CMCO - Earnings call transcript Q3 2022 | Columbus McKinnon Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to Columbus McKinnon Corporation Third Quarter Fiscal Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Deborah Pawlowski. Deborah. you, to Over

Deborah Pawlowski

and and everyone. McKinnon. your Peter your certainly time today interest good you, We morning, appreciate Thank in Columbus

me Officer. our Rustowicz, Wilson, results this quarter are CEO; the financial Joining Greg market before and opened. fiscal President XXXX our released We and Financial morning our third Chief David

we conversation line Greg's release website flow www.columbusmckinnon.com. our get and Q&A. adequate that access the allow formal can to ask ask at this well as that for the and in slides back one a David today and will that We kindly You question continuous queue as then will for follow-up discussion morning accompany open our you After question time. with

will the you'll statement. Harbor first review If slide deck, to turn Safe X in I the

know, are forward-looking what statements is and session. stated are the to and Q&A sec.gov. factors the and may statements during well to results that you These uncertainties as could well we other some differ events during with subject other earnings as future make documents factors These discussions formal from that in Commission. can be as other our These documents at website today. cause Exchange or the with the and as actual provided uncertainties as release Securities risks risks apply to filed found well here as materially As at

measures are which During today's believe call, performance. also we we will financial in non-GAAP evaluating some useful discuss our

in with for reconciliation release this accordance measures slides comparable your GAAP. the for in substitute presentation non-GAAP You with the measures the information. should in and or not the provided results consider additional tables GAAP information isolation of today's in the We've prepared of

David? you will I to David So begin. to will turn with X, it over to that slide if turn

David Wilson

morning, Deb you, good and Thank everyone.

in shipments Solutions our solid is $XX chain reflects a a to pandemic-related XX% of leaving planned the strong supply once executing contributions organic delivered as tied set approximately stronger despite well of the and We challenging constraints. power. improvements demonstrates This million achieved were Conveyor to very from noteworthy we and our acquisitions team especially the of operational Sales quarter of in unshipped due and record again environment impact pricing quarter. strategy This just the effectiveness up margin Our performance growth adjusted strong last is XX.X%, it margin gross quarter. which previous our acquisitions. through drive

seasonally it Additionally, our weakest against backdrop is set the of quarter.

margins margin benefits We the was a as provide highest on EPS to the good the even and below to are volumes and have expanded McKinnon's bottom-line EBITDA our period. history. by two pre-COVID prior approximately $X.X expansion for Strong cost margins, year margin sales delivered adjusted XX% increase progress in driving has and gross make income. XX/XX Adjusted over continuing acquisitions year-to-date Adjusted to year-to-date has two growth. Columbus million operating quarters in last drove organic great XX.X% to our contributed $X.XX, continues remain XX%. discipline businesses

the acquisition, example which have conveyance McKinnon's completed of our adjusted markets December we provided precision to of Solutions to excellent income. we Columbus an XX% in unique new Acquisitions out is solutions The and providing our secular quarter growth Garvey platform with Our strong Motion potential third drivers. are platform this continue in high-value the XX% operating Intelligent where revenue build of advancing is transformation. to we

chain capacity and the to by supply persistent of be continue challenges. remain across demand targeted We encouraged strength global but markets, our impacted with

platform Our conveying in presence is markets. our solutions and life sciences, e-commerce and expanding beverage food the

parcel of production that tests, increased use or demand distribution the quarter the or with where e-commerce backlog ended it's whether record just online conveyance systems. active also distribution ordering and slide We acquisition very increased just of are quarter. to and enhancement pandemic a to COVID We areas We've shippable vaccines is driving solutions the our Please in the of rapid many is is It's December. pleased the offering. been precision fourth million completed million, in excellent which turn the $XXX of X. we Garvey, in an approximately with of $XXX the driving addition

our acquisition has April, Motion higher our of earnings growth, stronger With portfolio becoming potential. the our growth a Linear Combined addition XX% profile and Dorner businesses now relevant and our the Solutions with over Garvey, within mix. are higher-margin with higher business last of now of and Automation more

Dorner's acquired accumulation Let me is for on X. balances between food review little They in Garvey solutions life the we target conveying accumulation Garvey at a the acquisition was when and Briefly, different slide position science in bring It buffering that and volume system. in processes them. speeds. a more already sciences. on list beverage detail a market-leading operate

balancing of production a process. single to production to engineering can there in filling, reintroduce regarded Garvey's highly machine of and one For processes. the solutions patented all in same are flow and needed a such you expertise shapes large vial offering across and production example standard between for continuous combine handle in modular products highly increase and product and that production imagine piece accumulation the batch as offer labeling, into engineered They systems product to both align transform can the sizes, as operate Founded solutions from productivity and Garvey's variety flow flow efficiency broad its at machines. lines XXXX, – design for product the solutions. machine rapidly. this next by a convey and process, in solutions rate. Their packaging machines enhancements pharmaceutical this a process accumulation Not advanced would sealing store and be unloading and

operations are their and that range when was tapered more. we in in acquired reverse million from annual In bottling bottles fact, margin EBITDA $XX them, XX%. a vaccine to approximately they With small vials approximately leader was gross and wine revenue margin XX%

with we successful months creating in in business of winning the synergies, combined for a We sales our project food products solutions this company. precision a packaged just first In combination platform. Dorner are were truly together, $XXX,XXX ready-to-eat conveyance excited our about

through throughout packaging. product assembly from metal process to bulk packaging Our manages the and combined the detection solution

$X.XX in the over I'll Greg? details expect EPS Greg, he quarter. call to cover in We of from and the acquisition now the fiscal the turn will XXXX. accretion

Greg Rustowicz

Good Thank slide everyone. morning, second the we quarter. sales and from you, X, last the period, slightly year provided net million, David. XX.X% On $XXX.X guidance up in were ahead of the prior quarter

supply other Our chain are to addressing. we an and every sales estimated industrial guidance for included challenges, company impact

last million third seasonal quarter the days estimate As holiday sales shipping to third Europe, the in due days low down we to our is quarter. David we the three were shipping in Sequentially, But as quarter, that point, fiscal the and our schedule. even mentioned less to earlier, $XX approximately due discussed revenue in was US impact less X.X%.

together Corporation third acquisition Overall, Garvey The had quarter benefit million our in Dorner over most our of the and Garvey in one the revenue recent results. $XX of month delivered of quarter.

was up of million Looking with sales $X X.X%. a volume major driver bridge, at or our volume growth sales

also X.X%. we year-over-year positive as realized pricing by We saw pricing improved

Our million reported year-over-year of pricing of $X.X price, quarter. $X from up the year-over-year actions last price we million resulted in

headwind a X.X% or sales and was sales. currency million of Foreign by $X.X reduced

sales by Let little region. color a on me provide

X.X%. with the sales up For continued the we third in US, quarter, volume saw strength

increased sales relatively pricing America, Europe, the X% in off basis up quarter as X% volume also base. in volume in declined We Canada. X.X%, and X% approximately XX% of XXX up points second was from Volume in levels. improved a Latin US, APAC X% Outside of small

points. quarter also by over up internationally by second X.X%. improved XX levels We pricing basis This was

mitigate the pricing with price pricing which actions that also pricing material our actions our frame proposition, power implementing to inflation expect We continue we raw fourth is value time inherent in fiscal for we accelerating taking pressures. globally, inflationary With will see the are annual increases. our in quarter, more

amortization. include these was On are impact million $X fully front fourth the stay quarter these we of for to With negative pressures. backlog represents impact additional Garvey XX.X%, and a amortized. of from included inflationary items, gross month cost inventory as out slide million This material actions, which an margin recent step-up acquisition amortization seven, The expect of acquired will balances $X.X the one both from negative expense. in

decline quarter. liability predecessor product McKinnon these acquired well that XX.X% XX in a as adjusted a meaningful given a typically accomplishment company settled million acquisitions the adjusted from Overall, for gross was margin $X.X were year. as by seasonal third gross last to claim significant XXXX. the normal also was points about fiscal ago we years precision business accretive to gross record the the points, This items, we this over points XXX We product as our matched for XXX supply well our Columbus points quarter. XXX sold This as -- This the basis of XXX that margins Normalizing legal of in we in was some basis conveyance quarter. basis realignment reported costs, experience experienced. XXX chain basis margin was claim in prior quarter, constraints a up the

In in addition productivity our factories. gross reflected year-over-year to of impact acquisitions, the improved adjusted margins our

gross bridge for point Let highlights the on profit me out few a our quarter.

gross and million Third increased with $XX.X profit by year several driven quarter was factors. compared prior the

of profit. million $XX.X gross provided acquisitions Our

settlement included Sales million million. productivity items, discussed, and volume discussed. higher of of I inflation product which $X.X liability added material were pricing $X.X million, $X.X costs net just million. and these added As just mix $X.X Offsetting million added legal $X the

were $XX.X the costs million The of the quarter acquisitions compared million year. or prior in shown sales. with to slide As eight on costs RSG&A added RSG&A XX.X% $X.X

incentive $X.X recorded stock-based year also and period. We with million in compared compensation the higher prior

as forma and item calculations. $XXX,XXX incurred included adjusted EPS in addition, adjusted In deal we pro income, costs, we in a adjusted which have our acquisition EBITDA operating

impact expect additional QX. fiscal well a This RSG&A in fiscal the For strategic from investments quarter, growth as includes to be the we as initiatives. to Garvey full expense similar quarter fourth acquisition,

This was accretive expansion slide operating the million. from basis basis up nine, sales, X.X% which to points. XXX points $XX.X was largely operating driven prior acquisitions the year, of completed by contributed year. margin Turning adjusted was margin Adjusted fiscal XXX this income

on and strategic pricing. benefited from also operating improved We volume leverage

share share earnings XX, quarter from As $X.XX, of of in on prior was $X.XX per you see for $X.XX. can up the slide per recorded the diluted period. we earnings substantially Adjusted GAAP year diluted

As this capabilities a basis been this true indicator per adding diluted on share cash diluted adjusted on earnings have to of share. In adjusted the this better feel $X.XX expense QX, generation reminder, that the tax-affected amortization for this We per of chart All are to restated earnings Company. we change. added is a a periods calculation. back

are is quarter. With in that the approximately last expense recently be average more past $X.X this we interest million diluted to fourth at quarter. outstanding shares the December, running million Weighted per about completed anticipated acquisition financing and May $XX

and year we continues on of rate to non-GAAP for to XX% expected tax forma GAAP XX% is share. EBITDA when use XX.X% the and adjusted on a XX% Our continue range pro rate our basis adjusted per slide a expand tax in was calculating to On full margin basis. our year-to-date non-GAAP a be earnings for XX, to

to For improved the EBITDA XXX quarter, XX.X%, basis adjusted margin points. up

in adjusted points were acquisitions EBITDA recent by the accretive Our basis quarter. XXX margin to our

invested Our basis. trailing capital was return X.X% a on to on improve also XX-month continues and

target impact ROIC the excluding We double acquisitions. continue to margin be XXXX, to our digits a expect and EBITDA of future XX% in fiscal

incurred Moving outflows to deal basis, Year-to-date, of a the of costs. cash cash quarter. XX, acquisition slide generated to related $X generated $XX.X $XX have million. we we we million On third in year-to-date million

demand of have also chain approximately added rising supply to inventory meet $XX and We impacts. million lessen

was percent of expenditures in expecting. a sales million was quarter. as capital line in which the with $X.X were Capital what XX.X%, working were we Our

capital We for million $XX the year. of to expenditures $XX million expect full

XX, to loan structure refinanced term we included the acquisition, an which new Dorner Turning offering capital equity a B. and post slide

finance acquisition, structure capital basis an and of is feature an which floor. flexible million we the term borrowed To loan $XX million. rate LIBOR LIBOR comprised plus with Garvey a term point a accordion utilized low-cost Our interest additional of B, our X.XX% of B $XXX carries loan XX the

but December and our As cost ratio of times. adjusted December was leverage excludes EBITDA synergies, XXst, Garvey's, on both Dorner's includes basis, LTM a net expected which pro forma X.X

ratio fiscal leverage XXXX targeted our times barring achieve any of to two additional acquisitions. within expect We

slide cash which and I remained to includes back to end $XXX hand our and David. was and it of XX, the on availability, over Finally, advance turn strong December. approximately million will our at liquidity, revolver Please

David Wilson

Thanks, Greg.

through in third It's worth with beverage, increasing quarter. typical quarter, strong Average orders up rate markets sequentially parcel noting X% last earlier, the the average from were order January, management. demand that food been compared tailwinds third year-over-year Total unchanged I'd solid all remained in daily the year-over-year. Friday, increased the daily defining mentioned for and essentially when very seasonality from and our the quarter. up second orders Organic across orders XX% sciences, As with a life e-commerce, warehousing were quarter. XX% has

Our Garvey projects our fourth review times to XX, ship run for the will four of record to backlog In total, conveying next months. up to that Please expected solutions I expectations quite XX a with developing are Garvey's lead months is includes over orders, backlog to where $XX quarter. million which six advance typically year. nicely. the slide months can are our

that As we This last current last quarter are year, sales advance labor approximately challenges be chain continue reflects $XXX the into and will supply -- expecting fiscal of the quarter net levels. million. assumption our we shortages to at

e-commerce. uptick promising. gears are as while electronic The In is in investments paper aerospace food to industry our metals available and new excellent that growth hampered particular, building improvements continues by and showing chip for to upgrades. remain beverage, of vehicles. up on all also investments in production our recovery. productivity shortages, significant The and in the seeing sciences are industries supporting the lines rates very an are and These doorsteps. by e-commerce within markets its order of driven and are up industry out shape. expect expansion capacity. increases expanding the robust board boxes those and We in footprints pipeline is their in is We're investing making as add also Both capacity industry opportunities life package Automotive for

difficult chain electrical supply to predictably. the castings motors source and remain Regarding components

the McKinnon we sources Blueprint highly with The near-term expedite variant enters uniquely We're remaining market addressing suppliers to for and difficulties. increased these Nonetheless, solutions staffing issues the we is projects are Columbus existing global and most bring third and closely very this The rapidly matched economy. encouraged new by market flexible is infrastructure workplaces and Omicron productivity developments remain as unprecedented also our that our supply global as alternatives provide developing their and operations they spreading also solve and working year. the are well. Growth issues our production we're challenges play We X.X facing strategy. We of might imagine very related rebalance the despite and automation relevant to an are assessing add proactively assist while believe would the of safer. and you We world to where making some driving manufacturers shortage in to transformation deliveries to and pressing contagious within capacity. as solutions has As workers, implementation the investments pandemic its world's in imagine of you advance moment appropriate. we COVID the reshore through as of agile

holds. can With open up transforming successfully future the line excited are the to vehicles questions. growth truly Our what the we shift And Peter, McKinnon and e-commerce, higher-growth that, solutions for also as Through and times in support unprecedented the Columbus energy electric higher-margin food to we're explosive transition into industries a model. resulting as well about more enterprise. move direct-to-consumer beverage pharmaceutical these we the and a

Operator

will Thank question session. from question-and-answer you. At line be time, this conducting Please first Wells is [Operator Michael go ahead. of Fargo. the we Instructions] with McGinn a The

Michael McGinn

Hey. Good everybody. morning,

David Wilson

Good morning, Mike.

Deborah Pawlowski

Mike?

David Wilson

we you? Mike, can't hear

Deborah Pawlowski

Peter?

Michael McGinn

Can you hear me now?

David Wilson

we ahead. now. Mike, Go can Yeah. hear you

Michael McGinn

Okay.

that. about Sorry

XX any was So forward if the a if comfortable food able to you the you numbers, and in the past in was given potential COVID into tailwind feel revenue pharma there Are business. to pull margin beverage? strength mentioned grow frame Garvey those that you or trailing

David Wilson

products environment of drying also process you provide accumulation support the for only to the storage. provide process but not technology as and out do accumulation take cold the through COVID We vaccine-related Yeah. those production for the

And that build, we demand this for us support we as initial vaccines that well and position growing is that but so did we related there requirements head believe other fiscal year. coming pharmaceutical into growth for

Michael McGinn

And you... Right. can

Greg Rustowicz

Yeah.

to add just Sorry color. some

a a J&J. companies like lot is kind with Labs, Jersey really Merck, headquarters New relationships of people pharma Abbott and which for strong they've Pfizer, Garvey So headquartered as is you know got of the in

David Wilson

beverage Their and virtual Yeah. who a who's and customer is food companies. pharmaceuticals of list

Michael McGinn

to looks then size? stands targets How smaller or And as the do Garvey there, there Are today? of in regarding be right the deleveraging pipeline for year per how of targets the Dorner something type it it. similar would can you number of us what frame any Got down Xx, great? you -- out there more kind help

David Wilson

Yes. Sure Mike.

and we attractive through we've an strategy great we in have M&A And the moves our the linear executing developing access programmatic on to company precision fragmented into of solutions addition discussed provided automation and continue to our opportunities in with approach in landscape As intend very and specialty the efforts to initial into to company and have active conveying developing develop spaces. us conveying solutions pipeline our be areas. and to motion that there, in our

And we discussions those active could pipeline own opportunities even in we're opportunities, that so size of to we've be nice have, at opportunities I that that say their – discussions And paces. resulting opportunities. would possibilities like got a develop in range and than opportunities Garvey larger sized but those Dorner at up from and

Gregory Rustowicz

with about the And order really in David and that significant of And would is that Mike occurred in that Garvey a Dorner, one a that's together just over Garvey. have $XXX,XXX synergy think results on first Dorner I talked and call truly December the revenue without sized the was that the won very not impressive fact month. of

David Wilson

case opportunity either markets. in for leading technology. they successful accumulation we combined are we much conveying others may independently and the end but are And been the not where customers past terms Yes. more that we're have in have attractive multiple technology in in Right. a And leading right behind attractive that have there of areas

Michael McGinn

time. you. Thank Appreciate the Great.

David Wilson

Mike. Thanks,

Operator

Chris Greg with so next from Howe Craig-Hallum Group. Capital Thank question is it's -- Palm you. The go with Please with ahead.

Greg Palm

guess Thanks. million similar How that $XX maybe hear everyone. your impact of starting you're just expecting of morning, where current right of commentary. sort Good level unshipped chain off does initial the in supply And quarter? a here I related Yes. did compared it to expectations? I on impacts orders the

David Wilson

impact Good little continued it period quarter. than supply remarks kind a earlier, near-term in it's that anticipated to would million spots was number mentioned rates into is David. rising higher our had as bit Yes. Omicron I lot than worse in And as quarter. Hi, on Yes. a a bright challenges $XX impact million said, and the Greg. and impact the overall And of in had a my than pegged coming impact of that of bigger $XX We the relates coming little the supply. we'd the labor we there's had prepared say anticipated morning. expected. with we models a chain. variants I infection the But an into our This bit

Greg Palm

demand that how enough. the or Fair orders Okay. January time? just And of normally has during us daily commentary said is the you up the I terms play this of at X% March usually to-date. in that think quarter, And least that What out? for remind January maybe in cadence

David Wilson

through rates say, is our quarter lowest quarter. I was seasonally our that unchanged third the order and it quarter that's Yes. remained why noteworthy our essentially would third

about very run projects up early X% the X%. XX% as up thinking nice we a of a is side on And and positive this then was is days development cycle in we're the the the side. short advance that split through third X% quarter. January on that about And sequentially So

Greg Rustowicz

to significant that from it's I were of low in Yes. It's of pandemic. Greg, would a points we in a it's ago Greg. hard year say the ramp-up the – compare kind

we certainly ago we because companies on And a would higher have the the it with such I significant it's most we X%. it year so call than we -- data sure about But and probably I'm that starting pandemic was a say talked could in had decline XXXX. as did largely

Greg Palm

back hop the queue. in I'll right. All Thanks. Good. Okay.

David Wilson

Greg. Okay. Thanks

Operator

is go The question ahead. Chris Research. next Barrington from Howe you. Thank with Please

Chris Howe

this variation that heard for into last in others I've I get many you. -- which my on call. won't name, of Thank

David Wilson

Hey, Chris, morning. good

Chris Howe

you Good legacy achieve an to inorganic linear you morning. The evolution of of here. closer I Solutions think to XX-XX you play come see just automation combination over to does How now Lifting that your set remains you more fruition backlog do the Solutions, with perhaps mentioned as the of Can need slide? this Can that in the about XX% of getting XX%. Yes, or about business this and opportunity businesses to time? robust XX% or higher the split is conveying get with Conveying to mix? existing talk

Greg Rustowicz

be interesting to business Solutions move got I growth. grow a think play some in over even the the the organic in because allow that that that excited is growth portion about say time. and compared that and we be attractive would lot say think very not nice that of to believe acquisition to that developments would historical rate both for direction achievable a Yes. the levels, through we've organic XX% and through pretty that doesn't planning we we very Lifting at And and we're of would that is there will more

over secularly that has Motion of are oriented Intelligent we business our that planning is of a a strategically very product mix attractive So five-year course higher business Solutions we high-growth, high-margin, offerings a horizon, believe space. to the period, the that which in transformed strategic the

David Wilson

Yes.

at double-digits. just that of of an been accelerate growth So, we get we quickly. we're It precision facto that is time. with of that segments that at in move Garvey a synergies expect into we Chris, right mix a conveyance here. of about the we with X% move And would beyond revenue can just that business. de typically growth can transition how that talking attractive get inorganic can And there. the really as acquisitions it's kind clearly of question sorts outpacing outgrowing trajectory. the and Dorner It's We've But sort matter bigger the

are components the today Difficulty]. other grow. to clearly motion and And key continues business that growing automation that two are then So [Technical linear

Greg Rustowicz

Yes.

and growing the growth of the the mid outpacing organic portion. legacy lifting single-digits those in So,

Chris Howe

the rising say, and Powell But net times question what on we context this with And it's up Thanks. potential on have you here. with Yes, into in your come where regard environment happens. environment and balance Do then Okay. be your following to the what of leverage opportunities is on We're surrounding any do to place today, M&A. this in the see in some going place entering would rate depending would -- we'll how your previous shakes two sheet how how this closer think down what's on wants out context you opinion pricing companies that? all you or to thoughts as opportunities, multiples these this market? these leverage exit do to

David Wilson

Sure.

got acquired I and within balance performing We've complements think we've a and the added a track. cash everything we've And position. in all what and our a cycles we're attractive. well, it businesses remaining business opportunity portfolio. the direction generation are strong we're to that through healthy same The really on performance sheet landscape good in is trending right

pricing to so And that this a market. would potentially through and taking rates go maybe companies thoughtful, the said I going come both logical disciplined and little down we're ability you would bit. themselves in that out leverage opportunities have highly equity advance and that mix anticipate And the as be what leveraged with up to it's but are of we

Greg Rustowicz

Yes.

times the X.X to in cost below basis times Chris quarter we're a is covenant were leverage on synergies. just we and add not a X.X including so that's So what financial from On we'll at net report. perspective

we leverage pro what was acquisition. out up to said transparent gates with that. finance talked than about Garvey we We're line And targeted we going clearly we times. plans equity I comfortable X.X X.X where raising help also we forma of higher the be very basis. we're at we're to in and when in had bought at But we would -- the on So be case Dorner, the a of that to think

that it's So happen And a an sense, acquisition lot for both be the that get And you part consummated. to strategically just make the with as at. from not It's there's got as of perspective. that over equity a deal. till is to over cost will to just unpredictable an why It's part well know. a don't looked equation has always that's it's such

Greg Palm

Right. That makes sense.

I remain timing seems if you're McKinnon prudent kind It may like unpredictable, Columbus but opportunities and you such these still disciplined, of -- deals to position. same time, that. be at summarize finish doesn't change? the the remains in the It's the there. Okay. are deals line as for of But going where good are necessarily on

David Wilson

Chris. That's business. the right. the That's strategy right, overall strategy really excited we the for M&A have we're about And

Greg Palm

Thank : you.

Operator

is Tanwanteng Thank ahead. you. from The next Securities. Jon question CJS with Please go

Jon Tanwanteng

to Hi, could guys, talk a I Garvey what good QX about compared guidance? the a first And within fiscal right Garvey Garvey and price, potential the quarter my My first think other nice perhaps as your whether do you the all? cross-selling nice question guess, more synergies, morning. that Arrowhead Congrats is, getting revenue market and down be congrats of it's and Also, thanks cost you you broken taking bit from contributed insourcing in little synergies especially for or questions. on a much things maybe on now. at might second, going how between identified broader on then

David Wilson

Yeah. Sure.

we earlier and ask in Let garner and mentioned on bringing a the acquisition, me comments, technology of to the We start Jon look conveyor then recognition around I leading we that -- value Dorner's synergistic together with on. offerings think synergy my technology there's as Greg the at their growth add brand selling can the accumulation We robust both side. of leading leading patented spaces. lot on and Garvey's as side differentiated they're

month December a order the in And we are that $XXX,XXX more as so I mentioned, secured we've and got following.

is really automation and other more Garvey beverage and spaces. an pharmaceutical science where business and into the they into the more today Dorner have position And food in its beverage about of develop to product to XX% technology their and food have and We business of historical spaces. pharmaceuticals application pull likewise, outside and opportunities life industrial their of us opportunity help

complement nice really leverage the a and this got we've opportunity businesses two so, together. And to great

have also to Columbus opportunity broader globally both great the leveraging businesses footprint. abroad McKinnon further We take a

behind And towards we little synergy and cost so, let whole talk bit that. already. I'll premise geared have synergy, synergy although the cost Greg do the was opportunities And growth really deal versus a about some realized of those we've

Greg Rustowicz

Yeah.

the Dorner Jon, small we realized compared to there certain X% number on on McKinnon $XXX,XXX the we've cost already on make year synergy maybe the is what that's is the next the cost the we acquisition we next the deck that of we synergy into targeted And program. fiscal approximately positive our public But overall such expected $XXX,XXX need a small company out one in pulling side, the a put with sales. to because saved and are insurance synergies about on really year -- when We company it's was So by reason what insurance Garvey of company run as family bring standards. Columbus to up to costs. side, investments why

we be that investments think there that business the be teams I've will some the our of And the So $XXX,XXX that to number of of in savings administrative as overall synergies the sourcing kind But involved. be of there's savings. offset be achieving going There's won't that we to going synergies got difficult, going made to sourcing $XXX,XXX that other get cost already accomplished. essence are one-third into to but we expect net X%.

Jon Tanwanteng

chain. you just secondly, quarter? gets going Omicron is against And to wanted might a much talk environment basis at think guys maybe you to due gets how that in normally bit dive strong that? Could margin supply that it for deeper headwind uplift do on into Greg, headwind you'd before you Thanks color. be seeing great. about or maybe little I how the see Okay, to sequential much better worse this seasonally a point? And there a the

Greg Rustowicz

Yeah.

the decline in in implemented that seasonal there's increases least our because usually So, the let's uplift maybe more QX, shipping more year, even we expect quarter would normal have price the quarter, would we see the historically COVID margins probably there's price the of we picture, increases. a definitely with strong we XXX because years in point fixed cost more, in put would third basis days, -- have out absorption, at annual there's stronger are

So, been and in one gross normally margins. this with in but or Impact on since only facility not in now an in our suppliers. it nice a see we expect impact has Omicron, form we've sometime our in of sequentially staffing, to fashion, also dealing would November jump own probably

challenge a in. so necessary And get components all to to ship product of constant a it's the

And It becomes inefficient that an impact. somewhat having process. certainly so a is

say to come the As you're you delayed. motor motor's start producing a something, expecting in,

that aside, put another And got you working start to you product. so, on stop,

there the managing all a not being there's in complexity team takes we've a from component all one inventory as but shipped. So a lot talked our added And is doing job system this about, operations a being prevents of and coming. -- that is fantastic that's I it product

-- that brings as McKinnon legacy as both Garvey. So well and Dorner and that Columbus true for

be would our is about margin expect bias. In important. comparable positive that terms plants, perspective we this facility, headway our staff adding making a -- to -- more of from a which with we -- it We're that on probably do to quarter though would

Europe, sources We continue team, for work certain to with hard Eastern of are suppliers. in chain in looking number alternative supply looking at speak, a alternative our sourcing the as know we components. I

to I last the a over demonstrated it's been that challenge So, have really But, manage able we've year. this challenge. think we

David Wilson

Yeah.

But, be add line quarter. quarter. So overall dynamic the and we would I biased that are all the would that, number actions in a third we puts with and takes, finished to evolving the of how just positively given circumstances have in

Jon Tanwanteng

it. and Thanks, Greg. Appreciate Got it. Dave

David Wilson

bet. You

Operator

The you. Please is Ferazani Sidoti with Company. question Steve & from go next ahead. Thank

Steve Ferazani

ask about the to this Thanks couple of Garvey. morning. information Good I all a want questions morning, do for everyone.

necessarily. do is times, sitting one would of But of becomes be back you if noted XX-months larger just lead the I'm those that wouldn't issues a if reduce to pricing a year those we your how projects about and you Clearly, avoid period went portion think exist a you on and longer again you expect given a ahead costs. and it that point First trying year risks. challenging revenue? the We to you're price when backlog, to higher were XX-month how

Greg Rustowicz

relevant material extent or to we sure swings. indices allow are to for what try to our Steve there make Right. long-term tie have is, metrics contracts, do we a the we to Yeah. that With that try adjustment

Garvey that about a And where preserving a we're something is of attractive longer-term Dorner, attractive forecast. margins. of in that for has we've offerings differentiated for price expanding a ability it where so, to quarter of got offerings. provide some the with the They have And Dorner offering coupled about as large a that the factories, into area substituting we legacy you and the we're That Garvey done of what it's conveyor and those advance and participating more a the offerings allow produced their consider us in we in I from quarter perspective, for or as job third with own their fourth really opportunity to in historically and systems relates Dorner the Garvey had And us solutions a the say. as those environment. partnership level projects. confident well to influence conveyor margin nice scale benefit performed should certainly the in there's fourth quarter, think

a not the result a our customer, more in – Company. for position so that solution for And better attractive would but only

into And consideration so a in feel spot. good like take that we all and we're of

Steve Ferazani

that? Garvey opportunities XXX% in early Right. Dorner will to That's you on international terms how thinking much how helpful. then are And can Garvey about America, being help North – of on a and

Greg Rustowicz

then as into think and to while that are XXX% do Yeah. sell North Sure. highly biased very They America pulled I say is think of specify fair them they large it's would thereabouts North them America. geographies. What other I their and global to companies product that, towards

certainly partnering reach, we're the McKinnon where help to to might would for to entity, help help global And McKinnon offering their around But location globally to their they so to US. Columbus we'd Columbus And today in with are sell can then help another expansion. development, American production certainly beyond collective move of support And them. the with reach, drive Dorner and where that it an and application they support take can the really the world. to consistency their more that with Dorner entity engaging and

Steve Ferazani

the Great. for time. Thanks

David Wilson

you, Steve. Thank

Operator

Thank Davidson. D.A. you. Summerville Matt go with question The next is from Please ahead.

Will Jellison

Jellison Will morning. Good on is Matt Summerville for This today.

David Wilson

morning. good Will Hi,

Will Jellison

with question start operating wanted I on a income. to adjusted

the entirely If from that, sequential chain it more second wondering, push-out revenue million quarter, the are fiscal was if if move you to decremental there? other color on And was in you look at on quarter provide if to margin or third $XX high. the relatively by and supply came driven lower things challenges just could I the fiscal the there consider

David Wilson

second that Let me for a think Will. about

I'd adjusted I have were think margins P&L, sequential our of – clearly see an comparable one but basis. gross on to

the they same. sequentially were So

So item. I isn't think an with expense more you That amortization Garvey. saw adjusted

So and accruals And inventory got costs then I'm not bigger would say, higher RSG&A incentive and to I there. the comp stock the talking be would about step-up. the it's amortization backlog be drivers

Will Jellison

Got it.

Garvey owners that stock you. prior was thought the those on XX-plus Thank executives are a board, ownership its your a to staying having for going why family-owned of transition curious been be business I Garvey was Okay. years they to the time for forward. as And moving moving Columbus business forward? it just I'm you of And acquisition. if operating to about – then follow-up right wondering, and

David Wilson

Right. to really the technologies Garvey incentive Yeah, leading conveying Company solutions with and question. been impact from not our been impact. them team having already. of with the leading food our areas got to benefit management our and engaged powerful they we're have in really Garvey acquisition to They've the the with And that addition great the Garvey's that thrilled only accumulation into terrific a other relates got We've are because beverage of and pharmaceutical engaged Dorner and legacy we've are serving ability packs the both offering think big a organization. the it the also combination bridge the bring that as stock is to a that their performance and they but them companies can Columbus of together through I time and where link in brings now right to incentives. important customers as and an are serving, punch along And with said, a them great McKinnon programs I

is So going us. transaction. think of I It joined team create synergistic lot And great a multiple, really value that was it's to us a and a terrific terrific the it's for a team.

Will Jellison

questions. taking you Understood. for Thank my

David Wilson

Thanks.

Operator

go question next from Seaport The Research. you. is Liptak Walter Thank with Please ahead.

Walter Liptak

nice the Hey. Good morning, guys for and quarter. thanks

David Wilson

Walt. morning, Good

Walter Liptak

us just about is nice pricing bit where margin conversion a headwind the ask margin and wanted and and bit to there. through margin Can not more we're it seeing line? the walk that's the and -- a why more the little little about supply gross happening you chain one on the about I see gross it's to gross detail

David Wilson

Yes.

coming place. and which price, the of while his we And as in increases QX. an that calls highlighted the quick a through QX had what increase we has well outpaced to pressure the was in saw Greg million than we've QX as over more in that inflationary the this in pretty QX So offset response $X.X with we've comments put inflationary price had inflationary sequentially past quarter and pressure. that through bridges communicated our had throughout pressures we've these he's with we in in And as

that. into been in successful of supply that have the the So continued ask the to that we that's speaking a But in where we're power standpoint. direction pricing we pricing I and mindful are. from that with line should would we're we've close answer in Greg changes And to implement within where be movement paying very preparing that and organization. have think in We're impact with to to as and how QX, head base attention moving we might sure the we're comment we to additional I'd make we

Greg Rustowicz

factories plants our good our And in despite busy. in also the some Yes. productivity to we challenges chain are saw and addition supply really that

backlog. record have We

We to have meet trying demands. -- we're and needs customer

in generate the as typically legacy than of the Columbus a businesses in we Garvey there and gross activity And are which quarter that was helped other saw margin stronger Dorner in high million so of that factor level range. the the $X.X productivity XX%-plus McKinnon Walt the quarter. then is probably as And well

little And gross our a so margins that third to of quarter. tailwind the was a in bit

Walter Liptak

Great. Okay.

cautious. fourth quarter you're And gross same still the expect made about comments you sounds bit David like so It with should margin little the the a on we level?

David Wilson

we're as very head obviously things to benefits in get environment. quarter. we into this dynamic And would mean volume quarter we all and a equal certainly I through assume this Yes. being

we better And or Then at neutralize quarter. if so slightly biased we're offsetting don't know. kind taking to with of challenges about QX kind be And actions those this positive also would we're to to were all navigating in where be potential do of what the to we in that don't we than we hard been things we're try see headwinds we but know to-date, -- successfully we're we know. we've cautious we don't if but can working

Greg Rustowicz

cautionary And inflation. the really of this material raw just all the maybe part is

fiscal the a the annualized inflation a $XX So annualized second in in million quarter, rate. it's $XX about rate. quarter was this net And million

accelerated prices talked the we've steel about definitely So the has past. inflation in

through renegotiated part contracts will most the see we higher for in and those locked costs haven't We've We going forward. steel XX/XX.

David Wilson

prices. Energy

Greg Rustowicz

And we time respond, prices. same but at price raise the have Energy to opportunity and the

David Wilson

repriced. There's the backlog in lag a always isn't

Walter Liptak

kind up it, you And or lines inventory along just again in those only then book? the it. stepped is front that buy of do existing Got Was the it of to quarter-over-quarter. inventory Okay. meet order

Greg Rustowicz

hard be worked inventory We sure to we're support to of take at mindful demand. as was a to inventory where discount obviously buy deliberate. growing can trying get the opportunities trying had It advantage of to And Yes. make we we well. it to

couple good great XXX million with increasing -- backlog a be a of a So profile. reasons inventory and near $XXX demand to

David Wilson

vendor And also of buying in increases. price advance

Greg Rustowicz

Yes.

Walter Liptak

or gears or industrial? just through basically, from to to was it that a so it. was Garvey of $XXX,XXX Dorner was switching Garvey Garvey pull it order then Dorner synergistic Got And pharma Dorner that Okay. with

David Wilson

the Yes. Garvey was and it It space. was and to Dorner in beverage food

Walter Liptak

guys. Thanks right. All it. Got Okay.

David Wilson

Walt. Thanks

Operator

next go Steve JPMorgan. with Tusa is from The Steve Thank you. ahead. question

Steve Tusa

Hey guys good morning.

David Wilson

morning, Steve. Hi good

Steve Tusa

don't next strong calendar medium-term it's When still you there do the, understanding some calendar are where it of mean that. you growth of a the kind solidly that that given market pretty how that it's either about seeing flows. for Can ebbs that there more today. activity warehouse a look a I kind and call basis? are of fiscal we at over grow of time I pretty or think it's business in out sometimes the period that mean think I'll on cycle. kind kind I outlook you're really of of 'XX but

would commentary next expect So some commentary or a you little what fiscal solid -- on 'XX calendar more year? fiscal

David Wilson

Steve. and seen really into year. increase the next demand we're seeing there head Thanks this throughout year We've fiscal Yes. We're out as by what's encouraged fiscal there. biased what positively towards we possible

So, growing fiscal see 'XX 'XX. calendar we or do as that solidly we advance through

Steve Tusa

-- do the kind how cash think then flow And conversion? you Great. free Okay. guys cash kind proper about of do you How now with kind in the free working historically. see capital where of of been line sales it's

David Wilson

Sure.

basis, trying of kind abnormally we're comment So, We on as at that working at was X% achieve. around sustainable a where that's We're a which ended not a to sales point this last growth a we percent be and our expected -- in to cycle. year at as business low really capital right of and XX% just the level we're mid-teens. I'll

flow working feel the cycle. that we're about try And and I navigate a level I'll capital. to going we're good ask business talk of so, cash like spot in to with the performing to to at continue free Greg

Greg Rustowicz

Yes.

free or reduced in it's free of XX-month average of This free you our XXX% the are flow trailing our not XX% year-to-date conversion which light So those Steve flow And it's company to pandemic. typically at on question. about look both as other I XX%. year when your you to cash basis going year-to-date conversion. last cash was think year, the cash was We're over together over. a a It's that -- we if of conversion part a XXX% reflects inventory look CapEx-intensive We're -- all. little flow at going

think about basis So on an way the XXX% about to It's ongoing it. that's

David Wilson

now. better be to Yes. tend We

Steve Tusa

chain revenues. then it. on one Got on just just the supply And impact more

worse little I bit in was it a think XQ versus XQ.

think bigger -- was -- confidence the have it that you said similar not gives get would than bigger of back near Is the expected? bit then then worse impact. to that, expected kind in term? than And it's I a going you You a it what here

David Wilson

was have position find we another more sources under alternative less. to code to moving of closely really than the but working as expected, our our quarter, then as balance or It working indicated a Greg slightly belt. very this And vendors the level earlier, larger at with we Yes. ZIP look had of same in quarter and ourselves success. we've to We're

mindful to like and what power advance like we those haven't I this we're we is our what to to do yet position see that feel of quarter feel ourselves to we'll a working we're are the of how from. things And unfold. we've three control we applying pretty as front it through things to a there do have bit as from But well being just well they hearing of the learned maybe through on positioned we're backlog that that within in execute be little to past us sense and got are. outcomes everything great us head quarter. the we've So we have cautionary happened those quarters you're And in

Steve Tusa

lot. a Thanks Great.

David Wilson

Thanks Steve.

Operator

Wilson I the to turn [Operator David would question-and-answer you. Ladies back closing Thank remarks. call we Thank and Instructions] gentlemen, the have the session. like reached you. end of to Mr. for

David Wilson

Business scalability our core strategy building on or McKinnon competencies. in executing to We're as call Columbus Peter. drive and excellence CMBS you, the Thank and our it, we Great. System out

pandemic, Columbus say you emerging your great are. and a only Thank has As business. years, closing, landscape. the to proud It's a we over a And time agile how resilient believe but McKinnon still your a navigating higher-margin, and not our we're McKinnon. and higher-growth, persevered, today that that last hard want to creating two appreciate valuable Columbus it as company. result, We midst is been McKinnon I the dynamic global more been what interest is In better emphasize has in very a I'm stronger to of but we're and a Columbus a in make team while day.

Operator

conference. This concludes you. Thank today's

at for time. disconnect your lines You Thank your this may you participation.

Columbus McKinnon (CMCO) 27 Jan 222022 Q3 Earnings call transcript