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01/09 22:04
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights several concerning factors: declining sales and EPS, increased expenses due to acquisition costs, and significant tariff impacts. Guidance indicates further sales and EPS declines. The Q&A reveals uncertainty about managing tariff impacts and competitive pressures. While the acquisition and backlog offer some positives, the overall sentiment is negative due to weak financial performance and guidance, lack of shareholder return plans, and competitive challenges. The lack of clarity in management's responses further adds to the negative sentiment.
Net Sales $963 million, down 4% year-over-year on a constant currency basis due to lower volume from short-cycle order softness and timing of project-related orders.
Fourth Quarter Sales $246.9 million, down 5% year-over-year on a constant currency basis due to a 9% decrease in short-cycle sales.
Backlog $322.5 million, a $41.7 million or 15% increase year-over-year, reflecting strength in project-related orders.
Gross Profit $79.8 million, down $14.5 million year-over-year, impacted by $4.4 million in factory closure costs and lower sales volume.
Gross Margin 32.3% GAAP, 35.2% adjusted; adjusted gross margin contracted 140 basis points year-over-year due to lower volume and unfavorable mix.
RSG&A Expenses $67.5 million, up $6.1 million year-over-year, including $11 million of deal-related costs from the pending Kito Crosby acquisition.
Operating Income $4.9 million GAAP, $24.1 million adjusted; adjusted operating margin was 9.8%.
Loss per Diluted Share $0.09 GAAP, $0.60 adjusted; adjusted EPS decreased $0.15 year-over-year due to lower volume and unfavorable mix.
Adjusted EBITDA $36.1 million with an adjusted EBITDA margin of 14.6%.
Free Cash Flow (Quarter) $29.5 million, down $600,000 year-over-year.
Free Cash Flow (Year) $24.2 million, lower than prior year due to timing of collections and higher inventory levels.
Debt Repayment $60 million paid down in fiscal '25, including $15 million in the fourth quarter.
Net Leverage Ratio 3.1 times, in line with guidance.
Tariff Impact on EBITDA Approximately $40 million unmitigated impact expected.
Interest Expense $35 million expected, an increase year-over-year due to the expiration of a favorable interest rate hedge.
Amortization Expense $30 million expected.
Effective Tax Rate 25% expected.
Diluted Average Shares Outstanding 29 million expected.
Headwind to Adjusted EPS $0.20 to $0.30 in the first half of fiscal 2026 due to tariffs.
Pending Acquisition of Kito Crosby: The acquisition is expected to scale the business, expand customer capabilities, enable synergies, and accelerate the intelligent motion strategy.
Strength in Precision Conveyance: Order momentum remained strong, particularly in precision conveyance, contributing to a 4% increase in orders on a constant currency basis.
Vertical End Markets: Strength observed in vertical end markets such as battery production, life sciences, e-commerce, food and beverage, and aerospace.
Operational Execution: Achieved a top-tier TRIR of 0.54 and improved customer lead times and on-time delivery.
Backlog Increase: Backlog increased by 15% to $322.5 million, reflecting strength in project-related orders.
Debt Repayment: Paid down $60 million of debt in fiscal '25, including $15 million in the fourth quarter.
Mitigation Strategies for Tariffs: Implementing pricing increases and surcharges to offset tariff impacts, targeting cost neutrality by the second half of fiscal 2026.
Focus on Operational Agility: Prioritizing effective operations and strategic plan execution while navigating macroeconomic uncertainties.
Tariff Impacts: The company anticipates an EBITDA impact of approximately $40 million due to unmitigated tariff exposure. Tariffs are expected to negatively affect margins and adjusted EPS in the first half of fiscal 2026, with a goal to achieve gross profit dollar neutrality by the second half of fiscal 2026.
Macro Environment Uncertainty: The company is navigating a challenging macroeconomic environment characterized by policy uncertainty and evolving US policy landscape, which is impacting short-cycle orders and overall sales.
Supply Chain Challenges: The company is adjusting its supply chain and implementing pricing increases and surcharges to mitigate the impact of tariffs, indicating ongoing supply chain challenges.
Regulatory Issues: The pending acquisition of Kito Crosby is subject to regulatory approvals, with one outstanding approval related to the Hart-Scott-Rodino Act filing, which could pose a risk to the acquisition timeline.
Competitive Pressures: Short-cycle orders are sensitive to channel dynamics, which are influenced by competitive pressures and channel inventory reductions.
Pending Acquisition of Kito Crosby: The acquisition is expected to scale the business, expand customer capabilities, enable synergies, and accelerate the intelligent motion strategy. The company anticipates closing the deal by the end of the calendar year, having received 13 of the 14 required regulatory approvals.
Operational Execution: The company has improved operational execution in areas like safety, achieving a top-tier TRIR of 0.54, and enhancing customer experience, particularly in the EMEA region.
Mitigation Strategies for Tariffs: The company is implementing a robust mitigation plan to offset tariff impacts, including pricing increases and supply chain adjustments, targeting tariff cost neutrality by the second half of fiscal 2026.
Strategic Plan Execution: The company remains focused on executing its strategic plan, including the 80-20 initiatives, while managing costs and navigating the evolving macro environment.
Fiscal 2026 Net Sales Guidance: The company expects net sales growth to be flat to slightly up year-over-year.
Fiscal 2026 Adjusted EPS Guidance: Adjusted EPS growth is expected to be flat to slightly up year-over-year, with a headwind of $0.20 to $0.30 in the first half due to tariffs.
Interest Expense Guidance: Interest expense is projected at $35 million, an increase due to the expiration of a favorable interest rate hedge.
Amortization Expense Guidance: Amortization expense is expected to be $30 million.
Effective Tax Rate Guidance: The effective tax rate is anticipated to be 25%.
Diluted Average Shares Guidance: Diluted average shares outstanding are expected to be 29 million.
Share Repurchase Program: The company has not mentioned any share repurchase program during the call.
Dividend Program: The company has not discussed any dividend program during the call.
The earnings call presents mixed signals: strong U.S. order growth and backlog increase are positives, but overall orders are down. Gross profit and free cash flow improvements are offset by tariff impacts and increased expenses. The Q&A reveals management's cautious stance and lack of specific guidance, with uncertainties around tariffs and acquisition delays. Despite some positive trends, these factors suggest a neutral sentiment, especially without market cap data to assess potential volatility.
The earnings call presents a mixed picture. The pending acquisition of Kito Crosby and operational improvements are positives, but the flat sales and EPS guidance, increased expenses, and tariff impacts are concerns. The Q&A highlighted uncertainties, particularly in gross margins and acquisition impacts. The stock reaction is likely neutral due to balanced positive and negative factors.
The earnings call reveals a challenging financial performance with declining net sales and EPS, increased expenses, and negative tariff impacts. The Q&A section highlights concerns over tariff impacts and unclear management strategies, leading to uncertainty. The acquisition of Kito Crosby and synergies offer potential upside, but weak guidance and financial metrics overshadow this. The lack of a share repurchase program and no clear positive catalysts further contribute to a negative outlook. The stock is likely to see a negative movement between -2% to -8% over the next two weeks.
The earnings call highlights several concerning factors: declining sales and EPS, increased expenses due to acquisition costs, and significant tariff impacts. Guidance indicates further sales and EPS declines. The Q&A reveals uncertainty about managing tariff impacts and competitive pressures. While the acquisition and backlog offer some positives, the overall sentiment is negative due to weak financial performance and guidance, lack of shareholder return plans, and competitive challenges. The lack of clarity in management's responses further adds to the negative sentiment.
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