Columbus McKinnon Corp/NY Small-Cap Virtual Conference

I joined the company July 1st, so about to hit 90 days. I have been involved in a couple of different industrial manufacturing businesses as CFO and COO in my past, both public and private equity contexts, all sort of global, complex global industrial businesses. I feel very comfortable sliding into what is a very transformative time at Columbus McKinnon. For those of you who are newer to our name, I guess I can share my own experience of I just kind of went through the process of underwriting the decision to come join the company, looking at what had happened with the transformative acquisition and sort of the dislocation and the equity price, then what is the value creation from here? How do we create value?

I was able to really get excited and comfortable with what we are going to do from here to rerate the multiple, drive equity value creation. A lot of it is going to come through leverage reduction, but also delivering on what we said we would do from a synergy standpoint in the acquisition. Also trying to drive some more organic growth. Through my own due diligence process of joining the company, I saw a clear line of sight to some of those value creation levers that are going to hopefully move us forward from here and create the value for our stakeholders. It is great to be with you at my first Sidoti conference. I have two really quick slides just to recalibrate folks that are newer to the name, then we will move into Steve's list of questions that he has got for the fireside chat.

For anybody who is new, really quick, Columbus McKinnon recently acquired Kito Crosby in a transformative acquisition, which doubled the size of the business to approximately $2 billion of revenue on a pro forma basis. We are what we believe is the leader in intelligent motion solutions for material handling, serving a wide array of end markets. As you can see in the bottom right pie chart, our end markets are very diversified by a number of different demand channels. In general, anything industrial environment, manufacturing environment that requires lifting, motion control, conveyance, that is where we play. We also play very strongly when those highly engineered solutions are required. That is where Columbus McKinnon shows up and shows up well. On a pro forma basis, including the synergies we hope to achieve, EBITDA margins in the low 20s.

We have aspirations to get that into the mid-20s here over the next few years. You can see that a diversity of product mix and geographic mix. About 60% of our revenue is out of the Americas. Europe and Middle East would be the next largest. Asia Pacific would be the smallest of our sort of three geographic areas. We are a very global business. Long history in operation, both on the Columbus McKinnon side was 150 years, and the Kito Crosby side even had a history longer than that. This is a very well-established business with good brands in the marketplace. On the next slide, I will just speak very briefly to sort of how do we move forward from here? What are we doing to create value? I am sure some of this will come up in the Q&A as well.

First of all, on the revenue side, we see significant opportunity of the combination of these two businesses in terms of revenue synergies and opportunity to drive an acceleration in organic volume growth here. We have got two businesses that are brought together with not really a ton of customer overlap. We have got opportunity to cross-sell Columbus McKinnon product and the Kito Crosby customer bases and vice versa. We have got opportunities to improve our digital go-to-market tools for our customers to be easiest to do business with, and we are making investments there. We are bringing together the sales and service organization and harmonizing the sales incentive plans to make sure we are driving the right behaviors and driving the revenue synergies. We are also going to be reinvesting in sort of new product innovation under this new product portfolio.

That combined with some strategic pricing to try and stay ahead of inflation, we feel like we are well positioned to unlock some volume growth over the next few years and really see organic growth be a driver of value creation. In the middle of the slide there is really the margin drivers. We have publicly committed to a $70 million cost synergy target for the acquisition of Kito Crosby. We have said we expect to get 20% of that this fiscal year. We are in our fiscal year 2027 right now. As we talked about in our last earnings call, that is well on the way, and we feel good about our ability to achieve that target and hopefully exceed it this fiscal year. Beyond just the $70 million of cost synergies, there is a lot of opportunity in this business just to drive efficiency in our cost of goods sold.

If I look at our cost structure, we have got nearly $1.3 billion on a pro forma basis, about $1.3 billion of cost of goods sold here. I think about some of the tools we are implementing around Columbus McKinnon Business System and the 80/20 tools. We should really be able to drive out some year-in, year-out cross productivity out of our material cost, labor cost, overhead cost to drive some year-in, year-out savings and accrete to margins there. So, feeling very bullish about where margins can go over the next few years in the business. Finally, in order for us to really make this story work, we are going to have to de-lever, and de-lever very quickly. We took on a fair amount of debt to fund this acquisition. So our capital allocation priorities are 100% around debt paydown and debt reduction.

We are trying to drive free cash flow, optimize working capital, drive efficiencies in our cash flow conversion, and make sure that that EBITDA flows through to free cash flow. I think our Q1 print was a strong step in the right direction to show that we are executing on this. We know we need to do more of that, and we are going to hopefully continue to execute and deliver on expectations here over the next few quarters and build track record and credibility with the buy side on how this value creation is going to come to life. With that, Steve, I will hand it to you for sort of the fireside chat portion.

Yeah. In our Q1 prep, for those who are less familiar, we talked about really strong orders growth on a consolidated basis. That was highlighted by low teens orders growth in the Americas. A lot of that was short cycle driven, and partially offset by a bit of weakness, some year-over-year weakness in the Europe and Middle East side of our business. Maybe focusing on the Americas first, we continue to see good strength there. Q1 was strong. I would say that fiscal Q2 is pacing for more orders growth year over year, both whether you were to look at it on an as-reported basis for just Columbus McKinnon or even pro forma for the combined business. I would say we're pacing for good orders growth in Q2 as we're closing out the quarter this week.

Maybe not as strong as what we printed in Q1, but still good demand. On the Europe Middle East side of our business, obviously you've got uncertainty there with the macro. Some of our bigger countries in Europe just haven't been growing as much. You got Germany, which has been a bit sluggish, and then you've had sort of the uncertainty in the Middle East and some of the conflicts there on the geopolitical side. What that resulted in Q1 was we saw orders being down slightly year over year. Some of that was a comparability issue, some of it was just what we saw on the macro. I'd say, for Q2, again, what we're pacing here with a little bit to go in the quarter, we're seeing some improvements.

I would say on a year-over-year basis, I would hope that we're inflecting towards some orders growth in Q2.

Good. That's hoping what we should deliver.