Reconciliations of these non-GAAP results to applicable GAAP numbers are included in the attachments to our earnings release. I'd like to thank everyone for joining our third quarter earnings conference call. Adjusted EBITDA was $55 million, or 13% of net sales, compared to $55 million, or 14% of net sales, in the third quarter of 2024. Operating cash flow for the nine months ended September 30, 2025, was $102 million, or 116% of net income.
Net sales for Third Quarter of 2025 were $420 million, up 4.7%, including organic growth of 3.4% compared to the Third Quarter of 2024. Gross margin for the Third Quarter of 2025 was 24.2%, down 90 basis points compared to the Third Quarter of 2024. The degradation in gross margin was primarily due to unforeseen production inefficiencies related to the consolidation of manufacturing facilities in the Vegetation Management Division and due to tariff costs in both divisions. Regarding tariff costs, during the Third Quarter, we raised prices further to mitigate the impact of tariffs going forward.
SG&A expense in the Third Quarter of 2025 included $3.3 million related to the CEO transition, acquisition, and integration costs. Adjusted earnings per share on a fully diluted basis for the Third Quarter of 2025 was $2.34 compared to $2.38 for the Third Quarter of 2024. Net sales in the Industrial Equipment Division for the third quarter of 2025 were $247 million, representing an increase of 17%, or 14.5% organic growth compared to the third quarter of 2024. This performance reflects another record quarter for the Industrial Equipment Division, with strong sales across all groups.
| Metric | Period | Current guidance |
|---|---|---|
| Consolidated net sales (sequential Q3 to Q4) | Q4 2025 | Decline of roughly 4%-5% sequentially, seasonally driven |
| Decremental drop-through to gross profit (Q3 to Q4) | Q4 2025 | Around 30% |
| Industrial operating margin | Q4 2025 | Roughly 12%-13% zip code, no major sequential movement expected |
| Tariff cost (gross) | 2026 | A little less than 1% of sales, before any impact from recently announced truck-chassis tariffs |
| Sales growth (long-term through-the-cycle) | Long-term | 10%+ including acquisitions |
| Adjusted operating income margin (long-term) | Long-term | Around 15% |
| Adjusted EBITDA margin (long-term) | Long-term | Around 18%-20% |
| Free cash flow as a percentage of net income (long-term) | Long-term | 100% |
| Capital expenditures | Average / long-term | Around 2% of sales |
| Metric | YoY | Note |
|---|---|---|
| Net sales | +5% (4.7%) to $420 million | Continued strength in Industrial Equipment offsetting weakness in Vegetation Management; organic growth of 3.4%. |
| Gross margin | -90 bps to 24.2% | Production inefficiencies from Vegetation Management facility consolidations plus tariff costs in both divisions. |
| Adjusted net income | -3% to $28.2 million (from $28.6 million) | Margin pressure from Vegetation consolidation inefficiencies and tariffs; adjusted EPS $2.34 vs $2.38. |
| Industrial Equipment Division net sales | +17% (14.5% organic) to $247 million | Price increases, market growth, market share gains and the Rengomatic acquisition; a record quarter. |
| Industrial Equipment Division adjusted EBITDA margin | 15.5% vs 15.7% | Roughly flat; modest tariff pressure not yet fully offset by pricing. |
| Vegetation Management Division net sales | -9% to $173.1 million | Persistent end-market weakness in tree care and agriculture plus production challenges from facility consolidations, partly offset by pricing. |
| Vegetation Management Division adjusted EBITDA margin | 9.7% vs 11.5% | Lower volumes and consolidation-related production inefficiencies. |
| Interest expense | $3.9 million vs $4.9 million | Lower average outstanding debt. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Leadership transition | Prior CEO in place | New President and CEO Robert Hero in his first ~60 days, outlining a four-pillar strategy (people and culture, commercial excellence, operational excellence, acquisitions) and stepped-up long-term margin targets. | — |
| Operating model | More decentralized structure | Accelerating a shift toward centralization in key areas like procurement, supply chain and IT, with outside advisors engaged, to unlock procurement savings. | — |
| Tariffs | None in Q1, a little in Q2 2025 | Spiked in Q3; prices raised late in the quarter (not yet fully covering costs); expected a little under 1% of sales in 2026 before any truck-chassis tariff impact. | — |
| Industrial growth pace | Seven consecutive quarters of double-digit growth (17% in Q3) | Expected to moderate to still-attractive levels; book-to-bill below one and some end-market cooling into 2026. | — |
| Vegetation Management cycle | Down two to three years running, continued decline | Orders up double digits and possible stabilization/improvement in 2026 if the Fed keeps cutting rates; management believes it is near the cycle bottom. | — |
| Capital allocation / M&A | $50 million buyback authorized in 2024 (still authorized) | Primary use of cash is acquisitions, mainly tuck-ins (~$100M-$150M revenue, $20M-$30M EBITDA each); growing pipeline, buybacks de-emphasized given M&A pipeline and limited float. | — |