The Eastern Company

Good morning and welcome to the Eastern Company fourth quarter fiscal year 2025 earnings call. At this time, all participants are in a listen only mode and the floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Marianne Barr, Treasurer and Corporate Secretary at the Eastern Company. Marianne, the floor is yours.

Good morning, and thank you, everyone, for joining us this morning for a review of the Eastern Company's results for the fourth quarter and full year 2025. With me on the call are Ryan Schroeder, Chief Executive Officer, and Nicholas Vallejos, Chief Financial Officer. The company issued its earnings press release yesterday after market close. If anyone has not yet seen the release, please visit the Investors Information section of the company's website, www.easterncompany.com, where you will find the release under Financial News. Please note that some of the information you will hear during today's call will consist of forward-looking statements about the company's future financial performance and business prospects. including, without limitation, statements regarding revenue, gross margins, operating expenses, other income and expenses, taxes, and business outlook. These forward-looking statements are subject to risks and uncertainties that could cause actual results or trends to differ significantly from those projected in these forward-looking statements. We undertake no obligation to review or update any forward-looking statements to reflect events or circumstances that occur after the call. For more information regarding these risks and uncertainties, please refer to risk factors discussed in our SEC filings, including Form 10-K filed with the SEC on March 3, 2026, for the fiscal year 2025. In addition, during today's call, we will discuss non-GAAP financial measures that we believe are useful as supplemental measures of Eastern's performance. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. A reconciliation of each of the non-GAAP measures discussed during today's call to the most directly comparable GAAP measure can be found in the earnings press release. With that introduction, I'll turn the call over to Ryan.

Thanks, Marianne. 2025 is a year defined by two things. challenging end markets, particularly heavy truck and automotive, and significant operational progress that positions us well for the future. Our primary end markets remained under pressure throughout most of the year, though we began to see early signs of stabilization in November and December. At the same time, we were navigating tariff impacts and broader macro uncertainties. As a result, our financial performance reflects both the difficult environment and the actions we took to respond decisively. For the full year, revenue was $249 million, down 9% year-over-year. Adjusted EBITDA was $19.4 million, representing a 7.8% margin, compared to $26.3 million, or a 9.6% margin last year. Importantly, the performance represents roughly a 7% margin on reduced operating scale, which we view as a commendable outcome given the revenue pressure. Encouragingly, the fourth quarter showed sequential improvement. Revenue increased 4% from the third quarter, rising from $55.3 million to $57.5 million. Adjusted EBITDA improved by $1.1 million sequentially. That reflects a 50% margin on the incremental revenue from Q3. Clear evidence that our cost actions are working and flowing through to the bottom line as volume stabilized. While we couldn't control when the markets would turn, we made sure that 2025 would be the year we prepared Eastern to win going forward. Here's what we did. In 2025, we made the decisive structural changes to Eastern's cost base, portfolio, and operating model. As a result, Eastern is leaner, more focused, and better positioned with a solid foundation for its next chapter of growth. First, we lowered our cost structure. We reduced our cost base, generating approximately $4 million in annual savings from restructuring and footprint optimization initiatives. At the same time, we strengthened leadership. We hired Zach Gorney to lead Eberhard, promoted Emilio Ruffalo to lead Big Three, and added two strong commercial leaders to drive growth in both of those businesses. Second, we streamlined the portfolio. We divested the underperforming Centralia mold division of Big Three and a business that was a drag on earnings. This allowed us to concentrate capital and management attention on our high-conviction core businesses. Third, we addressed tariffs head-on. We neutralized approximately $10 million of tariff exposure, offsetting substantially all of the impact through pricing actions and supply chain cost reductions. We are also building more flexible and resilient supply chain. giving customers multiple sourcing options, both domestic and offshore, so we can pivot as the trade environment evolves. Fourth, we invested in future revenue. We executed a commercial realignment to strengthen our go-to-market capabilities going into 2026, expanding new customer relationships and targeting new end markets. We maintained our investment and product development throughout 2025 with output that will become increasingly visible in 2026 and beyond. Notably, our Asia business grew 25% year over year, following the deployment of dedicated sales resources in the region, a geography where we see opportunity for incremental profitable growth going into the future. Fifth, we strengthened the balance sheet. We enhanced financial flexibility by refinancing our credit facility. The incremental capital supports organic growth, provides a buffer against macro uncertainty, and positions us to act decisively when the right M&A opportunity arises. Finally, we demonstrated capital discipline. We reduced debt by $8.7 million, returned $2.7 million to shareholders, and we purchased approximately 153,000 shares, or about 2.5% of shares outstanding. Our operating model demonstrated resilience. A 9% revenue decline resulted in only a 20 basis point of gross margin erosion in the fourth quarter. Sequential financial improvement and momentum in our sales funnel suggests the third quarter represented the trough. To summarize, we exited 2025 with a leaner cost structure, a more efficient operational footprint, a stronger balance sheet, and a leadership team that is action-oriented and focused on results. 2025 was the year we built the foundation. I'll now turn the call over to Nick to review our fourth quarter and full year financials results in more detail. Nick, over to you.