Financial Data and Key Metrics Changes - Fourth quarter revenue increased 17% year-over-year to $143.4 million, with 15% organic growth on a constant currency basis [9] - Gross margin expanded 90 basis points year-over-year to 32.4%, driven by higher volumes, favorable mix, and operational efficiencies [12] - Operating income for the fourth quarter increased 76% to $11.4 million, representing 7.9% of revenue [14] - Net income for the quarter more than doubled to $6.4 million, or $0.38 per diluted share [14][15] - Record operating cash flow of $56.7 million for the year, up 35% from the prior year [16] - Total debt declined to $180.4 million, with net debt down to $139.7 million, a reduction of $48.4 million year-over-year [18] Business Line Data and Key Metrics Changes - Industrial revenue increased 24% in the quarter, driven by strengthening automation demand and power quality solutions [9] - Vehicle revenue increased 35%, primarily due to increased commercial automotive shipments [9] - Medical revenue increased 9%, supported by steady demand for surgical instruments [10] - Aerospace and defense revenue declined 5%, reflecting program timing dynamics and the cancellation of the M10 Booker tank program [10] Market Data and Key Metrics Changes - 50% of revenue was generated in the U.S., with the remainder from Europe, Canada, and Asia Pacific [9] - The industrial sector remains the largest vertical, increasingly anchored by higher value applications [11] - European markets, particularly Germany, are expected to remain soft, with no growth predicted for 2026 [38] Company Strategy and Development Direction - The company aims to expand structural margins, strengthen the balance sheet, and position the portfolio around durable secular growth drivers [4] - The "Simplify to Accelerate NOW" program focuses on reducing complexity, improving throughput, and strengthening margins sustainably [6] - The company is aligning its portfolio around higher value motion controls and power solutions, serving long-term drivers of electrification, automation, and digital infrastructure [23] Management's Comments on Operating Environment and Future Outlook - Management noted improving industrial demand and a return to normalized ordering patterns after a destocking cycle [5] - The macro environment remains uneven across certain end markets, with ongoing monitoring of customer capital spending and policy considerations [22] - Confidence is derived from control over cost structure, working capital discipline, and capital allocation [23] Other Important Information - The company expects capital expenditures in the range of $10 million-$12 million for 2026, primarily supporting customer programs and growth initiatives [17] - The backlog at the end of the year was approximately $233 million, with most expected to convert within 3 to 9 months [21] Q&A Session Summary Question: What will drive growth and margin expansion in 2026? - Management indicated that both external tailwinds and internal initiatives will contribute, with a focus on long-term drivers like data center infrastructure and defense spending [28][39] Question: What are the trends seen in Q1? - Management noted that Q4's unusual growth was due to pull-ins and that some areas may see lower demand in Q1 as a result [50][52] Question: What is the status of the data center facility expansion? - The facility is on track to be fully operational by late Q2 or early Q3, which aligns well with increasing market demand [59] Question: How is the company addressing supply chain challenges related to the NDAA? - Management acknowledged ongoing work to comply with the NDAA, particularly regarding rare earth materials, and emphasized proactive steps taken to regionalize the supply chain [78][81]