Myers Industries, Inc. Aktie

Hello, everyone. Thank you for joining us and welcome to the Myers' Second Quarter 2026 Earnings Results Conference Call. [Operator Instructions]

I will now hand the conference over to Meghan Beringer, Senior Director of Investor Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Myers' second quarter 2026 earnings review. Joining me today are Aaron Schapper, President and Chief Executive Officer; and Samantha Rutty, Executive Vice President and Chief Financial Officer. After the prepared remarks, we will host a question-and-answer session. Earlier this morning, we issued a press release outlining our second quarter financial results. In addition, a presentation to accompany today's prepared remarks has been posted. Both documents are available on the Investor Relations section of our website at myersindustries.com. This call is being webcast live on our website and will be archived along with the transcript of the call shortly after this event.

Please turn to Slide 3 of the presentation for our safe harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements. Further, information concerning these risks, uncertainties and other factors are set forth in the company's periodic SEC filings.

Also, please be advised that certain non-GAAP financial measures such as adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted earnings per share may be discussed on this call. Finally, all results presented and discussed in today's call are from continuing operations.

Now please turn to Slide 4 of our presentation as I turn the call over to Aaron.

Thank you, Meghan. Good morning, everyone, and thank you for joining us. I will begin today's call with a review of our second quarter followed by an update on our focused transformation program and a deep dive into one of our growth platforms. Sam will then provide a detailed review of the second quarter financials and our outlook for the year.

Turning to Slide 5. Our second quarter results reflect continued execution of our focused transformation and the meaningful progress we've made to strengthen the business. Second quarter revenue growth was 9.8% year-over-year supported by strength in infrastructure and food and beverage. Infrastructure revenue improved 52% as we continue to see market growth driven by strong ongoing spend for utility projects to support data center buildouts as well as large construction projects that are converting from wood to composite for ground protection.

As a reminder, composite ground matting is one of the best ways to create a safe and stable environment during construction and helps mitigate environmental remediation costs post construction. In addition, Signature's turf protection was featured throughout the FIFA World Cup at multiple events, increasing global awareness of our product's ability to protect playing surfaces. Food and beverage was up 48% on strong demand for seed boxes and intermediate bulk containers. The team delivered an exceptional performance driving margin expansion by managing cost, taking price actions and implementing operational excellence initiatives.

Adjusted EPS improved 60.6% year-over-year and adjusted EBITDA increased 30.6%. We continue to have strong cash flow conversion of EBITDA with free cash flow improving 10.5% during the quarter to $26.5 million, providing additional financial strength and flexibility to fund our growth platforms. I'm pleased with our second quarter performance and the actions we have taken to improve margins, enhance efficiency and simplify the organization. We are delivering great results while positioning the business for sustainable growth.

I'd now like to review the 3 strategic priorities guiding our 2026 focused transformation as shown on Slide 6. Our focused transformation is designed to create long-term shareholder value by delivering consistent and reliable results and effectively controlling what we can control. The results that we have delivered over the last several quarters demonstrate the progress we have made. While I'm pleased with how far we have come, I know there's still much more for us to accomplish. In 2026, our strategy is centered on 3 priorities.

First, we are delivering differentiated products that protect, creating greater customer value through deep customer relationships and enhanced commercial excellence. Second, we are advancing operational excellence and cost leadership by implementing standardized processes that improve consistency, productivity and execution across the organization. Third, we are investing in growth platforms that offer the greatest opportunity to generate attractive returns and accelerate profitable growth. These priorities are strengthening our business, improving profitability and positioning Myers to deliver sustainable value to our shareholders.

Turning to Slide 7 and diving deeper on our priority to improve how we operate as a company. A key part of this effort has been simplifying the business, making a unified Myers organization built to move faster, operate smarter and accelerate growth. Historically, we operated as a collection of siloed businesses with fragmented operating systems and decision-making. Today, we're bringing the organization together under enterprise leaders with accountability across the company. To support this evolution, we strengthened our executive leadership team with 2 new appointments during the quarter.

First, we welcome Gustavo Oberto as our President of Commercial & Strategy. This newly created role reflects our commitment to building a unified commercial organization and positioning Myers for our next growth phase. Gustavo brings over 25 years of global leadership experience and will lead our commercial strategy by listening closely to our customers and accelerating customer-informed product innovation that addresses their evolving market needs. Gustavo will lead us as we strengthen customer relationships while driving internal synergies and expanding multi-brand sales opportunities.

Second, Jeff Condino has been appointed the President of Operations with responsibility for safety, supply chain and manufacturing operations across Myers. Jeff has over 30 years of manufacturing experience and joined Myers in 2024 with the Signature acquisition. Jeff has already begun extending many operational best practices across the broader organization. In his new role, Jeff will continue to identify and execute additional productivity opportunities across manufacturing and procurement while driving margin expansion and customer satisfaction.

Turning to Slide 8. We are making strategic investments to maximize profitable growth. Today, we are highlighting sector products for military applications. We see meaningful opportunities to expand our product portfolio and grow our military business by applying our material conversion expertise across a broad range of ammunition packaging. We supply military packaging products, including ammunition containers to defense customers across the United States and NATO allied nations with products qualified for use by military customers in those markets.

Our highly engineered solutions improve logistics, reduce weight by up to 40% and lower life cycle costs compared to historical wood and steel products. These advantages result in lower transportation costs and improved soldier safety while also reducing replacement and maintenance requirements. We are leveraging our portfolio to accelerate adoption within existing programs and expand into adjacent categories.

Turning to Slide 9. We are making targeted investments to support a broader range of ammunition programs globally. Specifically, we have launched production of military ammunition containers in Europe through Scepter International Poland, expanding our European reach to strengthen alignment with key programs, improve speed to market and support expected NATO growth. Our military growth story is also about leveraging our existing platforms more effectively. A great example of the flexibility within our manufacturing platform is our new 120-millimeter tank container.

While this is a new product, it leverages the same mold base as our established 155-millimeter C-137 artillery container, allowing us to expand our offering with minimal incremental capital investment and accelerating time to market. Rather than funding an entirely new tooling platform, we can introduce new products at a fraction of the cost while utilizing existing manufacturing capabilities. Beyond the direct revenue opportunity, this success has strengthened our relationships with key decision-makers across NATO allied nations and U.S. defense customers, creating opportunities to participate in additional programs in the years ahead.

Myers ammo packaging revenue increased from $20 million in 2024 to $49 million in 2025 and we see a path to continued growth with a serviceable market of approximately $300 million. We expect our ammo packaging revenues to grow at a 10% to 15% CAGR through 2028. Our investments will position us to support new military programs and help customers develop new products for equipment modernization and the introduction of new weapon systems. This category creation opportunity is one of several organic growth platforms and we are excited to share more with you as we execute on our strategy.

At this time, I will turn the call over to Sam for a review of our financial results.

Thank you, Aaron, and good morning, everyone. Now please turn to Slide 11 for a review of our second quarter results. Net sales increased 9.8% year-over-year. Excluding the impact of our decision in the fourth quarter of 2025 to exit low margin products with the idling of 2 rotational molding facilities, net sales would have increased 13% year-over-year. Strong infrastructure and food and beverage growth was partially offset by soft vehicle and consumer demand.

Adjusted gross margin increased 310 basis points to 34.6% driven by volume, mix, price and lower manufacturing costs despite rising resin costs. Adjusted operating margin improved to 16.7%, up 410 basis points over last year. Adjusted EBITDA margin improved to 21.8%, up 350 basis points over last year with improved gross margin as well as improving our cost structure and reaping the benefits from our focused transformation. Adjusted EPS was $0.53, up 60.6% year-over-year.

Please turn to Slide 12. We ended the quarter with a cash balance of $47.6 million and a total liquidity of $292.3 million providing us with ample flexibility to support our capital allocation priorities. We reduced net debt by $21.2 million during the second quarter resulting in a net leverage ratio of 1.9x, well within our target ratio of 1.5 to 2.5x and down significantly from last year when it was 2.8x. We plan to further reduce debt in 2026 as we continue to fortify our balance sheet.

Earlier this week, we restructured our debt with a new $250 million revolving credit facility and a $250 million term loan. This does not change our total debt, but does extend our maturity to 2031. Second quarter operating cash flow was $32.1 million and CapEx was $5.6 million, resulting in free cash flow of $26.5 million, up 10.5% compared with the first quarter. Working capital as a percent of trailing 12-month sales was down sequentially and year-over-year primarily due to an improved cash conversion cycle even while we're growing the business. We continue to prioritize working capital management to improve both metrics.

Please turn to Slide 13. Our capital allocation framework balances investing in growth while returning cash to shareholders. CapEx was approximately 3.1% of sales for Q2. For the full year, we expect CapEx to be 3.5% of sales with investments in organic growth, productivity and infrastructure projects. Our 2026 projects include a European military production launch, capacity expansion in infrastructure, new automation to drive productivity and mold and press replacements to sustain our core operations.

Turning to Slide 14. We are modestly updating our 2026 outlook by raising our food and beverage end market outlook from slightly down to moderate growth while reaffirming our outlook for all other end markets. As a reminder, our market outlook excludes the impact from exiting low margin products and idling 2 rotational molding facilities in Alliance, Ohio that occurred in Q4 of 2025. This represents approximately $5 million in revenue per quarter, primarily industrial and consumer markets, with favorable impact to earnings.

For industrial, we expect moderate growth. Overall, we see momentum building in capital spending trends from our industrial customers. As discussed, we have launched production of military ammunition containers in Europe through Scepter International Poland. Production began earlier this year with initial customer shipments in April 2026. In infrastructure, we expect strong growth as both the first and second quarters set consecutive sales records. Second quarter performance was primarily driven by strong demand for our MegaDeck and turf protection products.

As these products continue to support U.S. market expansion fueled by sustained investment in transmission and distribution related utility projects, data centers and large-scale construction; we expect strong growth to continue. With the World Cup now concluded, we anticipate ongoing demand for turf protection products although at more moderate pace than in the second quarter. As the summer months start to draw to a close, we expect the third quarter to slow slightly given the drier ground conditions and typical seasonality. We expect the vehicle end markets to be stable overall with mixed demand indicators.

Through the first half of the year, the U.S. RV industry experienced meaningful year-over-year decline driven by higher interest rates and fuel prices as well as weak consumer confidence amid economic uncertainty. We expect this trend to continue through the second half of the year. On the other hand, we expect strong growth in marine and commercial vehicle demand. Finally, for automotive OEMs, program launches over the next 2 years should drive increased demand for new component packaging beginning in the second half of the year.

In consumer, we anticipate stable sales. Demand in this end market is dependent upon weather-related events that drive fuel container sales. We still expect average storm activity this year. We now expect our food and beverage end market to achieve moderate growth. Sales are expected to be higher than last year given recent quoting trends and existing backlog. This growth was primarily driven by integrated bulk container sales. We expect seed to remain flat to prior year. We continue to weigh both risks and opportunities for our end markets as we monitor geopolitical conditions, including energy markets, tariffs or other factors that may influence demand trends.

The conflict in the Middle East continues to drive volatility in global resin pricing. While availability has remained stable due to our secure resin supply, higher input costs have increased material expenses. We have taken selective and contractual pricing actions to help offset these increases although there is typically a lag between higher costs and price recovery. As a result, we expect continued pressure on margins in the third quarter given the ongoing uncertainty in resin markets. Our team will continue to be disciplined in looking for ways to mitigate resin cost in the third quarter.

I would now like to turn the call back to Aaron for some closing comments before we take your questions. Aaron?

Thank you, Sam. The Myers team has performed very well through the first half of 2026; growing revenue, expanding margins, improving cash flow and making strategic investments to maximize profitable growth. We continue to make meaningful progress on our focused transformation, taking actions to improve margins and increase operating efficiency as we instill a continuous improvement culture and mindset across the organization.

We are simplifying our portfolio, streamlining our path to market and improving our margin profile supported by a capital allocation framework that balances growth investments and returning cash to shareholders. Combined, all these initiatives are enabling us to focus resources and investments on opportunities that maximize profitable growth and deliver products that protect.

With that, I'd like to turn the call over to the operator for questions. Operator?

[Operator Instructions] Your first question comes from the line of Bill Dezellem from Tieton Capital Management.

Two questions. First of all, would you give more details on the European expansion? And maybe start with the point of do you currently have any manufacturing outside of the U.S. and how you kind of led to this expansion? And to what degree you had contracts lined up versus the proverbial field of dreams?

Bill, thanks for the question. We appreciate it. We've always -- our military business really started on the NATO side in the earlier days. So we've always exported to Europe. And as we looked at the changing geopolitical situation in Europe, it really was a priority for our customers to be building closer to home. And so for us was, both Sam and our background on the international side, we really looked at what is the most optimal structure for us to really get our products closer to our customer and decided that's really kind of working a new footprint there with a Poland partner, it was the best way to do it.

Where we would then supply the raw materials, we would supply the tooling, we supply our engineering expertise and, more importantly, the specifications to those NATO customers and they would help us produce there. So with minimal capital outlay from the get-go, we were able to really maximize our footprint in Europe and really get what our customers needed was that quick local supply. And our first local shipments shipping from our Poland partner was in April. So we were very happy with the quick actions that our team made. And once again, a big compliment to our Scepter team to react quickly to our customer needs and the setup of that supply there in Europe. So we're very happy with what they've done and the results that they posted.

Congratulations. And then relative to your commentary about the automotive market and the new models ultimately benefiting your business, would you talk through the timing of when you anticipate to see those benefits flowing through?

Yes. I mean so automotive has been tough, right? So it's kind of a tale of 2 industries right now. The commercial side is doing better. There's always a lot of tariff noise and what's happening with parts and everything else. So that noise continues between North America, Canada, Mexico, those kind of things. And so the new program launches have already -- have been announced and we are seeing some good signs of life from our automotive partners on the normal consumer vehicle side. That being said, our heavy-duty vehicles, more of the commercial vehicles is doing much better.

So you kind of see a little bit of 2 stories going on in that market right now. So we're hoping for signs of life in the back half of the year, more specifically in Q4, on our automotive side to see a little bit of revival in that business. And then if we can get -- there's some tariff understanding that we still all have to work through to understand the impacts of the tariffs for our partners that are doing a lot of parts back and forth to Canada. So there's a few little pieces that still have to be worked out. And as we all know, there was some new tariff information the last few weeks that everyone is working through.

Great. And Aaron, just to be clear that I understood what you said that the fourth quarter is when you would expect the passenger automobile business to show some improvement. You're already seeing respectable activity in the commercial vehicles. Did we hear that correctly?

That is correct.

Thank you and congratulations on a great quarter.

Your next question comes from the line of Christian Zyla from KeyBanc Capital Markets.

Really amazing results this morning. I know you don't give formal guidance, but can you just help us figure out the shape of the year? Like are there first half dynamics -- first half, second half dynamics to think about or any pull forward in the quarter? Just like based on the prepared remarks and your materials, it sounds like a lot of this performance was structural. So just looking for any color of how we should think about the full year and maybe the quarters and then like just the shape not specifically like what you're expecting and then ultimately how it impacts the future?

Yes. Thanks, Christian, for the question. Yes, we see Q2 was really strong. We came into the quarter with a particularly strong backlog in Signature for the infrastructure business. We still have a very strong backlog going into Q3 although it's a little bit down to Q2 for Signature just because we had that significant demand for the FIFA World Cup and a real spike in demand. And Q2 tends to be one of their highest quarters for that business if you look at their history. So we do expect Q3 to be a little softer in the infrastructure business than what we saw in Q2, but still a really strong backlog comparative to last year going into Q3.

We saw maybe a little bit of pull-through with some customers I think trying to get ahead of resin price increases early in Q2, but a little bit in the seed side, but we're anticipating that is just more of a pull forward right now. Now that could result if Q4 from a seed perspective ends up being unusually higher. But right now, we're anticipating seed full year to be flat and that was more of just a pull forward. So a little bit of those dynamics. Those are the 2 things I would say that are a little different about Q2 than what we're anticipating from our normal business cycles in the second half.

Got it. That's helpful. And maybe just to clarify. So we shouldn't expect like a significant step down like 1 half to 2 half like sure, there's some normal seasonality in your business, but you're not seeing anything that would suggest that there's a big step down 1 half to 2 half. Is that correct?

No, not on the top line from a volume plus revenue perspective from first half to second half. That's typical seasonality, yes.

Got it. Understood. And then just my second question, maybe piggybacking off the answer to the first one. So you guys have been shifting around some capacity between a few of your facilities namely in infrastructure and food and bev. I guess conceptually how much of the strong performance in 2Q was driven by market dynamics of like price and volume versus how much was driven by unlocking some of that throughput from the capacity shift? And then do you have any more plans on future iterations of how that capacity unlock helps the business? Are there other parts of the business where you can kind of make those quick nice little adjustments?

Yes. I mean I do think Q2 having the ability to make that capacity move between food and beverage side for Buckhorn and our Signature brand did help us, I would say, accelerate faster and we'll continue to look for opportunities. We are seeing some other businesses that are seeing volumes grow at a little faster pace than anticipated. And that's what's great about our business is we have injection molding capacity at multiple sites. And so where we see that, we'll consistently look for those opportunities to maximize our footprint and our capital. So nothing to formally say right now, but we're definitely always looking for that. And with the new structure with Jeff Condino being across all of operations, he will consistently look for those opportunities so that we can satisfy our customer demand when those spikes in demand occur.

And Christian, we'll have more to come on this. But once again, the leadership change is critical to make sure we keep capturing those opportunities.

Great to hear. Congrats on a really strong quarter.

Your next question comes from the line of Edward Nakamura from Gabelli Funds.

Great results especially on the Signature side. Just wondering if you can somewhat parse out what some of the onetime effects were in the quarter from the World Cup and any other onetime orders?

Yes. I wouldn't say we're giving a specific number around the World Cup. A lot of our performance, I would say, on the bottom line is due to the volume and mix. It was a really strong throughput to Christian's question there around being able to leverage our footprint to really accelerate that volume. I wouldn't say there was any other particular onetimers other than a little bit of pull forward, as I mentioned, in the seed. But from the rest of the P&L perspective, there was very little in terms of unusual onetime activity. It's really a factor of business mix and their volume.

Got it. And then just if you have any quick updates on the sale of MTS, that would be great.

Yes. This is Aaron. I'll take that one. So we're working the internal schedules and the project plan on it and we're working diligently to get the sales process to move as fast as possible. As you know, I can't offer any definitive timelines at this stage, but we are acting with urgency. We are acting to push it forward as quickly as possible. And we'll keep you updated as we're able to as news comes along, but rest assured, it is one of our project plans that is moving along.

At this time, there are no further questions -- apologies. Your next question comes from the line of Christian Zyla from KeyBanc Capital Markets.

Really last second, I can get it in. Just the updated guide on the food and beverage side like how much is that driven by kind of the 2Q performance versus like just orders and kind of conversations you're having with customers? Like do you feel like we're kind of getting out of that trough that we've been in the last year or 1.5 years or is the guidance raise really primarily predicated on the 2Q performance?

I'd say it's a combination of both. I think Q2 obviously was really strong in that business as well. But quoting activity and backlog have given us confidence that we're seeing that go forward. Obviously there's always risk with everything going on right now. But right now based upon quote activity, we felt like it was a go-forward raise as well as the Q2, probably not to that level, but consistent growth for the second half.

Yes. I mean Chris, we mentioned the IBC growth on that side because really it's seed and IBC really drive that section of the business. And we're very proud of our Buckhorn team and the work they're doing with IBCs and driving that forward. It's good to see that kind of growth in the IBC side and we're proud of the team for doing what they've done last quarter and really just building that business for the future.

At this time, there are no further questions. I will now turn the call back to Meghan Beringer for closing remarks.

Thank you for joining us today. If you'd like to continue the conversation, my contact information can be found on the final slide of the presentation. We look forward to staying in touch. With that, we'll conclude the call. Have a good day.

This concludes today's call. Thank you all for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to Myers Industries 2026 First Quarter Results Conference Call. [Operator Instructions] I will now hand the call over to Meghan Beringer, Senior Director of Investor Relations. Meghan, please go ahead.

Thank you. Good morning, everyone, and welcome to Myers First Quarter 2026 Earnings Review. Joining me today are Aaron Schapper, President and Chief Executive Officer; and Samantha Rutty, Executive Vice President and Chief Financial Officer.

After the prepared remarks, we will host a question-and-answer session. Earlier this morning, we issued a press release outlining our first quarter financial results. In addition, a presentation to accompany today's prepared remarks has been posted.

Those documents are available on the Investor Relations section of our website at myersindustries.com. This call is being webcast live on our website and will be archived along with the transcript of the call shortly after this event.

Please turn to Slide 3 of the presentation for our safe harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements.

Further, information concerning these risks, uncertainties and other factors are set forth in the company's periodic SEC filings. Also, please be advised that certain non-GAAP financial measures such as adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted earnings per share may be discussed on this call. Finally, all results presented and discussed in today's call are from continuing operations. Now please turn to Slide 4 of our presentation as I turn the call over to Aaron.

Thank you, Meghan. Good morning, everyone, and thank you for joining us. I will begin today's call with a review of our first quarter, followed by an update on our focused transformation program.

Sam will then provide a detailed review of the first quarter financials and our outlook for the year. Turning to Slide 5, we began 2026 on a positive trajectory, building on the momentum we created in 2025.

The team performed well, delivering revenue growth, improved earnings and strong cash flow. We are continuing to see benefit from our focused transformation initiatives to improve margins, increase operating efficiency and instill a culture of continuous improvement across the organization.

First quarter adjusted EPS improved 57.1% year-over-year and adjusted EBITDA increased 27%. Free cash flow improved to $23.9 million, providing additional financial strength and flexibility to fund our growth platforms.

It was a strong quarter to begin the year, and I am proud of the performance of our entire team. I would now like to review the 3 strategic priorities for 2026 of our focused transformation as shown on Slide 6.

Our first priority is to focus on our core markets and customer value we deliver. Our decision to sell MTS is a significant step forward in achieving this objective. When complete, this step will simplify our portfolio and streamline our path to market by eliminating a fragmented customer base that has limited overlap with other parts of our business.

Further, this step will enhance our ability to deliver customer excellence by focusing our value proposition on areas where we offer differentiated solutions. Beyond the sale of MTS, we continue to take steps to strengthen our end market position by adding new products and customers while strengthening long-standing customer relationships.

Last quarter, new customers accounted for 24% of Infrastructure's revenue. This provides a larger diverse customer base for business vitality and future growth. In addition, Signature's turf protection will be featured throughout the FIFA World Cup at multiple events this summer.

The majority of the 11 venues either already own or will rent our products throughout the event. We are proud to help protect the critical infrastructure supporting the athletes and their fans from around the world.

Our second priority is to drive a culture of high performance by instilling operational excellence and cost leadership across the organization. We have consistently and proactively taken steps to improve efficiencies, reduce costs and expand margins.

One example is increasing our use of recycled materials. We are installing additional regrind equipment that will enable us to bring more of this process in-house in the second half of the year.

This reduced costs, secures our supply chain and decreases waste. Our third priority is to focus on investments that maximize profitable growth. Our continued free cash flow generation enables us to invest in attractive growth platforms such as composite matting and military applications that align with our competitive advantages.

We can accomplish this through capital investments in organic growth as well as more efficient use of our current operating footprint. We are currently in the process of moving a portion of our infrastructure production to optimize our manufacturing footprint, including all stadium products.

This will simplify manufacturing workflows and maximize the output of each facility. It also enables operating efficiencies as the local team can focus their resources on a simplified product portfolio.

This improves output with minimal capital investment and enhances our ability to serve our customers. These strategic priorities are guiding us as we make progress on our focused transformation.

Our core values provide a solid and unifying foundation, empowering our employees to work together as a team to accomplish our goals. By focusing on these activities, we are creating a company that consistently and reliably delivers profitable growth. We have already demonstrated our ability to achieve milestones, and I'm confident we will continue to move forward along the positive trajectory we are on. At this time, I'll turn the call over to Sam for a review of our financial results.

Thank you, Aaron, and good morning, everyone. Before I begin my review, I would like to discuss changes in our reporting framework. MTS is now being reported as discontinued operations and all results we are presenting today are continuing operations only.

For assistance in modeling and comparison with previous periods, we have included a slide in the appendix of our earnings deck that shows our income statement for the last 5 quarters adjusted for this reporting change.

In addition to the reporting of discontinued operations, we have made changes to our reporting of revenue by end market, most notably, the removal of automotive aftermarket. Discontinued operations includes most but not all of our previous distribution segment.

The remaining business is now reported across the vehicle, industrial, and infrastructure end markets. We are also enhancing our financial disclosures in response to investor feedback with a focus on improving transparency and comparability with our peers.

While we plan to report enhanced disclosures throughout the year, this quarter, we are introducing 2 of these improvements. First, we have reclassified approximately $5 million per quarter of shipping and handling costs from SG&A into cost of sales.

This reclassification has no impact on operating income. Second, we are updating our non-GAAP EPS to exclude intangible asset amortization expense to better reflect our current operating performance.

Now please turn to Slide 8 for a review of our first quarter results. Net sales increased 1.8% year-over-year. Excluding the impact of our decision in the fourth quarter of 2025 to exit low-margin products with the idling of 2 rotational molding facilities, net sales would have increased 5% year-over-year.

Strong infrastructure, military and consumer growth was partially offset by soft vehicle and food and beverage demand. Adjusted gross margin increased to 34.7% due to favorable mix, lower material costs and lower manufacturing costs.

Adjusted operating margin improved to 15.7% and adjusted EBITDA margin improved to 21.3%, up 420 basis points over last year as we made significant progress towards improving our cost structure and reaping the benefits from our focused transformation.

Adjusted EPS was $0.44, up 57.1% year-over-year. Please turn to Slide 9. We ended the quarter with a cash balance of $44.6 million and total liquidity of $289.3 million, providing us with ample flexibility to support our capital allocation priorities.

We reduced net debt by $18.3 million during the first quarter, resulting in net leverage ratio of 2.2x within our target ratio of 1.5 to 2.5. We plan to further reduce debt in 2026 as we continue to fortify our balance sheet.

First quarter operating cash flow was $26.7 million and CapEx was $2.8 million, resulting in free cash flow of $23.9 million, significantly higher than last year and up 28.5% compared to the fourth quarter.

Working capital as a percent of trailing 12-month sales was down sequentially and year-over-year, primarily due to the timing of receivables. We continue to prioritize working capital management to improve both metrics.

Please turn to Slide 10. Our capital allocation framework balances investing in growth with returning cash to shareholders. CapEx was $2.8 million in the first quarter, approximately 1.7% of sales.

For the full year, we expect CapEx spend to be 3.5% of sales with plans to invest in organic growth, productivity and infrastructure projects. Our 2026 projects include capacity expansion in infrastructure, new automation to support consumer end markets, molds and press replacements to sustain our core operations.

Turning to Slide 11. We are reaffirming the 2026 outlook that we provided on March 5. As a reminder, our market outlook excludes the impact from exiting low-margin products and idling 2 rotational molding facilities in Alliance, Ohio that occurred in Q4 2025.

This represents approximately $5 million in revenue per quarter, primarily industrial and consumer markets with favorable impact to earnings. For Industrial, we expect moderate growth as we are seeing modest recovery in manufacturing capital expenditure trends from our industrial customers.

Militaries around the world are replenishing their inventories and demand for military products continues to increase. Further, we are diversifying our product lines within current military customers.

In infrastructure, we are seeing U.S. market expansion driven by strong ongoing spend for data centers-related utilities projects and large construction, supported by conversion from wood to composite matting.

Further, orders for our MegaDeck product are up over 130% compared to this point last year, giving us confidence in our 2026 outlook. Finally, we are projecting an increase in the turf protection products sold in stadiums.

We expect the vehicle end market to be stable overall with mixed demand indicators. For RV and marine, we expect flat sales as consumer sentiment is soft. For commercial vehicles, we expect recovery starting in the second half of 2026.

For automotive OEMs, the volume of new and updated vehicle program launches over the next 36 months is expected to improve demand for the new component packaging starting in the second half of the year.

In consumer, we anticipate stable sales. Demand in the first quarter was strong following winter storms across most of the U.S. Spring sales continue to be strong as the lawn and garden season is at its height, and spring storms continue to drive demand across the country.

For the next 2 quarters, demand will be dependent on future storm activity. We are planning for the average of 3 landed storms in the Continental U.S. this year. Our food and beverage end market is forecasted to be slightly down for the year.

With the agricultural market, seed demand is projected to be flat while farm input costs are being impacted by the supply challenges. Based upon recent quoting trends and existing backlog, we maintain cautiously optimistic outlook for continued growth in integrated bulk container production through the second half of the year.

We continue to weigh both risks and opportunities for our end markets as we monitor geopolitical conditions, including energy markets, tariffs or other factors that may influence demand trends.

The conflict in the Middle East has affected global resin supply and pricing. While availability has not been an issue for us due to secure resin supply, we are experiencing higher material costs as global prices have increased.

To mitigate this impact, we are focusing on what we can control, including working with customers and taking selective or contractual pricing actions where appropriate. As there is a typical lag between cost increases and price recovery, we expect some pressure on second quarter gross margins.

Beyond pricing, we are pursuing additional actions to offset cost increases. One example mentioned earlier is our investment in additional equipment to increase our use of recycled materials, which lowers costs and strengthens supply security. We expect to mitigate these cost pressures and expand margins in the second half of the year through a combination of contract structure, pricing actions and cost reductions. I would now like to turn the call back over to Aaron for some closing comments before we take your questions. Aaron?

Thank you, Sam. We are off to a strong start to the year. We're making meaningful progress on our focused transformation, taking actions to improve margins and increase operating efficiency as we instill a continuous improvement culture and mindset across the organization.

The decision to sell MTS will simplify our portfolio, streamline our path to market and improve our margin profile. Supported by a capital allocation framework that balances growth investments and returning cash to shareholders, we are on a clear path to creating sustainable value. Combined, all these initiatives are enabling us to focus resources and investments on opportunities that maximize profitable growth and deliver products that protect. With that, I'd like to turn the call over to the operator for questions. Operator?

[Operator Instructions] Your first question comes from the line of Christian Zyla from KeyBanc Capital Markets.

First question, really nice growth in your infrastructure end market even with the reclass. So how are you guys thinking about your current capacity levels along with pricing for Signature? And then looking at your last 6 months or so of sales, you guys are run rating just above $140 million. I know the business can be lumpy at times, but is this a fair annual estimate? Or just how are you thinking about it in the context of the strong growth that you guys guide to?

Well, let me -- let's start with the capacity question. And so as you can see in our remarks that we talked about, I mean, the great thing about Myers is because we are in the business of thermoplastics, we have a lot of opportunity to look across our manufacturing footprint.

And so what you can see what we've done is taken the Signature product and some of the product lines and then making sure that we use our footprint to make sure the product lines are more specialized to each plant.

So you see we talked about basically moving the stadium products so that our Orlando facility could concentrate on the MegaDeck product. So what we can do is with some limited capital expenditures is really increase our capacity by utilizing our footprint better.

So from a footprint discussion, that's really our first plan. And secondly, Sam mentioned a lot of the capital expenditures will be going to our growth businesses. And obviously, Signature is not only going to get the capital it needs to continue to grow at this rate, but it's also going to get a lot of attention from our operations group to make sure that we don't run into those bottlenecks.

Yes. And we're also -- we have -- I mentioned also we're adding actual capacity in Orlando as well. And so that will be coming on board early next year, Q1 as well.

Yes. We've accelerated that a little bit.

Sorry. Go ahead.

But we're not concerned on capacity for the year being a factor for our demand. And we expect to continue to grow each quarter the rest of the year.

Got it. And then I guess, on the run rate questions, so with your comments that expecting to grow each quarter for the rest of the year, is that year-over-year or sequentially? Just how should we think about -- like I'm just trying to gauge in the context of strong growth.

Year-over-year. Year-over-year.

Got it. Thanks. And then my second question, and then I'll hop back in the queue. You alluded to some of this in your prepared remarks, Sam. But it looks like HD polyethylene prices have been basically going parabolic over the last month or so.

And looking at some of your domestic suppliers, they've been raising prices pretty drastically. Can you maybe quantify the price cost impact in the near term? And I know you guys are pretty good at strategically increasing inventory and materials. But conceptually, how much supply do you have relative to your internal sales forecast? Thanks.

Yes. So from a cost increase, yes, you alluded, we've seen a very significant short-term increase, and what that's going to do over time, obviously, we're monitoring that weekly, daily very carefully.

And so Q2, we are expecting some pressure on our gross margins. We have gone out quite quickly. We had to because of how significant those increases were. So we took action already in Q2, but we do have contracts to abide by, and there is a time lag in terms of index reporting and when that will take effect. So there will be some impact in Q2, but no impact on supply. We've had a steady source within the U.S. from a materials perspective. And then we see recovery to our margins in the second half of the year.

Your next question comes from the line of Edward Nakamura from Gabelli Funds.

Given that you've moved MTS to a discontinued operations, can you just give us an update on the process there, and what that would mean for the business?

I think there was -- it was breaking up a little bit, but I think I heard an update on the process of the sales for MTS. Is that correct?

Yes, correct.

Okay. Yes. I mean, obviously, we can't really give any specifics, but we had a calendar. We're pleased with the general process and the progress that the team is making.

And Ed, just like any acquisition, divestitures of the same situation are hard to time exactly when these things are going to close. So rest assured, we're working on it and working through the process with the team, and we'll update you at the appropriate time.

Perfect. Thank you. And then the portion of the distribution business that's getting added to the rest of the material, I know that's the Patch Rubber business, just to be clear.

Yes.

Your next question comes from the line of Christian Zyla from KeyBanc Capital Markets.

Great. Thanks for taking the follow-up. Just quickly on free cash flow, solid free cash flow quarter. How do you rank your deployment between debt paydown versus opportunistic M&A that I think you guys highlighted in the slide deck. Just kind of can you conceptually just frame out like what the current thought process is? Thank you.

Yes. So when we look at our uses of cash, obviously, we're working on debt first. As you can see, we've made steady progress throughout the year last year, and then we'll continue to get debt down.

We're opportunistic. I mean that's our first priority, get debt down. The second priority, though, is really to make sure we invest in ourselves. And the one thing I've always said I love about Myers is a great organic growth opportunities within this business.

And we're going to make sure our capital gets back to those businesses that have great organic growth opportunities. And so beyond that, our free cash flow will go back to investing in those great growth opportunities.

And then third, we'll look at opportunistic M&A. And these once again, timing these things is always difficult. But when we look at M&A, we always have to bring more than money to our M&A acquisitions.

We have to bring something that really can -- we can bring value to. So when M&A opportunities come up, we look at our growth vectors, our opportunities and the businesses in our Signature and sector businesses specifically.

And if an opportunistic M&A comes in there, then we can talk about deploying that capital there. So that's kind of our priorities haven't changed on that. We've been fairly consistent. And so kind of our priority 1, 2 and 3 are laid out that way. And then behind that, of course, is then looking at any opportunities to return other cash to shareholders. So...

That's great. Super helpful. Maybe if I could just follow up on the M&A, and thanks for taking the follow-up again. Is there an end market or a category that you'd be interested in? Or is it really just leveraging your footprint and your capabilities in plastics? Just any thoughts on which end market or yes.

Yes. So end markets we're most interested in is ones with growth, obviously. So if we look at kind of the Signature and Scepter footprint, the Signature's ground protection, any -- when we look at kind of the utility expansion in thermoplastics and what they're doing for ground protection construction, that area, of course, we're interested in those growth areas for M&A. But any other opportunities that come and strengthen our other brands such as Scepter and Buckhorn and pieces on the military side to continue to expand our growth opportunities to the -- I mean, our product lineup to our customers is great. So we'll look at a number of things as they come across. But once again, it's opportunistic. It's not our first priority for use of cash.

There are no further questions. At this time, I will now turn the call back to Meghan Beringer for closing remarks. Meghan, please go ahead.

Thank you for joining us today. If you'd like to continue the conversation, my contact information can be found on the final slide of this presentation. We look forward to staying in touch. With that, we'll conclude the call. Have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the Myers 2025 Fourth Quarter and Full Year Results Call. [Operator Instructions]

I will now hand the conference over to Meghan Beringer, Senior Director of Investor Relations. Meghan, please go ahead.

Thank you. Good morning, everyone, and welcome to Myers Fourth Quarter 2025 Earnings Review. Joining me today are Aaron Schapper, President and Chief Executive Officer; and Sam Rutty, Executive Vice President and Chief Financial Officer. After the prepared remarks, we will host a question-and-answer session. Earlier this morning, we issued a press release outlining our fourth quarter financial results. In addition, a presentation to accompany today's prepared remarks has been posted. Those documents are available on the Investor Relations section of our website at myersindustries.com. This call is being webcast live on our website and will be archived along with the transcript of the call shortly after this event.

Now please turn to Slide 3 of the presentation for our safe harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements.

Further, information concerning these risks, uncertainties and other factors is set forth in the company's periodic SEC filings. Also, please be advised that certain non-GAAP financial measures such as adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted earnings per share may be discussed on this call.

Now please turn to Slide 4 of our presentation as I turn the call over to Aaron.

Thank you, Meghan. Good morning, everyone, and thank you for joining us. I will begin today's call with a review of our fourth quarter, then I will review full year 2025, which was a clear inflection point in Myers' history with both the Focus transformation program and the significant decision to sell Myers Tire Supply. Overall, we believe these actions will unlock substantial value, enhancing the company's long-term growth profile. Following my comments, Sam will provide a detailed review of fourth quarter and full year financials and our outlook for the year.

Turning to Slide 5. Fourth quarter sales were essentially flat year-over-year. Excluding the impact from our decision to exit low-margin products with the idling of 2 rotational molding facilities, sales would have been up 3% as infrastructure, industrial and food and beverage growth was partially offset by soft consumer and vehicle demand.

We expanded margins in the fourth quarter, demonstrating our ability to improve profitability as we grow the business in high-margin applications and align our operating footprint with customer needs. Both gross and operating margins improved with adjusted operating margins expanding 230 basis points. SG&A was lower as we are benefiting from our focused transformation objectives. As a result, fourth quarter adjusted EPS improved 63% year-over-year.

Looking at full year 2025, Material Handling sales increased while distribution demand declined. With Material Handling, growth in industrial and infrastructure markets was offset by lower consumer and vehicle demand. We achieved higher profitability with operating and net income increasing on both a reported and adjusted basis. We're encouraged by the improved earnings as it demonstrates the ability of our team to control what we can control and achieve good results in a challenging demand environment.

In addition to improved earnings, we increased cash flow in 2025 with free cash flow up 23%, further strengthening our balance sheet. We invested in growth, reduced debt and returned cash to shareholders, all while increasing our cash balance. This is a testament to the performance of our team and gives me confidence that we are well on our way to achieving our long-term strategic goals. It has been 1 year since my first earnings call as CEO. While I had only been in the role for about 3 months, that initial period confirmed for me the great team and potential at Myers. I was confident that we could create a company that delivers consistent and reliable results by building on our strong foundation. We launched a focused transformation to energize our team and accelerate our progress.

After meeting and engaging with our leadership team and many employees, I knew we were up for the challenge. Over the last year, we have taken actions to improve business performance and drive shareholder value. It's still early days, and we have a lot of work to do, but I'm encouraged by the progress we have made.

In our first year, our Focus transformation program was formed around 4 objectives shown on Slide 6. Our first objective was to establish a culture of execution and accountability to drive performance. We revised our core values, adding a focus on delivering results and continuous improvement. We aligned our incentive plans to drive business unit performance and create accountability across the organization to ensure we generate long-term shareholder value. We emphasized lean principles to drive clear and efficient processes. These actions are helping us to build a culture that consistently outperforms.

Second was to create clear strategies to improve the profitability of our entire portfolio. We engaged with a broad group of employees, including our executive management team to dive deep into each of our businesses, understand their value propositions and create action plans. We developed strategic plans and implemented KPIs to drive organic growth, expand margins, track progress and create accountability.

One significant outcome of this activity was the completion of a strategic review of MTS, resulting in the decision to sell the business. Once complete, this will result in a portfolio that is focused on growth platforms that drive improved margin profiles. Our third objective was to deliver consistent and reliable results across the organization by effectively controlling what we can control.

In 2025, we delivered annualized cost savings of $20 million, primarily in SG&A, structurally reducing expenses while also optimizing organizational efficiency. We exited low-margin products and idled 2 of our 9 rotational molding facilities to improve utilization and reduce costs. We formalized and launched a strategic deployment tool to drive disciplined planning and empower businesses to convert long-term goals into annual objectives. This tool is being implemented across all levels of the organization, and we are beginning to see results.

Finally, we have deployed a disciplined capital allocation framework, allowing us to invest in growth while returning cash to shareholders. We grew free cash flow 23% through improved earnings and prudent cash management, providing additional flexibility to fund our organic investments. We continue to invest in growth, targeting CapEx of 3% of sales, focusing on high-growth opportunities with superior returns, and we returned $23 million to the shareholders to enhance their total return.

Sam will expand on our capital allocation framework later in the call. To summarize, in 2025, we moved Myers forward with purpose and urgency, made significant progress on our transformation and deliver results with a continuous improvement mindset, providing a strong catalyst for 2026. Looking ahead, I would now like to discuss how focused transformation approach is shifting in 2026 as our strategy evolves as shown on Slide 7.

One thing that remains the same is our resolve and commitment to achieve real transformation. We are continuing our deliberate process to create a transformed organization focused on delivering consistent and reliable, profitable growth. To do this, we are shifting our priorities to reflect the progress and evolution of our strategy. With this new approach, we have established 3 strategic priorities or focus areas that will guide us in 2026. Within each focus area, we have identified transformation objectives to drive performance.

Our first priority is to focus on our core markets and the customer value we deliver. We will invest to gain a deeper understanding of our markets and customers, informing our value proposition and positioning us to lead in our categories. This knowledge is gained through commercial excellence skills that strengthen customer relationships and deepen market insight. We are simplifying our portfolio to intentionally focus on serving prioritized markets that align with our competitive advantages as we provide products that protect.

Our second priority is to focus on instilling operational excellence and cost leadership across the organization to drive a culture of high performance. We delivered measurable progress against this priority last year. For 2026, we want to make sure that we do not lose ground by standardizing the improvements we made in workflows. We want to work smarter and ensure our processes are repeatable year after year. When needed, we will make changes to refine our organizational structure and optimize our operating footprint.

Last year, we put this into practice with the idling of facilities and changes in the organization to ensure that we have the right talent. The culture of continuous improvement will continue to be fostered across the organization. Our third priority is to focus on investments that maximize profitable growth. This is a disciplined capital allocation approach to invest in growth platforms where returns are highest. As we align with markets where we add the greatest value, we can invest in innovation and pursue business development activities that enhance and strengthen our ability to provide differentiated solutions for our customers' challenges.

We believe that these focus areas and the related transformation objectives will drive desired strategic outcomes such as deliver revenue growth, EBITDA margin expansion, free cash flow conversion and the acceleration of Myers to a company that achieves world-class performance. This is all built upon our foundational set of core values that dictate how we operate and what unites us.

At this time, I'll turn the call over to Sam for a review of our financial results.

Thank you, Aaron, and good morning, everyone. Let me start by reviewing our fourth quarter and full year results and then wrap up with the outlook by end market for the year. Please turn to Slide 9. Fourth quarter net sales were $204 million, essentially flat year-over-year due to our decision to exit low-margin products with the idling of 2 rotational molding facilities. Excluding this, sales would have been up 3%. Adjusted gross margin increased 140 basis points to 33.6% due to favorable mix and higher volume, partially offset by unfavorable price.

Adjusted operating margin improved 230 basis points to 11% as SG&A was lower year-over-year, driven by focused transformation savings. As Aaron mentioned, we achieved $20 million in annualized cost savings, primarily in SG&A, improving our margins in 2025 and positioning us well for 2026. Going forward, we will continue to focus on cost reductions and operating efficiencies to drive sustainable improvement in profitability.

Turning to segment results on Slide 10. Material Handling net sales decreased $0.4 million. Excluding the impact of idling our rotational molding facilities, sales increased 3.4%. By end market, food and beverage, infrastructure and industrial growth was offset by soft consumer and vehicle demand. Adjusted EBITDA margin was 25.6%, expanding 290 basis points with the benefit of our focused transformation savings plus improved mix and higher volume, partially offset by unfavorable pricing. Distribution net sales increased 0.9% and adjusted EBITDA margin improved 160 basis points.

Turning to Slide 11. Full year 2025 net sales was $825.7 million, down 1.3% year-over-year. Excluding the impact from idling our 2 rotational molding facilities, sales decreased 0.6%. Material Handling growth was offset by distribution softness. Within Material Handling, sales in Industrial and Infrastructure increased while consumer and vehicle sales were lower. Adjusted gross margin increased 30 basis points to 33.7% due to lower material costs, favorable cost productivity and favorable mix. Adjusted operating margin improved 30 basis points to 10.3% due to benefits from our focused transformation program.

Turning to Slide 12. Fourth quarter operating cash flow was $22.6 million and CapEx was $3.6 million, resulting in free cash flow of $18.9 million. For the full year, free cash flow improved 23% to $67.2 million. We reduced net debt by $44.2 million in 2025, resulting in net leverage ratio of 2.4x within our target ratio of 1.5x to 2.5x. We plan to further reduce debt in 2026, bringing our net leverage ratio closer to the midpoint of our target range. We ended the year with a cash balance of $45.1 million and total liquidity at $289.8 million, providing us with ample flexibility to support our capital allocation priorities.

Working capital as a percentage of sales increased slightly, primarily due to higher receivables from infrastructure project delivery timing, partially offset by lower inventory. We continue to focus on working capital management as a priority.

Please turn to Slide 13. Our capital allocation framework balances investing in growth while returning cash to shareholders. In 2025, we spent $19.6 million in CapEx, approximately 2.4% of sales. In 2026, we expect to be close to our target of 3% of sales as we continue to invest in organic growth platforms. We are also open to opportunistic acquisitions with a disciplined approach to support our growth platforms, now that our leverage ratio is within our target range. We returned $23 million to shareholders in 2025 through the combination of dividends and share repurchases. Returning cash to shareholders is an important element of our objective to create value for our shareholders.

Turning to Slide 14. We are providing our market outlook for 2026. Due to the planned divestiture of MTS, we are not providing an outlook for automotive aftermarket. Related to that, MTS is expected to qualify for discontinued operations accounting treatment beginning in the first quarter. We still see both risks and opportunities for our end markets as we continue to monitor geopolitical conditions, including energy markets, tariffs or other factors that may influence demand trends.

Also, our market outlook excludes the impact from exiting low-margin products and idling 2 rotational molding facilities in Alliance, Ohio that occurred in Q4. This represents approximately $5 million in revenue per quarter, primarily industrial and consumer markets with a favorable impact to earnings. Let me review our expectations by market. For industrial, we expect moderate growth as we are seeing modest recovery in manufacturing capital expenditure trends from our industrial customers. Militaries around the world are replenishing their inventories and demand for military products continues to increase.

In Infrastructure, strong ongoing spend for large construction and utility projects supported by conversion from wood to composite matting should continue to drive strong growth. The current backlog for matting products is now the largest in the history of this business, giving us confidence in our 2026 outlook. We expect the vehicle end market to be stable overall with mixed demand indicators.

For RV and marine, we expect flat sales as consumer sentiment is stabilizing. For commercial vehicles, we expect recovery starting in the second half of 2026. For automotive OEMs, the volume of new and updated vehicle program launches over the next 12 to 18 months is expected to drive demand for new component packaging. In consumer, we now anticipate sales to be stable. Strong winter storms across most of the U.S. at the start of 2026 created a sharp increase in demand for fuel containers. While this event drove demand in Q1, it is still early to determine full year storm impact. However, we are planning for the average of 3 landed storms in the Continental U.S. this year.

Our food and beverage end market is forecasted to be slightly down for the year, reflecting the agricultural market position at the low end of its cycle. I would now like to turn the call back to Aaron for some closing comments before we take your questions. Aaron?

Thank you, Sam. In closing, I'm pleased with the meaningful progress we are making on our focused transformation to become a company that consistently delivers reliable financial results. There is still room for improvement, but our overall trajectory is encouraging. Margins are improving and cash flow is increasing as we begin to see early benefits from focused transformation. Supporting this is our capital allocation framework that balances investment in growth and returning cash to shareholders to create sustainable value. And as we invest, grow and simplify our portfolio, we are aligning our operations with markets that are growing and offer higher returns as we deliver products that protect.

With that, I'd like to turn the call over to the operator for questions. Operator?

[Operator Instructions]

Your first question comes from the line of Christian Zyla with KeyBanc Capital Markets.

Congratulations on the quarter and the full year. My first question is on broader end market sentiment. Industrial production has been strong for the last 14 months. PMI has been strong to start 2026 and sentiment on the industrial side seems to be improving after a few years of weakness. With your opening remarks, it sounds like you're seeing something similar. I know your outlook is moderate growth for your industrial bucket, but can you help break that down between the subcategories like Akro-Mils, Buckhorn sector, et cetera? Just kind of what you're seeing across those lines.

Sure. Yes. So in general, if you look at the PMI, it's a broad spectrum, right, across manufacturing here in the U.S. So yes, that helps, right? So if you're looking at some of our products that specifically supply to those larger industrials such as Akro-Mils, then yes, that tracks closely. So as you see that strength, it does translate over. Then there's other product lines that are a little more specific to the end markets in those industries, automotive and what Buckhorn will do for automotive. There's also then if you look at the -- basically construction and a lot of utility and kind of data center mega build-outs, those track strongly to what we do with our ground protection product at Signature.

So although PMI gives us kind of a broad based scope, you kind of look at -- we look at each of the end markets and say, okay, well, how is the construction industry, data centers, utility, kind of the AI investing of infrastructure pulls along Signature. Automotive pulls along Buckhorn. Agriculture will pull along of seed box business. And right now, agriculture is still at a cyclical low [indiscernible]. And so those are kind of -- that's where you get some of that mix. So the moderate growth story is there, but you have to look into some of the end markets to understand what our application is in those end markets. Sam, do you have anything to add?

Yes. Yes, overall, I think you made the right comments there. I mean, obviously, militaries as well, as we commented earlier in the pre-read is a big driver as well on the industrial side.

Yes. I think, Christian, we've talked about that. And obviously, with new geopolitical issues coming out, it's becoming -- I think it has been an important focal point for the last year. It certainly will continue to do so. So as we look at militaries that are looking to rearm and make sure that they have the stockpiles they need to go the distance in any conflict.

Yes. Got it. That actually goes nicely into my next question. I remember at the Investor Day a few years ago, your team highlighted U.S. qualification for your defense products along with NATO orders. Are you selling to the U.S. Dow now? And are you anticipating or seeing a pickup in demand from your programs given just what's unfortunately happening across the world? It just seems like your product is a great complement of consumables in the end market. So just any broad thoughts there and kind of how you see that shaping up through the year and maybe how you size that full business?

Yes. So if we look at kind of the arc of that business, really we split it into kind of 2 sides. So one, we do sell directly to the U.S. military, and that's kind of one of our customer sets. And the other one is the NATO customer set, which is going to obviously be more European-based and more internationally based. So we sell to both sides on that. NATO has made it a more of a strategic priority to have a supply chain that's independent -- more independent of the U.S. in the past. And so as a result, that's given a great opportunity for us. As you know, we have Canadian operations that dovetail well with the needs of NATO. And then we also have operations here in the U.S. for injection molding to meet the needs of the U.S. government.

So what we plan on doing is we use both our supply chain in both Canada and the U.S., and we're looking for opportunities globally. As NATO grows, we want to grow with that business. So we're always happy to look for those opportunities internationally. For us, look, the product dovetails very well with what's needed. As you know, we focus on the ammunition side. So as they bring up these complex weapon systems, the ammunition was really shown during the conflict in Europe between Ukraine and Russian war, how quickly ammunitions go -- get consumed in a near-peer conflict.

So as a result, that's really helped drive not only business for the last year, business this year, but also real solid plans on growth in the future and making sure -- so from our side, on the Myers side, we just want to make sure that our capital follows those growth vectors and that we make sure that we have great organic growth opportunities, and we have the capital spent to service our customer as they grow. So we're bullish on that business in the future, and we remain confident that we'll do well, and we're positioned well in the future.

That's great. If I could sneak one last one in. Just a very nice result in Material Handling margins really for the full year, given the changes that you've made throughout 2025. Was there anything unusual in the fourth quarter and then assuming volume absorption benefits and maybe some uptick in your end markets and volume absorption, just given all the changes you've made with your capacity, is there any reason why this new 18% level can't be the new baseline? Just kind of like puts and takes there.

Yes. I mean, yes, a really great quarter for Material Handling. A lot of what we've been doing around focused transformation. I mean, we've talked a lot about the idling of the roto facilities, right? But that was when we started to see the real benefit of those actions there. But as said, we're not done around focused transformation. There is more to be done. There's a lot of focus on continuous improvement broadly across our businesses. And so I would say good mix helped some in Q4. That's always a factor, right?

We're seeing, as Aaron mentioned, good strong backlog around our matting products as well as some of the good tailwinds at the end of the year, even, I would say, a slight pickup in the fourth quarter for volumes on the roto side as well, which helped after our restructuring activities.

And obviously, we continue to see the impact of our SG&A reductions as well, which helped a lot as well, and that continue as we've made that structural change in our cost base. So there's no reason to suggest that it wouldn't continue, although obviously, with recent activities in the world, we'll be continuing to look at risk and material costs as we think about resin prices and things like that, we'll have to continue to adapt.

[Operator Instructions]

Your next question comes from the line of Bill Dezellem with Tieton Capital Management.

Congratulations on meeting your $20 million cost reduction goal in '25. How much of that $20 million is going to be incremental to '26 because you did not have it all as of January 1, '25?

Yes. I mean there will be some incremental. We've obviously got things that was a factor of some of those savings were within our distribution business and obviously, dependent upon the sale of that business, it's going to impact how much of that carries forward within the RemainCo. But again, as we mentioned, we're not done, and we'll continue to look for more opportunities within Material Handling and build upon those in 2026.

And Sam, would you please put some numbers behind both that incremental that flows through in '26 and the additional target that you're looking at for this year?

I don't think we're at a place that we can talk about a specific target for 2026. And we've got actions and work to do depending upon the timing of that sale as we -- as that business splits off.

There are no further questions at this time. I will now turn the call back to Meghan Beringer for closing remarks.

Thank you for joining us today. If you'd like to continue the conversation, my contact information can be found on the final slide of this presentation. We look forward to staying in touch. With that, we'll conclude the call. Have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everybody, and welcome to the Myers 2025 Third Quarter Results. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions]

I would now like to hand over to Meghan Beringer, please go ahead.

Thank you. Good morning, everyone, and welcome to Myers Third Quarter 2025 Earnings Review. Joining me today are Aaron Schapper, President and Chief Executive Officer; Sam Rutty, Executive Vice President and Chief Financial Officer; and Dan Hoehn, Vice President and Corporate Controller. After the prepared remarks, we will host a question-and-answer session. Earlier this morning, we issued a press release outlining our third quarter financial results.

In addition, a presentation to accompany today's prepared remarks has been posted. Both documents are available on the Investor Relations section of our website at myersindustries.com. This call is being webcast live on our website and will be archived along with the transcript of the call shortly after this event.

Please turn to Slide 3 of the presentation for our safe harbor disclosures. I would like to remind you that we may make some forward-looking statements during this call. These comments are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and involve risks, uncertainties and other factors, which may cause results to differ materially from those expressed or implied in these statements. Further information concerning these risks, uncertainties and other factors are set forth in the company's periodic SEC filings.

Also, please be advised that certain non-GAAP financial measures such as adjusted gross profit, adjusted operating income, adjusted EBITDA and adjusted earnings per share may be discussed on this call.

Now please turn to Slide 4 of our presentation as I turn the call over to Aaron.

Thank you, Meghan. Good morning, everyone, and thank you for joining us. I will begin today's call with a review of our third quarter, then I will provide an update on our focused transformation program. Following my comments, Sam will provide a detailed review of the third quarter financials and our outlook for the year.

Turning to Slide 5. Third quarter net sales were $205.4 million, slightly higher year-over-year as infrastructure and industrial growth was offset by continued soft demand in Automotive Aftermarket and vehicle end-markets. In addition, consumer sales, specifically fuel containers, were lower with the absence of weather-driven events. Within infrastructure, we continue to see strong demand as customers switch from wood to composite matting products used in construction, utility and other infrastructure projects. Industrial growth was driven by ongoing demand for military products. With the exception of consumer sales, our end market outlook is relatively unchanged as demand and backlog across our larger infrastructure and industrial end-markets remain steady.

For the quarter, we earned $0.19 per share. Adjusted EPS was $0.26, up year-over-year. Cash flow improved significantly with free cash flow doubling compared with last year. We continue to make steady progress against our objectives, and I remain confident in our ability to improve performance.

Turning to Slide 6. I would like to provide an update on our focused transformation program. We made meaningful progress during the quarter as we focus on tasks that have the biggest impact. Chief among the milestones we achieved this quarter was the completion of our MTS strategic review and the conclusion that the right decision is for us to sell this business. We have formally launched this process, partnering with KeyBanc to execute the transaction. Once complete, this divestiture will be a large step towards optimizing our portfolio with the remaining businesses better aligned with our mission of protecting assets from the ground up, enhancing our ability to apply our competitive advantages for high-return applications.

We have made progress on each of our 4 objectives. Some of these changes are already visible across our organization. For example, we have made tremendous progress this year establishing a culture of execution and accountability by implementing KPIs to measure the progress and success of our business and aligning incentive plans with long-term targets and objectives to ensure that we are creating long-term value for our shareholders.

We continue to build on this with continuous improvement mindset to drive performance now and into the future. We are creating clear strategies to improve performance on our entire portfolio to ensure we are achieving optimal profitability. The decision to sell MTS is a step in the right direction as it will have a notable impact towards improving our margins. We're also doing a better job of sharing best practices across the organization. For example, through a collaboration with Buckhorn, Signature has improved their structural foam mold change process, which has reduced downtime and improved throughput.

As we develop this operational excellence discipline, we will become more aware of opportunities to drive best practices across the portfolio. We are on track to deliver $20 million in annualized cost savings, primarily SG&A by the end of 2025, having already identified $19 million. We consolidated production in idled 2 of our 9 rotational molding facilities to improve utilization and reduce cost. We are continuing to be diligent about costs and investigate areas where we can be more efficient as an organization while maintaining customer services that distinguish Myers in our markets. I am encouraged by the progress.

We have updated our approach to developing and implementing our long-term strategy as a part of our focused transformation. This is a new framework for Myers and one that I've seen to drive proven measurable results through a disciplined approach. It begins with a strategic planning session. For this, we gathered broad key leadership, representing a cross-functional group from across our businesses for a disciplined and more collaborative process. We discussed where each of our businesses will play to win, their unique differentiators and our growth potential. This was a tremendously valuable exercise and led to great insights that will inform our strategic direction.

With the strategic plan established, we are prepared to implement a strategic deployment tool, which will support disciplined planning and breakthrough objectives. We started by rolling the tool out to senior leaders who will cascade it down throughout their organizations. The tool helps businesses break down long-term goals into an annual objective, identify key improvement initiatives and metrics and assign ownership for each action. With the implementation, we will shift towards a culture of delivering results where progress is visible, measured and shared across teams. This progress on our focused transformation objectives positioned us well for the next leg of our journey. As we continue to strengthen the foundations of our business and build platforms for growth, we are creating operational rigor and instilling a mindset of continuous improvement. These will serve us well and enable us to become a highly successful company that I am confident we can become.

At this time, it is my pleasure to formally welcome our new CFO, Sam Rutty, to the call. She joined us a little over 5 weeks ago. Sam Rutty made a positive impression across the organization with her energy and vision. I'm excited to have her join our executive leadership team and look forward to working with her as we launch our new long-term strategy. Her arrival will accelerate the transformation of both the business and our culture. Sam brings incredible knowledge, turnaround success and more than 2 decades of financial leadership experience across global services and manufacturing companies. She was the CFO of Brink's North America and spent 20 years with Eaton Corporation in a series of senior financial roles. She's consistently taken on big challenges and has helped her team succeed, and I know she will do the same here.

Before I turn the call over to Sam, I want to thank Dan Hoehn for stepping into the interim CFO role these last 6 months. Dan is a steady hand, clear thinker and understands the business and the numbers intimately. I'm personally grateful for the partnership during the time that Dan served in this role, and I look forward to continuing to work with him as he resumes his role as our Corporate Controller.

With that, I will now turn the call over to Sam.

Thank you for that introduction, Aaron, and good morning, everyone. I'm excited about this opportunity to join Myers, a manufacturing company with a clear vision and customer value proposition. I spent the early part of my career in manufacturing, an area where my true passion lies, and I'm eager to work with Aaron and the team to drive operational excellence across the organization and support the achievement of our long-term strategic objectives.

I also want to thank Dan and the team for sharing your knowledge and bringing me quickly up to speed. Let me start by reviewing our third quarter results, and then I will wrap up with the outlook by end market for the remainder of the year.

Please turn to Slide 8. Third quarter net sales were $205.4 million, slightly higher than last year. Material handling growth was offset by lingering distribution softness. Adjusted gross margin increased 150 basis points to 33.9% due to higher volume, favorable mix and cost productivity as well as lower material costs. Adjusted operating margin improved 20 basis points to 10.2% as higher SG&A offset some of our gross margin benefits. Overall, we reduced inefficient spend as the culture of the company shifts to a continuous improvement mindset. We are performing better this year and therefore, maintain our accruals for performance-based incentive compensation compared to this period last year when we reversed those accruals.

We are pleased to be able to reward the hard work of our team as they drive improved performance. The quarter reflected strong execution despite a few unusual SG&A expenses from legal fees and medical claims. Our employees are proactively finding ways to reduce recurring inefficient costs while continuing to support our growth initiatives. I'm excited about the opportunity before us to drive continuous improvement and look forward to partnering with our business leaders to support their progress.

Turning to Slide 9. Material Handling net sales were up 1.9% as strong sales of military products and composite matting were partially offset by lingering vehicle softness and lower storm-driven demand for fuel containers. Adjusted EBITDA margin was 24%, expanding 180 basis points with the benefit of higher volumes and favorable material costs. Distribution net sales decreased 4.4% on lower volumes. Adjusted EBITDA margin fell 260 basis points as the impact of lower volume was partially offset by lower SG&A.

Turning to Slide 10. Operating cash flow was $25.8 million and CapEx was $4.2 million, resulting in free cash flow of $21.5 million. By managing our working capital effectively and maintaining disciplined capital spending, we doubled free cash flow year-over-year. As we evaluate our portfolio to focus on core products and addressable markets for growth, we will align our capital strategy accordingly and continue to target capital expenditures near 3% of sales. We ended Q3 with a cash balance of $48 million and total liquidity of $292.7 million, providing us with ample flexibility to support our capital allocation priorities.

Please turn to Slide 11. We reduced debt by $10 million, bringing total debt to $369 million. Net debt per the credit agreement was $339 million, bringing our net leverage ratio down to 2.6x. We remain committed to achieving our target ratio of 1.5 to 2.5. We repurchased $500,000 in shares during the quarter, bringing total year-to-date repurchases of $2 million. The share repurchase program was an additive measure to complement our ongoing dividend as part of our capital allocation strategy to return cash to shareholders.

Turning to Slide 12. We are updating our market outlook for 2025 that was provided during our second quarter earnings call. We still see both risks and opportunities for our end-markets, and we'll continue to monitor conditions for impacts from tariffs or other factors that may influence demand trends. Let me review our expectations by market. Industrial should continue with moderate growth, driven by demand for military products as militaries around the world replenish their inventories as evidenced by a strong backlog. We still expect sales of our military products to exceed the $40 million target for the year 2025. Year-to-date, military sales are up 119%. We expect this sales growth to be partially offset by lower sales of other industrial products as manufacturing operations slow their buying cadence in response to softer general industrial trends.

In infrastructure, strong ongoing spending for large construction and utilities projects supported by conversion from wood to composite matting should continue to drive strong growth. This is reinforced by our strong backlog for these infrastructure products, most of which should be converted in the fourth quarter. We expect the vehicle end market to be down as a result of economic uncertainty. This end market includes RV, marine, heavy truck, and automotive manufacturing customers. In Consumer, we now anticipate sales to be down due to less than typical storm-related activity in 2025. On average, there are 3 landed storms in the Continental U.S. per year. This year, there have been none.

Our food and beverage end market, which includes agriculture, is projected to be stable for the full year. While there were headwinds earlier in the year, we achieved 8% growth year-over-year in Q3 and are expecting further improvement in Q4 with our agricultural customers, led by a strong backlog in seed boxes. Automotive Aftermarket distribution is expected to be down. We continue to manage the business closely as we navigate a challenging end market and proceed through the process to identify potential buyers.

In closing, I would like to simply state again how excited I am to be part of the Myers team. I look forward to meeting many of you in the coming weeks. I would now like to turn the call back to Aaron for some closing comments before we take your questions. Aaron?

Thank you, Sam. As I look back on the progress we've made throughout 2025, I believe more than ever in our focused transformation plan. I know our journey of continuous improvement will take time. Myers has a portfolio of well-regarded brands and products designed to protect. We are working with urgency to rightsize the organization, drive accountability and deploy capital to support growth in these brands. I'm confident that we are transforming into a focused company with a high-performance culture that drives growth with consistent, reliable results that create value for shareholders.

With that, I'd like to turn the call over to the operator for questions. Operator?

[Operator Instructions] First question comes from Christian Zyla with KeyCorp.

Sam, welcome officially. My first question, it looks like Material Handling organic growth flipped positive for the first time in like 11 quarters. I guess the primary driver of that growth is Signature. Can you just talk about how you see that business progressing since you've acquired it? And what are some additional growth opportunities that you're targeting in Signature and maybe in your defense business?

Yes. We're happy with the growth trajectory of Signature. I mean there's a lot of tailwinds on the infrastructure construction market that continues to push that. And then just from the current product that they offer. And also, we are excited to line up new offerings in that market, too. So we'll have some new offerings coming out in the next -- well, about 2 quarters that we think can help strengthen our business on the stadium side. And we have some good pipeline -- innovation pipeline.

I think, Christian, we spent some time over the summer getting the team together and really talk about our strategic plan and then very specifically make sure that we are continuously -- continuing to develop and innovate new products, and Signature was a major part of that. They have a lot to offer the market, and we have a good pipeline of new products that not only help in the construction spaces, but will also help in other areas so we can continue to have that growth.

So we're excited where we are with Signature. We believe the growth will continue to be strong. And we've got a great operational team behind that growth to make sure that we continue to get good margins.

And sorry, just in defense, any further growth opportunities? Is that just contract running really well? Are there more opportunities for additional customers or additional...

Yes, sorry, specific to the Scepter side, absolutely. As kind of our militaries, both in NATO and the U.S. militaries look at a future kind of near-peer kind of competition. When you look at near-peer competition, one of the things that has been concerning for that -- for the defense industry was just making sure that the consumption of ammunition matches something that's closer to a near-peer conflict. As a result, what you get is a lot of people looking at the consumables of warfare. And so those consumables are ammunition. A lot of that ammunition needs to be packaged. And that's where Scepter not only plays a role in today, but will play a continuing growing role in the future.

So for us, it's making sure that we take care of our customer, whether it be the U.S. military or our NATO allies and positioning our manufacturing to take advantage of that growth in the coming years.

Great. And then my next question, Sam, maybe this one is for you. Gross margin held in really well, but SG&A still seems to be high. I guess with the cost down restructuring that you guys have done, do you expect to see a decrease in SG&A dollars in 4Q? Or is that more of a 2026 and beyond event?

I mean we are expecting our SG&A costs to start to come down. We had some unusual items in Q3 that impacted us, medical and some legal costs. A couple of those items, I would say, can sometimes be a little bit difficult to predict exactly, but we are confident that our transformation savings are going to start to deliver reductions in SG&A. And the onetime or larger impact in Q3 from the compensation incentives last year being zeroed out and was a material impact. And had we not had that, we would have seen a bigger decline in SG&A. And yes, we are confident that we'll start to see those savings impact SG&A on the top.

Got it. Last one for me, and I'll turn it over. Really nice free cash flow quarter with about $22 million. What drove that? And then is that increase in part of the changes you've been making? Or is there something else that we should be thinking about? And then do you expect 4Q to be another solid quarter for free cash flow like you guess at the time?

Yes, I think a lot of focus on working capital across the organization, which will continue. It's something I plan to continue to put a lot of focus on. Capital spend is a little bit lighter, some timing going on there. So maybe a little bit higher in Q4 from a CapEx perspective. But generally, we are confident around our efforts around working capital, particularly inventory, we're trying to really focus on reductions and are anticipating a fairly good month quarter in Q4 as well.

[Operator Instructions] We now turn to William Dezellem with Tieton Capital Management.

Relative to Scepter, would you please walk through the additional opportunities you see with military beyond the current application?

Yes. So Bill, we haven't specifically to put numbers or guidance out for what we see on the military side. We put the numbers out for what we're going to hit this year in military. We've already well exceeded that number. So we're very confident in the growth numbers on that side. However, so the military projects are all programmatic in nature. So the way that we look at the business is we make sure that we have -- as the program kind of runs through whether we're going to get to stack the next program and the next program behind that.

So right now, we haven't broken out publicly what each of those programs are or the size of it. But I will tell you that we expect to -- continue to expect strong growth from that side, and we also are going to be putting CapEx plans and have CapEx plans around those growth opportunities. So you'll continue to see strong growth on the Scepter military business. We're very happy with the way that's progressing. And we're very happy with the team. The team is very -- is aggressively pursuing those goals.

And I think our customers are realizing the value of making the material switches over to a lot of the plastic products that we offer as a superior product to what they're using in both steel and wood. So we feel good about where we are in that, and we keep continuing to add programs and new products to help grow that business.

We have no further questions. I'll now hand back to Meghan Beringer for any final remarks.

Thank you for joining us today. If you would like to continue the conversation, my contact information can be found on the final slide of this presentation. We look forward to staying in touch. With that, we'll conclude the call. Have a great day.

Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.