. We see synergy opportunities from a revenue perspective because of our complementary geographic footprints. We have a strong presence in the European markets and the Middle Eastern markets within Columbus McKinnon that complements the European position for Kito Crosby. The Kito Crosby team has a very strong position in Asia, that complements our smaller or less developed position in Asia and Columbus McKinnon.
We're supporting one another in other geographies in Latin America, we overlap quite a bit in the U.S. In all areas, there are opportunities to cross-sell, to represent the portfolio and markets that have been underserved, we're doing that today effectively. To go and capture more share of wallet in areas where we do overlap because we're simpler and easier to do business with as a scaled player in those markets. I really do believe that there's a great opportunity for us as we pursue revenue growth, I think that the size of the opportunity will be material, but it's something that we're wanting to put more points on the board or more runway behind us as we execute on those before we're able to disclose those publicly.
Got it. Over the past few years, we've had volatility in demand across the industry. How should we think about the company's growth post-acquisition and divestiture in fiscal 2027 and over the next few years?
Yeah. We see the markets as remaining fairly robust in terms of inquiries, quotations, demand leading to orders. I'd say the order activity in the U.S. extending from those inquiries and quotations has been robust, and we're very pleased with, particularly on the short cycle side of the business, which is great. Asia has remained robust. Europe has been softer. Europe has had, I think, more headwinds, and I think there's more downstream effects of the Middle East conflict that is ongoing. We're encouraged by demand generally. We reported in our prepared remarks in our conference call that orders were up mid-single digits for the total enterprise, combined Kito Crosby and Columbus McKinnon, mid-single digits through the first two months of our first quarter, which is between April and June. We feel good about the demand profiles that we're seeing in the business right now.
There are a number of industries that are performing very well. We think that macro trends tied to labor scarcity, onshoring, automation requirements, infrastructure investment, are going to be tailwinds to our growth over time, in addition to the synergies that I mentioned that I think we can realize over time. I really do believe that the growth trajectory of the company will be in a position of higher levels of performance, given the combination of the two companies as we go forward.
Got it. Maybe we can double-click on the different end markets and the strengths and weaknesses you're seeing in those end markets.
Yeah, sure. I would say that the defense spending is an area of strength. We certainly see strength in the steel markets. We see strength in heavy equipment. E-commerce, pharmaceuticals, and food and beverage are strong. Battery production is increasing. Electronic spend for us is increasing. I would've said that automotive was soft, but it's starting to pick up-
Sure.
in recent months. General demand is relatively high. Clearly, tech spending on data centers and AI is driving the overall economy right now.
Yep.
We're participating in that as well. Every data center that's built is built using cranes and rigging equipment that we supply. We have demand that is tied to the construction of data centers. We also have demand that is tied to fixed installation of our hoist and crane solutions in those facilities that are set up to provide data center support.
Got it. Can we double-click on the data center piece? How much of the business is tied to that? How much of the demand is-
Yeah, it's not something that we. On a materiality basis, I wouldn't call it material at this point.
Yep.
I would say that if you think about the size of spend for some of the items that go into data centers more generally, these are big pieces of cooling equipment.
Right.
Big pieces of infrastructure equipment. We provide relatively low ASP products into the support to make those. If you think about our first quarter to date, reference to mid-single digit growth in orders through the first two months of our period, I don't think the general industrial economy is growing at mid-single digits in total. I think, that'll give you a sense for the fact that we're getting support outside of just general industrial activity.
Right.
In our order activity.
Got it. On the last earnings call, you mentioned that margins in Q4 were impacted by some short-term dynamics, and you expect an improvement over the course of the year. How should we think of the timing of those improvements?
Yeah, I guess, I would say that we're going to see continued margin expansion as we move through the year. Both actions taken in terms of synergy realization through the combination of our companies that expand our gross margin through cost of goods sold reductions, as well as operational excellence initiatives that we're executing within our facilities, more broadly, organic activity in our factory arenas to drive performance improvement. As well as some of the impacting items that affected the first quarter that have a little bit of a tail on them that progress into the successive quarters. I would say that we'll expect to see the margin expansion continue throughout the year, and that is factored into the guidance that we provided as it relates to our full year guide for the year.
You shared previously that you were on track to offset the cost of tariffs last year, you were aiming to becoming margin neutral later this year.
Yeah.
How are you tracking against this?
Good. We're a company that has had success at increasing our prices to offset the cost of doing business, whether that's material cost inflation, or a tariff, or other cost increases. We've been disciplined and prudent, and our products have high quality, high reliability, high criticality. We're well-known, and we have a level of pricing power related to our position in the market. We feel confident that we've taken the actions that we need to take to address not only cost neutrality from a tariff impact perspective, but as we indicated when we started talking about tariffs, are expected to achieve cost neutrality through this past year, and then margin neutrality as we exit this year, and that's what we're on track to do. We're taking the actions we need to take so that we're able to achieve those outcomes.
The guide that we have that's out there takes that into consideration. Barring any unforeseen developments in that environment, we feel like we've taken the actions we need to take or have planned actions in place to get us to where we need to get to.
Got it. With the recent tariff regime changes, Section 232, any changes to that guidance? Is it tailwind for you guys or is it largely the same?
It's largely the same. When we finalized our plan for the year and communicated that in just the early part of this month.
Yep.
We've taken latest developments into consideration. To the extent there are new developments that have not yet been announced, that would be something to consider both good and bad.
Got it. How do you expect recent inflation on certain raw materials like steel, aluminum, and energy to impact your business? Do you expect to be able to increase prices to offset cost input increases?
Yes. It's a short answer, but we track all commodity costs. We tend to negotiate long-term contracts for our cost inputs. We're in the process, as I mentioned, as we combine the two companies of running a lot of vendor-related initiatives and kind of repricing initiatives, looking at the total combined spend, trying to get better or more favorable pricing and terms. As we do that, we try to lock in pricing at a long-term beneficial position, and then execute at that level. As we see prices increase, or cost inputs increase, we feel like that's the cost of the product that we offer and the value of our product is, as I said, seen as high in the industry.
As we work to fight as much of that increase as possible, whatever remains that does need to be passed on, we have been effective at passing along. Now, clearly, we don't like to pass an unnecessarily sloppy cost to our customers. We try to protect them and fight for them. If the cost is increasing, we feel that the value is there and our customers are willing to pay for that. Our competitive landscape has historically been quite disciplined as it relates to pricing and the overall price cost environment.
Got it. Just wanted to make sure the audience has an opportunity to ask questions. Rich?
Thanks very much. Inside the client base, is there an opportunity for a higher degree of organic growth? I guess cross-selling, not across the vertical, for the segments, but just inside individual lines of business. Do you have opportunities for richer growth inside of the client relations?
I think so. Yeah, I think we do. When you think about the comprehensive portfolio that we now have, and I know you mentioned not within cross-selling, but within the individual lines, I think that the portfolio today, for example, in lifting, is broader. If you've been historically a customer for lifting equipment or lifting solutions, and the company individually was able to bring a comprehensive solution to you needed to get some of your needs satisfied somewhere else. Today, we have the ability to be a more comprehensive provider, more of a one-stop shop where we can become an easier-to-do-business-with solution for our customers. Additionally, we've done work around the digitization of engagement with our customers. Configure Price Quote tools, online portal engagement, and automation around the way that we provide updates.
As we build more connectivity and combine that with a company with a stronger balance sheet, a broader market position, and a combined talent pool, that is what we think is the best in the industry, I think we'll be able to win more of the wallet share of our customers. Now, that has to be earned and respectfully, we need to work with our customers to ensure that that happens. That's what we believe is possible.
[audio distortion] The problem is I don't have an [audio distortion] to ask you to answer the question. I have a sense of the outline, but it looked like from here, like last year you had hard to call it that $10 million of just plain volume in the sense of what you get up to.
Yeah. We have targets internally that we haven't communicated, as I said earlier. We haven't communicated anything relative to the growth synergy plan for the business. All of it is upside to the current guide. What I would say is the current guidance does not assume revenue synergies tied to the points that I'm making now. Yeah.
Appreciate it.
Of course. Yeah.
When we think about free cash flow, you reported $68 million of free cash flow last year, excluding acquisition and divestiture-related cash payments. What should we expect in terms of free cash flow and debt paydown in fiscal 2027?
One of the hallmarks of Columbus McKinnon is its free cash flow generation. We are a CapEx-light company, and we've had a long history of free cash flow conversion of over 100%. This past year, as you mentioned, we generated $68 million of free cash flow. When you adjust for deal costs, which was obviously a very unusual year for us, we had all the transaction costs for the Kito Crosby acquisition. We had cash taxes that we had to pay on a gain on our divestiture, that together they were roughly $200 million, which is a very sizable number for us. The $68 million was more than double what we generated in fiscal 2025. As we move forward into our new fiscal year, which started April 1st, it's all about free cash flow generation and de-levering. That's our number one capital priority.
Essentially, all of our free cash flow will go to debt repayment except for maintaining our current dividend, which is about $8 million a year. We've given a lot of guidance, and it's in our press release, in terms of how you would get to free cash flow with our adjusted EBITDA at the midpoint, $400 million. CapEx at the midpoint at $55 million. Our cash interest is roughly going to be, call it about $170 million- $175 million. We expect to unlock working capital improvement, just given the combination of the two companies. We think there's an opportunity for roughly $25 million+ of working capital improvement, largely in the inventory area. Kito Crosby's turns are roughly 2x . Ours were 3.5x . So, that gives you a sense of what could be achievable. All in, it should be a pretty sizable number.
We've not given direct guidance. Really, the only item that we haven't given is really cash taxes, which can be a little bit unpredictable, but once again, it's within a fairly well-defined range.
Got it. You shared that your primary capital allocation priority is debt paydown. Do you still feel confident about your ability to hit your target of reducing that leverage ratio below 4x in two years?
We do. We ended on a pro forma basis this past March at 5.1x, we do see a pretty clear path to getting to under four times. It's really all about execution. It's about achieving the synergies, hitting our growth targets that we've got internally, hitting our guidance. We've got a pretty good record, and I think in some of the slides that we've actually put out in an 8-K today, we've showed how we've de-levered after the STAHL acquisition and after the Dorner acquisition. Typically, about a half a turn to six-tenths of a turn a year, that would essentially get us down to the roughly just under four times.
Okay, great. Wanted to make sure if anyone else had questions, feel free to raise your hand and I can call. Okay, I can keep going with questions. Just curious on it wouldn't be a conference without an AI question. How are you guys using AI today? Any interesting use cases that you guys have seen? Could you just talk a little bit more about that?
Yeah. AI is obviously a very powerful tool that can unlock a lot of productivity, we start with governance around AI to make sure that we're secure and we're protecting our intellectual property and the assets of the company. We make sure that we're using an AI stack that stays contained within our four walls of the company, if you will, and we're not adding our intellectual property into someone else's large language model that then becomes public.
Sure.
We have a policy around the use of AI, we have basically an incubator team that is progressing initiatives around AI use and how we can leverage productivity benefits. We've had varying degrees of progress with that. We have an annual process where we develop our strategy that runs through a cycle of not only functional and business unit strategic initiatives, but also how each function and business unit is leveraging AI technology to advance productivity, reduce cost as a part of our five-year strategy. We have engagement with our board relative to not only education on the topic, but engagement around their intelligence and kind of the transfer of knowledge around collective experiences. We're trying to tap into a broad base of inputs and apply them in a way that brings productivity into the business.
One use case I know Greg has experience with, because he and his team have done some good work in the internal audit function using AI, relates to the way that they're using AI in that function. I don't know if you want to talk a little bit more about that.
Yeah. The case was in the U.A.E., and it had to do with some social benefits. There was a population of people with what these benefits were accrued, our internal audit team basically developed a very quick and easy AI program, put some parameters in, and said, "For this population, what should it be?" Obviously, it came back very close to what was essentially accrued on the books and with very immaterial differences. Instead of someone spending half a day or a day validating all this data to third-party sources, it was done in a matter of minutes. That would be one case study.
Yeah. Just another quick thing is on our basically FP&A and reporting-
Forecasting.
forecasting, we're leveraging the tools to give us intelligence around historical trends and how they may relate to forecasted trends. In addition, as we get results, we're using the AI tools to notate what those results were or to provide descriptive language around what the results say. If you have a P&L and a set of results and a compare and a lot of information cut by business unit, by segment, I can say, "Summarize this," and I get AI-generated summaries of the results, so we're better able to quickly make management decisions and point out the outlying data and where we need to pay attention.
One other area that I know of that we're using it is our legal team. As they look at cases and the appropriate case law on a particular issue, that's a natural area where they can very quickly save hours and hours of research by using the tools.
Yeah. We're kind of growing both in terms of usage by function, application, business, but also thinking more strategically about how we'll apply it and trying to be very deliberately targeting high return, kind of low-hanging fruit opportunities that actually deliver results that impact our P&L.
Got it.
P&L, I would also say.
Risk.
Balance sheet too.
Yeah.
As I think about it, we talked about the substantial amount of inventory that we have and being able to use AI to say, how much inventory should we really carry in a particular SKU based on history, et cetera.
Got it.
Of usage.
Yeah.
Interesting. Last question from Ian, we're almost running on time. What are investors missing about the Columbus McKinnon story? What would you highlight?
Yeah. I think the opportunity as we've communicated is real. The forecast is very achievable, our guide is something we're committed to. We have a business through combination that is going to be a top quartile return company that is at scale north of $2 billion. That from an industrial technology company perspective will be highly investable, if you will. We have obviously at close, a higher degree of debt, the de-leveraging characteristics of our business are high, we're fast in terms of our ability to do that. We're super committed to the integration targets that we've put out there, the synergy targets that we've put out there, we recognize that this is going to be a bit of a show-me story for a short period of time, I think that is the issue.
I think we're in a position where we just put the businesses together, just reported the first combined set of results, which were partial results. We're focused on executing to a guide in our first quarter, as we print those results, I think people are going to take notice. My hope is that those that believe in the story take notice earlier and get the benefit of even more return.
Awesome. Well, running on time. I want to thank you both for joining us today.
Great.
Thank you.
Great to have you.
Yeah, appreciate it. Thank you, Kevin.