Core Insights - The company reported significant profitability improvements, with adjusted gross margin increasing by 290 basis points to 32.5%, driven by pricing, raw material cost actions, acquisitions, divestitures, and targeted cost reductions [1] - Adjusted EBITDA for fiscal 2025 was $170 million, reflecting a 15% year-on-year increase, while adjusted EPS rose 39% to $1.28 due to higher operating income and a reduced share count from share repurchases [1][6] - Despite a challenging economic backdrop, the company achieved double-digit profit growth in fiscal 2025, attributing margin expansion to pricing discipline and restructuring efforts [4] Financial Performance - For Q4, net revenue decreased by 3.1% year-over-year, primarily due to a weak economic environment and strategic portfolio actions, although it would have increased by about 1% when adjusting for the flooring divestiture [2] - Organic revenue fell by 1.3%, with a 2.5% volume decline partially offset by 1.2% pricing growth [2] - Cash flow from operations in Q4 was $107 million, up 25% year-on-year, driven by higher net income [6] Segment Performance - Engineering Adhesives (EA) showed organic revenue growth of 2.2%, with strength in automotive, electronics, and aerospace, while Hygiene, Health and Consumables (HHC) saw a 1.8% decline in organic revenue due to lower volume [7] - Building Adhesives Solutions (BAS) experienced a 4.8% decrease in organic sales, attributed to lower volume and tough comparisons from the previous year [7] 2026 Outlook - Management expects organic sales to be roughly flat for fiscal 2026, with adjusted EBITDA guidance of $630 million to $660 million and adjusted EPS of $4.35 to $4.70 [5][9] - The company anticipates a foreign currency translation benefit of approximately 1% to revenue if rates hold [9] - For Q1, revenue is expected to decline in low single digits, with adjusted EBITDA projected between $110 million and $120 million [11] Strategic Initiatives - The company is focusing on ongoing portfolio repositioning and a "Quantum Leap" initiative for manufacturing and warehouse consolidation [13] - In 2023 and 2024, the company acquired eight companies with a combined EBITDA of $41 million, which contributed $73 million of EBITDA in 2025 [14] - The company plans to reduce its solar business, with revenue expected to decline from $80 million in 2025 to around $50 million by the end of 2026 [16] Special Items - A reserve for a product liability legal claim related to the divested flooring business was recorded in Q4, amounting to approximately $35 million pre-tax [17]

Financial Data and Key Metrics Changes - The company reported a 2.1% decrease in revenue year on year, but net revenue adjusted for the flooring divestiture increased by 2.8% [14] - Organic revenue was up 0.4%, with pricing growth of 0.7% and a volume decline of 0.3% year on year [15] - Adjusted EBITDA for the quarter was $166 million, reflecting a 5% year on year increase, driven by targeted pricing actions and cost savings [16] - Adjusted earnings per share (EPS) increased by 5% to $1.18 due to higher net income and lower shares outstanding [17] - Operating cash flow increased by 36% year on year to $111 million, reflecting improved net income and working capital [17] - Net debt to adjusted EBITDA decreased from 3.5 times to 3.4 times, indicating improved cash flow and lower debt balances [17] Business Line Data and Key Metrics Changes - In the HHC segment, organic revenue increased by 1.8% year on year, driven by positive volume and pricing, although EBITDA margin was down year on year due to higher raw material costs [8] - Engineering Adhesives saw a 0.4% decrease in organic revenue, with strong performance in transportation markets offset by weakness in solar [9] - Building Adhesive Solutions experienced a 0.9% decrease in organic sales year on year, but EBITDA increased by 5% with a margin expansion of 60 basis points [10] Market Data and Key Metrics Changes - In the Americas, organic revenue was up 2% year on year, driven by strength in roofing and flexible packaging [10] - EIMEA region saw a 2% decline in year-over-year organic revenue, with strong performance in hygiene offset by weak demand in construction-related markets [11] - Asia Pacific experienced slight organic revenue growth year on year, with strong performance in transportation markets but slower results in solar and electronics [11] Company Strategy and Development Direction - The company is focused on delivering positive organic revenue growth while managing costs and leveraging global sourcing to respond to market uncertainties [6] - A strategic shift towards higher growth and higher margin markets is underway, including the divestiture of lower margin businesses [6] - The company aims to achieve a greater than 20% EBITDA margin target and is optimistic about margin expansion in 2025 [26] Management's Comments on Operating Environment and Future Outlook - Management expects a challenging operating environment with high uncertainty and constrained demand, particularly in the second half of the year [12] - Despite economic uncertainties, the company is optimistic about its strong execution and expects profit growth to accelerate in the second half [12] - The company anticipates slightly weaker volume in the latter half of the year but expects continued margin expansion due to pricing actions and raw material purchasing leverage [12] Other Important Information - The company was recognized as one of the world's greenest companies in 2025 by Newsweek, highlighting its commitment to sustainability [23] - The Vice President of Investor Relations announced his retirement, with plans for a smooth transition [24][25] Q&A Session Summary Question: Can you provide more context on the strong margin performance in Engineering Adhesives? - Management noted that the acquisition of ND Industries performed better than expected and strong cost control contributed to margin expansion [32][33] Question: How did volume velocity across business units compare in fiscal Q2? - Overall volume trends were flat in Q2, with some positive momentum in automotive and flexible packaging, while residential construction markets showed softness [38][39] Question: What is the expected impact of tariffs on the business? - The company has limited direct tariff impact due to local sourcing but is prepared for potential lower volumes and is actively managing costs to mitigate impacts [86][89] Question: Can you elaborate on the capital expenditure trajectory? - The company expects to close the gap in capital spending in the second half of the year, with a full-year guidance of $150 million [61][62] Question: What was the pension income for the quarter? - Pension income for the quarter was approximately $5.7 million, up from $4 million in the previous year [67]