ALAMO GROUP INC

Alamo Group Inc. is a leader in the manufacture and sale of high-quality, purpose-built industrial and vegetation management equipment, serving end-markets such as infrastructure building and maintenance, industrial construction, public works, land maintenance, agriculture and tree care. The Company operates two divisions: the Industrial Equipment Division and the Vegetation Management Division. Founded in 1969, the Company has approximately 3,800 employees and operates 27 manufacturing facilities in North America, Canada, Europe, Brazil and Australia.

The Company believes that within the U.S. it is a leading supplier to governmental markets, a leading supplier in the U.S. agricultural market, and one of the largest suppliers in the European market for its key niche product offerings. The Company competes with several large national and international companies that offer a broad range of equipment and replacement parts, as well as with numerous small, privately-held manufacturers and suppliers of a limited number of products, mainly on a regional basis. Some of the Company's competitors are significantly larger than the Company and have substantially greater financial and other resources at their disposal.

The Company generates revenue through the manufacture and sale of high-quality, purpose-built industrial and vegetation management equipment, including vocational products (vacuum trucks, street sweepers, roadside safety equipment, excavators, and snow removal equipment) and light machinery (tractor mounted mowing equipment, land maintenance and recycling equipment) as well as related after-market parts and services. Products are sold to independent equipment dealers and directly to contractors and municipalities. Replacement parts represented approximately 16% ¹ of the Company's total sales for the year ended December 31, 2025.

The Vegetation Management Division includes Bush Hog and Rhino equipment sold to farmers, ranchers and other end-users to clear brush, mow grass, maintain pastures and unused farmland, shred crops, till fields, and for haymaking and other applications. The Division also includes Dixie Chopper zero turn radius mowers, Schulte heavy-duty mechanical rotary mowers, McConnel hydraulic boom-mounted hedge and grass cutters, Bomford hydraulic boom-mounted hedge and hedgerow cutters, Spearhead tractor-mounted vegetation maintenance equipment, Fieldquip rotary mowers and tractor attachments, Rousseau hydraulic and mechanical boom mowers, SMA hydraulic boom-mounted hedge and hedgerow cutters, Forges Gorce cutting blades, Morbark tree chippers, stump grinders, mulchers, brush cutters, flails and debarkers, Timberwolf commercial tree care and forestry equipment, Alamo Industrial hydraulically-powered tractor-mounted mowers, Tiger heavy-duty tractor- and truck-mounted mowing equipment, and Alamo Group The Netherlands landscape and vegetation maintenance equipment. Herder and Santa Izabel give the Company a presence in the Brazilian agricultural market. The Industrial Equipment Division includes Gradall telescopic excavators, VacAll catch basin cleaners and roadway debris vacuum systems, Super Products truck-mounted vacuum machines, combination sewer cleaners and hydro excavators, Rivard vacuum trucks, high pressure cleaning systems and trenchers, Tenco and RPM snow removal equipment, Wausau snow removal and ice control products, Everest snow removal and ice control products, Henke snow plows and heavy duty snow removal equipment, H.P. Fairfield public works and runway maintenance products, Schwarze truck-mounted air vacuum, mechanical broom, and regenerative air sweepers, ODB leaf and debris collection equipment and replacement brooms, Nite-Hawk parking lot sweepers, Royal Truck highway crash attenuator trucks, cone safety and traffic control trucks, and ROM industrial vacuum excavation machines.

In 2025, the Company acquired 100% of the issued and outstanding equity capital of Ring-O-Matic, Inc. for approximately $17.5 million ². On October 31, 2025, the Company acquired certain UK assets of GreenMech Ltd. and 100% of the issued and outstanding equity capital of GreenMech subsidiaries in France and Germany for approximately £2.6 million ³ (about USD $3.6 million ⁴). On January 26, 2026, the Company acquired Petersen Industries LLC. On January 2, 2026, the Board of Directors increased its quarterly dividend from $0.30 per share to $0.34 per share ⁵. The Company also had a share repurchase program under which the Company had authorized to repurchase, in the aggregate, up to $50.0 million ⁶ of its outstanding common stock. During 2025, the Company repurchased zero shares.

In 2025, the Company's net sales decreased by 1.5% ⁷ and net income decreased by 10% ⁸ compared to 2024. Net sales were $1,603.7 million ⁹ in 2025 compared to $1,628.5 million ¹⁰ in 2024. Net income was $103.8 million ¹¹ in 2025 compared to $115.9 million ¹² in 2024. Consolidated income from operations was $152 million ¹³ for the full year of 2025 compared to $165 million ¹⁴ for the full year of 2024, a decrease of 8% ¹⁵. The Company's Vegetation Management Division experienced a 17% ¹⁶ decrease in net sales and a 59% ¹⁷ decline in income from operations for the full year of 2025 compared to 2024. The Company's Industrial Equipment Division reported a 13% ¹⁸ increase in net sales for the full year of 2025 compared to 2024, and income from operations for 2025 rose 19% ¹⁹ versus 2024.

The Company expects research & development spending to continue at similar levels in 2026, having been approximately 0.7% ²⁰ of sales in 2025. The Company expects pricing to remain elevated in 2026 but anticipates a slowing of the rate of inflation. The Company expects the cost environment to return to more historically normal levels than we have seen in recent years, anticipating modest increases in the average cost of commodities, components, parts, and accessories compared to 2025 levels.

The Company continues to implement cost-saving initiatives and enhancement of operational efficiencies in an effort to improve operating margins. Over the next approximately one to two quarters, the Company plans to finish remaining line installations and increase production as part of ongoing efforts to optimize operations in both Divisions. Following completion, the Company expects improved capacity utilization, service levels and structural cost reductions.

The Company will fund any future capital expenditures from operating cash flows or through its revolving credit facility. Capital expenditures were $30.6 million ²¹ for 2025, compared to $25.0 million ²² for 2024. On January 2, 2026, the Board of Directors increased its quarterly dividend from $0.30 per share to $0.34 per share ²³. The Company also had a share repurchase program under which the Company had authorized to repurchase, in the aggregate, up to $50.0 million ²⁴ of its outstanding common stock.

Market conditions continue to be mixed. Demand for governmental and industrial products is healthy and vegetation product demand remains weak by soft commodity pricing, elevated interest rates, and reduced housing construction activity. The Company continues to be affected by inflationary impacts for many of the raw materials it purchases. Cost inflation continues to be an ongoing challenge that could have a material impact on the Company's business and financial results, particularly if there are unexpected shifts in political policy changes (including the continued imposition of tariffs), global economic environment or supply chain dynamics.

A downturn in general economic conditions and outlook in the United States and around the world could adversely affect net sales and earnings. The Company depends on governmental sales, and a decrease in such sales could adversely affect business, results of operations and financial condition. Impairment in the carrying value of goodwill could negatively impact consolidated results of operations and net worth; as of December 31, 2025, goodwill was $214.6 million ²⁵, which represents approximately 13% ²⁶ of total assets. The Company operates in a highly competitive industry, and some of its competitors and potential competitors have greater resources than it does. Fluctuations in currency exchange rates may adversely affect financial results; on December 31, 2025, the result of a uniform 10% strengthening in the value of the U.S. dollar relative to the currencies in which the Company's sales are denominated would have been a decrease in gross profit of $12.5 million ²⁷.

Management's message emphasizes that the Company continued to experience strong demand for industrial equipment products in 2025, while demand for vegetation products was mixed, with agricultural, tree care and recycling markets remaining weak. Operating margins declined as strong performance in the Industrial Equipment Division only partially offset lower margins in the Vegetation Management Division. Management notes that the Company continues to implement cost-saving initiatives and enhancement of operational efficiencies in an effort to improve operating margins, and that over the next approximately one to two quarters, the Company plans to finish remaining line installations and increase production, expecting improved capacity utilization, service levels and structural cost reductions following completion.