Douglas Dynamics, Inc. Aktie

Thank you. you All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the Start key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Nathan Elwell, Vice President of Investor Relations.

Please go ahead.

Thank you. Welcome everyone and thank you for joining us on today's call. Before we remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materialized. Those risks include, among others, matters that we have described in today's press release and in our filings with the SEC. Please note the quarterly fact sheet can be found on our IR website. Joining me on the call today is Mark Van Genderen, President and CEO, and Sarah Lauber, Executive Vice President and CFO. will provide an overview of our performance, followed by Sarah reviewing our financial results and guidance. After that, we'll open the call for questions.

With that, I'll hand the call over to Mark. Please go ahead.

Thanks, Nathan, and welcome to our call, everyone. We're pleased to report that both segments performed well in Q2, resulting in a record quarter for the company. These continued results underscore the strength of our current position, the markets we serve, the positive market conditions we're experiencing today, well we're operating across almost every facet of our business and ultimately are just a fantastic example of a team effort across the entire company. In the attachment segment, our team responded exceptionally well to the elevated demand created by last winter's snowfall, delivering strong operational performance. And meanwhile, the solution segment delivered another excellent quarter, continuing the pattern of strong results that has characterized the business in recent years. Sarah will share more details shortly, but as a quick summary, three key factors have been driving our performance so far this year. First, above average snowfall last winter created strong pre-season demand at attachments.

Second, ongoing robust demand for our municipal focus products and services at solutions And third, our teams have really maintained an unwavering focus on execution, meaning near-term customer demand will continue to advance our long-term strategic priorities. While performance was strong across the company, results in the attachment segment really exceeded our expectations. This gives us the confidence to raise our full year guidance once again, Sarah will discuss later in the call. Let me walk through our performance by segment, starting with work truck attachments. As you know, our dealers put in pre-season orders for the upcoming winter during Q2 each year. I'm pleased to share that very solid retail sales combined with lower plow and hopper field inventory drove strong pre-season orders during the quarter. The team did a great job delivering roughly the first half of these orders, resulting in year-over-year top and bottom line growth.

Furthermore, we continue to expect a preseason shipment mix of roughly 50% in Q2 and 50% in Q3. For context, in 2025, we shipped approximately 60% of preseason orders in the second quarter and 40% in the third quarter. So bottom line, we anticipate a very strong Q3 in attachments. We will continue to ship these remaining preseason orders to our dealers over the next several weeks so they will be ready to install the products as we move into their main retail season before winter weather arrives. And based on the ordering patterns we've observed and our most recent field inventory taken in Q2, it's clear that dealer inventories are lower than they have been in recent years. This means, in addition to strong demand, our preseason has seen a boost from dealers who are rebuilding their inventories. We are also in the process of building more finished goods inventory compared to last year so that we're ready to ship to dealers in season when the snow starts to fly.

And it's not just whole goods. You may remember that we achieved record parts and accessory sales in 2025. Well, based on current trends, we expect to surpass that record by the end of the third quarter this year, which is just a tremendous achievement by our team. As always, we'll continue to closely monitor reorder activity during the second half of the year and weather trends once we get into the fourth quarter. So staying with attachments but switching gears to cranes and hoists, the integration of Benco Venturo is essentially complete. Our new team in Cincinnati is incredibly receptive to and already benefiting from Douglas' manufacturing, sourcing, and operational expertise, which is contributing to a lot of the work that we're doing. improve execution across the business. To wrap up attachments, we remain optimistic about our third quarter performance and believe we are ready for whatever the weather brings us in the fourth quarter.

All right, so turning to work truck solutions, where municipal demand continues to be a key source of strength, and where we're investing to expand our capacity to meet customer needs. Of course, we know results and solutions will naturally fluctuate from quarter to quarter. And after delivering record second quarter results in both 2024 and 2025, we're pleased to deliver another excellent second quarter in 2026. Our municipal business continues to generate growth. Supported by ongoing operational improvements and our continued strong competitive position in the market is the main driver behind our strong backlog. To support this growth, I'm pleased to confirm that our new purpose-built facility in Missouri is now open and fully operational, right on schedule. We're also expanding our manufacturing operations in Manchester, Iowa, with the addition of a new logistics facility.

Construction is already underway and we expect the building to begin operations during the fourth quarter. complete, it will also free up valuable space within our existing manufacturing facility and help improve throughput and efficiency. And more recently, we announced the planned relocation of our Ohio Outfit Center to a larger, better suited facility which will increase capacity and efficiency. These investments represent important additions to our capacity and position us well to exceed customer expectations and support future growth opportunities. As I mentioned earlier, the strength of our municipal business helped offset softer demand in certain areas of our commercial operations. As we continue to navigate shifting demand trends, we're taking targeted actions to optimize our sales and marketing efforts, while aligning our cost structure to preserve profitability wherever possible. It's encouraging to note that our dealer channel, which has historically been one of the more difficult parts of the business to forecast, has shown signs of improvement recently and is trending in the right direction. Another trend we've observed recently is that several of our larger fleet customers have paused their ordering as they evaluate the current geopolitical and economic landscape.

This is an important distinction, as these orders have been put on hold, so to speak, rather than lost to competitors. Overall, we continue to expect another solid year from the solutions segment as well. All right, so with the results of another strong quarter covered, I'd like to take a moment to focus on the bigger picture. Over the last several quarters, our leadership team has taken the time to reflect on what makes our company great, namely the dedication and expertise of our people, the strength of our iconic brands, and the impact our products have on helping keep people safe and communities thriving. Two things really became clear during these discussions. First, we've traditionally focused our strategy and structure at the individual brand level. And second, we needed a clearer, more consistent, and inspirational way to communicate who we are, what guides our decisions, and where we're headed over the long term. not just for each of our divisions, but for Douglas Dynamics as a whole.

This is why, over the last several quarters, we've shared how we're reframing and executing our strategy. First, through the three pillars of optimize, expand, and activate, a clarifying and compelling foundational framework now being used across the company. And second, the creation and introduction of an updated mission and vision. At Douglas Dynamics, our mission is to keep people safe and communities thriving. This simple, memorable tenant underscores the importance of the work our employees do every day. In snow and ice control, our products literally help save lives and keep our communities on the road and able to function during winter weather. And across our upfitting operations, we provide the equipment and upfit the vehicles that ensure professionals across countless industries can do their jobs safely, efficiently, and productively.

Just as importantly, we believe safe and thriving applies to the community we've built inside Douglas Dynamics. Our people have always been our greatest competitive advantage, and creating an environment where our people feel safe, supported, and proud of the work they do is of paramount importance. As we look to the future, our vision is to build the most comprehensive portfolio of trusted work vehicle attachments and solutions that set the standard for safety, quality, and productivity backed by the best team in the industry. Now, we already know we have the best team in the industry, but this vision reinforces our commitment to investing in great people, delivering products that customers trust and rely on, expanding thoughtfully into adjacent markets, and continuing to build a stronger, more diversified company. Now ultimately this framework doesn't change who we are, it provides a clear way to provide purpose to our teams internally while more clearly explaining where we're headed externally. As we continue to execute our strategy and pursue future opportunities, you'll hear us reference these ideas more consistently because they represent the lens through which we're making decisions and building Douglas Dynamics for the long term. To conclude, our business is performing well, our operations are executing efficiently, and the end markets we serve support continued growth opportunities.

The strength of these fundamentals is clearly reflected in our results. all of our employees thank you these record-setting results are a direct reflection of your hard work commitment and focus on delivering every day for our customers And to all of our stakeholders, this is an exciting time for Douglas Dynamics. As we move through the third quarter, we remain confident in our ability to execute our strategic priorities and continue making progress towards our long-term vision. While we are justifiably proud of what we have accomplished so far in 2026, there is a lot more we are aiming to achieve in the years ahead. And on that note, I'd like to pass the call to Sarah. Thanks, Mark.

I'll start by walking through the quarter before turning to our increased guidance, and then we'll open it up to questions. Before I talk to the numbers, unless stated otherwise, all these comparisons I'll make today are between the second quarter of 2026 and the second quarter of 2025. As Mark noted, it was a record second quarter overall, with both segments delivering strong financial results. Combined with our excellent first quarter performance, we generated outstanding results for the first half of 2026, and we are well positioned as we move into the back half of the year. Based on the outperformance of the attachment segment, the ongoing strong performance of solutions, and our visibility now into the third quarter, we've raised our guidance ranges, which I will also discuss. Turning to the numbers, consolidated net sales increased 10% to a record $214.6 million, driven primarily by robust pre-season orders at work truck attachments, while gross margins remain strong at 31%. Flat with last year. SG&A expenses increased 37% to $29.8 million, as improved performance led to higher variable incentive and stock-based compensation, along with increased employee costs associated with the addition of Benco Ventura.

Adjusted EBITDA increased 5% to a record $44.6 million, and adjusted earnings per share increased 7% to a record $1.22. So we saw quite a few record consolidated numbers this quarter. Before going further, I want to remind you that the tariffs that impacted many companies recently were not material for Douglas Dynamics. As we source the vast majority of our materials in North America, we manufacture solely in the US and 95% of our sales are also in the US. While we have received IEPA refunds, they are not material and they've been accounted for in our results and in our updated outlooks for the year. Okay, let's look at the results for the two segments. Work truck attachments delivered a fantastic quarter, exceeding our initial expectations.

Performance was driven primarily by strong pre-season demand, particularly for parts and accessories, as well as the efficient manufacturing and shipping execution of our team. Net sales increased 20% to $129.3 million, driven by strong demand on above-average snowfall and the addition of Benco Ventura. Adjusted EBITDA increased 13% to $35.8 million, with adjusted EBITDA margins of 27.7%. As Mark mentioned, the ratio of preseason shipments in 2026 is expected to be close to a 50-50 split between second and third quarters, compared to a 60-40 split last year. While margins remain strong, they were impacted relative to last year by the addition of Benco Venturo, as well as the timing of preseason shipments and changes in product mix. As we noted last quarter, the more balanced timing of preseason shipments between the second and third quarters can create some quarter-to-quarter variability in margins. Looking ahead, the outlook for attachments remains positive.

We are on track to deliver improved margins for the year. We are also on track to complete our pre-season shipments by the end of the third quarter, and we expect to enter the fourth quarter with healthy inventory levels, well positioned for the start of the winter season. Turning to work truck solutions, our net sales of 85.3 million were relatively flat compared to the record results achieved last year. while adjusted EBITDA was $8.8 million. We are pleased with these results, particularly given the difficult comparisons to the record second quarters achieved in both 24 and 25. The demand trends continue with performance driven by the continued strength of our municipal operations, which helps offset ongoing softness in certain areas of the commercial business that led to lower volumes and greater inefficiencies. Municipal demand remains strong. We are booking production dates well into 2027 and added approximately 10% of additional municipal capacity. At the same time, we are maintaining discipline around our cost structure in the areas of the commercial business that exhibits softness.

All in all, another great quarter of positive results for solutions. With the results for the quarter cover, let's turn to the balance sheet and liquidity. Cash used in operating activities increased $12.5 million to $25.2 million for the first half of the year. Year-to-date, free cash flow decreased approximately $14.6 million to negative $32.5 million compared to negative $17.8 million in the first half of 2025. The main factors were higher inventory, which was needed to meet demand, and increased receivables driven by higher net sales. At min-year, we maintained $69.4 million of total liquidity, comprised of $1.9 million in cash and $67.5 million of available capacity on our revolver, which is more than ample for our needs this year. Capital expenditures increased by $2.2 million to $7.3 million in the first half of the year, which is right in line with our plan.

And looking at 2026 as a whole, we still expect full-year CapEx to be within our traditional relatively modest range of 2% to 3% of net sales. Our capital allocation priorities remain consistent. We're committed to returning excess cash to shareholders via the strong dividend we've consistently paid for 16 years. We also repurchased around 67,000... 7,500 shares. And when combined, we returned a total of 10.1 million to shareholders during the quarter. Finally, while we are open and interested in pursuing strategic M&A opportunities as they arrive as part of our Activate Strategic Pillar, we will always remain prudent in our approach and have to find the right companies and products at the right valuation. Okay, let's turn to our outlook.

We are raising our guidance ranges based on the strength of pre-season at attachments. We now expect 2026 net sales to be between $765 million and $805 million. Adjusted EBITDA is now predicted to range from $120 million to $135 million, which is an 8.5% increase at the midpoint compared to the previous ranges. Adjusted earnings per share now expected to be in the range of $2.90. to $3.40, which is a 12.5% increase at the midpoint compared to the previous ranges. The effective tax rate is still expected to be approximately 24 to 25 percent. And as always, this assumes relatively stable economic and supply chain conditions. and average snowfall in the fourth quarter. Let me provide a little more context.

As you've already heard, it's important to remember the timing of shipments this year versus last year at attachments. We expect preseason to be close to 50-50 split between second and third quarters versus the 60-40 split in the 2025 preseason. At Solutions, the outlook remains generally in line with our initial expectations. Our backlog provides partial visibility for the remainder of the year. were for growth and low double-digit margins, which encompasses the growth of municipal and the stockness in commercial. While we continue to see raw materials and energy-related inflation, our teams are taking the appropriate actions to mitigate these pressures, and we will remain vigilant going forward. To summarize, we're very pleased with our year-to-date performance and our updated outlook indicates that we are on track to deliver record annual results in 2026. To put that into perspective, if we achieve the low end of our updated adjusted earnings per share guidance range, that That would represent an approximate 20% increase over our previous record set in 2019.

In addition, our guidance range implies that we can achieve margins in the low 20s for attachments while maintaining low double-digit margins for solutions. With that said, our focus remains on the task at hand, continuing to manufacture and deliver equipment, increasing throughput across our work truck facilities, and positioning the business to deliver strong results. Congratulations to our dedicated teams whose constant focus on delivering for our dealers and customers every day is highlighted by the strength of our performance this quarter. That concludes our commentary. We'd like to open the call for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Mike Cholesky with D.A. Davidson. Please go ahead. Yes, hi, good morning.

Thanks for taking my questions.

Good morning, Mike. Good morning. I'm blanking here on attachments. Help me fill in the blanks. Maybe you mentioned this in your prepared comments. I don't think I heard it. the EBITDA margins were down year over year, the sales were up about 20%. Can you just help me bridge, and I think you beat my estimates on this, but just to make sure I know what's going on, help us bridge some of the downside and the margins over the prior year.

Sure, I'd be happy to do so. So the second quarter, the margins were down slightly. I would say the largest impact there is the addition of Benco Ventura. In addition, when you look at what we shipped and the timing of everything, we essentially had some shifts in the mix of what we were getting out the door in the second quarter This is the third quarter. If you take out the Venco acquisition, our margins in the second quarter would have been flat to last year on higher volumes. And then I'll add just two more points on the attachments margins. When you look at the total pre-season and what we expect, we expect our margins to be up year over year, when you just look at like pre-season and total.

And we also expect the full year margins to.

into the low 20s. Outstanding. And then attachment on the top line, I know you mentioned Q2 and Q3 being roughly 50-50. What about Q4? That could be a wild card based on actual snow activity, given the strong orders you had in the second quarter that will hopefully affect the rest of the year, Do you think we should be modeling at least a little bit of growth in attachments in the fourth quarter?.

Yes, so we have not really changed our expectations for the fourth quarter. I believe I spoke to it a little bit last year and the fact that fourth quarter was a strong parts and accessories quarter last year. We had a lot of snow early. Our expectation from that standpoint is from a whole unit perspective. We're being relatively conservative, I would say, okay.

That's probably all I would elaborate on. Yes, and from a more anecdotal standpoint, I think Sarah is spot on. I mean, we know that fourth quarter, if you look back to the last several years, it can be great, it can be a little bit lighter. I'd say a couple things. One is, in talking with our dealers, there's a, I'd say a sense of optimism that maybe we haven't seen as much, you know, the few years where we didn't have as much snowfall, we're coming off a very strong year. So you see, as I mentioned, the inventory, you see the retail sales, talking with them at the various shows. You know, there's a lot of excitement out there. we're also committed I don't want to take to be lost that in attachments we're doing everything we can to ship the very strong preseason that we the orders that we had you know by the end of the third quarter so our teams are very diligent because it's during the summer and early fall where product is being put on contractors' vehicles. And so we see that occurring as well.

So kind of everything's lined up. You know, obviously we have to wait and see what Snowfall does, but everything else that we can control, it's in a really good spot right now.

I'll add just a little bit, Mike. When you look at the midpoint of our guidance, for the full year, that leads you to about 15 to call it 20% growth for the entire company.

But everything else that we can control, it's in a really good spot right now.

I'll add just a little bit, Mike. When you look at the midpoint of our guidance, for the full year, that leads to a lead you to about 15 to call it 20% growth for the entire company. With our expectation of solutions with what we're seeing in municipal and the softness in commercial, just having volume up in the load in the single digits. essentially the rest of that growth then is in attachments. Okay, okay, got it.

I also want to throw out a quick Venco Ventura question for you as well. You know, as we look at your attachments businesses that are part of the snow business, You've had a great track record of innovating with new products for years and years in the snow business. Tell us a little bit about what Venco Ventura offers. Are there any new products on the horizon there? What's been their track record and their history of putting out new hoisting cranes to the market? Yes.

Yes, we talked about, good question, we talked about in the call some of the, I'd say, initial that we have focused on and continue to around manufacturing, supply chain, just overall operations. We have a strong product development team, as you mentioned, on the snow side. That's something I would say we'll continue to look at in the future. Don't have anything to report out right now in terms of any huge changes that we've made from a product client standpoint but as we have with other functions kind of looking at seeing a work and we take our historic strength in that in that area and see how we can apply that to them go.

Okay, thank you so much. I'll pass it along. Thanks.

The next question comes from Tim Weiss with Baird. Please go ahead. Hey everybody, good morning. Nice job.

Hey, maybe just, by the way, I like this morning stuff. the morning release and the morning conference call. So, uh, my vote would be to keep it going, but, um, maybe just kind of, yes, maybe just kind of stepping back in the attachments business, you know, what, what was stronger than when we talked 90 days ago? Uh, on the preseason because it still sounds like we've got kind of a 50-50 mix Q2 to Q3. but we're raising the guy effectively on the sales side for a stronger preseason. So I'm just trying to – did you get more out in the second quarter than you thought as well? I'm just trying to think about where the upside surprise was.

Yes, in general, I'd say kind of across the board we saw on plows and hoppers, the numbers from the pre-season orders came up. And then as Sarah mentioned, I talked to it too, the parts and accessories orders were extremely strong. And those, again, we ship some in the second quarter. A lot of that will get shipped out in the third quarter. That's why we feel comfortable about talking about a strong Q and really focused on making sure the remaining preseason orders get out by the end of Q3.

Okay. And I guess like when you're talking to the channel, I mean, I guess, you know, parts and accessories, I can understand kind of being pretty strong in the first quarter, just given the usage. Is it your understanding that both the plows and the parts and accessory inventory levels in the channel were pretty low, and so you're rebuilding both? Is that kind of what's going on there? Yes.

Yes, I would say we don't have as much visibility into the parts and accessories inventory in the channel as we do with files and hoppers. So we're basing the belief that's more anecdotal on parts and accessories and certainly the fact that our dealers have ordered what they have both for what they use and consume. last year selling to contractors and then what we anticipate they're buying coming into this year. When we talk field inventory specifically and we go out and have some formal processes to get this several times a year, we're talking to the plows and then the hoppers on the back of the trucks, and that's where we've seen our most recent inventory check. which was a month or so ago, both Bows and Hoppers were lower than what we've seen the last several years, and the dealers also reported strong retail sales on those product lines.

Okay, okay, that's helpful. And then just maybe just dialing in Q3 a little bit just given some of the moving pieces historically like I guess just given the 50-50 split it seems like We should be thinking attachments will have revenue that's well north of $100 million and margins or EBITDA margins that are probably north of 20%. Is that math check out with you guys?.

Yes, certainly because we have a lot more going out the door than at 40% last quarter. I will say from a margin perspective, because of the volume higher than last year, but sequentially I would expect it to be lower than the second quarter.

Okay, that's helpful. I'll hop back in queue. Thanks everybody. Nice work.

Thanks, Jill. The next question goes to Greg Burns with Sidoti & Co. Please go ahead.

Morning. On the municipal side of the solutions business, can you just characterize a little little bit more color around where you're seeing strength in that business. Is it just broader market-related, like a rising tide, or are you taking share within the market? And then I was hoping maybe you could give us a little bit more color around backlog, where that stands, lead times, and how much capacity you have. you've brought on and what is coming online from.

what you kind of detailed in your prepared remarks. Thank you. Yes, I'll take the first part, kind of more the qualitative, and then Sarah can handle the quantitative on backlog. You know, the Henderson team right now is just performing very, very well. You look at the timing of the delivery, you look at the the efforts on behalf of the sales teams, you look at some of the new contracts that we've been able to achieve. I mean, a key in that market is to look out over the next several years. And when we talk backlog, it's interesting, we shared the concept before. It's not necessarily that want trucks right now, we develop a relationship that says, hey, over the next three years, we want 150 trucks, 50 trucks a year, and that's all included in our backlog.

So it is absolutely paramount that we deliver trucks when we say we're going to, that the quality of the vehicles is there, and that our customers participate. can come to rely on us. And if you look over the last two or three years with what Chad Barker and his team have been able to do in that space, you know, it really is that. It's developed, I'd say, the strongest relationships that we've ever had, you know, with current customers, with new customers, and really, you know, doing what we say we're going to do, making it happen. So, yes, I'm not going to provide a lot of commentary on what we see from a competitive standpoint, but I will tell you that we're just – we're really doing well right now.

Yes, on the backlog and capacity question, so the backlog, We are very close to the record backlog that we had back in 2022. So that just shows where we're winning some orders and that's increasing. On a capacity stand front with the Missouri facility coming online, I would call that up to 10% more capacity capacity was added. And the announcement that Mark just walked through in his script on Ohio will add, call it about the same amount next year, but the facility has room to grow. I would say more importantly, though, that the team has been very focused on their throughput in the up-fit locations. so that we can get these larger contracts, get the trucks out the door quicker, and they have been making very good progress on that. Great. Thank you.

As a reminder, if you would like to ask a question, please press star then 1 to join the question queue. That's star then 1 to ask a question. This concludes our question and answer session. I would like to turn the conference back over to Mark Van Gendersen, President and CEO, for any closing remarks.

Carol, I'll finish by saying thank you for your time and continued interest in Douglas Dynamics, and we look forward to talking with you all soon. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good day, and welcome to the Douglas Dynamics First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Nathan Elwell, Vice President, Investor Relations. Please go ahead.

Thank you, Chad. Welcome, everyone, and thank you for joining us on today's call.

Before we begin, I would like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. Please note the quarterly factsheet can be found on our IR website.

Joining me on the call today is Mark Genderen, President and CEO; and Sarah Lauber, Executive Vice President and CFO. Mark will provide an overview of our performance, followed by Sarah reviewing our financial results and guidance. After that, we'll open the call for questions.

With that, I'll hand the call over to Mark. Please go ahead.

Thanks, Nathan, and welcome, everyone, to our call. So this was another excellent quarter for our company across the board with both segments executing successfully and delivering just really solid results.

We're running efficiently. In the Attachments segment, our team has responded admirably to the above-average snowfall-driven demand of this past winter and the employees in our Solutions segment have delivered another great performance, continuing a strong trend.

If you look back at our typical first quarter results, you'll see that it is often the case when we don't generate a profit due to the seasonality of our Attachments business. But this year, we produced record sales, adjusted earnings and EPS, just a tremendous achievement on behalf of the teams.

This significant year-over-year growth was really driven -- primarily driven by 3 factors: First, significantly above-average snowfall boosting demand at Attachments. Second, the ongoing strength of demand in our municipal operations; and third, strong execution across the board from our teams to both address this demand and make meaningful progress against our strategic priorities.

Okay. Let's talk Work Truck Attachments. Before I discuss the quarter specifically, I want to make a general point on snowfall and our business. Yes, snow is absolutely the main driver of demand in the Attachments business. We need snow to drive excellent results. But it's more than that.

Snowfall creates the demand, but it's the relationship we have with our dealers and contractors. It's the projects we undertake every day. It's our fantastic product, our culture, our strategic pillars, the sheer hard work and determination of our team that fulfills that demand.

So in short, it's execution that gets product shipped, sold and serviced, and that doesn't happen without our people and their commitment to operational excellence every day. So my continued and heartfelt thanks to the 1,700 people who are at Douglas Dynamics.

Okay. Looking back at the winter, snowfall was significantly above average in many of our core markets. In total, the season came in roughly 20% above the 10-year average and 40% higher than last winter. This winter, snowfall came early with major November and December storms in the Midwest and significant persistent lake effect snow in the Great Lakes region.

In the first quarter, several large snow and ice storms made their way across much of the country, including Fern and Hernando, record breakers, which brought significant and widespread snowfall totals across the Heartland and up the East Coast, all the way from New Mexico to Maine. Elsewhere in the country, both out West and the South experienced lower snowfall than normal.

As a skier myself, I don't like to see dry conditions in the mountains, but it was sure great to see the snowfall where it did. Of course, all this weather meant that many of our dealers and contractors in our core markets in the Midwest and on the East Coast were working tirelessly to keep people safe and get communities back on their feet after the storms. It shouldn't be overlooked how important plowers are to the safety and well-being of the general public and in turn, our dealers who keep the contractors on the road. It is at the very core of our mission statement to keep people safe and communities thriving.

As equipment was used during the winter, dealers were drawing down on their inventories, which we believe are now solidly below their 10-year averages. We will see how our dealers replenish their inventories with their preseason orders.

All of these elements came together to contribute to a record first quarter top line for Attachments with sales up just over 65%. This included our first full quarter of sales from Venco Venturo, the crane and hoist manufacturer we acquired in November of last year.

These excellent results were driven first and foremost by demand for our parts and accessories as the persistent snowfall took its toll on equipment. In fact, we achieved record shipments of P&A during the quarter. Sales of plows and hoppers also increased, but the first quarter at Attachments is always about parts and accessories, and this quarter was no different.

So we pretty much exited winter and rolled straight into preseason, which kicked off at the beginning of April. Now as a refresher, we typically receive around 2/3 of our annual orders from dealers in the second and third quarters of the year. We ship these orders in time for our dealers to be stocked and ready to install equipment before the first snowflake of the season fly.

While it was still early in preseason, while it's still early, as expected, we are off to a good start following the robust winter I detailed earlier. More specifically, sales of parts and accessories continue to come in strong. Plow sales, while not as directly correlated to last season snowfall as P&A are also tracking ahead of last year. And the great news is that we are in a strong position operationally.

Plans are lining up as expected, inventories are in good shape, and our teams are hard at work. We continue to invest in the business and are even pulling ahead select equipment and technology projects given current demand. As it stands right now, we are optimistic about how the year is unfolding.

That excitement will build at SIMA, the Snow and Ice Management Association Annual Symposium, which will be held in June this year in Cincinnati. As a market leader, this is a great opportunity here for us to showcase our expanding line of products and spend quality time with our dealers and contractors.

All right. Turning to Work Truck Solutions, where the teams consistently continue to perform, now measuring their ability to drive improvements in years, not quarters or months. The team produced near-record sales and once again, record adjusted earnings and record margins, and that's on top of a record first quarter last year. So just really outstanding work.

The strongest part of the business remains our municipal-focused operations. Both demand and backlog from municipal customers remains robust, and our sales teams continue to pursue and win important profitable multiyear contracts.

From what we've heard across the industry, our excellent lead times are proving tough to match. And combined with our attentive and knowledgeable customer support, we are well positioned to continue our track record of steady, profitable growth.

The strength in our municipal operation helped offset slightly softer demand in certain commercial business segments. The outlook is mixed overall, but there are pockets of that business that aren't performing as well as last year. While end users are approaching the current economic environment cautiously and demand for dealer orders remains dynamic in real time, the business is holding its own overall.

We are focused on the factors we can influence to continually optimize the business and rapidly adapt to any changes and shifts in customer behavior. And finally, backlog in Solutions remains positive and above traditional levels. We are booking production dates well beyond the current year.

Now as we've noted before, our backlog includes vehicles that customers have ordered now for future delivery. Our goal is to make sure that vehicles are delivered exactly when and where they were promised. And our Solutions team does that exceptionally well.

All right. So before handing it over to Sarah, I'd like to just take a step back from our operational results and provide a brief strategic update regarding the optimize, expand and activate pillars of our strategic framework that we first shared late last year and how we are now migrating from introduction to action.

The first priority is to continue to optimize our current operations across the board. As we said in the past, optimize is not a new concept for Douglas Dynamics. In fact, it's been a core tenet of our company for decades. Striving to get better every day is in the company's DNA. And at any one point in time, there are dozens of project examples, some of which are beginning this year, some are already in progress and many will span multiple years.

So let me mention just a few. As much as we and you, I imagine, would like to predict the weather for next winter, we can't. But we continue to improve our demand and production planning processes to more quickly, accurately and precisely respond to whatever mother nature throws our way.

We are using a more data-driven approach that incorporates algorithm statistics, historical trends and more recently, AI, leading to a more sophisticated way of smoothing out volatility that is benefiting us this year and will continue to pay dividends in the years ahead.

At Attachments, we continue to expand our suite of communication tools with our dealer network, through a greater exchange of data, information and ordering capabilities, resulting in greater efficiency and an improved ease of doing business, which is certainly appreciated by our dealers.

On the Solutions side of the business, we are working hard on enhancing our CPQ process, which stands for configure price quote at our municipal operations. This increasingly automated process is helping to produce greater efficiency and accuracy in order taking, which is then helping to streamline many additional processes from sourcing to production planning and at the same time, providing the appropriate level of customization required and desired by our customers.

And finally, we recently broke ground on an exciting project at our municipal operations main facility in Manchester, Iowa. We are building a dedicated logistics building adjacent to our existing manufacturing facility. This new facility will serve as a centralized hub for all municipal logistics operations, including receiving raw materials, staging components and shipping finished products.

Additionally, this will also help improve efficiency by freeing up critical floor space and reducing congestion at and around our manufacturing facility. So I picked just a few to mention today, but there are many more exciting projects, both being planned and underway.

The second pillar is expand, which is our focus on internally driven growth, more specifically, continuing to develop new products across our divisions to meet the emerging needs of customers and geographic expansion where it makes sense.

On previous calls, I mentioned our plans to build a new upfit center in Missouri to replace an outdated operation with a brand-new purpose-built facility in an ideal location for both new builds and to make it convenient for customers in the region to have existing trucks serviced.

I am pleased to report that the process is virtually complete. The ribbon-cutting ceremony is a few weeks away with production beginning around midyear. The new facility will add much needed capacity to Henderson and is an important factor to help us maintain our best-in-class delivery times.

This expansion will allow us to better serve existing customers in surrounding markets to continue to deliver trucks on time and to increase our attractiveness to new customers, all of which will strengthen our competitive advantage. My sincere thanks to everyone involved in making this important project a success.

And finally, Activate, which refers to last year's restart of our M&A efforts, which led to the acquisition of Venco Venturo last November. Our integration team is making good progress and the Venco team, as we believe would be the case, are proving to be a great cultural fit. Moving forward, we continue to look for the right businesses and product lines to acquire that align with our attachment-centric strategy.

So in summary, 2026 is off to a great start. It is an exciting time at Douglas Dynamics with market conditions and company performance aligning well across most of the business. We are in a strong position and as a more resilient company today, we are prepared for a wide variety of potential scenarios with strategies in place to capitalize on these opportunities.

With our strategic framework now really taking hold in the business, we are hitting our stride, always striving to maximize our business and operational agility.

While we are proud of our recent results, we know we have a lot more work to do to reach our potential. Our leadership team is working in lockstep, intently focused on executing our strategic plans to produce profitable, sustainable long-term growth.

And with that, I'd like to pass the call to Sarah.

Thanks, Mark. I'll start with a summary of our financials and then talk to our updated guidance. But before I begin, please note that unless stated otherwise, all the comparisons I'll make today are between the first quarter of 2026 versus the first quarter of 2025.

I would sum up our performance in 2 sentences. Our results improved across the board with record shipments of parts and accessories at Work Truck Attachments following significantly above-average snowfall. At Work Truck Solutions, higher volumes for our municipal operations helped offset lower commercial volumes to deliver strong results.

Consolidated net sales increased 20% to a record $137.8 million. Gross margins improved by 290 basis points to 27.4% based on strong execution in both segments and significantly higher volumes at Work Truck Attachments. SG&A expenses increased by 13% to $26.3 million as our improved performance led to higher incentive and stock-based compensation plus the increased headcount, which included the addition of Venco Venturo employees.

Adjusted EBITDA increased 78% to a record $16.8 million. Adjusted EBITDA margin increased by 400 basis points to 12.2%. This created a record adjusted earnings per share of $0.36. I'm sure you'll agree a fantastic set of results all around.

So let's walk through the results for the segments. Working -- starting with Work Truck Attachments. Our excellent results this quarter were driven by strong demand, particularly for parts and accessories and a tremendous effort from our teams to address that demand.

Net sales increased 67% to a record $60.9 million and adjusted EBITDA increased significantly to $7.7 million. The fact that equipment was being used in many core markets during the quarter will help the market incrementally move back towards a more normal replacement cycle in the years ahead. The outlook at Attachments remains positive today as we move through the preseason.

Turning to Work Truck Solutions. Our teams produced record bottom line results and profitability and near record net sales, and that's despite the tough comparisons to record results in the first quarter of last year. The performance was driven by ongoing strength of municipal operations with commercial operations still exhibiting softer demand.

Net sales decreased slightly to $76.9 million, but we're still very close to the record set at this point last year. Adjusted EBITDA increased slightly to a record $9.1 million and margin increased to a record 11.9%.

Okay. Let's quickly touch on the balance sheet and capital allocation. Net cash used in operating activities of $1 million was in line with the prior year, primarily due to improved earnings, which offset higher working capital driven by the increased demand.

Capital expenditures increased from $2.2 million in the first quarter of 2025 to $3.7 million this quarter as we expected. Free cash flow was negative $4.2 million, a decrease of $700,000 over last year, driven by higher capital expenditures.

Let me reiterate our capital allocation priorities for 2026. Our first priority is returning excess cash to shareholders through both our strong dividend and to a lesser extent, share repurchases. This quarter, we returned approximately $10.1 million via the dividend and the repurchase of approximately 70,000 shares of company stock.

In addition, we are investing in a variety of projects as part of the optimize and expand strategic pillars. As far as investing in the business, we expect CapEx to increase year-over-year as we saw in the first quarter as we pursue growth opportunities, but we still expect to stay within our typical range of 2% to 3% of net sales.

And as Mark mentioned earlier, we expect to continue to pursue strategic M&A opportunities as they arise as part of our Activate strategic pillar.

Finally, let's review our outlook. We started the year with strong guidance in place. We decided to raise those ranges today based primarily on our excellent first quarter results, particularly in Attachments. Plus our preseason sales period is off to a good start. However, it's early in the process. There's still a good deal of uncertainty as to how the orders and shipments will settle out.

Raising the guidance at this stage of the year is not typical for us, and it's not something we'll do regularly, but this has been an unusually positive start to the year. One important point to consider is the timing of shipments this year. We expect preseason to be close to a 50-50 split between the second and third quarters. That's a large shift from last year.

As you may remember, the 2025 preseason was skewed towards the second quarter. The 60-40 split between the second and third quarters last year was a result of higher available inventory going into preseason, which led to more shipments in the second quarter.

So far, 2026 is shaping up to produce a return towards more typical shipment timing closer to the 50-50. This is something we are expecting. It's simply timing. It will not be a reflection of our overall preseason results.

At Solutions, the situation remains generally in line with our initial expectations for the year, another year of top line growth while maintaining low double-digit margins. Our backlog remains solid, and we have good visibility and continued positive momentum in our municipal operations.

In our commercial operations, the outlook is more complex with limited visibility, and there are areas showing softer demand based on macroeconomic uncertainty. Over the long term, we aim to reach margins in the low teens, but our plans don't call for us to get there this year.

Regardless, both businesses will continue to focus on the optimized and expand pillars of our strategy to grow even further over the longer term. So continued strong performance and aiming to deliver another very solid year.

It's worth mentioning that we plan for and continue to see raw material and energy-related inflation. As in the past, our teams have taken appropriate action thus far, and we are continuing to monitor the situation in case further mitigation is required.

Now let me walk through the updated 2026 numbers for you. We now expect 2026 net sales to be between $750 million and $795 million. Adjusted EBITDA is now predicted to range from $110 million to $125 million. Adjusted earnings per share are now expected to be in the range of $2.55 to $3.05. The effective tax rate is still expected to be approximately 24% to 25%.

As always, this assumes relatively stable economic and supply chain conditions and average snowfall in the fourth quarter. Based on these assumptions and with our current level of visibility, we believe the business is well positioned to drive significant year-over-year improvement. In fact, at the low end of our new guidance ranges, it would be record annual results for our company.

In summary, it was an excellent first quarter. We're in a strong position to deliver another positive performance this year.

That concludes our commentary. We'd like to open the call for questions. Operator?

[Operator Instructions] And our first question comes from Mike Shlisky from D.A. Davidson.

This is Linda Umwali on for Mike. My first question -- first of all, congratulations on the quarter. My first question, we're seeing a return of the final mile vehicle market in early 2026. I know that's not Dejana's main business, but are you seeing any tailwinds there? [Technical Difficulty]

Ladies and gentlemen, it appears that our location for our speakers has inadvertently disconnected from the call. I please urge you to stay on the line while we get them reconnected. Thank you very much for your patience.

Can you guys hear me?

Linda, sorry about that.

Not sure what happened.

No worries good to have you guys on. Yes. So one for Mike. And my first question was we're seeing a return in the final mile vehicle market this early 2026. I know that it's not Dejana's main business, but are you seeing any tailwinds there?

Yes, Linda. absolutely. So the final mile business would be part of our Dejana business. It is a small portion for them, less than 5%. I would say, yes, we're still seeing softness there. So when we're talking about commercial softness, economic uncertainty, all of that, that is clearly what we're seeing in that market. So we've not seen a bounce back as of this point.

Got it. And then my other question, how much of the 1Q revenue upside in Attachments would you consider to be onetime in nature and directly attributable to specific snowstorms -- trying to figure out what to model for early 2027?

Yes, I can -- when we think about the correlation between snowfall and our product lines, the highest correlation or immediate correlation is between parts and accessories. So when we talk about snowfall being up 40% year-over-year compared to last year, that's where we saw a strong Q4 last year and strong Q1 this year. Plows and hoppers, that's a multiyear replacement cycle.

So we look back at the last several years of snowfall. And as you know, we had a few lower-than-average snowfall years and then this one, which we would consider a strong one. So it's hard to predict or to say exactly what that's going to look like. But we can say that I'd say a good portion of our increased expectations for the -- what we achieved for the quarter.

And then to Sarah's point, raising guidance for the year is really attributable to the strength of P&A in the first quarter in Attachments and a lot of that's driven by what we saw as above-average snowfall.

Yes. Linda, I would add on. I mean our volume increased over 60% in the first quarter, driven by the strong storms and record P&A is when the snow is flying. So 1/3 of the increase was related to parts and accessories. So when you're thinking about next year, I would go back to thinking about average snowfall in the first quarter, not the significantly above average snowfall that we experienced. So our prediction on average snowfall would not be at the same higher level of volume.

Average snowfall. And my last question, does the new Section 232 tariff structure affect Douglas Dynamics at all? Could you actually reduce your tariff impact? And do you know if any of your competitors are in tougher shape due to the new tariff numbers?

Yes. So on the tariffs, the impact that we've experienced thus far and the new impacts for us are not overly material. We are very North America-centric. When thinking about the competitors, I can't say that I could point to any that would change their competitive aspects based on the tariffs that we're seeing today.

[Operator Instructions] The next question comes from Tim Wojs from Baird.

Maybe just first question. I guess the 35 -- I think it's $35 million or so of the guidance range raise for sales in the new guide. Could you just break down what's kind of the upside from Q1 versus some of the higher preseason visibility that you talked about?

Yes. So I'll frame the increase in the guidance. I don't know that I have an exact breakout of that. But when you think about the increase, it's predominantly the Q1 strength that we saw and then the very early indications of preseason. Off the cuff, I would say maybe it's 50-50 between the 2. And then when you look to the midpoint of the new guidance, you can kind of separate that into the 2 segments being also close to 50-50 because we have had a strong start in Solutions also.

Okay. Okay. And then I guess what is -- I guess if you looked at the 2 -- what are you expecting for the segments to grow this year kind of in aggregate? Because I'm kind of, I guess, penciling out that Solutions maybe grows kind of mid-single digits. And if that's the case, Attachments might grow over 30%. I guess are those kind of directionally accurate?

Yes. In total, also with Venco, I would say our volume growth is between 15% to 20% in total for Douglas and low -- I'm sorry, mid- to high single digits for solutions and then the remainder at Attachments.

Okay. And then I guess just the last question on the equipment shipments and kind of the split, is it -- it sounds like things are coming in better than you would have expected, but the preseason shipments are kind of weighted more to Q3 than we've seen in the last couple of years. Is that just purely a timing dynamic that you're seeing? Or is there anything in the customer base that's pushing those orders from one quarter to another?

No, great question. There's nothing we're seeing from a customer standpoint. It really -- if you look at last year, when we came out of the first quarter with higher company-owned inventory, we had inventory available to ship as soon as preseason orders started coming or I should say a higher percentage of inventory available to ship.

So we got the preseason orders, so we would send that out to dealers. This year, there's a bit of a reverse in that because it was a strong winter, we shipped a lot of products. Our inventories -- company-owned inventories were lower than they were last year going into the second quarter. So basically, the orders that they're coming in, we're making product and shipping it compared to last year, where we just had more inventory available.

So the goal, the ordering pattern isn't coming in any differently this year from our dealers or when they're expecting it. The commitment to them is we'll try to get it to them. Our focus is by the time, as I mentioned, the first snow flies. So whether they receive that in second quarter or third quarter as long as they're getting it in time to install it on trucks and have it stocked, they're fine with that. It's really on our end to be producing the equipment that we're going to then ship out to fulfill the preseason orders, which this year makes it a little more traditional.

Okay. Okay. And does that -- I know that's on the preseason shipment cadence. Is it -- does that also kind of fall down to the EBITDA cadence? Or because I think Q2 has always been the strongest EBITDA quarter. Is that, I guess, still going to be the case in Attachments?

Yes. I would say the cadence between the 50-50, that falls through to EBITDA. In the same manner.

And ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the conference back to Mark Van Genderen, President and CEO, for any closing remarks.

I'd just like to say thank you for your time and continued interest in Douglas Dynamics, and we look forward to talking with you soon.

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day and welcome to the Douglas Dynamics 2026 Annual Meeting Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mark Van Genderen, President and Chief Executive Officer of Douglas Dynamics. Please go ahead.

Good morning. I am Mark Van Genderen, the President and Chief Executive Officer of Douglas Dynamics, Inc. It's my pleasure to welcome you to our 2026 Annual Meeting. We are delighted that you are here with us today, either participating in person or listening via our live audio presentation.

I now turn the meeting over to Don Sturdivant, our Chairman, to call the meeting to order.

Good morning and thank you, Mark. I'm Don Sturdivant, the Chairman of Douglas Dynamics, Inc. It is my pleasure to welcome you to our 2026 Annual Meeting. We are delighted that you are with us today.

At this time, I call this Annual Meeting of the Stockholders of Douglas Dynamics to order. Sarah Lauber, our Corporate Secretary, will serve as Secretary for this meeting. I have also appointed Jon Sisulak, our Senior Vice President, Controller and Treasurer, as Inspector of the Elections for this meeting. We will first hold the official business portion of the meeting. Following the business meeting, we will open the floor for questions and answers.

Ms. Lauber has advised me that the notice of this meeting was mailed on or around March 20, 2026, to each stockholder of record as of March 2, 2026. An additional supplement was subsequently mailed on or about April 2, 2026. The purpose of this meeting are the following: #1, to elect 3 persons to the company's Board to hold office until the 2029 Annual Meeting of Stockholders and 1 person to the company's Board to hold office until 2028 Annual Meeting of Stockholders; #2, to conduct an advisory vote to approve the compensation of the company's named executive officers as disclosed in the proxy statement; #3, to ratify the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026; #4, to approve the amendment to our Fourth Amended and Restated Certificate of Incorporation to provide for exculpation from personal liability for certain officers as permitted by Delaware law. And finally, #5, to transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

As of the record date for this meeting, a total of 23,084,814 shares of Douglas Dynamics common stock were outstanding and eligible to vote. Ms. Lauber has advised me that at least 21 million shares are represented in person or by proxy at this meeting, constituting a quorum. Accordingly, I declare this meeting open for business. Before we consider the matters for stockholder action, there are several individuals I would like to recognize. First, I would like to introduce the other directors of the company participating today and thank them for their contributions they make to the company. Mark Van Genderen is our President and Chief Executive Officer; Joher Akolawala is the retired Executive Vice President and Chief Financial Officer of Pella Corporation. Jennifer Ansberry is the Executive Vice President, General Counsel and Secretary of Lincoln Electric; Kenneth Krueger is Chairman of the Board of the Manitowoc Company, Inc.; Brad Nelson is the Chief Executive Officer of Mastercard -- I'm sorry, MasterCraft Boat Holdings, Inc.

I would also like to introduce other members of the company's management team who are present at the meeting. Sarah Lauber is the company's Executive Vice President, Chief Financial Officer and Secretary; Jon Sisulak is the company's Senior Vice President, Controller and Treasurer. Lastly, I would like to introduce some guests who are present at the meeting. Robert Perry is a partner in the accounting firm, Deloitte & Touche LLP, the company's independent registered public accounting firm for fiscal years 2019 through 2026. Bryan Schultz is a partner in the law firm of Foley & Lardner LLP, corporate counsel to the company.

We will now move to consider the matters for stockholder action at this meeting. If you have not previously submitted a proxy, please go to the registration table at this time to vote your shares. After all stockholders have voted, the polls will be closed. We will consider the election of 4 directors. The Board has nominated Joher Akolawala, Jennifer Ansberry, Brad Nelson to serve as directors for terms -- 4 terms to expire at the 2029 Annual Meeting of Stockholders and Jim Janik to serve as a director for a term to expire at the 2028 Annual Meeting of Stockholders.

The nominations are closed since no other nominations have been received in accordance with the company's bylaws. Based on the proxy votes, at least 17.8 million shares have voted for the election of Joher Akolawala, Jennifer Ansberry, Bradley -- Brad Nelson, Jim Janik as directors, which in each case exceeds the vote required for election. Therefore, Joher Akolawala, Jennifer Ansberry, brad Nelson, each have been elected as director for a term to expire at the 2029 Annual Meeting of Stockholders and Jim Jan has been elected as director for a term to expire at the 2028 Annual Meeting of Stockholders.

We will now consider the advisory vote to approve the compensation of the company's named executive officers as disclosed in the proxy statement. Based on the proxy votes, at least 18.7 million shares voted for the advisory vote to approve the compensation of the company's named executive officers as disclosed in the proxy statement, which exceeds the vote required for approval. Therefore, the advisory vote to approve the compensation of the company's named executive officers has been approved. We will now consider the ratification of the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026. Based on the proxy votes, at least 20.6 million shares voted for ratification of the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026, which exceeds the vote required for approval. Therefore, the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2026 has been ratified.

We will now consider the approval of the amendment to our Fourth Amended and Restated Certificate of Incorporation to provide for exculpation from personal liability for certain officers as permitted by Delaware law. Based on the proxy votes, at least 16.9 million shares voted for approval of the amendment to our Fourth Amended and Restated Certificate of Incorporation, which exceeds the vote required for approval. Therefore, the amendment to our Fourth Amended and Restated Certificate of Incorporation to provide for exculpation from personal liability for certain officers as permitted by Delaware law has been approved.

The final voting results will be included in a Form 8-K filing that the company will make with the Securities and Exchange Commission in the next several days. Thank you for participating in the business portion of the meeting, which I now declare adjourned.

Questions and answers? Any questions? Leon, do you have any questions for anybody? No? Anybody else? Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Douglas Dynamics Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Nathan Elwell, Vice President, Investor Relations. Please go ahead.

Thank you, Gary. Welcome, everyone, and thank you for joining us on today's call.

Before we begin, I would like to remind you that some of the comments that will be made during this conference call including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different.

Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. We also published a 1-page fact sheet on our IR website that summarizes our results for the quarter.

Joining me on the call today is Mark Van Genderen, President and CEO; and Sarah Lauber, Executive Vice President and CFO. Mark will provide an overview of our performance then Sarah will review our financial results and outlook for 2026. After that, we'll open the call for questions. With that, I'll hand the call over to Mark. Please go ahead.

Thanks, Nathan. And welcome, everyone, to our fourth quarter call. Given our core business, we'd be remiss not to recognize the magnitude of Winter Storm Hernando's impact on the East Coast right now. Our dealers, contractors and teams are doing everything they can to keep people safe during this historic winter event.

Stepping back, as a company, we've experienced dramatic changes in operating conditions over the past several years. We've successfully navigated COVID, supply chain disruptions, tariffs and the tough but necessary business decisions necessitated by several consecutive seasons of low snowfall. While the journey has been demanding, our teams have continually risen to the challenge, and we are emerging stronger, more resilient and better prepared for what lies ahead.

In 2025, we saw a significant increase in business activity across the company, and once again, it was the determination, strength and ingenuity of our people that allowed us to fully capitalize on these opportunities. Across every aspect of our operations, our people stepped up to the plate in 2025 and their commitment is clearly reflected in our results. So thank you to everyone at Douglas Dynamics.

There are three main areas of focus Sarah and I would like to cover in this morning's call. First, an excellent fourth quarter topped off a fantastic 2025 with operational strength and robust financial performance in both the Work Truck Attachments and Work Truck Solutions segments.

Second, with an above-average snowfall so far this winter, we expect to build off of 2025s momentum in 2026 with continued growth in both segments. Sarah will cover that outlook later in our call.

And finally, and arguably most importantly, the strategic framework we introduced in 2025 and the actions we've taken to support that strategy have positioned us extremely well, not only going into 2026 but beyond to drive sustainable long-term value creation.

So let's start with 2025 performance. We delivered strong financial results throughout the year with each quarter and in particular, the fourth quarter growing from the prior year. These year-over-year fourth quarter improvements were primarily driven by two things: the excellent performance at Solutions and the early onset of winter boosting demand at attachments.

During 2025, we increased our guidance ranges twice and still managed to come in at the high end of this range. When you look back over the past few years, our earnings have grown from roughly $1 of adjusted EPS in 2023 to $1.47 in 2024 to $2.24 in 2025. That's a fantastic return to form.

Okay. Let's discuss our fourth quarter and full year results in more detail, starting with Work Truck Attachments. Demand for the product lines, work truck attachments designs, builds and sells is primarily driven by snowfall. And as a refresher, the average life cycle of the equipment we produce is between 5 and 10 years. We know that there are tens, if not hundreds of thousands of our FISHER, WESTERN and SnowEx products in use on the roads today. Just as below average snowfall winters lead to an elongated life expectancy above-average snowfall winter drive increased usage and ultimately, demand.

Of note, we measure this phenomenon over multiyear periods and develop forecast models, create production schedules and make investment decisions based on snowfall over time, not any one given year. This is also the reason that one strong winter can help to provide a multiyear tailwind.

This winter snowfall came early with major November and December storms in the Midwest and significant persistent lake effect snow in the great Lakes region. And so far in 2026, several large snow and ice storms made their way across much of the country, including the Plains, Mid-Atlantic states and the Northeast including the historical storm that many of you just experienced. In fact, after several years of low snowfall, we're confident that the current snow season will end above the 10-year average.

We want to thank our many dealers and contractors in these core markets for their tireless work to keep people safe during these storms. Our regular channel checks at the end of January confirmed that with increased year-over-year retail sales file and hopper inventories are below the 10-year averages.

These weather conditions in the fourth quarter helped increase net sales and adjusted EBITDA, including record sales of parts and accessories. Now unlike sales of plows and hoppers, which are generally aligned with snowfall trends over multiple years, we see a high correlation and immediate impact between parts and accessories sales and current snowfall. On a full year basis, net sales and adjusted EBITDA improved by double digits.

With the end of the 2025, '26 snow season coming into view, our teams have been working nonstop to meet demand driven by the recent major storms. In addition, we have already started planning and preparing for what we believe will be a solid preseason.

Okay. Turning to Work Truck Solutions, which exceeded our expectations once again. In fact, it was a record quarter to finish a record year, which is also the fourth consecutive year of improvement. On a full year basis, not only did we deliver double-digit net sales growth and adjusted EBITDA growth, we saw record annual margins.

Demand and backlog from municipal customers remain robust and we continue to work through the large multiyear contracts that we discussed last year. After 4 consecutive years of growth, the bar is set high.

Given our excellent lead times and customer support, we are in a formidable position in the marketplace today. We continue to see strong demand from municipal customers. We are executing effectively and we maintain a near record backlog.

All in all, we expect our municipal business will continue to grow, although not quite at the same pace we have experienced in the last 4 years.

Commercial demand dynamics remain somewhat opaque, while the fleet business remains generally solid, we are seeing some minor softening of demand in the dealer business, which is difficult to predict. Dealers have inventory on the ground and smaller customers remain hesitant and price conscious. Our commercial teams remain diligently focused on optimizing this business. Overall, really a fantastic performance for the Solutions segment in 2025.

All right. Now that I've covered our results, let me just take a step back for a moment and discuss strategy. Building upon our strong financial performance in 2025, and with a seasoned management team now in place, we have crafted a more defined strategic vision for the future.

This manifested itself through the three strategic pillars that we've been talking about for the past couple of quarters, optimize, expand and activate.

The first priority is to optimize our current operations. Now continuous improvement through our DDMS system is part of our DNA, and our optimized pillar has helped refocus our efforts across the organization. The creation of centers of excellence within the Attachments segment was a great example where production has moved from brand focused to a specific product-focused manufacturing approach at each facility. This has enabled greater specialization and brings the full breadth of our engineering, supply chain and manufacturing expertise to bear across our WESTERN, FISHER and SnowEx product lines while leveraging the unique strength of each location and workforce.

The second pillar is expand pursuing organic geographic growth and new product offerings. For example, with lead times across the municipal sector top of mind, we are excited about the opening of Henderson's new Missouri upfit facility this summer. This expansion will allow us to better serve customers in surrounding markets and continue to deliver trucks on time, both of which will strengthen our competitive advantage.

In addition, the attachments team launched the auto speed controller for hopper spreaders last year. This controller is linked directly to the truck's CPU and as a result, can automatically adjust the flow of de-icing material as the vehicle speed changes, improving efficiency, reducing waste and allowing for better monitoring and it's retrofittable to all hoppers we produced back to 2016. This product its capabilities and the fact that it can be fitted to every hopper that we've built and our dealers have sold over the past 10 years have all been received extremely well by our end user professionals.

And finally, activate, which refers to last year's restart of our M&A efforts, which led to our first acquisition in 9 years. We welcome Venco Venturo to the Douglas Dynamics family in November. Adding this well-established and highly respected provider of truck-mounted cranes and dump hoist was a meaningful first step as we look to diversify and balance our portfolio over the long term.

Our integration team has been working diligently to start realizing the benefits of this partnership and drive profitable growth. Venco is a great example of the types of high-quality brands and businesses that align with our long-term vision. Given the financial strength of Douglas Dynamics, combined with this clarifying strategic vision for the company, we will continue to pursue the right acquisitions in the Vehicle Attachments space. I'm really pleased to say that our mission, vision and strategic direction have all been well received internally and externally with substantial initiatives now underway across all three pillars we entered 2026 with a clear focus on sustainable, profitable growth.

So in summary, 2025 was an important year for our company. And frankly, we're just getting started. Divisional plans aligned with the optimized expand and activate strategies are rapidly gaining traction and delivering results. We are confident in the strategic path ahead and we are focused on sustaining and expanding our recent success in 2026 and beyond.

Personally, I'm looking forward to attending the NTEA Work Truck Show in Indianapolis in 2 weeks which is always a great opportunity to reconnect with our teams and meet with partners and customers. It's an exciting time in our industry with considerable opportunities ahead, and our teams are continually striving to get better every day. With that, I'd like to pass the call to Sarah.

Thanks, Mark. Before I begin, unless stated otherwise, all the comparisons I'll make today are between the fourth quarter or full year of 2025 and versus the same time period in 2024. Also, please remember that 2024 results included a onetime gain of $42.3 million from the sale-leaseback transaction completed in September of 2024.

Overall, our financial results were excellent. We closed out the year strong I want to commend everyone at the company on their hard work this year that really paid off. Let me walk through the numbers for you, and I'll start with the quarter and then discuss the full year.

On a consolidated basis, fourth quarter net sales increased approximately 29% to $184.5 million with growth in both segments. Gross profit grew approximately 35% to $48.1 million, with gross margin increasing 120 basis points to 26.1%.

SG&A expenses increased approximately 29% to $27.3 million, primarily due to higher variable compensation on increased sales. Net income and diluted earnings per share both increased over 60% to $12.8 million and $0.54, respectively.

Adjusted EBITDA increased approximately 37% to $25.8 million and margins increased 90 basis points to 14%. And adjusted earnings per share increased approximately 58% to $0.62.

These tremendous improvements to finish the year were driven by improved weather trends that helped boost demand, coupled with positive execution at both of our segments.

Turning to the full year. 2025 net sales grew approximately 15% to a record $656.1 million. Gross profit grew approximately 19% and to $175 million, with gross margin increasing 80 basis points to 26.6%.

SG&A expenses increased just 4% to $94.9 million. Net income and diluted earnings per share were $46.9 million and $1.96, respectively. Adjusted EBITDA increased approximately 23% to $97.9 million and margins increased 90 basis points to 14.9%.

Adjusted earnings per share increased approximately 52% to $2.24. The effective tax rate for 2025 was 23.8% and in line with 24% for 2024.

As you can see, 2025 was a relatively straightforward year with fewer headwinds than we've seen in recent years. The generally favorable market conditions for both segments, coupled with a strong performance operationally, delivered strong year-over-year improvements.

Okay. Let's look at the results for the two segments, and I will start with Work Truck Attachments. As Mark already mentioned, we are pleased to buck the trend of recent years with winter arriving early across a good portion of the Midwest and Northeast in the fourth quarter. The subsequent increase in demand caused fourth quarter net sales and adjusted EBITDA to both increase by more than 50% to $83.1 million and $13.9 million, respectively.

Looking at 2025 overall, the impact of increased snowfall in core markets in both the first and fourth quarters drove higher volumes. Full year net sales increased approximately 16% to $295.7 million, and adjusted EBITDA also improved by 16% to $56.2 million.

We experienced very healthy aftermarket demand. In the quarter and for the full year, we achieved record sales of parks and accessories. We saw a dramatic spike in demand during December as end users went to dealers looking to keep their plows in tip top shape. Equipment was being used, and this should help to chip away at the elongated replacement cycle we are experiencing. The outlook at attachments is more positive today than it has been in recent years.

Next, I'll cover Work Truck Solutions. Our teams produced record results for both the quarter and the year despite facing tough comparisons to 2024. The team really ended the year on a high note. Well done to everyone at Work Truck Solutions for delivering record results once again.

Fourth quarter net sales increased approximately 13% to $101.5 million. Adjusted EBITDA grew approximately 22% to $11.9 million. And adjusted EBITDA margins increased 80 basis points to a record 11.7%.

Results were driven by ongoing strength of municipal demand plus efficient operations that meant more trucks were delivered. The fourth quarter results were really a continuation of the trends that we saw all year.

For 2025, Net sales grew approximately 15% and adjusted EBITDA increased 35%, adjusted EBITDA margins grew substantially to a record 11.6%, a 170 basis point increase.

As we have previously noted, 2025 net sales included approximately $18 million of incremental chassis sales related to several large municipal contracts. So 2025 was the fourth consecutive year of significant financial improvement for Solutions. The goal now is to maintain this margin performance in the near to medium term and to continue to focus on meaningful projects to optimize and expand in the years ahead.

Okay. Turning to the balance sheet. Total liquidity at quarter end was $127.8 million, comprised of $8.3 million in cash and $119.5 million of borrowing capacity on the revolver, which is more than enough for our needs in the foreseeable future. We are just avidly proud of our cash generation for the year. Free cash flow increased 91% to $63.6 million, which was primarily driven by the increase in net income, somewhat offset by higher inventory levels and solutions.

We also had a onetime benefit of approximately $7 million in lower cash taxes in 2025 due to the One Big Beautiful Bill Act. Inventory increased approximately 9% to $150 million. The great reduction in finished goods inventory in our snow and ice control equipment within Attachments, was more than offset by a combination of two items. First, the addition of inventory from Venco Venturo. And second, the logical and necessary increase in champion components in the Solutions segment to support the sales growth that we have experienced.

Next, I'd like to talk a little bit about how we are thinking about capital allocation. When we look at our capital allocation priorities for 2026, they are not fundamentally different than the past. First, we are continuing to focus on returning cash to shareholders, predominantly through maintaining our strong dividend. To a lesser extent, we also have the flexibility for share repurchases with $38 million remaining on our buyback authority. Second, we want to support projects by investing in the business as part of the optimized and expand strategic pillars.

Beyond that, we expect to continue to pursue strategic M&A opportunities as they arise as part of our Activate strategic pillar.

Let me add some details to these points. On the dividend, we're maintaining the current quarterly cash dividend of $0.295 per share. For share repurchases, we would expect 2026 to be similar to that of 2025 with the opportunity to reassess as we go through the year. As far as investing in the business, Capital expenditures for 2025 increased to $11.1 million after restricted spending in 2024.

While not strictly classified as CapEx, we also invested approximately $5 million in facility improvement projects as part of the 2024 sale-leaseback agreement. For 2025, even with those two combined components combined to $15.1 million, we remained well within our traditional range of 2% to 3% of net sales.

With our plans for 2026 in place, we expect spending to increase year-over-year as we invest to grow, but we still expect to stay within that same 2% to 3% of net sales.

Lastly, at year-end, our leverage ratio was 1.8x, which is well within our goal range of 1.5 to 3x. We are well positioned to consider small- to medium-sized acquisitions of complex attachments in the years ahead.

Okay. Let's review our outlook. Over the past 2 years, we have delivered meaningful improvements on both the top and bottom line. The trends we have been discussing allow us to issue a strong outlook for 2026. As you saw in the release, we expect 2026 net sales to be between $710 million and $760 million. Adjusted EBITDA predicted to range from $100 million to $120 million. Adjusted earnings per share is expected to be in the range of $2.25 to $2.85. The effective tax rate is expected to be approximately 24% to 25%.

As always, this assumes relatively stable economic and supply chain conditions, and we are assuming above-average snowfall in the first quarter and average snowfall in the fourth quarter, which should help address the elongated replacement cycle that we talked to earlier.

Based on these assumptions and with our current level of visibility, we believe the business is well positioned to drive improvements with the midpoint of our ranges, projecting higher volumes across both segments, which would lead to double-digit top line growth for the company.

I think you'll agree this is a strong outlook overall. It's the first time our net sales outlook has been above $700 million. The first time our adjusted EBITDA guidance started at $100 million and the first time our adjusted earnings per share range exceeds prior year results.

In summary, it was a great end to a great year. In 2025, we outlined our strategy, executed our plans effectively. We're in a strong position entering 2026 to deliver yet another very solid year. With that, we'd like to open the call for questions.

[Operator Instructions] The first question comes from Mike Shlisky with D.A. Davidson.

Just following your last comment there, Sarah. I just missed this. You said that you'll see growth in both segments -- can you maybe pinpoint for us which segment might have the better growth outlook for '26? And then secondly, from a margin perspective, which ones got the better opportunities for some additional margin leverage in 2026.

Sure, absolutely. So yes, you heard me on the call, talk about double-digit sales growth for Douglas as expected. Right now, the expectation and solutions is that we are at our target growth of mid- to high single digits for the year. And then the remaining growth is in attachments and that's a combination of our Venco acquisition plus higher than average snowfall expected in Q1. So we expect higher volumes than we had last year.

On the margin question, I would say on solutions, and you heard in my script, I talked about maintaining the margin, but continuing to grow through our optimize and expand. We will be working hard on both of those. We optimize will certainly help to increase our margins, whereas the focus on growth this year is going to be more evident because we have the mid- to high single-digit level growth on a record year. On the margin on Attachments, I would say, right now, assuming those to be relatively flat. And again, there's upside as cloud volumes return to average. For us, it's going to be just very critical for us to see what occurs in the preseason period.

Got it. Got it. So as usual, will be better feel for it. in the springtime, it sounds like. Can you comment also about how it's been going so far with owning Venco Venturo or anything surprised you or look different than you expected?

Yes, Mike, this is Mark. I'd be happy to take that one. Thanks for the question. So far, it's been going very well. I mean against the backdrop of the size of our company, as we've indicated, it's a relatively small acquisition, but we think there's possibilities, huge opportunities there over the next not few months or years, but over a long period of time.

I can tell you from an integration standpoint, it's been going we had high expectations, and it's going better than expected. It's a great team, really committed, I think, really now proud to be part of Douglas Dynamics have a great reputation in the industry of being a company that takes care of employees and really puts people and culture first. So it's just been a really good dynamic so far.

Now we're getting kind of past the initial what I'll call the honeymoon period and really focusing on, hey, what is the potential of this company now with strength and backing of Douglas Dynamics.

I would just add from a financial perspective, no surprises as we sit here today and the expectation that they would be earnings per share and free cash flow accretive, although smaller for us is still there for 2026.

Great. Maybe one last one for me, but all this recent snow, I got the window I can definitely see it's been a very heavy winter. In parts of the country, though, there were some large storms that don't always see a tonnage mill. I don't mean like a Houston and Dallas or even in the Southern Georgia area, but I mean like Virginia, are around the border or the edges of your typical most important core regions of the country. I'm curious whether those kind of borderline states and markets have any kind of unusual growth potential in 2026, if there's been some very elongated period of replacement in those areas.

Yes, I would say if you look across pretty much all the areas where we sell cloud the major areas and kind of that Northeast corridor, Mid-Atlantic, Midwest, we've seen, as we mentioned, above average snowfalls. And in some cases, it's huge storms like what you're experiencing on the East Coast or just did. In other cases, even if it's 2 or 3 inches. We call those plowable events and 2 to 3 inches versus 8 or 9 basically going to have the same impact in terms of the plow needs to go out, folks need to go out.

And then the other thing we've continued to see over the last several years is a lot more, I'd say, on average salt events. So events where trucks are going out and not just flowing but putting down salt and sand on the road using our hoppers.

So overall, as I said, this is -- it's been a pretty good year so far. We still have I don't know, say, 6 to 8 weeks of winter left, knowing that sometimes storms in certain parts of the country can go into April. But so far, so good. And again, we feel like this will be an above-average winter compared to the last 10 for us.

The next question is from Tim Wojs with Baird.

Nice to see the results here. So maybe could you put a little finer point on just kind of the parts and accessory performance in kind of the fourth quarter? And maybe how big P&A was for attachments for the year or maybe just the percentage of the business?

Yes. They operated for both the year and the quarter, call it, 14% to 15% of sales for Douglas. And the benefit for us in the fourth quarter is really driven by the high margins that parts and accessories bring along with it.

Okay. Is that why you're kind of assuming that margins and attachments would be kind of flattish next year, I guess, I would expect to see just given some of the cost takeout you guys have had and the volume growth you would expect that you would see margin leverage. Is there kind of a mix component with parts and accessories that kind of normalizes? Is that a headwind?

You answered your own question.

Yes, you're spot on. When we looked at last year, and we always talk about things kind of assuming average snowfall, and then as a company, we've become, I think, really good at being able to adjust accordingly up or down.

So last year in the fourth quarter with some of the early snowfalls in the Midwest, in particular, in some of the lake effect. That increase in P&A sales helped to drive that -- our overall EPS in the quarter and then for the year above what we expected, which is great.

And as I mentioned in the call, there is a direct impact. If we see snow coming in and especially knowing the amount of product that we have out in the field, we're going to see an immediate impact, which we saw in the fourth quarter, which helped to drive that overall volume.

It's hard to speculate how we seen more average snow volume in the fourth quarter, we most likely wouldn't have seen as high as P&A sales. results still would have been very good, but not as good as they are, which is also why when we look at the full year for 2026, with parts and accessories, we say, "Hey, you know what, we're going to take an average approach", which then leads and drives to where our guidance was.

And the cost takeout that you mentioned, those occurred in '24, and they were -- they're essentially already baked in through '25. So not a lot of incremental cost savings coming to us in '26. The real opportunity in attachments is as the equipment volumes return, which, again, is critical for us to see the preseason order patterns.

And is it too early to kind of understand what the preseason might look like? Is it just too early?

Yes, it really is. I mean, anecdotally, we talked about the fact that we mentioned it here in the call that overall dealer inventories are lower than what we've seen in the last several years, which you might expect, just given the increased snowfall.

Dealer sentiment right now is very positive, and we've seen an increase overall in retail sales, not just in parts and accessories, but for our major equipment, we'll know more in the next couple of months. Our sales teams are out talking with dealers on a regular basis, helping them get the flowers that they need right now in season. And then, yes, we'll really -- we'll have a lot more color as we always do in the second quarter conference call.

Okay. Great. And then just to put a finer point on Solutions. Are you basically saying that the margins here are kind of in that your kind of targeted range, call it, low teens, kind of low double-digits type range, and now you're really focused on driving EBIT growth as opposed to margin expansion? Just trying to kind of understand maybe what the long-term margin profile solutions really looks like.

Yes. The answer is yes. So our target was double digit to low teens. I'm not saying there's not opportunity to grow from the 11.6%. But our focus very much is on the top line growth which we do expect further top line growth after a year of having 15% top line growth. So that is more so our focus is the EBITDA dollar growth.

Okay. Got you. And then I'll sneak one last one in. Any comments you want to make on the first quarter? And the reason I ask is I know that's kind of been a wonky quarter historically. So just any sort of modeling items or anything like that you'd want to get out there.

No. I mean, in the first quarter, with attachments driving much of it is the lighter quarter. I mean, clearly, we haven't seen snow storms like this in a long time in the first quarter. So I don't expect really the quarterly cadence to change of the seasonality. The wildcard, I guess, will be what we see for parts and accessories.

The next question is from Greg Burns with Sidoti & Company.

When we look at the results for the Solutions segment, how it ended the year on such a strong note. I think earlier in the year, you were expecting maybe a little bit of moderation in the second half that didn't really seem to play out. It seems to almost like accelerate momentum into the end of the year. So can you just talk about why that was -- why the second half end up maybe stronger than you had thought earlier in the year?

Yes. I would put it entirely on the team's execution in completing trucks and getting them out the door. They have quite a backlog, and so they have the opportunity to certainly outperform. We didn't want to get ahead of ourselves. But I would say the team has really stepped up to the plate, and we were able to deliver on the backlog. And it has not really lowered the backlog dramatically because they're also winning new business. .

Okay. And the Missouri facility wins that capacity coming online?

We're targeting the second quarter. I think I said summer, early summer, I think, is what we're shooting for right now. And that is moving along nicely.

Again, that's similar and consistent with what we've done with other properties. We won't own that, but it is a build-to-suit lease. So we're working with the company, and that's coming along very nicely, and we're excited about that. It will give us another maybe 8% to 10% volume increase for Henderson from an end truck from a completed truck standpoint in a targeted area for us that we've looked at and said, "Hey, we really want to make sure we're on the ground and providing great service to customers".

And that growth is an annual growth.

Yes, great point. Yes. Okay. And then for the fourth quarter in the Attachments segment, margin was, I guess, flat year-over-year, but you mentioned obviously the strength in the parts and services and the beneficial margin impact of that. So why was the -- given the strong mix of parts and services, why was the margin flat this quarter?

That's a great question. I think some of it is the first part of Venco coming in. Some of it is variable compensation. I can't think of anything other top of mind. I think it's just the growth last year in the fourth quarter was a much lighter year, but fourth quarter typically is parts and accessories, not whole units. So I think when you look at the size that's different, but the mix is probably not dramatically different.

Got it. Okay. And then when we're looking at the, I guess, the guide -- the initial guide for like flattish margin for next year, I know you mentioned mix of parts and services. But is there any of that like a cost avoidance that may be coming back online now that market demand is picking up. Like is there any element of that like you're kind of resetting the cost structure and then maybe you start to see improved leverage into '27.

Absolutely. So when I think about our businesses, I don't think the incremental volume or incremental margins, the opportunity has changed our solutions tend to be 15% to 20%, and our attachments is 25% to 30%. However, there's two caveats. One, we are layering in some investments for growth this year in our plan. So we have that in 2026. And then the other area is the fact that our volumes still are not at average volumes. And so that's probably the largest piece out there that changes the margin profile for attachments and for the company.

I would add to that. You look back a couple of years ago and I think $10 million to $12 million that we took out of the business at that time. That's not something that we did it was necessary, but it wasn't something that we did lightly. That's not our MO as a company. And we're all very focused, I'd say, as a management team and as a leadership team, both at corporate and at the divisional levels. of making sure that as much of that as we can continue to keep flows through. We're not opening up the checkbook significantly even against the backdrop of a better than average snowfall year because we just want to make sure that we're being very prudent.

Okay. I guess with that said, where what are normalized margins like normal volumes get back to kind of average historical levels. Where do you see the -- what is the margin profile of the Attachments segment?

Yes. So we ended the year for attachments at 19%. We get to the mid-20s with average volumes.

[Operator Instructions] Showing no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Mark Van Genderen for any closing remarks. Thank you.

We really appreciate your continued interest in Douglas Dynamics. And certainly, please reach out to Nathan, if you would like to talk to us in the coming weeks. Thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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" Sidoti & Company, LLC

" Robert W. Baird & Co. Incorporated, Research Division

Good day, and welcome to the Douglas Dynamics Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Nathan Elwell, Vice President of Investor Relations. Please go ahead.

Thank you. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I would like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC.

Please note, in addition to our earnings release, we issued another press release yesterday afternoon regarding the acquisition of Venco Venturo. We also published a one-page fact sheet on our IR website that summarizes our results for the quarter. Joining me on the call today is Mark Van Genderen, President and CEO; and Sarah Lauber, Executive Vice President and CFO. Mark will first discuss the acquisition of Venco Venturo before providing an overview of our performance for the quarter. Then Sarah will review our financial results and guidance. After that, we'll open the call for questions.

With that, I'll hand the call over to Mark. Please go ahead.

Thanks, Nathan, and welcome, everyone. We had another solid quarter, which Sarah and I will discuss shortly. But I'd like to start by thanking the employees of Douglas Dynamics for their continued focus and resolve. This team truly cares about keeping people safe and communities thriving, especially important as we head into winter. I'd also like to take a moment to highlight 2 changes we recently announced regarding our Board of Directors. After 13 years of dedicated service, Margaret Dano decided to retire. We wish her the very best and want to thank her for her many meaningful contributions to Douglas Dynamics over the years. Always collaborative and thoughtful, her guidance will have a lasting positive impact on Douglas Dynamics for many years to come.

Second, we are pleased to welcome Jennifer Ansberry and Brad Nelson as new independent directors. Jennifer is the Executive Vice President and General Counsel of Lincoln Electric. Her extensive legal and M&A experience and deep understanding of the industrial sector will be invaluable as we advance our strategic priorities. Brad possesses a strong track record and significant leadership experience in manufacturing from companies such as Oshkosh Corporation to his current role as CEO of MasterCraft Bolt Company. Both Jennifer and Brad bring valuable experience and fresh perspectives that will be essential to support our future progress.

As a result of these changes, our Board has now expanded from 7 to 8 members, 6 of whom are independent.

Turning to the business and our announcement we made last night. Over the past several months, we've shared with our employees and with you, our shareholders, the Optimize, Expand, and Activate strategic pillars. On our last quarterly call, I focused mostly on Optimize and Expand. So as you may have guessed, today, I'll talk to Activate, which refers to the restart of our M&A efforts as we look to build our portfolio of attachments over the long term.

Today, I'm pleased to confirm that Venco Venturo has officially joined the Douglas Dynamics family. Adding this well-established and highly respected provider of truck-mounted cranes and dump hoists is a meaningful first step as we look to diversify and balance our portfolio over the long term. Sarah and I returned from Cincinnati last night after an energizing visit with a 70-person team at Venco Venturo. Brett Collins, Mike Stridholt, and the entire group in Ohio have built an exceptional business, and we're extremely proud to become the new stewards of the Venco Venturo brand. We're thrilled to welcome Venco Venturo's employees to our team and look forward to learning from their expertise, collaborating closely, and growing this great business with them.

With access to Douglas Dynamics' operational capabilities and continuous improvement processes, we believe there's a strong opportunity to build on Venco Venturo's success, driving profitable growth. Now that the deal is complete, the real work begins to fulfill that goal. Our integration team has been working diligently to lay out a clear plan to ensure a smooth transition and to start realizing the benefits of this partnership. This marks our first acquisition in more than 9 years, and I want to emphasize that our approach to M&A remains disciplined and strategic.

Over time, we're committed to building a diversified portfolio of complex attachments that require professional upfitting to work vehicles. This acquisition represents an excellent first step and a great example of the types of high-quality brands and businesses that align with our long-term vision. We're excited about the opportunities and look forward to partnering with the Venco Venturo team and to all that we will accomplish together in the years ahead. A heartfelt thank you to everyone involved in making this deal happen, including Sarah, Jon Sisulak, and the finance team for leading the charge with the financial analysis and legal review, plus Shannon Zleger, Chris Burnuer, the Work Truck Attachments team, and the Venco Venturo leadership team for making this a straightforward transition.

Stepping back, I'm pleased to report that 8 months into my tenure as CEO, our team is working collaboratively and effectively. This has been clear to me over the past few months as we pursue the Venco Venturo acquisition and with success of our established divisions.

Speaking of, let's turn to our current operations. Needless to say, we are pleased with our results. The improvements this quarter were primarily driven by the excellent performance of Work Truck Solutions, which delivered growth of over 30% and record third-quarter results again. And Attachments preseason shipments were in line with expectations. In fact, let's review the segment results, starting with Work Truck Attachments. Results improved this quarter, mainly due to the timing of preseason orders and ongoing cost control measures. The ratio of preseason shipments was a more typical 60-40% between the second and third quarters this year versus the 65-35% split in 2024.

Remember that 2024 was unusual, as higher finished goods inventory at the end of Q1 last year drove a stronger shipment mix in Q2. That wasn't the case this year as the Attachments team significantly decreased its inventory, with it currently down $11 million on a year-over-year basis. Additionally, based on our recent channel checks, dealer inventories are now back below the 5-year average after being elevated for quite some time. This is healthy news, and when coupled with positive dealer sentiment and financial health means we are ready for winter. Our operations are on the front foot, and we are primed and ready to respond to demand shifts, snowfall, and ice event trends as they occur. We're proud of the way our team has adapted and prevailed over the weather-driven challenges over the past few years.

Assuming we receive a somewhat typical amount of snow and ice events in our core markets this winter, we are well aligned and well positioned for the season to come.

Turning to Work Truck Solutions. The teams exceeded expectations and produced record third-quarter results yet again. With both net sales and adjusted EBITDA up over 30%, it's clear the strong demand and higher volumes are also being met with improved efficiencies. Our teams at HENDERSON and DEJANA are really knocking it out of the park. This is even more impressive now that the comps are much tougher and we're being compared to a record third quarter last year. Our municipal business continues to grow, thanks to the team's continuous improvement work in the recent years, which is now paying off as we'd hoped. When combined with the strong competitive position in a dynamic market, we are in a formidable position today.

In our commercial business, after seeing softer order patterns in the local dealer markets in recent quarters, an overall reduction in economic and tariff concerns led to a stronger-than-expected performance in the third quarter. We hope these trends continue, but also understand that dealers still have inventory on the ground. And despite interest rates starting to come down, smaller customers are more price-conscious and slower to make decisions.

The commercial fleet business remains generally positive. Fleet buyers are less influenced by near-term issues, instead managing their business more for the medium term. So really a fantastic performance in the Solutions segment. Overall, we're still seeing strong demand from municipal customers and solid demand from commercial customers. Our teams are receiving the chassis and components they need, allowing them to flex their DDMS muscles, driving greater efficiency and deliver improved profitability. From an operational standpoint, we are executing effectively across the segment. And when you add in our solid backlog, Solutions is set to have another fantastic year.

In summary, this was an excellent quarter for Douglas Dynamics, characterized by important wins and strong execution. Work Truck Solutions continues to experience encouraging fleet business and substantial demand and backlog from municipal customers. Attachments preseason came in as expected, and the team is primed and ready for winter. We have launched our strategic pillars internally, and the teams are building the specific divisional plans aligned with the Optimize, Expand, and Activate strategic pillars. We are confident in both the direction we are taking and our ability to execute and deliver sustained impact in the years to come.

With that, I'd like to pass the call to Sarah.

Thanks, Mark. Before I begin, unless stated otherwise, all the comparisons I'll make today are between the third quarter of 2025 and the third quarter of 2024. Also, please remember the third quarter of 2024 included a one-time gain of $42.3 million from the sale-leaseback transaction.

I want to start by congratulating everyone on their performance this quarter, with all teams either meeting or exceeding our expectations. This strong work has allowed us to increase our guidance ranges again, which I will get to. But first, let's look at the third quarter. Overall, results were very encouraging. Solutions produced another record quarter with top and bottom line growth of over 30% and preseason shipments were in line with expectations at Attachments. On a consolidated basis, net sales increased 25% to $162.1 million, and gross profit grew 23% to $38.1 million, primarily driven by higher demand plus improved throughput at Solutions and the timing of preseason shipments at Attachments.

SG&A expenses were $22.5 million. The change this quarter, excluding the 2024 sale-leaseback transaction costs, was driven by higher stock and incentive-based compensation on higher earnings, somewhat offset by lower CEO transition costs. Interest expense decreased 16% to $3.8 million for the quarter due to lower interest on the term loan and revolver from lower borrowings and a lower interest rate, which was partially offset by floor plan interest on higher chassis inventory. Adjusted net income and adjusted earnings per share both increased more than 60% for the third quarter to $9.5 million and $0.40, respectively.

Adjusted EBITDA increased 31% to $20.1 million, and margins increased 60 basis points to 12.4%.

Okay. Let's look at the results for the 2 segments. Attachments, our preseason orders ended in line with our forecast. Net sales increased 13% to $68.1 million, and adjusted EBITDA increased 29% to $10.5 million based on the timing of preseason shipments and ongoing cost control measures. Importantly, the ratio of preseason shipments was a more typical 60-40 split between second and third quarter this year versus the more unusual 65-35 split we saw last year. As Mark already noted, as we look towards winter, the team is primed and ready to respond to a variety of weather conditions, and our operations are as efficient and effective as they've ever been.

Turning to Solutions, and I don't mind sounding repetitive when I say that combined, our municipal and commercial teams produced record third quarter results again, despite facing tough comparisons to a record-setting quarter last year. Net sales increased 36% to $94 million, which includes approximately $8 million of incremental chassis sales. Adjusted EBITDA increased 34% to $9.6 million, which produced margins of 10.2%, higher than our initial expectations. The strength of the performance stems from strong demand, higher throughput volumes, and improved efficiencies following a solid performance across all locations.

With our overall backlog still well above historical norms, the full-year outlook remains positive. As the timing of deliveries and business mix shift from quarter to quarter, our overall results will continue to fluctuate, but we do expect to show annual improvement in solutions for the fourth year in a row.

With the results for the quarter covered, let's look at our balance sheet and liquidity. Total liquidity at quarter end was $70.1 million and was comprised of $10.6 million in cash and $59.5 million of borrowing capacity on the revolver, which is more than ample for our needs this year. On a year-to-date basis, net cash used in operating activities decreased 36% due to improved earnings, which were partially offset by an increase in accounts receivable. Year-to-date, free cash flow improved 21% to negative $29.3 million.

Inventory fell approximately 5% to $138.7 million compared to the same quarter last year. Attachments has done a great job reducing its inventory over the past year, which was partially offset by a planned increase in chassis and components in the Solutions segment, which are needed to address the robust backlog. As expected, capital expenditures increased to $8.1 million year-to-date. We now expect total 2025 CapEx to be at the lower end of our traditional range of 2% to 3% of net sales.

We are happy with our current debt levels, and the leverage ratio at the end of the quarter was a very manageable 1.9x. At this point, we expect to stay close to 2x through the end of the year, which is well within our goal range of 1.5 to 3x.

And finally, we paid our quarterly dividend of $0.295 per share at the end of the quarter. Finally, let's review our improved outlook. In short, our year-to-date performance has outperformed our expectations. The combination of exceptional results at Solutions and Attachments preseason shipments in line with our forecast means we have been able to raise our guidance ranges again. We now expect net sales to range from $635 million to $660 million, from the previous range of $630 million to $660 million. Adjusted EBITDA is now predicted to range from $87 million to $102 million versus the previous range of $82 million to $97 million. And adjusted earnings per share are expected to be in the range of $1.85 per share to $2.25 per share, up from the previous range of $1.65 to $2.15.

Finally, the effective tax rate is still expected to be approximately 24% to 25%. The outlook assumes relatively stable economic and supply chain conditions and that core markets will experience average snowfall in the fourth quarter. We are being prudent in our assumptions given the weather we've seen in recent winters and the elongated replacement cycle, which is reflected in our guidance. We believe our inventory and cost control efforts mean we are ready for whatever weather conditions we see later this year, and we are monitoring reorder patterns closely as winter weather begins.

We executed effectively across the company this quarter and are very pleased with our year-to-date results. We feel well prepared as winter weather approaches and look to support solutions as they push to close out another excellent year.

Finally, I'll just mention a couple of points related to the Venco Venturo acquisition. The deal is expected to be modestly accretive to earnings and free cash flow in 2026, with a minimal impact on the fourth quarter of 2025. We funded the acquisition through our revolver, and we do not expect it to materially change our leverage ratio. We look forward to working with the Venco Venturo team longer term on operational synergies and profitable growth initiatives.

With that, we'd like to open the call for questions. Operator?

[Operator Instructions] The first question comes from Greg Burns from Sidoti & Company.

Would you be able to share maybe a little bit more detail about the acquisition? Maybe how much revenue Venco was generating, what type of margins, and maybe what multiple you paid for the business?

Yes, Greg, I'll start and then turn it over to Sarah. Maybe I'll start qualitatively, and she can get into more of the quantitative questions. But this is a business that we've been talking to and looking at for the last several years. The owner of the business, Brett Collins and I have developed a relationship during my time at Douglas, and we realized it was just a great fit for us. And with a lot of the discussions that Sarah and I have had over the last several months with our shareholders and the investment community, and as we kind of thought about our strategic pillars, an area of focus was, hey, it's great that you're looking at additional M&A opportunities. But it's been a while since you've done one, look to find something maybe a little bit on the smaller side, something that fits in really well strategically with the company.

And the list of kind of the boxes that we wanted to check went on and on, and Venco Venturo really hit every one of those. So Brent and I started talking in earnest, probably 6 months ago. And again, he's been fantastic to work with and his team have, and we couldn't be more excited about it. Again, the grand scheme for us may be on the small end of the scale of what we've done historically, but certainly, as we've kind of said, small but mighty small and strong internally as we look to the future and really get excited about the opportunities there and the synergies that can be built between our attachments team and between -- maybe I'll turn it over to Sarah to add a little more color on the quantitative.

Yes. So Greg, we can't get into the specifics on the terms of the deal. I guess what I can say is we've been talking -- since we've been turning on this Activate pillar, we have been talking about focusing on small- to medium-sized deals, which for us would be $25 million to $75 million, call it. I would say this one is on the very low end of that scale.

For 2026, we talk about it being modestly accretive to earnings per share and free cash flow. I would estimate that their sales are in the $30 million to $40 million range. And currently, pre-synergies, their margins are closer to our solutions business margins, with plenty of opportunity for us to get in there with our DDMS and our sourcing and our operational synergies to work on margin improvement longer term.

And then just one more on Venco. Is DEJANA currently -- are they a supplier to DEJANA? Is DEJANA using them in their upfits? And what kind of opportunities are there for you to leverage the solutions business to maybe increase the demand or the growth for Venco?

Yes, you hit it spot on. This is why it kind of hit all of the boxes that Mark was describing, because it is a complex attachment that we do upfit. DEJANA is a purchaser of Venco Venturo cranes and hoists. It's certainly an opportunity for us to grow that also in future for the future upfit of DEJANA.

Yes. As we started the integration work in earnest, it's been good to see our sales team down there working with the sales organization at Venco Venturo and really looking to see, hey, where could this take us in the future. And again, in upcoming quarters, as we really settle in, I'm sure we'll have plenty of updates on how that's going.

[Operator Instructions] The next question comes from Tim Wojs from Baird.

Maybe just the first question I had, Sarah, I guess, if you could kind of maybe kind of outline maybe what you're expecting in each segment in the fourth quarter? And I guess, most specifically in attachments, just given we haven't really seen like, I guess, a normal snowfall in the fourth quarter for a long time. So just kind of curious if you could delve deeper into kind of what you're expecting in the fourth quarter in both segments.

Certainly. When you look at our new guidance and you focus in on the midpoint, I would say for attachments, that would be back to the '23 levels in volumes, which is, like I said on the call, it's still a conservative approach for us. We are focused on average snowfall, but we are not pinpointing average volumes at this time. From a margin perspective on attachments, I would say right now, our expectation at that volume level would be that that would be flattish margins to last year and where we landed last year.

And then I guess on the Solutions side, really good growth there. I guess, kind of how did the muni business perform kind of relative to the kind of commercial DEJANA businesses, in terms of maybe the pace of revenue growth between the 2 businesses? And then I guess, just given the growth, I thought there might be a little bit more leverage from a margin perspective. So if you just walk through kind of the margin expectations and kind of what you saw there in the third and fourth quarter?

Yes, absolutely. From the perspective of commercial and municipal, both of them had record top-line quarters. So we really did see good growth across both. It wasn't one versus the other. From a margin perspective, both performed very well, which led us to outperforming our expectation in the third quarter. The leverage when we look at that quarter-to-quarter can be a little bit choppy for solutions, just the way the Truck flow is. So when you think about incremental margins for solutions, you really need to look over a couple of quarters and/or a year period. I do expect for the year that solutions will be close to 25% incremental margins, which is pretty much where I've had them.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mark Van Genderen, President and CEO.

Thank you. We appreciate your continued interest in Douglas Dynamics, and we look forward to seeing some of you at the Baird conference in Chicago next week.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.