Executive Summary

Q4 2024 net sales were $385.3 million, down 7.7% year over year; diluted EPS was $2.33, with adjusted diluted EPS of $2.39 excluding ~$1.0 million separation costs .
Segment divergence persisted: Industrial Equipment net sales rose 11.0% to $225.5 million and delivered 12.4% operating margin; Vegetation Management net sales fell 25.5% to $159.8 million with 4.0% operating margin .
Full-year operating cash flow reached $209.8 million and net debt dropped to $23.2 million, enabling a 15% dividend increase to $0.30 per share and positioning for M&A; management reiterated cost savings of $25–$30 million annualized .
Management expects Industrial Equipment to deliver mid-single-digit organic growth and Vegetation Management to show modest recovery in 2H 2025; profitability is expected to improve as consolidation savings flow through in Q2 2025 .
Likely stock reaction catalysts: confirmation of cost savings execution, dividend increase, improved backlog quality, and active M&A pipeline commentary, balanced by Vegetation Management headwinds and tariff risks .

What Went Well and What Went Wrong

What Went Well

Industrial Equipment strength: Q4 net sales +11% YoY to $225.5 million; operating income $28.0 million (12.4% margin); demand strong for vacuum trucks, snow removal and excavators .
Balance sheet and cash flow: Operating cash flow $209.8 million; net debt fell to $23.2 million (down $160.1 million YoY), creating flexibility for M&A and a dividend raise to $0.30 per share .
Cost actions on track: Workforce reductions and consolidations (~14% staff reduction) with targeted annualized savings of $25–$30 million; management expects Q2 2025 margin uplift as consolidation benefits fully flow through .
Quote: “Profitability is expected to show improvement in the second quarter as the full benefits of the plant consolidations and staff reductions flow through.” — Jeff Leonard .

What Went Wrong

Vegetation Management headwinds: Q4 division net sales down 25.5% YoY; operating margin compressed to 4.0% on lower volumes and under-absorption despite savings .
Consolidated margins compressed: Gross margin fell 230 bps to 23.8%; operating margin declined to 8.9%, reflecting Vegetation Management softness and separation costs .
Macro/tariff risk: Management cautioned on potential cost inflation from reciprocal international tariffs and noted continued softness in forestry/tree care and ag; recovery expected to be back-half weighted in 2025 .

Financial Results

Consolidated quarterly performance

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Millions)	$416.3	$401.3	$385.3
Diluted EPS ($USD)	$2.35	$2.28	$2.33
Gross Margin %	26.0%	25.1%	23.8%
Operating Margin %	10.4%	10.0%	8.9%
Net Income ($USD Millions)	$28.3	$27.4	$28.1

Q4 year-over-year comparison

Metric	Q4 2023	Q4 2024
Revenue ($USD Millions)	$417.5	$385.3
Diluted EPS ($USD)	$2.63	$2.33
Gross Margin %	26.1%	23.8%
Operating Margin %	10.7%	8.9%
Net Income ($USD Millions)	$31.5	$28.1

Segment breakdown (Q4 2024 vs Q4 2023)

Segment	Net Sales ($USD Millions)	Operating Income ($USD Millions)	Operating Margin %	EBITDA ($USD Millions)	EBITDA Margin %
Vegetation Mgmt (Q4 2023)	$214.4	$19.8	9.2%	$25.9	12.1%
Vegetation Mgmt (Q4 2024)	$159.8	$6.5	4.0%	$15.3	9.6%
Industrial Equip (Q4 2023)	$203.2	$25.0	12.3%	$33.4	16.4%
Industrial Equip (Q4 2024)	$225.5	$28.0	12.4%	$35.5	15.7%

KPIs and balance sheet trajectory

KPI	Q2 2024	Q3 2024	Q4 2024
Backlog ($USD Millions)	$768.9	$728.8	$668.6
Total Debt net of Cash ($USD Millions)	$175.1	$84.1	$23.2
TTM EBITDA ($USD Millions)	$236.6; 14.1% of Net Sales	$228.2; 13.7% of Net Sales	$220.6; 13.5% of Net Sales
Cash & Equivalents ($USD Millions)	$118.5	$140.0	$197.3
Operating Cash Flow ($USD Millions, FY)	—	—	$209.8

Non-GAAP adjustments: Adjusted diluted EPS was $2.39 in Q4 excluding separation costs; full-year adjusted diluted EPS was $10.12 excluding separation/strike impacts .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Industrial Equipment organic sales	Early 2025	Strong backlog; solid outlook (qualitative)	Mid-single-digit organic growth expected	Increased specificity (maintained positive)
Vegetation Management sales	FY 2025	Continued pressure; improvement contingent on inventories/rates (qualitative)	Modest growth expected in 2H 2025; sequential order/backlog improvement	Turning positive in 2H (clarified timing)
Consolidated operating margin	FY 2025	“Drive margins higher” with cost actions (qualitative)	Aim to be above 10% operating margin for FY25	Formalized target (raised clarity)
Profitability cadence	Q2 2025	Cost savings underway (qualitative)	Profitability improvement expected in Q2 2025 as consolidations/staff reductions flow through	Timing specified
Quarterly dividend	Ongoing	$0.26 per share (Q3 2024)	Increased to $0.30 per share (15% increase)	Raised
Cost savings (annualized)	Ongoing	Target $25–$30 million (introduced in Q3)	On track to deliver $25–$30 million	Maintained
Capital allocation (M&A)	2025	Active pipeline discussed; buyback authorization $50M (Q3)	Pipeline “most active since pre-pandemic”; prefer M&A over further debt reduction; opportunistic buybacks possible	Maintained/increased emphasis

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024)	Previous Mentions (Q3 2024)	Current Period (Q4 2024)	Trend
Cost reduction & consolidations	Initiated; $10M 2H savings; workforce -7%; consolidations in forestry/ag; divestiture of small ag parts business	Expanded actions; workforce down ~10%; capacity cut ~8%; further margin expansion plans	Workforce -14%; savings $25–$30M annualized; Q2 2025 benefit timing	Accelerating; impact nearing inflection
Industrial demand & lead times	Strong across vacuum, sweepers, snow; lead times 3–4 months; chassis supply improving (incl. electrified sweeper chassis)	Strong; backlog >$540M; election-year timing caused some booking softness	Strong start to January; no major mix shifts; utilization high; under-absorption nil	Sustained strength
Vegetation Management markets	Forestry/ag soft; gov mowing bright; orders ~$150M/qtr; inventory elevated	Continued softness; orders/backlog stabilizing; sequential improvement modest	Q4 orders highest of year; book-to-bill >115% in ag; Europe/S. America modestly better; gov mowing historically high	Early signs of bottoming
Tariffs/macro	Rate cuts needed to spur forestry; no surge in utility/data center vegetation orders yet	Election-related caution in gov spend; macro mixed	Contingency plans to mitigate N. America cross-border tariffs; broader reciprocal tariffs would raise input costs; pricing actions as needed	Risk management articulated
Capital allocation & M&A	Strong cash flow; balancing dividends; preparing for acquisitions	Authorized $50M buyback; pipeline interesting for 2025	Pipeline “most active” since pre-pandemic; prioritize M&A over further deleveraging; possible buybacks if targets don’t close	M&A priority rising

Management Commentary

“Operating cash flow was excellent in the fourth quarter and net debt declined to just $23 million. Our balance sheet strengthened considerably at year-end.” — Press release .
“We expect that our Industrial Equipment division will continue to produce strong results and mid-single-digit organic sales growth.” — Jeff Leonard, prepared remarks .
“Profitability is expected to show improvement in the second quarter as the full benefits of the plant consolidations and staff reductions flow through.” — Jeff Leonard .
“Our previously announced cost reduction and facility consolidation initiatives have proceeded as planned and with the expected results… Staffing levels across the Company were nearly 14% lower than at the end of 2023.” — Press release .
“We have increased our quarterly dividend from $0.26 to $0.30 per share.” — Press release .

Q&A Highlights

Margin trajectory: Management targets >10% operating margin for FY25; Q4 is seasonally lower; expects improvement as savings accelerate and under-absorption declines .
Vegetation decrementals: Savings expected to improve decrementals; consolidation benefits to stabilize and lift margins as Q1/Q2 progress; all $25–$30M savings are in Vegetation .
Industrial segment mix/lead times: No significant mix changes; lead times ~3–4 months with capacity available; repurposed Wooster, OH into snow removal to mitigate tariff risks .
Capital allocation: With near-zero net debt, priority is M&A; further debt reduction viewed as counterproductive; buybacks possible if targets don’t materialize .
CEO succession: Search progressing well; current CEO remains engaged until transition .

Estimates Context

Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at the time of analysis due to data access limits; as a result, we cannot assess beat/miss versus consensus. Values retrieved from S&P Global were unavailable due to API limits today.*

Metric	Q4 2024 Consensus	Actual
Revenue ($USD Millions)	N/A	$385.3
Diluted EPS ($USD)	N/A	$2.33

Implication: Without consensus, estimate revisions should be assessed after S&P access restores; narrative drivers suggest upward bias for Industrial and margin expectations in 2025, while Vegetation forecasts likely remain conservative near term .

Key Takeaways for Investors

Segment divergence persists: Industrial Equipment continues to deliver double-digit growth and high-teens EBITDA margins; Vegetation remains pressured but shows sequential order/backlog improvement and should benefit from consolidation savings in mid-2025 .
Margin inflection likely in Q2 2025: Consolidation and workforce actions are largely complete; management expects profitability to lift as under-absorption declines and cost savings fully flow through .
Strong cash generation and deleveraging: FY operating cash flow of $209.8 million enabled net debt reduction to $23.2 million, creating capacity for inorganic growth and supporting dividend increases .
Capital deployment skewed to M&A: Pipeline described as most active in years; management prioritizes acquisitions over additional debt reduction; opportunistic buybacks possible .
Watch tariff/policy backdrop: Management has contingency plans for North American tariffs; broader reciprocal international tariffs could raise input costs, prompting pricing actions to defend margins .
Near-term trading setup: Confirmed savings, dividend increase, and resilient Industrial trends are positives; Vegetation softness and lack of explicit revenue guidance keep estimates anchored conservatively; updates on M&A could be a catalyst .
Longer-term thesis: Consolidation-driven efficiency, diversified end-markets (gov/industrial), disciplined capital allocation, and a cleaner balance sheet support margin expansion and strategic growth through 2025–2026 .

ALAMO GROUP INC (ALG)·Q4 2024 Earnings Summary