Columbus McKinnon(US:CMCO)2020-11-01 00:55Financial Data and Key Metrics Changes - Sales for the quarter were approximately $158 million, at the upper end of the expected range, with a sequential growth of 13.5% [7][12] - Adjusted gross margin expanded to 34.4%, an increase of 60 basis points, while adjusted operating margin improved to 8.9%, up 530 basis points [7][8] - Free cash flow for the quarter was $36 million, with net debt leverage ratio reduced to below one times trailing 12-month adjusted EBITDA [8][30] Business Line Data and Key Metrics Changes - Short-cycle business, comprising about 50% of total revenue, saw a sequential increase of 22% [9] - Project business experienced a 5.5% sequential sales increase, although growth was dampened by project acceptance timing [10] - Adjusted EBITDA margin expanded to 13.4%, reflecting decisive actions taken to reduce costs [11] Market Data and Key Metrics Changes - Sales volume in the U.S. declined by 26.4%, while outside the U.S., sales volume was down 25.8% [14] - Foreign currency translation positively impacted sales by 1.1% [13] - Total backlog increased by 2% year-over-year and improved 12% sequentially, reaching approximately $147 million [37] Company Strategy and Development Direction - The company is focused on evolving its Blueprint for Growth strategy, emphasizing market-led, customer-centric, and operational excellence principles [44][46] - Investments are being made in R&D and digital experiences, with plans to increase RSG&A levels in the second half of the year [21][46] - The company aims to maintain a flexible capital structure to support growth initiatives and return cash to shareholders [73][74] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improved stability in markets but acknowledged risks associated with increasing infection rates [43] - The fiscal third quarter is typically the weakest, but the company expects sales to remain consistent with the second quarter levels [43][53] - Management highlighted a healthy backlog and potential for improved order rates, which could drive higher execution levels [76] Other Important Information - The company achieved a GAAP loss per diluted share of $0.17 due to a pension settlement expense [24] - Adjusted earnings per diluted share were $0.34, down from $0.74 in the previous year [25] - The company has a strong liquidity position of approximately $245 million [31] Q&A Session Summary Question: Can you provide more color on the cadence of orders and overall demand activity? - Management noted a 26% improvement in order rates during the quarter, with a sequential increase of 41% in the short-cycle business [48] Question: Is there any reason to think gross margins might go down in Q3? - Management indicated that typically, gross margins decline in Q3 due to fewer shipping days and lower fixed cost absorption [57] Question: Can you quantify the increase in RSG&A for the coming quarter? - The increase is expected to be about $2 million for incentive compensation, a couple of million for growth investments, and another couple of million related to returning to work [63] Question: Can you elaborate on the Amazon-related order? - The order involves actuators being sold to a partner providing solutions for Amazon's warehousing operations, with potential for further demand [65][67] Question: What are the capital allocation priorities moving forward? - The company plans to maintain a consistent capital allocation framework, focusing on organic growth and strategic initiatives while returning cash to shareholders [71][74]