Quarter 1
Q1 2026 Earnings Call — May 12, 2026
Kyle Mingus (Citigroup): Thank you, guys. Maybe to start off, I'm curious just any notable changes in how you're thinking about the growth and any of the verticals in North America for the rest of the year and maybe piggybacking on that. I think you mentioned commercial in-home outgrew the industry in the quarter. I'm curious if that growth was still positive and just how you're thinking about commercial in-home for the rest of the year.
Mike (Executive): Look, I don't think anything's changed. So we still feel very optimistic in terms of all verticals in the business having continued growth. Momentum is positive. Sentiment is positive. Commercial and home in particular has been, as you know, been doing quite well for a number of years. We see no change in demand. So at the moment, everything is green.
That's helpful. And I'd love to just hear more about the ScanPay Wash technology that you've rolled out and just curious how unique this is to Alliance. And then just how are you thinking about monetizing it? And is it more of a, I guess, market share gain play that you think you can get with this technology?
Mike (Executive): So remember, we're really the only player in the industry who has a truly integrated platform with software and hardware together. The payment is a part of that. The ScanPay Wash has been very, very popular just because people don't like to download apps. So I think it's just convenient, it's easy, it provides some benefits to the store owners, but ultimately it's a convenience for the end user. And in terms of monetization, you know, as I said in the opening remarks, I think we're more focused today on, hey, let's just get adoption. And we believe, again, that that stickiness, the value that we can bring sort of by the digital platform in general is going to continue to be very strong. We do clip a little bit of a fee on the scan pay wash, but it is not really meaningful, Kyle. And that we think is the right strategy for now.
Mike Hollerin (Baird): So first just on the vended side of things North America, maybe just talk about the dynamics you're seeing in the marketplace. Any sensitivity to the volatility right now when it comes to the refurbishment cycle or even build-out cycle? And what are the customers saying about the current dynamics?
Mike (Executive): At the store level, not really any major impact of note. At the investor level, so those who are hoping to get new stores or retrofit their existing stores that they have. There is no change in demand. The continual challenge has been more on the permitting and then just finding labor in particular. And to a lesser extent, still, you know, when you're putting a store together, you've got a lot, a lot of different components and parts and pieces. And so some of that is subject to supply chain where, you know, you can't get a front door that closes or a boiler or whatever it happens to be. But in general, it's really just permitting labor. And then as we talked about on past calls, site selection. But more of the drag is just it just takes more time and you're pushing through the funnel. But demand, the pipeline is still very, very robust.
Thanks for that. And then on the price-cost side of things, maybe just talk to the inflationary backdrop, how you think the price-cost manages through the year, and do you foresee any incremental pricing options on your side?
Dean (Executive): I think from the standpoint of price and cost, as we disclosed in our release and talked about previously, we've really covered our cost increases from inflation as well as tariff with the price increases we took in late middle to late 2025 and then some in early 2026 internationally. So we're well positioned to manage as pricing evolves, as tariff environment evolves to adjust accordingly. But we feel good with where we're at today in our guidance for covering our price, our costs with price for the rest of the year.
David Ridley (Bank of America): Am I right in thinking that this is probably the on a year-over-year basis, the most meaningful one for tariff pressure, just given the timing of all the things? And then also on the topic, could you discuss, there were changes to Section 232 tariff on steel and aluminum. Can you discuss whether that was a net benefit or a drag for you and also maybe your competitors?
Mike (Executive): I think from the standpoint of tariffs, yes. I think the first quarter is really the toughest comp quarter given the ramp up and the activity in tariffs in 2025. We have about $4.5 to $5 million of headwind in the first quarter from tariffs that are consistent with prior year. And again, consistent with the prior question, we've covered those costs with price. Also on the other side of some of our commodities, as you know, we've locked in the most important commodities in terms of our cost of materials, in terms of steel and stainless steel for the year. So we feel good with where we're at. We have good visibility on those costs as it relates to our prices. Then I will say on the change in the Section 232, I would say it's slightly favorable, but pretty close to what it was before.
David Ridley (Bank of America): Got it, thank you. And just on the it sounds like you are in a good position from your own costs. It would seem that broadly this concept that electricity prices are going higher is out there and in the public mainstream now. And that would seem to me to be an impetus maybe for, since utility costs are so meaningful for your customer base, that it seems to be maybe on the margin, maybe an impetus for refreshing. Is your energy efficiency more of a selling point today than in the past? And how do you think about that?
Mike (Executive): So again, it depends on the age of the equipment you currently have. So an older generation, let's say, you know, approaching the seven to 10 year again, these units, as you know, get warm and written pretty hard. So everything kind of loosens up efficiency generally degrades over time, particularly if it's not well maintained, which, you know, is the reality very few people really maintain their product as well as they should. It's just like a car or anything else. Nobody really does what the manufacturer is asking you to do. So there is a value proposition there. I think it would take probably several quarters of when you really see that show up. And it materially impacts your results month after month. I think that gets people off of sort of dead center. So I think it helps people. I think more important is sort of the innovation and the digital connectivity that allows people, again, to not only reduce energy but gives you potentially an uplift in terms of the revenue side of the equation. So I think it'll come, but I don't think it's a quick one, and we need it to be pretty consistent out there for a number of quarters.
Tomo Sano (JP Morgan): So, Europe and APAC was strong, and could you talk about where exactly is the growth coming from, countries, channels, and if you could talk about what are the key risks, including geopolitics and competition, please?
Mike (Executive): So for Europe, very strong across the board, all parts of the business. So vended was up pretty significantly. Our on-premise business was up significantly. The majority of that has come where we have direct offices, so Italy, Spain, in particular, and France. And we see no change in that. I will say, having just been in that region a week or two ago, sentiment is people are a little bit, I wouldn't say nervous, but they're thinking, they're pausing, and they're kind of waiting. So I would expect that. You know, given energy prices in particular, given, again, the uncertainty around the war, we'll see some pullback, I would suspect. Nothing material at the moment, nothing that we could sort of point our fingers at, but general sentiment in that part of the world is slightly negative, I would characterize it that way. In APAC, you know, it's been a continual story. We are getting more growth from on-premise. It is one of the areas that we have, as I've talked about in prior calls, sort of lost a little bit of focus on. So they're getting more there. And then in particular, Thailand has really had a very, very strong start to the year. And most of that has been on the vended side of the business.
Tomo Sano (JP Morgan): And one follow-up. International margins are now 30.4% versus North America, 27.2%. What structurally drives the gap, and how should we think about it going forward, please?
Mike (Executive): I would say, first, Tomo, as we've talked about in the past, as we grow internationally and as different regions of the international segment and mix impact those regions, especially Europe in particular that Mike talked about, we will see stronger EBITDA margins as a result. So it is a little bit lumpy, but consistently growing, trending up and to the right. So parity with North America will continue to increase or to get closer together. One thing I would say is that about a third of the top line and a third of the bottom line is FX related in the quarter. So if you take away the FX impacts internationally, we'd be up 7% in revenue and 9% in EBITDA. So still margin expansion. We're benefiting from the natural hedge that we have on our local for local manufacturing strategy. So we feel really good about the margin trajectory internationally. But again, it's somewhat episodic or lumpy in terms of which regions and which end markets are the strongest in a quarter, again, up and to the right over time.
Susan McCleary (Goldman Sachs): My first question is on the adoption rates that you're seeing with ScanPay Wash. It sounds like you're getting some really nice traction there. As we think about the next several quarters and this continuing to gain some momentum, can you talk about how we should think about what that means in terms of the overall growth and then how you're also thinking about investing in the next wave of innovation and other strategic initiatives that you have in the pipeline?
Mike (Executive): So just on ScanPay Wash, again, it's part of our digital platform. So there are a lot of other sort of features that you would get with that. So it's more just sort of an add-on. And again, as I mentioned, it's not really material at the moment in terms of showing up in the financials in any way. And I think in terms of our innovation, you know, it is really across the board. It's something that we have invested pretty significantly in. I talked about almost doubling our testing capacity that we have in the U.S., in Thailand, as well as in Czech Republic to really get that 24-7 turn. So the physical product, again, Susan, will be a little bit slower because what we don't want to do is launch a product before it's tried, tested, and true. So those labs are very, very important, helping us accelerate the physical product and simulating all kinds of things from brownouts to dirty water to vibration to all kinds of things and run life testing to make sure that that product is durable, reliable, and long-lasting. And then the digital side, again, much, much quicker to innovate faster, to roll out. And we see, again, that sort of one-two punch.
We've got a very significant development team. As I said, we believe we are the only fully integrated company in the space and got some great team members in the development center, again, primarily in our Asian market. But it is going to be pretty healthy, I think, in terms of how we feel about it, how we look at it, and what you will continue to see from the company.
Okay. That's great color. And then you also mentioned that you completed your second acquisition of a distributor in New York. Can you just talk a bit about the M&A pipeline, and have there been any changes given the recent changes? uncertainty in the macro and moves in inflation?
Mike (Executive): I mean, again, I think you should think of us as very capable of acquisitions. We're always looking. That pipeline is not, you know, infinite. It's a small number. We have largely accomplished what we said we would do, setting out our strategy a number of years ago in terms of the acquisitions of distribution in the U.S. market. That's not to say we aren't engaging, continuing to dialogue with people, but it will be a part of our story. You should not think of us that way. On the manufacturing side, again, we're always in active discussion. But I would say more than anything, we've got everything we need to continue to grow at a pace above market. And we view all of these as complimentary, nice to have, but none of it is a need to have, and that's kind of how we look at it. So where we can find value, and again, I would emphasize we are very disciplined in terms of any of these targets that we're looking at, but where we see it, you know, you'll see us act, but it is more on the margin is what I would say.
Amit Mehrotra (UBS): Can we just talk about the phasing of the pricing actions? I was trying to understand, like, the natural carryover pricing from last year versus the incremental pricing from tariffs. And then just my second question is just around, can you just elaborate?
The question is called African negative impact from the North American margins. And just based on guidance, it seems like the negative mix should reverse to the bounce of the year. Just any color there would be helpful.
Dean (Executive): Yes, the impact on margins, gross margin in particular in the quarter was pretty much mix related product and region. Nothing fundamental to the gross margin for the quarter. We still expect gross margin expansion and EBITDA expansion built into our guidance for the full year. So I think your point is accurate that we will start to see that pick up as we comp our price increases year over year and our public company costs. With regard to pricing, as we said in the previous quarter and consistent with this quarter, is that pricing will be a bigger benefit to our top line in the first half of the year, given the timing of price increases in 2025 due to tariffs and otherwise. We pulled forward our 2026 North America price increases into November, announced them in November of 2025. So those could be started and realized at the beginning of 2026. As the year progresses, you'll see less impact in the second half from price because of that timing. But we're also very confident that quarter over quarter consistently for the year, you're going to see volume increases consistent each quarter on a comparable basis, quarter over quarter, such that for the full year, we still expect to be about 50 percent price on average and 50 percent volume in terms of our guidance for the full year.
Ketan Mamtoora (BMO Capital Markets): Maybe to start with, can you talk a little bit about, and we discussed M&A, but I'm just curious, as you start to approach your target of two times leverage, can you talk about how you are thinking about sort of capital allocation, and if you can just rank order your priorities, please?
Mike (Executive): Consistent is the theme, I think, here in terms of our communication on capital allocation strategy. And we're fortunate, given our business model and our strong free cash flow profile that's consistent throughout the year, to have multiple opportunities to pull multiple levers at the same time in order to return capital to shareholders and be balanced. But still, our number one priority currently is deleveraging. Having said that, we are able to deleverage at the same time we are going to continue to invest in our business in terms of capital and new product and innovation at scale compared to our competition. As Mike referred to earlier, M&A is really not a big portion of our story. It's not something that's going to take a lot of capital as we foresee it today. And then we will still have the opportunity, as we said in our prepared remarks, to return cash to shareholders over the longer term, medium term, in terms of when it's available, when it's opportunistic to buy back shares, and or over the long term, consider a dividend. So the good news is that we have a lot of opportunity at our discretion, given our strong free cash flow profile. And deleveraging is our number one priority, but able to pull on multiple levers at the same time given our strong free cash flow profile.
Mike (Executive): I mean, again, where we can find the information, as you know, our number two competitor is publicly traded, so you guys who follow them can find the information. You know, I think in general, the competitive situation is unchanged. You know, we do see, at times, again, these are great companies. At times, there are decisions they make that we don't fully follow and we're not clear on. But I would say, in general, it is the same as it has been. Again, you know, the international players struggling a little bit more here in the U.S., particularly given the tariff dynamic. You know, we're starting to see some of those pricing actions begin to come in. They are not anywhere close to what we know their costs are going up, but they are beginning to pass those on. And as we talked about, we felt that that would really begin to manifest itself in the back half of the year. We still think that is the situation. And, you know, the competitive dynamics from our position we feel that we are in a stronger position, certainly, and again, I've been here almost two decades. I've really never seen the opportunities that we have at the moment in terms of our value proposition, our products, our team, what we have coming down the pike in terms of the innovation and value for end users is incredibly, incredibly strong. So I'd probably just leave it at that. I feel we're executing very, very well and in a tremendous, tremendous position.
This does conclude today's question and answer session, as well as Alliance Laundry's first quarter 2026 earnings conference call. You may now disconnect your lines and have a wonderful day.
Quarter 2
Q4 2025 Earnings Call — March 12, 2026
Analyst Tomo Sano (J.P. Morgan): Good morning, everyone. Congrats on a quarter. My first question is, given the trends you saw in Q4, do you expect any notable differences in demand strengths between North America and your international business or across your key segments as you target 5% to 7% top line growth for 2026? Are there particular areas where you see more robust or softer demand, please?
Executive Mike: Yeah, I would say to almost, Mike, that, again, we see really strong demand across all parts of the business. I do think given some of the volatility in the, but at least at the moment, you know, that's likely to be a little bit weaker and that'll take some time to see how that ends. But I would say across the board, we really do see strong, strong opportunities and that is across the business. There's none that I could think of, honestly, that would give me pause or concern. And then we've talked about, you know, sort of over-indexing a little bit on the laundromat piece in particular, right, both in emerging markets as well as in more mature markets such as Europe and the U.S. and select Asian countries. But, you know, very strong across the board.
Analyst Tomo Sano (J.P. Morgan): A follow-up on the 2026 guidance, how are you factoring in outlook for steel costs, pricing power, and potential changes in tariff policy? Could you elaborate on assumptions you're making for each of these drivers and how sensitive your guidance is to movements in these areas, please?
Executive Mike: Yeah, so in steel, we're locked, right? And we have more than offset those cost increases both on steel as well as tariffs with some pricing actions that we took last year. So they are both margin and dollar accretive. So that is straight up. And what was the second part of the question? I don't recall. I don't know if I answered that. Oh, sorry. Yeah, who knows? You tell me. But we expect no change. And, again, you guys are reading the news like we are. You know, if something does change, hey, we're ready to react. But we expect that the administration will continue to find ways to keep those barriers in place. We do see competitors beginning to take action. And so that is something that we thought would happen, and it's playing out exactly that way. And Tomo, I would add that the steel and aluminum tariff duties that have been put in place were not part of the Supreme Court ruling. So those are still in place and a competitive advantage for us as foreign competition and manufacturing and international locations, you know, imports into the U.S. We'll keep watching that to my point from their pricing actions and react accordingly. But we still think that's a tailwind for us in 2026.
Analyst Kyle Mingus (Citigroup): Maybe, Mike, following up on your last comment, just what are you seeing from competitors that are facing more tariff impact versus you guys? And just how do you see that relative tailwind unfolding as we progress throughout 2026?
Executive Mike: Yeah, so again, we know where their costs are up. Again, given the tariffs on steel, which I'll remind people is 50% for any non-U.S. steel and aluminum content. And remember, that is our primary and their primary input material. So, you know, we've seen not enough to fully offset where their costs are. And if I were them I think what I would be doing is looking that over slowly over time to try to offset those premiums but it is significant, Kyle, and again we are seeing action. Sometimes it's very hard to get, you know, real information but again we know from the cost base and given their financial profile it is not a hit that they can sustain and they must pass on those cost increases.
Analyst Kyle Mingus (Citigroup): That's helpful. And then you guys had mentioned that international capacity. I think you had said kind of fully ramped or something along those lines. I'm curious just at what point in international markets would you need to potentially expand capacity and check in Thailand?
Executive Mike: Yeah, so the expansion that we did was really more on the engineering front in the laboratories, right, to get that 24-7 capacity, global engineering, accelerated product development and innovation. So in terms of those facilities, and remember, we have a Czech facility, a facility in Thailand, as well as one in China. And those locations and the core ones are really Czech and Thailand. They've got plenty of capacity and plenty of room to continue to grow without any real material significant investments of any kind, right? So we might have to add additional bodies, but there is no real, again, capex, and they can run for a while.
Analyst Mike Halloran (Baird): So maybe just a little more help with the guidance here. I know, Dean, you laid out a little stronger revenue growth in the front half of the year versus back and a margin expansion later on through the year. But maybe just help a little bit more with the cadencing. How does this compare with normal seasonality as you look at the core business, particularly from a volume perspective? Any particular weighting we should put to the revenue or the EBITDA front half versus back half?
Executive Dean: Yeah, so thanks, Mike. We're not giving quarterly guidance, but to your point, I wanted to help you understand how the year will unfold from a revenue perspective. First of all, I would say we expect volume growth to be consistent throughout the year. So underlying our guidance is consistent volume growth quarter over quarter, 26 versus 25. In the first half of the year, though, we have a meaningful amount of carryover of pricing actions taken, mostly in North America, to offset the tariff costs in 2025. So those pricing actions will really ramp up the top line from a pricing perspective in the first half of the year. Also impacts international, but to a lesser extent. All of that really evening out as the full year completes to about 50-50 price versus volume. Having said that, we do have some pricing actions in our forecast, primarily internationally, weighted toward the first half of the year, so those will continue to benefit us, but those are in the low single-digit types of increases. Our guidance does not assume any additional pricing actions in North America in 2026.
So that's something we'll continuously watch and an opportunity for us as markets and competition evolves. Regarding the EBITDA side, you know, we expect continued EBITDA expansion sequentially as well as year over year. But it's a little bit muted in the first half of the year, primarily because those public company costs are rolling over. We have annually now about $15 million in public company costs, $8 million incremental in 2026, and those are really evident in the first half of the year. So the price increases and margin expansion that we're going to experience throughout the year from the underlying business will be slightly muted by those rollover of public company costs. But those are well known, and, you know, we think that's the maximum amount as we go forward.
Analyst Mike Halloran (Baird): Yeah, no, thanks, Dean. So maybe just a question on the distribution side of things. A couple in the New York area lately. Is the opportunity, maybe just, I know we've talked about this through the process, but do you see a different opportunity today than, say, a couple years ago? Was the fact that you had a couple in the same region more a function of what the go-to-market strategy was in that region versus a broader opportunity in other regions? And maybe just what's the funnel look like as far as bringing on more of your own distribution in the United States?
Executive Mike: Yeah, so I'll say, Mike, it was really a strategy we mapped out seven or eight years ago as we really embarked on it. And we identified certain specific markets that we wanted to really make sure that we were present in a more meaningful way, and we had people that we could partner with. The last piece of that puzzle, and that's really what it was, was putting together, identifying the markets, and then getting in a position when we had the partnership with distribution, that sort of New York metro area in particular was an area where we just felt there was a lot that we could do. We had good partners, and we are incredibly excited about that, those two recent acquisitions. We think there's more to do, but again, we are being very selective. And, you know, as those opportunities come up, they will be opportunistic. And as I think I've said to you, hey, you should think of us as very capable of doing these acquisitions, but it is not something that is needed in order to continue to grow at an above-market rate.
Analyst Andrew Obin (Bank of America): Yeah, can you just break out the reasons why commercial and home has been so strong in 25? Did you have distributors? Was the pricing impact more significant? And also, what does it mean for the comps in 2026 because first half growth was so strong?
Executive Mike: Yeah, so I'll remind you, Andrew, we have a very unique distribution strategy and we have a very unique product strategy. So let's talk about distribution where, again, we go only through independent retailers. Our value proposition to those retailers is our product will be the most profitable product for them to sell. A big part of that is it is an incredible product that, to use their terminology, it stays sold. It doesn't come back under warranty or quality or other problems which, you know, are plaguing a lot of consumers. And so, you know, one different distribution, curated, defined, careful, allows that distribution network to be profitable. So very different than our competitive set in that part of the world. The second piece is that product quality in the differentiation and being really the only true professional grade washer and dryer available in the marketplace. And you have seen some of our testing. You have seen some of our teardowns.
And when you take it apart and you look at the guts and the internal and you understand the drives and the transmission and the suspension and all of the things that go in where we are using steel, or others are using plastic, there is no comparison, right? So it is a product that is highly desirable. And I think, as I said in my opening comments, everybody is looking for quality. That total cost of ownership, despite our price point, this thing is engineered to last. And I think that is resonating with people who are buying competitive product that is optimized for cost versus what our professional operators need for their business, which is quality, reliability, and durability. Andrew, on the comp side, although we're not giving any detailed guidance on individual business units, we're not building in double-digit growth in this business in our guidance for 2026. But the key is we do expect to continue to meaningfully outgrow the industry with really this replacement-driven product, not tied to new home construction and things like that in other cycles. It's really a replacement-driven, upgraded product, as we talked about in the prepared remarks.
But again, we're not forecasting double-digit growth in this market, although there's lots of opportunities as we move forward.
Analyst Andrew Obin (Bank of America): Okay, so just to make sure, no negative growth in the first half comes to a remain. you can achieve growth even with the comps.
Executive Mike: Absolutely.
Analyst Andrew Obin (Bank of America): That's great. Uh, and then maybe what are you seeing out of the Middle East? I know it's like what I think 60 million revenues for you. How should we think about that?
Executive Mike: Yeah. So again, I think it's five, 6% of revenue somewhere in that range. I don't think it's, it's six closer to the five. So, so I would say, Hey, it's something we're watching very closely. But if it were to go significantly south, I don't think the impact on the company would be material. We had yesterday, we have a global sort of operating review that we do with all of our leaders. Middle East leader is thinking, again, that the impact, I won't give you the exact dollar amount, but it is more than backstopped with lots of other initiatives that we have going on, and we still think we're going to have a pretty good year. And I can't comment on where they'll come in, but I think we'll be fine unless something really, really significant happens, in which case everybody's going to be in kind of a different boat.
Analyst Amit Mehrotra (UBS): Thank you. Morning. Dean, I wanted to ask about the guidance and how you guys just simply approached it. There's obviously your first full-year guidance as a public company, and many companies approach guidance many different ways. Some companies approach it as a floor that they're highly confident they can deliver, and maybe there's some upside to it. Maybe for companies like you who have recurring revenue streams, it's more a realistic view because you are forecasting kind of low, you know, three-ish percent volume growth. I would assume maybe there's some opportunity to do a little bit better. You are, your guidance implies EBITDA incrementals kind of at 30%, which is lower than what you did in fourth quarter, even though the price volume dynamic is similar for Q to 26. So maybe just talk about like how you approach the guide in the context of maybe what seems to be a little bit of pretty conservatism?
Executive Dean: Well, I would say thanks for the question. First of all, I think that's a great one because as a new public company, this is something we take very, very seriously in the way in which we're guiding. And I think number one, the replacement driven characteristic of our business provides us confidence in what we are guiding from a top line perspective. and the opportunities we have in margin expansion, the continued cost-down initiatives, the significant leverage we get on incremental margins from our fixed cost base give us confidence in our ability to continue to expand margins, the bottom line more than the top line. Having said that, there's a lot of things going on in the world that we don't control, so I think we're being prudent with regard to our guidance. We want to make sure that we do what we say we're going to do, which is a characteristic of the company for a long, long time. And so I would say we're confident in our ability to hit these numbers and we have opportunities to beat them that we will hopefully be able to unfold as the year progresses.
Analyst Amit Mehrotra (UBS): Okay. Thank you.
Analyst: Yeah, that does help. Thank you, Dean.
Analyst: Hey, Mike, I wanted to follow up with maybe a bigger question because one thing that resonates with me when you speak, you're very consistent about the mission of the company, the sole focus on laundry, the full focus on quality. And it's definitely a hallmark for great companies, this sort of very clear vision and mission of what you're trying to accomplish. And I guess as we think about how that translates to growth, there's a couple different ways to approach that. One is obviously the quality is what sells. And then what I'm more interested in is are there new product introductions or new incremental revenue streams, whether it's your distribution channel that you're acquiring or just new product introductions that may be accelerating that put more outgrowth in your control as opposed to just the quality dynamic that's very clear and exists for a long time. Maybe you can just help us think about how much of the outgrowth you can actually have in your control with respect to either changes in how you go to market or enhances how you go to market or new product introductions.
Executive Mike: Yeah, so, again, I think, you know, you heard us talk about the investments we've made in the laboratories, actually testing. If you think about our value proposition to our customers, it is, you know, those things we talked about. The low total cost of ownership. The worst thing you can do is launch a product before it's ready. So that is why we do and it takes a lot of time to test and then test again and test again. And the consequence of that is the rollout of these new innovative products. And certainly we touched on, for example, our Lint capture system that is very, very significant in terms of the innovation. And if you are an operator in a hotel property or an operator in a laundromat or whatever it is, that ability to do that drives efficiency, it drives a lot of value. And rolling that out across the rest of our product line that's certainly top of mind, and you'll see that continue to happen. We do have an innovation team that's working on a series of things, but I would say the ones that we feel good about and that are faster to roll out are more on the digital side.
I've equated that to the brain is the physical, mechanical, electrical product, but when you complement that with a very, very smart brain and our ability to bring insights to that operator. It's an extraordinary value proposition. And so it's kind of a one-two punch thinking it about a slow, steady, but proven, tried, tested. You buy a product from us, it's not going to be something you will experiment with. It's a little slower on that side, but steady, consistent, and complemented with the digital side, which is faster. And again, we have been at this for a long, long time. We believe we've been at it much, much longer than any competitor. And to get the digital right, you need the teams, right? You need a lot of software developers. You need data engineers in really big quantities to be able to get things like predictive analytics and others, but we feel very, very confident about that. And there are other avenues that we're talking about. I think we spoke on how we're looking at aftermarket, which is accessories. It includes consumables, right? And I think also on the parts side. We see opportunity really throughout, but hopefully that answered the question for you.
Analyst: Yeah. Yeah, it does, Mike. Thank you so much. Appreciate your time.
Analyst Susan McCleary (Goldman Sachs): Thank you. My first question is thinking about the price mix dynamic in North America. I think you mentioned that you're not planning on launching an additional price increase in the U.S. or in North America this year. But as you think about the more recently launched products and digital initiatives, can you talk a bit about how they're gaining momentum, where we are in that process, and how we should think about their contribution to price mix this year?
Executive Mike: Yeah, so I would say it's complimentary. But look, on the initial launches of product, let's talk about that in the innovation, for example, on our lint capture system. We're providing more value, so the pricing reflects that value. We feel confident about it. You know, we'd go through a lot of analysis here in terms of, Hey, what does that mean for the operator? If we can save them, uh, energy, if we can get them better efficiency. Uh, so all those things are, are, are reflected, but, but again, it's slow, steady, uh, more incremental in nature. It takes time. I will also say that the industry on the professional side, right, they really want to make sure that that innovation is exactly what I talked about tested and tried and true. And so they they are they'll dip a toe in. It takes a bit. So that's why I characterize it as incremental in nature. And then on the digital side, look, I think what we're very focused on is really driving differentiation, driving unit volumes through the factory. We view it as complimentary. And we think that over time, right, we can add and get that to where it is more meaningful in terms of the revenue and margin that it contributes to the business, right? But it's all embedded and it's sort of a package is the way we think about it.
Analyst Susan McCleary (Goldman Sachs): Okay. That's helpful, Collar. And then turning to the balance sheet and the cash flows, as you do approach that two times leverage by year end, can you talk about what you're looking for and how we should think about the potential to start with some shareholder returns, maybe buybacks, those kinds of things where you have some flexibility?
Executive Mike: Sure. Yeah, thanks. So I think, number one, we're very proud of our deleveraging trajectory and the strength of our free cash flow strategy really allows us that multi-pronged approach to continue deleveraging while also investing in the business and considering those other types of capital allocation opportunities that you talked about. We view two times leverage as a comfort level from the balance sheet perspective, but having said that, we don't view two times as a floor. Given our cash flow generation, we could operate comfortably below two in the near term. But deleveraging continues to be our number one capital allocation priority. But to your point, we will consider buybacks in the market as our majority shareholder monetizes their investment and sells down over time. So that is still an opportunity for us. And then as we said in the prepared remarks, given our strong free cash flow and our opportunities to invest in multiple things to return capital to shareholders, A dividend policy longer term for this company might make sense, given that strong free cash flow. So there's a lot of opportunities at our fingertips, and we're really excited about those many different things that we can do to create that shareholder value while continuing to invest in the business at a scale that no one else in the competition can.
Analyst Keaton Mentora (BMO): Good morning and congrats on a strong quarter and year. Maybe to start with, can you talk a little bit about your M&A pipeline and which areas or geographies you think you've got the most opportunity as you think about growth in the coming 12 to 24 months?
Executive Mike: Yeah, so again, I would emphasize that we do not need acquisitions to continue to grow at an above market rate. So that's the first thing I would comment. And I said we've done 16 or 17 mostly, you know, tuck-ins here in the U.S. I think the opportunity to do more is there, but we will be very, very selective. We will do it when we have partners who we are confident in and partners who want to do that. So it is part of our strategy. It is not something that is core or required. And I would say the opportunities are limited on that side, but we will be opportunistic. We are always looking. We are talking to folks. I'm not going to disclose where they are. But again, we feel pretty good about it, but there's probably one or two that would be interesting. None of those are, you know, really, really significant. So, I don't know if I'm being detailed enough for you, but that's how we think about it, right? We've got everything we need, everything we need to continue to grow at an above-market rate.
Analyst Keaton Mentora (BMO): Got it. Now, that's social perspective. And then just one more follow-up on the international side related to the Middle East. You talked about, you know, sort of watching the demand side there. But are there sort of any potential supply chain disruptions that could impact other markets in the region that we should think about?
Executive Mike: Yeah, I'll say for right now, again, our local for local manufacturing strategy where we are sourcing products building and selling in those markets. We don't see any disruption that we're aware of on the supply chain side. I'm not aware of any. Zero. You know, again, transit times, things like that, as you're trying to get product from one part to another, which is de minimis, again, because most of those markets are manufactured locally. Some of that will impact. It is going to impact the Middle East for sure and Africa. But, again, we feel really, it's almost like the tariff thing where we're not immune, but we are highly, highly insulated for any of that noise that, you know, is happening in that region.
Analyst Keaton Mentora (BMO): Perfect. Now, that's very helpful. Good luck.
Executive: Thank you.
Executive: Thank you, ladies and gentlemen. This concludes today's Alliance Laundry fourth quarter and full year 2025 earnings conference call. You may now disconnect your lines and have a wonderful day.