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.