Executive Summary

Q1 2025 delivered a clean EPS beat and in-line revenue: diluted EPS $2.64 vs SPGI consensus $2.2067*, revenue $391.0M vs consensus $391.1M*, with operating margin rising to 11.4% from 8.9% in Q4 and backlog up 5.1% sequentially .
Division mix: Industrial Equipment remained strong (net sales +12.5% YoY; operating margin 13.7%), while Vegetation Management showed sequential recovery in margin to 8.1% despite a 26.8% YoY sales decline .
Management guides to sequential expansion in sales and margins in Q2 and Q3, finishing ag facility capex in Q2 with full benefits in Q3; SG&A down >10% YoY and interest expense down ~50% YoY, supporting improving profitability .
Risk lens: evolving tariffs could lift input costs (~1–2% of COGS modeled); mitigation includes shifting production to U.S./Canada and pricing discipline. Pricing power remains reasonable in governmental/industrial; vegetation pricing still muted near-term .
Capital allocation and potential stock catalysts: quarterly dividend $0.30 declared; very active M&A pipeline with multiple opportunities in motion (tuck-ins and larger deals) .

What Went Well and What Went Wrong

What Went Well

Industrial Equipment net sales hit $227.1M (+12.5% YoY) with operating margin 13.7%, aided by strong demand in vacuum trucks, excavators, and snow removal equipment; orders up nearly 59% vs Q4 and backlog rose to $513.2M (+6.6% vs year-end) .
Cost actions drove margin improvement: SG&A fell >10% YoY; operating margin rose 40 bps YoY and 250 bps vs Q4; interest expense fell ~50% YoY on lower net debt (“best since Q3 2023”) .
Working capital discipline: DSO improved by 6 days YoY to 78; inventory down YoY; cash rose to $200.3M; net debt fell to $16.5M (down $183.2M YoY) .

Quote: “We were also pleased to see that the benefits from our second-half 2024 cost reduction efforts were reflected in our first quarter 2025 results… SG&A expenses declined more than 10%, and interest expense fell by almost 50% as our debt continued to decline” .

What Went Wrong

Consolidated net sales declined 8.1% YoY to $391.0M on Vegetation Management weakness; consolidated operating income dipped to $44.5M from $47.0M YoY .
Vegetation Management sales fell 26.8% YoY to $163.9M; EBITDA margin declined YoY to 12.2% (from 13.0%), with Europe and South America softer; backlog -30.3% YoY (but improved sequentially) .
Currency translation modestly pressured reported net sales (-1.4% impact), highlighting external headwinds layered on volume declines .

Financial Results

Consolidated performance vs prior periods

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$401.3	$385.3	$391.0
Diluted EPS ($USD)	$2.28	$2.33	$2.64
Gross Margin %	25.1%	23.8%	26.3%
Operating Margin %	10.0%	8.9%	11.4%
Net Income ($USD Millions)	$27.4	$28.1	$31.8
Net Income Margin %	6.8%	7.3%	8.1%

Actuals vs SPGI consensus

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue Actual ($USD Millions)	$401.301	$385.323	$390.950
Revenue Consensus ($USD Millions)	$404.300*	$396.850*	$391.075*
EPS Actual ($USD, Primary/Normalized)	$2.38*	$2.39*	$2.64*
EPS Consensus ($USD, Primary/Normalized)	$2.4625*	$2.2775*	$2.20667*

Values retrieved from S&P Global.
Notes: SPGI “Primary EPS” tracks normalized EPS; Q4 2024 SPGI actual reflects $2.39 (ex-separation costs), while GAAP diluted EPS was $2.33 .

Segment breakdown

Segment	Q3 2024 Net Sales ($MM)	Q3 2024 Op Margin %	Q4 2024 Net Sales ($MM)	Q4 2024 Op Margin %	Q1 2025 Net Sales ($MM)	Q1 2025 Op Margin %
Vegetation Management	$190.1	6.5%	$159.8	4.0%	$163.9	8.1%
Industrial Equipment	$211.2	13.1%	$225.5	12.4%	$227.1	13.7%

KPIs and balance sheet

KPI	Q3 2024	Q4 2024	Q1 2025
Total Backlog ($MM)	$728.8	$668.6	$702.7
Industrial Backlog ($MM)	$543.4	$481.5	$513.2
Vegetation Backlog ($MM)	$185.4	$187.1	$189.5
Cash & Equivalents ($MM)	$140.0	$197.3	$200.3
Inventory ($MM)	$372.0	$343.4	$356.4
Net Debt ($MM)	$84.1	$23.2	$16.5
DSO (days)	—	—	78
Operating Cash Flow ($MM)	—	—	$14.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Consolidated operating margin trajectory	FY 2025	Mgmt “above 10%” expected for 2025	Sequential expansion in Q2 and Q3; outlook “cautiously optimistic”	Maintained/strengthened
Vegetation Management margin	Q2–Q3 2025	Sequential improvement expected post consolidations	Sequential margin improvement to continue; full benefits after Q2 capex completion (visible in Q3)	Raised confidence on timing
Industrial sales/margins	Q2–Q3 2025	Mid-single digit organic growth expected entering 2025	Sales and margin expansion expected in Q2 and Q3; backlog quality “really good”	Maintained/affirmed
Tax rate	Q1 2025	FY 2024 effective ~22.5%	~24% effective tax rate in Q1	Higher
Tariffs/COGS impact	2025	Monitoring tariff risk; price discipline	~1–2% of COGS modeled impact; mitigation via sourcing/efficiency/pricing	Clarified magnitude
Dividend	Q2 2025	$0.26 in 2024; raised to $0.30 in Feb	$0.30 declared for April 2025	Maintained at higher level

Earnings Call Themes & Trends

Topic	Q-2 (Q3 2024)	Q-1 (Q4 2024)	Current (Q1 2025)	Trend
Tariffs/macro	Cautious on elections; tariff risk flagged; share repurchase authorized	Mitigation via shifting production; reciprocal tariffs could drive input inflation	Modeled ~1–2% COGS impact; shifting production; pushing back on suppliers	Risk acknowledged; mitigation detailed
Vegetation recovery	Orders stabilized; backlog $185M; consolidations underway	Expect modest recovery in 2H 2025; largest consolidations completed	Fifth sequential quarter bookings improvement; sequential margin +410 bps; governmental ag orders stronger	Gradual improvement
Industrial demand	Strong governmental/contractor demand; lead times 3–4 months	Expect continued strength; mid-single-digit growth; margin expansion	Sales +12.5% YoY; record operating income; backlog >$0.5B	Strong/expanding
Cost actions/SG&A	Workforce reductions; $25–30M annual savings targeted	Savings flowing; double-digit operating margin; SG&A reductions continue	SG&A down >10% YoY; efficiency gains to continue; further consolidations planned (EU & NA)	Structural margin uplift
M&A pipeline	Active for 2025; balance sheet capacity	“Most active since pre-pandemic”; buybacks opportunistic	“Most active M&A market” in years; several live deals; tuck-ins too	Elevated activity
Pricing power	N/A	Maintained pricing in industrial	Good pricing power in governmental/industrial; vegetation limited near-term	Mixed (strong in industrial)
Steel/input costs	N/A	N/A	Steel price pass-through processes in place; monthly tracking vs indices	Managed

Management Commentary

“Industrial Equipment orders exceeded the strong pace set in the first quarter of 2024… up nearly 59% versus the fourth quarter of 2024… Backlog in the Industrial Equipment Division was $513 million, up $31.7 million or 6.6% from the backlog at the end of 2024” .
“Vegetation Management Division’s… operating margin improved 410 basis points sequentially. We are pleased to see savings from our cost reduction actions taken in 2024” .
“We expect profitability should continue to improve as we enter the seasonally stronger second and third quarters… full benefit of the actions we took at the end of 2024 [will be] in the third quarter” .
“We are enjoying an increase in the number of opportunities for acquisitions of meaningful scale… This is the most active M&A market we’ve experienced for several years” .

Q&A Highlights

Tariffs: Reciprocal tariffs modeled at ~1–2% of COGS (5% on purchased materials), with production shifts to U.S./Canada and supplier pushback to mitigate cost inflation .
Pricing power: Strong in governmental/industrial due to favorable lead times; limited in vegetation until demand normalizes .
M&A capital allocation: M&A is top priority; buybacks authorized but secondary to accretive deals; multiple large and tuck-in targets actively pursued .
Vegetation outlook: Fifth straight quarter of bookings improvement; dealers beginning to restock; expectation of back-half 2025 revenue growth as backlog builds .
Q2 outlook: Sequential sales and margin expansion expected in both divisions; Industrial backlog quality “really good” supports trajectory .

Estimates Context

Q1 2025: EPS $2.64 vs consensus $2.2067* (beat); revenue $390.95M vs $391.08M* (in line) .
Prior quarters: Q4 2024 EPS $2.39* vs $2.2775* (beat) and revenue $385.32M vs $396.85M* (miss); Q3 2024 EPS $2.38* vs $2.4625* (miss) and revenue $401.30M vs $404.30M* (miss). Values retrieved from S&P Global.
Implications: Ongoing cost actions and sequential vegetation recovery should bias EPS estimates higher near-term; revenue estimates likely modestly raised for Industrial, maintained for Vegetation pending tariff clarity and EU/SA demand trends .

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue Actual ($MM)	$401.301	$385.323	$390.950
Revenue Consensus ($MM)	$404.300*	$396.850*	$391.075*
EPS Actual ($, Primary/Normalized)	$2.38*	$2.39*	$2.64*
EPS Consensus ($, Primary/Normalized)	$2.4625*	$2.2775*	$2.20667*

Values retrieved from S&P Global.

Key Takeaways for Investors

Quality beat: EPS beat driven by cost discipline and margin expansion; revenue held in-line despite vegetation headwinds—supports upward EPS estimate revisions .
Industrial strength durable: Elevated governmental/contractor demand, record operating income, >$0.5B backlog quality—visibility into Q2/Q3 expansion .
Vegetation turning: Sequential margin improvement (+410 bps) with bookings/backlog stabilizing; back-half 2025 poised for modest growth as dealer restocking begins .
Tariff risk manageable: Modeled ~1–2% COGS impact; production shifts and pricing/efficiency levers in place; watch reciprocal tariffs across components .
Balance sheet optionality: Net debt $16.5M, cash $200.3M; active M&A pipeline could add scale/product breadth—near-term deal announcements are a potential catalyst .
Capital return: Dividend at $0.30 sustained; buyback authorization in place from Q3 2024 leaves tactical flexibility .
Execution focus: Completing ag facility capex in Q2, full benefits in Q3; continued SG&A efficiencies and potential additional consolidations (EU/NA) support margin trajectory .

ALAMO GROUP INC (ALG)·Q1 2025 Earnings Summary