Columbus McKinnon Corporation

Greetings. Welcome to the Columbus McKinnon Corporation third quarter fiscal year 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Deborah Pawlowski, Investor Relations for Columbus McKinnon. You may begin.

Thanks, Shamali, and good morning, everyone. We certainly appreciate your time today and your interest in Columbus McKinnon. Joining me on the call are David Wilson, our president and CEO, and Greg Rustowitz, our chief financial officer. You should have a copy of the third quarter fiscal 2021 financial results, which we released this morning before the market. If not, you can access the release, as well as the slides that will accompany our conversation today, on our website at www.columbusmckinnon.com. After our formal presentation, we will be opening the line for Q&A. We kindly ask that you ask one question with a follow-up question and then get back in queue to allow for continuous flow and adequate time. If you'll turn to slide two in the deck, I will review the safe harbor statement. You should be aware that we may make some forward-looking statements during the formal discussions as well as during the Q&A session. These statements apply to future events that are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today. These risks and uncertainties and other factors are provided in the earnings release, as well as with other documents filed with Securities and Exchange Commission. These documents can be found on our website or at sec.gov. During today's call, we will also discuss some non-GAAP financial measures. We believe these will be useful in evaluating our performance. You should not consider the presentation of additional information in isolation or as a substitute for results prepared in accordance with GAAP. We have provided reconciliation of non-GAAP measures with comparable GAAP measures in the tables that accompany today's release and the slides for your information. So with that, if you will turn it to slide three, I will turn it over to David to begin. David?

Great. Thank you, Deb. And good morning, everyone. These are certainly interesting times, and I'm very proud of the way the Columbus McKinnon team continues to rise to the challenges presented by the pandemic. We have continued to lead with health and safety at the forefront through these dynamic times. Even as global infection rates accelerated in the December quarter, we were able to exceed our revenue targets, grow our daily order rates, and meet our customers' requirements. Through all of this, we have been evolving our Blueprint for Growth strategy to Blueprint for Growth 2.0. Our Columbus McKinnon Business System, or CMBS, is developing to provide the underpinnings for the discipline, processes, and core competencies necessary to scale our business. We believe that core elements of CMBS are enabling us to drive results today as we address challenges such as labor availability, supply chain shortages, and delayed freight schedules. I'll talk more about our strategy and CMBS in a moment, but let's hit on the highlights of the quarter first. Sales of $166.5 million surpassed our expectations, even as we dealt with the staffing, supply chain, and logistics challenges associated with rising rates of COVID-19 infections. In fact, We are ahead of plan for our organic growth initiatives involving new product and solutions development, geographic expansion, and advancing COMPAS, our online CPQ or configure price quote tool that speeds up our channel partners' ability to design and quote our equipment. We are forecasting new product revenue defined as revenue from products introduced within the last three years to be up 24% year over year in fiscal 2021. As a percentage of sales, our new product revenue has grown nearly 200 basis points. Gross margin was 33.2%, which we were pleased with given the typical impacts of underabsorption in the December quarter and the incremental costs associated with labor availability and supply chain expediting fees. Our suppliers similarly faced staffing impacts associated with the pandemic. In addition, we had to overcome increased freight costs due to capacity constraints in our global shipping channels. Despite all of this, adjusted operating income was $11.2 million and gap earnings were 27 cents per share or 26 cents per share when normalized for the tax rate in our fiscal third quarter. As Greg likes to say, a hallmark of Columbus McKinnon is our ability to generate cash through all cycles. I believe this is true, and we are also getting better at it. As we drive operational excellence through CMBS, I expect that we will advance this capability even further. We generated approximately $22 million in free cash in the quarter and have more than sufficient financial flexibility to put our capital to work for growth, both organically and through acquisitions. Notably, our backlog is up 4% sequentially, continuing an encouraging trend of recovery. If you will now turn to slide four, I would like to introduce more about the evolution of our Blueprint for Growth strategy to version 2.0. To execute this strategy, we are building the Columbus McKinnon Business System, or as I said previously, CMBS. CMBS leverages the foundational elements of EPAS and expands upon them with a broader set of core competencies, key processes and tools that establish a stronger enterprise foundation and a Columbus-McKinnon way for enabling growth and creating scalability. This provides the infrastructure that enables the core growth framework of our Blueprint for Growth 2.0 strategy. The key principles of CMBS are rooted in being market-led, customer-centric, and operationally excellent with our people and values at the center of all that we do. This requires somewhat of a shift from where we have been as a company. We are altering our orientation and perspective to be more outside-in focused. Being market-led and customer-centric means we must establish a deeper and more institutionalized understanding of the markets we serve, the competitive landscape we engage in, and the opportunities that strategic adjacencies provide. This perspective sharpens our insight into what drives our customers' behaviors, why they buy, what they buy, and how they buy. We are improving our knowledge of how we are perceived, enabling us to align internally to improve our customers' experience. With CMBS as the foundation, we can execute the core growth framework of our Blueprint for Growth 2.0 strategy. The framework defines four parallel paths for Columbus McKinnon's growth and provides clear organic and strategic initiatives focused on strengthening our core, growing our core, expanding our core, and reimagining our core. This is how we will pivot to growth, both organic and acquisitive. Strengthening the core is a foundational path focused on initiatives that will strengthen competencies and improve our competitive position within our existing share of the SAM, or Serviceable Addressable Market. Initiatives include further developing commercial and product management competencies and improving our digital front end. Growing the core is a path that is focused on taking greater market share, both organically and through acquisitions, Within the markets we currently serve, or again, our SAM, we are making progress on this path with product localization, new product development, and advancements in automation and aftermarket support for our distributors. Expanding the core is a path that is focused on improved channel access and geographic expansion. Here we are talking about expanding beyond our SAM into the broader total addressable market, or TAM. This will involve building out our presence both geographically and in new verticals. A current example is the hygienic markets we are targeting with evolved products and solutions. This will also be achieved through organic and acquisitive growth. Reimagining the core is a more transformational path that rethinks our current TAM and targets strategic growth Beyond that, as we think more broadly about material handling and increasing trends in intelligent motion, not just lifting, but solutions for how materials move throughout customer environments, there are some compelling ideas that emerge. This growth can be achieved organically through innovative approaches in the application of Columbus McKinnon technologies in markets that extend beyond today's TAM, as well as through strategic development. We have detailed plans underpinning each of the paths of our core growth framework. We look forward to discussing these in greater detail when we host a strategy briefing in our first quarter of fiscal 2022. Please turn to slide five, and I'll speak to the current success of one of our key Columbus McKinnon business system tools, the 80-20 process. While the results of this process are volume dependent, we are nonetheless reaping incremental benefits. even during the recession created by the pandemic. Year to date, we have generated $9 million in contributions to operating income resulting from strategic pricing initiatives, the consolidation of facilities, and customer simplification. In addition to our continued focus in these areas, a primary area of emphasis going forward is on product line simplification. If you would now turn to slide six, you will see that we are continuing to recover from the low point in the first quarter of fiscal 2021. Both our short cycle and project businesses demonstrated growth over the second quarter. As we have noted previously, the third quarter is typically our weakest quarter due to seasonality and fewer workdays. We are certainly encouraged that the landscape appears to be improving overall. I will now turn the call over to Greg to discuss our Q3 performance in further detail. Greg? Thank you, David.