Alliance Laundry Holdings Inc. 2026 Q2 Earnings Call

Along with today's call, you can find our earnings press release and presentation on our investor relations website at ir.alliancelaundry.com. A replay will also be available on our website following the call. As a reminder, today's earnings release presentation and statements made during this call include forward-looking statements under federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include factors set forth in the earnings release and in our filings with the SEC, including the Risk Factors section of our 10-K filing and subsequent 10-Q filings. We assume no obligation to update or revise any forward-looking statements except as required by law. Additionally, during today's call, we will discuss certain non-GAAP financial measures outlined in our earnings presentation.

We believe these measures are important indicators of our operations as they exclude items that may not be indicative of ongoing business performance. Reconciliations to the most directly comparable GAAP measures can be found in our earnings release and presentation appendix. With that, I'd like to now turn the call over to Mike Schoeb, our Chief Executive Officer.

Mike? Hey, thanks, Tom, and thank you for joining our earnings call.

Our second quarter results reinforce the message we have carried since becoming a public company that a resilient, replacement-driven, essential industry, a market-leading position, and disciplined operational excellence combine to deliver strong, sustainable outcomes through any environment. In the second quarter, revenue grew 7% year-over-year, with adjusted EBITDA growth of 12% and adjusted net income up 54%. This performance was broad-based and reflects the diversification that defines our business across products and markets and geography. The strength of our first half, combined with our growing visibility into the balance of the year, gives us the confidence to raise our guidance today, and Dean will take you through that detail shortly. I'd like to highlight again that this performance was achieved in a macro environment that's still volatile in many parts of the world.

But remember, every day really is laundry day. Commercial laundry is a vibrant, growing, and essential part of modern life. Our diversified geographies and end markets serving non-discretionary needs, hospitals and elder care, hospitality, industrial, emergency responders, and many other verticals have performed across all economic cycles, giving us a level of growth, consistency, and downside protection that is hard to find. This quarter was no different. Revenue met our expectations with strong adjusted EBITDA and net income conversion. Digital innovation also continues to see strong adoption, and our strategy here is unchanged. The more connected our equipment is, the more value we can deliver through better uptime, smarter servicing, lower costs, and higher revenue, and ultimately, a better end consumer experience that further strengthens our customer relationships.

Turning to the regions, North America delivered another strong, broad-based quarter, with growth across every vertical and pricing that helped offset inflation and tariff impacts. Internationally, we saw strength in Asia Pacific, especially in vended markets, and Europe was steady. As we noted previously, the Middle East/Africa region represents less than 2% of our global revenue, so the direct impact of the ongoing conflict is small. While we are seeing some knock-on effects in other regions, mainly due to higher energy costs, we expect normal growth dynamics to return when the conflict subsides. We are also continuing to strengthen our balance sheet, repaying $50 million of debt in the quarter, bringing year-to-date paydown to $115 million and over $800 million over the past 12 months, which has resulted in a reduction in net leverage from 4.6 to 2.4 times.

So taken together, the strength we demonstrated this quarter, broad-based demand, pricing discipline, our local-for-local manufacturing footprint, and a strengthened balance sheet are what we expect to carry us through the balance of 2026. Before Dean walks you through the financials, I want to share a recent event that brings a key aspect of our long-term growth story to life. In late June, I attended our annual event in Bangkok, where we bring current and prospective laundromat operators together with our distribution partners. Southeast Asia has long been a strategic growth engine for us, and laundromats are leading the way. The demand for new stores continues to impress me in a market that barely existed a decade ago and one we are proud to have helped create. This demand is structural, not cyclical.

Urbanization, a growing middle class, and the shift toward modern out-of-home laundry is durable, essential demand, the kind that has carried this company through every economic cycle. Here, our advantages are unmistakable. Our technology, our distribution network, our highly trained team, and unmatched product reliability. Operators choose Alliance because our connected, durable equipment delivers a lower total cost of ownership and a better experience for their customers. There is a second tailwind building underneath the growth. This equipment runs hard all day, every day in high throughput stores, and that intensity of use sets up a durable replacement cycle in the years ahead. So even as new stores drive the top line today, the installed base we are building now becomes a recurring source of demand tomorrow. The event generated hundreds of qualified leads across Thailand, with the opportunity extending across the region. Thailand isn't the exception, it's the template.

We see the same early innings dynamics taking shape in market after market. Structural tailwinds, a growing installed base, and emerging market runway, all pointing to a business built to compound for years to come. On that note, I'll hand it over to Dean to provide details of our second quarter performance and increased guidance.

Thanks, Mike. Starting on slide 5, I'll walk through our financial results, including our strengthening balance sheet. Second quarter net revenue grew 7% versus the prior year. Pricing contributed slightly more than half of the increase, with the balance coming mainly from volume. Gross profit grew 9%, representing a gross margin of 39.8%, up approximately 90 basis points from the prior year. Regarding the cost environment, pricing actions already in place helped to offset our tariff exposure and other current inflationary pressures. Our domestic manufacturing footprint continues to provide a meaningful structural advantage relative to our peers. Adjusted EBITDA grew 12% versus the prior year, with a margin of 28.1%, up 135 basis points. This expansion came from volume leverage, operational excellence, and supply chain efficiency, and also includes continued investment in people, digital, engineering, and commercial capabilities at scale versus the competition.

In addition, during the quarter, we received tariff refunds and a business interruption insurance claim totaling approximately $3.8 million. Excluding these two items, adjusted EBITDA grew 9% versus the prior year quarter, and EBITDA margin expanded 60 basis points. Adjusted net income was up 55% year-over-year, and adjusted EPS was up 32% to $0.41. This result reflects both strong operating performance and the meaningful benefit of significantly lower interest expense, down roughly $22 million from the prior year quarter. Moving to cash and the balance sheet. Operating cash flow was $66 million in the quarter, reflecting strong conversion and continued working capital discipline. We paid down $50 million of debt in the quarter, bringing our year-to-date paydown to $115 million. Net leverage at the end of the quarter was 2.4x adjusted EBITDA, down 0.2x in the quarter, and down 0.4x from year-end.

Stepping back, the progress over the past year is striking. Since June 30, 2025, we have paid down $825 million against our term loan, funded by strong organic cash generation and IPO proceeds, cutting our net leverage nearly in half over the last 12 months, from 4.6x to 2.4x. With one full turn of that de-leveraging due to organic cash flow generation and EBITDA expansion. In addition, we are quite pleased that both Moody's and S&P have upgraded our corporate and senior debt ratings, recognizing our ability to both grow and de-lever at the same time. This action also has the benefit of lowering our borrowing costs on our term loan by 25 basis points going forward. Drilling into the segments on slide 6. North America delivered a strong quarter, with revenue up 9%, adjusted EBITDA up 17%, and adjusted EBITDA margin of 31.6%.

Adjusted EBITDA growth was over 12% if you exclude the impact from the insurance recovery and tariff refunds mentioned previously. Growth was broad-based across our end markets, with mix providing a modest positive impact in the quarter. Internationally, revenue was approximately flat, with adjusted EBITDA of $34 million and a margin of 28.9%. Asia-Pacific saw strong growth, particularly in fast-developing vended markets. Europe was steady across all end markets, with operators actively investing in new stores, fleet upgrades, and energy efficiency. This flat result masks genuinely strong underlying momentum. As we noted, our Middle East and Africa region, which makes up less than 2% of global revenue, saw a temporary pause in demand tied to the ongoing regional conflict as well as higher energy costs, which also weighed on certain other international markets in the quarter.