Douglas Dynamics, Inc. (PLOW) Q1 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Douglas Dynamics First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nathan Elwell, Vice President, Investor Relations. Please go ahead.

Thank you, Chad. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I would like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. Please note the quarterly factsheet can be found on our IR website. Joining me on the call today is Mark Genderen, President and CEO; and Sarah Lauber, Executive Vice President and CFO. Mark will provide an overview of our performance, followed by Sarah reviewing our financial results and guidance. After that, we'll open the call for questions. With that, I'll hand the call over to Mark. Please go ahead.

Thanks, Nathan, and welcome, everyone, to our call. So this was another excellent quarter for our company across the board with both segments executing successfully and delivering just really solid results. We're running efficiently. In the Attachments segment, our team has responded admirably to the above-average snowfall-driven demand of this past winter and the employees in our Solutions segment have delivered another great performance, continuing a strong trend. If you look back at our typical first quarter results, you'll see that it is often the case when we don't generate a profit due to the seasonality of our Attachments business. But this year, we produced record sales, adjusted earnings and EPS, just a tremendous achievement on behalf of the teams. This significant year-over-year growth was really driven -- primarily driven by 3 factors: First, significantly above-average snowfall boosting demand at Attachments. Second, the ongoing strength of demand in our municipal operations; and third, strong execution across the board from our teams to both address this demand and make meaningful progress against our strategic priorities. Okay. Let's talk Work Truck Attachments. Before I discuss the quarter specifically, I want to make a general point on snowfall and our business. Yes, snow is absolutely the main driver of demand in the Attachments business. We need snow to drive excellent results. But it's more than that. Snowfall creates the demand, but it's the relationship we have with our dealers and contractors. It's the projects we undertake every day. It's our fantastic product, our culture, our strategic pillars, the sheer hard work and determination of our team that fulfills that demand. So in short, it's execution that gets product shipped, sold and serviced, and that doesn't happen without our people and their commitment to operational excellence every day. So my continued and heartfelt thanks to the 1,700 people who are at Douglas Dynamics. Okay. Looking back at the winter, snowfall was significantly above average in many of our core markets. In total, the season came in roughly 20% above the 10-year average and 40% higher than last winter. This winter, snowfall came early with major November and December storms in the Midwest and significant persistent lake effect snow in the Great Lakes region. In the first quarter, several large snow and ice storms made their way across much of the country, including Fern and Hernando, record breakers, which brought significant and widespread snowfall totals across the Heartland and up the East Coast, all the way from New Mexico to Maine. Elsewhere in the country, both out West and the South experienced lower snowfall than normal. As a skier myself, I don't like to see dry conditions in the mountains, but it was sure great to see the snowfall where it did. Of course, all this weather meant that many of our dealers and contractors in our core markets in the Midwest and on the East Coast were working tirelessly to keep people safe and get communities back on their feet after the storms. It shouldn't be overlooked how important plowers are to the safety and well-being of the general public and in turn, our dealers who keep the contractors on the road. It is at the very core of our mission statement to keep people safe and communities thriving. As equipment was used during the winter, dealers were drawing down on their inventories, which we believe are now solidly below their 10-year averages. We will see how our dealers replenish their inventories with their preseason orders. All of these elements came together to contribute to a record first quarter top line for Attachments with sales up just over 65%. This included our first full quarter of sales from Venco Venturo, the crane and hoist manufacturer we acquired in November of last year. These excellent results were driven first and foremost by demand for our parts and accessories as the persistent snowfall took its toll on equipment. In fact, we achieved record shipments of P&A during the quarter. Sales of plows and hoppers also increased, but the first quarter at Attachments is always about parts and accessories, and this quarter was no different. So we pretty much exited winter and rolled straight into preseason, which kicked off at the beginning of April. Now as a refresher, we typically receive around 2/3 of our annual orders from dealers in the second and third quarters of the year. We ship these orders in time for our dealers to be stocked and ready to install equipment before the first snowflake of the season fly. While it was still early in preseason, while it's still early, as expected, we are off to a good start following the robust winter I detailed earlier. More specifically, sales of parts and accessories continue to come in strong. Plow sales, while not as directly correlated to last season snowfall as P&A are also tracking ahead of last year. And the great news is that we are in a strong position operationally. Plans are lining up as expected, inventories are in good shape, and our teams are hard at work. We continue to invest in the business and are even pulling ahead select equipment and technology projects given current demand. As it stands right now, we are optimistic about how the year is unfolding. That excitement will build at SIMA, the Snow and Ice Management Association Annual Symposium, which will be held in June this year in Cincinnati. As a market leader, this is a great opportunity here for us to showcase our expanding line of products and spend quality time with our dealers and contractors. All right. Turning to Work Truck Solutions, where the teams consistently continue to perform, now measuring their ability to drive improvements in years, not quarters or months. The team produced near-record sales and once again, record adjusted earnings and record margins, and that's on top of a record first quarter last year. So just really outstanding work. The strongest part of the business remains our municipal-focused operations. Both demand and backlog from municipal customers remains robust, and our sales teams continue to pursue and win important profitable multiyear contracts. From what we've heard across the industry, our excellent lead times are proving tough to match. And combined with our attentive and knowledgeable customer support, we are well positioned to continue our track record of steady, profitable growth. The strength in our municipal operation helped offset slightly softer demand in certain commercial business segments. The outlook is mixed overall, but there are pockets of that business that aren't performing as well as last year. While end users are approaching the current economic environment cautiously and demand for dealer orders remains dynamic in real time, the business is holding its own overall. We are focused on the factors we can influence to continually optimize the business and rapidly adapt to any changes and shifts in customer behavior. And finally, backlog in Solutions remains positive and above traditional levels. We are booking production dates well beyond the current year. Now as we've noted before, our backlog includes vehicles that customers have ordered now for future delivery. Our goal is to make sure that vehicles are delivered exactly when and where they were promised. And our Solutions team does that exceptionally well. All right. So before handing it over to Sarah, I'd like to just take a step back from our operational results and provide a brief strategic update regarding the optimize, expand and activate pillars of our strategic framework that we first shared late last year and how we are now migrating from introduction to action. The first priority is to continue to optimize our current operations across the board. As we said in the past, optimize is not a new concept for Douglas Dynamics. In fact, it's been a core tenet of our company for decades. Striving to get better every day is in the company's DNA. And at any one point in time, there are dozens of project examples, some of which are beginning this year, some are already in progress and many will span multiple years. So let me mention just a few. As much as we and you, I imagine, would like to predict the weather for next winter, we can't. But we continue to improve our demand and production planning processes to more quickly, accurately and precisely respond to whatever mother nature throws our way. We are using a more data-driven approach that incorporates algorithm statistics, historical trends and more recently, AI, leading to a more sophisticated way of smoothing out volatility that is benefiting us this year and will continue to pay dividends in the years ahead. At Attachments, we continue to expand our suite of communication tools with our dealer network, through a greater exchange of data, information and ordering capabilities, resulting in greater efficiency and an improved ease of doing business, which is certainly appreciated by our dealers. On the Solutions side of the business, we are working hard on enhancing our CPQ process, which stands for configure price quote at our municipal operations. This increasingly automated process is helping to produce greater efficiency and accuracy in order taking, which is then helping to streamline many additional processes from sourcing to production planning and at the same time, providing the appropriate level of customization required and desired by our customers. And finally, we recently broke ground on an exciting project at our municipal operations main facility in Manchester, Iowa. We are building a dedicated logistics building adjacent to our existing manufacturing facility. This new facility will serve as a centralized hub for all municipal logistics operations, including receiving raw materials, staging components and shipping finished products. Additionally, this will also help improve efficiency by freeing up critical floor space and reducing congestion at and around our manufacturing facility. So I picked just a few to mention today, but there are many more exciting projects, both being planned and underway. The second pillar is expand, which is our focus on internally driven growth, more specifically, continuing to develop new products across our divisions to meet the emerging needs of customers and geographic expansion where it makes sense. On previous calls, I mentioned our plans to build a new upfit center in Missouri to replace an outdated operation with a brand-new purpose-built facility in an ideal location for both new builds and to make it convenient for customers in the region to have existing trucks serviced. I am pleased to report that the process is virtually complete. The ribbon-cutting ceremony is a few weeks away with production beginning around midyear. The new facility will add much needed capacity to Henderson and is an important factor to help us maintain our best-in-class delivery times. This expansion will allow us to better serve existing customers in surrounding markets to continue to deliver trucks on time and to increase our attractiveness to new customers, all of which will strengthen our competitive advantage. My sincere thanks to everyone involved in making this important project a success. And finally, Activate, which refers to last year's restart of our M&A efforts, which led to the acquisition of Venco Venturo last November. Our integration team is making good progress and the Venco team, as we believe would be the case, are proving to be a great cultural fit. Moving forward, we continue to look for the right businesses and product lines to acquire that align with our attachment-centric strategy. So in summary, 2026 is off to a great start. It is an exciting time at Douglas Dynamics with market conditions and company performance aligning well across most of the business. We are in a strong position and as a more resilient company today, we are prepared for a wide variety of potential scenarios with strategies in place to capitalize on these opportunities. With our strategic framework now really taking hold in the business, we are hitting our stride, always striving to maximize our business and operational agility. While we are proud of our recent results, we know we have a lot more work to do to reach our potential. Our leadership team is working in lockstep, intently focused on executing our strategic plans to produce profitable, sustainable long-term growth. And with that, I'd like to pass the call to Sarah.

Thanks, Mark. I'll start with a summary of our financials and then talk to our updated guidance. But before I begin, please note that unless stated otherwise, all the comparisons I'll make today are between the first quarter of 2026 versus the first quarter of 2025. I would sum up our performance in 2 sentences. Our results improved across the board with record shipments of parts and accessories at Work Truck Attachments following significantly above-average snowfall. At Work Truck Solutions, higher volumes for our municipal operations helped offset lower commercial volumes to deliver strong results. Consolidated net sales increased 20% to a record $137.8 million. Gross margins improved by 290 basis points to 27.4% based on strong execution in both segments and significantly higher volumes at Work Truck Attachments. SG&A expenses increased by 13% to $26.3 million as our improved performance led to higher incentive and stock-based compensation plus the increased headcount, which included the addition of Venco Venturo employees. Adjusted EBITDA increased 78% to a record $16.8 million. Adjusted EBITDA margin increased by 400 basis points to 12.2%. This created a record adjusted earnings per share of $0.36. I'm sure you'll agree a fantastic set of results all around. So let's walk through the results for the segments. Working -- starting with Work Truck Attachments. Our excellent results this quarter were driven by strong demand, particularly for parts and accessories and a tremendous effort from our teams to address that demand. Net sales increased 67% to a record $60.9 million and adjusted EBITDA increased significantly to $7.7 million. The fact that equipment was being used in many core markets during the quarter will help the market incrementally move back towards a more normal replacement cycle in the years ahead. The outlook at Attachments remains positive today as we move through the preseason. Turning to Work Truck Solutions. Our teams produced record bottom line results and profitability and near record net sales, and that's despite the tough comparisons to record results in the first quarter of last year. The performance was driven by ongoing strength of municipal operations with commercial operations still exhibiting softer demand. Net sales decreased slightly to $76.9 million, but we're still very close to the record set at this point last year. Adjusted EBITDA increased slightly to a record $9.1 million and margin increased to a record 11.9%. Okay. Let's quickly touch on the balance sheet and capital allocation. Net cash used in operating activities of $1 million was in line with the prior year, primarily due to improved earnings, which offset higher working capital driven by the increased demand. Capital expenditures increased from $2.2 million in the first quarter of 2025 to $3.7 million this quarter as we expected. Free cash flow was negative $4.2 million, a decrease of $700,000 over last year, driven by higher capital expenditures. Let me reiterate our capital allocation priorities for 2026. Our first priority is returning excess cash to shareholders through both our strong dividend and to a lesser extent, share repurchases. This quarter, we returned approximately $10.1 million via the dividend and the repurchase of approximately 70,000 shares of company stock. In addition, we are investing in a variety of projects as part of the optimize and expand strategic pillars. As far as investing in the business, we expect CapEx to increase year-over-year as we saw in the first quarter as we pursue growth opportunities, but we still expect to stay within our typical range of 2% to 3% of net sales. And as Mark mentioned earlier, we expect to continue to pursue strategic M&A opportunities as they arise as part of our Activate strategic pillar. Finally, let's review our outlook. We started the year with strong guidance in place. We decided to raise those ranges today based primarily on our excellent first quarter results, particularly in Attachments. Plus our preseason sales period is off to a good start. However, it's early in the process. There's still a good deal of uncertainty as to how the orders and shipments will settle out. Raising the guidance at this stage of the year is not typical for us, and it's not something we'll do regularly, but this has been an unusually positive start to the year. One important point to consider is the timing of shipments this year. We expect preseason to be close to a 50-50 split between the second and third quarters. That's a large shift from last year. As you may remember, the 2025 preseason was skewed towards the second quarter. The 60-40 split between the second and third quarters last year was a result of higher available inventory going into preseason, which led to more shipments in the second quarter. So far, 2026 is shaping up to produce a return towards more typical shipment timing closer to the 50-50. This is something we are expecting. It's simply timing. It will not be a reflection of our overall preseason results. At Solutions, the situation remains generally in line with our initial expectations for the year, another year of top line growth while maintaining low double-digit margins. Our backlog remains solid, and we have good visibility and continued positive momentum in our municipal operations. In our commercial operations, the outlook is more complex with limited visibility, and there are areas showing softer demand based on macroeconomic uncertainty. Over the long term, we aim to reach margins in the low teens, but our plans don't call for us to get there this year. Regardless, both businesses will continue to focus on the optimized and expand pillars of our strategy to grow even further over the longer term. So continued strong performance and aiming to deliver another very solid year. It's worth mentioning that we plan for and continue to see raw material and energy-related inflation. As in the past, our teams have taken appropriate action thus far, and we are continuing to monitor the situation in case further mitigation is required. Now let me walk through the updated 2026 numbers for you. We now expect 2026 net sales to be between $750 million and $795 million. Adjusted EBITDA is now predicted to range from $110 million to $125 million. Adjusted earnings per share are now expected to be in the range of $2.55 to $3.05. The effective tax rate is still expected to be approximately 24% to 25%. As always, this assumes relatively stable economic and supply chain conditions and average snowfall in the fourth quarter. Based on these assumptions and with our current level of visibility, we believe the business is well positioned to drive significant year-over-year improvement. In fact, at the low end of our new guidance ranges, it would be record annual results for our company. In summary, it was an excellent first quarter. We're in a strong position to deliver another positive performance this year. That concludes our commentary. We'd like to open the call for questions. Operator?

[Operator Instructions] And our first question comes from Mike Shlisky from D.A. Davidson.

This is Linda Umwali on for Mike. My first question -- first of all, congratulations on the quarter. My first question, we're seeing a return of the final mile vehicle market in early 2026. I know that's not Dejana's main business, but are you seeing any tailwinds there? [Technical Difficulty]

Ladies and gentlemen, it appears that our location for our speakers has inadvertently disconnected from the call. I please urge you to stay on the line while we get them reconnected. Thank you very much for your patience.

Can you guys hear me?

Linda, sorry about that.

Not sure what happened.

No worries good to have you guys on. Yes. So one for Mike. And my first question was we're seeing a return in the final mile vehicle market this early 2026. I know that it's not Dejana's main business, but are you seeing any tailwinds there?

Yes, Linda. absolutely. So the final mile business would be part of our Dejana business. It is a small portion for them, less than 5%. I would say, yes, we're still seeing softness there. So when we're talking about commercial softness, economic uncertainty, all of that, that is clearly what we're seeing in that market. So we've not seen a bounce back as of this point.

Got it. And then my other question, how much of the 1Q revenue upside in Attachments would you consider to be onetime in nature and directly attributable to specific snowstorms -- trying to figure out what to model for early 2027?

Yes, I can -- when we think about the correlation between snowfall and our product lines, the highest correlation or immediate correlation is between parts and accessories. So when we talk about snowfall being up 40% year-over-year compared to last year, that's where we saw a strong Q4 last year and strong Q1 this year. Plows and hoppers, that's a multiyear replacement cycle. So we look back at the last several years of snowfall. And as you know, we had a few lower-than-average snowfall years and then this one, which we would consider a strong one. So it's hard to predict or to say exactly what that's going to look like. But we can say that I'd say a good portion of our increased expectations for the -- what we achieved for the quarter. And then to Sarah's point, raising guidance for the year is really attributable to the strength of P&A in the first quarter in Attachments and a lot of that's driven by what we saw as above-average snowfall.

Yes. Linda, I would add on. I mean our volume increased over 60% in the first quarter, driven by the strong storms and record P&A is when the snow is flying. So 1/3 of the increase was related to parts and accessories. So when you're thinking about next year, I would go back to thinking about average snowfall in the first quarter, not the significantly above average snowfall that we experienced. So our prediction on average snowfall would not be at the same higher level of volume.

Average snowfall. And my last question, does the new Section 232 tariff structure affect Douglas Dynamics at all? Could you actually reduce your tariff impact? And do you know if any of your competitors are in tougher shape due to the new tariff numbers?

Yes. So on the tariffs, the impact that we've experienced thus far and the new impacts for us are not overly material. We are very North America-centric. When thinking about the competitors, I can't say that I could point to any that would change their competitive aspects based on the tariffs that we're seeing today.

[Operator Instructions] The next question comes from Tim Wojs from Baird.

Maybe just first question. I guess the 35 -- I think it's $35 million or so of the guidance range raise for sales in the new guide. Could you just break down what's kind of the upside from Q1 versus some of the higher preseason visibility that you talked about?

Yes. So I'll frame the increase in the guidance. I don't know that I have an exact breakout of that. But when you think about the increase, it's predominantly the Q1 strength that we saw and then the very early indications of preseason. Off the cuff, I would say maybe it's 50-50 between the 2. And then when you look to the midpoint of the new guidance, you can kind of separate that into the 2 segments being also close to 50-50 because we have had a strong start in Solutions also.

Okay. Okay. And then I guess what is -- I guess if you looked at the 2 -- what are you expecting for the segments to grow this year kind of in aggregate? Because I'm kind of, I guess, penciling out that Solutions maybe grows kind of mid-single digits. And if that's the case, Attachments might grow over 30%. I guess are those kind of directionally accurate?

Yes. In total, also with Venco, I would say our volume growth is between 15% to 20% in total for Douglas and low -- I'm sorry, mid- to high single digits for solutions and then the remainder at Attachments.

Okay. And then I guess just the last question on the equipment shipments and kind of the split, is it -- it sounds like things are coming in better than you would have expected, but the preseason shipments are kind of weighted more to Q3 than we've seen in the last couple of years. Is that just purely a timing dynamic that you're seeing? Or is there anything in the customer base that's pushing those orders from one quarter to another?

No, great question. There's nothing we're seeing from a customer standpoint. It really -- if you look at last year, when we came out of the first quarter with higher company-owned inventory, we had inventory available to ship as soon as preseason orders started coming or I should say a higher percentage of inventory available to ship. So we got the preseason orders, so we would send that out to dealers. This year, there's a bit of a reverse in that because it was a strong winter, we shipped a lot of products. Our inventories -- company-owned inventories were lower than they were last year going into the second quarter. So basically, the orders that they're coming in, we're making product and shipping it compared to last year, where we just had more inventory available. So the goal, the ordering pattern isn't coming in any differently this year from our dealers or when they're expecting it. The commitment to them is we'll try to get it to them. Our focus is by the time, as I mentioned, the first snow flies. So whether they receive that in second quarter or third quarter as long as they're getting it in time to install it on trucks and have it stocked, they're fine with that. It's really on our end to be producing the equipment that we're going to then ship out to fulfill the preseason orders, which this year makes it a little more traditional.

Okay. Okay. And does that -- I know that's on the preseason shipment cadence. Is it -- does that also kind of fall down to the EBITDA cadence? Or because I think Q2 has always been the strongest EBITDA quarter. Is that, I guess, still going to be the case in Attachments?

Yes. I would say the cadence between the 50-50, that falls through to EBITDA. In the same manner.

And ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the conference back to Mark Van Genderen, President and CEO, for any closing remarks.

I'd just like to say thank you for your time and continued interest in Douglas Dynamics, and we look forward to talking with you soon.

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.