Q4 2025 Applied Industrial Technologies Inc Earnings Call

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

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Please note that this conference is being recorded I would now like to turn the call over to Ryan Cieslak Director of Investor Relations and Treasury Ryan you may begin.

Speaker #2: Welcome to the fiscal 2025 fourth quarter earnings call for Applied Industrial Technologies. My name is Carly and I will be your conference operator for today's call.

Neil Schrimsher: Welcome to the fiscal 2025 fourth quarter earnings call for Applied Industrial Technologies. My name is Carly, and I will be your conference operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question at that time, press star followed by the number one on your telephone keypad. Prior to asking a question, please lift your handset to ensure the best audio quality. If at any time during the conference call you need to reach an operator, please press star zero. Please note that this conference is being recorded. I would now like to turn the call over to Ryan Cieslak, Director of Investor Relations and Treasury. Ryan, you may begin.

Okay. Thanks, Kelly and good morning to everyone on the call. This morning.

Speaker #2: At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question at that time, press star followed by the number one on your telephone keypad.

We issued our earnings release and supplemental investor deck detailing our fourth quarter results. Both of these documents are available in the.

The Investor Relations section of apply Dot com before we begin just a reminder, will discuss our business outlook and make forward looking statements. All forward looking statements are based on current expectations subject to certain risks and uncertainties, including those detailed in our SEC filings.

Speaker #2: Prior to asking a question, please lift your handset to ensure the best audio quality. If at any time during the conference call you need to reach an operator, please press star zero.

Speaker #2: Please note that this conference is being recorded. I would now like to turn the call over to Ryan Cieslak, Director of Investor Relations and Treasury.

Actual results may differ materially from those expressed in the forward looking statements.

The company undertakes no obligation to update publicly or revise any forward looking statement.

Speaker #2: Ryan, you may begin.

Speaker #4: Okay, thanks Carly and good morning to everyone on the call. This morning, we issued our earnings release and supplemental investor deck detailing our fourth quarter results, both of these documents are available in the Investor Relations section of Applied.com.

Ryan Cieslak: Okay. Thanks, Carly, and good morning to everyone on the call. This morning, we issued our earnings release and supplemental investor deck detailing our fourth quarter results. Both of these documents are available in the investor relations section of applied.com. Before we begin, just a reminder, we will discuss our business outlook and make forward-looking statements. Our forward-looking statements are based on current expectations subject to certain risks and uncertainties, including those detailed in our SEC filings. Actual results may differ materially from those expressed in the forward-looking statements. The company undertakes no obligation to update publicly or revise any forward-looking statement. In addition, the conference call will use non-GAAP financial measures, which are subject to the qualifications referenced in those documents. Our speakers today include Neil Schrimsher, Applied's President and Chief Executive Officer, and Dave Wells, our Chief Financial Officer. With that, I will turn it over to Neil.

In addition, the conference call will use non-GAAP financial measures, which are subject to the qualifications referenced in those documents.

Our speakers today include Neil Scripture applies president and Chief Executive Officer, and Dave Wells, Our Chief Financial Officer with that I'll turn it over to Neil.

Speaker #4: Before we begin, just a reminder, we'll discuss our business outlook and make forward-looking statements. I'll forward-looking statements are based on current expectations, subject to certain risks and uncertainties including those detailed in our SEC filings.

Thanks, Ryan and good morning, everyone. We appreciate you joining us I'll begin today with perspective and highlights on our results, including an update on industry conditions and expectations going forward, Dave will follow with more financial detail on the quarter's performance and provide additional color on our fiscal 2000.

Speaker #4: Actual results may differ materially from those expressed in the forward-looking statements. The company undertakes no obligation to update publicly or revise any forward-looking statement.

Speaker #4: In addition, the conference call will use non-GAAP financial measures, which are subject to the qualifications referenced in those documents. Our speakers today include Neil Schrimsher, Applied's President and Chief Executive Officer, and David Wells, our Chief Financial Officer.

26 guidance I'll, then close with some final thoughts.

Before I discuss our fourth quarter results I wanted to take a moment to acknowledge our applied team.

I'm extremely proud of what we accomplished in fiscal 2025 within a muted demand backdrop.

Speaker #4: With that, I'll turn it over to Neil.

Speaker #5: Thanks, Ryan, and good morning everyone. We appreciate you joining us. I'll begin today with perspective and highlights on our results, including an update on industry conditions and expectations going forward.

Neil Schrimsher: Thanks, Ryan, and good morning, everyone. We appreciate you joining us. I will begin today with perspective and highlights on our results, including an update on industry conditions and expectations going forward. Dave Wells will follow with more financial detail on the quarter's performance and provide additional color on our fiscal 2026 guidance. I will then close with some final thoughts. Before I discuss our Q4 results, I want to take a moment to acknowledge our Applied team. I am extremely proud of what we accomplished in fiscal 2025 within a muted demand backdrop. We achieved new records for sales, EBITDA, and EPS. Full-year EPS growth of 4% exceeded the high end of our initial guidance. Gross margins expanded nearly 50 basis points and surpassed 30% for the first time in our history. We also delivered another record year of cash generation that enabled meaningful capital deployment.

We achieved new records for sales EBITDA and EPS.

Full year EPS growth of 4% exceeded the high end of our initial guidance.

Speaker #5: Today, we'll follow with more financial detail on the quarter's performance and provide additional color on our fiscal 2026 guidance. I'll then close with some final thoughts.

<unk> margins expanded nearly 50 basis points and surpassed 30% for the first time in our history.

We also delivered another record year of cash generation.

Speaker #5: Before I discuss our fourth quarter results, I want to take a moment to acknowledge our Applied team. I'm extremely proud of what we accomplished in fiscal 2025 within a muted demand backdrop.

Enabled meaningful capital deployment.

This included the strategic acquisition of Hydra Dyne, our largest M&A transaction in six years.

Overall, our performance in fiscal 2025 provides further evidence of our operating resiliency and value creation potential and builds on our compelling track record over the past five years.

Speaker #5: We achieved new records for sales, EBITDA, and EPS. Four-year EPS growth of 4% exceeded the high end of our initial guidance. Gross margins expanded nearly 50 basis points and surpassed 30%.

This includes compounded annual growth for EBITDA, and EPS of 14% and 22%, respectively as well as gross margins and EBITDA margins, expanding 130, and 330 basis points respectively.

Speaker #5: For the first time in our history, we also delivered another record year of cash generation that enabled meaningful capital deployment. This included the strategic acquisition of Hydrodyne, our largest M&A transaction in six years.

Neil Schrimsher: This included the strategic acquisition of Hydradyne, our largest M&A transaction in six years. Overall, our performance in fiscal 2025 provides further evidence of our operating resiliency and value creation potential and builds on our compelling track record over the past five years. This includes compounded annual growth for EBITDA and EPS of 14% and 22%, respectively, as well as gross margins and EBITDA margins expanding 130 and 330 basis points, respectively. I am honored to be a part of our incredible Applied team and the financial performance we continue to deliver. Our progress in fiscal 2025 ended on an encouraging note with several positive trends developing. Our Q4 sales and EPS exceeded our expectations. Our team once again executed well against an ongoing muted in-market backdrop. Sales exceeded the high end of our Q4 guidance by 2.5% and returned a modest positive organic growth.

I'm honored to be a part of our incredible applied team and the financial performance, we continue to deliver.

Speaker #5: Overall, our performance in fiscal 2025 provides further evidence of our operating resiliency and value creation potential, and builds on our compelling track record over the past five years.

Our progress in fiscal 2025 ended on an encouraging note with several positive trends developing.

Fourth quarter sales and EPS exceeded our expectations our team once again executed well against an ongoing muted end market backdrop.

Speaker #5: This includes compounded annual growth for EBITDA and EPS of 14% and 22% respectively, as well as gross margins and EBITDA margins expanding by 130 and 330 basis points, respectively.

Sales exceeded the high end of our fourth quarter guidance by two 5% and returned to modest positive organic growth.

Underlying organic sales trends strengthened across both segments as the quarter progressed average daily sales increased 4% sequentially, which was ahead of normal seasonal patterns for the first time in 10 quarters.

Speaker #5: I'm honored to be a part of our incredible Applied team and the financial performance we continue to deliver. Our progress in fiscal 2025 ended on an encouraging note, with several positive trends developing.

Speaker #5: For fourth quarter sales and EPS exceeded our expectations. Our team once again executed well, against an ongoing muted in-market backdrop. Sales exceeded the high end of our fourth quarter guidance by 2.5%, and returned a modest positive organic growth.

Upside compared to our expectations was primarily driven by stronger than expected engineered solutions segment sales, which grew organically year over year for the first time in seven quarters.

This segments, 2% organic daily sales increase was a notable improvement from mid single digit declines in recent quarters.

Speaker #5: Underlying organic sales trends strengthened across both segments as the quarter progressed. Average daily sales increased 4% sequentially, which was ahead of normal seasonal patterns for the first time in 10 quarters.

Neil Schrimsher: Underlying organic sales trends strengthened across both segments as the quarter progressed. Average daily sales increased 4% sequentially, which was ahead of normal seasonal patterns for the first time in 10 quarters. Upside compared to our expectations was primarily driven by stronger than expected Engineered Solutions segment sales, which grew organically year over year for the first time in seven quarters. The segment's 2% organic daily sales increase was a notable improvement from mid-single-digit declines in recent quarters, with the underlying drivers encouraging on many fronts. Our ES teams capitalized on recent order strength, as well as improving demand and business development efforts across several key growth verticals. This includes double-digit organic growth across our technology vertical and mid-single-digit organic growth across our automation platform during the quarter.

The underlying drivers encouraging on many fronts.

Our E S teams capitalize on recent order strength.

As well as improving demand and business development efforts across several key growth verticals.

Speaker #5: Upside, compared to our expectations, was primarily driven by stronger-than-expected engineered solutions segment sales. Which grew organically year-over-year for the first time in seven quarters.

This includes double digit organic growth across our technology vertical and mid single digit organic growth across our automation platform during the quarter.

Service Center segment trends were also encouraging including exceeding normal seasonal patterns for the second straight quarter and returning to positive organic growth during the month of June.

Speaker #5: The segment's 2% organic daily sales increase was a notable improvement from mid-single-digit declines in recent quarters. With the underlying drivers encouraging on many fronts.

M&A sales contribution was also encouraging with progress continuing to develop at Hydra dyne as well as initial contribution from our early May acquisition of Iris factory automation.

Speaker #5: Our ES team's capitalized on recent order strength, as well as improving demand and business development efforts across several key growth verticals. This includes double-digit organic growth across our technology vertical, and mid-single-digit organic growth across our automation platform during the quarter.

Taken together, our fourth quarter sales performance highlight solid execution combined with emerging growth tailwind tied to our industry position and business pipeline.

Speaker #5: Service center segment trends were also encouraging, including exceeding normal seasonal patterns for the second straight quarter. And returning to positive organic growth during the month of June.

Neil Schrimsher: Service Center segment trends were also encouraging, including exceeding normal seasonal patterns for the second straight quarter and returning to positive organic growth during the month of June. M&A sales contribution was also encouraging, with progress continuing to develop at Hydradyne, as well as initial contribution from our early May acquisition of Iris Factory Automation. Taken together, our fourth quarter sales performance highlights solid execution combined with emerging growth tailwinds tied to our industry position and business pipeline. As it relates to underlying in-market demand, trends remained relatively mixed during the quarter, though with some positive signs developing. Year-over-year trends across our top 30 in-markets were relatively unchanged from last quarter, with 15 generating positive sales growth compared to 16 last quarter. Declines continued across several top markets, including machinery, primary metals, utility and energy, aggregates, and chemicals.

As it relates to underlying end market demand trends remained relatively mixed during the quarter.

Though with some positive signs developing.

Year over year over year trends across our top 30 in markets were relatively unchanged from last quarter.

Speaker #5: M&A sales contribution was also encouraging, with progress continuing to develop at Hydrodyne, as well as initial contribution from our early May acquisition of Iris Factory Automation.

With 15 generating positive sales growth compared to 16 last quarter.

Declines continued across several top markets, including machinery primary metals utility and energy aggregates and chemicals.

Speaker #5: Taken together, our fourth-quarter sales performance highlights solid execution combined with emerging growth tailwinds tied to our industry position and business pipeline. As it relates to underlying in-market demand, trends remained relatively mixed during the quarter.

Consistent with prior quarters declines were most pronounced across all five way mobile OEM verticals within our fluid power operations.

Speaker #5: Though with some positive signs developing. Year-over-year trends across our top 30 in-markets were relatively unchanged from last quarter, with 15 generating positive sales growth compared to 16 last quarter.

This was offset by solid demand across our technology vertical, which we estimate contributed approximately 100 basis points to our consolidated organic growth rate during the quarter.

Sales were also positive across pulp and paper fabricated metals, food and beverage and oil and gas verticals.

Speaker #5: Declines continued across several top markets including machinery, primary metals, utility and energy, aggregates, and chemicals. Consistent with prior quarters, declines were most pronounced across all highway mobile OEM verticals within our fluid power operations.

Further capital maintenance spending started to slowly pick up during the quarter within our service Center network, while project activity across the various process flow markets strengthens later in the quarter.

Neil Schrimsher: Consistent with prior quarters, declines were most pronounced across all highway mobile OEM verticals within our fluid power operations. This was offset by solid demand across our technology vertical, which we estimate contributed approximately 100 basis points to our consolidated organic growth rate during the quarter. Sales were also positive across pulp and paper, fabricated metals, food and beverage, and oil and gas verticals. Further, capital maintenance spending started to slowly pick up during the quarter within our Service Center network, while project activity across various process flow markets strengthened later in the quarter. In addition, orders in our Engineered Solutions segment increased by a high single-digit percent year over year during the quarter, adding to the positive inflection we've seen in recent quarters.

In addition orders in our engineered solutions segment increased by a high single digit percent year over year during the quarter.

Speaker #5: This was offset by solid demand across our technology vertical, which we estimate contributed approximately 100 basis points to our consolidated organic growth rate during the quarter.

Adding to the positive inflection we've seen in recent quarters.

Speaker #5: Sales were also positive across pulp and paper, fabricated metals, food and beverage, and oil and gas verticals. Further capital maintenance spending started to slowly pick up during the quarter within our service center network, while project activity across various process flow markets strengthened later in the quarter.

This includes positive growth in industrial and mobile OEM fluid power orders.

An encouraging sign following notable headwinds in this area of our business over the past year.

During fiscal 2025 reduced sales from industrial and mobile OEM fluid power customers negatively impacted our consolidated organic year over year sales growth rate by approximately 100 basis points.

Speaker #5: In addition, orders in our engineered solutions segment increased by a high single-digit percent year-over-year during the quarter. Adding to the positive inflection we've seen in recent quarters.

As well as the engineered solutions segment organic growth rate by over 400 basis points.

Overall, while end market visibility remains limited and mixed we believe the underlying backdrop improved modestly from last quarter and.

Speaker #5: This includes positive growth in industrial and mobile OEM fluid power orders. An encouraging sign following notable headwinds in this area of our business over the past year.

Neil Schrimsher: This includes positive growth in industrial and mobile OEM fluid power orders, an encouraging sign following notable headwinds in this area of our business over the past year. During fiscal 2025, reduced sales from industrial and mobile OEM fluid power customers negatively impacted our consolidated organic year-over-year sales growth rate by approximately 100 basis points, as well as the Engineered Solutions segment organic growth rate by over 400 basis points. Overall, while in-market visibility remains limited and mixed, we believe the underlying backdrop improved modestly from last quarter. In addition, based on our core indicators, including order momentum, business funnels, and what we are hearing from our customers, we believe industrial activity and customer spending behavior are starting to pick up to some degree. It is also important to highlight the positive impact our own initiatives and ongoing evolution are having.

In addition, based on our core indicators, including order momentum business funnels, and what we're hearing from our customers, we believe industrial activity and customer spending behavior are starting to pick up to some degree.

Speaker #5: During fiscal 2025, reduced sales from industrial and mobile OEM fluid power customers negatively impacted our consolidated organic year-over-year sales growth rate, by approximately 100 basis points, as well as the engineered solutions segment organic growth rate by over 400 basis points.

It's also important to highlight the positive impact of our own initiatives and ongoing evolution or having.

While our overall organic sales trends in fiscal.

2025 were muted.

Speaker #5: Overall, while in-market visibility remains limited and mixed, we believe the underlying backdrop improved modestly from last quarter. In addition, based on our core indicators— including order momentum, business funnels, and what we're hearing from our customers— we believe industrial activity and customer spending behavior are starting to pick up to some degree.

Average daily sales finished the full year down a modest 2%.

This was directionally in line with the midpoint of our initial guidance. Despite a more challenging end market backdrop that was highly influenced by persistent uncertainty tied to the U S election.

Interest rates and eventually shifts in trade policy.

The negative impact of many of our legacy manufacturing end markets was evident as reflected in the I S. M. Hitting one of the longest contractionary stretches as well as notable pressure, we experienced in OEM and machinery related verticals.

Speaker #5: It's also important to highlight the positive impact our own initiatives and ongoing evolution are having. While our overall organic sales trends in fiscal 2025 were muted, average daily sales finished the full year down a modest 2%.

Neil Schrimsher: While our overall organic sales trends in fiscal 2025 were muted, average daily sales finished the full year down a modest 2%. This was directionally in line with the midpoint of our initial guidance, despite a more challenging in-market backdrop that was highly influenced by persistent uncertainty tied to the U.S. election, interest rates, and eventually shifts in trade policy. The negative impact to many of our legacy manufacturing in-markets was evident, as reflected in the ISM hitting one of the longest contractionary stretches, as well as notable pressure we experienced in OEM and machinery-related verticals. This also followed double-digit organic compounded sales growth in the prior three-year period. Considering this context, we believe our fiscal 2025 performance showcases the more durable and differentiated growth profile we continue to shape across Applied.

Yeah.

Speaker #5: This was directionally in line with the midpoint of our initial guidance. Despite a more challenging in-market backdrop, that was highly influenced by persistent uncertainty tied to the U.S. election, interest rates, and eventually shifts in trade policy.

This also followed double digit organic compounded sales growth in the prior three year period.

Considering this context, we believe our fiscal 2025 performance showcases the more durable and differentiated growth profile, we continue to shape across applied.

Speaker #5: The negative impact to many of our legacy manufacturing in-markets was evident, as reflected in the ISM hitting one of the longest contractionary stretches as well as notable pressure we experienced in OEM and machinery-related verticals.

Of note our service Center segment benefited from ongoing sales force productivity initiatives technology investments and increased cross selling momentum, which helped balance softer MRO customer spending during the year.

In addition growth investments across our flow control and fluid power operations as well as the ongoing expansion of our automation platform have diversified our end market exposure and supported our engineered solutions segment and.

Speaker #5: This also followed double-digit organic compounded sales growth in the prior three-year period. Considering this context, we believe our fiscal 2025 performance showcases the more durable and differentiated growth profile we continue to shape across Applied.

In particular, we benefited from encouraging growth tied to data centers semiconductor manufacturing new process infrastructure.

Speaker #5: Of note, our service center segment benefited from ongoing Salesforce productivity initiatives, technology investments, and increased cross-selling momentum. Which helped balance softer MRO customer spending during the year.

Neil Schrimsher: Of note, our Service Center segment benefited from ongoing Salesforce productivity initiatives, technology investments, and increased cross-selling momentum, which helped balance softer MRO customer spending during the year. In addition, growth investments across our flow control and fluid power operations, as well as the ongoing expansion of our automation platform, have diversified our in-market exposure and supported our Engineered Solutions segment. In particular, we benefited from encouraging growth tied to data centers, semiconductor manufacturing, new process infrastructure, advanced robotic solutions, and calibration services as the year played out. This helped offset acute weakness in our legacy off-highway mobile markets and drove a return to positive segment organic growth during the fourth quarter. At the same time, we continued to expand gross margins while maintaining cost discipline in fiscal 2025, which helped drive modest EBITDA and EPS growth for the year.

Advanced Robotics solutions and calibration services as the year played out.

This helped offset acute weakness in our legacy off highway mobile markets and drove a return to positive segment organic growth during the fourth quarter.

Speaker #5: In addition, growth investments across our flow control and fluid power operations as well as the ongoing expansion of our automation platform have diversified our in-market exposure and supported our engineered solutions segment.

At the same time, we continued to expand gross margins, while maintaining cost discipline and physical 2025, which helped drive modest EBITDA and EPS growth for the year.

Speaker #5: In particular, we benefited from encouraging growth tied to data centers, semiconductor manufacturing, new process infrastructure, advanced robotic solutions, and calibration services as the year played out.

When excluding the impact from acquisitions, we achieved 10% decremental margins on low single digit organic sales decline.

This is inclusive of ongoing growth investment and inflationary pressures throughout the year.

Speaker #5: This helped offset acute weakness in our legacy off-highway mobile markets and drove a return to positive segment organic growth during the fourth quarter. At the same time, we continue to expand gross margins while maintaining cost discipline in fiscal 2025.

During the fourth quarter gross margins increased sequentially and were in line with our guidance.

As previously highlighted year over year gross margin trends were impacted by difficult prior year comparison.

Really reflecting a LIFO layer liquidation benefit last fourth quarter.

Speaker #5: Which helped drive modest EBITDA and EPS growth for the year. When excluding the impact from acquisitions, we achieved 10% decremental margins on low single-digit organic sales decline.

This fourth quarter also included higher than expected, a provisioning, which held back EBITDA margins to some degree but is expected to normalize moving forward.

Neil Schrimsher: When excluding the impact from acquisitions, we achieved 10% decremental margins on low single-digit organic sales decline. This is inclusive of ongoing growth investment and inflationary pressures throughout the year. During the fourth quarter, gross margins increased sequentially and were in line with our guidance. As previously highlighted, year-over-year gross margin trends were impacted by difficult prior year comparisons, partially reflecting a LIFO layer liquidation benefit last fourth quarter. This fourth quarter also included higher-than-expected AR provisioning, which held back EBITDA margins to some degree but is expected to normalize moving forward. Fiscal 2025 was also a year showcasing our cash generation and capital deployment capacity. We generated over $465 million of free cash, up 34% to a new record on both an absolute basis and as a percent of sales.

Speaker #5: This is inclusive of ongoing growth investment and inflationary pressures throughout the year. During the fourth quarter, gross margins increased sequentially and were in line with our guidance.

Fiscal 2025 was also a year of showcasing our cash generation and capital deployment capacity with.

We generated over 465 million of free cash up 34% to a new record on both an absolute basis and as a percent of sales.

Speaker #5: As previously highlighted, year-over-year gross margin trends were impacted by a difficult prior-year comparison, partially reflecting a LIFO layer liquidation benefit last fourth quarter.

Over the past three years, our business has generated a 40% compounded annual free cash growth.

Speaker #5: This fourth quarter also included higher-than-expected accounts receivable provisioning, which held back EBITDA margins to some degree, but is expected to normalize moving forward. Fiscal 2025 was also a year showcasing our cash generation and capital deployment capacity.

Culminated in meaningful capital deployment, including over $560 million deployed in fiscal 2025.

We accelerated capital deployment on M&A closing four transactions in fiscal 2025.

Speaker #5: We generated over 465 million of free cash, up 34%, to a new record on both an absolute basis and as a percent of sales.

Including the strategic acquisition of Hydra Dyne.

Sales from acquisitions contributed over 400 basis points of inorganic growth in fiscal 2025 up 100 basis points from the prior year.

Speaker #5: Over the past three years, our business has generated 40% compounded annual free cash growth, which has culminated in meaningful capital deployment, including over $560 million deployed in fiscal 2025.

Neil Schrimsher: Over the past three years, our business has generated 40% compounded annual free cash growth, which has culminated in meaningful capital deployment, including over $560 million deployed in fiscal 2025. We accelerated capital deployment on M&A, closing four transactions in fiscal 2025, including the strategic acquisition of Hydradyne. Sales from acquisitions contributed over 400 basis points of inorganic growth in fiscal 2025, up 100 basis points from the prior year. At the same time, we were more active with share buybacks, repurchasing a total of 656,000 shares for $153 million, as well as increasing our quarterly dividend by 24%. We also continue to invest in technology platforms, distribution centers, and growth capacity. Overall, very compelling numbers that highlight the powerful flywheel effect of our operating model and strategy, including our consistency in generating elite levels of cash and shareholder returns long term.

At the same time, we want more active with share buybacks repurchasing a total of 656000 shares for $153 million as well as increasing our quarterly dividend by 24%.

Speaker #5: We accelerated capital deployment on M&A, closing four transactions in fiscal 2025, including the strategic acquisition of Hydrodyne. Sales from acquisitions contributed over 400 basis points of inorganic growth in fiscal 2025, up 100 basis points from the prior year.

We also continued to invest in technology platforms distribution centers and growth capacity.

Overall, very compelling numbers that highlight the powerful flywheel effect of our operating model and strategy.

Including our consistency in generating elite levels of cash and shareholder returns long term.

Speaker #5: At the same time, we were more active with share buybacks, repurchasing a total of 656 thousand shares for 153 million as well as increasing our quarterly dividend by 24%.

As it relates to the evolving tariff backdrop, we continue to work closely with our suppliers as they manage through the dynamic backdrop and the impact on supply chains as expected we received a greater level of price increase notifications from our suppliers during the fourth quarter.

Speaker #5: We also continue to invest in technology platforms, distribution centers, and growth capacity. Overall, very compelling numbers that highlight the powerful flywheel effect of our operating model and strategy.

Our teams are proactively and effectively managing through this and in short we remain highly confident in our ability to execute is the tariff backdrop continues to evolve.

Speaker #5: Including our consistency in generating elite levels of cash and shareholder returns long-term. As it relates to the evolving tariff backdrop, we continue to work closely with our suppliers as they manage through the dynamic backdrop and the impact on supply chains.

As a reminder, we have limited direct exposure to procuring products outside the U S.

Neil Schrimsher: As it relates to the evolving tariff backdrop, we continue to work closely with our suppliers as they manage through the dynamic backdrop and the impact on supply chains. As expected, we received a greater level of price increase notifications from our suppliers during the fourth quarter. Our teams are proactively and effectively managing through this, and in short, we remain highly confident in our ability to execute as the tariff backdrop continues to evolve. As a reminder, we have limited direct exposure to procuring products outside the U.S. We also have a strong track record of effectively managing inflation given our technical industry position, while structural mixed tailwinds and various self-help gross margin initiatives provide strong countermeasures. The overall price impact to our sales was limited in the fourth quarter, but we expect it to slowly increase moving forward as supplier price increases take effect.

We also have a strong track record of effectively managing inflation, given our technical industry position.

<unk> structural mix tailwind and various self help gross margin initiatives.

Speaker #5: As expected, we received a greater level of price increase notifications from our suppliers during the fourth quarter. Our teams are proactively and effectively managing through this, and in short, we remain highly confident in our ability to execute as the tariff backdrop continues to evolve.

Provide strong countermeasures.

The overall price impact to ourselves was limited in the fourth quarter, but we expect it to slowly increase moving forward as supplier price increases take effect.

Next I'd like to take a moment to provide some initial thoughts on our outlook as we enter fiscal 2026.

Speaker #5: As a reminder, we have limited direct exposure to procuring products outside the US. We also have a strong track record of effectively managing inflation given our technical industry position, while structural mixed tailwinds in various self-help gross margin initiatives provide strong countermeasures.

First we are highly focused on accelerating growth.

We will remain mindful of ongoing trade and interest rate policy uncertainty, which continues to impact broader demand visibility and could remain a gating factor to growth near term.

Speaker #5: The overall price impact to our sales was limited in the fourth quarter, but we expect it to slowly increase moving forward as supplier price increases take effect.

That said when we consider the underlying fundamentals beneath this on both a secular and structural basis, we believe a productive demand environment should develop his policy clarity continues to emerge.

Speaker #5: Next, I'd like to take a moment to provide some initial thoughts on our outlook as we enter fiscal 2026. First, we're highly focused on accelerating growth.

Neil Schrimsher: Next, I would like to take a moment to provide some initial thoughts on our outlook as we enter fiscal 2026. First, we are highly focused on accelerating growth. We remain mindful of ongoing trade and interest rate policy uncertainty, which continues to impact broader demand visibility and could remain a gating factor to growth near term. That said, when we consider the underlying fundamentals beneath this on both a secular and structural basis, we believe a productive demand environment should develop as policy clarity continues to emerge. Recent U.S. trade agreements with several primary trading partners are a welcome development. In addition, the recent passage of tax reform legislation, including accelerated depreciation incentives and the potential for a more favorable U.S. interest rate policy, could recatalyze U.S. business sentiment and capital investment.

Recent U S trade agreements with several primary trading partners are a welcome development.

In addition, the recent passage of tax reform legislation.

Speaker #5: We remain mindful of ongoing trade and interest rate policy uncertainty, which continues to impact broader demand visibility. And could remain a gating factor to growth near term.

<unk> accelerated depreciation incentives and the potential for a more favorable U S interest rate policy could recapitalize U S business sentiment.

Speaker #5: That said, when we consider the underlying fundamentals beneath this, on both a secular and structural basis, we believe a productive demand environment should develop as policy clarity continues to emerge.

And capital investment.

It remains early we're encouraged to see positive sales momentum continue into early fiscal 2026 with first quarter organic sales to date up by an estimated 4% compared to prior year levels.

Speaker #5: Recent US trade agreements with several primary trading partners are a welcome development. In addition, the recent passage of tax reform legislation including accelerated depreciation incentives and the potential for a more favorable US interest rate policy could recatalyze US business sentiment and capital investment.

Secular growth tailwind also remain on firm footing.

A related exposure is high given our industry position supporting U S manufacturing and deep technical knowledge of our customers' facilities.

As macro and trade policy dynamics stabilize we believe our customers' capital investment decisions will be active given heightened considerations around reassuring.

Speaker #5: While it remains early, we're encouraged to see positive sales momentum continue into early fiscal 2026, with first-quarter organic sales to date up by an estimated 4% compared to prior-year levels.

Neil Schrimsher: While it remains early, we are encouraged to see positive sales momentum continue into early fiscal 2026, with first quarter organic sales to date up by an estimated 4% compared to prior year levels. Secular growth tailwinds also remain on firm footing. Our related exposure is high given our industry position, supporting U.S. manufacturing, and deep technical knowledge of our customers' facilities. As macro and trade policy dynamics stabilize, we believe our customers' capital investment decisions will be active given heightened considerations around reshoring. Technical service requirements will increase as break-fix MRO activity supports aged manufacturing equipment and as customers expand industrial production infrastructure across North America. Our Service Center segment is favorably positioned to benefit from these positive tailwinds. This could be particularly evident across heavy manufacturing, machinery, mining, metals, and aggregates, given their break-fix intensive nature, as well as potential incremental demand from U.S. trade and pro-growth policies.

Technical service requirements will increase as break fix MRO activity supports aged manufacturing equipment.

And as customers expand industrial production infrastructure across North America.

Speaker #5: Secular growth tailwinds also remain on firm footing. Our related exposure is high given our industry position supporting U.S. manufacturing and deep technical knowledge of our customers' facilities.

Our service Center segment is favorably positioned to benefit from these positive tailwind.

This could be particularly evident across heavy manufacturing machinery mining metals and aggregates given their break fix intensive nature as well as potential incremental demand from U S trade and pro growth policies.

Speaker #5: As macro and trade policy dynamics stabilize, we believe our customers' capital investment decisions will be active given heightened considerations around reshoring. Technical service requirements will increase as break-fix MRO activity supports aged manufacturing equipment.

In addition, we expect additional benefits from technology investments.

Optimizing salesforce productivity and new business sourcing.

Speaker #5: And as customers expand industrial production infrastructure, across North America. Our service center segment is favorably positioned to benefit from these positive tailwinds. This could be particularly evident across heavy manufacturing, machinery, mining, metals, and aggregates given their break-fix intensive nature.

We're also focused on increasing our growth with local customers through greater sales of ancillary products, such as seals material handling fluid conveyance.

Chemicals, lubricants and safety as well as providing comprehensive service and repair solutions for their production assets.

Speaker #5: As well as potential incremental demand from US trade and pro-growth policies. In addition, we expect additional benefits from technology investments, optimizing Salesforce productivity and new business sourcing.

In addition, we're constructive on the growth opportunities developing across our engineered solutions segment, considering ongoing positive order momentum and investments made in recent years.

Neil Schrimsher: In addition, we expect additional benefits from technology investments, optimizing Salesforce productivity, and new business sourcing. We are also focused on increasing our growth with local customers through greater sales of ancillary products such as seals, material handling, fluid conveyance, chemicals, lubricants, and safety, as well as providing comprehensive service and repair solutions for their production assets. In addition, we are constructive on the growth opportunities developing across our Engineered Solutions segment, considering ongoing positive order momentum and investments made in recent years. Underlying demand fundamentals are notable across key growth verticals, including technology and discrete automation, which combined represent more than 25% of segment sales today. The ongoing build-out of data center and semiconductor infrastructure is expanding the addressable market for our fluid conveyance, flow control, and robotic solutions.

Underlying demand fundamentals are notable across key growth verticals, including technology, and discrete automation, which combined represent more than 25% of segment sales today.

Speaker #5: We're also focused on increasing our growth with local customers through greater sales of ancillary products, such as seals, material handling, fluid conveyance, chemicals, lubricants, and safety, as well as providing comprehensive service and repair solutions for their production assets.

The ongoing build out of data center and semiconductor infrastructure is expanding the addressable market for our fluid conveyance flow control and robotics solutions.

Speaker #5: In addition, we're constructive on the growth opportunities developing across our engineered solutions segment considering ongoing positive order momentum, and investments made in recent years.

We have a growing business pipeline tied to them the emerging transition to electric powered fluid power systems were.

We expect to play a significant role, giving a leading engineering capabilities and supplier relationships.

Speaker #5: Underlying demand fundamentals are notable across key growth verticals, including technology and discrete automation, which together represent more than 25% of segment sales today. The ongoing build-out of data center and semiconductor infrastructure is expanding the addressable market for our fluid conveyance, flow control, and robotic solutions.

Combined with the required flow control infrastructure investments across the U S. Our engineered solutions segment is in a strong position to drive above market organic sales growth moving forward.

We also expect acquisitions to remain an important element of our growth potential and we look to build on the M&A momentum we achieved in fiscal 2025.

Speaker #5: We have a growing business pipeline tied to the emerging transition to electric-powered fluid power systems. Where we expect to play a significant role given our leading engineering capabilities and supplier relationships.

Neil Schrimsher: We have a growing business pipeline tied to the emerging transition to electric-powered fluid power systems, where we expect to play a significant role, giving our leading engineering capabilities and supplier relationships. Combined with required flow control infrastructure investments across the U.S., our Engineered Solutions segment is in a strong position to drive above-market organic sales growth moving forward. We also expect acquisitions to remain an important element of our growth potential, and we look to build on the M&A momentum we achieved in fiscal 2025. Our pipeline is developing nicely, and we expect to be active in fiscal 2026 as we continue our strategic expansion. The value of our scale, broad technical solution portfolio, engineering capabilities, strategic supplier relationships, and balance sheet capacity has never been stronger in our marketplace. Lastly, we are in a strong position to further expand margins as these growth tailwinds play out.

Our pipeline is developing nicely and we expect to be active in fiscal 2026, as we continue our strategic expansion.

The value of our scale broad technical solution portfolio.

Speaker #5: Combined with required flow control infrastructure investments across the U.S., our engineered solutions segment is in a strong position to drive above-market organic sales growth moving forward.

Engineering capabilities.

Strategic supplier relationships and balance sheet capacity has never been stronger and our marketplace.

Lastly, we're in a strong position to further expand margins as these growth tailwind play out.

Speaker #5: We also expect acquisitions to remain an important element of our growth potential, and we look to build on the M&A momentum we achieved in fiscal 2025.

Of note structural mix tailwind should strengthen as sales recover across our engineered solutions segment.

Speaker #5: Our pipeline is developing nicely, and we expect to be active in fiscal 2026 as we continue our strategic expansion. The value of our scale, broad technical solution portfolio, engineering capabilities, strategic supplier relationships, and balance sheet capacity has never been stronger in our marketplace.

And local customer accounts.

We're also have ongoing opportunities tied to pricing analytics optimizing sales processes utilizing AI.

And expanding shared services.

While synergy benefits from our hydro dine acquisition should ramp moving forward.

Combined with leveraging recent growth investments and are scaling automation platform, we remain constructive on the EBITDA margin potential developing beyond our current intermediate target of 13%.

Speaker #5: Lastly, we're in a strong position to further expand margins as these growth tailwinds play out. Of note, structural mixed tailwinds should strengthen as sales recover across our engineered solutions segment and local customer accounts.

Neil Schrimsher: Of note, structural mixed tailwinds should strengthen as sales recover across our Engineered Solutions segment and local customer accounts. We will also have ongoing opportunities tied to pricing analytics, optimizing sales processes, utilizing AI, and expanding shared services, while synergy benefits from our Hydradyne acquisition should ramp moving forward. Combined with leveraging recent growth investments and our scaling automation platform, we remain constructive on the EBITDA margin potential developing beyond our current intermediate target of 13%. At this time, I will turn the call over to Dave Wells for additional detail on our results and outlook.

At this time I will turn to call over to Dave for additional detail on our results and outlook.

Speaker #5: We're also have ongoing opportunities tied to pricing analytics, optimizing sales processes, utilizing AI, and expanding shared services while synergy benefits from our Hydrodyne acquisition should ramp moving forward.

Thanks Neil.

Reminder, before I begin has in prior quarters, we have posted a supplemental presentation to our investor site for additional reference we hope that you will find this useful as we recap our most recent quarter performance and initial fiscal 2026 guidance.

Speaker #5: Combined with leveraging recent growth investments and our scaling automation platform, we remain constructive on the EBITDA margin potential developing beyond our current intermediate targets of 13%.

Turning now to details of our financial performance in the quarter consolidated sales increased five 5% over the prior year quarter.

Acquisitions contributed 6.5 point of growth, which was partially offset by a negative 40 basis point impact from foreign currency translation had a negative 80 basis point impact from the difference in selling days.

Speaker #5: At this time, I'll turn the call over to Dave for additional detail on our results and outlook.

Speaker #6: Thanks. Thanks, Neil. Just another reminder before I begin, as in prior quarters, we have posted a supplemental presentation to our investor site for your additional reference.

Dave Wells: Thanks, Neil. Just another reminder before I begin, as in prior quarters, we have posted a supplemental presentation to our investor site for your additional reference. We hope that you will find this useful as we recap our most recent quarter performance and initial fiscal 2026 guidance. Turning now to details of our financial performance in the quarter, consolidated sales increased 5.5% over the prior year quarter. Acquisitions contributed 6.5 points of growth, which was partially offset by a negative 40 basis point impact from foreign currency translation and a negative 80 basis point impact from the difference in selling days. Netting these factors, sales increased 20 basis points year over year on an organic daily basis compared to a 3.1% decline in the third quarter.

Many of these factors.

Increased 20 basis points year over year on an organic daily basis compared to a three 1% decline in the third quarter.

Speaker #6: We hope that you'll find this useful as we recap our most recent quarter performance and initial fiscal 2026 guidance. Turning now to details of our financial performance in the quarter, consolidated sales increased 5.5% over the prior year quarter.

As it relates to pricing, we estimate the contribution of product pricing on year over year sales growth with over 100 basis points for the quarter and slightly above the contribution from last quarter.

Speaker #6: Acquisitions contributed 6.5 points of growth, which was partially offset by a negative 40 basis point impact from foreign currency translation and a negative 80 basis point impact from the difference in selling days.

Okay.

Moving to consolidated gross margin performance as highlighted on page seven of the deck gross margin of 36% was down nine basis points compared to the prior year level up 37%, but was directly in line with our guidance and up 15 basis points sequentially.

Speaker #6: Netting these factors, sales increased 20 basis points year-over-year on organic daily basis, compared to a 3.1% decline in the third quarter. As it relates to pricing, we estimate the contribution of product pricing on year-over-year sales growth was over 100 basis points for the quarter and slightly above the contribution from last quarter.

During the quarter, we recognized LIFO expense of $2 $9 million, which was up slightly from the third quarter.

Dave Wells: As it relates to pricing, we estimate the contribution of product pricing on year-over-year sales growth was over 100 basis points for the quarter and slightly above the contribution from last quarter. Moving to consolidated gross margin performance, as highlighted on page seven of the deck, gross margin of 30.6% was down nine basis points compared to the prior year level of 30.7%, but was directionally in line with our guidance and up 15 basis points sequentially. During the quarter, we recognized LIFO expense of $2.9 million, which was up slightly from the third quarter. In the prior year fourth quarter, we recognized LIFO expense of only $0.3 million, which, as you may recall, was favorably impacted by a layer liquidation benefit. On an F basis, this resulted in an unfavorable 21 basis point year-over-year impact on gross margins during the quarter, which was directionally in line with our guidance.

In the prior year fourth quarter, we recognized LIFO expense of only $3 million, which as you may recall was favorably impacted by a rare liquidation benefit.

Speaker #6: Moving to consolidated gross margin performance, as highlighted on page seven of the deck, gross margin of 30.6% was down nine basis points compared to the prior year level of 30.7%, but was directly in line with our guidance and up 15 basis points sequentially.

On that basis. This resulted in unfavorable 21 basis point year over year impact on gross margins during the quarter, which was directly in line with our guidance.

Excluding the adverse impact of LIFO gross margins increased over the prior year, reflecting positive mix contribution from our recent hydro dine acquisition as well as ongoing channel execution and benefits from our margin initiatives.

Speaker #6: During the quarter, we recognized LIFO expense of 2.9 million dollars, which was up slightly from the third quarter. In the prior year fourth quarter, we recognized LIFO expense of only 0.3 million dollars, which as you may recall, was favorably impacted by a layer liquidation benefit.

This was partially offset by mix headwinds from lower sales across local accounts as well as tougher comps against prior year fourth quarter mix tied to higher margin solutions sales.

Speaker #6: On an F basis, this resulted in an unfavorable 21 basis point year-over-year impact on gross margins during the quarter, which was directly in line with our guidance.

Price cost trends were relatively neutral in the quarter.

As it relates to operating cost selling distribution and administrative expenses increased 10, 5% compared to prior levels.

Speaker #6: Excluding the adverse impact of LIFO, gross margins increased over the prior year, reflecting positive mixed contributions from our recent Hydrodyne acquisition, as well as ongoing channel execution and benefits from our margin initiatives.

Dave Wells: Excluding the adverse impact of LIFO, gross margins increased over the prior year, reflecting positive mixed contribution from our recent Hydradyne acquisition, as well as ongoing channel execution and benefits from our margin initiatives. This was partially offset by mixed headwinds from lower sales across local accounts, as well as tougher comps against prior year fourth quarter mix tied to higher margin solution sales. Price cost trends were relatively neutral in the quarter. As it relates to our operating cost, selling distribution and administrative expenses increased 10.5% compared to prior levels. On an organic cost and currency basis, SDNA expense was up a modest 0.3% year over year. SG&A expense included an unfavorable $4 million or 2% year-over-year impact from higher AR provisioning. We view the AR provisioning impact as more timely related and expected to normalize moving forward.

On an organic constant currency basis, SG&A expense was up a modest <unk>, 3% year over year.

SG&A expense included an unfavorable $4 million or 2% year over year impact from higher provisioning.

Speaker #6: This was partially offset by mixed headwinds from lower sales across local accounts, as well as tougher comps against the prior year's fourth quarter mix tied to higher-margin solution sales.

We view the provisioning impact is more timing related and expected to normalize moving forward.

Speaker #6: Price cost trends were relatively neutral in the quarter. As it relates to our operating cost, selling distribution and administrative expenses increased 10.5% compared to prior levels.

Our provisioning requirement it can fluctuate quarter to quarter based on various factors.

In addition, the fourth quarter of last year included a provision benefit tied to recoveries achieved reflecting our ongoing working capital initiatives and collection efforts.

Speaker #6: On an organic cost and currency basis, SD&A expense was up a modest 0.3% year-over-year. SD&A expense included an unfavorable $4 million, or 2%, year-over-year impact from higher AR provisioning.

As far as the context.

DSO trends remained favorable and relatively unchanged from last year and our air provision as a percentage of sales for fiscal 2025 was at the midpoint of our recent historical range.

Speaker #6: We view the AR provisioning impact as more timing-related and expect it to normalize moving forward. Our provisioning requirements can fluctuate quarter to quarter based on various factors.

SG&A expense. This quarter also includes net unfavorable 80 basis point impact from higher deferred compensation costs compared to the prior year.

Dave Wells: Our provisioning requirements can fluctuate quarter to quarter based on various factors. In addition, the fourth quarter of last year included an AR provision benefit tied to recoveries achieved, reflecting our ongoing working capital initiatives and collection efforts. As further context, our DSO trends remain favorable and relatively unchanged from last year, and our AR provision as a percentage of sales for fiscal 2025 was at the midpoint of our recent historical range. SG&A expense this quarter also includes an unfavorable 80 basis point impact from higher deferred compensation costs compared to the prior year. As a reminder, changes in deferred compensation costs in SG&A are primarily driven by market values of investments tied to our non-qualified deferred compensation plan. There's a corresponding offset to these fluctuations in other income and expense, which we report below net interest and incomes.

Speaker #6: In addition, the fourth quarter of last year included an AR provision benefit tied to recoveries achieved, reflecting our ongoing working capital initiatives and collection efforts.

As a reminder, changes in deferred compensation costs and SG&A are primarily driven by market values of investments tied to our nonqualified deferred compensation plan.

Speaker #6: As further context, our DFO trends remain favorable and relatively unchanged from last year and our AR provision as a percentage of sales for fiscal 2025 was at the midpoint of our recent historical range.

There is a corresponding offset to these fluctuations and other income and expense, which we report below net interest income.

When normalizing for the AAR provision impact and higher deferred compensation costs in the quarter, we estimate SG&A expense on an organic constant currency basis, but declined by over 2% year over year, reflecting benefits from ongoing efficiency gains and solid cost control.

Speaker #6: SD&A expense this quarter also includes an unfavorable 80 basis point impact from higher deferred compensation costs compared to the prior year. As a reminder, changes in deferred compensation costs and SD&A are primarily driven by market values of investments tied to our non-qualified deferred compensation plan.

Overall, encouraging sales growth trends and stable underlying gross margin performance were masked by the unfavorable prior year, LIFO comparison and higher provisioning in the quarter.

Speaker #6: There's a corresponding offset to these fluctuations in other income and expense, which we report below net interest and income. When normalizing for the AR provision impact and higher deferred compensation costs in the quarter, we estimate SD&A expense on an organic constant currency basis would have declined by over 2% year-over-year, reflecting benefits from ongoing efficiency gains and solid cost control.

This resulted in EBITDA margin of 12, 5% declining 73 basis points from the prior year level up 13, 2%.

Dave Wells: When normalizing for the AR provision impact and higher deferred compensation costs in the quarter, we estimate SG&A expense on an organic cost and currency basis would have declined by over 2% year over year, reflecting benefits from ongoing efficiency gains and solid cost control. Overall, encouraging sales growth trends and stable underlying gross margin performance were masked by the unfavorable prior year LIFO comparison and higher AR provisioning in the quarter. This resulted in an EBITDA margin of 12.5%, declining 73 basis points from the prior year level of 13.2%. This was modestly below our fourth quarter guidance of 12.6% to 12.8%, primarily reflecting the higher than anticipated AR provision in the quarter, which was 20 to 30 basis points unfavorable to our guidance. Normalizing the AR provision and excluding the impact of LIFO, EBITDA margins would have been relatively unchanged year over year.

This was modestly below our fourth quarter guidance of 12, six to 12, 8%, primarily reflecting the higher then it takes but anticipated a provision in the quarter, which was 20 to 30 basis points unfavorable to our guidance.

Speaker #6: Overall, encouraging sales growth trends and stable underlying gross margin performance were masked by the unfavorable prior year LIFO comparison and higher AR provisioning in the quarter.

Normalized NIE, our provision and excluding the impact of LIFO EBITDA margins would have been relatively unchanged year over year.

In addition reported EBITDA of $153 million was at the high end of our guidance range, reflecting stronger sales trends in the quarter.

Speaker #6: This resulted in an even margin of 12.5%, declining 73 basis points from the prior year level of 13.2%. This was modestly below our fourth quarter guidance of 12.6% to 12.8%, primarily reflecting the higher-than-anticipated AR provision in the quarter.

Reported earnings per share of $2 80 was up five 9% from prior year EPS of $2.64 and exceeded the high end of our guidance by nearly 5%.

Speaker #6: Which was 20 to 30 basis points unfavorable to our guidance. Normalizing the AR provision and excluding the impact of LIFO, even a margin would have been relatively unchanged year over year.

On a year over year basis, EPS benefited from a lower effective tax rate as well as a reduced share count tied to our buyback activity.

Partially offset by higher interest and other expense on a net basis.

Speaker #6: In addition, reported EBITDA of $153 million was at the high end of our guidance range, reflecting stronger sales trends in the quarter. Reported earnings per share of $2.80 was up 5.9% from prior year EPS of $2.64 and exceeded the high end of our guidance by nearly 5%.

Dave Wells: In addition, reported EBITDA of $153 million was at the high end of our guidance range, reflecting stronger sales trends in the quarter. Reported earnings per share of $2.80 was up 5.9% from prior year EPS of $2.64 and exceeded the high end of our guidance by nearly 5%. On a year-over-year basis, EPS benefited from a lower effective tax rate, as well as a reduced share count tied to our buyback activity. This was partially offset by higher interest and other expense on an F basis. Turning now to performance by segment, as highlighted on slides 8 and 9 of the presentation, sales in our Service Center segment decreased 0.4% year over year on an organic daily basis.

Turning now to performance by segment as highlighted on slides eight and nine of the presentation sales in our service Center segment decreased 4% year over year on an organic daily basis.

This excludes 30 basis points of contribution from acquisitions.

The 80 basis point impact from the difference in selling days and a negative 60 basis point impact from foreign currency translation.

Speaker #6: On a year-over-year basis, EPS benefited from a lower effective tax rate, as well as a reduced share count tied to our buyback activity. This was partially offset by higher interest and other expenses on an F basis.

The organic sales decline was primarily driven by muted MRO spending early in the quarter, particularly across our international operations.

That said the trend improved from last quarter's organic decline of one 6%.

Speaker #6: Turning now to performance by segment, as highlighted on slides eight and nine of the presentation, sales in our service center segment decreased 0.4% year-over-year on an organic daily basis.

In addition on a sequential basis segment sales per day increased one 5% from the third quarter, which was above normal seasonal patterns for the second straight quarter.

Speaker #6: This excludes 30 basis points of contribution from acquisitions, a negative 80 basis point impact from the difference in selling days, and a negative 60 basis point impact from foreign currency translation.

Dave Wells: This excludes 30 basis points of contribution from acquisitions, a negative 80 basis point impact from the difference in selling days, and a negative 60 basis point impact from foreign currency translation. The organic sales decline was primarily driven by muted MRO spending early in the quarter, particularly across our international operations. That said, the trend improved from last quarter's organic decline of 1.6%. In addition, on a sequential basis, segment sales per day increased 1.5% from the third quarter, which was above normal seasonal patterns for the second straight quarter. Sales growth remained positive across our national account base, partially reflecting benefits from our internal initiatives, including Salesforce investments and cross-selling actions. Segment trends were also supported by growth across fluid power MRO sales and our consumable vending and VMI offerings.

Sales growth remained positive across our national account base.

Reflecting benefits from our internal initiatives, including sales force investments and cross selling actions.

Speaker #6: The organic sales decline was primarily driven by muted MRO spending early in the quarter, particularly across our international operations. That said, the trend improved from last quarter's organic decline of 1.6%.

Segment trends were also supported by growth across fluid power of MRO sales and our consumable pending and BMI offerings.

Segment EBITDA decreased eight three percentage over the prior year, while segment EBITDA margin of 13, 6% was down 100 basis points.

Speaker #6: In addition, on a sequential basis, segment sales per day increased 1.5% from the third quarter, which was above normal seasonal patterns for the second straight quarter.

The year over year decline, primarily reflects the unfavorable our provisioning as previously discussed.

Speaker #6: Sales growth remained positive across our national account base, partially reflecting benefits from our internal initiatives including Salesforce investments and cross-selling actions. Segment trends were also supported by growth across fluid power MRO sales and our consumable vending and VMI offerings.

Which had an approximate 300 basis point negative impact to segment EBITDA growth.

And a 50 basis point negative impact to segment EBITDA margin in the quarter.

In addition, LIFO expense was approximately 100 basis points unfavorable to segment EBITDA growth in the quarter or 15 basis points to EBITDA margin.

Speaker #6: Segment EBITDA decreased 8.3% over the prior year, while segment EBITDA margin of 13.6% was down 100 basis points. The year-over-year decline primarily reflects the unfavorable AR provisioning as previously discussed, which had an approximate 300 basis point negative impact to segment EBITDA growth, and a 50 basis point negative impact to segment EBITDA margin in the quarter.

Dave Wells: Segment EBITDA decreased 8.3% over the prior year, while segment EBITDA margin of 13.6% was down 100 basis points. The year-over-year decline primarily reflects the unfavorable AR provisioning as previously discussed, which had an approximate 300 basis point negative impact to segment EBITDA growth and a 50 basis point negative impact to segment EBITDA margin in the quarter. In addition, LIFO expense was approximately 100 basis points unfavorable to segment EBITDA growth in the quarter or 15 basis points to EBITDA margin, primarily reflecting the prior year layer liquidation benefit as previously discussed. Lastly, as highlighted earlier, higher deferred compensation costs, which are reported in our Service Center segment, had an unfavorable 20 basis point year-over-year impact to segment EBITDA margin.

Primarily reflecting the prior year their liquidation benefit as previously discussed.

Lastly, as highlighted earlier.

Higher deferred compensation costs, which are reported in our service center segment, and an unfavorable 20 basis point year over year impact to segment EBITDA margin.

On a full year basis, our service Center segment delivered solid margin and cost control performance with operating expense per day down 1% on organic basis, and EBITDA margins up modestly against the low single digit sales decline.

Speaker #6: In addition, LIFO expense was approximately 100 basis points unfavorable to segment EBITDA growth in the quarter or 15 basis points to EBITDA margin. Primarily reflecting the prior year layer liquidation benefit as previously discussed.

Within our engineered solutions segment.

Increased 27% over the prior year quarter with acquisitions contributing a positive 19 seven points of this increase.

Speaker #6: Lastly, as highlighted earlier, higher deferred compensation costs, which are reported in our service center segment, had an unfavorable 20 basis point year-over-year impact to segment EBITDA margin.

On an organic daily basis accounting for the difference in selling days segment sales increased one 8% over the prior year.

Speaker #6: On a four-year basis, our service center segment delivered solid margin and cost control performance, with operating expense per day down 1% on an organic basis and EBITDA margins up modestly against the low single-digit sales decline.

Dave Wells: On a full-year basis, our Service Center segment delivered solid margin and cost control performance, with operating expense per day down 1% on an organic basis and EBITDA margins up modestly against the low single-digit sales decline. Within our Engineered Solutions segment, sales increased 20.7% over the prior year quarter, with acquisitions contributing a positive 19.7 points of this increase. On an organic daily basis, accounting for the difference in selling days, segment sales increased 1.8% over the prior year. The year-over-year increase was primarily driven by solid growth across our fluid power pneumatic and conveyance solutions, supporting the technology vertical, as well as growth in our flow control business. In addition, organic sales in our automation operations increased by a mid-single-digit percent over the prior year quarter.

The prior year.

He's made year over year increase was primarily driven by solid growth across our fluid power pneumatic conveying solutions supporting the technology vertical as well as growth in our flow control business.

Speaker #6: Within our engineered solutions segment, sales increased 20.7% over the prior year quarter, with acquisitions contributing a positive 19.7 points of this increase. On an organic daily basis, accounting for the difference in selling days, segment sales increased 1.8% over the prior year.

In addition, organic sales in our automation operations increased by mid single digit percent over the prior year quarter.

Partially aided by easier prior year comparisons the segment's underlying performance improved noticeably with two year stacked trends improving across all primary business units, reflecting strong execution on our recent order strength and firmer demand.

Speaker #6: The prior year-over-year increase was primarily driven by solid growth across our fluid power, pneumatic and conveyance solutions supporting the technology vertical, as well as growth in our flow control business.

The benefit from improved automation growth performance was partially offset by ongoing weakness across mobile fluid power OEM markets. Those are year over year decline eased from last quarter.

Speaker #6: In addition, organic sales in our automation operations increased by a mid-single-digit percent over the prior year quarter. While partially aided by easier prior year comparisons, the segment's underlying sales performance improved noticeably with two-year stack trends improving across all primary business units reflecting strong execution on recent order strength and firmer demand.

Segment, EBITDA increased 13, 5% over the prior year, reflecting the impact from our hydro dine acquisition as well as solid cost management.

Dave Wells: While partially aided by easier prior year comparisons, the segment's underlying sales performance improved noticeably, with two-year stack trends improving across all primary business units, reflecting strong execution on recent order strength and firmer demand. The benefit from improved automation growth performance was partially offset by ongoing weakness across mobile fluid power OEM markets, though the year-over-year decline eased from last quarter. Segment EBITDA increased 13.5% over the prior year, reflecting impact from our Hydradyne acquisition, as well as solid cost management. Segment EBITDA margin of 14.8% was down roughly 90 basis points from prior year levels, though influenced by several dynamics. First, the prior year fourth quarter segment EBITDA margin of nearly 16% was record high and benefited from unusually strong mixed tailwinds from higher Engineered Solutions segment sales. As a reminder, Hydradyne currently flows through at a lower EBITDA margin relative to the segment's average.

Segment EBITDA margin of 14, 8% was down roughly 90 basis points from prior year levels.

Influenced by several dynamics.

The prior year fourth quarter segment EBITDA margin of nearly 16% was record high and benefited from the unusually strong mix tailwind from higher engineered solution sales.

Speaker #6: The benefit from improved automation growth performance was partially offset by ongoing weakness across mobile, fluid power OEM markets. Though the year-over-year decline eased from last quarter.

As a reminder, Hydra dyne currently flows through at a lower EBITDA margin relative to the segment average.

Speaker #6: Segment EBITDA increased 13.5% over the prior year, reflecting the impact from our Hydrodyne acquisition, as well as solid cost management. Segment EBITDA margin of 14.8% was down roughly 90 basis points from prior year levels, though influenced by several dynamics.

This represented a 60 basis point year over year headwind in the quarter, while LIFO was unfavorable by 30 basis points over the prior year.

I would note that the Hydra dyne EBITDA margin mix impact improved from last quarter with further positive direction expect that moving forward as we continue to work through our integration and synergy plans.

Speaker #6: First, the prior year fourth quarter segment EBITDA margin of nearly 16% was record high, and benefited from unusually strong mixed tailwinds from higher engineered solution sales.

Of note <unk> EBITDA contribution in the quarter was up over 30% sequentially from the third quarter.

Speaker #6: As a reminder, Hydrodyne currently flows through at a lower EBITDA margin relative to the segment's average. This represented a 60 basis point year-over-year headwind in the quarter, while LIFO was unfavorable by 30 basis points over the prior year.

Care to a 12% sequential increase in sales contribution.

On a full year basis, our engineered solutions segment delivered solid underlying margin and cost control performance in fiscal 2025, excluding the impact from acquisitions segment operating expense per day was down 5%.

Dave Wells: This represented a 60 basis point year-over-year headwind in the quarter, while LIFO was unfavorable by 30 basis points over the prior year. I will note that the Hydradyne EBITDA margin mix impact improved from last quarter, with further positive direction expected moving forward as we continue to work through our integration and synergy plans. Of note, Hydradyne's EBITDA contribution in the quarter was up over 30% sequentially from the third quarter, compared to a 12% sequential increase in sales contribution. On a four-year basis, our Engineered Solutions segment delivered solid underlying margin and cost control performance in fiscal 2025, excluding the impact from acquisitions, segment operating expense per day was down 5%, and segment EBITDA margins increased approximately 40 basis points against a 4% organic decline in average daily sales.

Speaker #6: I will note that the Hydrodyne EBITDA margin mix impact improved from last quarter, with further positive direction expected moving forward as we continue to work through our integration, and synergy plans.

Segment, EBITDA margins increased approximately 40 basis points.

Against a 4% organic decline in average daily sales.

Speaker #6: Of note, Hydrodyne's EBITDA contribution in the quarter was up over 30% sequentially from the third quarter, compared to a 12% sequential increase in sales contribution.

Moving to our cash flow performance cash generated from operating activities. During the fourth quarter was $147 million, while free cash flow totaled $138 $2 million or 128% of net income.

Speaker #6: On a four-year basis, our engineered solutions segment delivered solid underlying margin and cost control performance in fiscal 2025. Excluding the impact from acquisitions, segment operating expense per day was down 5%.

For the full year, we generated free cash of 465 $2 million or 118% of net income.

Speaker #6: And segment EBITDA margins increased approximately 40 basis points, against a 4% organic decline in average daily sales. Moving to our cash flow performance, cash generated from operating activities during the fourth quarter was 147 million dollars, while free cash flow totaled 138.2 million dollars, or 128% of net income.

It's about 34%, reflecting more modest working capital investment compared to the prior year as well as ongoing progress with internal initiatives and our enhanced margin profile.

Dave Wells: Moving to our cash flow performance, cash generated from operating activities during the fourth quarter was $147 million, while free cash flow totaled $138.2 million, or 128% of net income. For the full year, we generated free cash of $465.2 million, or 118% of net income. This was up 34%, reflecting more modest working capital investment compared to the prior year, as well as ongoing progress with internal initiatives and our enhanced marketing profile. From a balance sheet perspective, we ended June with approximately $388 million of cash on hand and net leverage at 0.3 times EBITDA, which is above the prior year level of 0.2 times and down slightly from last quarter. In summary, our balance sheet is in a solid position to support our capital deployment initiatives moving forward.

From a balance sheet perspective, we ended June with approximately $388 million of cash on hand, and net leverage at three times EBITDA, which is above the prior year level of two times and down slightly from last quarter.

Speaker #6: For the full year, we generated free cash of 465.2 million dollars, or 118% of net income. This was up 34% reflecting more modest working capital investment compared to the prior year, as well as ongoing progress with internal initiatives and our enhanced margin profile.

In summary, our balance sheet is in a solid position to support our capital deployment initiatives moving forward.

Turning now to our outlook, which is detailed on page 12 of the presentation. We are establishing full year fiscal 2026 guidance.

EPS in the range of $10 to $10 75.

Speaker #6: From a balance sheet perspective, we ended June with approximately 388 million dollars of cash on hand, and net leverage at 0.3 times EBITDA. Which is above the prior year level of 0.2 times, and down slightly from last quarter.

Based on assumptions for total sales, increasing 4% to 7% <unk>.

Including 1% to 4% growth on an organic basis as.

As well as EBIT margins up 12 to 12, 5%.

Speaker #6: In summary, our balance sheet is in a solid position to support our capital deployment initiatives moving forward. Turning now to our outlook, which is detailed on page 12 of the presentation, we are establishing full-year fiscal 2026 guidance, including EPS in a range of $10.00 to $10.75 based on assumptions for total sales increasing 4% to 7%, including 1% to 4% growth on an organic basis, as well as EBITDA margins of 12.2% to 12.5%.

Our outlook takes into consideration sales trends through mid August as well as ongoing economic uncertainty.

At the midpoint of guidance, we assume ongoing tariff and interest rate uncertainty continues to impact end market demand through the first half of the year, followed by a more favorable underlying end market demand trends in the second half of the year.

Dave Wells: Turning to our outlook, which is detailed on page 12 of the presentation, we are establishing full-year fiscal 2026 guidance, including EPS in the range of $10 to $10.75, based on assumptions for total sales increasing 4% to 7%, including 1% to 4% growth on an organic basis, as well as EBITDA margins of 12.2% to 12.5%. Our outlook takes into consideration sales trends through mid-August, as well as ongoing economic uncertainty. At the midpoint of guidance, we assume ongoing tariff and interest rate uncertainty continues to impact end market demand through the first half of the year, followed by more favorable underlying end market demand trends in the second half of the year. Guidance also assumes 150 to 200 basis points of year-over-year sales contribution from pricing, as well as ongoing inflationary headwinds and growth investments.

Guidance also assumes 150 to 200 basis points of year over year sales contribution from pricing as well as ongoing inflationary headwinds and growth investments.

We expect inorganic growth from completed acquisitions to contribute approximately 300 basis points to sales growth in fiscal 2026 include.

Speaker #6: Our outlook takes into consideration sales trends through mid-August, as well as ongoing economic uncertainty. At the midpoint of guidance, we assume ongoing tariff and interest rate uncertainty continues to impact end-market demand, through the first half of the year, followed by more favorable underlying end-market demand trends in the second half of the year.

Including approximately 600 basis points in the first half primarily reflecting two quarters of contribution from hydro dime, which closed at the end of December 2025.

Guidance does not assume contributions from future acquisitions or share buybacks.

Speaker #6: Guidance also assumes 150 to 200 basis points of year-over-year sales contribution from pricing, as well as ongoing inflationary headwinds and growth investments. We expect inorganic growth from completed acquisitions to contribute approximately 300 basis points to sales growth in fiscal 2026, including approximately 600 basis points in the first half, primarily reflecting two quarters of contribution from Hydrodyne, which closed at the end of December 2025.

In addition, based on quarter to date sales trends through mid August and prior year comparisons for the remainder of the quarter as well as ongoing trade policy uncertainty. We currently project fiscal first quarter organic daily sales to increase by a low single digit percent over the prior year quarter.

Dave Wells: We expect inorganic growth and completed acquisitions to contribute approximately 300 basis points to sales growth in fiscal 2026, including approximately 600 basis points in the first half, primarily reflecting two quarters of contribution from Hydradyne, which closed at the end of December 2025. Guidance does not assume contribution from future acquisitions nor share buybacks. In addition, based on quarter-to-date sales trends through mid-August and prior year comparisons for the remainder of the quarter, as well as ongoing trade policy uncertainty, we currently project fiscal first quarter organic daily sales to increase by a low single-digit percent over the prior year quarter. Our guidance also assumes fiscal first quarter EBITDA margins between 11.9% to 12.1%. From a margin and cost perspective, guidance assumes ongoing inflationary pressures and growth investments, as well as $14 million to $18 million of LIFO expense.

Our guidance also assumes fiscal first quarter EBIT margin between 11 nine to 12, 1%.

From a margin cost perspective guidance assumes ongoing inflationary pressures and growth investments.

Speaker #6: Guidance does not assume contribution from future acquisitions nor share buybacks. In addition, based on quarter-to-date sales trends through mid-August and prior year comparisons for the remainder of the quarter, as well as ongoing trade policy uncertainty, we currently project fiscal first quarter organic daily sales to increase by a low single-digit percent over the prior year quarter.

As well as 14 million to $18 million of LIFO expense.

We expect stronger relative year over year EBITDA margin trends in the second half of the year, reflecting greater expense, leveraging Hydra dyne synergy progress and easier comparisons.

Lastly, we expect free cash generation to remain strong in fiscal 2026, but the potentially trend lower year over year, reflecting greater working capital investment tied to potentially stronger demand and growth opportunities.

Speaker #6: Our guidance also assumes fiscal first quarter EBITDA margins between 11.9% and 12.1%. From a margin and cost perspective, guidance assumes ongoing inflationary pressures and growth investments, as well as $14 million to $18 million of LIFO expense.

In addition, we expect ongoing organic investments supporting our strategy and technology investments with capital expenditures targeted in the $30 million to $35 million range for fiscal 2026.

Speaker #6: We expect stronger relative year-over-year EBITDA margin trends in the second half of the year, reflecting greater expense leveraging, Hydrodyne synergy progress, and easier comparisons.

Dave Wells: We expect stronger relative year-over-year EBITDA margin trends in the second half of the year, reflecting greater expense leveraging, Hydradyne synergy progress, and easier comparisons. Lastly, we expect free cash generation to remain strong in fiscal 2026, but to potentially trend lower year over year, reflecting greater working capital investment tied to potentially stronger demand and growth opportunities. In addition, we expect ongoing organic investments supporting our strategy and technology investments, with capital expenditures targeted in the $30 million to $35 million range for fiscal 2026. With that, I will now turn the call back over to Neil for some final comments.

With that I'll now turn the call back over to Neil for some final comments.

So to wrap up fiscal 2025 was another meaningful year for applied we executed well in a slower demand environment, while positioning the company for long term success through several acquisitions and internal growth investments.

Speaker #6: Lastly, we expect free cash generation to remain strong in fiscal 2026, but to potentially trend lower year-over-year, reflecting greater working capital investment tied to potentially stronger demand and growth opportunities.

Speaker #6: In addition, we expect ongoing organic investments supporting our investments, with capital expenditures targeted in the 30 to 35 million dollar range, for fiscal 2026.

The year culminated in significant capital deployment enhancing our long term earnings power, while continuing to drive strong shareholder returns are.

Speaker #6: strategy and technology

Our market cap today, it exceeds $10 billion and we've delivered total shareholder returns that have more than doubled primary market benchmarks over the past three and five years.

Speaker #6: With that, I will now turn the call back over to Neil for some final comments.

Speaker #7: So to wrap up, fiscal 2025 was another meaningful year for Applied. We executed well in a slower demand environment, while positioning the company for long-term success.

Neil Schrimsher: To wrap up, fiscal 2025 was another meaningful year for Applied. We executed well in a slower demand environment while positioning the company for long-term success through several acquisitions and internal growth investments. The year culminated in significant capital deployment, enhancing our long-term earnings power while continuing to drive strong shareholder returns. Our market cap today exceeds $10 billion, and we've delivered total shareholder returns that have more than doubled primary market benchmarks over the past three and five years. A strong testament to the power of the Applied team and our differentiated strategy. Moving into fiscal 2026, we're encouraged by recent sales momentum, which could accelerate given the underpinnings of various secular tailwinds and deferred customer spending the past 18 months. That said, we're taking a prudent approach to our initial outlook, pending greater clarity on trade policy, interest rates, and broader macro conditions.

A strong testament to the power of the applied team and our differentiated strategy.

Moving into fiscal 2026, we are encouraged by recent sales momentum, which could accelerate giving the underpinnings of various secular tailwind and deferred customer spending the past 18 months.

Speaker #7: Through several acquisitions and internal growth investments, the year culminated in significant capital deployment, enhancing our long-term earnings power while continuing to drive strong shareholder returns.

That said, we're taking a prudent approach to our initial outlook pending greater clarity on trade policy interest rates and broader macro conditions.

Speaker #7: Our market cap today exceeds $10 billion, and we've delivered total shareholder returns that have more than doubled primary market benchmarks over the past three and five years.

Our track record shows we can manage through various macro and trade scenarios as they develop.

Speaker #7: A strong testament to the power of the Applied team, and our differentiated strategy. Moving into fiscal 2026, we're encouraged by recent sales momentum, which could accelerate given the underpinnings of various secular tailwinds, and deferred customer spending the past 18 months.

And have company specific growth and margin tailwind that could strengthen into fiscal 2026.

In addition, we expect to remain active in M&A share buybacks and dividend growth.

And lastly, our technical industry position.

Speaker #7: That said, we're taking a prudent approach to our initial outlook, pending greater clarity on trade policy, interest rates, and broader macro conditions. Our track record shows we can manage through various macro and trade scenarios, as they develop.

Manufacturing domain expertise and aligned strategy provide a compelling long term growth and margin expansion opportunity as various secular and structural tailwind continue to develop across the U S industrial economy.

Neil Schrimsher: Our track record shows we can manage through various macro and trade scenarios as they develop and have company-specific growth and margin tailwinds that could strengthen into fiscal 2026. In addition, we expect to remain active in M&A, share buybacks, and dividend growth. Lastly, our technical industry position, manufacturing domain expertise, and aligned strategy provide a compelling long-term growth and margin expansion opportunity as various secular and structural tailwinds continue to develop across the U.S. industrial economy. We believe this backdrop, combined with our compounding cash generation algorithm and balance sheet capacity, support double-digit compounded earnings and dividend growth long term. We look forward to building on our performance in fiscal 2026 and beyond as our evolution continues to unfold. With that, we'll open up the lines for your questions.

Speaker #7: And have companies-specific growth and margin tailwinds, that could strengthen into fiscal 2026. In addition, we expect to remain active in M&A, share buybacks, and dividend growth.

We believe this backdrop combined combined with our compounding cash generation algorithm and balance sheet capacity support double digit compounded earnings and dividend growth long term.

We look forward to building on our performance in fiscal 2026 and beyond as our evolution continues to unfold.

Speaker #7: And lastly, our technical industry position, manufacturing domain expertise, and aligned strategy provide a compelling long-term growth and margin expansion opportunity as various secular and structural tailwinds continue to develop.

With that we'll open up the lines for your questions.

Thank you we will now begin the question and answer session. If you would like to ask a question. Please pick up your handset and press star followed by the number one on your telephone keypad.

Speaker #7: Across the U.S. industrial economy, we believe this backdrop, combined with our compounding cash generation algorithm and balance sheet capacity, supports double-digit compounded earnings and dividend growth long-term.

You would like to withdraw your question from the queue Press Star one again.

As a reminder, if at anytime you need to reach an operator, Please press star and he ran well pause for just a moment to compile the Q&A roster.

Speaker #7: We look forward to building on our performance in fiscal 2026 and beyond, as our evolution continues to unfold. With that, we'll open up the lines for your questions.

Yes.

Okay.

Your first question comes from the line of Christopher Glynn with Oppenheimer.

Yeah.

Speaker #3: Thank you. We will now begin the question and answer session. If you would like to ask a question, please pick up your handset and press star followed by the number one on your telephone keypad.

Conference Operator: Thank you. We will now begin the question and answer session. If you would like to ask your question, please pick up your handset and press star followed by the number one on your telephone keypad. If you would like to withdraw your question from the queue, press star one again. As a reminder, if at any time you need to reach an operator, please press star zero. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Christopher Glynn with Oppenheimer.

Thanks, Good morning.

I had a couple just first on hydro Diane talked about 12% sequential sales growth and 30%.

Speaker #3: If you would like to withdraw your question from the queue, press star one again. As a reminder, if at any time you need to reach an operator, please press star zero.

EBIT.

Yeah, I don't know if that reflected integration costs that you incurred in the third quarter, that's diminished in the fourth or just wanted to dimensionalize that a little bit.

Speaker #3: We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Christopher Glynn with Oppenheimer.

I think it's a combination.

Relatively similar integration costs, I think about Q3 versus Q4, Chris.

What it really points to is the you know kind of the leverage that we saw on the DNA flowing through to EBITDA.

Speaker #7: Thanks. Good morning. Had a couple just first on Hydrodyne, talked about 12% sequential sales growth and 30% EBITDA I don't know if that reflected integration costs that you incurred in the third quarter that diminished in the fourth, or just wanted to dimensionalize that a little bit.

Christopher Glynn: Thanks. Good morning. I had a couple. First on Hydradyne, talked about 12% sequential sales growth and 30% EBITDA. I do not know if that reflected integration costs that you incurred in the third quarter that diminished in the fourth, or just wanted to dimensionalize that a little bit.

The stronger margin performance as you know, obviously, a contributing factor there as well as you know very pleased with the progress. We've made to date in terms of you know quicker realization of synergy benefits. So we're actually ahead of where we anticipated at this point in terms of synergy realization and continue to work.

That angle, so really all of those factors combined I would say the.

Speaker #8: Thanks for the combination. You know, it's relatively similar integration costs. I think about Q3 versus Q4, Chris. So, you know, what it really points to is the, you know, kind of the leverage that we saw on the SD&A falling through to EBITDA. You know, the stronger margin performance is, you know, obviously a contributing factor there.

Ryan Cieslak: I think it's a combination. It's relatively similar integration costs. I think about Q3 versus Q4, Chris. What it really points to is the kind of the leverage that we saw on the SDNA falling through to EBITDA. The stronger margin performance is obviously a contributing factor there, as well as very pleased with the progress we've made to date in terms of quicker realization of synergy benefits. So we're actually ahead of where we anticipated at this point in terms of synergy realization and continue to work that angle. Really, all those factors combined, I'd say the integration costs quarter over quarter really didn't play heavily into that improvement.

The integration costs quarter over quarter, where you really didn't play heavily into that improvement.

I'd say as we thought about synergies going in we've said.

Roughly 80%.

<unk> cost in margin and as well as 20% sales opportunity in todays point, we're pleased on both including the interaction with the teams and the cross selling opportunities, especially.

Speaker #8: As well as, you know, very pleased with the progress we've, you know, made to date in terms of, you know, quicker realization of synergy benefits.

Speaker #8: So, we're actually ahead of where we anticipated at this point in terms of synergy realization, and we continue to work that angle.

In our service and repair opportunities throughout that South east geography, as well as things that we can do in key growth verticals around data centers.

Speaker #8: So, really all those factors combined, I'd say the, you know, the integration cost, quarter over quarter, we're, you know, really didn't play heavily into that improvement.

And the technology segment. So pleased about the performance in our start and look forward to continuing that momentum.

Speaker #8: I would say, as we thought about synergies going in, you know, we said roughly 80% from cost and margin, as well as 20% sales opportunity.

Neil Schrimsher: I would say as we thought about synergies going in, we said roughly 80% from cost and margin, as well as 20% sales opportunity. To Dave's point, we are pleased on both, including the interaction with the teams and the cross-selling opportunities, especially in the service and repair opportunities throughout that Southeast geography, as well as things that we can do in key growth verticals around data centers and the technology segment. So, pleased about the performance in our start and look forward to continuing that momentum.

Great and then.

Just on the.

Market for kind of break fix MRO, an idea of any kind.

Speaker #8: And to Dave's point, we’re pleased on both, including the interaction with the teams and the cross-selling opportunities, especially in the service and repair opportunities throughout that Southeast geography.

Pent up coming through it sounds like you might be starting to see some of that with the national accounts, but not so much with the local so another.

Another thing just asking to Dimensionalize a bit.

Yes, so as we look at the breakdown the sales they were pleased in the last month on.

Speaker #8: As well as things that we can do and key growth verticals around data centers and the technology segment. So, I'm pleased about the performance in our start and look forward to continuing that momentum.

Local accounts being a positive as well as S. A in the month of July. So I think that's a good indicator that things could be firming and build from here.

Speaker #7: Great. And then, just on the, market for kind of break-fix MRO and idea of any kind of pent-up coming through. It sounds like you might be starting to see some of that with the national accounts, but not so much with the locals.

Christopher Glynn: Great. Then, just on the market for kind of break-fix MRO and idea of any kind of pent-up coming through, it sounds like you might be starting to see some of that with the national accounts, but not so much with the locals. So, another thing just asking to dimensionalize a bit.

Yeah.

Okay, Great and then just.

The midpoint of the year doesn't have any acceleration versus the.

Speaker #7: So, another thing just asking to dimensionalize a bit.

First quarter at all but you do have easy comps I know, there's a little shift when you get to the fourth quarter.

Speaker #8: Yeah. So, as we look to break down the sales, we're pleased with the local accounts being positive last month, as well as SA in the month of July.

Neil Schrimsher: Yeah. So as we look at, break down the sales, we are pleased in the last month on local accounts being positive, as well as SA in the month of July. So I think that is a good indicator that things could be firming and build from here.

And then you know.

The avs halfway through the quarter.

Really outpacing the outlook.

You referenced comps I don't know if there's a major kind of hockey stick in the September comp a little bit but is there.

Speaker #8: So, I think that's a good indicator that things could be firming and build from here.

Just a couple of layers in prophylactic caution in there with a potential month to month volatility around behaviors is that how we should think about the guide.

Speaker #7: Okay. Great. And then just the, midpoint of the year, doesn't have any acceleration versus the, first quarter at all, but, you know, you do have easy comps.

Christopher Glynn: Okay, great. The midpoint of the year does not have any acceleration versus the first quarter at all, but you do have easy comps. I know it is a little rough when you get to the fourth quarter. The ADS halfway through the quarter is really outpacing the outlook. You referenced comps. I do not know if there is a major kind of hockey stick in the September comp a little bit, but is there just a couple of layers of prophylactic caution in there with the potential month-to-month volatility around behaviors? Is that how we should think about the guide?

There is a ramp in the prior prior September and I, just think overall, Chris it's taken our view of kind of the right prudent approach given some of the some of the macro and.

Speaker #7: I know there's a little shift when you get to the fourth quarter. And then, you know, the ADS halfway through the quarter really outpacing the outlook, your reference comps. I don't know if there's a major kind of hockey stick in the September comp a little bit, but is there just a couple layers of prophylactic caution in there with potential, you know, month-to-month volatility around behaviors.

We believe some of those firm up as we move through these these summer months, but.

That's what.

Comes in our.

Our approach to have a.

Be prudent in the in the guide and the outlook.

And the specific detail, we provide around the first quarter.

It makes a lot of sense. Thanks Neal.

Speaker #7: Is that how we should think about the guide?

Speaker #8: Yeah. There, there is a, a ramp in the, prior, prior September, and, I just think overall, Chris, it's taken, our view of, hey, kind of the right, prudent approach given some of the, some of the macro and, we believe some of those firm up as we move through these, these summer months.

Neil Schrimsher: Yeah. There is a ramp in the prior prior September. I just think overall, Chris, it's taken our view of, hey, kind of the right, prudent approach given some of the macro. We believe some of those firm up as we move through these summer months. That's what comes into our approach to be prudent in the guide and the outlook and the specific detail we provide around the first quarter.

Your next question comes from David Manthey with Baird.

Thank you and good morning, everyone.

My first question is related to pricing I think you said 100 basis points in the quarter and an expectation that that would slowly increase ahead I'm hoping.

Speaker #8: But, you know, that's what comes in to our approach to, you know, have a, be prudent in the, in the guide and the outlook, and then, and the specific detail we provide around the first quarter.

If you didn't they didn't hear it but could you scale at more narrowly for us and talk about sort of what benefit from price is baked into the first quarter guidance and the the overall 2026.

Speaker #7: Makes a lot of sense. Thanks, Neil.

Christopher Glynn: Makes a lot of sense. Thanks, Neil.

Yeah, I would say Dave for the first quarter I would say to be similar and you know we've talked about a little over 100 basis points in the quarter. So in the first quarter similar but with the expectation that it ramps as we move through the year and the perhaps a hunt.

Speaker #3: Your next question comes from David Manti with Baird.

Conference Operator: Your next question comes from David Manthey with Baird.

Speaker #7: Thank you. Good morning, everyone. My first question is related to pricing. I think you said 100 basis points in the quarter, and the next expectation is that that would slowly increase ahead.

Ryan Cieslak: Thank you. Good morning, everyone. My first question is related to pricing. I think you said 100 basis points in the quarter and an expectation that that would slowly increase ahead. I am hoping, if I did not hear it, could you scale that more narrowly for us and talk about what benefit from price is baked into the Q1 guidance and the overall 2026?

Speaker #7: I'm hoping, if, if you didn't, I didn't hear it, but could you scale that more narrowly for us and talk about sort of what benefit from price is baked into the first quarter guidance and the, the overall 2026?

Third and 50 to 200 basis points as we look at all of fiscal 'twenty six and if the demand environment is strong and there's additional.

Supplier inflation in increases of that.

Perhaps it will be higher than that number.

Speaker #8: Yeah. I would say, Dave, for the first quarter, I would say to be similar and, you know, we talked about, a little over 100 basis points, in the quarter.

Neil Schrimsher: Yeah. I would say, Dave, for the first quarter, it would be similar. We talked about a little over 100 basis points in the quarter. So in the first quarter, similar, but with the expectations that it ramps as we move through the year, in the perhaps 150 to 200 basis points as we look at all of fiscal 2026. If the demand environment is strong and there's additional supplier inflation and increases of that, perhaps it will be higher than that number for 2026.

Four or 26.

Okay got it.

And second.

Yes trends looking really good you mentioned technology and automation.

Speaker #8: So, in the first quarter, similar. But with the expectations that it ramps as we move through the year, in the perhaps, 150 to 200 basis points as we look at all of fiscal '26.

First question and then I've got one after that but could you give us examples of when you say technology as a vertical could you talk about what you mean by that is an area youre seeing growth today.

Speaker #8: And if the demand environment is strong, and there's additional supplier inflation and increases, perhaps it'll be higher than that number.

Yeah. So that would include the data center.

It would include a semiconductor manufacturing in the side. So I think those would be the.

Speaker #7: Mm-hmm.

Speaker #8: '26.

The most significant components of that are tech vertical and we're broadening our participation and so we've historically had a strong presence with fluid power.

Speaker #7: Okay, got it. And second, ES trends are looking really good. You mentioned technology and automation. First question, and then I've got one after that. Could you give us examples of when you say technology as a vertical? Could you talk about what you mean by that as an area you're seeing growth today?

Ryan Cieslak: Okay, got it. Second, Engineered Solutions segment trends looking really good. You mentioned technology and automation. First question, then I have one after that, but could you give us examples of when you say technology as a vertical, could you talk about what you mean by that as an area you are seeing growth today?

But today, we're doing more with our fluid conveyance and also our automation business participates in that vertical well.

Mhm.

Okay, and then on automation, which you said grew mid single digits.

Speaker #8: Yeah. So, that would include the data center; it would include the semiconductor manufacturing on the side. So, I think those would be, you know, the most significant components of that tech vertical.

Neil Schrimsher: Yeah, so that would include the data center. It would include the semiconductor manufacturing in the side. I think those would be the most significant components of that tech vertical. We are broadening our participation. We have historically had a strong presence with fluid power, but today we are doing more with fluid conveyance, and our automation business participates in that vertical well.

There are two I guess, you sort of touched on that as saying that datacenter and technology is getting more applications in in those verticals.

Verticals, but.

As it relates to two.

Speaker #8: And we're broadening our participation and so we've historically had, strong presence with fluid power. but today we're doing more with, fluid conveyance and also, our automation business participates in that vertical well.

To yes overall.

Are you seeing a benefit of our people talking about this bonus depreciation is helping.

Mainly on the on the flow control side and it seems like a higher ticket maybe I mean any color you can give us on that would be helpful. In terms of you mentioned some of the growth tailwind and I'm. Just wondering if that's one of them that you're hearing about or not.

Speaker #7: Mm-hmm. Okay. And then, on automation, which you said grew mid-single digits, there are two. I guess you sort of touched on that as saying that data center and technology are getting more applications in those verticals.

Ryan Cieslak: Okay. On automation, which you said grew mid-single digits, you touched on that as saying that data center and technology getting more applications in those verticals. As it relates to ES overall, are you seeing a benefit? Are people talking about this bonus depreciation as helping, mainly on the flow control side, which seems like a higher ticket maybe? Any color you can give us on that would be helpful in terms of you mentioned some of the growth tailwinds, and I am just wondering if that is one of them that you are hearing about or not.

And so as we think about where the businesses participating even in automation doing well and some other segments be it food and beverage life Science and farm out I would say yes.

Speaker #7: But as it relates to ES overall, are you seeing a benefit, or are people talking about this bonus depreciation as helping mainly on the flow control side, which seems like a higher ticket maybe?

We have a full pipeline of projects with customers. They have great return profiles we.

<unk> talked about in prior quarters, perhaps the approval process of those had elongated while still strong returns in our view of the customers are in a a very good cash position I think the opportunity for accelerated depreciation on those will be a further stimulus of those projects.

Speaker #7: I mean, any color you can give us on that would be helpful. In terms of, you mentioned some of the growth tailwinds, and I'm just wondering if that's one of them that you're hearing about or not.

Speaker #8: And so, as we think about where the business is participating, even in automation, doing well in some other segments, you know, be it food and beverage, life sciences, and pharma, I would say yes.

Neil Schrimsher: As we think about where the businesses participate, even in automation doing well in some other segments, be it food and beverage, life science, and pharma, I would say yes. We have a full pipeline of projects with customers. They have great return profiles. We have talked about in prior quarters, perhaps the approval process of those had elongated while still strong returns, and our view of customers are in a very good cash position. I think the opportunity for accelerated depreciation on those will.

<unk> being acted and converted so as we look out over 26 that could be a positive development.

For our pipeline.

Speaker #8: We have a full pipeline of projects with customers. They have great return profiles. We've talked about, in prior quarters, how the approval process for those had elongated.

Great Alright, thanks, Neil thank.

Thank you.

Yeah.

Your next question comes from Ken Newman with Keybanc capital markets.

Speaker #8: While still strong returns, and our view of customers is in a very good cash position, I think the opportunity for accelerated depreciation on those will be a further stimulus for those projects being acted upon and converted.

Hey, good morning, guys.

Good morning.

Good morning.

So maybe the first one Neil just wanted to go back to the low end of our full year organic sales growth guide.

Dave Wells: be a further stimulus of those projects being acted and converted. As we look out over 2026, that could be a positive development for our pipeline.

It kind of implies that volumes at the low end of kind of assuming down 50 basis points year over year organic on what's a pretty easy comp throughout the entire year.

Speaker #8: So, as we look out over '26, that could be a positive development for our pipeline.

Speaker #7: Great. All right. Thanks, Neil.

Neil Schrimsher: Great. All right. Thanks, Neil.

I guess the question is you're assuming one or 2% of our price contribution outside of maybe the timing of comp in this first quarter that you talked about is there anything else structural that kind of assume within that that low end of the guide or anything that we should kind of be aware of.

Speaker #8: Thank you.

Dave Wells: Thank you.

Speaker #3: Your next question comes from Ken Newman with KeyBank Capital Markets.

Conference Operator: Your next question comes from Ken Newman with KeyBank Capital Markets.

Speaker #9: Hey, good morning, guys.

Ken Newman: Hey, good morning, guys.

Speaker #7: Morning.

Dave Wells: Good morning.

Speaker #9: Good morning. So maybe the first question, Neil, I just wanted to go back to the low end of the full-year organic sales growth guide. I think it kind of implies that volumes at the low end are kind of assuming, you know, down 50 basis points year-over-year organic.

Ken Newman: Morning. So, maybe the first one, Neil, just wanted to go back to the low end of the full-year organic sales growth guide. I think it kind of implies that volumes at the low end are kind of assuming, you know, down 50 bps year over year organic on what's a pretty easy comp throughout the entire year. I guess the question is, if you're assuming 1% to 2% of price contribution outside of, you know, maybe the time on comps in this first quarter that you talked about, is there anything else structural that's kind of assumed within that low end of the guide or anything that we should kind of be aware of?

I think again, Ken as we think about the full range of the guide, including the low and we just want to be.

Prudent in the approach given still some of the uncertainty that that would be out.

If we think about more.

At the midpoint.

That's going to assume some headwinds continue on on the macro in the tariff environment and some of that uncertainty in the first half.

And then with those headwinds abating somewhat into the second half and so that that's been more of the approach and the consideration going in.

Dave Wells: I think, again, Ken, as we think about the full range of the guide, including the low end, we just want to be prudent in the approach given still some of the uncertainty that would be out. If we think about more the midpoint, that is going to assume some headwinds continue on the macro and the tariff environment and some of that uncertainty in the first half, and then with those headwinds abating somewhat into the second half. That is when more of the approach and the consideration going in.

Okay.

And then for my follow up maybe just help us fine tune.

The comments about normalizing LIFO in our provisioning through the year.

By segment obviously.

Yes, EBIT margin kind of took a bigger hit sequentially and year over year.

Part of that was that the a our provisioning and hydrodynamic.

How should we think about segment margins implied at the midpoint of the <unk> guide and how.

How that trends through the rest of the year.

Yes.

But a clarification in terms of our Q4 the majority of that air provisioning was more skewed to the U S service centers or service centers as opposed to the engineered solutions Youre getting at the formulary process and you kind of based on several variables in terms of credit ratings, you know each balances don't see anything problem.

Ken Newman: Okay. From a follow-up, maybe just help us fine-tune the comments about normalizing LIFO and AR provisioning through the year by segment. Obviously, Engineered Solutions segment EBIT margins kind of took a bigger hit potentially year over year. I think part of that was the AR provisioning and Hydradyne. How should we think about segment margins implied at the midpoint of the Q1 guide and how that trends through the rest of the year?

There is we had a couple of customers that were just you know kind of.

To wait on some payments the yeah. If you look back I look and kind of benchmark or as I said, our DSO has maintained stability.

You know, our our provisioning as a percent of sales for the year was it are you really the mid point of rate, where we've been the last five year average. So we've made some good progress in terms of the initiatives, yielding some you know kind of improvements in terms of past dues and just the timing issue.

Dave Wells: Yeah, just, you know, a little bit of clarification in terms of our Q4. The majority of that AR provisioning was more skewed to the U.S. Service Center segment as opposed to the Engineered Solutions segment. Again, that is a formulaic process, you know, kind of based on several variables in terms of credit ratings, you know, age balances. I do not see anything problematic there. As we had a couple of customers that were just, you know, kind of delayed on some payments. If you look back, I look and kind of benchmark our, as I said, our DSO has maintained stability. Our provisioning as a percent of sales for the year was at, you know, really the midpoint of right where we have been the last five-year average.

It's Johan proportionately I should say maybe.

A lot I came back in like the first two weeks or so of July so.

We see that normalize.

In terms of the you know the EBITDA margins, we talked about in the service centers. They were also impacted this you know this past quarter by you know, that's where the deferred comp.

Mark to market adjustment hits, and then it gets offset in other income and expense. So that also distorts things I would expect.

Dave Wells: So we have made some good progress in terms of the initiatives yielding some, you know, kind of improvements in terms of past dues and, you know, just a timing issue. We have, unfortunately, a lot of that, or fortunately, I should say maybe, a lot of that came back in like the first two weeks or so of July. So let us see. We would see that normalize, you know, in terms of the EBITDA margins we talked about in the Service Center segment. They are also impacted, this past quarter by, you know, that is where the deferred comp, mark-to-market adjustment hits and then gets offset in other income and expense. So that also distorts things. I would expect, you know, the margins to normalize as we talked about, you know, kind of as we think about 2026, the LIFO, you know, will read through proportionately.

The margins to normalize as we talk about you know kind.

Kind of as we think about twenty-six LIFO will read through proportionately.

And then you'll continue to see the mix up benefit from Hydra Dine and improvement in the drag that it is right now on this on the engineered solutions segment EBITDA margins as we continue to realize the synergy benefits, which as we discussed are coming quicker than we had anticipated.

Like the <unk> like the progress there.

Ken I would just add if we think about the quarter over quarter comparison, I mean, if we reflect back last fourth quarter in engineered solutions I mean, it was really strong you know 16.

16% record high we have benefited from strong mix of solutions going across so I think that demonstrates the strong potential to Dave's point on Hydra Dyne, we're pleased with the progress, but he touched on or talked about the 60 basis point headwind in EBITDA margins there. So.

Dave Wells: And then, you know, we will continue to see the mix-up benefit from Hydradyne and improvement in the drag that it is right now on the Engineered Solutions segment EBITDA margins as we continue to realize those synergy benefits, which, as we discussed, are coming quicker than we had anticipated. So I like the progress there.

If we think about.

The potential around the engineered solutions is on the full year.

Neil Schrimsher: Yeah, Ken, I would just add, you know, if we think about the quarter-over-quarter comparison, I mean, if we reflect back last fourth quarter in Engineered Solutions, I mean, it was really strong, you know, 16% record high. You know, we benefited from a strong mix of solutions going across. So I think that demonstrates the strong potential, you know, to Dave Wells' point on Hydradyne, we are pleased with the progress. But he touched on or talked about the 60 basis point headwind in EBITDA margins there. So if we think about the potential around Engineered Solutions, if on the full year, you know, we were very cost accountable and OpEx and expense, you know, down 5% into that side. But with EBITDA margins up on lower organic daily sales of, you know, 4% in that side.

We were very cost accountable.

Opex and our expense down five 5% into to that side.

Yeah. Ken. I I just add, uh, you know, if we think about the, the quarter over quarter comparison and if we reflect back last fourth quarter and the engineered Solutions, I mean, it was really strong, you know?

But with EBITDA margins up on lower organic daily sales.

4% in that side, so as we see an inflection coming.

And growth in that opportunity, but it felt like hey, we're well positioned.

And of course that Q4 noise destroyed storage NOI and stronger performance between the Dr provisioning, which I see.

16% record high; you know, we benefited from a strong mix of solutions going across. So I think that demonstrates the strong potential. You know, to Dave's point on hydro, we're pleased with the progress, but he touched on or talked about the 60 basis point headwind in any margins there.

So you're getting back obviously as we as we move into 'twenty six.

Comp noise and.

You know like I said the.

That was true if you look back at last year the quarter performance on gross margins across the business.

You know Q4 was going with it even started in the thirties right everything else was a startup with less than three so at 37% comp in the prior year quarter.

Neil Schrimsher: So as we see an inflection coming in growth in that opportunity, we feel like, hey, we are well positioned.

That was very very challenging comp and.

Even with a life of it we rolled through this quarter versus the favorability last year.

Dave Wells: Unfortunately, that Q4 noise just really distorted some of the underlying stronger performance, between the AR provisioning, which I see getting back, obviously, as we move into 2026, the deferred comp noise. If you look back at last year, the quarter performance on gross margins across the business, Q4 was the only one that even started in the 30s. Everything else started with less than a 3. So at 30.7% comp in the prior year quarter, that was a very, very challenging comp. Even with the LIFO that we rolled through this quarter, versus the favorability last year, within nine basis points of that, I think it was a pretty good story.

About the uh, the potential around engineered Solutions is it on the full year. You know, we we were very cost accountable and uh you know, Opex and expense you know down 5 5 percent into to that side. Uh but with Eva D, margins up on Lower organic daily sales of, you know, 4% in that side. So as we see an inflection coming, uh, in growth in that opportunity we feel like, Hey, we're well positioned.

Within nine basis points of that to think it was a pretty good story.

Understood. Thanks.

Your next question comes from Sabrina Abrams with Bank of America.

Hey, good morning, everyone.

Good morning.

You guys have given some helpful color on Hydra dyne, but maybe I guess, what I'm just going to ask.

Could you disclose I guess hydro contribution in dollars to EBITDA.

EBITDA in the quarter.

Maybe any color from.

From either an EBITDAR EPS standpoint, our Watson fiscal 'twenty six guide.

In Q4, Hydra Dyne contributed just over $7 million of EBITDA just to help frame. It up if we Oh in factor is lost interest income from financing that deal with cash on hand about <unk> contribution we had said at the time of year.

And of course that Q4 noise is really distorted some in the line stronger performance, uh, between the the ARP provisioning, which I, you know, see, getting back obviously, as we as we move into 26, you know, that's for a comp noise and uh, you know, like I said the that was, you know, the true. If you look back at last year, the the quarter performance on Gross margins across the business, uh you know, Q4 was the only 1 that even started in the 30s, right? Everything else was uh started with less than a 3. So at 30.7% comp in the prior year quarter, uh you know that was a very, very challenging comp. And you know even with the life of that we rolled through this quarter, you know, versus the favorability last year, you know, within, you know, 9 basis points of that I think was a good pretty good story.

Ken Newman: Understood. Thanks.

So thanks.

Conference Operator: Your next question comes from Sabrina Abrams with Bank of America.

Your next question comes from Sabrina Abrams with Bank of America.

Ryan Cieslak: Good morning, everyone.

Dave Wells: Morning.

Hey, good morning, everyone.

Ryan Cieslak: You guys have given some helpful color around Hydradyne, but maybe I guess what I am just going to ask, could you disclose Hydradyne contribution in dollars to EBITDA in the quarter and maybe any color, from either an EBITDA or EPS standpoint, what is in fiscal 26 guide?

The announcing the deal we would expect be.

<unk> 15 cents accretive EPS in the first 12 months so right on track there when you think about social and the integration costs at play.

We have not framed up necessarily you know kind of that impact on <unk>.

26, but here again like the traction in terms of running ahead on expectations on the cost synergies.

Dave Wells: In Q4, Hydradyne contributed just over $7 million of EBITDA. Just to help frame it up, if we, all in, factor in some lost interest income from financing that deal with cash on hand, about $0.03 contribution. We had said at the time of announcing the deal, we would expect $0.15 accreted EPS in the first 12 months. So, really right on track there when you think about still some of the integration costs at play. We have not framed up necessarily that impact on 2026. Here again, like the traction in terms of running ahead on expectations on the cost synergies, as well as the traction that we are seeing on cross-selling. I would expect it to certainly meet those first 12 months' expectations as a guide for you, if not potentially beat that initial expectation we set for the first 12 months.

Um, you guys have given um some helpful color around Hydra dine um but maybe I I guess what I'm just gonna ask, um could you disclose I guess hydrogen contribution in dollars to Evita in the quarter and maybe any color um from either an Evita or EPS standpoint. Uh what's in fiscal 26 guide,

As well as the you know kind of the traction that we are seeing on cross selling so I would expect it to certainly meet the first 12 months expectations are you kind of frame it up as a least a guide for you.

<unk> potentially beat that that initial expectation, we said for the first 12 months.

Thank you that's super helpful.

Second point I guess, a second question from me, maybe if you could give a little color I know there was some comment on lifestyle I in 'twenty, but maybe if you could just give some color on what is the.

Q4 hydron contributed just over $7 million of EBITDA, just to help frame it up. If we, you know, all in factor in some lost interest income from, you know, financing that deal with cash on hand about 3% contribution. We had said, at the time of, uh, you know, announcing the deal, uh, we would expect it, uh, you know, to be 15 cents, agreed at the EPS in the first 12 months, so really right on track there. When you think about social media integration costs at play. Um,

The amount of LIFO expense embedded in God in either dollars or better.

And anything else to sort of call out ashwin I other than like I guess like organic incrementals as we look at the fiscal 'twenty six op margin guide.

we have not framed up necessarily, you know, kind of that impact on on 26. But here again like the traction. In terms of running ahead on expectations on the cost synergies um as well as the, you know, kind of the the the traction that we are seeing on cross-selling. So you know, I would expect it to certainly you know meet those first 12 months expect

Sure.

We paid $14 million to $18 million in the guidance, so that would kind of work across the guidance range. Obviously, that's a function of you tie.

As a, you know, kind of frame it up as a, at least a guide for you. If not potentially beat that, uh, that initial expectation we set for the first 12 months,

Ryan Cieslak: Thank you, that's super helpful. Second point, I guess, second question from me. Maybe if you could give a little color. I know there was some comment on LIFO in 26, but maybe if you could just give some color on what is the amount of LIFO expense embedded in guide in either dollars or bps. Is there anything else to sort of call out, other than I guess organic incrementals as we look at the fiscal 26 margin guide?

Tied to obviously the inflationary increases that we see that impact indices as well as inventory levels. So goes part and parcel with some of the work around the you kind of what's happening in terms of pricing and inflationary impact.

And then Brian I'd say on Incrementals.

At the midpoint, which would be two 5%.

Growth, we've talked about low teens incrementals.

Dave Wells: Sure. We paid LIFO at $14 to $18 million in the guidance. That would kind of work across the guidance range. Obviously, that's a function of, tied to obviously the inflationary increases that we see that impact indices as well as inventory levels. So, it goes part and parcel with some of the work around the, what's happening in terms of pricing and inflationary impact.

Thank you. Uh, that's super helpful. Um, second point, I guess. Uh, second question for me. Um, maybe if you could give a little color. I know there were some comments on LIFO in '26, but maybe if you could just give some color on what is, uh, like the amount of LIFO expense embedded in the guide, and either dollars or bits. Um, and anything else to sort of call out, um, as we, other than, like, I guess, like organic incremental, as we look at the fiscal '26 margin guide.

That includes M&A mix coming in lower than the side some ongoing growth investments that will make it into the business in today's point that range of.

LIFO that we laid out.

More at a higher end.

We would expect mid teen Incrementals of EBITDA margin on that so you know when we think about the outlook again, we didn't want to be prudent and the approach, but if we consider the business incrementals ex M&A ex LIFO at the midpoint of our guidance.

Neil Schrimsher: Sabrina, I would say on incrementals, at the midpoint, which would be 2.5% growth, we talked about low teens incrementals. That includes M&A mix coming in lower in the side, some ongoing growth investments that we will make into the business. To Dave Wells' point, that range of LIFO that we laid out more at the higher end, we would expect mid-teen incrementals of EBITDA margin on that. We think about the outlook again, we just want to be prudent in the approach. If we consider the business incrementals X M&A and X LIFO at the midpoint of our guidance, that is a high-teen incremental, which I think talks to our views, our outlook as we think about year ahead and ongoing business capabilities.

Sure. Uh, we, we paid life, so at 14 to 18 million dollars, uh, in the guidance. So, you know, that would kind of work across the the guidance range. Obviously, that's a function of, you know, you know, tied to obviously the inflationary increases that we see that impact, the indices as well as inventory levels. So, uh, goes part and parcel, with some of the work around the, uh, you know, kind of what's happening in terms of pricing and, and inflationary impact.

That's a high teen incremental which I think talks to our views or outlook as we think about ear had an ongoing business capabilities.

And then Sabrina I'd say on incremental, you know, at at the midpoint you know, which would be 2 and a half percent uh growth. We talked about low teens incremental, you know, that includes m&a mix coming in lower in the side, some ongoing growth Investments that will make in

Thank you so much guys I'll pass it on.

Your next question comes from Chris Dankert with loop capital markets.

Yeah.

Hey, good morning, guys. Thanks for fitting me in here.

Yes, just to hold on for a second year in a fourth quarter as you mentioned in the remarks.

Well it had a typical seasonality in the fourth quarter just wanted to ask do you feel like there was anything pulled forward or anything onetime in nature that came in in the fourth quarter do you is that a fairly clean kind of growth bigger things.

Into the business. And today's point that range of, uh, of LIFO that we laid out more at the higher end, uh, we'd expect mid-teen incremental IBA margin on that. So, you know, we think about the outlook again, we just want to be prudent in the approach, but if we consider the business incremental, ex M&A and ex LIFO at the midpoint of our guidance.

Yeah, Chris I would say hey, no big pull forward did a nice job recognizing some of that order conversion that we had in doing it I think as just kind of normal as we move through.

Business capabilities.

Ryan Cieslak: Thank you so much, guys. I'll pass it on.

Thank you so much, guys. I'll pass it on.

Conference Operator: Your next question comes from Chris Dankert with Luke Capital Markets.

To your next question, comes from Chris Danker with Luke Capital Markets.

Neil Schrimsher: Hey, morning, guys. Thanks for fitting me in here. I guess just to hold on for a second here, fourth quarter, as you mentioned in the remarks, well ahead of typical seasonality in the fourth quarter. Just wanted to ask, do you feel like there was anything pulled forward, anything one-time in nature that came in in the fourth quarter? Or is that a fairly clean kind of growth figure, you think?

To close the fourth quarter sequentially.

Hey, morning guys. Thanks for, uh, fitting me in here.

Sequentially backlog would be down a little bit.

Book to Bill slightly below one.

And to the side, but this year is higher than the prior year and that.

And then as we look forward to at the start of the year, we're encouraged by.

The order rates around engineered solutions. So we feel like we've got a very good pipeline to work on and execute across our fluid power flow control pad our automation businesses.

Neil Schrimsher: Yeah, Chris, I would say, hey, no big pull forward. Did a nice job recognizing some of that order conversion that we had in doing it. I think as this is kind of normal as we move through, to close the fourth quarter, sequentially, backlog would be down a little bit. Book to bill slightly below one, into the side, but this year's higher than the prior year in that. As we look forward at the start of the year, we are encouraged by the order rates around Engineered Solutions. We feel like we have a very good pipeline to work on and execute across fluid power, flow control, and our automation businesses.

I guess just to, uh, hold on. Yes, for a sec, you know, fourth quarter, as you mentioned in the remarks, you know, up, you know, well ahead of typical seasonality in the fourth quarter. Just want to ask you if you feel like there was anything pulled forward or anything one-time in nature that came in in the fourth quarter. Is that a fairly clean kind of growth figure you think?

Got it Super Super helpful. There.

Just a follow up you'd mentioned some softness in the international markets.

Is that principally the Mexico market as it is the domestic headwinds we've heard about there or is it something else going on and I guess does that impact kind of what you're seeing it at Grupo co par.

Any color that'd be great yes.

Yeah, Chris I'd say more related maybe in in Canada, and I think there's just a settling out of <unk>.

Some tariff impact and what it means for <unk>.

Flows of products.

Yeah, Chris I I would say hey no big uh, pull forward. Did a nice job. Recognizing some of that order conversion that we had in doing it. Uh, I think as is kind of normal as we move through, uh, to close the, the fourth quarter, uh, sequentially backlog would be down a little bit, uh, book The Bill slightly below 1 uh, into the side. But this year's higher than the prior year in that. Um and then as we look forward at at the start of the Year, we're encouraged by the order rates around engineered Solutions. So we feel like we got a very good pipeline to work on and execute across uh fluid power flow control and our automation businesses.

Neil Schrimsher: Got it. Super, super helpful there. And I guess just as a follow-up, you mentioned some softness in the international markets. Is that principally the Mexico market? Is it the domestic headwinds we've heard about there, or is it something else going on? And I guess does that impact kind of what you're seeing at Grupo Copar? Any color there would be great.

But also in.

In country Canadian business industry of that we feel like the business is doing a very nice job, we're well diversified into that segment, but I'd say a little more in in Canada than the other geographies.

Those headwinds did less as we moved across the quarter, which was encouraging.

Glad to hear that well, thanks, again, guys and best of luck into 'twenty six here.

Neil Schrimsher: Yeah, Chris, I would say more related maybe in Canada. I think there is just a settling out of some tariff impact and what it means for flows of products, but also in-country Canadian business industry of that. We feel like the business is doing a very nice job. We are well diversified into that segment. I would say a little more in Canada than the other geographies. Those headwinds did less as we moved across the quarter, which was encouraging.

Got it, super, super helpful there. Um, I guess just a follow-up. You mentioned some softness in the international markets. Is that principally the Mexico market? Is it, you know, the domestic headwinds we've heard about there, or is it something else going on? And I guess, does that impact kind of what you're seeing at a group of copar? Any color that would be great.

Thanks, Chris.

Your next question comes from Ken Newman with Keybanc capital markets.

Hey, Thanks for squeezing me in I, just had one quick follow up more higher level.

Neil.

Yeah, Dave just curious.

What's the thought on potentially kind of maybe adding back some of this intangible amort for the earnings power It seems like.

You know, obviously hydro dam was pretty solid for our EBITDA and despite some of the negative mix in the in this part of the cycle, but.

Yeah. Chris I'd say more uh, related maybe uh in uh, in Canada. And I think there's just a settling out of, uh, some tariff impact and what it means for, uh, flows of products. Uh, but also in country Canadian business industry of that. We feel like a business is doing a very nice job. We're well Diversified into that segment but I'd say a little more in uh, in Canada than the other geographies.

Those who had wins did lessons; we moved across the quarter, which was encouraging.

Neil Schrimsher: Glad to hear that. Thanks again, guys, and best of luck into 2026 here.

I Wonder how much you are maybe getting.

Neil Schrimsher: Thanks, Chris.

Glad to hear that. Well, thanks again, guys. And, uh, best of luck in the 26 here.

That negatively comp just because some of your peers do add that back.

Thanks Chris.

Conference Operator: Your next question comes from Ken Newman with KeyBank Capital Markets.

And your thoughts on potentially kind of normalizing that to make the earning power of apples to apples.

Your next question comes from Ken Neumann with KeyBanc Capital Markets.

Ken Newman: Hey, thanks for squeezing me in. I just had one quick follow-up, more higher level. Neil and Dave, I am just curious, what is the thought on potentially adding back some of this intangible amortization to the earnings power? It seems like, you know, obviously, Hydradyne was pretty solid for EBITDA and, you know, despite some of the negative mix in this part of the cycle. But I wonder how much you are maybe getting negatively comped just because some of your peers do add that back. You know, your thoughts on potentially normalizing that to make the earnings power apples to apples.

Hey, thanks for squeezing me in. I just had one quick follow-up, more high-level. Um,

I'd say no.

I think we're pretty transparent in terms of the way we break it out.

And I'd prefer to kind of maintain the approach of.

Being consistent there and just continuing to break it out so you've got that visibility I mean to your point a headline read would yeah, maybe skew things, but let's say our focus is on continuing to improve it and make it not a talking point right and I think we're hard at work at that with the synergy realization that we've seen in driving that cross.

Neil, you know, Neil and Dave, I'm curious about the thought on potentially kind of maybe adding back some of this intangible amort to the earnings power. It seems like, you know, obviously Hydro Dynamo is pretty solid for EBITDA, and, you know, despite some of the negative mix in this part of the cycle. But, um,

Sally.

I wonder how much your maybe getting uh, you know, negatively comped, just because some of your peers do add that back. Um, and you know, your thoughts on potentially kind of normalizing that to make the the earnings power Apples to Apples.

Understood. Thanks.

Dave Wells: would say, you know, I think we are pretty transparent in terms of the way we break it out. I would prefer to, you know, kind of maintain the approach of, you know, being consistent there and just continuing to break it out so you have that visibility. I mean, to your point, a headline read would, you know, maybe skew things. But I would say our focus is on continuing to improve it and make it not a talking point, right? I think we are hard at work at that with the synergy realization that we have seen and driving that cross-selling.

At this time I'm, showing we have no further questions I'll now turn the call back over to Mr. Schrimsher for any closing remarks.

I just want to thank everyone for being with US today, we look forward to talking with you throughout the quarter.

Yeah.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.

I'd say, you know, I think we're pretty transparent in terms of the way we break it out. Um, and I, I prefer to, you know, kind of maintain the approach of, uh, you know, being consistent there and just continue to break it out. So you, you've got that visibility. I mean, to your point a headline read would uh, you know, maybe skew things. But uh, say our our our our focus is on continuing to improve it and and make it not a talking point, right? And I think we're hard at work with that with as soon as you realisation that we've seen and and driving that cross-selling

Ken Newman: Understood. Thanks.

Understood. Thanks.

Conference Operator: At this time, I am showing we have no further questions. I will now turn the call back over to Mr. Schrimsher for any closing remarks.

Neil Schrimsher: I just want to thank everyone for being with us today. We look forward to talking with you throughout the quarter. Thank you.

At this time, I'm showing we have no further questions. I'll now turn the call back over to Mr. Schrimsher for any closing remarks.

Uh, I just want to thank everyone for being with us. Uh, today we look forward to talking with you throughout the.

the quarter.

Conference Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.