Financial Data and Key Metrics Changes - Sales for the second quarter were $212 million, exceeding the outlook of $206 million, with foreign exchange contributing approximately $3 million to this overachievement [11][19] - Adjusted EBITDA margin was 18.6%, above expectations, despite being impacted by unfavorable product mix and tariff effects [11][12] - Cash from operations reached near-record levels of $37 million, marking a 10% improvement over the previous year [11][26] - Net debt decreased by $67 million year-over-year, improving the net debt to adjusted EBITDA leverage ratio to 2.6 times [12][28] Business Line Data and Key Metrics Changes - Hydraulic sales declined by 3% year-over-year, reflecting weakness in industrial and mobile end markets, although agriculture showed signs of stabilization [23] - Electronics segment sales were down 4% year-over-year, with significant declines in the recreational market [24] - Hydraulics gross profit and gross margin grew by 4% and 220 basis points year-over-year, respectively, due to lower material and direct labor costs [23] - Electronics gross profit declined by 18%, with a 530 basis point drop in gross margin primarily due to higher freight and duties costs [24] Market Data and Key Metrics Changes - EMEA region sales grew by 5% year-over-year, while sales in The Americas and APAC declined [20] - APAC electronics segment sales increased by 27% year-over-year, driven by the health and wellness end market [20] - The overall sales comparables remain negative year-over-year, but profitability improved sequentially with increased sales volume [20] Company Strategy and Development Direction - The company is refocusing its go-to-market strategy and prioritizing capital allocation to improve return on invested capital (ROIC) [12][14] - A definitive agreement was signed to sell Custom Fluid Power for approximately $54 million, which is expected to improve margin rates within the Hydraulics segment [12][14] - The company aims to achieve a sub-two times leverage ratio to enhance capital allocation flexibility [12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the recovery in various markets, including agriculture and health and wellness, with expectations for growth in the second half of the year [31][34] - The company anticipates third-quarter sales in the range of $208 million to $215 million, representing a potential 9% increase year-over-year [35] - Management acknowledged ongoing external challenges, including tariff changes and stagnant interest rates, but remains focused on long-term growth prospects [34][39] Other Important Information - The company has made significant progress in cash management, achieving a trailing twelve months free cash flow conversion rate of 291% [26] - The strategic divestiture of Custom Fluid Power is expected to provide greater flexibility for capital deployment decisions [39] - The company is committed to improving margins across all business lines and evaluating opportunities within its product portfolio [40] Q&A Session Summary Question: Market Inflections and Customer Engagement - Management noted growth in health and wellness and signs of recovery in agriculture, with expectations for all main businesses to grow in the second half of the year [46][48] Question: Non-Core Business Considerations - The divestiture of Custom Fluid Power was strategic, as it did not align with the core business, and no immediate non-core divestitures are planned [50][53] Question: Margin Expectations for the Second Half - Management did not provide specific segment margin guidance but indicated expectations for revenue growth in hydraulics and electronics, with potential margin uplift [62][64] Question: Competitive Positioning in the US - The company highlighted its competitive advantage due to its US manufacturing footprint, which allows for better pricing strategies and differentiation in the market [77][80] Question: Organizational Structure Changes - Management is focused on restructuring to improve efficiency and has made progress in aligning teams with brand and product focus [84][86] Question: Update on Water Guru Partnership - The partnership is expected to ramp up, with initial product launches completed, but significant revenue impact is not anticipated until 2026 [96] Question: Impact of Interest Rate Changes - A reduction in interest rates would be beneficial, particularly for consumer discretionary segments, but the company is prepared to grow without relying on this [98][99]