Good morning, and welcome to the Douglas Dynamics Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 risks 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 1-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 core 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 and their commitment is clearly reflected in our results. So thank you to everyone at Douglas Dynamics. There are three main areas of focus Sarah 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 Solutions segments. Second, with an above-average snowfall so far this winter, we expect to build off of 2025s 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…

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 and versus the same time period in 2024. Also, please remember that 2024 results included a onetime 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 $0.54, 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 $0.62. 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% and to $175 million, with gross 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…

[Operator Instructions] The first question comes from Mike Shlisky with D.A. Davidson.

Just following your last comment there, Sarah. I just missed this. You said that you'll see growth in both segments -- can you maybe pinpoint for us which segment might have the better growth outlook for '26? And then secondly, from a margin perspective, which ones got the better opportunities for some additional margin leverage in 2026.

Sure, absolutely. So yes, you heard me on the call, talk about double-digit sales growth for Douglas as expected. Right now, the expectation and solutions is that we are at our target 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. We optimize 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. On the margin on Attachments, I would say, right now, assuming those to be relatively flat. And again, there's upside as cloud 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. So as usual, will be better feel for it. in the springtime, it sounds like. Can you comment also about how it's been going so far with owning Venco Venturo or anything surprised you or look different than you expected?

Yes, 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 acquisition, but we think there's possibilities, huge opportunities there over the next not few months or years, but over a long period of time. I can tell you from an integration standpoint, it's been going 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 have a great reputation in the industry of being a company that takes care of employees and really puts people and 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 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 is still there for 2026.

Great. Maybe one last one for me, but all this recent snow, I got 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 tonnage mill. I don't mean like a Houston and Dallas or even in the Southern Georgia area, but I mean like Virginia, are around 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.

Yes, I would say if you look across pretty much all the areas where we sell cloud the major areas and 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. In other cases, even if it's 2 or 3 inches. We call those plowable events and 2 to 3 inches versus 8 or 9 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 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 flowing but putting down salt and sand on the road using our hoppers. So overall, as I said, this is -- it's been a pretty good year so far. We still have I don't know, say, 6 to 8 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.

The next question is from Tim Wojs with Baird.

Nice to see the results here. 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?

Yes. 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 bring 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 mix component with parts and accessories that kind of normalizes? Is that a headwind?

You answered your own question.

Yes, you're spot on. 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, in some of the lake effect. That increase in P&A sales helped to drive that -- 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. It's hard to speculate how we seen more average snow volume in the fourth quarter, we most likely wouldn't have seen as high as P&A sales. results still would have been very good, 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 approach", which then leads and drives to where our guidance was.

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

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

Yes, 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 in 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 retail sales, not just in parts and accessories, but for our major equipment, 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 flowers that they need right now in season. And then, yes, we'll really -- we'll have a lot more color as we always do in the second quarter conference call.

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, 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. The answer is yes. So our target was double digit 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. Got you. And then I'll sneak one last one in. Any 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 any sort of modeling items or anything like that you'd want to get out there.

No. I mean, in the first quarter, with attachments driving much of it is the lighter quarter. I mean, clearly, we haven't seen snow storms 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 wildcard, I guess, will be what we see for parts and accessories.

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

When we look at the results for the Solutions 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 play out. It seems to almost like accelerate momentum into the end of the year. So can you just talk about why that was -- why the second half end up maybe stronger than you had thought earlier in the year?

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

Okay. And the Missouri facility wins 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, that's 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 will 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.

Yes, great point. Yes. Okay. And then for the fourth quarter in the Attachments segment, 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?

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 that'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 a cost avoidance that may be coming back online now that market demand is picking up. Like 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 volume or incremental margins, the opportunity has changed our solutions tend 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 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 look back a couple of years ago and I think $10 million to $12 million that we took out of the business at that time. That's not something that we did it was necessary, but it wasn't something that we did lightly. That's not our MO as a company. And we're all very focused, I'd say, as a management team and as 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.

Okay. I guess with that said, where 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?

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

[Operator Instructions] 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.

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 has now concluded. Thank you for attending today's presentation. You may now disconnect.