Financial Data and Key Metrics Changes - Fourth quarter sales increased by 17% to $211 million, with full-year sales growth of 4% to $839 million, marking the first annual growth in three years [8][18] - On a pro forma basis, excluding the Custom Fluidpower (CFP) divestiture, fourth quarter sales were up 29% and full-year sales increased by 6% [9][15] - Gross profit for the fourth quarter rose by 31% to $71 million, with gross margin expanding by 350 basis points to 33.6% [16] - Adjusted EBITDA margin was 20.1% in the fourth quarter, up 270 basis points year-over-year [19] Business Line Data and Key Metrics Changes - Hydraulics sales grew by 10% in the fourth quarter, with pro forma growth of 27% [15][20] - Electronics sales increased by 31% year-over-year, driven by strong demand in recreational and industrial markets [21] - Hydraulics gross profit grew by 27% year-over-year, with gross margin expanding to 34.1% [20] - Electronics gross profit increased by 40%, with gross margin expanding by 220 basis points [21] Market Data and Key Metrics Changes - Demand in mobile applications was driven by construction markets across all regions, with early signs of recovery in agriculture [20] - The electronics segment saw persistent demand for construction equipment, particularly in the U.S. and Europe [21] - Channel inventory levels in the agriculture market improved, indicating potential future demand growth [52] Company Strategy and Development Direction - The company plans to continue its go-to-market initiatives and product innovation at an elevated pace in 2026 [7][30] - A focus on developing high-value, mission-critical solutions for niche applications is seen as a competitive edge [10] - The company aims to optimize capital allocation by investing in organic growth and driving sustainable shareholder returns [25] Management's Comments on Operating Environment and Future Outlook - The management characterized 2025 as a year of slow and uneven growth, with challenges from global tariffs and geopolitical uncertainty [8] - There is optimism regarding initial 2026 readings, with improvements in sentiment and actual production [8] - The company expects first quarter 2026 sales to be in the range of $218 million to $223 million, reflecting a 22% increase year-over-year [25] Other Important Information - The company initiated a share repurchase program in 2025, repurchasing 1% of outstanding shares [11] - The leadership team was strengthened in 2025, with key promotions and appointments [12] - The company has a long-standing practice of paying cash dividends, marking 116 consecutive quarters of dividends [11] Q&A Session Questions and Answers Question: Concerns about full-year outlook and go-to-market initiatives - Management acknowledged the cautious full-year outlook, citing tougher comparisons in the second half but expressed confidence in sustaining momentum from strong order trends [39] Question: Capital allocation priorities - The company plans to continue paying down debt while also increasing CapEx to invest in internal capabilities and productivity [41] Question: Insights on recent commercial wins - Management highlighted significant growth in the sales funnel and emphasized the focus on converting these into new business wins, particularly in existing customer relationships [49] Question: Clarification on agricultural market recovery - Management indicated that while channel inventory levels are healthier, there is no strong end-market recovery yet, but they are taking market share [52] Question: Tariff impact and pricing strategies - The company is monitoring tariff situations closely and has implemented pricing actions to offset tariff costs and overall cost inflation [67]

Financial Data and Key Metrics Changes - Fourth quarter sales increased by 17% to $211 million, resulting in a full-year sales growth of 4% to $839 million, marking the first annual growth in three years [8][9][15] - On a pro forma basis, excluding the Custom Fluidpower (CFP) divestiture, fourth quarter sales were up 29% and full-year sales were up 6% [9][15] - Gross profit for the fourth quarter rose by 31% to $71 million, with gross margin expanding by 350 basis points to 33.6% [16] - Adjusted EBITDA margin for the fourth quarter was 20.1%, up 270 basis points year-over-year [19] - Diluted EPS for the fourth quarter was $0.58, a fourfold increase compared to the prior year [18] Business Line Data and Key Metrics Changes - Hydraulics sales increased by 10% in the fourth quarter, with pro forma growth of 27% [15][20] - Electronics sales surged by 31% year-over-year, driven by strong demand in recreational and industrial markets [21] - Hydraulics gross profit grew by 27% year-over-year, with gross margin expanding to 34.1% [20] - Electronics gross profit increased by 40%, with gross margin expanding by 220 basis points [21] Market Data and Key Metrics Changes - Demand in mobile applications was driven by construction markets across all regions, with early signs of recovery in agriculture [20] - The electronics segment saw persistent demand for construction equipment, particularly in the U.S. and Europe [21] - Channel inventory levels in the agriculture market improved, indicating potential for future growth [52] Company Strategy and Development Direction - The company aims to continue executing its go-to-market initiatives and product innovation to drive growth [7][10] - A focus on optimizing the portfolio and aligning go-to-market strategies with core competencies was emphasized [10][11] - The introduction of a new share repurchase program and continued cash dividends reflect a commitment to returning value to shareholders [11][23] Management's Comments on Operating Environment and Future Outlook - Management characterized 2025 as a turnaround year, with expectations for continued growth in 2026 despite macroeconomic uncertainties [8][30] - The company anticipates first quarter 2026 sales to be in the range of $218 million to $223 million, representing a 22% increase year-over-year [25] - Management expressed confidence in sustaining momentum from the previous year, despite potential challenges from global events and supply chain issues [39][40] Other Important Information - The company has successfully reduced net debt to adjusted EBITDA leverage ratio to 1.8 times, the lowest since Q2 2022 [23] - A new Core 2030 Strategy will be unveiled at the upcoming Investor Day, outlining the company's vision for future growth [32] Q&A Session Summary Question: Concerns about full-year outlook and go-to-market initiatives - Management acknowledged the cautious outlook for the second half of 2026 but emphasized strong order trends and existing backlog supporting first quarter guidance [39][40] Question: Capital allocation priorities - Management highlighted a systematic approach to capital allocation, focusing on debt reduction and increased CapEx for internal capabilities [41][42] Question: Insights on recent commercial wins - Management noted significant growth in the sales funnel and emphasized the importance of converting these opportunities into new business wins [48][49] Question: Clarification on agricultural market recovery - Management indicated that improvements in channel inventory levels are a positive sign, but end-market demand remains weak [52] Question: Tariff impacts and pricing strategies - Management discussed the ongoing tariff situation and the company's strategy to mitigate costs through pricing actions [67][68]

Financial Data and Key Metrics Changes - Fourth quarter sales increased by 17% to $211 million, resulting in a full-year sales growth of 4% to $839 million, marking the first annual growth in three years [8][15][18] - On a pro forma basis, excluding the Custom Fluidpower (CFP) divestiture, fourth quarter sales were up 29% and full-year sales were up 6% [9][15] - Gross profit for the fourth quarter rose by 31% to $71 million, with gross margin expanding by 350 basis points to 33.6% [16][19] - Adjusted EBITDA margin was 20.1% in the fourth quarter, reflecting a 270 basis point increase year-over-year [19] Business Line Data and Key Metrics Changes - Hydraulics segment sales grew by 10% in the fourth quarter and 27% on a pro forma basis, driven by demand in mobile applications, particularly in construction markets [15][20] - Electronics segment sales increased by 31% year-over-year, with notable strength in recreational markets and solid demand in industrial and mobile end markets [21][22] Market Data and Key Metrics Changes - The U.S. market showed signs of weakness in factory output, with PMI and industrial production indicating extended contraction [6][8] - Initial readings for 2026 indicate improving sentiment and production, suggesting potential recovery in the market [8] Company Strategy and Development Direction - The company plans to continue its go-to-market initiatives and product rollouts at an elevated pace in 2026, focusing on high-value, mission-critical solutions [10][30] - A new share repurchase program was introduced, with 1% of outstanding shares repurchased in 2025, alongside a commitment to maintain cash dividends [11][24] Management's Comments on Operating Environment and Future Outlook - Management characterized 2025 as a year of slow and uneven growth, with challenges from global tariffs and geopolitical uncertainties [8][30] - The outlook for 2026 includes expected sales in the range of $820 million to $860 million, reflecting a 6% growth on a pro forma basis [26][27] Other Important Information - The company achieved record cash generation from operations of $46 million in the fourth quarter, totaling $127 million for the year [22][24] - The net debt to adjusted EBITDA leverage ratio improved to 1.8 times, with available liquidity surpassing total debt [24] Q&A Session Summary Question: Concerns about cautious full-year outlook despite strong results - Management acknowledged the strong order trends and existing backlog but noted potential challenges in the second half due to tougher comparisons and global uncertainties [40][41] Question: Capital allocation priorities under new leadership - The focus remains on paying down debt while also increasing CapEx for internal capabilities and productivity improvements [42][43] Question: Details on recent commercial wins and expected run rates - Management highlighted significant growth in the sales funnel and new business wins, particularly in existing customer relationships [51] Question: Clarification on agricultural market demand - Management indicated that improvements are seen in channel inventory levels rather than end customer demand, suggesting a stabilization rather than a strong recovery [54][55] Question: Impact of tariffs and pricing strategies - Management is monitoring tariff impacts closely and has implemented pricing actions to mitigate costs, aiming for price-cost neutrality in 2026 [68][69] Question: Margin expansion levers for 2026 - The company plans to leverage volume growth and internal productivity initiatives to drive margin improvements, targeting mid-30s gross margins [77][78]

Group 1: Core Business Performance - Achieved full-year sales growth for the first time in three years by transitioning to a customer-centric 'hunter' sales model and accelerating product launch cadences [4] - Expanded gross margins for four consecutive quarters through improved volume absorption, productivity initiatives, and the removal of the margin-dilutive Custom Fluid Power (CFP) business [4] - Overcame contraction in U.S. Industrial Production and PMI by capturing greater wallet share from existing customers with ruggedized, niche-application solutions [4] Group 2: Strategic Initiatives - Optimized the portfolio by divesting Custom Fluid Power (CFP) to exit lower-margin distribution and refocus on core high-value manufacturing of manifolds and integrated packages [4] - Reallocated engineering resources from a centralized model back into core business units to improve responsiveness and institutionalize innovation processes [4] - Fortified the leadership team with permanent appointments in CEO, CFO, and segment president roles to drive a predictable, performance-driven culture [4] Group 3: Financial Outlook - Guidance for 2026 assumes 6% pro forma revenue growth at the midpoint, primarily driven by volume gains in core platforms and the ramp-up of recent commercial wins [4] - Expects stronger year-over-year growth rates in the first half of 2026 due to favorable comparisons and current visibility into customer order flows [4] - Management anticipates reaching mid-30% gross margins by leveraging existing capacity without adding significant new overhead or infrastructure [4] Group 4: Capital Allocation and Future Strategy - Capital allocation will prioritize debt reduction and organic investment, with CapEx projected to rise slightly to address deferred equipment projects and automation [4] - The CORE 2030 strategy, to be unveiled in March, will outline the next chapter of growth, focusing on new market adjacencies and institutionalized innovation [4] Group 5: Risk Factors - Management flagged potential supply chain risks for 2026, specifically regarding the availability and cost of memory chips as manufacturers shift to high-end components [6] - Global tariff uncertainty remains a headwind, though the company aims to mitigate impacts through its 'in the region for the region' manufacturing strategy and pricing surcharges [6]