Alliance Laundry Holdings In Stock

Good morning and welcome to Alliance Laundry's Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

With that, it is my pleasure to turn the program over to Tom Gelston, Vice President of Investor Relations. Tom, please go ahead.

Thank you, and good morning, everyone. Along with today's call, you can find our earnings press release and presentation on our Investor Relations website at ir.alliancelaundry.com. A replay will also be available on our website following the call.

As a reminder, today's earnings release, presentation and statements made during this call include forward-looking statements under federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include factors set forth in the earnings release and in our filings with the SEC, including the Risk Factors section of our 10-K filing and subsequent 10-Q filings. We assume no obligation to update or revise any forward-looking statements, except as required by law.

Additionally, during today's call, we will discuss certain non-GAAP financial measures outlined in our earnings presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of ongoing business performance. Reconciliations to the most directly comparable GAAP measures can be found in our earnings release and presentation appendix.

And with that, I'd like to now turn the call over to Mike Schoeb, our Chief Executive Officer. Mike?

Thanks, Tom, and thank you for joining our earnings call. Our second quarter results reinforce the message we have carried since becoming a public company that a resilient, replacement-driven, essential industry, a market-leading position and disciplined operational excellence combined to deliver strong, sustainable outcomes through any environment. In the second quarter, revenue grew 7% year-over-year with adjusted EBITDA growth of 12% and adjusted net income up 54%. This performance was broad-based and it reflects the diversification that defines our business across products, end markets and geography. The strength of our first half, combined with our growing visibility into the balance of the year, gives us the confidence to raise our guidance today, and Dean will take you through that detail shortly. I'd like to highlight again that this performance was achieved in a macro environment that's still volatile in many parts of the world. But remember, every day really is laundry day.

Commercial laundry is a vibrant, growing and essential part of modern life. Our diversified geographies and end markets serving nondiscretionary needs, hospitals and elder care, hospitality, industrial, emergency responders and many other verticals have performed across all economic cycles, giving us a level of growth, consistency and downside protection that is hard to find. This quarter was no different. Revenue met our expectations with strong adjusted EBITDA and net income conversion. Digital innovation also continues to see strong adoption and our strategy here is unchanged. The more connected our equipment is, the more value we can deliver through better uptime, smarter servicing, lower cost and higher revenue. And ultimately, a better end user or end consumer experience that further strengthens our customer relationships.

Turning to the regions. North America delivered another strong broad-based quarter with growth across every vertical and pricing that helped offset inflation and tariff impacts. Internationally, we saw strength in Asia Pacific, especially in Vended markets and Europe was steady. As we noted previously, the Middle East, Africa region represents less than 2% of our global revenue, so the direct impact of the ongoing conflict is small. And while we are seeing some knock-on effects in other regions, mainly due to higher energy costs, we expect normal growth dynamics to return when the conflict subsides.

We're also continuing to strengthen our balance sheet repaying $50 million of debt in the quarter, bringing year-to-date paydown to $115 million and over $800 million over the past 12 months, which has resulted in a reduction in net leverage from 4.6x to 2.4x. So taken together, the strength we demonstrated this quarter, broad-based demand, pricing discipline, our local-for-local manufacturing footprint and a strengthened balance sheet are what we expect to carry us through the balance of 2026.

And so before Dean walks you through the financials, I want to share a recent event that brings a key aspect of our long-term growth story to life. In late June, I attended our annual event in Bangkok, where we bring current and prospective laundromat operators together with our distribution partners. Southeast Asia has long been a strategic growth engine for us and laundromats are leading the way. The demand for new stores continues to impress me in a market that largely barely existed a decade ago and one we're proud to have helped create.

This demand is structural, not cyclical, urbanization, a growing middle class and the shift toward modern out-of-home laundry is durable, essential demand, the kind that has carried this company through every economic cycle. And here, our advantages are unmistakable, our technology, our distribution network, our highly trained team and unmatched product reliability. Operators choose Alliance because of our connected durable equipment delivers a lower total cost of ownership and a better experience for their customers.

There's a second tailwind building underneath the growth. This equipment runs hard all day, every day and high throughput stores and that intensity of use sets up a durable replacement cycle in the years ahead. So even as new stores drive the top line today, the installed base we're building now becomes a recurring source of demand tomorrow. The event generated hundreds of qualified leads across Thailand with the opportunity extending across the region. And Thailand isn't the exception. It's the template. We see the same early innings dynamics taking shape in market after market, structural tailwinds, a growing installed base and emerging market runway all pointing to a business built to compound for years to come.

And on that note, I'll hand it over to Dean to provide details of our second quarter performance and increased guidance.

Thanks, Mike. Starting on Slide 5, I'll walk through our financial results, including our strengthening balance sheet. Second quarter net revenue grew 7% versus the prior year. Pricing contributed slightly more than half of the increase with the balance coming mainly from volume. Gross profit grew 9%, representing a gross margin of 39.8%, up approximately 90 basis points from the prior year. Regarding the cost environment, pricing actions already in place helped to offset our tariff exposure and other current inflationary pressures. Our domestic manufacturing footprint continues to provide a meaningful structural advantage relative to our peers.

Adjusted EBITDA grew 12% versus the prior year with a margin of 28.1%, up 135 basis points. This expansion came from volume leverage, operational excellence and supply chain efficiency and also includes continued investment in people, digital, engineering and commercial capabilities at scale versus the competition. In addition, during the quarter, we received tariff refunds and a business interruption insurance claim totaling approximately $3.8 million. Excluding these 2 items, adjusted EBITDA grew 9% versus the prior year quarter and EBITDA margin expanded 60 basis points. Adjusted net income was up 55% year-over-year and adjusted earnings per share was up 32% to $0.41. This result reflects both strong operating performance and the meaningful benefit of significantly lower interest expense, down roughly $22 million from the prior year quarter.

Moving to cash and the balance sheet. Operating cash flow was $66 million in the quarter, reflecting strong conversion and continued working capital discipline. We paid down $50 million of debt in the quarter, bringing our year-to-date paydown to $115 million. Net leverage at the end of the quarter was 2.4x adjusted EBITDA, down 0.2 turns in the quarter and down 0.4 turns from year-end. Stepping back, the progress over the past year is striking.

Since June 30, 2025, we have paid down $825 million against our term loan, funded by strong organic cash generation and IPO proceeds, cutting our net leverage nearly in half over the last 12 months from 4.6x to 2.4x, with one full turn of that deleveraging due to organic cash flow generation and EBITDA expansion. In addition, we are quite pleased that both Moody's and S&P have upgraded our corporate and senior debt ratings, recognizing our ability to both grow and delever at the same time. This action also has the benefit of lowering our borrowing costs on our term loan by 25 basis points going forward.

Drilling into the segments on Slide 6. North America delivered a strong quarter with revenue up 9%, adjusted EBITDA up 17% and adjusted EBITDA margin of 31.6%. Adjusted EBITDA growth was over 12% if you exclude the impact from the insurance recovery and tariff refund mentioned previously. Growth was broad-based across our end markets, with mix providing a modest positive impact in the quarter. Internationally, revenue was approximately flat with adjusted EBITDA of $34 million and a margin of 28.9%. Asia Pacific saw strong growth, particularly in fast-developing Vended markets and Europe was steady across all end markets with operators actively investing in new stores, fleet upgrades and energy efficiency. This flat result masked genuinely strong underlying momentum.

As we noted, our Middle East and Africa region, which makes up less than 2% of global revenue, saw a temporary pause in demand tied to the ongoing regional conflict as well as higher energy costs, which also weighed on certain other international markets in the quarter. The year-over-year international EBITDA and margin comparison reflects regional mix within the segment as well as our ongoing investments in people and products to support future growth. International EBITDA and profitability will be lumpier quarter-to-quarter in North America, given the smaller base and the swings in regional strength and mix. We look at progress over time and the trajectory is toward improved profitability and continued parity with our North America margins.

Now we will turn to our updated full year guidance on Slide 7. The strength of our first half performance and our growing visibility into the balance of 2026 give us the confidence to raise our full year guidance today. We are maintaining our full year revenue growth guidance of 6% to 7%, with volume and price expected to contribute equally. We are raising our adjusted EBITDA growth guidance to a range of 8% to 10%. We expect revenue to be fairly consistent between quarters across the second half, with margin expansion weighted more toward the fourth quarter given our geographical mix expectations and normal seasonal patterns.

We now anticipate net leverage of 2.0x at the end of the year, down from the prior forecast of the low 2x range. Of course, this is based on our current expectations of business operations and capital expenditures and does not take into account the potential impact of other capital deployment opportunities. A few additional adjustments to our full year outlook. We now expect 2026 interest expense to total approximately $80 million. We anticipate a lower effective tax rate of 23%. Our CapEx and share count guidance are unchanged.

Now I'll turn the call back over to Mike.

Thanks, Dean. And with that, I want to close with our 4 consistent messages. First, commercial laundry is a vibrant, growing and essential industry. Second, we hold a leading market position as the only scaled pure-play operator, 2x the size of our #2 competitor. Third, we have an experienced, hungry and proven team that has long delivered results through every economic cycle and that gives us the confidence to raise our outlook for the full year. And finally, there are systemic tailwinds of magnitude that we believe will continue to power this company for the next several years. So I'll close by thanking our employees, our distribution partners, our customers and our shareholders for your continued support. We really appreciate it and look forward to continuing to create long-term value for Alliance's stakeholders.

Before we open the line for questions, I do want to note that Dean is unable to participate in the Q&A portion of today's call due to a personal matter. I'll be handling questions this morning alongside Tom and Bob Calver, our outgoing Head of IR and Future International COO.

So with that, operator, let's open the line for questions.

[Operator Instructions] Our first question will come from Amit Mehrotra with UBS.

Appreciate the question. Maybe I can just start by asking about the Middle East conflict and sort of the direct and indirect impacts there. Be curious how much you think that impacted the international business, both on revenue and earnings? And maybe just give us a sense of kind of -- I know it's going to be lumpy prospectively, but as we think about third and fourth quarter, what are sort of the continuing impacts?

Yes. Amit, this is Mike. I would say, remember, it's 2% of revenue. So the region itself de minimis in terms of impact. What you have there is -- honestly, it's more transit, so vessels being delayed, things of that nature. And the good news is it includes Africa also, which has been an area that candidly, we have not -- we've done okay in select countries, but there's a lot of opportunity if you think about the demographics of that part of the world, right, large family sizes and other things. And so we've got a lot of opportunity. In many ways, like any crisis, it's a gift, if you look at it the right way. And that gift is forcing that team to refocus on the African market, which, again, is pretty stunning in terms of the long-term potential opportunity.

And then as I said in the opening remarks, it's more about the knock-on effects where understandably, some people are pausing a little bit on the international side. Energy costs are a little bit higher. The regions that matter there, obviously, are Asia and Europe, in particular. The thing that we see, as you know, Asia put in a great quarter. We're still very confident about that. I think in Europe, a little slower, but we've seen this before. And usually, what happens is people are a little hesitant, they pause and then all of a sudden, it sort of comes back because people realize laundry is every day, and they got to get to work and the business comes back. So it's not -- I would say we're probably seeing that same phenomenon where to use your words, a little lumpy, a little bumpy. But long term, they are -- and we believe we'll be fine.

Okay. That's helpful. And just maybe as a follow-up, obviously, the North American margins were just spectacular. And what I found interesting is you only attributed mix to sort of a modest benefit in the quarter. We have North America margins sort of approaching 32% here. I think that's sort of an all-time high tied to maybe something you did back in 2023. But what is the -- is there a ceiling here? Because the incremental margins are so far in excess of the absolute margin and your growth is good. It implies that you can continue on this expansion trajectory, but I just want to make sure I'm thinking about it correctly.

Yes. Look, I would sort of caution on that side. But I mean, as you know, we've got some internal targets that we won't talk about. We think we continue to grow. That is our plan on the margin side. But I would say sort of slow, steady upward trajectory, nothing radically different, but confident in our ability to, again, be cost down to offset any tariffs and inflation to just get better every day through our operational excellence, right? And then on the new product side, a lot of the design criteria that our engineering team is very, very capable of doing, particularly given, as we've talked about in some of the past calls, the expansion of our laboratory testing facilities. And also, we have added additional folks to our engineering team and the technicians and other guys that are involved in that. So again, being a little long-winded here, but I think up to the right and continual progress.

Our next question will come from Susan Maklari with Goldman Sachs.

My first question is on the strength, the mix shift that you saw in Vended. Can you talk a little more about what's driving that? And how you're overcoming some of those underlying perhaps headwinds given the macro and some of the other constraints you mentioned last quarter relative to the initiatives that you're putting through and the innovations that you're launching?

Yes. So the mix we've talked about, Susan, in the past, and I think it's pretty consistent, and that is in those -- the retail locations, right, it's all about revenue per square foot. The larger capacity product simply just drives better returns, right? The footprint is smaller, the ability to charge more is higher. So revenue per square foot is significantly higher. And again, you see people doing that. The other thing is the end consumer, most people don't like doing laundry. They particularly don't like doing laundry in public many times. So what they really want to do is they want to get in and they want to get out and they want to get on with their life and go play baseball with the kids or do whatever their free time allows them to do.

So it's really, really strong that way. And then it is the trifecta in terms of the third part which is for us, right, the engineering content is higher in larger capacity product. There is less of a competitive set on that side. And those things allow us to make a little more margin for it. So it's really a win across the board for the consumer, for the store owner and for us as a manufacturer.

Okay. That's helpful. And then maybe shifting to the margin and the cost side. Can you talk a bit about price cost and what you're seeing there, especially just given the move in steel and how you're thinking about the potential for any further pricing as we look to the back half of the year?

Yes. So steel, we're locked through the first quarter of '27. We are watching it. It does look like [ 427 ], the inflationary environment is a little more hot than we would like. But we're early days. Again, we're watching everything. We're seeing lots of different things in terms of freight and other things that are sort of moving around. I think my message would be, hey, as we have done traditionally, we will get ahead of any of those cost increases and offset that with price. And again, some of the cost down and other efforts that we have to continue to be really attractive in terms of our margin profile. But right now, again, just a little -- looks like it will be a little hot, but too early to tell.

Our next question will come from Mike Halloran with Baird.

So can we start on just some of the channel in North America? Maybe talk a little bit more depth on the Commercial-in-Home, what you're seeing on that side? Any broader macro headwinds impacting that demographic or that buying group? Any change in trajectory? Any kind of loose thoughts?

Yes. I mean having just returned actually night before last from a buying group show, I can tell you the demand is extraordinary. The preference for the Speed Queen brand is extraordinary and it is all signs green. There is no slowdown and they're really asking for us to deliver more product that's probably the biggest opportunity is to really scale that up a little bit more.

And you're going to be sub 2x leverage exiting the year here. Maybe just give a little context to what your capital allocation or deployment plan looks like beyond that. Does a dividend come into the cards? How are you thinking about the M&A market? Buyback seems maybe a little premature given the float. But maybe just add some context around the plan after you get down to 2 turns.

Yes. Mike, it's Bob Calver. Yes, really no change from what Dean has talked about the last 3 quarters. Primary use is to get that leverage down and we're, as you know, tracking really strongly against that. Investing in the business, be that CapEx or M&A remains the next best use of capital. We've talked about it before. There's limited M&A out there that we see and you've seen that over the last few years. We've -- we think, fairly successfully done those distributor roll-ups in the U.S., and that may continue, but they're fairly small dollar items. And then you're absolutely right, cash generation is really, really strong and we do need to start thinking about what we do with it at that point. I think it's a little bit premature right now to be talking about that in any detail. But I think long term, that combination of dividends, buybacks is kind of where you land logically, but we don't have a firm plan to share with anyone at this point.

Our next question will come from Kyle Menges with Citigroup.

I just wanted to understand maybe a little bit more what's embedded in the second half expectations for international markets. I mean it seems like in the second quarter, Middle East and Africa was down quite a bit year-over-year and Europe flat. So just trying to understand, are you basically assuming more of the same in the second half? And just any color you can provide on how you're thinking about some of these international markets in the second half and what's embedded in the guide?

Yes. I mean what I would say, Kyle, is we still feel pretty good about it. It is and can be lumpy at times. What we see is Europe continuing to perform. Nothing really systemic there in any way. And as I said on multiple calls, an incredible team, really, really strong manufacturing base where we can be very, very competitive from a cost side. Our competitive set there, very capable. But as you know, we've continued to grow. We think we have a lot of tailwinds still, particularly on the Vended side that, that is continuing to grow. It's a new market. And that region has always been strong on the on-prem. So very diverse, lots of opportunities, still feel good about it.

Asia Pacific, we should be okay. I don't expect anything negative. Again, lots of opportunity to grow. Certainly, challenges in the region for sure. Probably a little more energy conscious in that part of the world. Latin America, again, we feel like these emerging markets, it's sometimes lumpy, but long term, strong. For us, that region is really about what's happening in Mexico and Brazil. That drives the majority of the business. And Middle East, Africa, as I said, and actually, as an example, they had a pretty good start to Q3. But it is going to be dependent on what the team can do there. And I would say it's more like we talked about vessels that get delayed, transport, that kind of thing. Saudi and the UAE are down. So it's really up to that team to find other opportunities for growth, is very capable. And I would expect that to be down for sure. I don't see recovery there for the year. But as I stated, it's about 2% of revenue. So we'd love to have it up. But if there's a region that's going to be down, that's the one that would have my vote.

Got it. That's helpful, Mike. And then just a quick follow-up on the potential for some M&A. I mean it sounds like small dollars. Just curious how the M&A pipeline is looking now that you'll be at about 2x leverage exiting this year, if it's mostly small dollars or anything bigger in the pipeline?

Yes. Kyle, I think we've talked about it before. There's a limited amount that we need. We've got everything that we think we need to continue growing at historic rates well into the future. If anything did come up that was attractive in terms of filling product gaps, distribution gaps, those kind of things, we'd absolutely consider it. But we certainly don't believe that we need it. So yes, it's always a lever that's there, but I think we're very happy with what we've got and what the future looks for us like M&A.

Our next question will come from Tomo Sano with JPMorgan.

If you could talk about the international business, especially the primary drivers for margin pressures, geographic mix and cost and investment ramp and staffing and pricing. If you give us more color and what happened in 2Q? And how should we think about the back half?

Yes. So there's some dynamics going on, but let's start with the manufacturing base that we have, right? So in Europe or the Czech Republic, it is highly, highly cost competitive. We feel really good, both about that location, our sourcing team and the product design. So the international markets, I think, in general, what you see there is more large chassis, which is produced in each of those regions or certainly in Europe. And in the case of Asia, just to touch on that a little bit from the cost side, right? And that Thai factory, it is state-of-the-art. It is our newest factory. It is highly efficient. And again, it is sourcing all materials locally. So very competitive with local manufacturers.

And outside of Australia and New Zealand, not a lot of product coming from outside of the region, right? So it is primarily high margin. We use this term large chassis, as you know, product, where, again, you've got more engineering content, a lesser competitive set and we think opportunity to go. So sometimes you'll have some mix shifts where there'll be a country or 2 that all of a sudden takes a large order of lower-margin product that it would be the small chassis product. Again, highly differentiated, but not an equal margin versus the large chassis product. And over time, what those regions use small chassis to sort of seed the market, particularly on the Vended side because it's a lower capital cost, if you want to start up a store, as an example, we just stay on that for a minute.

And then they get comfortable and then they realize, hey, this is a really good business, it is every day. And then their next door, what they will do traditionally, they will upgrade then to a larger chassis product, which has longer life, got faster cycle times and offers a better return on investment. But they will dip their toes and we use that to allow them to dip, get comfortable and then that second and third and fourth store, hopefully, if all goes well, right, you do not see them using small chassis in those subsequent stores. Does that answer your question?

Yes. And a follow-up on Bob, congratulations on the leadership transition and this is a question for Mike and Bob. Under Bob's leadership, what will concretely change to improve speed and execution? And where will decision-making be different versus today in international business?

Tomo, thank you for the congratulations. I'm going to defer this one to Mike because I think this sounds like an objective conversation.

Yes. Tomo, trust me, we have those ongoing dialogues. I'm looking at him right now, and everything is going to change. No, but we feel really good. As you know, he's very capable. He's been in the business for a long period of time. One of the good things, Tomo, is we've had Tom join us, the transition and Tom's experience and tenure and professionalism, honestly, has allowed Bob to get a running start on the transition. So I can say, for example, we've been in almost every region of the world over the last 2 months and meeting customers, they know him already. He knows the sales team. And I think he is bringing in good perspective.

You always win when you bring somebody in new. They look at things differently. They uncover opportunities, they challenge. And I feel really good about the trajectory, the opportunity and I think Bob's leadership and knowledge. So he's not starting from 0. He's an experienced guy who's been around for a long time. And as you know, the numbers matter. And so actually, his background on the finance and Investor Relations side is super helpful to help drive that into his regional teams and I feel really good.

Our next question will come from Andrew Obin with Bank of America.

This is David Ridley-Lane on for Andrew. Just a question here. A competitor has instituted surcharges in response to, as you said, a little bit higher inflationary environment. What has Alliance done historically? And what is your plans on pricing second half and thoughts on -- maybe early thoughts on 2027?

Yes. So David, I say, look, we've done all of the above a little bit. It's a hyperinflationary. We have used surcharges for shorter periods of time, sort of waited, watched. If I go back a year or so ago, it was on the freight side. And then as that look to be a consistent cost increase, we did roll out a price increase. So you'll see us do that. At the moment, we're watching. We feel we can offset the majority of that with a lot of other different actions that we're taking here.

But the one thing you should know about us is we have consistently sort of gotten ahead of any price increase to make sure our margin profile remains attractive. So we're not quite there yet. We're watching it. As I said, I think '27 will be a little bit hotter than normal, nothing like what we've seen in the past, but it's likely to be a little bit hotter. But again, you'll see us announce, get ahead of it. We don't chase it because you can't -- you can never catch it. This is my experience anyway. So that's how I frame it.

And then just a follow-up on -- there's been a number of tariff changes. I know you're primarily local for local. Does the Section 301 tariffs kind of that 10% or 12.5% have any benefit to you in the second half neutral? Any thoughts on that?

Yes. David, I'll just take that one. I think you should consider the second half very similar to the first half. We don't see any changes and it's fairly neutral for us right now.

Our last question will come from Ketan Mamtora with BMO Capital Markets.

This is Patrick Beairsto on for Ketan. I wanted to ask about the demand trends in Europe, both by sort of end market and region. And how did you see those trends sort of evolve through Q2?

Yes. I'm sorry, I missed the first part of the question. Can you repeat that?

Yes. I just wanted to ask on the demand trends in Europe on an end market and region basis and then how you saw those trends sort of evolve through Q2?

Yes. So I don't think there's any material change. Again, the Vended piece continues to grow. Again, you've got a lot of new storefronts that are going in. No real change there. The incremental growth of that part of the business has been quite strong. And then again, it is a more On-premise heavy as a percent of revenue. There are a lot of opportunities in terms of same phenomenon you see here where Europeans are staying more often. They're staying in the region. So a lot of the bed and breakfast and you do have a different sort of hospitality market there where you've got a lot of smaller properties versus what you have here of 300, 400-room hotels. You don't see that there. You've got a lot of 50, 60 room locations that have On-premise laundry. So a lot of opportunity there and others, I would say, tailwinds that are favorable.

The Eastern Europe is a little more hard hit with the energy costs. You don't see -- I mean, there's concern across the region, right? As everybody knows, sustainability is really, really critical in that part of the world. We've got the right product suite that allows them to get much, much higher efficiency and lower cost. But I would say the East is a little bit more stressed than Western Europe and particularly where we are strong in France, Spain and Italy, which has a high population base, we have a direct business there that, that is performing very, very well and has long been outperforming and growing faster than some of our independent distributor countries.

Got it. That's helpful. And then on the -- on the tariff refund side, are you expecting anything for the remainder of the year?

Patrick, yes, it's Bob again. Look, we're not going to share anything specific. There was the benefit we got in Q2. The reality is that there's probably still something out there, but it's still subject to confirmation. So just to be clear on guidance, it's not included in our kind of full year guidance. Nothing over and above what we've seen in the second quarter is in there. So if there is any, it will be additional benefit.

Thank you. This brings us to the end of the Q&A portion and also the conclusion of Alliance Laundry's second quarter 2026 earnings conference call. You may now disconnect your lines and have a wonderful day.

Good morning, and welcome to Alliance Laundry's First Quarter 2026 Earnings Conference Call.

With us today are Mike Schoeb, Chief Executive Officer; Dean Nolden, Chief Financial Officer; and Bob Calver, Vice President of Investor Relations. [Operator Instructions]

With that, it is my pleasure to turn the program over to the team. Bob, please go ahead.

Thank you, operator, and good morning, everyone. Along with today's call, you can find our earnings press release and presentation on our Investor Relations website at ir.alliancelaundry.com. A replay will also be available on our website following the call. As a reminder, today's earnings release, presentation and statements made during the call include forward-looking statements under federal securities laws.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include factors set forth in the earnings release and in our filings with the SEC, including the Risk Factors section of our 10-K filing and subsequent 10-Q filings. We assume no obligation to update or revise any forward-looking statements, except as required by law.

Additionally, during today's call, we'll discuss certain non-GAAP financial measures outlined in our earnings presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of ongoing business performance. Reconciliations to the most directly comparable GAAP measures can be found in our earnings release and presentation appendix.

I'll now turn over to Mike.

Thanks, Bob, and thank you all for joining our earnings call. Building on a strong 2025, Q1 demonstrated what we've been talking about since becoming a public company that a resilient, replacement-driven, essential industry, a market-leading position and disciplined operational excellence deliver strong, sustainable outcomes.

In Q1, revenue grew 10% year-over-year with adjusted EBITDA growth of 9% and adjusted net income almost doubling. This growth was broad-based, driven by both volume and price. The strength and breadth of this performance, combined with our growing visibility into the balance of the year supports our confidence to raise the low end of our full year revenue and adjusted EBITDA guidance today to 6% to 7% revenue growth and 7% to 8% adjusted EBITDA growth. And Dean will take you through the detail shortly.

I'd like to highlight that this strong performance was achieved in what we all know has been a very volatile macro environment. But remember, Every Day is Laundry Day. Commercial laundry is a vibrant, growing and essential part of modern life. And our diversified geographies and end markets serving nondiscretionary applications have performed across all economic cycles, providing a level of growth, consistency and downside protection that is hard to find.

We see this period as no different. We saw solid performance from our Commercial-in-Home where replacement-driven demand means we are not exposed to new home construction trends and consumers everywhere are searching for reliable and durable products in their homes.

Europe also performed extremely well across all end markets. And on tariffs, which I know is top of mind for many, our local-for-local manufacturing strategy continues to be a real competitive advantage, not only in the U.S. but around the world. Our local-for-local manufacturing footprint puts us in a stronger position relative to competitors who have more import-dependent and complex supply chains.

Digital innovation also continues to see strong adoption, and I want to be clear about our strategy. Our priority is building an extensive connected installed base and driving adoption by delivering technology, innovation and tools that our customers love. The more connected our equipment is, the more value we can deliver through better uptime, smarter servicing, lower costs and higher revenue. And ultimately, all of this delivers a better end consumer experience, which further strengthens our relationships and stickiness with our customers.

Our connected equipment base continues to grow month-on-month, now standing at more than 250,000 connected machines. Also Scan/Pay/Wash, our first-of-its-kind cashless payment solution requiring no app download, processed over 100,000 transactions in the month of March alone, but total transactions in Q1 doubled the entirety of Q4 2025.

And we're still in the early innings of the value this technology can unlock, and we look forward to sharing more as this platform scales. But so far, the adoption trends are encouraging, and we continue to see strong progress on our multiyear product pipeline. And as we touched in our last earnings update, we were excited to complete the distributor acquisition in New York during Q1, which marks our second acquisition in one of the most vibrant commercial laundry markets in the U.S. This tuck-in also brings the Speed Queen, UniMac and Huebsch brands together under one highly talented team and provides us with the opportunity to realize its full potential.

We've also continued to strengthen our balance sheet, having made debt payments of $65 million in the quarter and reduced net leverage 0.2x to 2.6x adjusted EBITDA, and we remain on track for our full year deleveraging target. Taken together, the strength we demonstrated in Q1, broad-based demand, pricing discipline, a local-for-local manufacturing footprint and a strengthened balance sheet are what we expect to carry us through the balance of 2026. We remain confident in our ability to deliver on our raised guidance for the full year and equally confident in the long-term value we are creating for shareholders.

And finally, before Dean takes over, I want to thank all of the investors and the analysts we have met over the past few months. The level of engagement has been fantastic, and I look forward to continuing the dialogue as we work hard to continue demonstrating our best-in-class industrial, financial and operational profile.

On that note, I will hand it over to Dean to provide details on our Q1 performance and increased guidance.

Thank you, Mike. Starting on Slide 4, I'll walk through our strong results and strengthening balance sheet. First quarter net revenue grew 10% to $427 million versus the prior year. We saw real unit volume increases, contributing roughly 3%, consistent with our full year outlook, with the balance coming from pricing and roughly 1% benefit from foreign currency.

This reinforces what Mike said earlier, Alliance is fundamentally a volume-led growth story, enhanced by rational pricing and our results remain consistent with the balanced growth pattern that has long characterized us and our industry over time. Gross profit grew 8% to $157 million. representing a gross margin of 37%. On the cost environment and tariffs specifically, pricing actions already in place continue to offset our approximately $20 million annualized exposure.

And our domestic manufacturing footprint provides a meaningful structural advantage relative to peers. We are monitoring the evolving trade landscape closely and believe we are well equipped to manage through new developments or changes in the tariff environment. Operating expenses were $73 million or 17% of revenue, consistent with our expectations and reflecting the full quarter impact of public company costs as well as our continued investments in our digital, engineering and commercial capabilities at scale versus the competition.

Taken all together, these dynamics translated into adjusted EBITDA of $109 million, up 9% versus prior year and an adjusted EBITDA margin of 25.5%. Volume leverage, operational excellence and supply chain efficiency would have driven margin expansion higher in the quarter, but were offset by the incremental costs of operating as a public company. Adjusted net income was up 85% year-over-year to $63 million, a result that reflects both our strong operating performance and the meaningful benefit of significantly lower interest expense as our debt reduction over the past 12 months continues to flow through the P&L.

Moving to cash and the balance sheet. Operating cash flow in the quarter was $80 million, reflecting strong operating cash conversion and continued working capital discipline, consistent with what we've delivered historically. We paid down $65 million in debt in Q1, ending the quarter with total debt of $1.3 billion and net debt of $1.2 billion. That puts net leverage at 2.6x adjusted EBITDA, down 0.2x in the quarter and squarely on track for our full year leverage guidance.

Drilling into the segments, North America delivered a strong quarter with revenue up 9% to $320 million and adjusted EBITDA up 8% to $87 million and an adjusted EBITDA margin of 27.2%. Growth in the quarter was broad-based across our end markets with some mix impacting margin modestly in the quarter. We saw strong growth in our vended markets, both retail laundromats and communal laundry in multi-housing locations, driven by new store development and existing operators continuing to modernize their fleets with higher capacity digitally connected equipment.

Alliance remains well positioned to capitalize on this continuing growth driver. On-Premise delivered solid results driven by predictable replacement demand that defines that end market. And as Mike talked about earlier, Commercial-in-Home continued to outpace the industry. Internationally, revenue grew 10% to $107 million, with adjusted EBITDA up 13% to $33 million and margin of 30.4%.

Europe continues its strong momentum with our total cost of ownership value proposition resonating with an operator base that is actively investing in fleet upgrades and energy efficiency. Across our other international markets, we continue to see strong growth in Asia Pacific, especially in the nascent vended markets. Our Middle East and Africa region, which represents roughly 2% of total revenue, consistent with its historical size and split broadly between the Middle East and Africa, also grew in the quarter.

Now we will turn to our full year guidance on Slide 6. While it's still early in the year, the strength of our Q1 performance and our growing visibility into the rest of 2026 gives us confidence in raising our full year 2026 guidance today. We are increasing our full year revenue guidance with growth now expected to be in the range of 6% to 7%, an increase of 1 percentage point to the low end of our prior range with equal contribution expected from volume and price.

We also continue to anticipate adjusted EBITDA margin expansion for the full year and are updating our adjusted EBITDA growth to be in the 7% to 8% range as we realize price and volume increases and the benefit of continued cost down initiatives. In addition, subsequent to our first quarter deleveraging, we remain confident in our ability to continue to generate free cash flow and are reaffirming our expectation to reduce leverage by approximately 0.75x in 2026, bringing us to the low 2x net debt leverage range by year-end. Our other guidance items remain unchanged.

Before I wrap up, I want to reaffirm our capital allocation framework to highlight the strong position this business is in today and the compelling opportunities we have ahead. We are generating strong, consistent free cash flow and putting it to work strategically and deliberately. Deleveraging remains a priority. And as you've seen, we are executing against that commitment. Each quarter of paydown strengthens our balance sheet and expands our financial flexibility.

As we move through the year and leverage continues to decline, that flexibility grows, and with it, our ability to act on additional opportunities to drive shareholder value. Organic investment in high-return growth remains a core use of our capital, and we also continue to monitor the landscape for potential tuck-in acquisitions that could support and enhance our long-term growth.

At the same time, we expect to maintain the flexibility to return capital to shareholders when appropriate, potential buybacks in the near term and dividends as a longer-term consideration as the balance sheet continues to strengthen.

With that, let me turn it back to Mike.

Thanks, Dean. Before we open it up for Q&A, I want to close with 4 key messages. First, commercial laundry is a vibrant, growing and essential industry. Second, we hold a leading market position as the only scaled pure-play operator, 2x the size of the #2 competitor. Third, we have an experienced, hungry and proven team that has long delivered results through every economic cycle, and that gives us confidence to raise our outlook for the year. And finally, there are systemic tailwinds of magnitude that we believe will continue to power this company over the long term.

I'll close by thanking our employees, our distribution partners, customers and shareholders for your continued support. We appreciate it and look forward to continuing to create long-term value for Alliance's stakeholders.

And with that, let's open the line for questions.

[Operator Instructions] Our first question today will come from Kyle Menges with Citigroup.

Great. Maybe to start off, I'm curious just any notable changes in how you're thinking about the growth in any of the verticals in North America for the rest of the year? And maybe piggybacking on that, I think you mentioned Commercial-in-Home outgrew the industry in the quarter. I'm curious if that growth was still positive and just how you're thinking about Commercial-in-Home for the rest of the year.

Yes. Kyle, it's Mike. Look, I don't think anything has changed. So we still feel very optimistic in terms of all verticals in the business having continued growth. Momentum is positive. Sentiment is positive. Commercial-in-Home, in particular, has been, as you know, been doing quite well for a number of years. We see no change in demand. So at the moment, everything is green.

That's helpful. And I'd love to just hear more about the Scan/Pay/Wash technology that you've rolled out and just curious how unique this is to Alliance and then just how are you thinking about monetizing it? And is it more of a, I guess, market share gain play that you think you can get with this technology?

Yes. So remember, we're really the only player in the industry who has a truly integrated platform with software and hardware together. Payment is a part of that. The Scan/Pay/Wash has been very, very popular just because people don't like to download apps.

So I think it's just convenient, it's easy. It provides some benefits to the store owners, but ultimately, it's a convenience for the end user. And in terms of monetization, as I said in the opening remarks, I think we're more focused today on, hey, let's just get adoption. And we believe, again, that, that stickiness, the value that we can bring sort of by the digital platform in general is going to continue to be very strong, and we will monetize that as it goes through. We do clip a little bit of a fee on the Scan/Pay/Wash, but it is not really meaningful, Kyle. And that we think is the right strategy for now.

Our next question comes from Mike Halloran with Baird.

So first, just on the vended side of things, North America. Maybe just talk about the dynamics you're seeing in the marketplace. Any sensitivity to the volatility right now when it comes to the refurbishment cycle or even build-out cycle? And what are the customers saying about the current dynamics?

Yes. Mike, I will tell you, at the store level, not really any major impact of note. At the investor level, so those who are hoping to get new stores or retrofit their existing stores that they have, there is no change in demand.

The continual challenge has been more on the permitting and then just finding labor in particular. And to a lesser extent, still you -- when you're putting a store together, you've got a lot, a lot of different components and parts and pieces. And so some of that is subject to supply chain where you can't get a front door that closes or boiler or whatever it happens to be. But in general, it's really just permitting, labor, and then as we talked about on past calls, site selection. But more of the drag is just -- it just takes more time and you're pushing through the funnel. But demand, the pipeline is still very, very robust.

And then on the price cost side of things, maybe just talk to the inflationary backdrop, how you think the price cost manages through the year? And do you foresee any incremental pricing actions on your side?

Mike, this is Dean. I think from the standpoint of price and cost, as we disclosed in our release and talked about previously, we've really covered our cost increases from inflation as well as tariff with the price increases we took in late -- middle to late 2025 and then some in early 2026 internationally. So we're well positioned to manage as pricing evolves, as tariff environment evolves to adjust accordingly. But we feel good with where we're at today and our guidance for covering our price -- our cost with price for the rest of the year.

Our next question comes from Andrew Obin with Bank of America.

This is David Ridley-Lane on for Andrew Obin. Am I right in thinking that this is probably the -- on a year-over-year basis, the most meaningful one for tariff pressure just given the timing of all the things? And then also on the topic, could you discuss -- there were changes to Section 232 tariff on steel and aluminum. Can you discuss whether that was a net benefit or drag for you and also maybe your competitors?

I think from the standpoint of tariffs, yes, I think the first quarter is really the toughest comp quarter given the ramp-up and the activity in tariffs in 2025. We have about $4.5 million to $5 million of headwind in the first quarter from tariffs that are consistent with prior year. And again, consistent with the prior question, we've covered those costs with price. Also on the other side of some of our commodities, as you know, we've locked in the most important commodities in terms of our cost of materials, in terms of steel and stainless steel for the year. So we feel good with where we're at. We have good visibility on those costs as it relates to our prices.

Then I would say on the change in the Section 232, I would say it's slightly favorable, but pretty close to what it was before.

Got it. And just on the -- it sounds like you are in a good position from your own costs. It would seem that broadly, this concept that electricity prices are going higher is out there in the public mainstream now. And that would seem to me to be an impetus maybe for -- since utility costs are so meaningful for your customer base. It would seem to be maybe on the margin, maybe an impetus for refreshing. Is your energy efficiency more of a selling point today than in the past? And how do you think about that?

Yes. Sorry, go ahead.

No, that was it.

Okay. Yes. So again, it depends on the age of the equipment you currently have. So older generation, let's say, approaching the 7 to 10 year, again, these units, as you know, get warm and ridden pretty hard. So everything kind of loosens up, efficiency generally degrades over time, particularly if it's not well maintained, which is the reality.

Very few people really maintain their product as well as they should. Just like a car or anything else, like nobody really does what the manufacturer is asking you to do. But -- so there is a value proposition there. I think it would take probably several quarters of when you really see that show up and it materially impacts your results month after month. I think that gets people off of a sort of dead center. So I think it helps.

I think more important is sort of the innovation and the digital connectivity that allows people, again, to not only reduce energy, but gives you potentially an uplift in terms of the revenue side of the equation. So I think it will come, but I don't think it's a quick one, and we need it to be pretty consistent out there for a number of quarters.

Our next question comes from Tomo Sano with JPMorgan.

So Europe and APAC was strong. And could you talk about where exactly is the growth coming from countries, channels? And if you could talk about the -- what are the key risks, including geopolitics and competition, please?

Yes. So for Europe, very strong across the board, all parts of the business. So vended was up pretty significantly. Our On-Premise business was up significantly. The majority of that has come where we have direct offices, so Italy, Spain, in particular, in France, and we see no change in that. I will say having just been in that region a week or 2 ago, sentiment is -- people are a little bit -- I wouldn't say nervous, but they're thinking, they're pausing and they're kind of waiting.

So I would expect that given energy prices in particular, given again the uncertainty around the war, we'll see some pullback, I would suspect. Nothing material at the moment, nothing that we can sort of point our fingers at. But general sentiment in that part of the world is slightly negative, I would characterize it that way. In APAC, it's been a continual story. We are getting more growth from On-Premise. It is one of the areas that we have, as I've talked about in prior calls, sort of lost a little bit of focus on. So they're getting more there. And then in particular, Thailand has really had a very, very strong start to the year. And most of that has been on the vended side of the business.

And one follow-up. International margins are now 30.4% versus North America, 27.2%. What structurally drives the gap? And how should we think about it going forward, please?

I would say, first, Tomo, as we've talked about in the past, as we grow internationally and as different regions of the International segment and mix impact those regions, especially Europe, in particular, that Mike talked about, we will see stronger EBITDA margins as a result. So it is a little bit lumpy, but consistently growing, trending up and to the right. So parity with North America will continue to increase or to get closer together.

One thing I would say is that about 1/3 of the top line and 1/3 of the bottom line is FX related in the quarter. So if you take away the FX impacts in internationally, we'd be up 7% in revenue and 9% in EBITDA. So still margin expansion. We're benefiting from the natural hedge that we have on our local-for-local manufacturing strategy. So we feel really good about the margin trajectory internationally. But again, it's somewhat episodic or lumpy in terms of which regions and which end markets are the strongest in the quarter, again, up into the right over time.

Our next question comes from Susan Maklari with Goldman Sachs.

My first question is on the adoption rates that you're seeing with Scan/Pay/Wash. It sounds like you're getting some really nice traction there. As we think about the next several quarters and is continuing to gain some momentum, can you talk about how we should think about what that means in terms of the overall growth? And then how you're also thinking about investing in the next wave of innovation and in other strategic initiatives that you have in the pipeline?

Yes. So just on Scan/Pay/Wash, again, it's part of our digital platform. So there are a lot of other sort of features that you would get with that. So it's more just sort of an add-on. And again, as I mentioned, it's not really material at the moment in terms of showing up in the financials in any way.

And I think in terms of our innovation, it is really across the board. It's something that we have invested pretty significantly in, right? I talked about almost doubling our testing capacity that we have in the U.S., in Thailand as well as in Czech Republic to really get that [ 24/7 ] turn. So the physical product, again, Susan, will be a little bit slower because what we don't want to do is launch a product before it's tried, tested and true. So those labs are very, very important to helping us accelerate the physical product and simulating all kinds of things from brownouts, to dirty water, to vibration, to all kinds of things and run life testing to make sure that, that product is durable, reliable and long-lasting.

And then the digital side, again, much, much quicker to innovate faster to roll out. And we see, again, that sort of one-two punch. We've got a very significant development team. As I said, we believe we are the only fully integrated company in the space and got some great team members and a development center, again, primarily in our Asian market. But it is going to be pretty healthy, I think, in terms of how we feel about it, how we look at it and what you will continue to see from the company.

Okay. That's great color. And then you also mentioned that you completed your second acquisition of a distributor in New York. Can you just talk a bit about the M&A pipeline? And has there been any changes given the recent uncertainty in the macro and moves in inflation?

Yes. I mean, again, I think you got -- well, you should think of us as very capable of acquisitions. We're always looking. That pipeline is not infinite. It's a small number. We have largely accomplished what we said we would do, setting out our strategy a number of years ago in terms of the acquisitions of distribution in the U.S. market. That's not to say we aren't engaging, continuing to dialogue with people. But it will be a part of our story. You should not think of us that way.

On the manufacturing side, again, we're always in active discussion. But I would say more than anything, we've got everything we need to continue to grow at a pace above market. And we view all of these as complementary, nice to have, but none of it is a need to have, and that's kind of how we look at it. So where we can find value, and again, I would emphasize, we are very disciplined in terms of any of these targets that we're looking at. But where we see it, you'll see us act, but it is more on the margin is what I would say.

[Operator Instructions] Our next question will come from Amit Mehrotra with UBS.

This is Zach Walljasper on for Amit. Just my first question, can you just talk about the phasing of the pricing actions? I was trying to understand like the natural carryover pricing from last year versus the incremental pricing from tariffs. And then just my second question is just around -- can you just elaborate -- the press release called out like a negative impact from the North America margins. And just based on guidance, it seems like the negative mix should reverse in the balance of the year. Just any color there would be helpful.

Yes. Thanks. I'll start on the second question first. Yes. The impact on margins, gross margin, in particular, in the quarter was pretty much mix related product and region. Nothing fundamental to the gross margin for the quarter. We still expect gross margin expansion and EBITDA expansion built into our guidance for the full year.

So I think to your point is accurate that we will start to see that pick up as we comp our price increases year-over-year in our public company costs. With regard to pricing, as we said in the previous quarter and consistent with this quarter is that pricing will be a bigger benefit to our top line in the first half of the year, given the timing of price increases in 2025 due to tariffs and otherwise.

We pulled forward our 2026 North America price increases into November, announced them in November of 2025. So those could be started and realized at the beginning of 2026. As the year progresses, you'll see less impact in the second half from price because of that timing. But we're also very confident that quarter-over-quarter, consistently for the year, you're going to see volume increases consistent each quarter on a comparable basis quarter-over-quarter, such that for the full year, we still expect to be about 50% price on average and 50% volume in terms of our guidance for the full year.

And we'll go next to Ketan Mamtora with BMO Capital Markets.

Congrats on a strong start to the year. Maybe to start with, can you talk a little bit about -- and we discussed M&A, but I'm just curious, as you start to approach your target of 2x leverage, can you talk about how you are thinking about sort of capital allocation? And if you can just rank order your priorities, please?

Yes. Thanks for the question. I think consistent is the theme, I think, here in terms of our communication on capital allocation strategy. And we're fortunate, given our business model and our strong free cash flow profile that's consistent throughout the year to have multiple opportunities to pull multiple levers at the same time in order to return capital to shareholders and be balanced.

But still, our #1 priority currently is deleveraging. Having said that, we are able to deleverage at the same time, we are going to continue to invest in our business in terms of capital and new product and innovation at scale compared to our competition.

As Mike referred to earlier, M&A is really not a big portion of our story. It's not something that's going to take a lot of capital as we foresee it today. And then we will still have the opportunity, as we said in our prepared remarks, to return cash to shareholders over the longer term, medium term in terms of when it's available, when it's opportunistic to buy back shares and/or over the long term, consider a dividend. So the good news is that we have a lot of opportunity at our discretion given our strong free cash flow profile and deleveraging is our #1 priority, but able to pull on multiple levers at the same time given our strong free cash flow profile.

Got it. That's helpful. And then just as a follow-on question, Mike, can you talk a little bit about sort of competitive dynamics, both here in North America and in Europe?

Yes. I mean, again, where we can find the information, and as you know, our #2 competitor is publicly traded. So you guys who follow them can find the information. I think in general, the competitive situation is unchanged. We do see at times -- again, these are great companies. At times, there are decisions they make that we don't fully follow, and we're not clear on. But I would say, in general, it is the same as it has been.

Again, the international players struggling a little bit more here in the U.S., particularly given the tariff dynamic. We're starting to see some of those pricing actions begin to come in. They are not anywhere close to what we know their costs are going up, but they are beginning to pass those on. And as we've talked about, we felt that, that would really begin to manifest itself in the back half of the year. We still think that is the situation and the competitive dynamics from our position, we feel that we are in a stronger position, certainly.

And again, I've been here almost 2 decades, I've really never seen the opportunities that we have at the moment in terms of our value proposition, our products, our team, what we have coming down the pike in terms of the innovation and value for end users is incredibly, incredibly strong. So I'd probably just leave it at that. We're -- I feel we're executing very, very well and in a tremendous position.

Thank you. This does conclude today's question-and-answer session as well as Alliance Laundry's first quarter 2026 earnings conference call. You may now disconnect your lines, and have a wonderful day.

Good morning, and welcome to Alliance Laundry's Fourth Quarter and Full Year 2025 Earnings Conference Call.

With us today are Mike Schoeb, Chief Executive Officer; Dean Nolden, Chief Financial Officer; and Bob Calver, Vice President of Investor Relations. [Operator Instructions]

With that, it is my pleasure to turn the program over to the team. Bob, please go ahead.

Thank you, operator, and good morning, everyone. Along with today's call, you can find our earnings press release and presentation on our Investor Relations website at ir.alliancelaundry.com. A replay will also be available on our website following the call.

As a reminder, today's earnings release, presentation and statements made during this call include forward-looking statements under federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include factors set forth in the earnings release and in our filings with the SEC, including the Risk Factors section of our IPO prospectus and subsequent 10-K filing. We assume no obligation to update or revise any forward-looking statements, except as required by law.

Additionally, during today's call, we will discuss certain non-GAAP financial measures outlined in our earnings presentation. We believe these measures are important indicators of our operations as they exclude items that may not be indicative of ongoing business performance. Reconciliations to the most directly comparable GAAP measure can be found in our earnings release and presentation appendix.

I'll now turn the call over to Mike.

Thanks, Bob, and thank you all for joining us this morning for our first full year earnings call as a public company. I'll discuss our strong full year performance, key drivers of our success and how we're well positioned for continued growth. Dean will then walk through our financial results in detail and introduce our 2026 guidance. We'll conclude with Q&A.

But I want to start where I always begin, which is with appreciation for our employees around the world, our customers, distribution partners and our shareholders and analysts. We value your trust and engagement.

2025 was a landmark year for Alliance. Our results demonstrate what we have been talking about since becoming a public company that a resilient, replacement-driven, essential industry, a market-leading position and disciplined operational excellence delivers strong outcomes. And now before we get into our results, let me walk you through how I think about the business.

First, our industry. Commercial laundry is a vibrant, growing and essential part of modern life. Laundry is not discretionary. It performs across all economic cycles, providing a level of growth, consistency and downside protection that is hard to find. And every time there's a macroeconomic event or noise in the world, we're reminded of how fortunate we are to be a part of this incredible industry. After all, as we said on our roadshow, every day is laundry day.

And second, our leadership position. We are the #1 pure-play commercial laundry manufacturer in the world. And we have built striking advantages over any other competitor. Our scale, our global footprint and demonstrated manufacturing prowess exist to deliver what our customers want most and need to run their businesses efficiently. They are incredibly sophisticated, and they understand that long life, durability and reliability, combined with world-class aftermarket capabilities result in a favorable total cost of ownership. Initial price is always important. But what we hear again and again is please do not lower quality. That is what drives us and helps strengthen our leadership position. And in my nearly 20 years with Alliance, I've never been more confident about the opportunities ahead of us.

Turning now to our Q4 and full year highlights on Slide 4. We finished strong in Q4 with revenue up 10% year-over-year, driven by strong volume growth alongside selective price realization. For the full year, we delivered total revenue of $1.7 billion, up 13% versus the prior year, and adjusted EBITDA grew 14% with a record full year adjusted EBITDA margin of 25.5%. Nearly all of our growth for the quarter and full year was organic in nature.

So 2025 marks our second consecutive year of double-digit growth on both the top and bottom line, continuing our long track record of compounding above the market from a revenue base that is 25% larger than just 2 years ago. Full year growth was driven 70-30 by volume versus price with Q4 normalizing to a more historical even split. This is consistent with the dynamics we've seen in this industry over many cycles, where our diversification in product, geography and end markets provides multiple avenues for growth.

We strengthened our balance sheet, reducing net leverage to 2.8x, a reduction of 2.2 turns, roughly equally from operational deleveraging and our successful IPO in October. And we continue to invest in the business. Capital expenditures of $54 million were invested in capacity expansion, automation and new product development with increased investment to further support our digital and engineering capabilities to enhance innovation and Alliance's competitive differentiation.

So before we take you through our 2025 performance in more detail, let me step back and remind you why we are confident. Alliance stands alongside the very best industrial companies, not just in growth, profitability and free cash flow generation, but across every dimension that defines a great industrial business.

On Slide 5, we believe there are 4 factors that define why Alliance wins and is able to create sustainable long-term value. First, we operate in a very attractive industry. Commercial laundry is essential to everyday life. It is not cyclical, offering downside protection and economic uncertainty and steady replacement-driven demand.

Second, we believe Alliance has a sustainable competitive advantage. Our financial scale is more than twice that of our nearest competitor. We operate a global manufacturing and engineering platform across 3 continents that few, if any, competitors can replicate. That scale is both a barrier to entry and a growth enabler.

Third, we have a proven team that has delivered across economic cycles, and 2025 was no exception.

And fourth, we have a compelling growth algorithm supported by systemic tailwinds.

Next, I want to spend some time clearly laying out what defines Alliance's culture, its leadership and consistent success. Slide 6 captures this well. First, we are a pure-play commercial laundry company. This means every investment dollar, every engineering hour, every strategic decision is focused on one thing, commercial laundry. Even our residential product is a commercial machine sold into the home through independent retailers and has minimal exposure to new construction housing cycles. Our commercial and home customers buy for many reasons, but it largely is because they, too, are searching for low total cost of ownership. They tend to be more affluent given our price point, or they are processing large volumes of laundry such as those with large families or blue-collar workers who work in fields such as agriculture, oil and gas or our mechanical. And let me emphasize again, we are replacement driven.

Secondly, everything we do is built around delivering total cost of ownership. Our customers are clear, don't cheapen the product, don't cut corners, don't sacrifice quality. And this doesn't mean our teams are not focused on cost, but it does mean we are very methodical and test extensively to ensure we protect our TCO that customers value.

Thirdly, our value proposition is supported by high-quality distributors who provide premier pre- and post-sales support and service that our end customer and operators demand. Over decades, we have intentionally built a global distribution network of over 600 partners. These are businesses whose economics are centered on capital-efficient, demand-driven ordering. They do not hold large inventories or over purchase ahead of demand. And our delivery capabilities mean there is no incentive to do so. The results we see clearly mirror end market demand with limited order pattern distortions that can affect other industrial businesses.

And importantly, commercial laundry is mission-critical. laundromats, hospitals, hotels and communal laundry facilities need their machines to run regardless of the interest rate cycle, AI CapEx trends, construction activity or any single macro theme. We believe this genuine noncyclicality is underappreciated relative to other industrial businesses whose end markets are more driven by volatile or cyclical demand dynamics, and it is a distinction we think will increasingly differentiate Alliance.

Now I'll highlight a few initiatives that made 2025 such an excellent year. On the innovation front, we launched multiple industry-leading products.

We continue to expand ProCapture, our unique and patented lint filtration system across more of our product lines.

We launched the T55 stack tumbler, the industry's largest stack dryer.

We launched Scan-Pay-Wash, a first-of-its-kind cashless payment solution requiring no app download that has seen faster adoption than we have seen for any previous digital launch with more than 1/3 of 1 million transactions. I repeat, 1/3 of 1 million transactions processed to date.

And we began selling Stax-X, a stacked washer and dryer for laundromats, developed entirely at our Thailand engineering center for Asian markets, and that has seen strong initial demand.

Supporting our clear value proposition, our global test lab teams carried out over 5 million hours of physical product testing in 2025. This is the equivalent of more than 570 years of continuous testing conducted in a single year across our testing base worldwide, reflecting on our commitment to quality and durability, our testing hours will increase significantly in 2026 as our new facilities in Thailand and The Czech Republic are fully ramped up.

We also expanded our direct business in Q4, acquiring one of our New York-based distributors, deepening our direct presence in one of North America's most attractive urban markets. And just last week, we closed on an additional acquisition to further consolidate our position in that same market. We invested $54 million to expand capacity, add automation and launch new product lines in all of our global facilities and enhanced our advanced testing capabilities worldwide.

Alongside these investments, our cost-down initiatives, operational excellence programs and supply chain optimization delivered approximately 80 basis points of gross margin expansion, supporting our continued margin expansion trajectory and focus on investing in growth.

And finally, we successfully established ourselves as a public company, which allowed us to significantly delever, strengthen our balance sheet and provide capital allocation flexibility to support growth as we move into 2026. We also strengthened our governance, reporting and Investor Relations functions to support our long-term growth.

On Slide 8, let me turn to our 2026 strategic priorities. And we are fortunate to operate in a very stable market that grows consistently through economic cycles, and we see healthy demand into 2026 and beyond. This demand is broad-based across our key geographic markets with strength across our Vended, On-premise and Commercial-in-Home product offerings.

Dean will walk you through our detailed guidance for 2026. But as it is every year, our first priority is to deliver profitable growth. And at a high level, we expect revenue growth of between 5% and 7%, split roughly evenly between volume and price and adjusted EBITDA growth of between 6% and 8%, implying continued margin expansion despite the increased costs of being a public company. And as we've shared previously, the global commercial laundry industry grows at approximately 5% per year. Our '26 guidance of 5% to 7% revenue growth means we expect to continue to compound above the market. The demand environment has not changed, and we believe Alliance will continue to outgrow the industry.

Secondly, we will continue to invest in innovation and new product development. We have a robust pipeline planned across multiple categories with continued evolution of our physical products and digital platform to meet the growing demand for solutions across our end markets.

Third, drive manufacturing and operational excellence. We will continue to invest approximately 3% of revenue in CapEx on top of the 2% of revenue we expect to spend annually on physical and digital product development and innovation. These investments will drive efficiency. They will add capacity, and they will allow us to accelerate profitable growth.

Fourth is accelerate digital adoption. Our connected equipment base grew to 245,000 machines at year-end, up 25% year-over-year. And this matters because every connected machine provides valuable insights to operators, allowing them to increase revenue and improve efficiency. And we believe it makes us the obvious first choice when they buy, and if we do it right, we will be the preferred choice when time comes to replace their equipment.

And finally, maintain our disciplined approach to capital allocation, continuing to delever organically by thoughtfully investing in long-term growth opportunities and maintaining flexibility to opportunistically return capital to shareholders.

With that, I'll turn it over to Dean to walk through the financial details.

Thanks, Mike. Starting on Slide 9. I'll walk through our strong fourth quarter results and balance sheet position, then cover 2026 guidance and capital allocation.

Fourth quarter net revenue was up 10% to $435 million versus the prior year. We saw real unit volume increases across our end markets, which contributed roughly half of the growth in the quarter with the balance from price. This reinforces what Mike said earlier, this is a demand-driven growth story supported by both volume and price that is consistent with the durable growth pattern we've seen in this industry over time.

Q4 gross profit was up 16% to $161 million or 37% of revenue, with gross margin up 190 basis points versus the prior year. Margin expansion was driven by strong volume and successful cost-down initiatives in the quarter and supported by pricing actions that largely offset the approximate $5 million impact of tariffs in the quarter.

Q4 operating expenses were $97 million or 22.4% of revenue, including a $16 million noncash charge for performance-based option vesting related to our IPO. Excluding this onetime item, operating expenses as a percentage of revenue were consistent with our expectations and reflect the full quarter impact of public company costs and our continued investments in commercial, engineering and digital capabilities.

Adjusted EBITDA was up 17% to $107 million or 24.5% of revenue in the quarter, which was a 140 basis point improvement in profitability. We are proud of the quality of our growth with revenue up 10% and adjusted EBITDA up 17%. Alliance's ability to consistently drop more to the bottom line than add at the top is a function of our scale advantage and operating discipline, plus strong incremental margins on higher volumes.

Q4 adjusted net income was up 18% year-over-year to $49 million, which excludes the previously referenced vesting of stock options at IPO and other nonoperating or nonrecurring items. The improvement was driven by strong operating performance and significantly lower interest expense following our debt reduction actions.

Our Q4 effective tax rate was 35.6%, resulting in a full year effective tax rate of 26.3%. This is elevated versus the prior year due to approximately $4 million in discrete noncash charges, primarily related to our transition to public company status and the valuation allowance increase against certain foreign tax credits. Excluding those items, our Q4 and full year rates would have been 21.4% and 23.5%, respectively.

We ended the year with total debt of $1.4 billion, down from $2.1 billion at the start of the year and cash of $123 million. Net debt of $1.2 billion represents a net leverage ratio of 2.8x adjusted EBITDA, a reduction of 2.2 turns in a single year. Approximately 1 turn of that deleveraging was funded by cash from operations, which increased 46% versus the prior year and from adjusted EBITDA expansion, with the balance funded by IPO proceeds, our strong operational cash generation demonstrates our capability to continue deleveraging going forward.

Turning to Slide 10 and drilling into the segments for Q4. North America revenue was up 9% to $317 million, with adjusted EBITDA up 15% to $88 million and margin increasing to 27.9%. This margin level is consistent with our historical performance in the segment and reinforces our ability to expand adjusted EBITDA margins as we scale on our existing manufacturing footprint.

Growth in Q4 was broad-based across all 3 end markets. Our Vended markets, both retail laundromats and communal laundry and multi-housing locations, delivered strong growth driven by new store development and existing operators modernizing their fleets with higher capacity digitally connected equipment.

On-premise delivered solid results driven by predictable replacement demand that characterizes their end market. And Commercial-in-Home home continued to outpace the industry.

International Q4 revenue was up 12% to $118 million, with adjusted EBITDA up 25% to $29 million. Our margin of 24.8% represents 260 basis points of expansion year-over-year. This margin expansion reflects both the mix benefit from a growing European business and improving operating leverage as we scale our international business on our existing manufacturing platform.

Europe continued its strong momentum. Our total cost of ownership value proposition resonates strongly in this market as it has an operator base that is actively investing in fleet upgrades and energy efficiency. The margin profile of our European business is accretive to the overall International segment. And as Alliance continues to scale in this, it has a meaningful positive impact on segment level profitability.

In Asia Pacific, the launch of our Stax-X stacked washer dryer has been well received. We've been encouraged with the early customer adoption and the meaningful long-term growth platform that represents heading into 2026 and beyond.

For full year 2025, North America delivered revenue of $1.3 billion and adjusted EBITDA of $361 million, both up 14% year-over-year. EBITDA margin remained strong at 28.5%, which speaks to the quality of growth we're generating in this segment. Again, growth was broad-based across all of our end markets with attractive underlying volume growth complemented by continued price realization.

Commercial-in-Home significantly outpaced the industry as consumers continue to choose our brand for durability and reliability. Vended market growth was solid and supported by new store development and fleet modernization. And our On-premise laundry delivered steady growth in structural replacement cycles complemented by new locations.

International delivered revenue up 10% to $440 million, with adjusted EBITDA up 17% to $121 million. Adjusted EBITDA margin of 27.4% was up 160 basis points and reflected strong performance while continuing to make investments in emerging market expansion and sales infrastructure.

Europe was a standout performer throughout the year, driven by our Speed Queen licensed store strategy. We saw ongoing growth in our licensed store model as well as strong results across our direct sales offices in this region with our licensed store model continuing to gain momentum and establish Speed Queen as the premium choice in European vended laundry.

Growth in APAC was solid with strong performance in our priority emerging markets where population and urbanization drive laundry demand. We're establishing market leadership positions across the region and are leveraging our first-mover advantage as the Vended laundry concept gains adoption and the On-premise laundry end market continues to develop.

Our long-standing local-for-local manufacturing strategy with plants in the U.S., Europe and 2 in Asia, each primarily serving their home markets, provided significant structural tariff protection relative to foreign competitors who are more exposed to duties on imported products. We experienced modest tariff impact from certain imported components, which we largely offset on both a dollar and margin basis through selective pricing actions in 2025.

Turning to Slide 12 and initiating our 2026 full year guidance. We expect revenue growth of approximately 5% to 7%, driven by balanced contributions from volume and price and expect adjusted EBITDA growth of approximately 6% to 8%, continuing our long track record of profitable growth and strong margins. This above-market revenue growth reflects the strong tailwinds we have discussed and also takes into consideration normalization of benefits from customers who have returned following our 2022 to 2023 profitability initiatives, the outperformance of Commercial-in-Home and the moderation of tariff-related pricing, each of which supported double-digit growth over the past couple of years.

As we considered our guidance, we anticipate year-over-year revenue growth to be stronger in the first half of 2026, driven by pricing carryover from actions taken in 2025, with volume growth more consistent across the entire year. We expect adjusted EBITDA growth to be driven by gross margin expansion from pricing, cost-down initiatives and manufacturing leverage, partially offset by strategic investments in international markets, continued digital and engineering investments and approximately $8 million in incremental public company costs.

Public company cost impact is more heavily weighted to the first half of next year due to the second half prior year ramp-up. And therefore, we anticipate margin expansion in 2026 to be weighted toward the back half of the year.

We remain confident in our ability to generate free cash flow and expect to reduce leverage by approximately 0.75 of a turn in 2026, bringing us to the low 2x net debt leverage range by year-end. In addition, to assist with modeling in 2026, we expect CapEx as a percentage of revenue to be approximately 3% and anticipate an effective tax rate of approximately 23.5%, total interest expense of approximately $85 million and diluted share count of approximately 205 million shares.

Turning to Slide 13. Before I wrap up, I'll briefly touch on how we are continuing to prioritize capital allocation with the overarching goal of maximizing long-term shareholder value. First and foremost, deleveraging continues to be our top capital allocation priority. As I outlined earlier, we have a strong track record of reducing leverage by 0.75 to a full turn per year through free cash flow generation and EBITDA expansion alone. We are targeting net leverage in the low 2x range by year-end 2026.

We also plan to continue investing behind high-return growth opportunities, new products, capacity expansion, digital capabilities and potentially selective tuck-in M&A that enhances our platform. These are the investments that should help sustain our competitive advantage and drive above-market growth, and we will continue to invest in these areas.

And finally, we will maintain the flexibility to return capital to shareholders in the future when appropriate through share repurchases in the near term and considering a potential dividend policy over the longer term.

With that, let me turn it back to Mike.

Thanks, Dean. Before we open up for Q&A, I want to emphasize a few key points. One, we hold a leading market position as the only scaled pure-play operator in a noncyclical recession-resistant and essential industry.

Two, we have a proven team and business model that have delivered strong results through every economic cycle and the strategic clarity to continue doing so.

Three, we are committed to creating long-term shareholder value through our disciplined growth, operational excellence and balanced capital allocation. And over the past 2 decades, I have seen this business successfully navigate recessions, a global pandemic and shifts in the competitive landscape. The fundamentals that have carried us through all of it are stronger today than they have ever been, and that is the foundation for our next chapter.

I'll close by thanking our employees, distribution partners, customers and shareholders for your continued support. We look forward to driving Alliance's story and long-term value forward together.

And with that, let's open up the line for questions.

[Operator Instructions] Our first question will come from Tomo Sano with JPMorgan.

Congrats on the quarter.

Thanks, Tomo.

Thank you.

And my first question is, given the trends you saw in Q4, do you expect any notable differences in demand strength between North America and your international business 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?

Yes. I would say, Tomo -- this is Mike, that, again, we see really strong demand across all parts of the business. I do think given some of the volatility in the Middle East at the moment, that's likely to be a little bit weaker, and that will 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 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 very strong across the board.

A follow-up on, again, 2026 guidance. How are you factoring in outlook for steel cost, pricing power and potential changes in tariff policy? Could you elaborate on the assumptions you're making for each of these drivers and how sensitive your guidance is to movements in these areas, please?

Yes. 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'm not sure if I answer that, Tomo.

Tariff policy.

Tariff policy.

Sorry. Yes, who knows. You can mean. But we expect no change. And again, you guys are reading the news like we are. 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. And we do see Tomo 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 in international locations imports into the U.S. We'll keep watching that, to Mike's point, from their pricing actions and react accordingly. But we still think that's a tailwind for us in 2026.

Our next question comes from Kyle Menges with 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?

Yes. So again, we know where their costs 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 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 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.

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 in Czech and Thailand?

Yes. So the expansion that we did was really more on the engineering front in the laboratories, right, to get that 24/7 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.

Our next question will come from Mike Halloran with 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 the 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? I mean just help us get dialed a little bit more so on where the front half should be versus back half or even first quarter.

Yes. So thanks, Mike. We're not giving quarterly guidance, but to your point, and 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, 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 we think that's the maximum amount as we go forward. Hopefully, that's helpful. And if you have a follow-up there?

Yes. No. 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 of 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?

Yes. So I'll say, Mike, it was really a strategy we mapped out 7 or 8 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, is 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 2 recent acquisitions. We think there's more to do. But again, we are being very selective. And 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.

Our next question comes from Andrew Obin with Bank of America.

Can you just break out the reasons why Commercial and Home has been so strong in '25? Did you get 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?

Yes. So I'll remind you, Andrew, we have a very unique distribution strategy, and we have a very unique product. 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 are plaguing a lot of consumers. And so 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 and 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 where 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. And that total cost of ownership, despite our price point, this thing is -- it is engineered to last. And I think that is resonating with people who are buying a 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.

Okay. So just to make sure, no negative growth in the first half comps will remain. You can achieve growth even with the comps.

Absolutely.

That's great. 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?

Yes. So again, I think it's 5%, 6% of revenue, somewhere in that range. I don't think it's 6%, closer to the 5%. 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 is going to be in a kind of a different boat.

Our next question will come from Amit Mehrotra with UBS.

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 in 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 3-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 the fourth quarter, even though the price volume dynamic is similar 4Q 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?

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, it's -- 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. Hopefully, that helps.

Yes, that does help. Yes, can you hear me, just want to make sure I'm not on mute.

Yes.

Okay. Mike, I wanted to follow up with maybe a bigger picture 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 of 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. But maybe you can just help us think about how much of 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?

Yes. So again, I think 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 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 take 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, right, 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, like 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, and 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 about, hey, 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 in really big quantities to be able to get things like predictive analytics and others that 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.

Yes. Yes, it does, Mike.

Our next question will come from Susan Maklari with Goldman Sachs.

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?

Yes. So I would say it's complementary. But look, on the initial launches of product, let's talk about that and the innovation, for example, on our lint capture system, we're providing more value. So the pricing reflects that value. And we feel confident about it. We go through a lot of analysis here in terms of, hey, what does that mean for the operator?

If we can save them energy, if we can get them better efficiency. So all those things are reflected. But again, it's slow, steady, 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 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 complementary. 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 in sort of a package is the way we think about it.

Yes. Okay. That's helpful color. And then turning to the balance sheet and the cash flows. As you do approach that 2x 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?

Sure. Yes. Thanks. So I think, number one, we're very proud of our deleveraging trajectory and the strength of our free cash flow really allows us that multipronged 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 2x leverage as a comfort level from the balance sheet perspective. But having said that, we don't have -- we don't view 2x as a floor. Given our cash flow generation, we could operate comfortably below 2x in the near term. But deleveraging continues to be our #1 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, right? 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, the competition can.

And our last question will come from Ketan Mamtora with BMO.

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?

Yes. 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. I said we've done 16 or 17, mostly 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, and there are things that you don't anticipate where principles in markets that matter, that have the density that drive profitability change their mind and all of a sudden are interested in partnering.

So we're talking to people. We're out there, but it is not core. And again, we believe very, very much in independent distribution. But again, when we can partner and roll them into the rest of the Alliance business, hey, it makes sense. So on that part, very clear. We talked about the international facilities. We have lots of opportunity to grow. So we don't -- we do not need anything on that side.

But the same thing, we are 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 1 or 2 that would be interesting. None of those are 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 elevated rate.

Got it. No, that's helpful perspective. And then just one more follow-up on the international side related to the Middle East. You talked about 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?

Yes. I'll say for right now, again, our local-for-local manufacturing strategy where we are sourcing, 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, 0. 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, they 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 is happening in that region.

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.

Good morning, and welcome to the Alliance Laundry Third Quarter 2025 Earnings Conference Call. With us today are Mike Schoeb, Chief Executive Officer; Dean Nolden, Chief Financial Officer; and Bob Calver, Vice President of Investor Relations. [Operator Instructions]

With that, it is my pleasure to turn the program over to Mr. Calver, Vice President of Investor Relations. Mr. Calver, please go ahead.

Thank you, operator, and good morning, everyone. Welcome to Alliance Laundry Systems Third Quarter 2025 Earnings Call. I'm joined today by Mike Schoeb, CEO; and Dean Nolden, CFO.

Along with today's call, you can find our earnings press release and earnings presentation on our website at ir.alliancelaundry.com. A replay of this call will also be made available on our website.

As a reminder, today's earnings release, presentation and statements made during this call include forward-looking statements under federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission, including in the Risk Factors section of the prospectus from our initial public offering dated October 9, 2025. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Additionally, during today's call, we will discuss certain non-GAAP financial measures outlined in further detail at the beginning of our earnings presentation. We believe that these measures are important indicators of our operations as they exclude items that may not be indicative of our results from ongoing business operations. A reconciliation of these measures to the most directly comparable GAAP measure can be found in our earnings release, in our 8-K filed with the SEC and in the appendix to the slide presentation. Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures.

I'll now turn the call over to Mike.

Thanks, Bob, and thank you all for joining. It's a pleasure to speak with you today on the company's first earnings call as a publicly traded company. Before I begin, I'd like to express my thanks and appreciation to the Alliance team, our end customers and distribution partners as well as our advisers and the investors who made this milestone possible.

I'd also like to thank the research analysts who spend time getting to know our business, our culture, our products and our team. We look forward to continued dialogue, and we're excited about the future as we continue to expand our business and deliver what we believe are the highest quality machines and services available in the industry and create long-term value for our shareholders.

For this first call as a public company, I will start with an overview of Alliance, the markets we serve and our differentiated strategy. We will then dive in our results. So starting with Slide 4, there are 4 things I believe you should consider for any investment, and this is my core message on today's call.

So question number one, is the industry vibrant, growing and attractive? In a record of close to double-digit growth over the last decade would suggest it is, as Laundry is not a fab or a fashion, but it is essential to everyday life.

Additionally, the industry has a unique characteristic of providing downside protection in difficult times. But this is what we saw during COVID where laundromats were deemed essential by governments almost worldwide and stay open versus most retail locations, which were shuttered and many that closed for good.

The world is increasingly volatile. And every time there's a dip in the economy or bad news on the TV, those of us on the executive team look at each other and say, thank god for Laundry. That protection is combined with growth. We see in both emerging markets where the vended end market is in its early days as well as in mature markets where aging products need constant replacement and in the renewal happening in laundromats, where many of the old tired inventory is being replaced by clean, safe and friendly stores.

According to market research in the U.S. alone, there are over 20,000 of these retail locations and is estimated to be a $6 billion market, serving essential need in communities across the country.

The next question is industry structure and what are the market leaders -- or excuse me, who are the market leaders and do they have a sustainable advantage? Our scale versus the competitive set and our financial profile, give us the ability to invest at a higher level and simply do what others cannot afford to do. So I believe our advantage is both clear and sustainable.

And the next question is, do you have a team that can execute with consistency and take advantage of the gift that we had provided to be a market leader in an incredible industry? Our long-term history of compelling performance through economic cycles would suggest we've got a very capable team.

And the final question is, are there systemic tailwinds that provide an opportunity for the company to continue to put points on the board and grow profitably. For us, we see these tailwinds as being in their early innings and they are integral to our go-forward strategy, which I will touch on shortly.

So as against this backdrop, Alliance is at the center of a resilient, essential industry defined by steady replacement demand, consistent aftermarket needs and stable growth across all macro cycles.

On Slide 5, we are the #1 pure-play commercial laundry manufacturer in the world, more than twice the size of our next largest competitor. We are a true global business, serving customers in 150 countries, and we hold roughly 40% market share in North America. Our strong market leadership and financial results are built on a compelling value proposition for commercial laundry customers who are incredibly sophisticated and focused on total cost of ownership or TCO.

Our offering is defined by a relentless focus on quality, reliability and durability, an industry-leading distribution network, comprehensive wraparound services and a commitment to excellence. Every day is laundry day. And it is essential for modern life as we know it today. Our large installed base means people around the world interact with our products millions of times a day. Our products get used hard every day in demanding applications are mechanical in nature, so they have a finite life with a steady replacement driven and predictable demand.

We produce and deliver product via 5 prominent brands, including our Speed Queen brand, which was recognized by Consumer Reports as the most reliable appliance brand in the U.S. for 6 consecutive years.

We have a strong financial profile with a revenue CAGR of about 10% from 2010 to 2024, a best-in-class adjusted EBITDA margin above 25% and strong free cash flows. Throughout our history as a private company, we have invested in our business to support durable growth, which significantly strengthened operations, enhanced capacity drove our innovation pipeline and created long-term potential. Alliance operates in a broad diversified set of end markets, geographies and product categories, which helps us drive execution and deliver long-term growth. In terms of revenue mix, about 3/4 of our sales come from North America, where we have balance across our 3 end markets.

Now switching briefly to Slide 6 you will see the primary end markets we serve. And on-premise, we deliver best-in-class systems for hundreds of mission-critical applications that require tailored products, expertise and an extensive highly trained field service organization. This includes health care, hospitality and veterinary clinics as well as bespoke systems for industrial and commercial customers. If you are running one of these businesses, and your laundry equipment goes down, it is not a good day.

So think about managing a hotel with several hundred rooms that require thousands of pounds of fresh clean linens every day. Normally, there is little redundancy of equipment in on-premise laundry room. So if a unit fails, you do not have a [indiscernible] of a room, and you do not have a business. That example can be taken across all these verticals in our vended end market, applications take payment of some type which is increasingly digital in nature.

We equipped both retail store laundromats worldwide as well as communal laundry systems for apartments, condominiums, dormitories and other multi-housing facilities. Finally, our commercial in-home end market brings differentiated commercial quality washers and dryers into residential settings, offering the same durability, long life and performance trusted by our commercial customers. Consumers around the world are increasingly frustrated by competitive offerings, which are built for initial costs versus low total cost of ownership.

On Slide 7, we illustrate our long history of performance through all economic cycles. Looking all the way back to 2006, Alliance has generated a steady cadence of growth as we've continued to scale our business, serve more customers across more markets and expand our capabilities and customer offerings. We look forward to building on the strong momentum and driving consistent growth long into the future as we execute on our strategy.

Now on Slide 8, to touch briefly on additional investment highlights, which are both attractive and meaningful. First, as a pure play who only does laundry, we understand what our customers demand, and that is a compelling value based on low total cost of ownership. Price is always important. But what we hear most often is, please, do not cheapen the product, do not cut corners and do not sacrifice quality.

Customers know it's a smart decision to buy a better product that lasts longer, is more reliable and cleans extremely well. We have a proven ability to create the highest quality products by leveraging our engineering expertise and rigorous testing and quality controls that ensure long-lasting durability and reliability.

We have unmatched scale that is very difficult to replicate in this highly specialized and fragmented industry. Our premier aftermarket services and comprehensive wraparound capabilities are extremely important to support long-lived assets, and they provide us opportunities to win more market share.

We also benefited from a robust global manufacturing and engineering footprint, a diversified go-to-market strategy and a well-established reputation of innovation and commercial laundry expertise. These attributes aren't just individual advantages, they are highly complementary and allow Alliance to generate significant recurring revenue streams, protect margin and create long-term value for our shareholders.

On Slide 9, we are advancing a clear growth strategy focused on driving long-term sustainable performance. We start with our core strength, producing high-quality, reliable commercial laundry systems that drive repeat business and market share gains. When you provide strong value price is a byproduct and it is embedded in our go-to-market strategy. In on-premise laundry, we're serving a stable, heavily replacement-driven market while delivering leading TCO across many, many niche applications.

Alliance has also established a leading position supporting the evolution of laundromats. Laundromat demand is driven by both existing store owners, retooling their stores with more efficient and technologically sophisticated products as well as new investors attracted to the fundamentals of the industry. It is recession resistant. It is an essential need. It has low labor requirements as it is primarily self-service by customers and low shrink, particularly as payment systems become more digital.

Our products and services help commercially focused operators succeed backed by our wraparound services and digital platform. Digital and IoT connected equipment is a requirement for multisite and multistate operators. In North America, we're meeting rising demand for commercial quality products in the home, maintaining attractive margins and delivering the reliability customers expect from professional grade equipment. Internationally, we see significant vended market opportunities in underpenetrated regions leveraging our first-mover advantage to play a pivotal role in market development.

Alliance is also committed to staying at the forefront of innovation to continue introducing industry-leading features that accelerate replacement cycles and increase digital penetration to drive recurring revenue. And as the only manufacturer in the industry with footprints in Asia, the U.S. and Europe, our local-for-local manufacturing strategy helps to insulate us significantly from tariffs as most of what we source, manufacture and sell stays in the respective region.

We remain disciplined on operational improvements, including cost down initiatives, where we are extremely careful as well as plant and supply chain optimization. We are confident in our ability to successfully execute these strategic priorities and strengthen our market position.

And I'd also like on Slide 10, to share some recent business highlights. As I mentioned, innovation is core to Alliance's DNA and a key long-term growth driver. We recently attended the Clean Show Conference, North America's largest exposition in our industry and exhibited new technologies.

We launched a 25-pound stack -- or excuse me, 55-pound stack tumbler, the industry's largest, which allows for faster dry times, and we believe increased revenue. We also launched Scan-Pay-Wash, a cashless payment technology for laundromats that does not require an app download. This is the first for the industry and has been extremely well received.

We also began shipping our Stax-X product, a good example of our local-for-local manufacturing and product development strategy as it was developed in Thailand for customers in that region. Stax-X was built for high throughput and the limited square footage available in small retail locations, and it offers full commercial grade washing and drying power in a space-efficient vertically stacked configuration.

On the operational side, we acquired Metropolitan Laundry Machinery Sales in New York, deepening our coverage in a dense, high opportunity urban market and further enhancing our aftermarket and service capabilities. In October, we deployed over $500 million in IPO proceeds to pay down debt following our listing resulting in an IPO adjusted net leverage ratio of roughly 3.1x at quarter end.

Dean will discuss our successful efforts and further strengthening our balance sheet and financial flexibility shortly. We look forward to building on the strong momentum we've achieved as we continue to focus on disciplined execution of our strategy. Dean will now go through our consolidated and segment performance.

Thanks, Mike. Turning to Slide 11 and our financial performance. We provided our results for the 3 and 9 months ended September 30, 2025. I'll touch on the results for both periods, but focus mostly most of my remarks on the third quarter financial performance. We delivered strong results on a consolidated basis. We drove revenue of $438 million, up 14% year-over-year and year-to-date revenue of $1.27 billion, also up 14%.

Growth this quarter was driven by solid volume gains and modest low to mid-single-digit price increases implemented to offset higher input costs, which were primarily tariff related. Volume growth was broad-based across all of our end markets in both of our reportable segments of North America and international, supported by the strength of our brands, the durability of our value proposition and the product and geographical diversification of our business.

Year-to-date gross margin expanded by 70 basis points over last year, driven by higher volumes, manufacturing efficiencies and modest pricing actions. This performance reflects our core strategy of profitable growth, which is built on the superior total cost of ownership we offer to customers.

Adjusted EBITDA was $111 million in Q3 and $330 million year-to-date, representing growth of 16% and 13%, respectively. For the quarter, adjusted EBITDA margin was 25.3%, up 40 basis points year-over-year and year-to-date margin was 25.9%, down modestly by 30 basis points due to investments we are making in products and systems as well as public company support costs.

Net income for the quarter of $33 million was up from a loss of $6 million in the prior year. Third quarter adjusted net income was $48 million, up 47% versus the prior year quarter and year-to-date adjusted net income was $136 million, an increase of 9%. These results reflect strong top and bottom line performance with profitability amplified by a significant reduction in interest expense. This reduction was driven by our successful debt repricing to SOFR plus 2.25%.

We also strengthened our balance sheet through a voluntary debt repayment of $135 million made in the third quarter, and we are benefiting from lower variable interest rates year-to-date. Subsequent to the end of the third quarter, with an additional term loan paydown of $525 million post IPO. Our IPO adjusted net leverage came in at 3.1x. We now begin our life as a public company with a stronger balance sheet and we'll continue to prioritize deleveraging to earnings growth and cash generation.

Turning to Slide 12. At the regional level, our North America business continued to deliver strong results, driven by favorable end market fundamentals as we leveraged our scale, strong market position and manufacturing strategies. North America revenue in Q3 was $331 million, an increase of 14%, with our performance driven by robust growth across all 3 end markets. Volume and modest price increases accounted for approximately 2/3 and 1/3 of this increase, respectively.

Year-to-date revenue was $952 million, up 16% year-over-year. Q3 adjusted EBITDA in North America grew to $95 million or 13% year-over-year, and our adjusted EBITDA margin of 29% was flat versus prior year, with results driven by increased volume and realization of manufacturing efficiencies, offset by investments in future growth initiatives. We experienced $3.5 million of tariff impact in the third quarter which was mostly offset by implemented pricing actions. Year-to-date adjusted EBITDA grew to $273 million or 14%.

We continue to see strong demand from our vended customers in mature markets, coming from both our existing customer base through fleet refreshes as well as new entrants who are looking to access the attractive and resilient commercial laundry space. In the on-premise market, we also experienced strengthening demand, largely driven by the replacement cycle. We believe there are still significant opportunities ahead as new builds continue to come online and customers replace existing equipment with more efficient systems before their end of life.

Finally, demand in our commercial in-home end market remained high as customers prioritize the durability, reliability and long life of our products.

Turning to Slide 13. Our international business also contributed meaningfully to overall results this quarter. International revenue was $107 million, an increase of 12% with growth balanced across mature and developing markets. Volume, modest pricing and favorable foreign exchange movements each accounted for approximately 1/3 of the increase.

International revenue was $322 million year-to-date, up 10% compared to the same period last year. International adjusted EBITDA rose to $26 million or 9% year-over-year, reflecting strong top line momentum, partially offset by product and customer mix. International adjusted EBITDA margins declined modestly in Q3 compared to the prior year-end. Adjusted EBITDA was $91 million year-to-date, a 15% increase compared to the same period last year.

As you look across our international regions, our mature European markets and developing APAC and LATAM markets posted double-digit growth in the quarter. In Europe, our Speed Queen licensed store model continued to gain momentum and sales remained strong across our direct offices in France, Italy and Spain. APAC saw steady demand in Australia and New Zealand, along with our continued leadership in key markets like Thailand and expanding growth in newer markets like Indonesia, the Philippines and Vietnam.

Latin America delivered improved results with robust growth in vended, more than offsetting a challenging prior year comparison in on-premise laundry. Our performance was underpinned by successfully completing major projects in Mexico, and proactive customer and portfolio optimization initiatives in Brazil.

In the Middle East and Africa, we are navigating changes in project time lines in our largest market of Saudi Arabia, while capturing new opportunities with early laundromat adoption in select African markets. The underlying fundamentals of our international business remains strong, and we view it as a key to our consolidated sustainable profitable growth going forward.

Turning to Slide 14 and our balance sheet. We significantly strengthened our leverage profile, enhancing our ability to continue to drive long-term value creation. As you can see on this slide, we first reduced our leverage organically by approximately 3/4 of a turn through September 30. We then used proceeds from our IPO in October to further reduce our IPO adjusted leverage to 3.1x.

At the same time, we have favorably priced -- we have a favorably priced term loan post our repricings described earlier, and we have additional opportunity to further tighten our interest rate spread on our term loan in the future by another 25 basis points, as a result of our significant deleveraging supported by one non-trading upgrades by both major rating agencies.

We are on our way towards that goal. As in October, we received a 1-notch credit rating upgrade from S&P to B+ with a positive outlook and an outlook upgrade from Moody's to positive, retaining for the time being, our B2 corporate rating.

As a result of all these positive actions we've already taken, we will benefit from approximately $46 million in annualized interest savings at today's debt levels and we have increased our flexibility through the elimination of any mandatory principal payment requirements through the remaining life of our term loan facility.

Turning to Slide 15. As we begin our next chapter as a public company, we will execute on a capital allocation strategy designed to maximize long-term shareholder value. Our primary focus will continue to be on deleveraging. With our strong free cash flow profile, we believe we will continue the trend of 0.5 turn to 1 full turn organic deleveraging per year. We will continue to invest in areas to improve our operations and products, launch new products, further expand our capacity and the value we provide to existing customers and ultimately win market share.

We expect to continue these investments while maintaining our capital-efficient business model, with a focus on innovation and with CapEx spending targeting approximately 3% of net revenue. We will maintain a very disciplined approach to M&A. Our strategy is based on selectively pursuing opportunities that supplement our strong organic growth with accretive and value-creating acquisitions that expand our platform and capabilities.

And finally, we will maintain flexibility to return capital to shareholders in the future when appropriate through share repurchases in the near term and considering a dividend policy over the longer term.

In summary, we're very pleased with our financial performance in Q3 and the continued momentum in our business and our end markets. We currently intend to provide annual guidance beginning in 2026 when we report our Q4 results, but appreciate that you want to know how 2025 will end. We expect our Q4 growth versus prior year will moderate from year-to-date run rate to the mid-single-digit revenue growth, but 2025 will be an incredible year and mark our second consecutive year of low double-digit top and bottom line growth.

In addition, we expect to incur a onetime noncash charge of approximately $16 million in the fourth quarter related to divesting of stock compensation resulting from our IPO, which we intend to add back for purposes of our adjusted net income and adjusted EBITDA metrics.

Now I'll turn the call back to Mike.

Thanks, Dean. And let me end where I started, commercial laundry is an incredible, vibrant and growing industry in which we have earned a privileged position as a clear market leader with significant structural advantages. We have long demonstrated an ability to deliver a best-in-class financial profile, strong margins and solid growth and there are systemic tailwinds that we believe will propel continued profitable growth.

In closing, I'm incredibly proud of our employees around the world, their dedication and expertise make these results possible. I'd also like to thank our distributors, partners and new shareholders for your continued confidence and support.

With that, let's open the line for questions.

[Operator Instructions] Our first question comes from Andrew Obin with Bank of America.

Congratulations. Can we start -- many of your competitors are importing their product into the U.S. How have they responded to the incremental sections to 232 tariffs? What's the industry environment?

Yes, Andrew, this is Mike. We have seen one small Asian competitor increase price. I think for the full year, they've taken 16.5%, something like that. Outside of that, we have actually not seen anything so far. Again, we expect that to happen. I think as we talked about really pushing into 2026, but so far, really no activity of note.

Interesting. And maybe you acquired a New York distributor in the quarter. Can you talk about the strategic and financial benefits from acquiring distributors?

Yes. So Andrew, this is the 16th acquisition we've done. We're vertically integrating in the United States. We are focused on more dense urban markets, not that we haven't been opportunistic at times, but we're really looking for markets that matter, management teams that we can back where we see opportunity for outsized growth. So we like it. It allows us to get much closer to the customer. And we will continue to do it. And we will be a partner when we see those opportunities and when that distributor principle is interested in speaking to us, we're always there for them.

Our next question comes from Tomo Sano with JPMorgan.

Congratulations from my side as well. So you achieved double-digit growth on the revenue. And how are you managing supply chain challenges and inventory levels, especially given ongoing global disruptions? And have you seen any improvement or new risks in logistics or components sourcing?

Yes. So I'll say on the supply side, we've really seen nothing, Tomo, that is meaningful. There are always blips and always unexpected surprises, but nothing that we don't carry enough inventory for or don't have alternate sources of supply. So we feel really good about it. We see no signs that there's going to be any change in that status. But we're ready. And as you know, we've got a very, very capable sourcing team that's out there.

Follow-up on digitalization and service revenues. What progress have you made in expanding digital solutions and service-based revenue, such as Laundry IQ and SaaS offerings? How do you see the contributions of these business evolving, please?

Yes. So Tomo, we're focused on the long term. So we do generate revenue. I would say it's minimal at the moment. We're more focused on the analytics, the information that comes back to us as we get these connected machines. As you know, we've got several hundred thousand that are out there. I can't speak to our most recent launch of the Scan-Pay-Wash, already in the 90 days or so, it's been out there, there have been over 90,000 transactions.

So all of these things are additive. All of them are meaningful. All of them are putting us into a position of continued strength, but we are early days. And again, we're more focused on the power and the information and the data that it allows us to capture to be able to get the true predictive analytics that really complement, again, that best-in-class product that's out there in the field.

Our next question comes from Susan Maklari with Goldman Sachs.

My first question is talking a bit about the consumer. Can you give us some more color on what you're seeing in the CIH segment of the business, especially given the headwinds and some of the slowdown that we've been hearing as it relates to housing and then just overall consumer activity within R&R and other elements of their spend?

Yes. So Susan, I would say, one is we have a very, very unique product. It is a commercial true professional grade product. So one is, it's a highly differentiated product, but also highly differentiated strategy where our go-to-market is through independent shops and demand is extraordinary. We see no change in that. And again, we've got -- if you wanted to order a product today, you'd be waiting in order to get delivery. So no change in status on that.

Okay. That's good to hear. And then maybe turning to the balance sheet. Can you talk about the path to further deleverage as well as any other priorities for uses of cash as it relates to perhaps shareholder returns and other strategic initiatives?

Yes, Susan. First, we're very proud of what we've done year-to-date in terms of our deleveraging, as you've seen in our presentation in our prepared remarks, so significantly improved our balance sheet through the first 3 quarters and as a result of the IPO. Our main priority, as we've communicated we'll continue to be deleveraging through our strong free cash flow through both EBITDA growth and cash generation. And because of that strong free cash flow profile, we have the flexibility to push on multiple levers of capital allocation to continue to invest in CapEx, R&D, new products and capacity and productivity.

We're not giving any forward guidance on what we intend to do further from a use of cash perspective. But given that cash flow profile, we have the flexibility to return capital to shareholders through potential share repurchases in the medium term and then to consider dividends over the long term.

Our next question comes from Mike Halloran with Baird.

Congrats on the launch. First question here. Maybe some thoughts on the trajectory into the fourth quarter. I know Dean comments were towards the mid-single-digit growth rate in the fourth quarter. That is a decel from earlier this year, not terribly surprising based on conversations before, but maybe help understand the dynamic for why the growth is tracking where it is and how we should think about sequential dynamics as we move to the fourth quarter?

Yes. So Mike, remember, this is 2 years of consecutive double-digit growth. The industry grows around a 5% sort of CAGR. So it's really just reverting to a more normalized growth rate, number one. And number two, it's always about prior year comps. The fourth quarter is the strongest quarter of the year for us. So really a combination of that -- those 2 items.

But no change in demand, no change in customer sentiment, no change in anything that we see in the market. And as you know, we're very, very active in the field, always sensing, always touching, always trying to understand the signals, and we see no change.

And then follow-up is just maybe a similar conversation on the margins with a particular emphasis on how the international margins track as we move into the fourth quarter? Moving pieces behind how the international margins track 1H to 3Q? And just kind of calibrating where those should be both in the fourth quarter and as we exit the year, what the appropriate baseline is?

Yes. So maybe I'll just touch on it and make sure that Dean, if I don't cover it clearly. So in the quarter, obviously, we had customer mix. Obviously, larger customers have a little bit bigger discounts and then we had the launch of some new products, particularly the Stax-X where we wanted to field the early adoption of that product. So that's sort of a temporary launch period.

As you know, one of the characteristics about us that is unique is our margin parity between the U.S. and international markets is awfully close. So we don't see any change in that. Again, sometimes there will be blips one way or the other, as you know, emerging markets can sometimes be a little more volatile. So we flashed to that in the Middle East. But again, no change, and we feel really good about it.

And those factories in Thailand and in the Czech Republic, where the bulk of what they are selling are extremely well positioned from a cost perspective. So we see no change.

And Mike, I would just add on a longer-term view than just the quarter, you can see that year-to-date international revenue grew 10% and EBITDA grew 15%. And we enjoyed over 100 basis point improvement in adjusted EBITDA margin in international closing that parity gap with North America. So we're very proud of the year-to-date results we've achieved in international.

Our next question comes from Chris Snyder with Morgan Stanley.

I believe earlier you referenced that the competitors have yet to push incremental price on the back of 232, at least broadly speaking. Did you guys push incremental price in Q3? It seems like the price in the quarter was about 4%. So I'm just trying to figure out if there's like a step-up in Q4 if you get the full realization of that?

Yes. We did -- thank you, Chris. We did announce price increases in Q3. And there are some smaller ones that take place in Q4. So we've had various price increases as the year has progressed, so we will continue to see benefit from those on an annualized or full quarter run rate going forward. So our price increases were meant to offset our cost increases primarily related to tariffs. And so we'll continue to see that benefit into Q4 and going forward.

I appreciate that. And I guess to follow up, it feels like the guide is implying almost no volumes in Q4. It feels like price alone could maybe be mid-singles. So I guess, is there a conservatism in that? I understand it's been a long period of really strong growth for you guys, but it does seem like a pretty sharp falloff in volumes. And I think maybe the bigger question is like what does that mean for volumes in '26?

Good. We're -- Chris, thanks. We're looking forward to giving you 2026 guidance when we release our Q4 results. So we're very bullish on our industry, as Mike alluded to in his prepared remarks. And this return to a normalized run rate in Q4 is our current expectation, given where we sit in the quarter, middle of the quarter and our visibility to our customer demand and our factory production.

I'll turn it over to Mike.

Yes. And look, I will say again, no change in signals. We are, by nature, somewhat conservative, right? We try to under promise and over deliver. I'm not setting expectations there at all. I'm just telling you that is our culture. But no change in signal, no change in demand. I'll repeat what I said earlier, it's a tough Q4 comp. The industry is still vibrant. It is growing. We do not see changes in terms of that. And as we give you guidance on '26, we look forward to confirming that outlook.

Our next question comes from Ketan Mamtora with BMO Capital Markets.

Congratulations. Maybe to start with and not to put too fine a line on sort of Q4, but are there any sort of nuances that we should be mindful of between North America and international, as you think about sort of what happens in Q4?

Not really. I mean it's -- I'm trying to think through your question because it's a good one. But nothing significant that I can tell you, we, again, would expect to change. Again, emerging markets sometimes get lumpy. So that happens. We've seen a little bit of that in our Middle East Africa business, which is less than 3% of revenue. So sometimes that happens, but I -- and it can vary from quarter-to-quarter, but the core the markets that really matter for us that are -- and hopefully, I'm not offending any of our customers in these other regions. But given our revenue percentage, right, it's really U.S., Europe and Asia for the most part. That's how I'd answer that.

Got it. No, that's helpful. And then maybe one for Dean. As you think about deleveraging, where do you think sort of you want to get to in terms of a kind of more normalized level?

Yes. Thanks for the question. And I think we'll be prepared to discuss that as we give guidance in first quarter of next year for 2026 and beyond. But I would emphasize, I guess, in what we said that this business has a very strong free cash flows and deleveraging will continue to be our #1 priority, and you've seen that in our balance sheet through the end of September.

And we've historically deleveraged a half to a full turn per year organically, and we will continue to do that. So while we continue to invest in the business for growth, new product productivity, et cetera. So we have multiple levers at our disposal, and we'll continue to manage those and look forward to managing those to return value to our shareholders over the long term, but look forward to giving that guidance early next year.

Our next question comes from Kyle Menges with Citigroup.

This is Randy on for Kyle. I guess just on the margin side, outside of volume and price, what are some of the other margin drivers we should be thinking about in 2026? I mean it'd be right to get some more color on the cost down and manufacturing efficiency initiatives that you guys have in place, and how we should be thinking about that contributing to margin going forward?

Yes. So maybe I can start and then Dean, you can add a little more color. So mix -- and if you -- maybe I'll refer you back to sort of Slide 9 when we talk about it, but mix is a really important part of our margin. And so the larger capacity product, right, more engineering content, less competitive pressure and just more value, frankly, that gets offered to the users of those larger products. So mix is a big part. That's meaningful.

On the cost down side, look, there's always opportunity, but as we have stressed continually, quality is really the one thing that our customers care about. They talk to us about it all the time. So we do have cost down. There are opportunities. We've been pretty good at it. But we're very methodical, very careful, very slow because you have dynamic engineering and a product that is bouncing around, particularly in terms of a washer and there are always unexpected things that happen.

You can't always get it certainly on a computer-aided design certainly in our laboratories, which we have extensive ones across the world. So we do a lot of field testing. And again, we're very, very cautious, but it's there. It's meaningful. We'll continue to do it. Incremental volumes are meaningful in terms of the contribution that they get to us.

And then there is a lot of opportunity in these factories to optimize efficiency and those teams are working on them very diligently day after day. And it's a combination really of all those things.

Got it. That's helpful. And then just maybe a quick one on capital allocation. I mean, I know that your near-term priority is to you continue to deliver. But can you kind of frame what the M&A pipeline looks for you guys? It would be great to get some color on maybe the size of the acquisitions you've done in the past? And maybe some areas of your portfolio where you could continue to target, whether that might be more on the distribution side, the tax side or any other potential gaps you'd like to fill?

Yes. So maybe I'll start off. So you should think of us as very capable in terms of doing M&A. As we said, we've done 16 in the U.S. They are mainly smaller tuck-in businesses is part of the strategy, but it is not something that we need to have. So we're capable of growing at quite attractive rates and quite attractive margins.

When we see opportunity, we will enter conversations. We have some of those ongoing, I'm not in a position to comment on them. And then we're always looking again on the manufacturing side, but there's not really anything that would be close or anything that we would be overly excited about, and let me emphasize that we need at the moment to continue to grow as we have in the past.

And our final question comes from Damian Karas with UBS.

Congratulations on the IPO and your third quarter results. I have a follow-up question on price. You talked about some additional actions that you are taking in the fourth quarter. How much pricing benefit that maybe didn't flow through P&L this year, would you expect to carry over into 2026? And just kind of a hypothetical, if we were to see tariffs ease as a result of ongoing trade negotiations, would you expect that half of lower prices at all?

Yes. Go ahead, Dean.

First, I would say, from a carryover perspective, again, I apologize, and we're looking forward to giving guidance in the first quarter for 2026, but we had various price increases throughout the year, some in the second quarter, some in the third and then some in the fourth. So you will see some benefit next year from carryover pricing actions into next year from a price and profitability standpoint. So now I'll turn it over to Mike.

And then from a price give back, we don't have a history of doing that. But we're always, as I stated earlier, sensing, talking, seeing -- and I think one of the strengths is -- for us is we are very nimble. We are very quick. If we sense anything, you will see us act. But there's not a history of doing that, and I wouldn't expect that to change.

Okay. That's helpful. And you talked a little bit earlier about in North America, some of that strength in the market is new entrants emerging. Curious if you have a sense for what proportion of this emerging customer base you're winning? Is that keeping up with your installed base share of the market? Or is that maybe an opportunity where you're outgrowing?

Yes. Good question. So if you think about the newer entrant coming in, is they're really looking to scale up faster. They are looking for a multisite or as I stated in my earlier comments, oftentimes, it's multistate. So what you must have to do that is you need a full digital suite to allow that operator to understand what's happening to be able to maximize revenue to be able to manage their costs and really get the intelligence. And as a matter of fact, we call our digital platform insights because it gives the operator insights on how to be more effective, how to be more efficient and when they adopt those technologies, the financial performance of those stores improves.

So we think our value proposition is very strong. but particularly for the newer entrant, again, looking to scale, we believe we have, by far, the most comprehensive digital solution in the marketplace, and we are continuing to invest in that. We see a lot of opportunity for continued value. And so you'll see us strengthen that offering.

This concludes today's question-and-answer session. I would now like to turn the call back over to Mike Schoeb for any additional or closing remarks.

Okay. Well, thank you very much. That concludes our meeting. I really, really appreciate everybody joining. Thank you for the questions, and we look forward to updating you on the next quarter. Thanks again.

Thank you. That concludes today's third quarter 2025 Alliance Laundry Earnings Conference Call. You may now disconnect your lines at this time, and have a wonderful day.