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    ALG
    Earnings call· Jun 2026(Q2 FY26)

    ALAMO GROUP Q2 FY26 earnings call ALG

    Aug 4, 2026 Source

    Executive summary

    Alamo Group Q2 FY26 — Strong Sales and Improved Adjusted Earnings Driven by Industrial Equipment

    Alamo Group delivered a solid second quarter, marked by strong sales growth in its Industrial Equipment division, driven by recent acquisitions and organic demand. While gross margins faced pressure from mix and investments, adjusted earnings and EBITDA showed healthy improvement. The company maintains a disciplined capital allocation strategy, prioritizing tuck-in M&A and shareholder returns, with a strong balance sheet providing ample flexibility despite cautious near-term outlooks for some end markets.

    Highlights

    5

    • Net sales increased 7.6% to $415.7 million in Q2 FY26.

    • Adjusted EPS grew 7.2% to $2.82 in Q2 FY26.

    • Adjusted EBITDA rose to $63.9 million (14.2% of net sales) in Q2 FY26 from $58.8 million (14% of net sales) in Q2 FY25.

    • Industrial Equipment division sales increased 12.8% to $271.6 million, with organic growth of 2.6%.

    • Free cash flow for the LTM ended June 30, 2026, was $135.3 million, representing 134% of net income.

    Concerns

    5

    • Gross margin declined 120 basis points to 24.6% in Q2 FY26 due to sales mix and growth investments.

    • Net interest expense increased to $3.6 million in Q2 FY26 from $2.5 million in Q2 FY25, primarily due to the Petersen acquisition.

    • Industrial Equipment book-to-bill ratio was 0.85x in Q2 FY26, with net orders down 2% YoY.

    • Vegetation Management book-to-bill ratio was 0.9x in Q2 FY26, with net orders down 1% YoY.

    • Vegetation Management end markets are expected to be flattish to down mid-single digits for the remainder of 2026.

    Guidance & targets

    3
    CategoryTargetConfidence
    Adjusted Operating Income Margin
    15%
    high materiality
    High
    Adjusted EBITDA Margin
    18%
    high materiality
    High
    Business Exit
    Complete exit
    low materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Industrial Equipment
    Sales growth driven by organic demand and contributions from Petersen and Ring-O-Matic acquisitions. Strong performance in excavators, vacuum trucks, and rental business, which is on pace for a record year. Snow sales lower due to deliberate focus on attractive commercial opportunities, improving profitability. Adjusted EBITDA margins were roughly unchanged YoY, benefiting from higher volume, ramping procurement savings, and Petersen's contribution, partially offset by higher input costs (freight and steel) and streamlining costs. Orders strongest in snow and sweepers/safety (organic and inorganic growth), while excavator/vacuum truck orders were lower against a record Q2 FY25.
    Organic net sales growth: 2.6% YoYQ2 FY25 Net Sales: $240.7 millionQ2 FY25 Adjusted EBITDA: $40.3 millionQ2 FY25 Adjusted EBITDA Margin: 16.8%Book-to-bill ratio: 0.85xNet orders change: -2% YoYContribution to total sales: 59%
    		$271.6 million12.8%—$45.3 million Adjusted EBITDA (16.7% of net sales)
    Vegetation Management
    Sales were relatively stable YoY, marking the second consecutive quarter of growth after eight quarters of declines. Growth in North American agriculture, Tree Care, Recycling, and European businesses offset declines in municipal mowing and South America. Adjusted EBITDA margins were flat YoY, reflecting improved operational execution and favorable pricing offset by inflation, tariffs, and unfavorable sales mix. Municipal mowing orders showed strong momentum, and Tree Care/Recycling orders grew. North American agriculture orders were flat YoY but built on a strong year-to-date pattern.
    Q2 FY25 Net Sales: $178.4 millionQ2 FY25 Adjusted EBITDA: $18.5 millionQ2 FY25 Adjusted EBITDA Margin: 10.4%Book-to-bill ratio: 0.9xNet orders change: -1% YoYContribution to total sales: 41%
    		$179.1 million0.4%—$18.6 million Adjusted EBITDA (10.4% of net sales)

    Operational metrics

    34
    Net sales
    $415.7 million7.6% increase YoY
    Q2 FY26
    Organic net sales growth
    1.3%YoY
    Q2 FY26
    Gross profit
    $110.9 millionvs $108.3 million Q2 FY25
    Q2 FY26
    Gross margin
    24.6%down 120 bps YoY
    Q2 FY26

    Reflected impact of net sales mix and investments to support long-term growth, partially offset by favorable pricing, procurement savings, and continued operating disciplines.

    SG&A expense
    $60.1 millionup 5.1% YoY
    Q2 FY26

    Included acquisition and integration expenses, restructuring expenses, and the addition of Petersen and Ring-O-Matic businesses.

    SG&A expense as % of net sales
    13.3%vs 13.6% Q2 FY25
    Q2 FY26
    Adjusted SG&A expense as % of net sales
    12.5%vs 13.5% Q2 FY25
    Q2 FY26
    Net interest expense
    $3.6 millionvs $2.5 million Q2 FY25
    Q2 FY26

    Higher year-over-year, primarily as a result of Petersen acquisition and related financing activity.

    Effective income tax rate
    25.6%
    Q2 FY26

    In line with current and long-term expectations.

    Acquisition, integration, and restructuring expenses
    $4.3 million
    Q2 FY26

    Inclusive of investments to transform manufacturing activities and supply chain function, leadership changes, and costs to consolidate/streamline certain manufacturing facilities. $3.5 million recorded in SG&A.

    Adjusted EBITDA
    $63.9 millionvs $58.8 million Q2 FY25
    Q2 FY26
    Adjusted EBITDA margin
    14.2%vs 14% Q2 FY25
    Q2 FY26
    Adjusted EPS
    $2.82up 7.2% YoY
    Q2 FY26

    On a fully diluted basis.

    Cash provided by operations
    $22.7 million
    6 months ended June 30, 2026
    Investing cash outflow
    $171.6 million
    6 months ended June 30, 2026

    Primarily reflecting the Petersen acquisition and capital expenditures.

    Financing cash inflow
    $37.3 million
    6 months ended June 30, 2026
    Committed credit facility capacity
    $602.5 million
    as of May 2026

    Strengthens liquidity and financial flexibility.

    Revolving credit facility
    $400 million
    as of May 2026
    Term loan facility
    $202.5 million
    as of May 2026
    Cash balance
    $195 million
    as of June 30, 2026
    Total debt
    $262.7 million
    as of June 30, 2026
    Net leverage
    less than 1x
    as of June 30, 2026

    Leaving significant capacity to fund capital deployment priorities.

    Dividends paid
    $4.1 million
    Q2 FY26
    Quarterly dividend per share
    $0.34
    Q2 FY26

    Board approved, reflects target payout ratio of approximately 15% of net income.

    Share repurchases
    $9.4 million
    Q2 FY26
    Revolver repayment
    $25.9 million
    Q2 FY26

    Repayment on the revolver, which was drawn to finance the Petersen acquisition.

    Petersen Adjusted EBITDA margin
    23-24%
    current

    Example of accretive M&A, performing in line with expectations and benefiting from early synergies.

    Capital expenditures as % of net sales
    approximately 2%
    on average

    Policy to invest in people, products, facilities, and technologies to support profitable growth and productivity.

    Target net leverage
    up to 2.5x
    long-term

    Policy to maintain a strong balance sheet and preserve flexibility for opportunistic actions.

    Target M&A transactions per year
    1 to 2
    typical year

    Goal for tuck-in acquisitions close to core business, with leadership positions, attractive EBITDA margins, and acquired at attractive multiples.

    Target dividend payout ratio
    approximately 15%
    long-term

    Part of balanced capital return to shareholders.

    Procurement savings opportunity
    300 bps
    long-term

    Part of the 300 basis points of margin improvement directly within company control, contributing to long-term margin targets.

    Parts and service opportunity
    300 bps
    long-term

    Part of the 300 basis points of margin improvement directly within company control, contributing to long-term margin targets. Company feels underserved relative to history and benchmark.

    Manufacturing operations efficiency opportunity
    300 bps
    long-term

    Part of the 300 basis points of margin improvement directly within company control, contributing to long-term margin targets.

    Industry KPIs

    5
    MetricValueDetails
    Tariff cost impact—
    Parts aftermarket businessup a smidge
    Data center prime power demand—
    Order backlog order intake by segment4 to 5 months of revenue
    Industry production market size forecasts—

    Orderbook & backlog

    3
    Total backlog4 to 5 months of revenueQ2 FY26

    Represents aggregate lead times, consistent with historical levels outside of boom years.

    Industrial Equipment book-to-bill ratio0.85xQ2 FY26

    net orders down 2% YoY

    Vegetation Management book-to-bill ratio0.9xQ2 FY26

    net orders down 1% YoY

    Deals & partnerships

    3
    PetersenAcquisition of a business contributing to Industrial Equipment division.

    Acquired earlier in 2026. Integration efforts and advancement of commercial and operational synergies are progressing well.

    Ring-O-MaticAcquisition of a business contributing to Industrial Equipment division.

    Acquired during 2025.

    UndisclosedExit of a small business in the Netherlands serving the waterway vegetation management market.

    Part of portfolio review to align with long-term strategic direction. Expected to be completed either through sale or closure.

    Risks & headwinds

    7
    Gross margin declineQ2 FY26

    120 bps

    Mitigation: Favorable pricing, procurement savings, and operating disciplines partially offset the decline.

    Higher input costsQ2 FY26

    freight and steel

    Mitigation: Partially offset by higher volume, ramping procurement savings, and cost efficiency initiatives in Industrial Equipment.

    Cost to streamline manufacturing activitiesQ2 FY26

    costs incurred

    Mitigation: Partially offset by higher volume, ramping procurement savings, and cost efficiency initiatives in Industrial Equipment.

    Inflation, tariffs, and unfavorable sales mixQ2 FY26

    offsetting factors

    Mitigation: Offset favorable pricing and improved operational execution in Vegetation Management.

    Vegetation Management end market pressureH2 FY26

    flattish to down mid-single digits

    Mitigation: Company is focused on alternate sources of growth and strengthening dealer network. Expects long-term relevance of brands and products.

    Lumpiness and timing of orders in excavator and vacuum truck businessesQ2 FY26

    orders lower in Q2 FY26

    Mitigation: Acknowledged as inherent to the business; Q2 FY25 was a record quarter for orders, making comparison tough.

    Pockets of softness in construction marketsQ2 FY26

    some pockets

    Mitigation: Company notes market is stable but selective, with near-term growth moderating after several years of double-digit growth.

    What to watch in Q3 FY26

    5

    Vegetation Management End Market Trajectory

    H2 FY26
    CurrentFlattish to down mid-single digits
    TargetStabilization or improvement

    Why it matters

    This segment has seen 8 quarters of decline and is now stabilizing; its recovery is key to overall growth.

    I would call that end market to be flattish to down mid-single digits, somewhere in that ZIP code. Nonetheless, a remarkable swing in trajectory versus the prior 2 years to 3 years.

    Q&A highlights

    5

    Seeking clarity on backlog dynamics, lead times, and market share given normalized order patterns, specifically how much revenue is backlog-dependent and turn rates for Industrial vs. Vegetation.

    Robert Hureau explained that aggregate lead times represent 4-5 months of revenue in backlog, consistent with historical levels outside of boom years. He highlighted positive order trends in municipal mowing and snow business, while excavator/vacuum truck orders were down against a record Q2 FY25. He emphasized market share gains in both divisions.

    “Today, in the aggregate, those lead times, if you look at our backlog and our quarterly revenue, we've got 4 to 5 months of revenue sitting in backlog in the aggregate and similarly within the Industrial division.”

    asked by Chris Moore · answered by Robert Hureau

    2 min read5 chapters

    Detailed Narrative

    01

    Q2 Performance Overview

    Alamo Group reported strong Q2 FY26 results with net sales up 7.6% to $415.7 million and adjusted EPS increasing 7.2% to $2.82. Adjusted EBITDA reached $63.9 million, representing 14.2% of net sales. The company highlighted continued strong customer activity and progress on operational improvements and strategic priorities, despite a 120 basis point decline in gross margin to 24.6% due to sales mix and growth investments.

    02

    Industrial Equipment Division Strength

    The Industrial Equipment division saw net sales grow 12.8% to $271.6 million, with organic sales up 2.6%. This growth was driven by excavators, vacuum trucks, and the rental business, which is on pace for a record year. Recent acquisitions, Petersen and Ring-O-Matic, also contributed significantly, with Petersen's integration progressing well and its EBITDA margins performing as expected.

    03

    Vegetation Management Stabilization

    The Vegetation Management division's net sales were relatively stable, up 0.4% to $179.1 million, marking the second consecutive quarter of year-over-year growth after eight quarters of declines. Growth in North American agriculture, Tree Care, and Recycling, along with European businesses, offset declines in municipal mowing and South America. Adjusted EBITDA margins for the division were 10.4%, flat year-over-year, reflecting improved operational execution despite inflation and tariffs.

    04

    Strategic Priorities and Portfolio Review

    Management reiterated its four strategic pillars: people and culture, commercial excellence, operational excellence, and capital deployment. As part of a portfolio review, the company announced its decision to exit a small waterway vegetation management business in the Netherlands by the end of 2026 and expects further decisions in H2 FY26. These actions align with the long-term strategy of owning market-leading, strategically relevant businesses.

    05

    Capital Allocation and M&A Focus

    Alamo Group maintains a disciplined and balanced capital allocation strategy, targeting net leverage up to 2.5x. M&A remains a top near-term priority, focusing on tuck-in acquisitions in the industrial space with attractive EBITDA margins and strong strategic fit, aiming for 1-2 transactions annually. The company also returned capital to shareholders through $4.1 million in dividends and $9.4 million in share repurchases under its $50 million authorization.

    AI-generated summary of the company’s earnings call. Not investment advice.