Good morning, and welcome to the Alliance Laundry Third Quarter 2025 Earnings Conference Call. With us today are Mike Schoeb, Chief Executive Officer; Dean Nolden, Chief Financial Officer; and Bob Calver, Vice President of Investor Relations. [Operator Instructions] With that, it is my pleasure to turn the program over to Mr. Calver, Vice President of Investor Relations. Mr. Calver, please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Alliance Laundry Systems Third Quarter 2025 Earnings Call. I'm joined today by Mike Schoeb, CEO; and Dean Nolden, CFO. Along with today's call, you can find our earnings press release and earnings presentation on our website at ir.alliancelaundry.com. A replay of this call will also be made available on our website. As a reminder, today's earnings release, presentation and statements made during this call include forward-looking statements under federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission, including in the Risk Factors section of the prospectus from our initial public offering dated October 9, 2025. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Additionally, during today's call, we will discuss certain non-GAAP financial measures outlined in further detail at the beginning of our earnings presentation. We believe that these measures are important indicators of our operations as they exclude items that may not be indicative of our results from ongoing business operations. A reconciliation of these measures to the most directly comparable GAAP measure can be found in our earnings release, in our 8-K filed with the SEC and in the appendix to the slide presentation. Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. I'll now turn the call over to Mike.

Thanks, Bob, and thank you all for joining. It's a pleasure to speak with you today on the company's first earnings call as a publicly traded company. Before I begin, I'd like to express my thanks and appreciation to the Alliance team, our end customers and distribution partners as well as our advisers and the investors who made this milestone possible. I'd also like to thank the research analysts who spend time getting to know our business, our culture, our products and our team. We look forward to continued dialogue, and we're excited about the future as we continue to expand our business and deliver what we believe are the highest quality machines and services available in the industry and create long-term value for our shareholders. For this first call as a public company, I will start with an overview of Alliance, the markets we serve and our differentiated strategy. We will then dive in our results. So starting with Slide 4, there are 4 things I believe you should consider for any investment, and this is my core message on today's call. So question number one, is the industry vibrant, growing and attractive? In a record of close to double-digit growth over the last decade would suggest it is, as Laundry is not a fab or a fashion, but it is essential to everyday life. Additionally, the industry has a unique characteristic of providing downside protection in difficult times. But this is what we saw during COVID where laundromats were deemed essential by governments almost worldwide and stay open versus most retail locations, which were shuttered and many that closed for good. The world is increasingly volatile. And every time there's a dip in the economy or bad news on the TV, those of us on the executive team…

Thanks, Mike. Turning to Slide 11 and our financial performance. We provided our results for the 3 and 9 months ended September 30, 2025. I'll touch on the results for both periods, but focus mostly most of my remarks on the third quarter financial performance. We delivered strong results on a consolidated basis. We drove revenue of $438 million, up 14% year-over-year and year-to-date revenue of $1.27 billion, also up 14%. Growth this quarter was driven by solid volume gains and modest low to mid-single-digit price increases implemented to offset higher input costs, which were primarily tariff related. Volume growth was broad-based across all of our end markets in both of our reportable segments of North America and international, supported by the strength of our brands, the durability of our value proposition and the product and geographical diversification of our business. Year-to-date gross margin expanded by 70 basis points over last year, driven by higher volumes, manufacturing efficiencies and modest pricing actions. This performance reflects our core strategy of profitable growth, which is built on the superior total cost of ownership we offer to customers. Adjusted EBITDA was $111 million in Q3 and $330 million year-to-date, representing growth of 16% and 13%, respectively. For the quarter, adjusted EBITDA margin was 25.3%, up 40 basis points year-over-year and year-to-date margin was 25.9%, down modestly by 30 basis points due to investments we are making in products and systems as well as public company support costs. Net income for the quarter of $33 million was up from a loss of $6 million in the prior year. Third quarter adjusted net income was $48 million, up 47% versus the prior year quarter and year-to-date adjusted net income was $136 million, an increase of 9%. These results reflect strong top and bottom line performance…

Thanks, Dean. And let me end where I started, commercial laundry is an incredible, vibrant and growing industry in which we have earned a privileged position as a clear market leader with significant structural advantages. We have long demonstrated an ability to deliver a best-in-class financial profile, strong margins and solid growth and there are systemic tailwinds that we believe will propel continued profitable growth. In closing, I'm incredibly proud of our employees around the world, their dedication and expertise make these results possible. I'd also like to thank our distributors, partners and new shareholders for your continued confidence and support. With that, let's open the line for questions.

[Operator Instructions] Our first question comes from Andrew Obin with Bank of America.

Congratulations. Can we start -- many of your competitors are importing their product into the U.S. How have they responded to the incremental sections to 232 tariffs? What's the industry environment?

Yes, Andrew, this is Mike. We have seen one small Asian competitor increase price. I think for the full year, they've taken 16.5%, something like that. Outside of that, we have actually not seen anything so far. Again, we expect that to happen. I think as we talked about really pushing into 2026, but so far, really no activity of note.

Interesting. And maybe you acquired a New York distributor in the quarter. Can you talk about the strategic and financial benefits from acquiring distributors?

Yes. So Andrew, this is the 16th acquisition we've done. We're vertically integrating in the United States. We are focused on more dense urban markets, not that we haven't been opportunistic at times, but we're really looking for markets that matter, management teams that we can back where we see opportunity for outsized growth. So we like it. It allows us to get much closer to the customer. And we will continue to do it. And we will be a partner when we see those opportunities and when that distributor principle is interested in speaking to us, we're always there for them.

Our next question comes from Tomo Sano with JPMorgan.

Congratulations from my side as well. So you achieved double-digit growth on the revenue. And how are you managing supply chain challenges and inventory levels, especially given ongoing global disruptions? And have you seen any improvement or new risks in logistics or components sourcing?

Yes. So I'll say on the supply side, we've really seen nothing, Tomo, that is meaningful. There are always blips and always unexpected surprises, but nothing that we don't carry enough inventory for or don't have alternate sources of supply. So we feel really good about it. We see no signs that there's going to be any change in that status. But we're ready. And as you know, we've got a very, very capable sourcing team that's out there.

Follow-up on digitalization and service revenues. What progress have you made in expanding digital solutions and service-based revenue, such as Laundry IQ and SaaS offerings? How do you see the contributions of these business evolving, please?

Yes. So Tomo, we're focused on the long term. So we do generate revenue. I would say it's minimal at the moment. We're more focused on the analytics, the information that comes back to us as we get these connected machines. As you know, we've got several hundred thousand that are out there. I can't speak to our most recent launch of the Scan-Pay-Wash, already in the 90 days or so, it's been out there, there have been over 90,000 transactions. So all of these things are additive. All of them are meaningful. All of them are putting us into a position of continued strength, but we are early days. And again, we're more focused on the power and the information and the data that it allows us to capture to be able to get the true predictive analytics that really complement, again, that best-in-class product that's out there in the field.

Our next question comes from Susan Maklari with Goldman Sachs.

My first question is talking a bit about the consumer. Can you give us some more color on what you're seeing in the CIH segment of the business, especially given the headwinds and some of the slowdown that we've been hearing as it relates to housing and then just overall consumer activity within R&R and other elements of their spend?

Yes. So Susan, I would say, one is we have a very, very unique product. It is a commercial true professional grade product. So one is, it's a highly differentiated product, but also highly differentiated strategy where our go-to-market is through independent shops and demand is extraordinary. We see no change in that. And again, we've got -- if you wanted to order a product today, you'd be waiting in order to get delivery. So no change in status on that.

Okay. That's good to hear. And then maybe turning to the balance sheet. Can you talk about the path to further deleverage as well as any other priorities for uses of cash as it relates to perhaps shareholder returns and other strategic initiatives?

Yes, Susan. First, we're very proud of what we've done year-to-date in terms of our deleveraging, as you've seen in our presentation in our prepared remarks, so significantly improved our balance sheet through the first 3 quarters and as a result of the IPO. Our main priority, as we've communicated we'll continue to be deleveraging through our strong free cash flow through both EBITDA growth and cash generation. And because of that strong free cash flow profile, we have the flexibility to push on multiple levers of capital allocation to continue to invest in CapEx, R&D, new products and capacity and productivity. We're not giving any forward guidance on what we intend to do further from a use of cash perspective. But given that cash flow profile, we have the flexibility to return capital to shareholders through potential share repurchases in the medium term and then to consider dividends over the long term.

Our next question comes from Mike Halloran with Baird.

Congrats on the launch. First question here. Maybe some thoughts on the trajectory into the fourth quarter. I know Dean comments were towards the mid-single-digit growth rate in the fourth quarter. That is a decel from earlier this year, not terribly surprising based on conversations before, but maybe help understand the dynamic for why the growth is tracking where it is and how we should think about sequential dynamics as we move to the fourth quarter?

Yes. So Mike, remember, this is 2 years of consecutive double-digit growth. The industry grows around a 5% sort of CAGR. So it's really just reverting to a more normalized growth rate, number one. And number two, it's always about prior year comps. The fourth quarter is the strongest quarter of the year for us. So really a combination of that -- those 2 items. But no change in demand, no change in customer sentiment, no change in anything that we see in the market. And as you know, we're very, very active in the field, always sensing, always touching, always trying to understand the signals, and we see no change.

And then follow-up is just maybe a similar conversation on the margins with a particular emphasis on how the international margins track as we move into the fourth quarter? Moving pieces behind how the international margins track 1H to 3Q? And just kind of calibrating where those should be both in the fourth quarter and as we exit the year, what the appropriate baseline is?

Yes. So maybe I'll just touch on it and make sure that Dean, if I don't cover it clearly. So in the quarter, obviously, we had customer mix. Obviously, larger customers have a little bit bigger discounts and then we had the launch of some new products, particularly the Stax-X where we wanted to field the early adoption of that product. So that's sort of a temporary launch period. As you know, one of the characteristics about us that is unique is our margin parity between the U.S. and international markets is awfully close. So we don't see any change in that. Again, sometimes there will be blips one way or the other, as you know, emerging markets can sometimes be a little more volatile. So we flashed to that in the Middle East. But again, no change, and we feel really good about it. And those factories in Thailand and in the Czech Republic, where the bulk of what they are selling are extremely well positioned from a cost perspective. So we see no change.

And Mike, I would just add on a longer-term view than just the quarter, you can see that year-to-date international revenue grew 10% and EBITDA grew 15%. And we enjoyed over 100 basis point improvement in adjusted EBITDA margin in international closing that parity gap with North America. So we're very proud of the year-to-date results we've achieved in international.

Our next question comes from Chris Snyder with Morgan Stanley.

I believe earlier you referenced that the competitors have yet to push incremental price on the back of 232, at least broadly speaking. Did you guys push incremental price in Q3? It seems like the price in the quarter was about 4%. So I'm just trying to figure out if there's like a step-up in Q4 if you get the full realization of that?

Yes. We did -- thank you, Chris. We did announce price increases in Q3. And there are some smaller ones that take place in Q4. So we've had various price increases as the year has progressed, so we will continue to see benefit from those on an annualized or full quarter run rate going forward. So our price increases were meant to offset our cost increases primarily related to tariffs. And so we'll continue to see that benefit into Q4 and going forward.

I appreciate that. And I guess to follow up, it feels like the guide is implying almost no volumes in Q4. It feels like price alone could maybe be mid-singles. So I guess, is there a conservatism in that? I understand it's been a long period of really strong growth for you guys, but it does seem like a pretty sharp falloff in volumes. And I think maybe the bigger question is like what does that mean for volumes in '26?

Good. We're -- Chris, thanks. We're looking forward to giving you 2026 guidance when we release our Q4 results. So we're very bullish on our industry, as Mike alluded to in his prepared remarks. And this return to a normalized run rate in Q4 is our current expectation, given where we sit in the quarter, middle of the quarter and our visibility to our customer demand and our factory production. I'll turn it over to Mike.

Yes. And look, I will say again, no change in signals. We are, by nature, somewhat conservative, right? We try to under promise and over deliver. I'm not setting expectations there at all. I'm just telling you that is our culture. But no change in signal, no change in demand. I'll repeat what I said earlier, it's a tough Q4 comp. The industry is still vibrant. It is growing. We do not see changes in terms of that. And as we give you guidance on '26, we look forward to confirming that outlook.

Our next question comes from Ketan Mamtora with BMO Capital Markets.

Congratulations. Maybe to start with and not to put too fine a line on sort of Q4, but are there any sort of nuances that we should be mindful of between North America and international, as you think about sort of what happens in Q4?

Not really. I mean it's -- I'm trying to think through your question because it's a good one. But nothing significant that I can tell you, we, again, would expect to change. Again, emerging markets sometimes get lumpy. So that happens. We've seen a little bit of that in our Middle East Africa business, which is less than 3% of revenue. So sometimes that happens, but I -- and it can vary from quarter-to-quarter, but the core the markets that really matter for us that are -- and hopefully, I'm not offending any of our customers in these other regions. But given our revenue percentage, right, it's really U.S., Europe and Asia for the most part. That's how I'd answer that.

Got it. No, that's helpful. And then maybe one for Dean. As you think about deleveraging, where do you think sort of you want to get to in terms of a kind of more normalized level?

Yes. Thanks for the question. And I think we'll be prepared to discuss that as we give guidance in first quarter of next year for 2026 and beyond. But I would emphasize, I guess, in what we said that this business has a very strong free cash flows and deleveraging will continue to be our #1 priority, and you've seen that in our balance sheet through the end of September. And we've historically deleveraged a half to a full turn per year organically, and we will continue to do that. So while we continue to invest in the business for growth, new product productivity, et cetera. So we have multiple levers at our disposal, and we'll continue to manage those and look forward to managing those to return value to our shareholders over the long term, but look forward to giving that guidance early next year.

Our next question comes from Kyle Menges with Citigroup.

This is Randy on for Kyle. I guess just on the margin side, outside of volume and price, what are some of the other margin drivers we should be thinking about in 2026? I mean it'd be right to get some more color on the cost down and manufacturing efficiency initiatives that you guys have in place, and how we should be thinking about that contributing to margin going forward?

Yes. So maybe I can start and then Dean, you can add a little more color. So mix -- and if you -- maybe I'll refer you back to sort of Slide 9 when we talk about it, but mix is a really important part of our margin. And so the larger capacity product, right, more engineering content, less competitive pressure and just more value, frankly, that gets offered to the users of those larger products. So mix is a big part. That's meaningful. On the cost down side, look, there's always opportunity, but as we have stressed continually, quality is really the one thing that our customers care about. They talk to us about it all the time. So we do have cost down. There are opportunities. We've been pretty good at it. But we're very methodical, very careful, very slow because you have dynamic engineering and a product that is bouncing around, particularly in terms of a washer and there are always unexpected things that happen. You can't always get it certainly on a computer-aided design certainly in our laboratories, which we have extensive ones across the world. So we do a lot of field testing. And again, we're very, very cautious, but it's there. It's meaningful. We'll continue to do it. Incremental volumes are meaningful in terms of the contribution that they get to us. And then there is a lot of opportunity in these factories to optimize efficiency and those teams are working on them very diligently day after day. And it's a combination really of all those things.

Got it. That's helpful. And then just maybe a quick one on capital allocation. I mean, I know that your near-term priority is to you continue to deliver. But can you kind of frame what the M&A pipeline looks for you guys? It would be great to get some color on maybe the size of the acquisitions you've done in the past? And maybe some areas of your portfolio where you could continue to target, whether that might be more on the distribution side, the tax side or any other potential gaps you'd like to fill?

Yes. So maybe I'll start off. So you should think of us as very capable in terms of doing M&A. As we said, we've done 16 in the U.S. They are mainly smaller tuck-in businesses is part of the strategy, but it is not something that we need to have. So we're capable of growing at quite attractive rates and quite attractive margins. When we see opportunity, we will enter conversations. We have some of those ongoing, I'm not in a position to comment on them. And then we're always looking again on the manufacturing side, but there's not really anything that would be close or anything that we would be overly excited about, and let me emphasize that we need at the moment to continue to grow as we have in the past.

And our final question comes from Damian Karas with UBS.

Congratulations on the IPO and your third quarter results. I have a follow-up question on price. You talked about some additional actions that you are taking in the fourth quarter. How much pricing benefit that maybe didn't flow through P&L this year, would you expect to carry over into 2026? And just kind of a hypothetical, if we were to see tariffs ease as a result of ongoing trade negotiations, would you expect that half of lower prices at all?

Yes. Go ahead, Dean.

First, I would say, from a carryover perspective, again, I apologize, and we're looking forward to giving guidance in the first quarter for 2026, but we had various price increases throughout the year, some in the second quarter, some in the third and then some in the fourth. So you will see some benefit next year from carryover pricing actions into next year from a price and profitability standpoint. So now I'll turn it over to Mike.

And then from a price give back, we don't have a history of doing that. But we're always, as I stated earlier, sensing, talking, seeing -- and I think one of the strengths is -- for us is we are very nimble. We are very quick. If we sense anything, you will see us act. But there's not a history of doing that, and I wouldn't expect that to change.

Okay. That's helpful. And you talked a little bit earlier about in North America, some of that strength in the market is new entrants emerging. Curious if you have a sense for what proportion of this emerging customer base you're winning? Is that keeping up with your installed base share of the market? Or is that maybe an opportunity where you're outgrowing?

Yes. Good question. So if you think about the newer entrant coming in, is they're really looking to scale up faster. They are looking for a multisite or as I stated in my earlier comments, oftentimes, it's multistate. So what you must have to do that is you need a full digital suite to allow that operator to understand what's happening to be able to maximize revenue to be able to manage their costs and really get the intelligence. And as a matter of fact, we call our digital platform insights because it gives the operator insights on how to be more effective, how to be more efficient and when they adopt those technologies, the financial performance of those stores improves. So we think our value proposition is very strong. but particularly for the newer entrant, again, looking to scale, we believe we have, by far, the most comprehensive digital solution in the marketplace, and we are continuing to invest in that. We see a lot of opportunity for continued value. And so you'll see us strengthen that offering.

This concludes today's question-and-answer session. I would now like to turn the call back over to Mike Schoeb for any additional or closing remarks.

Okay. Well, thank you very much. That concludes our meeting. I really, really appreciate everybody joining. Thank you for the questions, and we look forward to updating you on the next quarter. Thanks again.

Thank you. That concludes today's third quarter 2025 Alliance Laundry Earnings Conference Call. You may now disconnect your lines at this time, and have a wonderful day.