Alamo Group delivered a solid second quarter of 2026 with net sales up 7.6% to $415.7 million, adjusted diluted EPS up 7.2% to $2.82, and Adjusted EBITDA of $63.9 million (14.2% of sales), driven largely by the Petersen and Ring-O-Matic acquisitions and share gains in Industrial Equipment (sales +12.8%). Vegetation Management returned to growth for a second consecutive quarter after eight quarters of declines, and facility consolidations that disrupted late 2025 have recovered, restoring throughput and margins. Gross margin fell 120 bps to 24.6% on unfavorable mix and growth investments, but SG&A discipline (ex-items ~12.5% of sales) and procurement savings support the path toward long-term 18% EBITDA margins. The balance sheet is strong with net leverage under 1x, LTM free cash flow of $135.3 million, and a renewed $602.5 million credit facility, positioning M&A as the top capital-allocation priority via industrial tuck-ins. Management characterizes 2026 as a transition year with flattish near-term end markets but remains bullish on the long-term outlook and heading into 2027.
Thank you. By now, you should have received a copy of the press release. 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 copy of the release and make sure you're on the company's distribution list. There will be a replay of the call, which will begin 1 hour after the call and run for 1 week. The replay can be accessed by dialing 1-855-669-9658 with the passcode 750-9167. 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, our President and Chief Executive Officer, and Agnes Kamps, Executive Vice President and Chief Financial Officer.
Management will make some opening remarks, 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, increasing costs due to inflation, disease outbreaks, geopolitical risks, including tariffs, trade wars, and the effects of the war in Ukraine and the Middle East, competition, weather, seasonality, currency-related issues, 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 like now to introduce Robert Hureau. Robert, please go ahead.
Thank you, Kevin. I'd like to thank everyone for joining our second quarter earnings conference call. We appreciate your continued interest in Alamo Group. Overall, we're pleased with the second quarter results. We made good progress across our key initiatives, highlighted by strong sales, improved adjusted earnings, and solid Adjusted EBITDA performance. We're encouraged by the volume, the pace, and the quality of customer activity we continue to see across our business. Our teams remain focused on operational improvement and disciplined execution of our strategic priorities. 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 second quarter of 2026 were $415.7 million, an increase of 7.6% compared to the second quarter of 2025. Organic net sales increased 1.3% compared to the second quarter of 2025. Gross profit for the second quarter of 2026 was $110.9 million compared to $108.3 million for the second quarter of 2025. Gross margin for the second quarter of 2026 was 24.6%, down 120 basis points compared to the second quarter of 2025. The year-over-year decline in gross margin reflected the impact of net sales mix and investments we are making to support long-term growth, partially offset by favorable pricing, procurement savings, and continued operating disciplines. Selling, general, and administrative expense or SG&A expense for the second quarter was $60.1 million, up 5.1% from the second quarter of 2025.
SG&A expense in the second quarter of 2026 included acquisition and integration expenses, restructuring expenses, and the addition of Petersen and Ring-O-Matic businesses. SG&A expense as percentage of net sales in the second quarter of 2026 was 13.3% compared to 13.6% in the second quarter of 2025. Excluding acquisition, integration, and restructuring expenses in both periods, SG&A expense as % of net sales was approximately 12.5% in the second quarter of 2026. Compared favorably to approximately 13.5% in the second quarter of 2025. We remain focused on the productivity of our teams, including early efforts to apply artificial intelligence across the organization. We expect these efforts to help us manage SG&A as percentage of net sales over time.
Net interest expense for the second quarter of 2026 was $3.6 million, compared to $2.5 million in the second quarter of 2025, higher year-over-year, primarily as a result of Petersen acquisition and related financing activity. The effective income tax rate was 25.6%, in line with our current and long-term expectations. During the second quarter of 2026, we recognized $4.3 million of acquisition integration and restructuring expenses. These costs included $0.3 million of acquisition integration expense and $4 million of restructuring expenses, which were inclusive of investments to transform our manufacturing activities and supply chain function, leadership changes, and cost to consolidate and streamline certain manufacturing facilities. Of the $4.3 million, $3.5 million was recorded in SG&A. All of these amounts are treated as adjustments to certain non-GAAP measures as shown in the press release.
Adjusted EBITDA for the second quarter of 2026 was $63.9 million or 14.2% of net sales, compared to $58.8 million or 14% of net sales in the second quarter of 2025. Adjusted earnings per share on a fully diluted basis for the second quarter of 2026 were $2.82, up 7.2% compared to $2.63 in the second 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 second quarter of 2026 were $271.6 million, an increase of 12.8% compared to net sales of $240.7 million in the second quarter of 2025. The year-over-year increase reflected organic demand and the contribution from Petersen, which was acquired earlier in 2026, as well as the contribution from Ring-O-Matic, which was acquired during 2025.
Organic net sales in the Industrial Equipment Division increased 2.6% compared to the second quarter of 2025. Adjusted EBITDA in the Industrial Equipment Division for the second quarter of 2026 was $45.3 million or 16.7% of net sales, compared to $40.3 million or 16.8% of net sales for the second quarter in 2025. We are pleased with the continued strong performance in this division, and particularly with the successful integration of our recent acquisitions. Net sales in the Vegetation Management Division for the second quarter of 2026 were $179.1 million, an increase of 0.4% compared to net sales of $178.4 million in the second quarter of 2025. Sales were relatively stable compared to the prior year, despite continued pressure in certain end markets. This marks the second consecutive quarter of year-over-year growth in this division after eight quarters of declines.
Adjusted EBITDA in the Vegetation Management Division in the second quarter of 2026 was $18.6 million or 10.4% of net sales, compared to $18.5 million or 10.4% of net sales for the second quarter of 2025. We remain focused on improving margins through operational execution, cost discipline, and targeted actions across the portfolio. Moving on to the balance sheet and cash flow. For the six months ended June 30th, 2026, cash provided by operations was $22.7 million. Investing cash outflow was $171.6 million, primarily reflecting the Petersen acquisition and capital expenditures. Financing cash inflow was $37.3 million. Looking at the last 12 months ended June 30th, 2026, free cash flow, which we define as cash flow from operations less capital expenditures, was $135.3 million or 134% of net income, which continued to compare favorably to our long-term target of 100%.
In May 2026, we renewed our credit facility on improved terms across the facility, extending maturity to 2031 and further strengthen our liquidity profile and financial flexibility. The renewed facility provides $602.5 million of committed capacity, including $400 million revolving credit facility and $202.5 million term loan facility, supporting ongoing capital deployment priorities, working capital needs, and long-term growth initiatives. At June 30th, 2026, we had $195 million of cash and total debt was $262.7 million. We ended the quarter with strong liquidity position, supported by substantial cash balances and available borrowing capacity on the recently renewed credit facility. The net leverage at quarter end was less than one times, leaving a significant capacity to fund our capital deployment priorities. Regarding our capital allocation activities during the quarter, we paid $4.1 million in dividends, and our board once again approved a quarterly dividend of $0.34 per share.
We repurchased $9.4 million of shares under 2024 $50 million board-approved share repurchase program, or approximately 19% of total authorization. We repaid $25.9 million on the revolver, which was drawn to finance the Petersen acquisition. All of these activities demonstrate the strength of our cash generation and a disciplined, balanced approach to deploying it. As we move forward, we remain well-positioned to drive growth, further strengthen operation, and return value to shareholders through disciplined capital allocation. Thank you. I 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 13% during the quarter. The increase was led by our excavators and vacuum truck businesses, where sales grew despite an end market that was relatively flat. This performance reflects the strength of our brands, our close partnerships with our dealers and customers, and the share gains our teams continue to drive. Our rental business also contributed meaningfully and is on pace for a record year in both sales and Adjusted EBITDA. Separately, Ring-O-Matic, which we acquired just over a year ago, is also delivering record results as the group continues to benefit from new commercial opportunities. Sweepers and safety sales also increased, primarily reflecting the addition of Petersen.
Excluding Petersen, sales in this group were relatively flat, though order activity strengthened during the quarter. Snow sales were lower year-over-year, reflecting the deliberate actions we've taken to focus on the most attractive commercial opportunities, which has meaningfully improved the profitability of this business. Snow and roadway maintenance remains an attractive space for us, and it's an area we will continue to invest. Adjusted EBITDA margins in the Industrial Equipment Division were 16.7% in the quarter, roughly unchanged from the same quarter last year. The division benefited from higher volume, ramping procurement savings and cost efficiency initiatives, and the contribution from Petersen. These gains were partially offset by higher input costs, namely freight and steel, and cost to streamline certain manufacturing activities. Regarding the Petersen business, we're very pleased with its financial performance through the first half of 2026 and the direction of the leadership team.
Integration efforts and the advancement of commercial and operational synergies are progressing well. Petersen's EBITDA margins are performing in line with our expectations and are benefiting from the early synergies we're capturing. We'll keep you updated as the business continues to perform. The book-to-bill in the Industrial Equipment Division for the second quarter of 2026 was 0.85x, as net orders were down 2% compared to the same quarter in the prior year. Orders varied across the division. Orders were strongest in our snow business, which saw continued year-over-year growth, reflecting the strength of our team, our products, and our brands. Sweepers and safety orders also grew, both on an inorganic and organic basis, meaning excluding Petersen, as we began to see the positive activity we had been anticipating with many states and municipalities entering the new budget year.
We also continue to grow this business in the contractor market, where activity and opportunity tied to data centers and other large-scale development remains attractive. Excavators and vacuum truck orders were lower, reflecting the lumpiness and timing of orders in this business and some pockets of softness in the construction markets. Regarding the lumpiness, it's important to note that the second quarter of 2025 was a record quarter for net orders for the excavator and vacuum group. It was the highest quarter in this group's history. Lead times in all the business within the Industrial Equipment Division are in good competitive position. Today, our Industrial Equipment Division represents 59% of our total sales. As a reminder, the products in the Industrial Equipment Division serve end markets, including public works, construction, utilities, and infrastructure. These are very attractive long cycle markets.
Consistent with broader construction industry commentary, we're seeing a market that is stable but selective, with the near-term rate of growth moderating after several years of double-digit growth supported by infrastructure investment. In that context, we expect certain industrial end markets to be flattish in the shorter term, but we remain very positive on the long-term outlook given the continued need for infrastructure maintenance, public works investments, utility modernization, and specialized vocational equipment. Now the Vegetation Management Division. Net sales in the Vegetation Management Division were slightly higher compared to the second quarter of 2025. The overall result reflected growth in North American agriculture, tree care and recycling, and our European businesses, offset by lower sales in municipal mowing in South America. In North America agriculture, sales improved, particularly in U.S. agriculture, which benefited from stronger manufacturing execution.
Tree care and recycling sales also increased, similarly supported by improved manufacturing throughput. Our European businesses also grew with particular strength in the Netherlands and France. Adjusted EBITDA margins in the Vegetation Management Division in the second quarter of 2026 were 10%. This was up significantly from the second half of 2025, reflecting the progress our teams have made in improving the efficiency of our manufacturing facilities and flat compared to the second quarter of 2025. The Adjusted EBITDA margin of 10% compared to the second quarter of 2025 reflects favorable pricing and improved operational execution, offset by inflation, tariffs, and unfavorable sales mix. The book-to-bill in the Vegetation Management Division for the second quarter of 2026 was 0.9 times, where net orders were 1% lower compared to the same quarter in the prior year, with mixed performance across businesses.
Municipal mowing orders showed strong momentum in the quarter, an encouraging sign of the improving activity among municipal customers, similar to what we're seeing in our sweepers business. Tree care and recycling orders also grew, reflecting the work our teams have done to strengthen our dealer network, including the new dealers who were added in parts of the country where we had gaps. North American agriculture orders were roughly flat year-over-year, continued to build on a strong year-to-date order pattern and a healthy backlog. Today, our Vegetation Management Division represents 41% 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. These end markets have declined from the elevated levels experienced during the 2021 and 2023 period, in the aggregate, they appear to be stabilizing in 2026.
External market commentary has similarly described farm equipment demand as cautious, with pressure from lower farm income, elevated borrowing costs, and tariff-related cost uncertainty. We're encouraged by the signs of stabilization and remain confident in the long-term relevance of our brands, dealer relationships, and product categories, but we don't expect a rapid recovery across the entire vegetation management portfolio. 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 on which we'll focus and devote resources. One, people and culture. Two, commercial excellence. Three, operational excellence, and four, capital deployment. Within each of these strategic pillars, there exist a series of prioritized initiatives on which our teams are working. We made good progress on all initiatives again during the quarter.
During the past year, we said we would review our portfolio and take action on businesses or product lines that are not aligned with our long-term strategic direction. As part of that review, we recently announced our decision to exit a small business in the Netherlands that serves the waterway vegetation management market. We expect to complete that exit either through a sale or closure of the business before the end of 2026. In addition, we're continuing our portfolio review and expect to make certain further decisions during the second half of 2026. These are not large businesses or product lines in the context of Alamo Group, but these decisions are important. They reflect our disciplined approach to capital deployment and operating performance, and they're consistent with our long-term strategy of owning and operating businesses that are leaders in their markets and strategically relevant.
Regarding capital allocation, our philosophy is disciplined and balanced. I'd like to summarize a few key important components of that strategy. First, we'll continue to invest in our people, our products, our facilities, and technologies to support profitable growth and productivity with capital expenditures running at approximately 2% of net sales on average. Second, we'll maintain a strong balance sheet, targeting net leverage of up to 2.5x, which preserves the flexibility to act opportunistically. Third, acquisitions remain a top near-term priority. As we've mentioned before, our focus is largely on tuck-ins close to our core, meaning product categories, sales channels, and geographies close to where we operate today that hold leadership positions in their markets, carry attractive EBITDA margins, and can be acquired at attractive multiples. Our goal is one to two of these transactions in a typical year.
Petersen's a great example of what that looks like in practice. Finally, we'll continue to return capital to shareholders in a balanced manner through opportunistic repurchases under our $50 million share buyback authorization and a quarterly dividend, currently $0.34 per share per quarter. That reflects our target payout ratio of approximately 15% of net income. In summary, I'd like to express our thanks and appreciation to all our employees who work tirelessly to produce, sell, and develop the very best brands of vocational trucks and mowing and tree care products in the industry. I'd also like to thank our customers and our investors for their trust and support. This concludes our prepared remarks. Operator, please open the lines for questions.