Douglas Dynamics, Inc. (PLOW) Q2 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Douglas Dynamics Second Quarter 2026 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 of Investor Relations. Please go ahead.

Thank you. 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 today's press release and in our filings with the SEC. Please note the quarterly fact sheet can be found on our IR website. 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, followed by Sarah reviewing our financial results and guidance. 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 to our call, everyone. We're pleased to report that both segments performed well in Q2, resulting in a record quarter for the company. These continued results underscore the strength of our current position in the markets we serve, the positive market conditions we're experiencing today, how well we're operating across almost every facet of our business and ultimately are just a fantastic example of a team effort across the entire company. In the Attachments segment, our team responded exceptionally well to the elevated demand created by last winter's snowfall, delivering strong operational performance. And meanwhile, the Solutions segment delivered another excellent quarter, continuing the pattern of strong results that has characterized the business in recent years. Sarah will share more details shortly. But as a quick summary, 3 key factors have been driving our performance so far this year. First, above-average snowfall last winter created strong preseason demand at Attachments. Second, ongoing robust demand for our municipal-focused products and services and solutions. And third, our teams have really maintained an unwavering focus on execution, meeting near-term customer demand while continuing to advance our long-term strategic priorities. Our performance was strong across the company. Results in the Attachments segment really exceeded our expectations. This gives us the confidence to raise our full year guidance once again, which Sarah will discuss later in the call. Let me walk through our performance by segment, starting with Work Truck Attachments. As you know, our dealers put in preseason orders for the upcoming winter during Q2 each year. I'm pleased to share that very solid retail sales, combined with lower plow and hopper field inventory, drove strong preseason orders during the quarter. Our team did a great job delivering roughly the first half of these orders, resulting in year-over-year top and bottom-line growth. Furthermore, we continue to expect a preseason shipment mix of roughly 50% in Q2 and 50% in Q3. For context, in 2025, we shipped approximately 60% of preseason orders in the second quarter and 40% in the third quarter. So bottom line, we anticipate a very strong Q3 in Attachments. We will continue to ship these remaining preseason orders to our dealers over the next several weeks, so they will be ready to install the products as we move into their main retail season before winter weather arrives. And based on the ordering patterns we've observed and our most recent field inventory taken in Q2, it's clear that dealer inventories are lower than they have been in recent years. This means, in addition to strong demand, our preseason has seen a boost from dealers who are rebuilding their inventories. We are also in the process of building more finished goods inventory compared to last year so that we're ready to ship to dealers in season when the snow starts to fly. And it's not just whole goods. You may remember that we achieved record parts and accessories sales in 2025. Well, based on current trends, we expect to surpass that record by the end of the third quarter this year, which is just a tremendous achievement by our team. As always, we'll continue to closely monitor reorder activity during the second half of the year and weather trends once we get into the fourth quarter. So staying with Attachments, but switching gears to cranes and hoists, the integration of Venco Venturo is essentially complete. Our new team in Cincinnati is incredibly receptive to and already benefiting from Douglas' manufacturing, sourcing, and operational expertise, which is contributing to improved execution across the business. To wrap up Attachments, we remain optimistic about our third quarter performance and believe we are ready for whatever the weather brings us in the fourth quarter. All right. So turning to Work Truck Solutions, where municipal demand continues to be a key source of strength and where we're investing to expand our capacity to meet customer needs. Of course, we know results in Solutions will naturally fluctuate from quarter to quarter. After delivering record second quarter results in both 2024 and 2025, we're pleased to deliver another excellent second quarter in 2026. Our municipal business continues to generate growth, supported by ongoing operational improvements, and our continued strong competitive position in the market is the main driver behind our strong backlog. To support this growth, I'm pleased to confirm that our new purpose-built facility in Missouri is now open and fully operational, right on schedule. We're also expanding our manufacturing operations in Manchester, Iowa, with the addition of a new logistics facility. Construction is already underway, and we expect the building to begin operations during the fourth quarter. Once complete, it will also free up valuable space within our existing manufacturing facility and help improve throughput and efficiency. And more recently, we announced the planned relocation of our Ohio upfit center to a larger, better-suited facility, which will increase capacity and efficiency. These investments represent important additions to our capacity and position us well to exceed customer expectations and support future growth opportunities. As I mentioned earlier, the strength of our municipal business helped to offset softer demand in certain areas of our commercial operations. As we continue to navigate shifting demand trends, we are taking targeted actions to optimize our sales and marketing efforts while aligning our cost structure to preserve profitability wherever possible. It's encouraging to note that our dealer channel, which has historically been one of the more difficult parts of the business to forecast, has shown signs of improvement recently and is trending in the right direction. Another trend we've observed recently is that several of our larger fleet customers have paused their ordering as they evaluate the current geopolitical and economic landscape. This is an important distinction as these orders have been put on hold, so to speak, rather than lost to competitors. Overall, we continue to expect another solid year from the Solutions segment as well. All right. So with the results of another strong quarter covered, I'd like to take a moment to focus on the bigger picture. Over the last several quarters, our leadership team has taken the time to reflect on what makes our company great, namely the dedication and expertise of our people, the strength of our iconic brands, and the impact our products have on helping keep people safe and communities thriving. Two things really became clear during these discussions. First, we've traditionally focused our strategy and structure at the individual brand level. And second, we needed a clearer, more consistent and inspirational way to communicate who we are, what guides our decisions, and where we're headed over the long term, not just for each of our divisions, but for Douglas Dynamics as a whole. This is why over the last several quarters, we've shared how we're reframing and executing our strategy. First, through the 3 pillars of optimize, expand, and activate, a clarifying and compelling foundational framework now being used across the company; and second, the creation and introduction of an updated mission and vision. At Douglas Dynamics, our mission is to keep people safe and communities thriving. This simple, memorable tenet underscores the importance of the work our employees do every day. In snow and ice control, our products literally help save lives and keep our communities on the road and able to function during winter weather. And across our upfitting operations, we provide the equipment and upfit the vehicle that ensure professionals across countless industries can do their job safely, efficiently and productively. Just as importantly, we believe safe and thriving applies to the community we've built inside Douglas Dynamics. Our people have always been our greatest competitive advantage, and creating an environment where our people feel safe, supported, and proud of the work they do is of paramount importance. As we look to the future, our vision is to build the most comprehensive portfolio of trusted work vehicle attachments and solutions that set the standard for safety, quality and productivity backed by the best team in the industry. Now we already know we have the best team in the industry, but this vision reinforces our commitment to investing in great people, delivering products that customers trust and rely on, expanding thoughtfully into adjacent markets and continuing to build a stronger, more diversified company. Now ultimately, this framework doesn't change who we are. It provides a clear way to provide purpose to our teams internally while more clearly explaining where we're headed externally. As we continue to execute our strategy and pursue future opportunities, you'll hear us reference these ideas more consistently because they represent the lens through which we're making decisions and building Douglas Dynamics for the long term. To conclude, our business is performing well. Our operations are executing efficiently, and the end markets we serve support continued growth opportunities. The strength of these fundamentals is clearly reflected in our results. So to all of our employees, thank you. These record-setting results are a direct reflection of your hard work, commitment and focus on delivering every day for our customers. And to all of our stakeholders, this is an exciting time for Douglas Dynamics. As we move through the third quarter, we remain confident in our ability to execute our strategic priorities and continue making progress towards our long-term vision. While we are justifiably proud of what we have accomplished so far in 2026, there is a lot more we are aiming to achieve in the years ahead. And on that note, I'd like to pass the call to Sarah.

Thanks, Mark. I'll start by walking through the quarter before turning to our increased guidance, and then we'll open it up to questions. Before I talk to the numbers, unless stated otherwise, all these comparisons I'll make today are between the second quarter of 2026 and the second quarter of 2025. As Mark noted, it was a record second quarter overall with both segments delivering strong financial results. Combined with our excellent first quarter performance, we generated outstanding results for the first half of 2026, and we are well positioned as we move into the back half of the year. Based on the outperformance of the Attachments segment, the ongoing strong performance of Solutions and our visibility now into the third quarter, we've raised our guidance ranges, which I will also discuss. Turning to the numbers. Consolidated net sales increased 10% to a record $214.6 million, driven primarily by robust preseason orders at Work Truck Attachments, while gross margins remained strong at 31%, flat with last year. SG&A expenses increased 37% to $29.8 million as improved performance led to higher variable incentive and stock-based compensation, along with increased employee costs associated with the addition of Venco Venturo. Adjusted EBITDA increased 5% to a record $44.6 million, and adjusted earnings per share increased 7% to a record $1.22. So we saw quite a few record consolidated numbers this quarter. Before going further, I want to remind you that the tariffs that impacted many companies recently were not material for Douglas Dynamics as we source the vast majority of our materials in North America, we manufacture solely in the U.S. and 95% of our sales are also in the U.S. While we have received IEEPA refunds, they are not material, and they've been accounted for in our results and in our updated outlook for the year. Okay. Let's look at the results for the 2 segments. Work Truck Attachments delivered a fantastic quarter, exceeding our initial expectations. Performance was driven primarily by strong preseason demand, particularly for parts and accessories, as well as the efficient manufacturing and shipping execution of our team. Net sales increased 20% to $129.3 million, driven by strong demand on above-average snowfall and the addition of Venco Venturo. Adjusted EBITDA increased 13% to $35.8 million, with adjusted EBITDA margins of 27.7%. As Mark mentioned, the ratio of preseason shipments in 2026 is expected to be close to a 50-50 split between second and third quarters compared to a 60-40 split last year. While margins remain strong, they were impacted relative to last year by the addition of Venco Venturo as well as the timing of preseason shipments and changes in product mix. As we noted last quarter, the more balanced timing of preseason shipments between the second and third quarters can create some quarter-to-quarter variability in margins. Looking ahead, the outlook for Attachments remains positive. We are on track to deliver improved margins for the year. We are also on track to complete our preseason shipments by the end of the third quarter, and we expect to enter the fourth quarter with healthy inventory levels, well positioned for the start of the winter season. Turning to Work Truck Solutions. Our net sales of $85.3 million were relatively flat compared to the record results achieved last year, while adjusted EBITDA was $8.8 million. We are pleased with these results, particularly given the difficult comparison to the record second quarter achieved in both '24 and '25. The demand trends continue with performance driven by the continued strength of our municipal operations, which helped offset ongoing softness in certain areas of the commercial business that led to lower volumes and greater inefficiencies. Municipal demand remains strong. We are booking production dates well into 2027 and added approximately 10% of additional municipal capacity. At the same time, we are maintaining discipline around our cost structure in the areas of the commercial business that exhibit softness. All in all, another great quarter of positive results for Solutions. With the results for the quarter covered, let's turn to the balance sheet and liquidity. Net cash used in operating activities increased $12.5 million to $25.2 million for the first half of the year. Year-to-date, free cash flow decreased approximately $14.6 million to negative $32.5 million compared to negative $17.8 million in the first half of 2025. The main factors were higher inventory, which was needed to meet demand and increased receivables driven by higher net sales. At mid-year, we maintained $69.4 million of total liquidity, comprised of $1.9 million in cash and $67.5 million of available capacity on our revolver, which is more than ample for our needs this year. Capital expenditures increased by $2.2 million to $7.3 million in the first half of the year, which is right in line with our plan. And looking at 2026 as a whole, we still expect full year CapEx to be within our traditional relatively modest range of 2% to 3% of net sales. Our capital allocation priorities remain consistent. We're committed to returning excess cash to shareholders via the strong dividend we've consistently paid for 16 years. We also repurchased around 67,500 shares. And when combined, we returned a total of $10.1 million to shareholders during the quarter. Finally, while we are open and interested in pursuing strategic M&A opportunities as they arise as part of our Activate strategic pillar, we will always remain prudent in our approach and have to find the right companies and products at the right valuation. Okay. Let's turn to our outlook. We are raising our guidance ranges based on the strength of preseason at Attachments. We now expect 2026 net sales to be between $765 million and $805 million. Adjusted EBITDA is now predicted to range from $120 million to $135 million, which is an 8.5% increase at the midpoint compared to the previous ranges. Adjusted earnings per share is now expected to be in the range of $2.90 to $3.40, which is a 12.5% increase at the midpoint compared to the previous ranges. The effective tax rate is still expected to be approximately 24% to 25%. And as always, this assumes relatively stable economic and supply chain conditions and average snowfall in the fourth quarter. Let me provide a little more context. As you've already heard, it's important to remember the timing of shipments this year versus last year in Attachments. We expect preseason to be close to a 50-50 split between second and third quarters versus the 60-40 split in the 2025 preseason. At Solutions, the outlook remains generally in line with our initial expectations. Our backlog provides partial visibility for the remainder of the year. Today, we're predicting full year top-line growth and low double-digit margins, which encompasses the growth of municipal and the softness in commercial. While we continue to see raw material and energy-related inflation, our teams are taking the appropriate actions to mitigate these pressures, and we will remain vigilant going forward. To summarize, we're very pleased with our year-to-date performance, and our updated outlook indicates that we are on track to deliver record annual results in 2026. To put that into perspective, if we achieve the low end of our updated adjusted earnings per share guidance range, that would represent an approximate 20% increase over our previous record set in 2019. In addition, our guidance range implies that we can achieve margins in the low 20s for Attachments while maintaining low double-digit margins for Solutions. With that said, our focus remains on the task at hand: continuing to manufacture and deliver equipment, increasing throughput across our Work Truck facilities and positioning the business to deliver strong results. Congratulations to our dedicated team whose constant focus on delivering for our dealers and customers every day is highlighted by the strength of our performance this quarter. That concludes our commentary. We'd like to open the call for questions.

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

I'm blanking here on Attachments. Help me fill in the blanks. Maybe you mentioned this in your prepared comments. I don't think I heard it. The EBITDA margins were down year-over-year. The sales were up about 20%. Can you just help me bridge -- and I think you beat my estimates on it, but just to make sure I know what's going on. Help us bridge some of the downside in the margins over the prior year.

Sure. I'd be happy to do so. So the second quarter, the margins were down slightly. I would say the largest impact there is the addition of Venco Venturo. In addition, when you look at what we shipped and the timing of everything, we essentially had some shifts in the mix of what we were getting out the door in the second quarter versus the third quarter. If you take out the Venco acquisition, our margins in the second quarter would have been flat to last year on higher volumes. And then I'll add just 2 more points on the Attachments margins. When you look at the total preseason and what we expect, we expect our margins to be up year-over-year when you just look at preseason in total. And we also expect the full year margins to get into the low 20s.

Outstanding. And then on Attachments on the top line, I know you mentioned Q2 and Q3 being roughly 50-50. What about Q4? That could be a wildcard based on actual snow activity. But given the strong orders you had in the second quarter that will hopefully affect the rest of the year, do you think we should be modeling at least a little bit of growth in Attachments in the fourth quarter?

Yes. So we have not really changed our expectation for the fourth quarter. I believe I spoke to it a little bit last year and the fact that fourth quarter was a strong parts and accessories quarter last year. We had a lot of snow early. Our expectation from that standpoint is from a whole unit perspective, we're being relatively conservative, I would say. That's probably all I would elaborate on.

Yes. And from a more anecdotal standpoint, I think Sarah is spot on. I mean we know the fourth quarter, if you look back the last several years, it can be great. It can be a little bit lighter. I'd say a couple of things. One is, in talking with our dealers, there's, I'd say, a sense of optimism that maybe we haven't seen as much the few years where we didn't have as much snowfall, we're coming off a very strong year. So you see the -- as I mentioned, the inventory, you see the retail sales, talking with them at the various shows. There's a lot of excitement out there. We're also committed. I don't want to be lost that in Attachments, we're doing everything we can to ship the very strong preseason that we -- the orders that we had by the end of the third quarter. So our teams are very diligent because it's during the summer and early fall where product is actually being put on contractors' vehicles. And so we see that occurring as well. So kind of everything is lined up. Obviously, we have to wait and see what snowfall does, but everything else that we can control is in a really good spot right now.

I'll add just a little bit, Mike. When you look at the midpoint of our guidance for the full year, that leads you to about 15% to, call it, 20% growth for the entire company with our expectation of Solutions with what we're seeing in municipal and the softness in commercial, just having volume up in the low to mid-single digits. And essentially, the rest of that growth then is in Attachments.

Okay. Got it. I also want to throw out a quick Venco Venturo question for you as well. As you look at your attached businesses that are part of the snow business, you've had a great track record of innovating with new products for years and years in the snow business. Tell us a little bit about what Venco Venturo offers. Are there any new products on the horizon there? What's been their track record and their history of putting out new hoisting cranes to the market?

Yes. We talked about -- good question. We talked about on the call some of the, I'd say, initial efficiencies that we have focused on and continue to around manufacturing, supply chain, just overall operations. We have a strong product development team, as you mentioned, on the snow side. That's something I would say we'll continue to look at in the future. I don't have anything to report out right now in terms of any huge changes that we've made from a product line standpoint. But as we have with other functions, kind of looking at seeing where can we take our historic strength in that area and see how we can apply that to Venco.

The next question comes from Tim Wojs with Baird.

Maybe just -- by the way, I like this morning stuff. So I'm someone who needs a morning conference call. So my vote would be to keep it going. But yes, maybe just kind of stepping back in the Attachments business, what was stronger than when we talked 90 days ago on the preseason? Because it still sounds like we've got kind of a 50-50 mix Q2 to Q3, but we're raising the guide effectively on the sales side for stronger preseason. So I'm just trying to -- did you get more out in the second quarter than you thought as well? I'm just trying to think about where the upside surprise was.

Yes. In general, I'd say kind of across the board, we saw plows and hoppers, the numbers from the preseason orders came up. And then, as Sarah mentioned, I talked to it, too, the parts and accessories orders were extremely strong. So -- and those, again, we shipped some in the second quarter, a lot of that will get shipped out in the third quarter. That's why we feel comfortable about talking about a strong Q3 and really focused on making sure the remaining preseason orders get out by the end of Q3.

Okay. And I guess like when you're talking to the channel -- I mean, I guess, parts and accessories, I can understand kind of being pretty strong in the first quarter, just given the usage. Is it your understanding that both the plows and the parts and accessory inventory levels in the channel were pretty low, and so you're rebuilding both? Is that kind of what's going on there?

Yes. I would say we don't have as much visibility into the parts and accessories inventory in the channel as we do with plows and hoppers. So we're basing the belief that's more anecdotal on parts and accessories and certainly, the fact that they -- that our dealers have ordered what they have, both for what they used and consumed last year, selling to contractors and then what we anticipate they're buying coming into this year. When we talk field inventory specifically, and we go out and have some formal processes to get this several times a year, we're talking to the plows and then the hoppers on the back of the truck. And that's where we've seen our most recent inventory check, which was a month or so ago, is both plows and hoppers were lower than what we've seen in the last several years, and the dealers also reported strong retail sales on those product lines.

Okay. That's helpful. And then just -- maybe just dialing in Q3 a little bit, just given some of the moving pieces historically. Like I guess, just given the 50-50 split, it seems like we should be thinking Attachments will have revenue that's well north of $100 million and margins -- or EBITDA margins that are probably north of 20%. Does that math check out with you guys?

Yes. Certainly because we have a lot more going out the door than that 40% last quarter. I will say from a margin perspective, because of the volume higher than last year, but sequentially, I would expect it to be lower than the second quarter.

The next question goes to Greg Burns with Sidoti & Company.

On the municipal side of the Solutions business, can you just characterize a little bit more color around why you're -- where you're seeing strength in that business? Is it just broader market-related like a rising tide? Or are you taking share within the market? And then I was hoping maybe you could give us a little bit more color around backlog, where that stands, lead times and how much capacity you've brought on and what is coming online from what you kind of detailed in your prepared remarks?

Yes, I'll take the first part kind of more of the qualitative and then Sarah can handle the quantitative on backlog. The Henderson team right now is just performing very, very well. You look at the timing of the deliveries, you look at the efforts on the behalf of the sales teams, you look at some of the new contracts that we're -- that we've been able to achieve. I mean a key in that market is to look out over the next several years. And when we talk backlog, it's interesting. We've shared the concept before. It's not necessarily that customers want trucks right now. We develop a relationship that says, "Hey, over the next 3 years, we want 150 trucks, 50 trucks a year," and that's all included in our backlog. So it is absolutely paramount that we deliver trucks when we say we're going to, that the quality of the vehicles is there and that our customers can come to rely on us. And if you look over the last 2 or 3 years with what Chad Barker and his team have been able to do in that space, it really is that to develop, I'd say, the strongest relationships that we've ever had with current customers, with new customers and really doing what we say we're going to do and making it happen. So again, I'm not going to provide a lot of commentary on what we see from a competitive standpoint, but I will tell you that we're just -- we're really doing well right now.

Yes. On the backlog and capacity question. So the backlog, we are very close to the record backlog that we had back in 2022. So that just shows where we're winning some orders, and that's increasing. On a capacity standpoint, with the Missouri facility coming online, I would call that up to 10% more capacity was added. And the announcement that Mark just walked through in his script on Ohio, we'll add, call it, about the same amount next year, but the facility has room to grow. I would say more importantly, though, that the team has been very focused on their throughput in the upfit locations so that we can get these larger contracts, get the trucks out the door quicker, and they have been making very good progress on that.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mark Van Genderen, President and CEO, for any closing remarks.

I'll finish by saying thank you for your time and continued interest in Douglas Dynamics, and we look forward to talking with you all soon. Thank you.

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