Earnings call transcript Q3 2023

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Operator

Greetings, and welcome to the Columbus McKinnon Corporation Third Quarter Fiscal Year 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for CMCO. Ms. you, Thank Pawlowski. ahead. Please go

Deborah Pawlowski

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

Joining and quarterly our me Financial the are here Wilson, David Officer. conference President Rustowicz, Greg call CEO; our Chief and for

have can third fiscal our You slides as as access results, the a we 'XX and morning, that of questions. David earlier and their provide will after for investors.columbusmckinnon.com. our at the on released open release Website we this copy conversation will if financial the line the should will quarter which not, today remarks, accompany you well Greg formal which

will review deck, you If Harbor X to I the in will the statement. turn Slide Safe

during Q&A as as today. as could are as You results should be other These aware session. subject here that uncertainties, that we what is future formal statements to during well the events the may well stated factors apply forward-looking to from statements to make and that differ materially actual risks discussions, cause some

These are the well Commission. factors as Exchange release, documents Securities provided with the uncertainties risks other with earnings by as and filed in and the and company other

those documents Website You can sec.gov. our find at or on

measures. we discuss call, will in During today’s evaluating performance. these some We non-GAAP also will financial believe our useful be

substitute should consider a in in results for the as not you or prepared However, with presentation information of additional isolation this accordance GAAP.

comparable measures measures and that non-GAAP have the with today’s GAAP slides. provided of reconciliation We release accompany in tables

with will to and to turn I please the Slide over to David X So, call begin. that, advance

David Wilson

everyone. good and Deb, morning, Thanks,

as plan higher were quarter. Past highlights improve higher efforts making price, by demonstrate we experience. XX% quarter captured our growth business. McKinnon on we million up into $XX as the the a progress for margin, are past results we backlog. Columbus or due as continued and to successfully meet basis demand in were XX% volume our increased backlog currency we constant execute transform was due the steady a to team to Sales reduced There a several reduced Our the customers

margins operating rates an daily Friday adjusted a points January on X% and nearly are order basis through basis expanded QX We basis up order last and by rates points sequentially, XX in XXX increased on basis. GAAP X%.

seeing that stalled to are activity we had QX advance begin Finally, project in month. this

for remain supply shifts, megatrends driving are softening that geopolitical support investment of We backdrop. expect on investment. or bullish automation, against we shifts, upgrades continue us limitations challenges, logistics the opportunities expanded drive and will decisions labor facility and available to Global even should that the insufficient I operational reshoring of the economic say transportation and manufacturing,

year We fiscal and $XX continue down our our our execute first million our financial X brought and ratio We X.Xx. our net the months strengthen have improve sheet debt leverage of strategy. in balance paid through to debt to flexibility to

We at $XX.XX also repurchased in an average price of approximately XX,XXX shares quarter. the

X, on update Slide strategic progress. On will our I you

believe quarter leader mentioned on leadership team constant success. to contributed teams growth basis I structure -- new the in XX%. was regional As earlier, currency this our a

XX% nearly of by and up pricing excluding both were FX EMEA in volume. the sales fact, In impact driven

footprint easy frequency a hoist upgrade with hoist new generation connected available remote wire path digitally the X.X tonnes and accuracy current provide innovate to line the we new flow includes offers products drive industrial competitive and The the profile; and for new general a hand This better pre-launched to speed and belted conveyor advantages duty a capabilities. to continue solution features also motion position We diagnostics rope and including controlled between tracking, monitoring. the that for in drive introduced and quarter, we markets three slim control. gap new medium next our many for capacity products that chain growth, fills and an flagship

revenue, NPD remains to total ahead we vitality plan. of revenue basis year-to-date Our use and X% measure on was N-X a of which

North market experience immediate customer improving America to our gain Our share is our and opportunity most in customer to base. grow

our including wait drawing times, status times, accuracy, lead lead quotation have backlog past metrics, customer lead due delivery times, call performance to reduction. accuracy, entry order service internal times, We improved time engineer relative and update

to reducing are lead product levels. times We will laser plans on that focused and delivery have reduce created lead for each advantaged times competitively

with are progress yet not results. initiatives, satisfied While these making the we are we on

live they ERP effectively to our be enable with as and internal initiatives went the I simplification digital This should provides improve system -- we foundation Mexico. teams for in and expected needs. This enterprise launched also that effective be new both our in also more successfully is efficiency to mention December, roadmap address with efforts. consistent more to and future our is customer external and

supply Despite to related and continue we impacts, headwinds margins. chain production expand

savings to $X.X annualized in we million We efforts balance in 'XX the expect we We year business 'XX. this realignment action offset actions inflationary initiated assured, identify fiscal year. have through further take now also to the 'XX. additional costs fiscal extracted these that we're pressures realized $X.X million in fiscal help costs and taking in on fiscal of earlier Rest can

operations We $X.X million as we and significant in inventory improve the in a the generated quarter capital. increase free are cash in and in reduce fourth flow cash expecting working from quarter,

several 'XX and gross years. depicts improved our adjusted fiscal have objectives. gross our 'XX, we XXX to achieve by believe Since track progression we on the margin are we basis fiscal X last Slide over margin points,

As we to are you approximately this our of on achieve address there slide, will targeted level can several see levers XX%.

We're heading leading control by leveraging X, material a expanding handling for Slide remind markets. enterprise I motion our and that want portfolio product secular into into growth were to why. you McKinnon we transforming Columbus and on

our identifying succeed. shift of command markets, platforms, have mix we organizing for that are By to around our into more margins strategy opportunities addressable potential. grow also our expect platforms growth greater We product business to larger and creating higher us and these

over to to Greg Greg? greater call discuss the our in turn results me let that, financial With detail.

Greg Rustowicz

the midpoint of Slide $XXX.X the in up sales everyone. basis, period from were provided million, the David. above on currency X, third prior constant net guidance Good the we a and XX.X% last quarter. quarter year Thank you, morning,

know, As quarter from in quarter. compared workdays perspective third geographies previous less a we the seasonality with most most four the had the world is the around impacted you as

pleased Overall, able we that by purchase. past other challenges we to for and components drives reduce persistent are chain were despite supply due million that we backlog motors, $XX

projects $X expected various recognized We in in in about that also impacted by QX. is delays revenue rail to had for This million QX. revenue certain reasons be

was points from level. current accelerated million million, the Looking we by which Volume at our X.X% our XX $XX.X of as or converted revenue will prices. orders up gains increased basis QX This regional bridge, X.X% sales to or we in update. at pricing X.X cover more

from of months December of the closed XXXX. Garvey acquisition, X the Xst represents quarter. which provided $X.X This in on growth revenue Acquisition incremental million sales of

reduced million sales. of or Foreign by currency $X.X X.X% translation sales

a provide on region. little me Let color by sales

increased the by from For sales basis. the the was by X.X% volume X.X% added Sales constant growth XX.X% and a third Garvey Acquired X.X% a up improvement X.X%. driven on U.S., pricing. saw growth grew we in quarter, in currency X.X% improved of revenue Outside the in Pricing sales was U.S the by U.S. .X%. volume

Africa in America, were we approximately Canada. were or in Europe, and which We XX% Asia, with X% in the encouraged saw, EMEA Latin volume East in the X% increases X% and Middle

cycle the XX% encouraged our in our be in which by Europe in business especially We has proven The business. the of short the of gains region resilient volume in business energy the and represents growth. Ukraine and project Both EMEA, meaningful face volume an to war saw are crisis.

gross prior basis from didn't gross Last was unusually third On Slide basis X, quarter the the lower because margin margin. points basis points our adjusted gross compared XX year's was On points strong of margin an by with year. XXX roughly prior dip up typical of XX.X% XXX seasonal we see was year. basis, in

a the we Garvey strong prior benefited from them. an exceptionally a acquired from on year, the right large In shipped they they delivered after month strong as project margin acquisition, we

margins. saw dip quarter more normal a sequential This we in

by with can Third quarter $X.X several compared see gross and the you profit which in factors was million the table. year driven prior increased

of $X enter profit, me a highlights on quarter. decelerating gross inflation the in inflation Pricing million on Let inflation of comment includes material material QX. net material bridge. we as of profit $X.X see gross which million We few our added

The had million. also translation, productivity an with liability incremental months Garvey prior gross and We repeat. gross profit the of unusual year reduced $X.X which million two the product foreign in compared acquisition quarter factory currency year from of the not and million that items profit revenue. settlement million was did last of lower Offsetting these $X.X by $X.X $X.X provided

more to we engineered than had new This as for facility, lower to the ETL volume production more productivity this planning efficiency activity processes. is as primarily our which has our up factory This mix The standard tool Künzelsau and our addressed shifted planning increase been as was of to order execution process. product product. disrupted a complex at picked

so X, Slide contingent our in out there acquisition first the owners to quarter was on earn was the The sales. EBITDA during million of million fiscal consideration The million certain structured escrow in $XX.X estimated $X.X year, paid impact was was XX.X% next earn delivering purchase year. which an when represents accounting. total a includes in out provision to this will SG&A with not the the item purchase what accounting million be quarter. deal expense cash it This based or of to the of when of QX excess of in of was placed related Moving for levels closed, is achieved $X.X The a paid Garvey. $X

annual compensation. increase accruals the business million In and sequential headquarters for included incentive costs includes acquisition, consideration higher to our SG&A realignment $X.X which which addition, $X.X the costs. the to million of prior discussed. remainder of relocation year, stock adjustments sequential due our plan SG&A by was I the Compared Garvey just contingent were the increase The with of and incremental in $XXX,XXX our

incremental also We which to of increases of were and well. costs acquisition these Garvey to cost reduced million. $X.X months $XXX,XXX related incurred reorganization, commercial added business $X.X currency the our X translation, SG&A Offsetting as cost the million realignment foreign our by our incremental

we For to fourth quarter, the expect fiscal SG&A expense $XX approximate our million.

as assessing we plan We reduction fiscal cost further opportunities 'XX. for are

expanded XXX income over Slide operating Adjusted income to margin operating quarter million. increased basis XX.X% XX basis million pricing, and points point Operating acquisition year. $XX.X sales, $XX.X to increase margin XX, adjusted volumes. the of higher and the reflecting prior operating was Turning a performance was XX% in

up As we you the can $X.XX, see for share GAAP prior recorded Slide quarter versus of $X.XX year. diluted the on XX, earnings per

on Our XX% GAAP tax quarter. in a was basis the rate

call. expected the the point we percentage items For X tax full in a reflects our which QX between to year, earnings that impact XX%, rate is discrete and be the from XX% two discussed

$X.XX prior of share diluted was up per the earnings $X.XX Adjusted from year.

While EPS gains, as higher EPS together the $X.XX interest by expense as had year, from mark-to-market share impacted favorable versus by which prior favorably FX investment impacted impact was from per well negatively per $X.XX share year-over-year. we gains

we quarter. per share. Weighted rate fourth interest to is though exposure, our $X.X for million hedged and average $XX diluted forma will increase is XX% to are calculating approximate the tax non-GAAP million Even expected XX% outstanding pro interest rate earnings in to expense shares adjusted

XX, trailing adjusted margin Slide EBITDA On our is XX-month XX.X%.

this steady are We key expect by in invested in target 'XX. plan on Garvey metric was is EBITDA over ROIC X.X% see billion with towards XX% we our of making fiscal long-term a and impacted revenue our to capital incentive a A time. margin of acquisition. the progress improve return in $X.X

both our product and We advance continue and factories. reduce simplify overhead, our to to improve productivity lines efforts

We and delivering growth our goals. key as to line profit top well. elements the are will drive also on the These

the million cash in to This flow of free inflows $X.X XX, operating and Moving million CapEx $X.X Slide includes million. third of had $XX.X from of cash we activities positive quarter.

interest payments Third impacted tax by $XX to year. prior compared cash approximately of quarter the cash higher flow million was cash and

million turn quarter. fiscal the are and of in $XX fourth quarter, we range $X.X million, of drive to $X.X free we year we expenditures be between to flow As expected expect reduce in the Full million or $XX cash CapEx the million to to earnings capital fourth working as strong investments. capital

principal have our leverage Slide flexible well and annual we sweep cash the Turning XX, as depending to requires excess the payments million term loan flow a on B, an capital ratio. structure comprised strong total as which of $X.X of

in down been $XX the payment million have paying We payments our and borrowings total year-to-date bringing $XX debt another made to the quarter, million. actively

additional an fourth pay $XX quarter. expect We in the to million

with loan term interest The hedged to XX% rate of B a rate that swaps is approximately swap blend X.XX%.

December XX, ratio of net As our leverage was debt X.Xx.

under expect ratio to current dropped prioritized debt next X.Xx and environment to in see We have our repayment quarter. leverage the

As David quarter. noted, the conditions stock a we of $X took advantage to repurchase about of in market million

at and liquidity approximately on of Finally, $XXX cash was our December. strong remains end and hand includes million which revolver availability our the

to I Please and turn advance David. Slide to XX over back will it

David Wilson

Greg. Thanks,

sequentially order As a two there mentioned daily On major earlier, our QX I were basis, affected rates levels. that year-over-year impacts in improved X% order QX.

negative $X First, million a impact in FX period. had the

impact Additionally, down million Year-to-date, curtailment by million. there was the to are approximately $X in $XX e-commerce new investment customer. from this customer large for a orders a resulting warehouse orders

While this projects. with we current on engaged promising and innovative activity is order with are customer paused, them new highly other

additional also are should winning. applications e-commerce I we about that highlight we're that excited

We for their efficiencies are increased looking production that logistics who with are are working serving integrators several users systems. end within intra

period. due in at in the we quarter, stable the more million in $XXX past Our reduction given was and achieved backlog current XX% the orders remained

our Slide Let me on up thoughts with some wrap regarding outlook. XX

to $XXX million year X% of for basis, to $XXX This constant on fourth growth our strategic the a line fiscal expect quarter, quarterly about million. is plan. 'XX looking First, in with the we currency to implies revenue deliver of full which

earlier, for the in generation I through in capital. mentioned improvement in quarter we cash reduction are a working As measurable a planning

deliver view We fiscal 'XX can well. digits of order with growth the anticipate low that are year. We mid-single as the for developing on of encouraged to the we

timing quotation are to industrial seeing of has been customer activity order and recession. well held quotation and conversion indications up levels extended While an we not have

There's in a that that of actually lot making help of our also projects difficulty] up [technical stabilizing held We number quite will been processes. think markets. decision a environment advance have

strength water facilities very treatment, Defense be Middle hoists to for Energy to also plants waste power also in are production. For with oil EV management facilities erect example, been adding or continued to vehicle active. drive around wastewater utilities mobile the has whether see upgrading tents. world chain we [ph] devices older market, it energy battery and and to are production From new efficiencies. in East. active the missile Utilities elevation active and improved and the

providing we're pharmaceutical delivery sciences, automated prescription and Life fulfillment. In packaging systems for

be for didn't to solid. Finally, mention I'd our solutions if demand I continues be that entertainment remiss

hyper enable focused plans on markets. improving will and to so. our expanding executing are share experience market are addressable customers do improved We and This

We improve moderates. our as to we experience look expect and also markets, as we're fiscal given seeing our in beyond look even our efforts 'XX, to backlog, continue -- grow we the economy customer activity strong the to

committed to goals are term to achieving steady proof our advance. and expect We additional longer deliver points as we

with up questions. I'll the open Donna, for that, call

Operator

question Davidson. is [Operator from Matt first of ahead. Instructions] Summerville The go coming Please D.A.

Will Jellison

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

David Wilson

morning. Hi, Will. Good

Will Jellison

my Thanks for question. taking

here? XXXX, next that And periods thing is you're into fiscal it's I was that how equation first how we to I into about you're The to was as thinking 'XX we fiscal about pricing considering approaching curious about the year, as as that curious year head in head strong. that especially entering curious been date, I'm

David Wilson

Will. stay managed pricing and over Yes, we've through of cost. it inflation price positive we've Obviously, to Okay. relates moves tried XX past months the lot to as thanks, made as a

think at we've about position bridge, inflation As and be new the versus X% might there cost look we translate year, we and our we be got year another look as into think this year, where to we're with where our at our X% we as might portfolio. thinking leverage that rates next might looking

Will Jellison

Understood.

had recover follow-up from actually had understanding if what get about It some prepared I was a been just And curious And to correctly, enabled a if like out chain. we during Okay. are the of better you as pushed could able sounded then in that sales remarks. bit you of interpreted that? result a I Greg, the question I quarter, periods for net prior supply

Greg Rustowicz

Yes.

level. So was what supply certain were than same Will, It that components we've about constraints in and categories was actually chain saw worse at better the others.

million maybe in better we think net-net, quarter. a So was was the roughly $X second I impact, which a $XX still had fiscal than it million

there that prepared So something the a you in to remarks else different led conclusion? was

Will Jellison

just of the was interpreting $XX I No, backlog. million the comment

Greg Rustowicz

backlog [indiscernible]. due Past

Will Jellison

That's right.

David Wilson

Yes.

a David, I'll bit. in is Will, jump So little this

reduce was total the backlog So reduction yes, we sequentially XX% past a backlog. $XX did in by million in That quarter. about past due due

as there are We progress to relates that I related dock, comment we progress head those particular make progress we're to we items. related that to expect making to what Greg's given But it as hour. the supply this current. do are as continuing did, some if we to backlog our There progress we addressing in chain through think it chain. will. we But able on you challenges are make to supply more were are is there loosening every are even the delays continue left opportunities items and to spot And make and single than better becoming to seeing quarter. the

Will Jellison

Understood. Thank you clarification. for that

David Wilson

Will. Thanks, Great.

Operator

Thank you. of The Company. Ferazani next ahead. from go Steve coming question SIDOTI is & Please

Steve Ferazani

morning, Greg. Good Good year-over-year decline. check want morning. a to things Couple in Appreciate David. I all explained on. you the this bit margin on of call the info gross morning, Greg, the little

to big particularly I we alluded sure year XQ -- most order trying the your the just get a of of you that's I'm gross Garvey because think gross trends. sequentially saw revenue margin ago. at end But to flat to decline. where essentially a the was of I'm change, a sense just make trying margin

Greg Rustowicz

Yes.

Thanks question. that, for great Steve. So

were our quarter. the XX.X% were the were, they quarter. So in second gross the in believe, actually they a I level same ago, year fiscal as margins And

see one almost because mentioning margin. I of that XXX we that month, So a would some December driver of that they large point didn't workdays to typically historical own had our we customer didn't see our month see large but for historical basis what drop. why XX% is gross we meaningful And with a we was had tremendous had of X less -- is Garvey revenue we drop that

drop. didn't was very, So and see typical we why very accretive, the it that's

our XX we just a a from days was more Now about saw bit I order actually our with that were where we've to more by XX And -- And September factory. seeing talked which that -- issues lower basis quarter. we addition, a There -- believe productivity, shift this seen takes planning the little [indiscernible] mix normally about complex, which most more it I more of what largely in less time. driven basis had only product, just with highly points. did drop call had is largest, of we is year, engineered we the engineered more QX. would have of product, points days. the we expect than most versus which have bridge was the XXX our we've XXX less is these factory, working working large projects. XXX and no would But standard we And in complex, also on a

And quarter. so in that the well impacted us as

we SAP introducing are, that to phase that, place year And take for module and we with see with to planning we today Steve, of to solution in that in a for are QX that solution have we will production what that our that level. for new time going supplements a period. our expect or benefits next augments a next challenge live And facility speak, as

in So zip our think margin. We're with especially as Steve, around of the would code, QX additional a gross expect that kind we normally margin, XX% gross we about workdays.

about point the average. in gross -- margins mix And negative XX much million are However, impact some are rail and revenue. ship rail basis typically -- has going is going it business of lower see to from quarter our it's corporate roughly $XX an a than typically overall to mix, projects the are that we

XXX XX have about XX an that impact. -- point to going So basis basis is point to

David Wilson

been given the that projects are sorry, those we've chain -- those Steve, are delayed, supply that have issues about. projects Steve, those have been talked

Xx electrical pricing And margins. is and and and less phasing that that's lot impacts, we're And business what controls, about of than that shipping. price adjustments in component are on a A been lower those. the in so some the there's quarter typical through impact of impacts volume cost

mix XX talking is points. about this shift the and so And that margin impact, drives Greg, basis

Steve Ferazani

and and think this when quarter, at generally faster have So you even forward, been rate about we been growing past because at helping moving this shift higher mix Garvey Dorner margin. has a

terms cetera? e-commerce the customer. next How you You shift orders, you're quarters over mentioned et what seeing of about mix were thinking from multiple in the

David Wilson

Yes, can the we in drive to to the Steve, continue we margins business long-term. think mid accretive over

stable period this Greg have issue we through -- of need are to by We growing driven get to would an of will come volume driven we work segments to and this system. those allow that that from legacy just the increases continuing that the by well that the which we large XX-XX the improving as our productivity as us in own margins. referred expanding faster to a expect volume anticipate very see shipment drive to around supply orders But is improvements chain more

Steve Ferazani

Thanks, David. Greg. Thanks,

David Wilson

Thanks, Great. Steve.

Greg Rustowicz

Thanks, Steve.

Operator

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

Jon Tanwanteng

just stay Any tell good for are if pretty the wondering I Hi, questions. and Are point? or there planning actively a was to expect? at of things crystal in this healthy weakening taking Or morning. my going [indiscernible] visibility David, the on you soft something you XXXX? this for little significant at your does landing bit more now a that here? ball from you different point comes rest Thanks

David Wilson

Right.

to thinking we're we the develops, year. later there the low period. change. deliver on soft way it's that of impact, We look next we our anticipating an and industrial and pretty year talking signs point, crystal years ball have go prepared And that years, on At activity. earlier, the our obviously in we're way see come an things is impact current were good recession to Obviously, as planning if out this And activity, certain would a an But quotation customer the the no relatively single-digit about can and a deed that landing. we mid we we're can as in remarks. discussion doesn't about and growth

as is pretty environment, our initiatives additions as in improvement and robust. activity marketplace, which backlog we're have, current the gains around shared the customer the the that seeing still we well Given

Greg Rustowicz

quarter we later think, just and Yes, slowdown us, recession is buffer that And or our fiscal or to mentioned, healthy very is if And of David in there a year. even add as so. lagged will, typically our I by backlog a a on, bit Jon, currently.

Jon Tanwanteng

the thoughts it's Got it. and helpful volume, on gross term That's directional message in very a takes I quarter? usually hear. expanding, I current there I you but me you to know encouraging on think that longer from did margins margins we the on Greg, give said, difficulty]? what the are little should bit plus better other and but [indiscernible] any [technical got

David Wilson

-- they'd to have current impact. an from minutes fourth point in we talked about a be few going where the negative our think so, we're mix from negative this Steve, and what rail expect basis expanded we'd XX% impact or roughly Hey margins quarter, about levels, with XX that roughly was the roughly is really that business normally a Yes. gross we ago, Jon,

Jon Tanwanteng

quarter, the was I that got difficulty] it. [Technical past

And then the that, where of or I be we terms can improvement. about? supply that's improving you Okay. flow that in is just last you're to that cash assume to something the there [indiscernible] Is near in else future, the working point expecting do capital thinking of should all,

Greg Rustowicz

by driven largely going Yes. working improvement. be No, capital to is it

quarter, our this the strong capital for you inventory and in see we than with. expect we meaningful almost we're working As $XX fourth started utilization on and And we'll improvement cash carrying the in been working us. million timeframe free flow to know see really a more we've year

Jon Tanwanteng

it. you Got very guys. Thank much,

Greg Rustowicz

Jon. Thanks,

Operator

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

Walter Liptak

guys. Good Hey, you. morning, thank

David Wilson

Hi, Walter.

Walter Liptak

saw of is that in? or productivity just that we you're footage of some that what location, I idea just the are of whatever? in follow-up similar an But maybe to And I percentage we expecting putting on could or that want going with you disruptions get ramp? to manufacturing to see the as ERP square a what wanted started size ERP, system the

David Wilson

No.

to We losses. facility that went impacted roughly ramp the in XXX% on shift good it's challenges acquisition had to impact productivity as while Greg mix and level manufacturing somewhat over Now that by that referenced it's activities, implementation have supply continue live, manufacturing order. of chain facility. Germany, we of planning lead the created in in Künzelsau, Balance a volume SAP And had an that the effectively. We largest as a more success a wake STAHL our we of -- period production engineered well. to disruption implemented

of don't be are that'll we'll as adjustment anticipate that module fiscal quarter We the planning implementing we have highly system. business begin into implementing next see realized. and that that impact a continue much ETL we're year to to a additional first the a on enable and disruptive will speak, to will when complex benefits an an start some business for ETL, planning It's our process. more that and confident have to -- efficient we're tool the execution And

Walter Liptak

thanks the Okay, David. great. during for And then, Greg, -- that,

productivity $X.X about You I'm provide talked you the that issue. just again? could details of million that sorry,

Greg Rustowicz

Yes.

we're and that bombs productivity STAHL can have due business the that are remember, is complex so largely the explosion to more -- engineered that negative handle. that our the factory. highly protected they very products, mix at shift talking So the than about, issue more And SAP with Künzelsau than is -- very, are this much

is planning factor So it as an improve where it as onto the improve have productivity from a capacity well utilization, and really will our into will which play. really perspective that help it additional add comes production planning increase will our to us system we'd --

was had. the negative the share So productivity that we lion's that of

Walter Liptak

Okay, great.

Okay.

in asked David, that And and you made the to was they Okay. a that about times? these Was that quarter, last order of then you I wanted turns. some of X there there in where order a I When comment, the was to to the there's about changed think out something lower delays that quoting -- called lot there last activity. months quarter, ask quote quote second about

David Wilson

their to Yes, The quotation is has what orders levels those high demand customers, that the robust. activity, saw great and you're as there's QX, this We're and began actually quotes with Walt, last quarter, had continue. conversations that seeing in we're so all are, to we've that that new about activity. come conversion I activity, of cases, that very new cycle But on budget seeing take January. progress start saw around in in fiscal but longer, talked perhaps And through a I projects we around recession, a remaining later believe. in taken would was And I quote the we we what drivers there cycle call, we that as encouraging. And that's better economic to, enter effect been a view we are as referring on say, capital to or in if people all periods. that's stabilization is what recession. break know, into stuck a very don't there's a view, many seeing we're loose

with saw them And so investments they pausing forward that pause people we couple the through moving are as last of were quarters. on,

that and through. the not So and an how projects issue. I activity, coming miscommunicated, timing looks on quotation they're is visibility the It's if the Demand, more conversion good. those

Walter Liptak

maybe that That one Okay, great. last a just very And for Great. sounds Thanks clarification. good. for me.

are a it do And get change, you little step be incremental? guys XX% headwind you through and more in issue, great. conversation XXXX is looking like more thinking sounds going you to you how rail, XXXX that this gross are margin margin you target, -- How had gross you for if bit -- which that the have once quarter. is there's of a On

David Wilson

to continuous gross going need in plus this going process the we're margin Yes, over year years, be essence it's XXX really margin XX% points up, we'll would basis step And exiting I'll get to a really gross 'XX. about the four fiscal be the that XX% at to roughly improvement level. in we take that. Walt, next to

of we more be it's a going So think to steady level.

work, to about XX and climb thinking going the hill. report be will it's [indiscernible] that a to if proof through think to have XX you I it each the put progress. impact, basis the planned on and But terms timing We're progressive. the enable we be try will a point and that in show get initiatives on linearize but think that visibility might there the we're to how an that you And planning better of productivity and our we're larger XX%. and year doing more per us to think, of it's work some maybe be improvements plus progression steady with to going chain points management there steady kind more I and that year lumps out around some time basis, to climbing consistent supply board to [indiscernible] we in

Walter Liptak

Okay, sounds great.

thank much. very you Okay,

David Wilson

Thanks. Walt.

Operator

coming next one is from Baumann JPMorgan. Please The you. go Patrick ahead. of Thank question

Patrick Baumann

questions. morning. taking Good Right. Thanks for my

David Wilson

Pat. Hey, Good morning.

Patrick Baumann

A quick morning. one. Good

just one the below up sequentially? backlog it hold -- what how the book-to-bill kind there? -- was Just parts mechanically did are moving How sable in like of on the quarter. with like, it was Or

David Wilson

Yes.

more was FX driven, guess. it I So

Greg Rustowicz

Yes.

David Wilson

FX, period, that period. than FX and then the That the move Pat. XXX. And in was if about anything the else, all than we shipped the you we really is saw It's adjustment the one we think book-to-bill in gap less XXX, FX booked

U.S the dollars to So is the as mark of December backlog XX.

you [indiscernible] around XXX think would to end end know, and as from at one of being been December. September roughly today, -- roughly moved bit one I around it's have of below basically the in a away, -- the quite at So

Patrick Baumann

you the you dynamics, which quarter? X% I on think said And think the Understood. is in orders, sequential I versus Okay. growth third January, said maybe

David Wilson

X% period basis through Friday quarter That's right. week. on a to of Sequential up date last versus about the third

Patrick Baumann

Got it? Yes.

question can if of to you'd needed think you the in to revenue in of in My down level your support you What you backlog of supply outlook up chain XXXX? to the growth from for that low kind levels. orders so number. normal mid So XXX. single-digit work is, absolute kind -- the more into do quarter close through continued, be to assuming Maybe XXX eases

Greg Rustowicz

we that about that of demand. are demand level forecasting we're levels we can of we base stable Yes, activity we a see continue seeing And a of outcome relatively support talked the that the base current with stable at period. through -- were

working it as any increasing grow on will help nor us is And relates opportunities. activity, declines in access it's to initiatives ambitious obviously gain that so water to aggressive overly we're to it material assuming more demand. And not, to and or

them. can stable, we we that seeking execute levels. performance to a improve, basic, been certainly think we've capitalize like that having And so we we'll things do to we'd if continuous with But be can -- on those

Patrick Baumann

in the I now? normalized past, level? you're level the what's right more backlog the think said of at what's What this XXX, you've normal is Like a kind kind of, than

David Wilson

Yes.

So if you look $XXX million more at about the legacy business, historical we have backlog than levels.

at say, used $XXX roughly backlog. that roughly so of means to we're run, we million And --

is you XXX between And Dorner. XXX. the for conveyance and take XXX Garvey difference will the [indiscernible] backlog to and that So

Patrick Baumann

it. Got

one cost think on and G&A the more that's Irish around, well. commentary like taking next can actions one we to around, rate Okay, the just working around, And may be you I actions think And intro side. quick run find already helpful. give of what's the slides -- our you're as year. you've that The How into on in reductions, about some should the taken there. SG&A color the

Patrick Baumann

yes. Okay,

relates talking need the be for we as were what there's, think volume we more So. value our we think to is proactive SG&A's in base. on good we we that scale. for from to scale going have grow percentage satisfied that's there that growth put opportunities that said a taking have the year, get moderate some also unlock in investments benefit place think we're were Pat, we we with next Clearly, in that relates get we as to our about as of in we it And are discussions not we've place, that approach given a enables plan but very cost that the strategy business, structure. that true. to And that business, to us sales. And previous to it the us structure and we for as execute the us the cost proactive more on are about, new we and the to

taking about that guide know, we point. this probably enter as talk at this we're prepared the to not in we'll giving up look at We're more that so specific But, be you a a And year. period. hard finish QX and

Greg Rustowicz

Yes.

roughly of margin, for .X looking there's, overall roughly percent we our XX%. back margins, XX% And about target EBITDA Pat' as long-term of then depreciation. SG&A the So, add half sales at we're as gross of a think XX%

to also but our combination a of being spend, is mentioned. XX% really with getting David So, scaling, efficient as

Patrick Baumann

it. Got

Okay.

year a as as which isn't in the high you long-term maybe in would plan. So want the growth in

look like. would be You to spend, more efficient, I your on sounds guess,

David Wilson

benefit in year, past at structural investments costs, over including, Yes, made and this the will Künzelsau of of [Indiscernible] implementations we've SAP look a the past Mexico. was couple cost, and that from lot we year. digital IT investments a instructional [indiscernible]

Patrick Baumann

sense. makes it. time. it Appreciate Okay, for Thanks the

Greg Rustowicz

Absolutely. Thanks.

Operator

follow-up Thank you. is [Operator from Instructions] Please of proceed with question Tanwanteng your The Jon coming next question. CJS Securities.

Jon Tanwanteng

guys. Hi,

point the then Just their large to any customer them all. in e-commerce? a assume on currently different? you Do and for of similar something would level come a automation at be at push paused is decrease that determine expect I back follow-up scale to and going or

So thoughts are? just wondering your what

David Wilson

the about period. It's that about a we and the material with dialogue very excited opportunities actively we've to with space. opportunities the exist really are Obviously, working made impact and really investments space term there But customers great and And as question, that pretty are in excited month think the a, Jon of them many great. a proud it's a the in and customer in team the engaged really longer there. them in we absorbed nine other

automating happen And there, or CapEx be e-delivery. with e-commerce the people think so and that developments some this spent both and when we're will really you look think delivery in customer nice see going execution, We and to as at others. what about over time, will

and the as you and things of on And in And what we're which the more focus that we've very past, obviously, opportunities the develop And you but depends could order having and fulfillment, distribution environment. look relevant so how as even that are needs pace general. and in the when broadly, But automation and at significant. that market project the experienced the every involve bit discussions at do being large that there. be more about execution think timing in our they on

I there's a opportunity. nice think

Jon Tanwanteng

in for repurchasing what some at the what's planning it. to you've you. a know pay then And that $XX the is Or back the I use Got is plan flow. just potential coming I planning the you improvement capital? shares. powder of cash point? down to excess debt, keep that in Thank million dry? this you're Are to been know

David Wilson

the inventory of a pretty you see a be of spike. and couple weeks the pushing reduce quarter receivables, to entire last quarter Yes, so cetera. we collect is when on more will front the times, et of the significant cash And lot

probably cash sheet. end putting we're balance with court the so and on we'll the the As full press on up

Jon Tanwanteng

it. got Okay, you. Thank

David Wilson

Great. Thanks, Jon.

Operator

I'd any At over showing time. the floor time, queue. in we're back for or At questions this additional turn you. like closing to this Thank no to additional comments. management

David Wilson

further proof appreciate XX% constant in on everyone's and made income. in had basis, closing our customer reduce Columbus increase In We a operating on you, improving point a McKinnon. thank to Great, experience progress along We Donna. we currency path delivering QX another towards the We debt. objectives. interest double-digit representative growth strategic

We are fiscal a close we year. everyone. excited about day after out forward great our future again and the we you Have updating to look

Operator

gentlemen, and today's event. this concludes Ladies

webcast time of day. at rest log You may disconnect or lines and your off this the your enjoy the

Columbus McKinnon (CMCO) 1 Feb 232023 Q3 Earnings call transcript