Alamo Group's first quarter 2026 net sales rose 6.7% to $417.1 million, with adjusted EBITDA of $59.3 million (14.2% of sales) up sharply sequentially from Q4 2025, even as adjusted EPS eased to $2.56 from $2.70 and gross margin fell 118 bps to 25.1% on Vegetation Management ramp costs and lower municipal mowing. Vegetation Management posted its first year-over-year quarterly sales increase in nine quarters (+7%) with margins recovering toward 11%, a key signal that its end markets may be stabilizing, though management struck a more cautious tone on rising input and freight costs. Industrial Equipment stayed strong (net sales +6.5%, ~16.4% EBITDA margin) helped by the smoothly integrating, above-margin Petersen acquisition, though organic sales dipped 1% and net orders fell 11% on tough comparisons and a deliberate quality-of-earnings shift in snow. The balance sheet is robust with net leverage below 1x and $195.2 million cash, supporting a $0.34 dividend and continued disciplined M&A. Management reaffirmed long-term targets of 15% adjusted operating and 18%+ adjusted EBITDA margins, expecting ~300 bps of improvement from procurement, manufacturing efficiency, and parts mix, with the main remaining gap being a fuller Vegetation end-market recovery.
Thank you. By now, you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact us at 212-827-3746, and we will send you a release and make sure you're on the company's distribution list. There will be a replay of the call, which will begin one hour after the call and run for one week. The replay can be accessed by dialing 1-855-669-9658 with the passcode 1646754. Additionally, the call is being webcast on the company's website at www.alamo-group.com, and a replay will be available for 60 days. On the line with me today are Robert Hureau, President and Chief Executive Officer, and Agnes Kamps, Executive Vice President and Chief Financial Officer.
Management will make some opening remarks, and then we will open up the line for your questions. During the call today, management may reference certain non-GAAP numbers in their remarks. Reconciliations of these non-GAAP results to applicable GAAP numbers are included in the attachments to our earnings release. Before turning the call over to Robert, I would like to make a few comments about forward-looking statements. We will be making forward-looking statements today that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results.
Among those factors which could cause actual results to differ materially are the following: adverse economic conditions which could lead to a reduction in overall market demand, supply chain disruptions, labor constraints, competition, weather, seasonality, currency-related issues, geopolitical events, and other risk factors listed from time to time in the company's SEC reports. The company does not undertake any obligation to update the information contained herein, which speaks only as of this date. I would now like to introduce Robert Hureau. Robert, please go ahead.
Thank you, Ed. I'd like to thank everyone for joining our first quarter earnings conference call. We appreciate your continued interest in the Alamo Group. Overall, we're pleased with the first quarter financial results. We made good progress with many of our key initiatives. In particular, the Vegetation Management Division reported solid improvement in terms of both sales and profitability. I'll turn the call over to Agnes to review our financial results in detail. When she's finished, I'll come back and discuss the performance of each of our divisions and make some remarks regarding our long-term strategic priorities. Agnes?
Thank you, Robert. Good morning, everyone. Net sales for the first quarter of 2026 were $417.1 million, an increase of 6.7% compared to the first quarter of 2025. Gross profit for the first quarter of 2026 was $104.8 million compared to $102.8 million for the first quarter of 2025. Gross margin for the first quarter of 2026 was 25.1%, down 118 basis points compared to the first quarter of 2025. The year-over-year decline was primarily driven by Vegetation Management Division, reflecting lower net sales in our municipal mowing business and certain manufacturing facilities, which are continuing to ramp up in terms of efficient throughput. Importantly, Vegetation Management margins improved meaningfully on a sequential basis as we exited the quarter, reflecting operational progress in both facilities.
While there's still work to be done, we are encouraged by the traction we are seeing and expect continued improvement as the year progresses. Selling, general, and administrative expense or SG&A expense for the first quarter was $57.8 million, up 6.3% from the first quarter of 2025. SG&A expense in the first quarter of 2026 included approximately $3.5 million related to acquisition and integration costs, restructuring costs, and the addition of Petersen and Ring-O-Matic acquisitions. SG&A expense as percentage of net sales in the first quarter of 2026 was 13.8% compared to 13.9% in the first quarter of 2025. Net interest expense for the first quarter of 2026 was $3.1 million compared to $2 million in the first quarter of 2025. Higher year-over-year as a result of Petersen acquisition.
The effective income tax rate was 25.3%, in line with our current and longer-term expectations. During the first quarter of 2026, we recognized $2.5 million of acquisition, integration, and restructuring expenses. These costs included $0.6 million, primarily related to acquisition and integration of Petersen Industries, and $1.9 million in restructuring expenses. Approximately $1.6 million of this cost was recorded in SG&A and $0.9 million in cost of sales. All of these amounts are treated as adjustments for certain non-GAAP measures, as shown in the press release. Adjusted EBITDA for the first quarter of 2026 was $59.3 million, or 14.2% of net sales, compared to $58.3 million or 14.9% of net sales in the first quarter of 2025.
On a sequential basis, adjusted EBITDA improved significantly from the fourth quarter of 2025, when it totaled $44.8 million or 12% of net sales. Adjusted earnings per share on a fully diluted basis for the first quarter of 2026 were $2.56, compared to $2.70 for the first quarter of 2025, and compared to $1.70 for the fourth quarter of 2025. Now I'll share some comments regarding the results of each of the divisions. Net sales in the Industrial Equipment division for the first quarter of 2026 were $241.7 million, an increase of 6.5% compared to net sales of $227.1 million in the first quarter of 2025. Excluding acquisitions, net sales declined $2.4 million or 1% compared to the first quarter of 2025, largely due to timing of orders in our snow group.
Adjusted EBITDA in the Industrial Equipment division for the first quarter of 2026 was $39.7 million or 16.4% of net sales, compared to $37.4 million or 16.5% of net sales for the first quarter of 2025. We are pleased with the continued strong performance in this Division and particularly with the successful integration of Petersen's acquisition. Net sales in Vegetation Management Division for the first quarter of 2026 were $175.4 million, an increase of 7% compared to net sales of $163.9 million in the first quarter of 2025. The increase is a result of operational improvements in our facilities and modest support from the agricultural end market, offsetting weakness in municipal mowing.
Adjusted EBITDA in the Vegetation Management Division for the first quarter in 2026 was $19.6 million or 11.2% of net sales, compared to $20.8 million or 12.7% of net sales for the first quarter of 2025. Moving on to the balance sheet and cash flow. Cash provided by operating activities for the first quarter of 2026 was -$23.5 million due to strong sequential growth, especially in the Vegetation Management Division, where the net sales increased by $36.7 million or 26.4% in the first quarter of 2026 compared to the fourth quarter of 2025. The operating cash flow on the last 12-month basis was $139.8 million or 138.2% of net income.
Cash used in investing activities for the first quarter of 2026 was $169.8 million and reflects cash used for the acquisition of Petersen Industries in January 2026 and $4.5 million used for capital expenditures. We funded Petersen acquisition with $120 million draw on our revolver and approximately $50 million cash on hand. We're excited about the acquisition of Petersen, given its leadership position, attractive margins, and commercial synergies. As of March 31, 2026, our gross debt was $290.5 million, and we had $195.2 million in cash on the balance sheet, resulting in net leverage ratio of less than 1x. Total liquidity remains very strong, positioning the company well to continue pursuing disciplined M&A opportunities. To conclude, I would like to emphasize our commitment to delivering long-term value to our shareholders.
We are pleased that our board has approved a quarterly dividend of $0.34 per share. As we move forward, we'll remain focused on driving growth and optimization of our operations. Thank you. I'll turn it back over to Robert.
Thank you, Agnes. Let me start by providing more color on the operating performance for each of our divisions. First, the Industrial Equipment division. As Agnes mentioned, net sales in the Industrial Equipment division increased by about 7% during the quarter. The increase in net sales during the quarter was driven primarily by our acquisitions, including the Petersen acquisition, which closed earlier in this first quarter, and Ring-O-Matic acquisition, which closed during the middle of 2025. Net sales in our excavator and vacuum business performed well during the quarter. Net sales in our sweeper and safety business, excluding the effects of the Petersen acquisition, were flattish. Net sales in the snow business declined compared to the prior year.
The decline in net sales in the snow business, as we've discussed, was due to the change in our sales strategy and our placing more emphasis on the quality of its earnings. We believe this strategy is and will continue to prove successful. As for profitability, the adjusted EBITDA margins in the Industrial Equipment division in the quarter were good at around 16%. This was roughly level to the adjusted EBITDA margins in the same quarter in the prior year and reflects positive pricing, procurement savings, and the inclusion of the Petersen business, given its above-average margin profile, partially offset by material inflation, including tariffs and various investments we're making in the division to support long-term growth.
As for the Petersen business, although still early, we're very pleased with the initial financial results, the integration activities, the leadership team, and the progress related to both the commercial and operational synergies. We'll keep you posted on the performance of this acquisition as it continues to evolve. The book-to-bill in the Industrial Equipment division for the first quarter of 2026 was around one time. Net orders for the Industrial Equipment division during the first quarter of 2026 were down 11% compared to the prior year. Net orders in the snow business were robust, up double-digit year-over-year again this quarter. This strength reflects the continued end market demand and the strength of our brands, commercial organization, and our customer partners. Net orders in the excavation and vacuum business were down.
Within the excavation and vacuum business, we're seeing strong order growth in the European markets, which bodes well for our expanded manufacturing facility in France, but softer activity in the U.S. Net orders in our sweeper and safety business, excluding the newly acquired Petersen business, were down but reflect an unusually large multiyear order in the first quarter of 2025, making comparability challenging. Lead times in all the businesses within the Industrial Equipment division are in a good competitive position. Today, our Industrial Equipment division represents 58% of our total net sales. As a reminder, the products in the Industrial Equipment division serve end markets, including public works, utilities, infrastructure, and construction. These are very attractive long cycle markets.
As I mentioned during our last call, net sales in this division and its end markets have been very robust, growing in the high teens over the past few years and were fueled in part by various government-driven investments in infrastructure. Looking forward, we expect the rate of growth in several of these end markets to slow in 2026 as the near-term effect of those prior external investments and the overall rate of construction spending slows before normalizing and then returning to steady long-term growth. Now the Vegetation Management Division. Net sales in the Vegetation Management Division increased 7% compared to the first quarter of 2025. This is the first year-over-year increase in quarterly net sales in the Vegetation Management Division in nine quarters.
This is a very positive development and is another data point indicating certain end markets might be settling. The 7% increase in net sales was due to several factors, including the ramping of our production activities in certain key manufacturing facilities, the improvement in underlying demand in certain end markets, and favorable pricing, partially offset by continued weakness in other end markets. Net sales in our North American ag business were positive, reflecting a slightly more constructive end market and ramping manufacturing activity. Net sales in our tree care business were also positive. Performance in the North American portion of this business reflect improved manufacturing efficiencies, not necessarily a recovery in the end markets. On the other hand, performance in the European markets reflect improving end market demand and overall strong commercial and operational performance by that team.
Net sales in our municipal mowing business were down in the first quarter of 2026, reflecting continued cautiousness we're experiencing with dealers and the related state DOT offices that use our products as they navigate their fiscal budgets. As for profitability, the adjusted EBITDA margins in the Vegetation Management Division in the first quarter of 2026 were about 11%. This is up significantly from the second half of 2025 and just shy of the margins in the first quarter of 2025. This is a positive development. The adjusted EBITDA margins of 11% compared to the first quarter of 2025 reflect volume leverage and favorable pricing, offset by material inflation, including tariffs and various investments we're making to support long-term growth. While there's much more work to be done, we're pleased with the margin progression during the quarter.
The book-to-bill in the Vegetation Management Division for the first quarter of 2026 was one time. Net orders for the total division during the first quarter of 2026 were up 5% compared to the prior year. Net orders in the North American and European ag businesses were strong. Net orders in tree care were soft, reflecting the state of those end markets, including a U.S. housing market, which remains weak. Net orders in municipal mowing were down for the reasons I previously highlighted. Today, our Vegetation Management Division represents 42% of our total net sales. As a reminder, the products in the Vegetation Management Division serve end markets including tree care and recycling, agriculture, public works, and landscape maintenance.
As I mentioned on our last call, net sales in this division and its end markets have declined over the past few years, rolling over a period of significant growth that occurred between 2021 and 2023. Looking forward, we expect the rate of decline in the end markets to slow. While we're pleased with the improvement in net sales in the Vegetation Management Division during the quarter, we would not necessarily expect the end markets to support this level of year-over-year growth over the balance of the year. I'd now like to share some comments regarding the broad framework of our long-term strategy. As mentioned before, there are four pillars of the strategy in which we'll focus and devote resources. First, people and culture. Second, commercial excellence. Third, operational excellence. Fourth, capital deployment.
Within each of these strategic pillars, there exists a series of prioritized initiatives on which our teams are working. We made good progress on all initiatives during the quarter. Today, I'd like to provide an update on our product innovation activities. Over the past two calls, we highlighted a few exciting new products. As a reminder, these included, first, our new non-CDL vacuum truck that can be purpose-built as a hydro-excavator or a sewer combo cleaner, providing greater appeal in the urban and rental applications due to its compact size and the operator not needing to hold a commercial driver's license. This product was engineered for efficient manufacturing and economical international shipping. Interestingly, this product is already sold out in 2026.
Second, our next generation hybrid sweepers that run on diesel, CNG, or electric chassis globally and use a proprietary electric sweeping architecture delivering superior efficiency, safety, and performance. We have a smaller NiteHawk hybrid air sweeper that's already in commercial production and generating significant customer interest, and we have a larger Schwarze hybrid mechanical sweeper that is smashing performance standards in testing in advance of a commercial launch in the second half of 2026. Operators love these products. Today, I'd like to highlight our new Wide Wing System introduced by our snow business. This innovative snowplow operates an extendable side wing system attached to a tri-drive chassis, offering a clearing capacity up to 27 feet, which is roughly 80% greater than standard large plows.
Its dramatically improved productivity, lower total cost of ownership, and increased operational flexibility is a game changer for state DOTs and road maintenance contractors. In addition, its technology is patent protected in both the United States and Canada, demonstrating once again our first-mover advantage. This product is quickly becoming the industry standard in the heavy-duty category and will eventually obsolete the traditional tow plow approach to snow removal. We highlight this and the other products today, not necessarily to support or help you forecast what sales might be in coming quarters, but simply to provide color around and share a vision regarding how Alamo Group and all our wonderful brands will revolutionize the vocational truck and land maintenance segments through our engineering expertise, adaptive technologies, and entrepreneurial culture over the next three to five years.