Douglas Dynamics, Inc.

Good morning and welcome to the Douglas Dynamics fourth quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Nathan Elwell, Vice President, Investor Relations. Please go ahead.

Thank you, Gary. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I would like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risk that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. We also published a one-page fact sheet on our IR website that summarizes our results for the quarter. Joining me on the call today is Mark Van Genderen, President and CEO, and Sarah Lauber, Executive Vice President and CFO. Mark will provide an overview of our performance Then Sarah will review our financial results and outlook for 2026. After that, we'll open the call for questions. With that, I'll hand the call over to Mark. Please go ahead.

Thanks, Nathan, and welcome everyone to our fourth quarter call. Given our poor business, we'd be remiss not to recognize the magnitude of Winter Storm Hernando's impact on the East Coast right now. Our dealers, contractors, and teams are doing everything they can to keep people safe during this historic winter event. Stepping back, as a company, we've experienced dramatic changes in operating conditions over the past several years. We've successfully navigated COVID, supply chain disruptions, tariffs, and the tough but necessary business decisions necessitated by several consecutive seasons of low snowfall. While the journey has been demanding, our teams have continually risen to the challenge and we are emerging stronger, more resilient, and better prepared for what lies ahead. In 2025, we saw a significant increase in business activity across the company. And once again, it was the determination, strength, and ingenuity of our people that allowed us to fully capitalize on these opportunities. Across every aspect of our operations, our people stepped up to the plate in 2025. Their commitment is clearly reflected in our results. So thank you to everyone at Douglas Dynamics. There are three main areas of focus Sharon and I would like to cover in this morning's call. First, an excellent fourth quarter topped off a fantastic 2025 with operational strength and robust financial performance in both the work truck attachments and work truck solution segments. Second, with an above average snowfall so far this winter, we expect to build off of 2025's momentum in 2026 with continued growth in both segments. Sarah will cover that outlook later in our call. And finally, and arguably most importantly, the strategic framework we introduced in 2025 and the actions we've taken to support that strategy have positioned us extremely well, not only going into 2026, but beyond. to drive sustainable long-term value creation. So let's start with 2025 performance. We delivered strong financial results throughout the year, with each quarter, and in particular the fourth quarter, growing from the prior year. These year-over-year fourth quarter improvements were primarily driven by two things, the excellent performance at solutions and the early onset of winter boosting demand at attachments. During 2025, we increased our guidance ranges twice and still managed to come in at the high end of this range. When you look back over the past few years, our earnings have grown from roughly $1 of adjusted EPS in 2023 to $1.47 in 2024 to $2.24 in 2025. That's a fantastic return to form. Okay, let's discuss our fourth quarter and full year results in more detail, starting with work truck attachments. Demand for the product lines, work truck attachments, designs, builds, and sells is primarily driven by snowfall. And as a refresher, the average life cycle of the equipment we produce is between five and ten years. We know that there are tens, if not hundreds, of thousands of our Fisher, Western, and Snowex products in use on the roads today. Just as below average snowfall winters lead to an elongated life expectancy, above average snowfall winters drive increased usage and ultimately demand. Of note, we measure this phenomenon over multi-year periods and develop forecast models, create production schedules, and make investment decisions based on snowfall over time, not any one given year. This is also the reason that one strong winter can help to provide a multi-year tailwind. This winter snowfall came early with major November and December storms in the Midwest and significant persistent lake effect snow in the Great Lakes region. And so far in 2026 several large snow and ice storms made their way across much of the country, including the plains mid Atlantic states and the Northeast, including the historical storm that many of you just experienced. In fact, after several years of low snowfall, we're confident that the current snow season will end above the 10-year average. We want to thank our many dealers and contractors in these core markets for their tireless work to keep people safe during these storms. Our regular channel checks at the end of January confirmed that, with increased year-over-year retail sales, plow and hopper inventories are below the 10-year averages. These weather conditions in the fourth quarter helped increase net sales and adjusted EBITDA, including record sales of parts and accessories. Now, unlike sales of plows and hoppers, which are generally aligned with snowfall trends over multiple years, we see a high correlation and immediate impact between parts and accessories sales and current snowfall. On a full year basis, net sales and adjusted EBITDA improved by double digits. With the end of the 2025-26 snow season coming into view, our teams have been working nonstop to meet demand driven by the recent major storms. In addition, we have already started planning and preparing for what we believe will be a solid preseason. Okay, turning to work truck solutions, which exceeded our expectations once again. In fact, it was a record quarter to finish a record year which is also the fourth consecutive year of improvements. On a full year basis, not only did we deliver double digit net sales growth and adjusted EBITDA growth, we saw record annual margins. Demand and backlog from municipal customers remain robust, and we continue to work through the large multi-year contracts that we discussed last year. After four consecutive years of growth, the bar is set high. Given our excellent lead times and customer support, we are in a formidable position in the marketplace today. We continue to see strong demand from municipal customers. We are executing effectively, and we maintain a near record backlog. All in all, we expect our municipal business will continue to grow, although not quite at the same pace we have experienced in the last four years. Commercial demand dynamics remain somewhat opaque. While the fleet business remains generally solid, we are seeing some minor softening of demand in the dealer business, which is difficult to predict. Dealers have inventory on the ground and smaller customers remain hesitant and price conscious. Our commercial teams remain diligently focused on optimizing this business.

Overall,

Really a fantastic performance for the solution segment in 2025. All right, now that I've covered our results, let me just take a step back for a moment and discuss strategy. Building upon our strong financial performance in 2025 and with a seasoned management team now in place, we have crafted a more defined strategic vision for the future. This manifested itself through the three strategic pillars that we've been talking about for the past couple of quarters. Optimize, expand, and activate. The first priority is to optimize our current operations. Now continuous improvement through our DDMS system is part of our DNA, and our optimized pillar has helped refocus our efforts across the organization. The creation of centers of excellence within the attachment segment was a great example where production has moved from brand focus to a specific product focus manufacturing approach at each facility. This has enabled greater specialization and brings the full breadth of our engineering, supply chain, and manufacturing expertise to bear across our Western, Fisher, and Snowex product lines while leveraging the unique strength of each location and workforce. The second pillar is expand, pursuing organic geographic growth and new product offerings. For example, with lead times across the municipal sector top of mind, We are excited about the opening of Henderson's new Missouri Outfit facility this summer. This expansion will allow us to better serve customers in surrounding markets and continue to deliver trucks on time, both of which will strengthen our competitive advantage. In addition, the attachments team launched the auto speed controller for hopper spreaders last year. This controller is linked directly to the truck's CPU, and as a result, can automatically adjust the flow of de-icing material as the vehicle speed changes, improving efficiency, reducing waste, and allowing for better monitoring. And it's retrofittable to all hoppers we've produced back to 2016. This product, its capabilities, and the fact that it can be fitted to every hopper that we've built and our dealers have sold over the past 10 years have all been received extremely well by our end-user professionals. And finally, activate, which refers to last year's restart of our M&A efforts, which led to our first acquisition in nine years. We welcome Venco Venturo to the Douglas Dynamics family in November. Adding this well-established and highly respected provider of truck-mounted cranes and dump hoists was a meaningful first step as we look to diversify and balance our portfolio over the long term. Our integration team has been working diligently to start realizing the benefits of this partnership and drive profitable growth. Venco is a great example of the types of high-quality brands and businesses that align with our long-term vision. Given the financial strength of Douglas Dynamics, combined with this clarifying strategic vision for the company, we will continue to pursue the right acquisitions in the vehicle attachment space. I'm really pleased to say that our mission, vision, and strategic direction have all been well received internally and externally. With substantial initiatives now underway across all three pillars, we entered 2026 with a clear focus on sustainable, profitable growth. So in summary, 2025 was an important year for our company. And frankly, we're just getting started. Divisional plans aligned with the optimize, expand, and activate strategies are rapidly gaining traction and delivering results. We are confident in the strategic path ahead. and we are focused on sustaining and expanding our recent success in 2026 and beyond. Personally, I'm looking forward to attending the NTEA Work Truck Show in Indianapolis in two weeks, which is always a great opportunity to reconnect with our teams and meet with partners and customers. It's an exciting time in our industry with considerable opportunities ahead, and our teams are continually striving to get better every day. With that, I'd like to pass the call to Sarah.

Thanks, Mark. Before I begin, unless stated otherwise, all the comparisons I'll make today are between the fourth quarter or full year of 2025 versus the same time periods in 2024. Also, please remember the 2024 results included a one-time gain of $42.3 million from the sale-leaseback transaction completed in September of 2024. Overall, our financial results were excellent. We closed out the year strong. I want to commend everyone at the company on their hard work this year that really paid off. Let me walk through the numbers for you and I'll start with the quarter and then discuss the full year. On a consolidated basis, fourth quarter net sales increased approximately 29% to 184.5 million with growth in both segments. Gross profit grew approximately 35% to $48.1 million, with gross margin increasing 120 basis points to 26.1%. SG&A expenses increased approximately 29% to $27.3 million, primarily due to higher variable compensation on increased sales. Net income and diluted earnings per share both increased over 60% to 12.8 million and 54 cents respectively. Adjusted EBITDA increased approximately 37% to 25.8 million, and margins increased 90 basis points to 14%. And adjusted earnings per share increased approximately 58% to 62 cents. These tremendous improvements to finish the year were driven by improved weather trends that helped boost demand, coupled with positive execution at both of our segments. Turning to the full year, 2025 net sales grew approximately 15% to a record $656.1 million. Gross profit grew approximately 19%. to $175 million, with growth margin increasing 80 basis points to 26.6%. SG&A expenses increased just 4% to $94.9 million. Net income and diluted earnings per share were $46.9 million and $1.96 respectively. Adjusted EBITDA increased approximately 23% to $97.9 million, and margins increased 90 basis points to 14.9%. Adjusted earnings per share increased approximately 52% to $2.24. The effective tax rate for 2025 was 23.8%, in line with 24% for 2024. As you can see, 2025 was a relatively straightforward year, with fewer headwinds than we've seen in recent years. The generally favorable market conditions for both segments, coupled with a strong performance operationally, delivered strong year-over-year improvements. Okay, let's look at the results for the two segments, and I will start with work truck attachments. As Mark already mentioned, we're pleased to buck the trend of recent years with winter arriving early across a good portion of the Midwest and Northeast in the fourth quarter. The subsequent increase in demand caused fourth quarter net sales and adjusted EBITDA to both increase by more than 50% to 83.1 million and 13.9 million respectively. Looking at 2025 overall, the impact of increased snowfall in core markets in both the first and fourth quarters drove higher volumes. Full year net sales increased approximately 16% to 295.7 million. And adjusted EBITDA also improved by 16% to 56.2 million. We experienced very healthy aftermarket demand. In the quarter and for the full year, we achieved record sales of parts and accessories. We saw a dramatic spike in demand during December as end users went to dealers looking to keep their plows in tip-top shape. Equipment was being used, and this should help to chip away at the elongated replacement cycle we are experiencing. The outlook at attachments is more positive today than it has been in recent years. Next, I'll cover Work Truck Solutions. Our teams produced record results for both the quarter and the year, despite facing tough comparisons to 2024. The team really ended the year on a high note. Well done to everyone at Work Truck Solutions for delivering record results once again. Fourth quarter net sales increased approximately 13% to 101.5 million. Adjusted EBITDA grew approximately 22% to 11.9 million. And adjusted EBITDA margins increased 80 basis points to a record 11.7%. Results were driven by ongoing strength of municipal demand plus efficient operations that meant more trucks were delivered. The fourth quarter results were really a continuation of the trends that we saw all year. For 2025, net sales grew approximately 15%, and adjusted EBITDA increased 35%. Adjusted EBITDA margins grew substantially to a record 11.6%, a 170 basis point increase. As we have previously noted, 2025 net sales included approximately 18 million of incremental chassis sales related to several large municipal contracts. So 2025 was the fourth consecutive year of significant financial improvement for solutions. The goal now is to maintain this margin performance in the near to medium term and to continue to focus on meaningful projects to optimize and expand in the years ahead. Okay, turning to the balance sheet, total liquidity at quarter end was 127.8 million, comprised of 8.3 million in cash and 119.5 million of borrowing capacity on the revolver, which is more than enough for our needs in the foreseeable future. We are justifiably proud of our cash generation for the year. Free cash flow increased 91% to $63.6 million, which was primarily driven by the increase in net income, somewhat offset by higher inventory levels and solutions. We also had a one-time benefit of approximately $7 million in lower cash taxes in 2025 due to the One Big Beautiful Bill Act. Inventory increased approximately 9% to $150 million, The great reduction in finished goods inventory in our snow and ice control equipment within attachments was more than offset by a combination of two items. First, the addition of inventory from Benco Venturo. And second, the logical and necessary increase in chassis and components in the solution segment to support the sales growth that we have experienced. Next, I'd like to talk a little bit about how we are thinking about capital allocation. When we look at our capital allocation priorities for 2026, they are not fundamentally different than the past. First, we are continuing to focus on returning cash to shareholders, predominantly through maintaining our strong dividends. To a lesser extent, we also have the flexibility for share repurchases with 38 million remaining on our buyback authority. Second, we want to support projects by investing in the business as part of the optimize and expand strategic pillars. Beyond that, we expect to continue to pursue strategic M&A opportunities as they arise as part of our activate strategic pillar. Let me add some detail to these points. On the dividend, we're maintaining the current quarterly cash dividend of 29.5 cents per share. For share repurchases, we would expect 2026 to be similar to that of 2025, with the opportunity to reassess as we go through the year. As far as investing in the business, Capital expenditures for 2025 increased to $11.1 million after restricted spending in 2024. While not strictly classified as CapEx, we also invested approximately $5 million in facility improvement projects as part of the 2024 sale leaseback agreement. For 2025, even with those two components combined to $15.1 million, we remained well within our traditional range of 2% to 3% of net sales. With our plans for 2026 in place, we expect spending to increase year over year as we invest to grow. But we still expect to stay within that same 2% to 3% of net sales. Lastly, at year end, our leverage ratio was 1.8. which is well within our goal range of 1.5 to 3 times. We are well-positioned to consider small to medium-sized acquisitions of complex attachments in the years ahead. Okay, let's review our outlook. Over the past two years, we have delivered meaningful improvements on both the top and bottom line. The trends we have been discussing allow us to issue a strong outlook for 2026. As you saw in the release, we expect 2026 net sales to be between 710 and $760 million. Adjusted EBITDA predicted to range from 100 to $120 million. Adjusted earnings per share is expected to be in the range of $2.25 to $2.85. The effective tax rate is expected to be approximately 24 to 25 percent. As always, this assumes relatively stable economic and supply chain conditions, and we are assuming above average snowfall in the first quarter and average snowfall in the fourth quarter, which should help address the elongated replacement cycle that we talked to earlier. Based on these assumptions and with our current level of visibility, we believe the business is well positioned to drive improvements with the midpoint of our ranges projecting higher volumes across both segments, which would lead to double digit top line growth for the company. I think you'll agree this is a strong outlook overall. It's the first time our net sales outlook has been above 700 million. The first time our adjusted EBITDA guidance started at $100 million, and the first time our adjusted earnings per share range exceeds prior year results. In summary, it was a great end to a great year. In 2025, we outlined our strategy, executed our plans effectively. We're in a strong position entering 2026 to deliver yet another very solid year. With that, we'd like to open the call for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

The first question comes from Mike Schliske with D.A.

Davidson. Please go ahead.

Good morning. Thanks for taking my questions here. Good morning, Mike. I guess, good morning. Yeah, just following your last comments there, Sarah. I hope I didn't miss this. You said that you'll see growth in both segments. Can you even pinpoint for us which segment might have the better growth outlook for 26? And then secondly... From a margin perspective, which one's got the better opportunities for some additional margin leverage in 2026?

Sure, absolutely. So, yeah, you heard me on the call talk about double-digit sales growth for Douglas is expected. Right now, the expectation in solutions is that we are at our target in growth of mid to high single digits for the year. And then the remaining growth is in attachments, and that's a combination of our Venco acquisition plus higher than average snowfall expected in Q1. So we expect higher volumes than we had last year. On the margin question, I would say on solutions, and you heard in my script I talked about maintaining the margin, but continuing to grow through our optimize and expand. We will be working hard on both of those. The optimized will certainly help to increase our margins, whereas the focus on growth this year is going to be more evident because we have the mid to high single digit level growth on a record year. The margins on attachments, I would say right now, assuming those to be relatively flat. And, again, there's upside as plow volumes return to average. For us, it's going to be just very critical for us to see what occurs in the preseason period.

Got it. Got it. As usual, we'll be better feel for it in the springtime, it sounds like. Yeah. Can you comment also about how it's been going so far with owning Benco Ventura? Anything surprise you or look different than you expected?

Yeah, Mike, this is Mark. I'd be happy to take that one. Thanks for the question. So far, it's been going very well. I mean, against the backdrop of the size of our company, as we've indicated, it's a relatively small small acquisition, but we think there's, you know, possibilities, huge opportunities there over the next, you know, not few months or years, but over a long period of time. I can tell you from an integration standpoint, it's been going, you know, we had high expectations and it's going better than expected. It's a great team, really committed. I think really now proud to be part of Douglas Dynamics. We have a great reputation in the industry of being a company that takes care of employees and really puts people in culture first. So it's just been a really good dynamic so far. Now we're getting kind of past the initial, what I'll call the honeymoon period, and really focusing on, hey, what is the potential of this company now with the strength and backing of Douglas Dynamics?

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

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

Yeah, I would say if you look across pretty much all the areas where we sell plows, the major areas in kind of that northeast corridor, mid-Atlantic, Midwest, we've seen, as we mentioned, above-average snowfalls. And in some cases it's huge storms like what you're experiencing on the East Coast or just did. You know, in other cases, even if it's two or three inches, you know, we call those plowable events and two to three inches versus eight or nine basically going to have the same impact in terms of the plow needs to go out, folks need to go out. And then the other thing we've continued to see, you know, over the last several years is a lot more, I'd say on average, salt events. So events where trucks are going out and not just plowing but putting down salt and sand on the roads using our hoppers. So overall, as I said, it's been a pretty good year so far. We still have, I don't know, say six to eight weeks of winter left, knowing that sometimes storms in certain parts of the country can go into April. But so far, so good. And again, we feel like this will be an above-average winter compared to the last 10 for us.

Okay. Mark, Sarah, thank you.

Thanks, Mark.

The next question is from Tim Weiss with Baird. Please go ahead.

Hey, guys. Good morning. Nice to see the results here.

Good morning, Tim.

Hey, so maybe could you put a little finer point on just kind of the parts and accessory performance in kind of the fourth quarter and maybe how big P&A was for attachments for the year or maybe just the percentage of the business?

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

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

Yep, you answered your own question.

Yeah, you're spot on. When we looked at, you know, when we looked at last year, and we always talk about things kind of assuming average snowfall, and then as a company, we've become, I think, really good at being able to adjust accordingly up or down. So last year in the fourth quarter with some of the early snowfalls in the Midwest in particular and some of the lake effect, that increase in P&A sales helped to drive our overall EPS in the quarter and then for the year above what we expected, which is great. And as I mentioned in the call, there is a direct impact. If we see snow coming in, and especially knowing the amount of product that we have out in the field, we're going to see an immediate impact, which we saw in the fourth quarter, which helped to drive that overall volume. You know, it's hard to speculate. Had we seen more average snow volume in the fourth quarter, you know, we most likely wouldn't have seen as high a P&A sales. Results still would have been very good, you know, but not as good as they are, which is also why when we look at the full year for 2026 with parts and accessories, we say, hey, you know what, we're going to take an average, you know, an average approach, which then leads, you know, and drives to where our guidance was.

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

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

Yeah, it really is. I mean, anecdotally, we talked about the fact that we mentioned it here in the call that overall dealer inventories are lower than what we've seen the last several years, which you might expect just given the increased snowfall. Dealer sentiment right now is very positive, and we've seen an increase overall in in retail sales, not just in parts and accessories, you know, but for our major equipment. You know, we'll know more in the next couple of months. Our sales teams are out talking with dealers on a regular basis, helping them get the plows that they need right now in season. And then, yeah, we'll really, we'll have a lot more color as we always do in the second quarter conference call. Okay.

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

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

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

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

Okay. Okay. Well, good luck. Thanks, everybody.

Thanks, Tim.

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

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

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

Okay. And the Missouri facility, when's that? capacity coming online?

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

And that growth is an annual growth.

Yeah, great point.

Okay. And then for the fourth quarter in the attachment segments, your margin was, I guess, flat year over year, but you mentioned obviously the strength in the parts and services and the beneficial margin impact of that. So why was the, given the strong mix of parts and services, why was the margin flat this quarter? Sure.

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

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

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

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

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

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

Okay, great. Thank you.

Again, if you have a question, please press star, then 1.

Showing no further questions, this concludes our question and answer session. I would like to turn the conference back over to Mark Van Genderen for any closing remarks.

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

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