James Kirby

James Kirby asked how both Columbus McKinnon's core business and Kito Crosby were trending relative to initial assumptions made a year ago when the deal was announced, particularly concerning the macro background and the sustainability of strong short-cycle demand.

Answer

David Wilson, President and CEO, referenced the pro forma fiscal year 2026 guidance from the January 14th press release, projecting combined revenue of $2 billion-$2.1 billion and EBITDA of $440 million-$460 million, inclusive of synergies. He noted robust short-cycle business, with orders up 10% year-over-year last quarter and slightly up period-to-date in January, especially in the U.S., expecting this trend to continue into the first half of the year. Greg Rustowicz, CFO, added that Kito Crosby's pre-announced 12/31 results showed sales between $1.14 billion and $1.15 billion (up 3%-4% from initial estimates) and adjusted EBITDA between $273 million and $283 million (up nicely).

James Kirby asked how both the core Columbus McKinnon and Kito Crosby businesses are trending relative to the initial assumptions embedded in the deal announced a year ago, particularly concerning macro background. He also questioned the sustainability of the 13% short-cycle growth and the sectors driving the forward order pipeline.

Answer

CEO David Wilson referenced the January 14th press release, which provided pro forma fiscal year 2026 guidance for the combined entity (including Kito Crosby for the full year and divestiture of chain/electric chain hoist business) of $2.0-$2.1 billion in revenue and $440-$460 million in Adjusted EBITDA, inclusive of $70 million synergies. He clarified that Kito Crosby's sales were ranged between $1.14-$1.15 billion and Adjusted EBITDA between $273-$283 million in their 12/31 results, up from initial estimates. He stated that short-cycle business is robust, with a 10% year-over-year increase in short-cycle orders last quarter, and orders slightly up year-over-year in the period to date through January, especially in the U.S.

James Kirby of JPMorgan Chase & Co. inquired about the top-line outlook for Q2, asking if revenue would improve from the 2% decline in Q1 or if Q2 would represent the low point for the year. He also asked if further price increases were planned following the July 10 surcharge, or if future actions depended on tariff developments.

Answer

President and CEO David Wilson indicated an expectation for positive revenue progression from Q1 into Q2, supported by a growing book-to-bill ratio and the impact of recent price increases. Regarding future pricing, Wilson stated that the company believes current actions are sufficient based on today's information but will remain agile and responsive to any new tariff developments, reiterating the goal to achieve tariff profit neutrality by October.

James Kirby of JPMorgan Chase & Co. asked about the specific tariff rates assumed in the first-half guidance and whether the pending Keto Crosby acquisition could accelerate tariff mitigation. He also inquired about recent trends in short-cycle orders and if similar dynamics were expected at Keto Crosby.

Answer

David Wilson, President, CEO & Director, stated the guidance assumes a 145% tariff on certain China imports and 10% on EU imports. He expressed confidence in the integration planning for the Keto Crosby acquisition to realize synergies but did not comment on its specific impact on tariff mitigation. Wilson also noted that while short-cycle orders were flat year-over-year in Q4, this represented a significant improvement from Q3, and that overall order demand has shown growth through mid-May.

James Kirby sought to clarify if the hurricane impact was the main driver for the reduced top-line guidance and asked if the montratec business's strong growth was due to portfolio integration or other factors.

Answer

President and CEO David Wilson explained the guidance change was driven by a combination of the hurricane impact and the phasing of project backlog into later quarters. He attributed the success of the entire precision conveyance platform, including montratec, to its market-leading technology combined with the scale, capacity, and broader sales reach provided by Columbus McKinnon's backing. CFO Greg Rustowicz added that montratec is on track to meet its goal of doubling revenue in three years.

James Kirby from JPMorgan Chase & Co. asked for guidance on modeling the charter business into early 2026, including capacity and ad hoc flying trends. He also requested a segment breakdown of the $1.5 billion revenue target for 2027.

Answer

CEO Jude Bricker explained that long-term contract charter business is stable, while ad hoc opportunities depend on fleet availability. CFO Bill Trousdale added that charter revenue per block hour grows around 4% annually. For the 2027 target, Bricker projected $230-$240 million from cargo, with charter growing 4% from today's base, and the remainder from scheduled service.

James Kirby asked if Sun Country was observing any market share shifts due to competitors altering their product offerings. He also inquired about the company's guiding principles for potential M&A, particularly concerning leverage and liquidity.

Answer

CEO Jude Bricker stated they believe they have the right product for their leisure customer and are not planning immediate changes. On M&A, Bricker emphasized the need to protect their unique, flexible operating model. He noted the company has significant balance sheet headroom and contracted revenues, making liquidity less of a concern than for peers.

James Kirby of JPMorgan Chase & Co. asked about the drivers of the strong ad hoc charter growth in the fourth quarter and the expected performance of the overall charter segment going forward. He also confirmed the status of major contract roll-offs.

Answer

President and CFO David Davis attributed the Q4 ad hoc growth to a significant amount of football-related flying and expects that strength to continue, with the total charter business projected to be flat to up low-single digits in 2025. Executive Grant Whitney added that this demonstrates the model's flexibility to capture ad hoc business when scheduled service is reduced. He also confirmed the company feels secure with its major contracts, including its partnership with MLS.

James Kirby, on for Jamie Baker, asked for a reaffirmation of the 2.5x leverage target, the rationale for the revolver upsizing, and an update on the timing for a new managed vehicle structure.

Answer

EVP & CFO Greg Willis confirmed the 2.5x leverage target remains unchanged since the company's inception. He explained the revolver was upsized to $8.2 billion due to strong bank demand during their annual extension process. On the managed vehicle, he noted it is a long-term project they are actively exploring.

James Kirby asked about the macro environment, inquiring if easing interest rates could attract undisciplined capital and whether airlines are pushing back on high lease rates. He also asked if the quarter's high gain on sale margin is sustainable.

Answer

CEO Aengus Kelly stated that capital attraction is based on the sector's maturity, not just interest rates, and dismissed airline pushback on lease rates as insignificant to their overall costs. Regarding sales, he noted that while lower rates can help, AerCap's hedged book and superior maintenance management are the true drivers of value and gains. CFO Pete Juhas added that inflation on hard assets also boosts sale margins.

Asked about the possibility of reclaiming predelivery payments (PDPs) from the OEM and inquired about the status and value of the new headquarters building.

Answer

The company is not discussing the return of PDPs, only financing them. The new headquarters is unencumbered, valued at approximately $250M-$300M, and may be used for future financing.