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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 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.
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, primarily 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), adjusted gross margin 35.2%, 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), adjusted operating income $24.1 million, with adjusted operating margin at 9.8%.
Earnings Per Share (EPS) $0.60 (adjusted), down $0.15 year-over-year, driven by lower volume and unfavorable mix, partially offset by lower RSG&A expenses and price increases.
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 the 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, with expectations for negative impact in the first half of fiscal 2026.
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 Vertical End Markets: Strength in orders related to 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.
Free Cash Flow: Generated $29.5 million of free cash flow in the quarter.
Debt Repayment: Paid down $60 million of debt in fiscal ’25, including $15 million in the fourth quarter.
Tariff Mitigation Strategy: Implementing pricing increases and surcharges to mitigate tariff impacts, targeting cost neutrality by the second half of fiscal 2026.
Focus on Operational Agility: Prioritizing effective operations and strategic plan execution amidst macroeconomic uncertainties.
Tariff Impacts: Tariffs are expected to negatively impact margins and adjusted EPS in the first half of fiscal 2026, with an unmitigated EBITDA impact of approximately $40 million. The company is targeting tariff cost neutrality by the second half of fiscal 2026 and margin neutrality by fiscal 2027.
Short-Cycle Order Sensitivity: Short-cycle orders remain sensitive to channel dynamics driven by policy uncertainty and macroeconomic conditions, impacting sales and margins.
Regulatory Approval for Acquisition: The pending acquisition of Kito Crosby is subject to regulatory approvals, with one outstanding approval related to the Hart-Scott-Rodino Act filing. Delays in this process could affect the acquisition timeline.
Economic Environment: The macroeconomic environment remains uncertain, with volatility related to evolving US policy landscape, which could impact future performance.
Supply Chain Adjustments: The company is making adjustments to its supply chain to mitigate tariff impacts and is implementing pricing increases and surcharges, which may not be immediately effective for existing orders.
Debt Management: The company has exceeded the maximum allowable adjustment for cash restructuring costs in its credit agreement, which could affect financial covenants.
Pending Acquisition of Kito Crosby: The acquisition is expected to scale the business, expand customer capabilities, enable synergies, and accelerate the intelligent motion strategy.
Operational Execution: Focus on improving operational execution, including safety, customer experience, and managing costs.
Mitigation Strategies: Implementing pricing increases and surcharges to offset tariff impacts.
80-20 Initiatives: Continuing to advance strategic plans including the 80-20 initiatives.
Fiscal 2026 Net Sales Growth: Guidance for net sales growth is flat to slightly up year-over-year.
Adjusted EPS Growth: Guidance for adjusted EPS growth is also flat to slightly up year-over-year.
Tariff Impact on EPS: Expect a $0.20 to $0.30 headwind to adjusted EPS in the first half of fiscal 2026 due to tariffs.
Interest Expense: Anticipated interest expense of $35 million for fiscal 2026.
Amortization Expense: Expected amortization expense of $30 million for fiscal 2026.
Effective Tax Rate: Effective tax rate projected at 25%.
Diluted Average Shares Outstanding: Estimated at 29 million shares for fiscal 2026.
Tariff Cost Neutrality: Targeting tariff cost neutrality by the second half of fiscal 2026.
Margin Neutrality: Aiming for margin neutrality over time, likely in fiscal 2027.
Share Repurchase Program: None
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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