Alamo Group Q1 Earnings Call Highlights

Key Points

• Q1 results: Net sales rose 6.7% to $417.1 million and adjusted EBITDA was $59.3 million (14.2% of sales), improving sequentially from Q4, though adjusted EPS fell to $2.56 and gross margins were pressured by Vegetation Management and tariffs.
• Petersen acquisition & balance sheet: The Petersen deal (closed Jan 2026) and Ring‑O‑Matic boosted Industrial sales and synergies; Alamo funded Petersen with a $120M revolver draw and cash, invested $169.8M in the quarter, but kept net leverage <1x and approved a $0.34 quarterly dividend.
• Outlook and strategy: Management expects Industrial to be "flattish" in 2026 excluding acquisitions and sees Vegetation stabilizing with sequential improvement, but is more cautious on certain end markets; long‑term targets remain 10%+ sales growth and double‑digit margins.

Alamo Group NYSE: ALG reported higher first-quarter 2026 sales versus the prior year and pointed to sequential profitability improvement exiting the quarter, while management also described a more cautious tone emerging in certain agricultural end markets.

First-quarter results and key drivers

Executive Vice President and Chief Financial Officer Agnes Kamps said net sales for the first quarter of 2026 rose 6.7% year over year to $417.1 million. Gross profit was $104.8 million versus $102.8 million a year ago, while gross margin declined 118 basis points to 25.1%.

Kamps attributed the year-over-year gross margin decline primarily to the Vegetation Management Division, citing “lower net sales in our municipal mowing business” and the impact of “certain manufacturing facilities, which are continuing to ramp up in terms of efficient throughput.” She added that Vegetation Management margins improved “meaningfully on a sequential basis as we exited the quarter,” reflecting operational progress at two facilities, and said the company expects continued improvement as the year progresses.

SG&A expense increased 6.3% to $57.8 million. Kamps said first-quarter SG&A included about $3.5 million tied to acquisition and integration costs, restructuring costs, and the addition of the Petersen and Ring-O-Matic acquisitions. SG&A as a percentage of sales was 13.8%, essentially flat versus 13.9% in the prior-year quarter.

Net interest expense rose to $3.1 million from $2.0 million, which Kamps said was due to the Petersen acquisition. The effective tax rate was 25.3%.

Adjusted EBITDA was $59.3 million, or 14.2% of net sales, compared with $58.3 million, or 14.9%, in the first quarter of 2025. On a sequential basis, Kamps highlighted that adjusted EBITDA improved from $44.8 million, or 12% of sales, in the fourth quarter of 2025. Adjusted earnings per share were $2.56 versus $2.70 a year ago and $1.70 in the fourth quarter of 2025.

Division performance: Industrial up; Vegetation rebounds but municipal mowing remains soft

In the Industrial Equipment division, Kamps reported net sales of $241.7 million, up 6.5% from $227.1 million. Excluding acquisitions, she said net sales declined $2.4 million, or 1%, “largely due to timing of orders in our snow group.” Adjusted EBITDA for the segment increased to $39.7 million, or 16.4% of net sales, from $37.4 million, or 16.5%.

Chief Executive Officer Robert Hureau said the Industrial sales increase was driven “primarily by our acquisitions,” including Petersen (closed in the first quarter) and Ring-O-Matic (closed mid-2025). He said excavation and vacuum performed well, sweeper and safety were “flattish” excluding Petersen, and snow sales declined year over year. Hureau reiterated that the snow decline reflected a deliberate shift away from lower-margin business, explaining the company is “not chasing every last single dollar of sales” if it requires outsourcing upfitting that compresses margins.

Hureau said Industrial adjusted EBITDA margins around 16% reflected “positive pricing, procurement savings, and the inclusion of the Petersen business,” partially offset by “material inflation, including tariffs” and investment to support long-term growth. He added the Industrial book-to-bill was about 1.0x and net orders were down 11% year over year, with snow orders up double digits, excavation and vacuum orders down, and sweeper and safety orders down due to an unusually large multiyear order in the prior-year quarter.

In the Vegetation Management division, Kamps said net sales rose 7.0% to $175.4 million, citing operational improvements and “modest support from the agricultural end market,” offset by weakness in municipal mowing. Segment adjusted EBITDA was $19.6 million, or 11.2% of sales, down from $20.8 million, or 12.7%, a year ago.

Hureau emphasized the Vegetation sales gain was the first year-over-year quarterly increase for the segment “in nine quarters,” calling it “a very positive development” and a sign certain end markets “might be settling.” He said the increase reflected ramping production at key facilities, improved demand in some end markets, and favorable pricing, partially offset by continued weakness elsewhere. He cited positive sales in North American agriculture and tree care, noting tree care gains in North America were driven by manufacturing efficiency improvements “not necessarily a recovery in the end markets,” while Europe reflected improving demand and strong execution. Municipal mowing sales declined as dealers and state DOT customers remained cautious while managing budgets.

Hureau said Vegetation adjusted EBITDA margins of about 11% were “up significantly from the second half of 2025,” though still slightly below the first quarter of 2025, with volume leverage and pricing offset by inflation (including tariffs) and growth investments. He said Vegetation book-to-bill was about 1.0x and net orders rose 5%, supported by strength in North American and European agriculture, while tree care orders were soft amid weak end markets including the U.S. housing market, and municipal mowing orders declined.

Cash flow, balance sheet, and dividend

Kamps said first-quarter operating cash flow was negative $23.5 million, driven by “strong sequential growth,” particularly in Vegetation Management, where net sales increased $36.7 million, or 26.4%, from the fourth quarter of 2025. On a trailing 12-month basis, she reported operating cash flow of $139.8 million, or 138.2% of net income.

Investing cash flow was negative $169.8 million, reflecting the Petersen Industries acquisition in January 2026 and $4.5 million of capital expenditures. Kamps said the company funded the Petersen acquisition with a $120 million draw on its revolver and about $50 million of cash on hand.

As of March 31, 2026, gross debt was $290.5 million and cash was $195.2 million, which Kamps said resulted in a net leverage ratio of less than 1x. She described total liquidity as “very strong,” supporting continued “disciplined M&A opportunities.”

Kamps also said the board approved a quarterly dividend of $0.34 per share.

Petersen integration and tariff commentary

On the acquisition front, Hureau said early results from Petersen Industries have been encouraging. He told analysts the company is “very pleased with the initial financial results, the integration activities, the leadership team, and the progress related to both the commercial and operational synergies.” In response to a question from Baird’s Joe Grabowski, Hureau said the integration has been “smooth,” with back-end systems work progressing well, and he highlighted commercial opportunities to expand Petersen’s presence, particularly via West Coast dealer channels. He also said operational synergies have been validated, especially around chassis procurement and leveraging Alamo’s purchasing scale.

Asked about tariffs, Hureau said the company’s overall outlook had not changed materially from the prior quarter. He noted tariffs were absent in the year-ago quarter but were included in first-quarter 2026 results, creating a year-over-year margin headwind. On a 12-month basis, he said the impact should be “slightly short of 1% of sales,” estimating about 0.8% to 0.9%, though effects can vary by business unit depending on manufacturing location and updated rules.

Outlook: Industrial seen as “transition year,” Vegetation stabilizing but management more cautious

On the Industrial side, Hureau told CJS Securities analyst Chris Moore the company expects 2026 to be “kind of a flattish year” excluding acquisitions—“anywhere between flattish to up very low single digits”—after several years of unusually strong growth. He said end markets remain constructive long term, but growth is likely to slow in 2026 as the near-term effects of prior infrastructure-related investments and the overall rate of construction spending slow before normalizing.

For Vegetation Management, Hureau said the rate of decline in end markets should slow in 2026, suggesting a stabilizing environment that could be “flattish, maybe still down a little bit, but definitely sequentially improving.” However, he added that management is “a bit more cautious today than we were a few months” despite the first-quarter sales increase, pointing to third-party data and rising costs such as fertilizer and freight, as well as recent declines in retail tractor sales in the 40 to 100 horsepower range. In response to Sidoti’s Greg Burns, Hureau said the first quarter did not show significant negative impact in results, but customer conversations and external indicators have supported a “slightly more cautious tone.”

Hureau also reiterated the company’s long-term financial objectives, including 10%+ sales growth through the cycle, 15% adjusted operating margins, 18%+ adjusted EBITDA margins, and free cash flow equal to 100% of net income. He outlined margin improvement initiatives under the company’s strategic pillars, including procurement savings (with benefits expected later in 2026 as inventory turns), continued manufacturing efficiency efforts, and increasing parts and service mix, while emphasizing that achieving targets also depends on a recovery in Vegetation end markets.

About Alamo Group NYSE: ALG

Alamo Group, Inc engages in the design, manufacture and marketing of equipment for vegetation management, roadside maintenance, agricultural harvesting and industrial applications. The company offers a broad portfolio of products, including boom mowers, flail mowers, rotary cutters, snow removal equipment, slurry seal machines, railcar movers and tow tractors. These offerings are distributed under a variety of brand names and through a network of independent dealerships and distributors, meeting the needs of municipalities, highway departments, agricultural producers and industrial operators.

The company operates through two primary segments: Agricultural and Industrial.

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