Alamo Group’s Earnings Call: Facility Consolidation Status and Procurement Savings Timelines Don’t Align

Date of Call: Aug 4, 2026

Financials Results

• Revenue: $415.7M, up 7.6% YOY (organic sales up 1.3% YOY)
• EPS: $2.82 adjusted earnings per diluted share, up 7.2% YOY
• Gross Margin: 24.6%, down 120 basis points YOY

Business Commentary:

Revenue and Sales Performance:

• Alamo Group reported net sales of $415.7 million for Q2 2026, reflecting an increase of 7.6% compared to Q2 2025. Organic net sales increased by 1.3%.
• The growth was driven by strong sales in the Industrial Equipment Division, particularly in excavators and vacuum trucks, as well as contributions from recent acquisitions like Peterson and Ringomatic.

Industrial Equipment Division Growth:

• The Industrial Equipment Division achieved net sales of $271.6 million, up 12.8% from Q2 2025, with organic demand contributing 2.6% growth.
• This growth was supported by strong performance in excavators, vacuum trucks, and the rental business, along with successful integration of Peterson, which delivered record results.

Vegetation Management Division Stability:

• The Vegetation Management Division reported net sales of $179.1 million, a slight increase of 0.4% compared to Q2 2025.
• Sales stability was achieved despite pressures in certain end markets, supported by growth in North American agriculture and tree care, offset by lower sales in South American municipal mowing.

Adjusted EBITDA and Margins:

• Alamo Group's adjusted EBITDA for Q2 2026 was $63.9 million, or 14.2% of net sales, compared to $58.8 million in Q2 2025.
• Margin improvements were driven by higher volumes and cost efficiencies, partially offset by higher input costs such as freight and steel.

Capital Allocation and Financial Health:

• The company maintained a strong liquidity position with $195 million in cash and total debt of $262.7 million, resulting in a net leverage ratio of less than one time.
• Alamo Group's capital allocation strategy includes disciplined investments in growth, acquisitions, and returning capital to shareholders through dividends and share repurchases.

Sentiment Analysis:

Overall Tone: Positive

• Overall pleased with Q2 results, highlighting 'strong sales, improved adjusted earnings, and solid adjusted EBITDA performance.' Encouraged by customer activity and operational progress. 'We remain very positive on the long-term outlook' for industrial end markets and 'bullish long-term' on vegetation.

Q&A:

• Question from Chris Moore (CJS Securities): Now that the order patterns lead time has been normalized, just trying to understand a little bit better how we should think about backlog moving forward. What percentage of Alamo revenue is backlog dependent and how quickly will the vast majority of industrial backlog turn versus the vegetation backlog?
  Response: Backlog represents 4-5 months of revenue, consistent historically. Lead times are in good competitive position. Order patterns show positivity in municipal mowing and sweepers, though industrial orders were down due to lumpiness and tough comparisons.

• Question from Chris Moore (CJS Securities): ...wondering if that's perhaps a reasonable expectation for Q3, and the Q4 comp is pretty light off of 25. Is that a reasonable way to look at it, maybe in that flattish area in Q3, and perhaps we could do a little bit better than that in Q4?
  Response: Remain cautious on vegetation end markets, expecting flattish to down mid-single digits for the year. Historically, Q2 is the peak quarter, with sales and earnings typically declining slightly in Q3 and Q4.

• Question from Peter Callum (Baird): When we think about that 18% consolidated margin target... where would we see margin for each division shaking out? ...how much can margins improve from current levels without any sort of volume improvement?
  Response: Long-term target is 15% operating and 18% EBITDA margins. ~300 bps improvement is within company control via procurement savings, parts/service, and manufacturing efficiency. Vegetation margins could reach 13-14% from ~10-10.5%.

• Question from Peter Callum (Baird): ...What's the current pipeline looking like? ...What would be the appetite... for a larger, more transformational deal?
  Response: M&A pipeline is strong, focused on tuck-ins in the industrial space, typically $15-$30M EBITDA range. Larger deals are possible but unlikely. Focus remains on strategic fit and synergies.

• Question from Mike Schliske (DA Davidson): ...how much was currency a factor in the year-over-year revenue change?
  Response: Currency impact was 0.4%.

• Question from Mike Schliske (DA Davidson): ...are you doing anything within the [vegetation] segment to maybe get more aggressive... to help speed things up...?
  Response: Focusing on 'alternate sources of growth,' including new channels and product categories, though specific initiatives are not yet public.

• Question from Mike Schliske (DA Davidson): ...do you feel confident that you'll actually get at least one deal done during 2026?
  Response: Pipeline is full and momentum is positive, but cannot guarantee a deal in 2026. Bullish on M&A and will use available dry powder.

• Question from Greg Burns (Sidoti & Company): Could you just give an update on the status of the facility consolidations on the vegetation management business?
  Response: Progress is good. Consolidated brands (Moorabark, Rako, Bush Hog, Rhino) showed sales growth and adjusted EBITDA margins are flat to pre-disruption levels. More efficiency gains are possible.

• Question from Greg Burns (Sidoti & Company): How should we think about the remainder of the year from an organic perspective [for industrial]?
  Response: Expect industrial end markets to be flattish in the near term, consistent with construction data, though bullish long-term.

• Question from Sam Carlivant (William Blair): Could you give an update on your progress [on procurement savings] here and maybe frame the timeline for these benefits to start flowing through?
  Response: Procurement program is going well. Savings will start coming in towards end of this year, but largely next year.

• Question from Sam Carlivant (William Blair): How the aftermarket business performed in the quarter and then how you've seen some of your initiatives around the aftermarket business progress here.
  Response: Aftermarket parts and service were up slightly YOY. Initiatives around pricing and parts availability are progressing, expected to be a strong contributor in future years.

Contradiction Point 1

Financial Seasonality Outlook for Vegetation Division

Guidance on sequential quarterly performance appears inconsistent.

Chris Moore (CJS Securities) - Chris Moore (CJS Securities)

2026Q2: Financial results are likely to follow a slight sequential decline from Q2 to Q3 and Q3 to Q4. - Robert Giroux(CEO)

Is it reasonable to expect flat growth in Q3 and improved performance in Q4 given the light Q4 comp off 25? - Chris Moore (CJS Securities)

2026Q2: Historically, Q2 is the peak quarter for sales and earnings. Excluding major acquisitions, sales and earnings tend to decline slightly from Q2 to Q3 and to Q4. - Robert Hureau(CEO)

Contradiction Point 2

Status and Impact of Facility Consolidations

Contradiction on whether consolidation disruptions are fully resolved or still impacting.

Greg Burns (Sidoti & Company) - Greg Burns (Sidoti & Company)

2026Q2: Progress on facility consolidations is positive... The business is in a much better position than during the disruption period. - Robert Giroux(CEO)

Could you provide an update on the status of facility consolidations in the vegetation management business and their expected impact on second-half revenue and margins? - Greg Burns (Sidoti & Company)

2026Q2: After consolidation disruptions in late 2025, throughput has recovered... There is more opportunity for efficiency gains and cost reduction... - Robert Hureau(CEO)

Contradiction Point 3

Industrial Division Organic Sales Outlook

Contradiction in projected organic growth for the Industrial division for 2026.

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2026Q2: For the Industrial Equipment Division's organic sales, the outlook is flattish for the remainder of 2026... - Robert Giroux(CEO)

How should we think about the remainder of the year in terms of organic growth, and has your outlook changed from flat or slightly up? - Christopher Moore (CJS Securities, Inc.)

2026Q1: For 2026, excluding acquisitions, the Industrial division is expected to be roughly flattish to up very low single digits. - Robert Hureau(CEO)

Contradiction Point 4

Procurement Savings Program Timeline

Contradiction on when benefits from the procurement savings program will materialize.

Sam Carlivant (William Blair) - Sam Carlivant (William Blair)

2026Q2: The procurement savings program is progressing really well. Savings are expected to start coming in towards the end of 2026, with the majority in 2027... - Agnes Camps(CFO)

Can you provide an update on procurement savings progress and the timeline for these benefits to start flowing through? - Gregory Burns (Sidoti & Company, LLC)

2026Q1: ...Key initiatives to drive margin improvement include: Procurement savings: A company-wide project underway, with benefits expected later in 2026 after inventory reduction. - Robert Hureau(CEO)

Contradiction Point 5

Vegetation Division Margin Trajectory

Contradiction in the expected progression of operating margins for the Vegetation division in 2026.

Peter Callum (Baird) - Peter Callum (Baird)

2026Q2: Long-term target is 15% adjusted operating margin... Vegetation margins (currently ~10-10.5%) could reach ~13-14%... - Robert Giroux(CEO)

How will the 18% consolidated margin target be distributed across each division, and what is the margin runway for the vegetation segment from current levels to its long-term outlook? - Christopher Moore (CJS Securities, Inc.)

2026Q1: ...The division’s rate of decline is expected to slow in 2026, leading to roughly flattish or slightly down end markets, but with sequential improvement. Margin progression is expected to continue. - Robert Hureau(CEO)