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.