Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $420 million, up 5% from Q3 2024, with organic growth of 3.4% [6][8] - Adjusted net income was $28 million, down 3% compared to $29 million in Q3 2024 [6][10] - Adjusted EBITDA was $55 million, or 13% of net sales, compared to 14% in Q3 2024 [6][8] - Gross profit was $101.7 million, up 0.8%, with a gross margin of 24.2%, down 90 basis points from the previous year [8][9] - Operating cash flow for the nine months ended September 30, 2025, was $102 million, or 116% of net income [7][13] Business Line Data and Key Metrics Changes - Industrial Equipment Division net sales were $247 million, up 17% with 14.5% organic growth [11] - Vegetation Management Division net sales were $173.1 million, down 9% due to weakness in end markets and production challenges [11][12] - Adjusted EBITDA as a percentage of net sales for the Industrial Equipment Division was 15.5%, while for the Vegetation Management Division it was 9.7% [11][12] Market Data and Key Metrics Changes - The company noted strong performance in municipal and contractor spending on infrastructure maintenance, with state and local spending growing at a compound annual rate of approximately 5% over the past 20 quarters [16] - The early order pattern in the fourth quarter for the Industrial Equipment Division started off reasonably, with a healthy backlog [18][22] Company Strategy and Development Direction - The company focuses on four strategic pillars: people and culture, commercial excellence, operational excellence, and acquisitions [23] - Emphasis on product innovation and catering to customer needs, with a focus on higher-margin profit pools such as parts and service [24] - The company aims for long-term financial targets including sales growth of over 10%, adjusted operating income margins around 15%, and adjusted EBITDA margins of 18-20% [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future performance despite mixed results in Q3, particularly in the Industrial Equipment Division [6][7] - The Vegetation Management Division is expected to improve as production efficiencies are realized and end markets stabilize [22][29] - The company anticipates a slight decline in sales moving from Q3 to Q4, typical for seasonal trends, with expectations for margin improvements in the long term [50][54] Other Important Information - The company has a strong financial position with total assets of $1,595 million and $244.8 million in cash as of September 30, 2025 [12][14] - A quarterly dividend of $0.30 per share was approved, reflecting the company's commitment to delivering long-term value to shareholders [14][25] Q&A Session Summary Question: Can you get back above 10% operating margins on vegetation without meaningful revenue growth? - Management believes they can achieve adjusted operating margins of 15% and adjusted EBITDA margins of 20% through improved production efficiencies and volume leverage as markets stabilize [29] Question: Are there specific areas within the industrial segment that are more challenged? - Management noted that while industrial orders are generally up year-to-date, there are some lumpy order patterns, particularly in excavators and vacuum trucks, with some cooling in end markets expected [31][33] Question: How do inventory levels sit in the vegetation management segment? - Inventory levels are reasonable, with order cancellations in line with historic averages, but there is some softness in tree care and government mowing segments [35] Question: What are the primary drivers behind the decline in margin on the industrial side of the business? - The decline in margins is primarily attributed to tariffs, which have increased in Q3, and management is working to pass these costs along to customers [36][37] Question: How long might it take to achieve the 18% EBITDA target? - Management expects to return vegetation division margins to previous levels within one or two quarters, with additional improvements from procurement savings and operational efficiencies [39][40] Question: What are the levers within control to sustain demand in the industrial segment? - Management highlighted the importance of product innovation and M&A as key drivers for sustaining demand, particularly in attractive end markets [61][62]