Financial Data and Key Metrics Changes - Revenue in Q1 2025 declined by 4% compared to the same period last year, primarily due to weaker capital shipments in the Industrial Processing segment [11][19] - Adjusted EBITDA decreased by 8% to $48 million, with an adjusted EBITDA margin of 20%, down from 21% in Q1 2024 [11][21] - Free cash flow increased by 15% to $19 million in Q1 2025 compared to $16.6 million in Q1 2024 [22] - GAAP EPS decreased by 3% to $2.04, while adjusted EPS decreased by 12% to $2.10, exceeding the high end of guidance by $0.05 [21][22] Performance by Business Segment - **Flow Control Segment**: Bookings increased by 6% to $100 million, with Q1 revenue up 7% to $92 million, driven by strong demand for Fluid Handling products [12][13] - **Industrial Processing Segment**: Q1 revenue declined by 15% to $90 million, primarily due to a significant drop in capital shipments, although aftermarket parts revenue made up a record 80% of total revenue in this segment [14][15] - **Material Handling Segment**: Revenue was slightly up to $57 million, with aftermarket parts comprising 65% of Q1 revenue, while overall bookings remained flat [15][17] Market Data and Key Metrics Changes - Aftermarket parts bookings represented 74% of total bookings, reaching a record $190 million, benefiting from a large installed base [11][12] - The company noted that the geopolitical climate and trade uncertainties have introduced transitory headwinds, particularly affecting the Industrial Processing segment [13][17] Company Strategy and Industry Competition - The company is assessing supply chain vulnerabilities due to tariffs and exploring alternative supply sources to mitigate impacts [7][8] - Management emphasized the importance of maintaining high levels of customer support while adapting to changing economic circumstances [8][18] - The company expects strong performance in the Flow Control segment despite geopolitical challenges, while the Industrial Processing segment faces more uncertainty [13][17] Management's Comments on Operating Environment and Future Outlook - Management indicated that the uncertainty from tariffs has delayed capital equipment orders, but they remain confident in the long-term fundamentals of their markets [9][18] - The company anticipates that the second half of 2025 will be significantly stronger than the first half, with a revised revenue guidance of $1.02 billion to $1.04 billion [30][31] - Management acknowledged that while there is a healthy level of quote activity for capital equipment, customers are delaying orders due to uncertainty [29][63] Other Important Information - The company expects incremental material costs of approximately $5 million to $6 million due to tariffs, impacting adjusted EPS by $0.32 to $0.39 [28][30] - The effective tax rate for Q1 was 24.3%, influenced by tax benefits related to equity awards [21] Q&A Session Summary Question: Insights on order book and potential deferrals - Management noted that while there is a pause in project timing, discussions and activity levels remain strong, with no projects canceled [36][38] Question: Impact of tariffs on discretionary capital projects - Management indicated that while tariffs create uncertainty, significant project cancellations are rare, and they expect projects to eventually move forward [50][52] Question: Guidance on capital bookings needed for a strong second half - Management stated that a 15% to 20% increase in capital order flow is necessary to achieve a strong second half, with ongoing discussions on several projects [58][60] Question: Understanding the impact of tariffs on pricing and margins - Management confirmed that they are implementing surcharges to mitigate tariff impacts, but the timing of these adjustments may vary [73][76] Question: Expectations for capital project recovery in the back half of the year - Management emphasized the need for capital bookings to materialize in Q2 to support revenue expectations for the second half of 2025 [78][79]