Financial Data and Key Metrics Changes - The company reported a 9.2% increase in consolidated sales year-over-year, with acquisitions contributing 6.3 percentage points to this growth [17] - EBITDA increased by 13.4% year-over-year, resulting in EBITDA margins of 12.2%, which expanded by 46 basis points from the previous year [21] - Earnings per share (EPS) rose by 11.4% to $2.63, benefiting from a reduced share count due to buyback activity [21] Business Line Data and Key Metrics Changes - The service center segment saw organic sales growth of 4.4%, driven by internal initiatives and firming technical MRO demand [22] - The engineered solutions segment experienced a 19.4% increase in sales, primarily due to acquisitions, but organic sales decreased by 0.4% year-over-year [23] - Hydradyne's EBITDA contribution improved by over 20% sequentially, indicating strong progress in integration and synergy initiatives [14] Market Data and Key Metrics Changes - Year-over-year organic sales growth was reported at 3%, the strongest in two years, with 16 out of the top 30 markets generating positive sales growth [6][17] - Strongest growth was observed in machinery, food and beverage, refining, pulp and paper, metals, oil and gas, and aggregates, while declines were noted in lumber and wood, transportation, chemicals, mining, and utilities [6] Company Strategy and Development Direction - The company remains focused on M&A as a top capital allocation priority for fiscal 2026, with an active pipeline of mid-sized targets [15] - Continued investments in engineering systems and production capacity are expected to leverage demand tailwinds moving forward [11] - The company aims to capitalize on trends in automation, life sciences, and technology, positioning itself to link legacy industrial production with advanced applications [32] Management's Comments on Operating Environment and Future Outlook - Management described the underlying demand backdrop as stable to slightly positive, with expectations for continued improvement in core markets [6][30] - The company anticipates a choppy near-term sales environment due to seasonal factors and trade policy uncertainty, but remains optimistic about the second half of fiscal 2026 [30][28] - Positive order momentum and customer sentiment are gradually improving, with expectations for increased capital investment decisions [31] Other Important Information - The company achieved 17% incremental margins on EBITDA, despite ongoing inflationary pressures [13] - Cash generated from operating activities was $119.3 million, with free cash flow totaling $112 million, representing a conversion of 111% relative to net income [25] - The balance sheet remains strong, with approximately $419 million in cash and net leverage at 0.3x EBITDA [26] Q&A Session Summary Question: Holiday shutdowns and customer activity - Management indicated it is still early to assess customer plans for holiday shutdowns, but some customers are expected to remain active [36] Question: Supplier pricing behavior - Management noted no significant changes in supplier behavior, with price increases being orderly and manageable [39][40] Question: Engineered solutions performance - Management expects engineered solutions to potentially outperform service centers in the second half of fiscal 2026 due to order backlog conversions [44] Question: Order growth dynamics - Management explained that project complexity and scheduling variances affect order conversion times, but remains optimistic about the pipeline [52] Question: Pricing expectations - Management stated that pricing contributions were better than expected, but it is too early to predict further increases beyond the current guidance [55] Question: Capital allocation priorities - Management confirmed that organic growth opportunities and M&A remain top priorities, with ongoing strong cash generation [63] Question: Margin guidance and dynamics - Management highlighted that LIFO expenses and non-routine rebates from the previous year would impact sequential EBITDA margins [68] Question: Hydradyne synergies - Management confirmed that Hydradyne's integration and synergy initiatives are on track, with positive contributions expected [72]